Six Grand Jury Witnesses, In re, s. 333

• Citation: 979 F.2d 939
• Decision Date: 19 November 1992
• Docket Number: 335,334,Nos. 333,D,336,s. 333
• Parties: , 24 Fed.R.Serv.3d 520, 36 Fed. R. Evid. Serv. 1010 In re SIX GRAND JURY WITNESSES. UNITED STATES of America, Appellee, v. John DOE # 1; John Doe # 3; John Doe # 5; John Doe # 6, Respondents-Appellants, Richard Roe; XYZ Corporation, Intervenors-Appellants. ockets 92-6147, 92-6149, 92-6151, 92-6157. Second Circuit
• Court: United States Courts of Appeals. United States Court of Appeals (2nd Circuit)

Page 939

979 F.2d 939

61 USLW 2363, 24 Fed.R.Serv.3d 520,

36 Fed. R. Evid. Serv. 1010

In re SIX GRAND JURY WITNESSES UNITED STATES of America, Appellee, v. John DOE # 1; John Doe # 3; John Doe # 5; John Doe # 6 Respondents-Appellants Richard Roe; XYZ Corporation, Intervenors-Appellants.

Nos. 333, 334, 335, 336, Dockets 92-6147, 92-6149, 92-6151, 92-6157.

United States Court of Appeals,Second Circuit.

Argued Sept. 2, 1992.

Decided Nov. 19, 1992.

Peter J. Romatowski, Washington, D.C. (Clifton S. Elgarten, Cary H. Plamondon, Crowell & Moring, Washington, D.C.; Vincenti & Schickler, New York City, of counsel), for appellant XYZ Corp.

Herald Price Fahringer, New York City (Diarmuid White, Lipsitz, Green, Fahringer, Roll, Salisbury & Cambria, of counsel), for appellant Richard Roe.

Peter J. Tomao, Asst. U.S. Atty. for the Eastern District of New York (Andrew J. Maloney, U.S. Atty., Peter A. Norling, Emily Berger, Charles S. Kleinberg, Asst. U.S. Attys. for the Eastern District of New York, of counsel), for appellee U.S.

John F. Kaley, Weinberg, Kaley & Pergament, P.C., Garden City, N.Y., of counsel; James O. Druker, Kase & Druker, Garden City, N.Y., of counsel, filed a joint brief for respondents-appellants John Doe # 1, John Doe # 3, John Doe # 5, John Doe # 6.

Before FEINBERG, NEWMAN, and CARDAMONE, Circuit Judges.

CARDAMONE, Circuit Judge:

Believing it had been deliberately defrauded by a subcontractor under a government contract, the United States commenced a criminal investigation and summoned several company employees to testify before a grand jury. When the contractor corporation learned it was the target of a criminal investigation it retained counsel, consulted with company officials and implemented an approach to evaluating the work performed that it believed would demonstrate that the government had received fair value for the equipment furnished. The employees responsible for monitoring the costs on the subject government project and who performed the analysis for defense counsel are the ones called before the grand jury. Their refusal to answer certain questions based on their corporate employer's assertion of the attorney-client privilege and the attorney's work product privilege precipitated this appeal.

Squarely presented for reconciliation are the seemingly conflicting interests of disclosure and secrecy. Discovery, designed to advance the pursuit of truth, takes the "sporting" element out of litigation by eliminating surprise. The inviolability of confidential communications between attorney and client and the protected privacy of the attorney's work product also contribute to the efficient functioning of the adversarial system's search for truth. Each ceases to be a privilege when it ceases to be a secret. The question before us asks to what extent may the prosecution obtain access to information defendant counsel alleges it has gathered; or, to phrase it another way, may these employees be compelled--despite the company's assertion of the two privileges--to testify before the grand jury with respect to their activities. With a few exceptions, we think they may be so compelled.

FACTS

The facts in this case are straightforward and undisputed. XYZ Corporation designs and builds timing devices for, among other uses, navigating satellites. A grand jury in the Eastern District of New York is investigating allegations that XYZ and its president, Richard Roe, conspired to defraud the United States in violation of 18 U.S.C. §§ 286 and 371 and committed major fraud against the United States in violation of § 1031 by submitting claims containing false statements in violation of § 1001. The investigation concerns XYZ's performance under contracts to design and build a frequency source amplifier, a voltage controlled crystal oscillator, a frequency multiplier power amplifier, a calibration upconverter, a reference generator unit, and a surface acoustic wave oscillator. The government believes XYZ illegally inflated its costs when submitting vouchers for work performed as a subcontractor on contracts called the "Fox" contracts that XYZ had with a prime government contractor producing this sophisticated space equipment.

