Dellwood Farms, Inc. v. Cargill, Inc., 97-2494

• Decision Date: 03 December 1997
• Docket Number: No. 97-2494,97-2494
• Citation: 128 F.3d 1122
• Parties: 1997-2 Trade Cases P 71,962, 39 Fed.R.Serv.3d 188 DELLWOOD FARMS, INC., et al., Plaintiffs-Appellees, v. CARGILL, INC., et al., Defendants.
• Court: U.S. Court of Appeals — Seventh Circuit

Page 1122

128 F.3d 1122

1997-2 Trade Cases P 71,962, 39 Fed.R.Serv.3d 188

DELLWOOD FARMS, INC., et al., Plaintiffs-Appellees, v. CARGILL, INC., et al., Defendants.

No. 97-2494.

United States Court of Appeals Seventh Circuit.

Argued Sept. 15, 1997.

Decided Oct. 30, 1997.

Rehearing and Suggestion for Rehearing En Banc Denied Dec. 3, 1997. ^*

Michael J. Freed, Much, Shelist, Freed, Denenberg & Ament, Chicago, IL, H. Laddie Montague, Jr. (argued), Charles P. Goodwin, Berger & Montague, Philadelphia, PA, Robert N. Kaplan, Kaplan, Kilsheimer & Fox, New York City, for Dellwood Farms, Sun Dew Sales, Corp., and Vitafood Products, Inc.

Barat S. McClain, Mary Jane Fait, Much, Shelist, Freed, Denenberg & Ament, Chicago, IL, H. Laddie Montague, Jr., Charles P. Goodwin, Berger & Montague, Philadelphia, PA, for Rite Foods, Inc.

Edward F. Malone, Jenner & Block, Chicago, IL, Terrence M. Grimm, Winston & Strawn, Chicago, IL, Joseph J. Duffy, Schiff, Hardin & Waite, Chicago, IL, Robert E. Bloch, Mayer, Brown & Platt, Washington, DC, Reid H. Weingarten, Steptoe & Johnson, Washington, DC, John D. Bray, Schwalb, Donnenfeld, Bray & Silbert, Washington, DC, Aubrey M. Daniel, III, Williams & Connolly, Washington, DC, for Cargill, Inc., AE Staley Manufacturing Co., and Archer-Daniels-Midland Co.

Donald R. Harris, Edward F. Malone, Jenner & Block, Chicago, IL, F. Louis Behrends, Behrends & Gentry, Peoria, IL, for American Maize Products Co.

Frank W. Hunger, Office of the United States Attorney General, Washington, DC, Mark Stern (argued), Alisa B. Klein, Carl E. Goldfarb, Department of Justice, Civil Division, Appellate Section, Washington, DC, John J. Powers, III, Department of Justice, Antitrust Division, Appellate Section, Washington, DC, for U.S. Department of Justice.

Joseph J. Duffy, Catherine M. Masters, Schiff, Hardin & Waite, Chicago, IL, John D. Bray, James T. Phalen, Kevin M. Dinan, Schwalb, Donnenfeld, Bray & Silbert, Washington, DC, for Michael D. Andreas.

Reid H. Weingarten, Mark J. Hulkower, Steptoe & Johnson, Washington, DC, for Terry Wilson.

Before POSNER, Chief Judge, and CUMMINGS and ROVNER, Circuit Judges.

POSNER, Chief Judge.

This appeal by the United States from an order by the district judge to turn over to private civil plaintiffs materials that the Department of Justice is holding for use in criminal investigations presents important questions concerning what is known as the "law enforcement investigatory privilege," a judge-fashioned evidentiary privilege. In 1992 the FBI began investigating charges that Archer Daniels Midland had conspired with other agricultural producers to fix the prices of feed and food additives, including lysine, citric acid, and high-fructose corn syrup, in violation of section 1 of the Sherman Act, 15 U.S.C. § 1. In the course of its investigation, the FBI made more than 150 hours of audio and video tape recordings of conversations within ADM and between ADM and its competitors germane to the alleged conspiracy. In 1995 the Department of Justice began presenting evidence to grand juries. The grand jury investigating price fixing of lysine has returned several indictments to which ADM and several other defendants have pleaded guilty. ADM has also pleaded guilty to price fixing of citric acid. To induce ADM to plead guilty to these criminal antitrust offenses the government, without seeking or obtaining any kind of confidentiality agreement or protective order, played some of the tapes for the law firm representing ADM's outside directors. The lawyers made notes of what they heard, and these notes were given to the law firm that represents ADM in class action suits brought against ADM and its suspected coconspirators in the wake of the government's investigation. We do not know who else may have seen the notes.

Some of these suits are scheduled to go to trial in August of next year. The plaintiffs have subpoenaed the tapes in the hope that they contain evidence of illegal conspiracy. They claim that the government waived its investigatory privilege by allowing the lawyers to listen to the tapes, make notes, and turn the notes over to the lawyers who are defending ADM in the civil suits, without insisting on a protective order or confidentiality agreement that would have forbidden the lawyers to whom the government played the tapes to show their notes to anyone except the outside directors and would have forbidden the outside directors to reveal the contents of the tapes or the notes to anyone else. The government does not claim that the tapes are protected from disclosure because they are before a grand jury. Fed. R. Crim. P. 6(e)(2). Maybe they haven't been submitted to a grand jury yet.

