Crystal Grower's Corp. v. Dobbins

Citation616 F.2d 458
Decision Date25 February 1980
Docket NumberNo. 78-1451,78-1451
Parties1980-1 Trade Cases 63,210 CRYSTAL GROWER'S CORPORATION, American Crystal Sugar Company, a Minnesota cooperative, American Crystal Sugar Company, a dissolved New Jersey Corporation, Wilburn Brekken and Arnet Weinlaeder, Plaintiffs-Appellants, v. Cris DOBBINS, C. W. Briggs, F. C. Zitkowski, Donald S. Graham, G. B. Aydelott, Stewart Cosgriff, Richard M. David, C. B. Flick, D. J. McGanney, Karl W. Mehlmann, John C. Mitchell and Harry T. Lewis, Jr., and United Bank of Denver, N. A., for E. Warren Willard, Deceased, and Davis, Graham & Stubbs, a partnership, the Boettcher Foundation, a Colorado Non-Profit Corporation, and Boettcher Realty Company, a Colorado Corporation, Defendants-Appellees.
CourtUnited States Courts of Appeals. United States Court of Appeals (10th Circuit)

Elmer B. Trousdale of Oppenheimer, Wolff, Foster, Shepard & Donnelly, St. Paul, Minn. (Bradley G. Clary, Janice Mileo and Madge Thorsen of Oppenheimer, Wolff, Foster, Shepard & Donnelly, St. Paul, Minn., and William R. Humphrey and Fred Hamel of Humphrey & Hamel, Denver, Colo., with him on briefs), for plaintiffs-appellants.

Walter A. Steele of White & Steele, P. C., Denver, Colo. (James D. Hinga, Denver, Colo., with him on brief) for defendants-appellees Cris Dobbins, F. C. Zitkowski, Donald S. Graham, G. B. Aydelott, Stewart Cosgriff, Richard M. Davis, C. B. Flick, D. J. McGanney, Karl W. Mehlmann, John C. Mitchell and Harry T. Lewis, Jr., and United Bank of Denver, N. A., for E. Warren Willard, Deceased.

Robert J. Kapelke of Gorsuch, Kirgis, Campbell, Walker & Grover, Denver, Colo., on the brief for defendant-appellee C. W. Briggs.

Robert S. Warren of Gibson, Dunn & Crutcher, Los Angeles, Cal. (Ernest W. Lohf of Lohf & Barnhill, P. C., Denver, Colo., with him on brief), for defendant-appellee Boettcher Foundation.

H. Thomas Coghill and Jay Horowitz of Coghill, Goodspeed & Horowitz, Denver, Colo., on brief, for defendant-appellee Boettcher Realty Company.

Mitchell L. Lathrop, Travers D. Wood, Thomas S. Kiddle and Lawrence D. Steckmest of MacDonald, Halsted & Laybourne, Los Angeles, Cal., and Rodney R. Patula of Pryor, Carney & Johnson, Englewood, Colo., on brief, for defendant-appellee Davis, Graham & Stubbs.

Before HOLLOWAY, BARRETT and LOGAN, Circuit Judges.

LOGAN, Circuit Judge.

The question for decision is whether, under the circumstances of this case, we should order to be sealed the docketing statement, joint appendix, and appellate briefs filed in connection with an appeal to this Court. The question arises in the following context.

In 1972 Crystal Grower's Corporation (Crystal Grower's), owned by various sugar beet growers, and American Crystal Sugar Company (American Crystal) formulated a plan of purchase and merger by which the sugar beet growers would become the only shareholders of American Crystal, the surviving corporation. Before consummation of the transaction, American Crystal was issued a subpoena in connection with a Justice Department investigation into possible antitrust violations committed by American Crystal and other companies. Following meetings between the parties to the proposed agreement, the contract was altered, the chief amendment being a one million dollar reduction of the gross purchase price of American Crystal. The amendment stated that it

represents an agreed upon adjustment because of possible adverse effects on the business and financial condition of American Crystal which might in any manner result from the investigation of its operations now being made by the United States Grand Jury for the Northern District of California in connection with which a subpoena dated December 7, 1972, has been served on American Crystal.

