Burden-Meeks v. Welch, 02-2460.

• Decision Date: 10 February 2003
• Docket Number: No. 02-2460.,02-2460.
• Citation: 319 F.3d 897
• Parties: Dorothy Jean BURDEN-MEEKS and Sheryl Perez, Plaintiffs-Appellees, v. Dwight WELCH and City of Country Club Hills, Defendants. Appeal of: Intergovernmental Risk Management Agency.
• Court: U.S. Court of Appeals — Seventh Circuit

319 F.3d 897

Dorothy Jean BURDEN-MEEKS and Sheryl Perez, Plaintiffs-Appellees, v. Dwight WELCH and City of Country Club Hills, Defendants.

Appeal of: Intergovernmental Risk Management Agency.

No. 02-2460.

United States Court of Appeals, Seventh Circuit.

Argued December 11, 2002.

Decided February 10, 2003.

Joshua Karsh, Shilpa S. Satoskar (argued), Gessler Hughes Socol Piers Resnick & Dym, Chicago, IL, for plaintiffs-appellees.

Richard T. Ryan, Ryan, Smolens & Jones, Russell W. Hartigan, Hartigan & Cuisinier, Chicago, IL, for defendants.

Larry J. Chilton (argued), Chilton, Yambert & Porter, Chicago, IL, for appellant.

Before COFFEY, EASTERBROOK, and DIANE P. WOOD, Circuit Judges.

EASTERBROOK, Circuit Judge.

Plaintiffs used to be employees of Country Club Hills, a city in Illinois. They contend in this suit under 42 U.S.C. § 1983 that Mayor Dwight Welch fired them for political reasons, violating the first amendment as it has been understood since Elrod v. Burns, 427 U.S. 347, 96 S.Ct. 2673, 49 L.Ed.2d 547 (1976). Resolution of that claim has been delayed by a dispute about access to a document prepared for the Intergovernmental Risk Management Agency (IRMA), a body created by modestly sized municipalities in northeastern Illinois to pool their liability risks. The Constitution of Illinois (see Art. VII § 10) permits municipalities to form intergovernmental cooperative agencies, of which IRMA is one.

The document in question was written by IRMA'S lawyers after it asked them to investigate whether Country Club Hills is doing enough to curtail litigation exposure. This is a vital question, for insurance creates moral hazard: when someone else pays the tab, the insured will take additional risks and may incur costs deliberately. The other 72 members of IRMA do not want to make it cheap for the Mayor of Country Club Hills to violate the Constitution, knowing that only 1/73 of the consequences will be borne by the local taxpayers. Plaintiffs believe that the report contains information that will help them prevail against the City. IRMA responded to the plaintiffs' subpoena, see Fed.R.Civ.P. 34(c), 45, by invoking the attorney-client privilege. Because plaintiffs' claim arises under federal law, this assertion of privilege also depends on federal law. See Fed. R.Evid. 501.

Federal law extends the privilege to communications about legal subjects, and it is hard to see why a business evaluation meets that description. Hiring lawyers to do consultants' work does not bring a privilege into play. But the district judge did not decide whether this report had a component of legal advice, because he held that IRMA had waived any claim of privilege by sharing the report with the Mayor—the defendant in this suit. Knowing disclosure to a third party almost invariably surrenders the privilege with respect to the world at large; selective disclosure is not an option. See, e.g., Dellwood Farms, Inc. v. Cargill, Inc., 128 F.3d 1122, 1126-27 (7th Cir.1997); United States v. Hamilton, 19 F.3d 350, 353 (7th Cir.1994). (One court of appeals thinks that disclosure to a regulatory body does not surrender the privilege with respect to other private persons, see Diversified Industries, Inc. v. Meredith, 572 F.2d 596 (8th Cir.1977) (en banc); see also In re Columbia/HCA Healthcare Corp. Billing Practices Litigation, 293 F.3d 289, 307-14 (6th Cir.2002) (Boggs, J., dissenting); but the majority view is otherwise, and at all events the Mayor of Country Club Hills was not acting as IRMA's regulator.) Disclosure to the Mayor also took care of IRMA'S contention that the report was covered by a "self-critical analysis privilege"—a privilege never recognized in this circuit, and pointless if it too was waived. The district judge added for good measure that the report was not self-critical—it examined the operations of Country Club Hills, not the operations of IRMA itself—and ordered IRMA to give plaintiffs a copy.