The judge, without reaching the issue of waiver, held that the investigatory privilege was inapplicable and ordered the tapes (though only those the government had actually played to the lawyers) turned over to the plaintiffs. It is understood that this means that these tapes will also be made available to the defendants in the civil suits, some of whom are also targets of the government's as yet uncompleted grand jury investigations. The plaintiffs argue in defense of the judge's ruling that the notes of the tapes have given the defendants an unfair advantage in the civil litigation, which can be rectified only by turning the tapes over to the plaintiffs, and that if they must wait until the conclusion of the grand jury investigations before receiving them the trial of the civil suits will be delayed indefinitely, to the plaintiffs' prejudice because witnesses may die or forget. They argue in the alternative that the government waived the privilege by playing the tapes to the outside directors' lawyers without imposing any restriction on the use that the lawyers might make of the information they gleaned from the tapes.

The judge certified his ruling for an immediate appeal under 28 U.S.C. § 1292(b). A motions panel of this court agreed to hear the appeal, but the plaintiffs ask us to reconsider that decision, as we can do, Sokaogon Gaming Enterprise Corp. v. Tushie-Montgomery Associates, Inc., 86 F.3d 656, 658 (7th Cir.1996), and to dismiss the appeal on the ground that it does not satisfy the criteria of section 1292(b), on which see, e.g., In re Hamilton, 122 F.3d 13 (7th Cir.1997); Johnson v. Burken, 930 F.2d 1202, 1205-06 (7th Cir.1991). We need not consider the merits of the request, as the appeal is securely within our jurisdiction by a different route, the collateral order doctrine. It is true that a discovery order is not deemed collateral even if it is an order denying a claim of privilege. We so held emphatically in Simmons v. City of Racine, 37 F.3d 325 (7th Cir.1994), and Reise v. Board of Regents, 957 F.2d 293, 295-96 (7th Cir.1992), and this is the view of the other circuits as well, Boughton v. Cotter Corp., 10 F.3d 746, 749-50 (10th Cir.1993), with the partial exception of the Third Circuit. In re Ford Motor Co., 110 F.3d 954, 957-64 (3d Cir.1997). But all these were cases in which the order was directed against a party, so that he had an appellate remedy at the end of the case if the order was erroneous and harmed him. When the order is directed against a nonparty, as it is here, he has no appellate remedy at the end of the litigation, so he is allowed to appeal immediately. E.g., Ivey v. Harney, 47 F.3d 181, 183 (7th Cir.1995); Frazier v. Cast, 771 F.2d 259, 262 (7th Cir.1985); Boughton v. Cotter Corp., supra, 10 F.3d at 749. We can proceed, therefore, to the merits.

The law enforcement investigatory privilege is not absolute. It can be overridden in appropriate cases by the need for the privileged materials. Tuite v. Henry, 98 F.3d 1411, 1417-18 (D.C.Cir.1996). The balancing of that need--the need of the litigant who is seeking privileged investigative materials--against the harm to the government if the privilege is lifted is a particularistic and judgmental task. It is therefore confided to the discretion of the district judge, meaning that appellate review is deferential. Id. at 1415-16; cf. United States v. Rainone, 32 F.3d 1203, 1206 (7th Cir.1994); United States v. International Brotherhood of Teamsters, 119 F.3d 210, 214 (2d Cir.1997). It seems to us, however, and not only to us, that there ought to be a pretty strong presumption against lifting the privilege. Black v. Sheraton Corp., 564 F.2d 531, 545-47 (D.C.Cir.1977). Otherwise the courts will be thrust too deeply into the criminal investigative process. Unlike France, Italy, and other European countries in which judicial officers control the investigation of crimes, the United States places the control of such investigations firmly in the executive branch, subject only to such limited judicial intervention as may be necessary to secure constitutional and other recognized legal rights of suspects and defendants. The plaintiffs in these civil suits, who are seeking to obtain material from the government's criminal investigation, are not criminal suspects or defendants. They thus have no definite legal right to the fruits of the FBI's investigative endeavors conducted in confidence; and it seems to us that neither should they have a right to force the government to tip its hand to criminal suspects and defendants by disclosing the fruits of the surreptitious (but presumably lawful) surveillance that the FBI conducted. The Freedom of Information Act confers on private persons legal rights to certain information in the possession of the government, but contains an exception for information that is collected and is being used for purposes of law enforcement, if disclosure would interfere with enforcement proceedings. 5 U.S.C. § 552(b)(7)(A). The plaintiffs do not assert any right under the Act.

Fundamentally they are asking the district court to mediate between their desire to expedite their civil litigation and the government's conduct of its criminal investigation. That is not a proper judicial role....