Grand Jury Subpoenas, 89-3 and 89-4, John Doe 89-129, In re

Decision Date26 April 1990
Docket NumberNo. 90-5901,90-5901
Parties, 30 Fed. R. Evid. Serv. 273 In re GRAND JURY SUBPOENAS, 89-3 AND 89-4, JOHN DOE 89-129. UNITED STATES of America, Plaintiff-Appellee, v. UNDER SEAL, * Defendant-Appellant.
CourtU.S. Court of Appeals — Fourth Circuit

Milton Eisenberg, argued, Jack B. Gordon, Bruce J. Casino, Jonathan M. Jacobson, on brief, Fried, Frank, Harris, Shriver & Jacobson, Washington, D.C., for defendant-appellant.

Mark J. Hulkower, Asst. U.S. Atty., argued, Henry E. Hudson, U.S. Atty., on brief, Alexandria, Va., for plaintiff-appellee.

Before ERVIN, Chief Judge, and RUSSELL and WIDENER, Circuit Judges.

WIDENER, Circuit Judge:

The district court in this case granted Movant's motion to quash subpoenas issued by two grand juries with respect to certain papers in its possession on the grounds of attorney-client privilege or work-product privilege, or both, and held that the Government had not established a prima facie case for the crime-fraud-tort exception to the attorney-client privilege. 734 F.Supp. 1206. It also held that the Government was, nevertheless, on the ground of necessity, entitled to certain statements of witnesses contained in the papers otherwise subject to the work-product privilege. But as to the papers in the possession of Subsidiary, which had waived all privileges it might possess, the district court held that all privileges had been waived by the Subsidiary as to a part of the papers, and that no joint defense privilege applied to the balance thereof. The effect of the district court's order was thus to the effect that the Subsidiary had to turn over all of the papers in its possession to the grand jury although the papers might well be subject to either an attorney-client or work-product privilege. We affirm in part, vacate in part, and remand.

In 1984 the United States Army awarded to Movant a contract to provide the Army with certain services. These services were performed by an unincorporated division of Movant for several years. In 1988, Movant created a wholly-owned subsidiary which, as stated before, we will call simply Subsidiary. Subsidiary, as a division and as a corporation, performed the services contracted for by Movant in its contract with the Army. The contract between Movant and the Army was assigned by Movant to Subsidiary but an agreement approving such assignment or novation has not been executed by the Army.

During Movant's performance of its contract with the Army, it became involved in several disputes concerning the obligations of the parties under the contract. In 1985, Movant filed an administrative claim, under certain contractual provisions, for an equitable adjustment to the terms of the contract. It alleged that omissions on the part of the Army had increased the costs of its performance and delayed its completion. In 1985, the Army's contracting officer issued a decision denying Movant's claim and asserting a counter-claim against Movant by the Army on account of damages for delay. Movant then filed its appeal with the Board of Contract Appeals. Movant continued to prosecute the claim against the Army and to defend against the counter-claim. The claim and counter-claim were settled in October of 1989 under what the parties call a walk-away agreement, which apparently means that neither side took anything from the controversy. In September 1988 Movant sold 40% of the stock in Subsidiary to four strangers and sold an additional 20% in January 1989 to four other strangers, thus giving up control of Subsidiary. It sold another 5% in October 1989 and the remainder of its Subsidiary stock in January 1990.

The district court found as a fact that from 1984 until Subsidiary was sold, Subsidiary, first as a division of Movant, then as a true subsidiary, and later as an uncontrolled corporation, "generated documents in connection with administering and performing the contract." Neither party to this dispute takes any exception to that statement.

The order of the district court appealed from was filed April 13, 1990, and the notice of appeal by Movant was filed April 18, 1990. In the meantime, on April 16, 1990, Movant filed a motion for reconsideration, having to do with none of the matters here involved, which was effectively granted by the district court on April 17, 1990. On April 17, 1990, Movant also filed a paper called "Supplemental Memorandum." This paper contained an attachment in the form of a letter agreement between Movant and Subsidiary that the cost and expense of prosecuting the claim against the Army was the sole responsibility of Subsidiary, for the disposition of the proceeds of any recovery, and required Movant's prior consent for settlement at less than a given figure. All in all, the agreement would certainly be evidence which tends to show a joint prosecution by Movant and Subsidiary of the claim against the Army. The record does not show that the letter agreement was before the district court when it entered the order appealed from.