Thereafter, the shareholders of the two companies approved the plan, as amended, and the merger was effected. Four months later American Crystal was converted from a New Jersey business corporation into a Minnesota cooperative corporation.

The federal antitrust investigation continued and resulted in an indictment charging American Crystal and other companies with violations of the antitrust laws. The United States contemporaneously filed a civil action for injunctive relief against those entities and a national federation of sugar beet growers. Following the government's actions, approximately 100 private antitrust suits were initiated against the sugar companies, including American Crystal, alleging the same violations charged by the government. Apparently these actions are all still pending.

In 1976, Crystal Grower's, American Crystal, and the other plaintiffs-appellants brought this suit, alleging fifteen claims for relief based upon federal, state and common law. All the claims hinged upon plaintiffs' assertion that defendants-appellees misled or deceived plaintiffs with respect to American Crystal's possible exposure to antitrust suits. Defendants are the twelve former directors of American Crystal, the law firm of Davis, Graham & Stubbs, which had served as counsel for American Crystal in connection with the merger, and Boettcher Realty Company and Boettcher Foundation, which as shareholders of American Crystal allegedly controlled five of the individual defendants.

In the course of discovery defendants Davis, Graham & Stubbs and the Boettcher entities tendered to plaintiffs a request for production of documents. Plaintiffs withheld 845 of the documents requested, asserting attorney-client privilege and work product immunity. Subsequently, the trial court granted defendants' Fed.R.Civ.P. 37 motion for an order compelling discovery of these documents, which consisted in part of premerger communications between plaintiffs and their attorneys, the law firms of Dosland, Dosland & Nordhougen of Moorehead, Minnesota, and Oppenheimer, Wolff, Foster, Shepard and Donnelly of St. Paul, Minnesota, and various reports prepared by those attorneys.

Defendants asserted, and the trial court agreed, that the documents were relevant to material issues raised by plaintiffs' claims: what representations plaintiffs made to defendants and their agents concerning their knowledge of American Crystal's potential antitrust exposure; what plaintiffs and their agents knew of that potential exposure through their own investigations; upon what facts did plaintiffs rely in going ahead with the merger; and, concerning defenses based upon statutes of limitations, the timeliness of plaintiffs' discovery and awareness of facts regarding American Crystal's alleged noncompliance with antitrust laws.

The trial court did not examine the 845 documents individually; instead, it assumed they were privileged and held that plaintiffs, by filing this lawsuit, put those documents in issue and therefore waived the right to resist production on the grounds of privilege and immunity. The trial judge, however, entered a protective order providing that the documents were to be produced only to the defendants in this lawsuit, and that in the further conduct of this litigation the parties and court would maintain the documents as confidential to the extent possible.

The litigation proceeded, and in April 1978 the trial court entered summary judgment or judgment on the pleadings in favor of the defendants, dismissing all claims. The trial court held as a matter of law that "plaintiffs actually knew, prior to the February 21, 1973 merger, facts sufficient to establish that American Crystal was susceptible to suit for violations of the Antitrust laws." Therefore, the court reasoned that plaintiffs' federal securities acts claims were nonmeritorious because plaintiffs did not reasonably rely upon defendants' representations "that American Crystal had no antitrust exposure," or their claims were barred by applicable statutes of limitations. The trial court also dismissed all state law claims, finding lack of diversity jurisdiction and declining to exercise pendent jurisdiction. The judgments concerning the federal securities law claims were based largely upon evidence in the 845 documents discussed above. The memoranda relating to defendants' motions and the district court's memorandum opinion, all of which quoted from and discussed the documents, were held under seal pursuant to the court's protective order.

Plaintiffs then appealed to this Court, seeking reversal of the judgments below. Among the issues raised by plaintiffs was the propriety of the trial court's ruling that plaintiffs had waived the right to assert the 845 documents were privileged from disclosure under the attorney-client privilege and the work product immunity doctrine.

The record on appeal filed with this Court, parts of which had been sealed pursuant to the trial court's protective order, remained sealed here as a ministerial matter. Plaintiffs requested that we order the amended...

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