Instead of either complying or refusing to do so as a prelude to a citation in contempt of court, the normal way to obtain appellate review of such an order, see United States v. Ryan, 402 U.S. 530, 91 S.Ct. 1580, 29 L.Ed.2d 85 (1971); Cobbledick v. United States, 309 U.S. 323, 60 S.Ct. 540, 84 L.Ed. 783 (1940), IRMA immediately filed a notice of appeal. Because the district court's order is not a final decision under normal standards, see 28 U.S.C. § 1291, we directed the parties to file supplemental briefs addressing the question whether we have appellate jurisdiction. IRMA analogized the situation to that in Perlman v. United States, 247 U.S. 7, 38 S.Ct. 417, 62 L.Ed. 950 (1918), which held that a party claiming a privilege may appeal immediately when the judge directs a non-party holding the documents to disclose them. The idea behind Perlman is that someone who is neither a party to the suit nor a person aggrieved by the disclosure cannot be expected to put his own neck on the chopping block, standing in contempt of court just to help the privilege holder obtain appellate review. See Church of Scientology v. United States, 506 U.S. 9, 18 n. 11, 113 S.Ct. 447, 121 L.Ed.2d 313 (1992) ("a discovery order directed at a disinterested third party is treated as an immediately appealable final order because the third party presumably lacks a sufficient stake in the proceeding to risk contempt by refusing compliance") (emphasis added). IRMA, however, is not disinterested; it asserts a privilege on its own behalf.

When documents are sought from the entity that claims the privilege, there is every reason to insist that it go through the contempt process, which by raising the stakes helps the court winnow strong claims from delaying tactics that, like other interlocutory appeals, threaten to complicate and prolong litigation unduly. See Powers v. Chicago Transit Authority, 846 F.2d 1139 (7th Cir.1988). And, independent of how we may evaluate arguments pro and con, there is the holding of Ryan that (subject to the Perlman proviso and another exception limited to the President of the United States, see United States v. Nixon, 418 U.S. 683, 690-92, 94 S.Ct. 3090, 41 L.Ed.2d 1039 (1974)) non-parties must wait for a contempt citation. Cf. Kerr v. United States District Court, 426 U.S. 394, 96 S.Ct. 2119, 48 L.Ed.2d 725 (1976) (mandamus not available to escape the rule barring appeal of orders requiring the production of documents said to be privileged). Courts recognize one distinction between appeals by parties and appeals by non-parties: parties must wait until the end of the case or a finding of criminal contempt, while non-parties may appeal from a finding of civil contempt. See Charles Alan Wright, Arthur R. Miller & Edward H. Cooper, 15B Federal Practice and Procedure § 3914.23 at 140, 143 & n. 44 (2d ed. 1992) (collecting authority). IRMA has not been found in any kind of contempt, however; it has done nothing to demonstrate that it possesses the sort of vital interest that justifies prolongation of a suit by interlocutory review.

Despite all of this, IRMA still holds a trump card: Dellwood Farms holds that non-parties always may appeal immediately when they contest discovery orders. The discussion is brief—just a single sentence—but it is a square holding. We wrote: "When the order is directed against a nonparty, as it is here, [the nonparty] has no appellate remedy at the end of the litigation, so he is entitled to appeal immediately." 128 F.3d at 1125. Dellwood Farms did not discuss the possibility of obtaining review through the contempt process, nor did it mention Ryan, Cobbledick, or similar decisions. Nor did it recognize that other circuits have resolved the same question against appellate jurisdiction. See, e.g., In re Grand Jury Subpoenas, 123 F.3d 695, 698 (1st Cir.1997) (collecting cases); In re Attorney General of the United States, 596 F.2d 58 (2d Cir. 1979) (holding that even a member of the Cabinet must be cited for contempt of court before a court of appeals will review a discovery order). Instead Dellwood Farms cited three appellate opinions— Ivey v. Harney, 47 F.3d 181, 183 (7th Cir.1995); Frazier v. Cast, 771 F.2d 259, 262 (7th Cir.1985); and Boughton v. Cotter Corp., 10 F.3d 746, 749 (10th Cir.1993)— that suggest the risks of excessive generalization.

Ivey did not entail a discovery dispute; instead a warden was appealing from a writ of habeas corpus ad testificandum, and to the extent the issues were related to discovery it was cousin to Perlman (for the warden, having no interest in the underlying suit, was not about to risk a contempt citation). Frazier likewise did not concern the assertion of privilege by a party resisting discovery; it took up an appeal by a lawyer sanctioned for violating Fed.R.Civ.P. 11. What is more, after we issued Dellwood Farms the Supreme Court scuttled Frazier (and decisions like it in other circuits) by holding that an attorney may not appeal immediately from an award of sanctions. See Cunningham v. Hamilton County, 527 U.S. 198, 119 S.Ct. 1915, 144 L.Ed.2d 184 (1999). Boughton, alone of the three opinions cited by Dellwood Farms, deals with an interlocutory appeal by someone whose claim of privilege has been rejected by a district judge—but it holds that courts of appeals lack jurisdiction in this situation. The Tenth Circuit collected decisions from many federal appellate courts to the effect that neither the collateral order doctrine...