Martin Marietta Corp., In re

• Decision Date: 14 October 1988
• Docket Number: No. 87-3648,87-3648
• Parties: In re MARTIN MARIETTA CORPORATION, Appellant. UNITED STATES of America, Plaintiff, v. William C. POLLARD, Defendant-Appellee.
• Court: U.S. Court of Appeals — Fourth Circuit

Page 619

856 F.2d 619

57 USLW 2212

In re MARTIN MARIETTA CORPORATION, Appellant.

UNITED STATES of America, Plaintiff, v. William C. POLLARD, Defendant-Appellee.

No. 87-3648.

United States Court of Appeals,

Fourth Circuit.

Argued April 8, 1988.

Decided Sept. 6, 1988.

Rehearing and Rehearing In Banc Denied Oct. 14, 1988.

Brian Christian Elmer (Richard L. Beizer, Alan W.H. Gourley, Pauline E. Waschek, Crowell & Moring, Washington, D.C., George Beall, Miles & Stockbridge, Baltimore, Md., Frank H. Menaker, Jr., Jay A. Brozost, Martin Marietta Corp., Bethesda, Md., on brief), for appellant.

Robert Harley Bear (James S. Maxwell, Maxwell & Bear, Washington, D.C., on brief), for defendant-appellee.

Before WINTER, Chief Judge, and MURNAGHAN and ERVIN, Circuit Judges.

MURNAGHAN, Circuit Judge:

William C. Pollard, a former employee of Martin Marietta Corporation (Martin Marietta), is under indictment, returned April 7, 1987, by a grand jury of the District of Maryland on three counts. Count I alleges a conspiracy to defraud the Department of Defense (DOD), Counts II and III allege mail fraud. Pollard is charged with operating a scheme to characterize improperly travel cost rebates paid by travel agencies PTI and its subsidiary IVI (companies independent of Martin Marietta) to Maxim, a subsidiary of Martin Marietta, as fees rather than credits against travel costs. The overall effect was that Martin Marietta could overstate the costs for which it received reimbursement by the DOD.

On June 1, 1987, Pollard, under Fed.R.Crim.P. 17(c), subpoenaed Martin Marietta for the production of fifteen categories of documents. On June 12, 1987, Martin Marietta moved to quash. On July 2, 1987, the district court denied the motion to quash but also ruled that the subpoena was overly broad. The court limited the subpoena to uncontested items until the defense established a need for particularized items. On September 9, 1987, Pollard limited the scope of the contested items to six categories. At a hearing held the next day the district court allowed Martin Marietta several weeks to determine what documents it would voluntarily produce. On October 1, 1987, Martin Marietta agreed that it would produce the documents responsive to two of the six categories, would produce some of the documents requested under a third category, and had no documents requested under a fourth category. It refused to produce any items in the other two categories. Thus, three categories of documents remained in dispute. They were:

1. Audit Papers. Martin Marietta's corporate internal audit reports, workpapers and related supporting documentation (including internal memoranda and internal and externalcorrespondence), covering the audits of Martin Marietta's subsidiary Maxim, and its relationship to travel companies IVI and PTI. [This is the category for which Martin Marietta made selected production.]

2. Witness Statements. Notes, transcripts and electronic recordings of interviews with and statements by William Pollard, Richard Westfall, Gregory Levins, John Rayburn, Peter Warren and James Simpson concerning the relationship of Martin Marietta, Maxim, IVI and PTI.

3. Administrative Settlement Agreement Materials. All correspondence and notes of unwritten communciations to or from Martin Marietta and the United States Government related to the Administrative Settlement Agreement between the company and the Defense Logistics Agency executed by the company on January 31, 1987.

On October 15, 1987, Pollard moved for an order to compel production of the items withheld by Martin Marietta. At Martin Marietta's request, the court committed itself to a two-step procedure: first, to require production of the documents at issue in camera; and second, to give the company another opportunity, after the court reviewed the documents, to argue against their production to Pollard. In the course of that procedure, Martin Marietta acknowledged that portions of some documents it sought to withhold had been earlier quoted in disclosures made by it to the Government, either or both the United States Attorney and the Defense Logistics Agency, part of the Department of Defense.

The district court ordered production of the documents at issue, with the exception of audit papers that had already been made available to the defense, and certain documents relating to the Administrative Settlement Agreement that the court determined after its in camera review to be irrelevant. In its accompanying memorandum, the court described its basis for ordering the disclosure of the materials by category. A contempt order was issued when Martin Marietta failed to comply with the order of production.

