Grand Jury Proceedings, In re

• Decision Date: 24 February 1984
• Docket Number: No. 83-1661,83-1661
• Citation: 727 F.2d 1352
• Parties: Fed. Sec. L. Rep. P 91,487, 15 Fed. R. Evid. Serv. 428 In re GRAND JURY PROCEEDINGS.
• Court: U.S. Court of Appeals — Fourth Circuit

Page 1352

727 F.2d 1352

Fed. Sec. L. Rep. P 91,487, 15 Fed. R. Evid. Serv. 428

In re GRAND JURY PROCEEDINGS.

No. 83-1661.

United States Court of Appeals, Fourth Circuit.

Argued Dec. 6, 1983.

Decided Feb. 24, 1984.

Alvin H. Goldstein, Jr., San Francisco, Cal. (Goldstein & Phillips, San Francisco, Cal., on brief), for petitioner.

Michael E. Winck, Asst. U.S. Atty., Charleston, W.Va. (David A. Faber, U.S. Atty., Charleston, W.Va., on brief), for respondent.

Before RUSSELL and PHILLIPS, Circuit Judges, and HOFFMAN, Senior District Judge, for the Eastern District of Virginia, sitting by designation.

DONALD RUSSELL, Circuit Judge:

The petitioner John Doe seeks a writ of mandamus requiring the vacation and reversal of an order of the Southern District of West Virginia directing him to testify concerning conversations between him and three individuals, Margolin, Kimball and Chernack pursuant to a subpoena issued by a duly convened grand jury of such district court and denying him access to the affidavit of the Internal Revenue Service [IRS] agent on whose testimony the Government relies to establish the "crime/fraud exception". ¹ We deny the writ.

The petitioner is an attorney at law licensed to practice in the States of Massachusetts and California, with offices located in San Francisco. He specializes in business and securities law. In his professional capacity, he has been retained on a number of occasions by Margolin, who was engaged in the securities business in San Francisco. In late September, 1977, he was retained by Margolin in connection with a proposed private placement of limited partnership interests in the leasing of coal mining equipment. Under the proposed arrangement, Margolin was to market the partnership interests; Kimball was to handle the acquisition and/or leasing of mining equipment; and Chernack was to provide financial support. Incident to this employment, the petitioner met on September 28, 1977, with Margolin, Kimball and perhaps Chernack, ² at Margolin's request, to discuss, the preparation of a prospectus to be used in the enlistment of investors in the private placement. Later, he had telephone and personal conversations with Kimball about the material to be included in the placement on one or two occasions. However, on October 13, 1977, little more than two weeks after the petitioner had been retained, he was instructed by Margolin to discontinue his services. From that date until the grand jury subpoena, the petitioner had no discussions, conversations or meetings with any of the participants about the aborted private placement.

On May 2, 1983, the petitioner was advised by the Government that he would be subpoenaed to testify before the grand jury investigating the 1977 proposed joint venture with reference to his conversations with Margolin, Kimball and Chernack. The petitioner immediately informed Margolin "and attempted [by letters addressed to each at what the petitioner, after inquiries, had ascertained was their addresses] ³ to inform Messrs. Chernack and Kimball and their attorneys, that he had been subpoenaed to testify before the grand jury and requested each to inform him whether or not he was instructing John Doe to assert the attorney-client privilege as to communications in connection with the transactions in question." After being advised by the petitioner of the subpoena, Margolin expressly waived any attorney-client privilege in connection with any conference with the petitioner relating to the proposed venture. The petitioner, though, has received no answer from either Kimball or Chernack nor have his letters been returned to him by the postal authorities as undelivered.

The petitioner appeared before the grand jury as required by its subpoena and "asserted the attorney-client privilege with respect to all communications between himself and Messrs. Kimball and Chernack either individually, with each other, or in the presence of Mr. Margolin." The United States Attorney thereupon moved the district court to compel petitioner's testimony, contending (1) that Kimball and Chernack were not clients of the petitioner; (2) such communications as were made were not intended to be kept confidential; and (3) that, if the two were clients, the crime/fraud exception applied. In support of the third ground, the United States Attorney submitted the affidavit of the IRS agent John Bowen. A hearing on this motion was had by the District Judge. The petitioner demanded at the hearing access to the affidavit of the IRS agent, which had been examined in camera by the Judge. At the conclusion of the hearing, the District Judge granted the Government's motion on all grounds but denied petitioner's request for access to the Bowen affidavit. ⁴ The petitioner then began this mandamus proceeding.