Because of the filing of that paper, we must decide a preliminary question in this appeal. The Government takes the position that that paper is a motion to alter or amend a judgment under FRCP 59, and, since it was not acted upon by the district court prior to the filing of the notice of appeal, the notice of appeal filed by Movant a day later, on April 18, 1990, was of no effect under FRAP 4(a)(4) which provides that a premature notice shall have no effect but that a new notice of appeal must be filed within the prescribed time. Thus, the Government asks us to dismiss the appeal because of the claimed lack of effect of the notice of appeal which was filed on April 18, 1990.

Movant, on the other hand, states that this is an appeal in a criminal case rather than in a civil case. And so, even if the supplemental memorandum amounted to a motion to alter or amend a judgment, our jurisdiction to hear the appeal should not be adversely affected absent prejudice. In this connection, Movant states that the Government had the letter agreement in its possession for a month or two prior to the order of the district court appealed from, so it could not have been prejudiced. Without opportunity to search its papers, the Government's attorney states that he has no recollection of the earlier delivery of the paper one way or the other, but he does not deny receiving it. It may well be that the addition of the letter agreement would make a showing of clearly erroneous of a part of the district court's fact finding easier to come by. We do not have to decide that, however, for we think that the papers before us, as well as the fact finding the district court did make, require us to find that there was a joint effort between Movant and Subsidiary both in the prosecution of the claim against the Army and in defense of the Army's counter-claim. This is shown by what we take as a recognition by the district court of Movant's "cooperation with the Subsidiary in pursuing the Movant's claim against the Government for performance of the contract." In this connection, we note that the district court had at hand some information with respect to any recovery, for it found that "Movant agreed that the Subsidiary would receive a portion of any monetary award involved." Despite all the facts that we have recited, the district court then apparently held that there was no joint defense privilege because there was no joint defense and that Subsidiary "merely" had a "pecuniary interest" in the litigation.

So far as the Government's suggestion that we dismiss this appeal for failing to file properly a notice of appeal, we think the suggestion is not well taken and deny it. We are of opinion this proceeding is criminal rather than civil so that FRAP 4(b) applies to the proceeding rather than FRAP 4(a). The Government relies on In Re Grand Jury Proceedings (Manges), 745 F.2d 1250 (9th Cir.1984), which, in the same context present here, held that an appeal from an order of the district court denying a motion to quash was civil rather than criminal and governed by FRAP 4(a) rather than 4(b) so that a notice of appeal filed 27 days after the district court's order was timely. The Movant relies on In Re Grand Jury Proceedings (Company X), 835 F.2d 237 (10th Cir.1987), which, on an appeal from an order of the district court denying a motion to quash, held that FRAP 4(b), with its 10-day time limit for filing a notice of appeal, applied and that a notice of appeal filed 18 days after the entry of the district court's order was untimely. We only briefly discuss the matter. Company X relies largely on the policy considerations supporting prompt disposition of appeals of decisions in criminal cases, especially those relating to grand jury proceedings, while Manges relies on previous circuit precedent. We are of opinion that the policy considerations favoring prompt disposition of appeals in criminal matters, especially with respect to grand jury proceedings, such as here, should be persuasive, and we hold that this is a criminal matter governed by FRAP 4(b). See also In Re Grand Jury Subpoena Duces Tecum dated January 2, 1985, (Simels), 775 F.2d 499 (2d Cir.1985), which held in the context of a claim for costs that a motion to quash a grand jury subpoena was not a civil action. We think that Manges from the Ninth Circuit, together with the opinions from the Tenth and Second Circuits, contains all the relevant authorities necessary for a disposition of this question, and we will add nothing further except to repeat that we think policy considerations for the prompt disposition of such appeals should control our disposition.

Because we do not have to consider the supplemental memorandum to arrive at our conclusion that there was a joint undertaking of the prosecution of the claim against the Army by Movant and Subsidiary, and a joint defense of the counter-claim, there could...

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