The investigation of XYZ for making false and inflated claims for payment under the Fox contracts started after "stop work" orders were issued in February XYZ retained counsel to represent it in connection with the investigation. In January 1991 defense counsel requested that an analysis of costs be made by certain high-ranking employees--John Does # 1 through # 6. These employees were engineering manager, program manager, microwave systems manager, director of marketing, program administrator, and vice-president of systems engineering, respectively. As such, they were the employees responsible for monitoring XYZ's costs and were familiar with the Fox contracts. In conducting their analysis each of them chose what documents they would review. In early 1992 all six employees appeared before the grand jury.

                1988.   Subsequently, certain of the Fox contracts were terminated altogether;  others were renegotiated and continued on a reduced scale.   XYZ's payment claims relate to the work it performed up to the date of the stop-work orders.   It also made proposals on the reconfigured continuing contracts.   The government alleges that XYZ created false books and records in support of its termination payment claims and proposals and that its original corporate records on these contracts were either destroyed or discarded.   At the commencement of its investigation in 1990 the government obtained two broad search warrants and a subpoena for "all documents related to the Fox contracts," resulting in its gathering truckloads of documents from XYZ amounting to at least 170 boxes of corporate records
                

During the course of their grand jury testimony John Does # 1, # 3, # 5 and # 6 refused to answer questions with respect to the analysis they had made of the Fox contracts because this work had been done at the direction of XYZ's counsel. The witnesses read a statement setting forth their understanding that the corporation was asserting the confidentiality of the attorney-client privilege with respect to the witnesses' communication with defense counsel and also the confidentiality under the work product privilege of "all information and materials generated" at the direction of counsel.

On January 27, 1992 counsel for the John Doe witnesses advised XYZ's counsel that in pre-grand jury interviews the government prosecutor had questioned them about communications with XYZ's counsel. Defense counsel thereupon suggested that the witnesses be shown documents of the government's own choosing and be asked to analyze them without reference to the analysis the witnesses had previously conducted for the defense. In rebuffing this approach, the prosecutor explained that this procedure would not elicit the witnesses' opinions regarding which of the government documents would be relevant to determine the costs incurred under the Fox contracts.

On March 10, 1992 the government obtained a show cause order as to why John Does # 1 through # 6 should not be held in contempt for refusing to answer certain questions before the grand jury. The actions against John Does # 2 and # 4 were later discontinued because they were not asked any disputed questions. The unanswered questions, further questions intended to be asked when the witnesses were recalled, and additional questions outlined in the government's trial brief of May 4, 1992 were submitted to defense counsel. All of these questions were collected and submitted to us after oral argument in a letter dated Sept. 3, 1992 from Assistant U.S. Attorney Peter J. Tomao. The 23 unanswered questions are set forth and attached to this opinion as Appendix A.

After conducting an in camera review of the witnesses' analyses, the district court issued an order dated June 8, 1992 directing the witnesses to respond to the questions. This direction was based on the trial court's finding that the information sought by the prosecutor was limited to underlying facts and that the witnesses' responses would not infringe on either of the privileges XYZ Corporation had asserted so long as--the district court carefully added--the questions were not connected to or identified with the analyses the witnesses had conducted at the request of defense counsel. From this order John Does # 1, 3, 5 and 6, XYZ Corporation and Richard Roe,

                its president, appeal.   On June 23, 1992 we granted a motion to expedite this appeal
                

DISCUSSION

Appellants contend that they may rightfully refuse to answer the questions set forth in Appendix A because the information gathered in the employees' analysis is protected by the attorney-client privilege, and that absent a waiver, the prosecutor has no right to discover the communications of these analyses to defense counsel no matter how great the need. Appellants also assert this information is immune from grand jury inquiry under the attorney's work product doctrine. Specifically, they assert that these privileges protect the "substance" of the work product, not simply the written analysis, which the government concedes it is not entitled to. The government responds that the information it seeks is limited to underlying facts and opinions relating to the "Fox" contracts within the knowledge of these witnesses and that it is entitled to their testimony before the grand jury because neither the attorney-client privilege nor the work product doctrine protects the requested information. We discuss each of these privileges in general and then in the context of the questions asked of the John Doe witnesses in this case.

I Attorney-Client Privilege

Fed.R.Civ.P. 26 permits discovery of any relevant matter not subject to privilege. All agree that the rules of discovery are to be applied broadly, but that according the discovery rules liberal treatment...