Rule 17(c) implements the Sixth Amendment guarantee that an accused have compulsory process to secure evidence in his favor. California v. Trombetta, 467 U.S. 479, 485, 104 S.Ct. 2528, 2532, 81 L.Ed.2d 413 (1984). Enforcement of a Rule 17(c) subpoena is governed by the standards established in United States v. Nixon, 418 U.S. 683, 94 S.Ct. 3090, 41 L.Ed.2d 1039 (1974). A party seeking pretrial production of documents must demonstrate (1) relevancy, (2) admissibility, and (3) specificity with respect to the documents. Id. at 700, 94 S.Ct. at 3103.

The district court correctly noted the Nixon requirements and then found that Pollard met them. Martin Marietta argues that the court misapplied the Nixon requirements. Its chief objection is that it thinks that the district court misapplied the admissibility criterion by improperly using a broad civil discovery standard rather than the narrower criminal evidentiary standard.

Martin Marietta has a heavy burden to meet on appeal.

Enforcement of a pretrial subpoena duces tecum must necessarily be committed to the sound discretion of the trial court since the necessity for the subpoena most often turns upon a determination of factual issues. Without a determination of arbitrariness or that the trial court finding was without record support, an appellate court will not ordinarily disturb a finding that the applicant for a subpoena complied with Rule 17(c).

Nixon, 418 U.S. at 702, 94 S.Ct. at 3104 (emphasis in original).

We turn to the three Nixon requirements. While Rule 17(c) is limited to evidentiary materials, that is not to say that the materials subpoenaed must actually be used in evidence. It is only required that a good faith effort be made to obtain evidence. Bowman Dairy Co. v. United States, 341 U.S. 214, 219-20, 71 S.Ct. 675, 678-79, 95 L.Ed. 879 (1951).

All the efforts to obtain material that Pollard makes come in a good faith effort to obtain evidence and the admissibility criterion of the Nixon requirements is thereby met. He seeks results of an internal audit. Since Pollard did not have direct contact with the DOD, the charge against him for defrauding the DOD is essentially a charge that he obstructed Martin Marietta's corporate internal audit of its subsidiary Maxim. The audit is clearly of evidentiary value. Pollard seeks interview notes, transcripts and electronic recordings concerning the audit. They are of evidentiary value. Pollard seeks correspondence and notes relating to the Administrative Settlement Agreement between DOD and Martin Marietta. They are of evidentiary value to Pollard's defense that he was made a scapegoat. Part of that administrative settlement was agreement by Martin Marietta no longer to fund Pollard's defense. Pollard was not indicted until after Martin Marietta had solved its problems: It pled guilty to criminal charges and administratively settled with the DOD. A subpoena of the administrative agreements is at least a good faith effort to acquire evidence by Pollard for a defense that Martin Marietta hung him out to dry while protecting its own interest.

The district court applied the correct standard for the second Nixon requirement: specificity with respect to the documents requested. It found that the requested materials: results of an internal audit, interview notes, transcripts, electronic recordings and correspondence relating to the Administrative Settlement Agreement between Martin Marietta and the DOD, were described with sufficient specificity. In that regard, we note that Pollard had, at the district court's order, greatly limited the scope of documents sought.

While the district court did not make detailed findings regarding relevancy that requirement, the third of the three Nixon requirements, was met. Further, while the Supreme Court in Nixon established relevancy and admissibility as separate requirements, it seems that admissibility subsumes relevancy since one aspect of admissibility is relevance.

The district court concluded that the Nixon requirements were met. That conclusion was not an abuse of discretion and will not be disturbed. Nixon, 418 U.S. at 702, 94 S.Ct. at 3104.

Martin Marietta next argues that, even if the documents were within the scope of a Rule 17(c) subpoena, they are protected from disclosure by either or both of the attorney-client and work-product privileges. A subpoena duces tecum should be quashed or modified if it calls for privileged matter. C. Wright, Federal Practice & Procedure Criminal 2d Sec. 275, at 162-163. Pollard argues that Martin Marietta in settling with the government both as to criminal charges and in the Administrative Settlement Agreement with the DOD impliedly waived the attorney-client and work-product privileges. There can be no dispute but that otherwise privileged materials were disclosed to the United States Attorney and the DOD. The issue is the extent of the implied waiver thereby created.

Implied waiver nullifies a privilege when disclosure of a privileged communication has vitiated confidentiality. Unlike express waiver which allocates control of the privilege between parties to the communication, implied waiver allocates control of the privilege between the judicial system and the party holding the privilege. Comment,...