Garner v. Wolfinbarger
| Decision Date | 29 September 1970 |
| Docket Number | 26266.,No. 26168,26168 |
| Citation | 430 F.2d 1093 |
| Parties | A. L. GARNER et al., Appellants, v. Rick WOLFINBARGER et al., Appellees. Ex parte A. L. GARNER et al., Petitioners, v. Hon. H. H. GROOMS, U. S. District Judge for the Northern District of Alabama, Rick Wolfinbarger, et al., Respondents. FIRST AMERICAN LIFE INSURANCE COMPANY, Appellants, v. A. L. GARNER et al., Appellees. |
| Court | U.S. Court of Appeals — Fifth Circuit |
J. Vernon Patrick, Jr., Howard P. Walthall, and Marvin Cherner, Birmingham, Ala., for appellants-petitioners, A. L. Garner and others; Berkowitz, Lefkovits, Vann & Patrick, Birmingham, Ala., of counsel.
Robert S. Vance, Birmingham, Ala., for appellant, First American Life Ins. Co.; Jenkins, Cole, Callaway & Vance, Birmingham, Ala., of counsel.
Wm. T. Gossett, Detroit, Mich., William Bew White, Jr., Birmingham, Ala., John C. Bartlett, Orvel Sebring, Gregory M. Harvey, Philadelphia, Pa., amicus curiae.
Charles H. Erwin, Mobile, Ala., for appellees Hiram D. Snowden, B. J. Withrow, Rick Wolfinbarger, Merritt Marine, Oscar B. Liddell and Ollie Howell.
Ronald P. Slepian, Mobile, Ala., for appellees Dr. George Mitchell, Daniel P. Matthews, Bruce W. Skinner and Charles A. Scheuerman; McDermott & Slepian, Mobile, Ala., of counsel.
C. A. L. Johnstone, Jr., J. Jeptha Hill, William H. Hardie, Jr., Mobile, Ala., for appellee Leon V. McVay, Jr.; Johnstone, Adams, May, Howard & Hill, Mobile, Ala., of counsel.
Bert S. Nettles, Mobile, Ala., for appellee William R. Marshall; Johnston, Johnston & Nettles, Mobile, Ala., of counsel.
Champ Lyons, Jr., Herman H. Hamilton, Jr., L. Lister Hill, Montgomery, Ala., for appellees Guy H. Aderholt, William M. Birchfield, Carey P. Buffington, C. T. Fitzpatrick, Dr. David C. Mussleman, Dr. Francis E. Nicholas, John N. Prim, Roy J. Reed, Jr., Ray Wyatt, A. J. Brown, Gale S. Fly; Capell, Howard, Knabe & Cobbs, Montgomery, Ala., of counsel.
Before JOHN R. BROWN, Chief Judge, GODBOLD, Circuit Judge, and CABOT, District Judge.
This case presents the important question of the availability to a corporation of the privilege against disclosure of communications between it and its attorney, when access to the communications is sought by stockholders of the corporation in litigation brought by them against the corporation charging the corporation and its officers with acts injurious to their interests as stockholders. Also we are asked to review the correctness of an order of the District Court transferring the case to another district.
The District Court in an order reported at 280 F.Supp. 1018 (N.D.Ala.1968), held the privilege was not available as against the stockholders as plaintiffs. Subsequently its ruling has been followed in Dahlke v. Morrison, No. 69-497, N.D.Ala., Oct. 3, 1969; Fischer v. Wolfinbarger, Nos. 5911 and 5919, M.D. Tenn., Aug. 29, 1969; and Fischer v. Wolfinbarger, 45 F.R.D. 510 (W.D.Ky. 1968).1
Stockholders of First American Life Insurance Company of Alabama (FAL) brought, in the Northern District of Alabama, a class action alleging violations of the Securities Act of 1933,2 the Securities Exchange Act of 1934,3 SEC Rule 10(b) (5),4 the Investment Company Act of 1940,5 the Alabama Securities Act6 and common law fraud, seeking to recover the purchase price which they and others similarly situated paid for their stock in FAL. The defendants are FAL and various of its directors, officers and controlling persons. The plaintiffs also claim that FAL was itself damaged by alleged fraud in the purchase and sale of securities, and they assert against various individual defendants a derivative action on behalf of the corporation.
FAL filed a cross-claim against all other defendants, asserting in its own behalf the rights the plaintiff shareholders had claimed in the derivative aspect of their complaint.