It seems appropriate at the outset to observe that the Government does not identify the petitioner as a "target" of the grand jury investigation and, in the hearing in the district court, the United States Attorney represented to that court that "Mr. ... [is not] in any way ... involved in the perpetration of ... fraud." This circumstance, however, does not deny him standing to raise in behalf of his possible clients the objection that the proposed interrogation could be violative of the attorney-client privilege. The rule is that an attorney in a situation such as that of the petitioner is entitled to raise such privilege on behalf of his alleged client. Fisher v. United States, 425 U.S. 391, 402, n. 8, 96 S.Ct. 1569, 1577 n. 8, 48 L.Ed.2d 39 (1976). This general rule, well settled in federal law, is stated with emphasis in a special provision of the California Business & Professions Code, Sec. 6068(e), which applies to the petitioner as a member of the bar of that State and which obligates him expressly "to maintain inviolate the confidence, and at every peril to himself to preserve the secrets of his client." In instituting this proceeding, therefore, the petitioner is merely carrying out his obligation as a responsible member of the California bar and is not to be faulted in any way for his obedience to his professional responsibilities. The question posed, though, is not the propriety of petitioner's action in instituting this proceeding (which we regard as incontestable) ⁵ but the applicability of the attorney-client privilege to the facts as present in this case. The resolution of such question requires an examination of the scope and application of the privilege itself.

The attorney-client privilege as traditionally recognized at common law and as now incorporated in the Federal Rules of Evidence, controls in all federal judicial proceedings. ⁶ However, since the privilege "impedes [the] full and free discovery of the truth," ⁷ and is "in derogation of the public's 'right to every man's evidence,' " ⁸ it is not "favored" by federal courts. ⁹ Accordingly the privilege is to be " 'strictly confined within the narrowest possible limits consistent with the logic of its principle.' " ¹⁰ Consonant with this policy, the privilege applies only when the person claiming the privilege has as a client consulted an attorney for the purpose of securing a legal opinion or services and not "for the purpose of committing a crime or tort" and in connection with that consultation has communicated information which was intended to be kept confidential. While, as is seen, the primary requirement, one which has been often characterized as "the essence" of the privilege, is that the communication was intended to be confidential, or, to use the language of one recent decision, was intended " 'to be held in the breast of [his] lawyer.' " ¹¹ See McCormick, Evidence, Sec. 91, pp. 187-88 (Cleary ed. 1972):

"It is of the essence of the privilege that it is limited to those communications which the client either expressly made confidential or which he could reasonably assume under the circumstances would be understood by the attorney as so intended."

And we have adopted this view in United States v. Jones, 696 F.2d 1069 (4th Cir.1982) that the "essence" of the privilege is the protection of what was "expressly made confidential" or should have been "reasonably assume[d] ... by the attorney as so intended." In determining whether it was to be reasonably "assume[d] that confidentiality was intended," it is the unquestioned rule that the mere relationship of attorney-client does not warrant a presumption of confidentiality.

As McCormick put it: "A mere showing that the communication was from client to attorney does not suffice, but the circumstances indicating the intention of secrecy must appear." Sec. 91 at pp. 187-88. ¹² In fact, so strong is this requirement of confidentiality that it has been held that the privilege may be lost "even if the disclosure is inadvertent" such as in some circumstances "eavesdroppers," and again, where if the privileged communication consisted of "privileged documents," the party did not "take reasonable steps to insure and maintain [their] confidentiality." Suburban Sew 'n Sweep, Inc. v. Swiss-Bernina, Inc., 91 F.R.D. 254, 258-59 (N.D.Ill.1981). See also, In Re Horowitz, 482 F.2d 72, 82 (2d Cir.), cert. denied, 414 U.S. 867, 94 S.Ct. 64, 38 L.Ed.2d 86 (1973) in which Judge Friendly declared: "It is not asking too much to insist that if a client wishes to preserve the privilege under such circumstances, he must take some affirmative action to preserve confidentiality," adding in a footnote: "Taking or failing to take precautions may be considered as bearing on intent" to preserve confidentiality. In particular, courts have consistently "refused to apply the privilege to information that the client intends his attorney to impart to others ...," or which the client intends shall be published or made known to others. United States v. Pipkins, 528 F.2d 559, 563 (5th Cir.), cert. denied, 426 U.S. 952, 96 S.Ct. 3177, 49 L.Ed.2d 1191 (1976); United States v. Cote, 456 F.2d 142,...