R. Richard Schweitzer served as attorney for the corporation in connection with the issuance of the FAL stock here involved. After the transactions sued upon were complete he became its president. On deposition Schweitzer was asked numerous questions concerning advice given by him to the corporation about various aspects of the issuance and sale of the stock and related matters. Other questions went into the content of discussions at meetings attended by him and company officials and information furnished to him by the corporation. All questions related to times at which Schweitzer acted solely as attorney, before he became an officer of the company and before the filing of suit. Objections were made by counsel for the corporation and by Schweitzer himself that the attorney-client privilege barred his revealing both communications to him by the corporation and the advice which he gave to the corporation.7
The plaintiffs had served a subpoena duces tecum on Schweitzer to bring various documents to the taking of his deposition. Both he and the corporation claimed the privilege with respect to some of the documents. The District Court treated the subpoena as though it were a motion to produce under Rule 34.
The District Judge held that the privilege is not available to the corporation as against these plaintiff stockholders.
Contemporaneously the District Judge ordered the case transferred to the Southern District of Alabama under 28 U.S.C. § 1404(a).8 With respect to both orders he entered appropriate findings pursuant to 28 U.S.C. § 1292(b), the interlocutory appeal statute.9
This court granted applications to allow both interlocutory appeals — the plaintiffs from the transfer order, docketed as No. 26168, and the defendants from the order denying the claim of privilege, docketed as No. 26266 — but provided that ultimate disposition of the appropriateness of interlocutory appeal would be taken with the case on the merits. Also the plaintiffs filed with this court a petition for a writ of mandamus directing the District Judge to retain jurisdiction of the case in the Northern District. The two interlocutory appeals were consolidated and the petition for mandamus carried with the consolidated case for decision.
The court has concluded that the consolidation of the two interlocutory appeals should be vacated. In this opinion we decide No. 26266, the interlocutory appeal of FAL on the privilege issue. No. 26168, the interlocutory appeal on the transfer issue, shall be a separate proceeding, and the petition for writ of mandamus is carried with it for decision. A separate opinion shall be rendered therein by the same panel of the court and a separate judgment and mandate entered.
The appeal from the order denying the attorney-client privilege to the corporation is proper under § 1292(b). It satisfies each of the three requirements of that subsection. The availability vel non of the privilege of the corporation as against its stockholders is a "controlling question of law" as opposed to a question of fact or matter for the discretion of the trial court. See Continental Grain Co. v. Federal Barge Lines, Inc., 268 F.2d 240 (5th Cir.1959), aff'd sub nom. Continental Grain Co. v. Barge FBL-585, 364 U.S. 19, 80 S.Ct. 1470, 4 L.Ed.2d 1540 (1960). As will appear from our discussion, there is "substantial ground for difference of opinion." The appeal "may materially advance the ultimate termination of the litigation." Several individual defendants have invoked their privilege against self-incrimination. The availability or unavailability of the testimony and documents sought may affect the disposition of the pending motions to dismiss. Review under § 1292(b) is available where decision on an issue would affect the scope of the evidence in a complex case, even short of requiring complete dismissal. Atlantic City Electric Co. v. General Electric Co., 207 F.Supp. 613 (S.D.N. Y.), aff'd, 312 F.2d 236 (2d Cir.1962), cert. denied, 373 U.S. 909, 83 S.Ct. 1298, 10 L.Ed.2d 411 (1963) ().
Turning to the merits, there is no contention by plaintiffs that FAL is outside the ambit of the attorney-client privilege because a corporation is not a client.10 Their argument is that the privilege is not available to FAL in the circumstances of this case against the demands of the corporate stockholders for access to the communications. The corporation says that its right to assert the privilege is absolute and of special importance where disclosure is sought in a suit brought by the shareholders against the corporation. The American Bar Association appears as amicus curiae and supports the view of an absolute privilege.
The privilege does not arise from the position of the corporation as a party but its status as a client. However, in this instance plaintiffs deny the availability to the corporation of the otherwise existent privilege because of the role of the corporation as a party defending against claims of its stockholders.11
We do not consider the privilege to be so inflexibly absolute as contended by the corporation, nor to be so totally unavailable against the stockholders as thought by the District Court. We conclude that the correct rule is between these two extreme positions.
The availability vel non of the privilege involves a complex problem of choice of law. 2B Barron & Holtzoff, Federal Practice & Procedure, § 967 at 241-44 (Wright ed. 1961). The order of the District Court appears to treat Alabama standards as controlling. We conclude that the choice of law cannot be settled by reference to any simple talisman, but can be arrived at only after a consideration of state and federal interests that are inseparable from the factors bearing on the availability of the privilege itself.
Our starting point is Rule 43(a), Fed. R.Civ.P.:
All evidence shall be admitted which is admissible under the statutes of the United States, or under the rules of evidence heretofore applied in the courts of the...
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Table of Cases
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