Haines v. Liggett Group Inc.

• Decision Date: 08 October 1992
• Docket Number: No. 92-5144,92-5144
• Citation: 975 F.2d 81
• Parties: , 36 Fed. R. Evid. Serv. 782 Susan HAINES, as Administratrix ad Prosequendum and Executrix of the Estate of Peter F. Rossi v. LIGGETT GROUP INC., a Delaware Corporation; Loew's Theatres Incorporated, a New York Corporation; R.J. Reynolds Tobacco Co., a New Jersey Corporation; Philip Morris Incorporated, a Virginia Corporation; the Tobacco Institute, Petitioners. Honorable H. Lee Sarokin, United States District Judge for the District of New Jersey, Nominal Respondent.
• Court: U.S. Court of Appeals — Third Circuit

Page 81

975 F.2d 81

61 USLW 2148, 36 Fed. R. Evid. Serv. 782

Susan HAINES, as Administratrix ad Prosequendum and Executrix of the Estate of Peter F. Rossi v. LIGGETT GROUP INC., a Delaware Corporation; Loew's Theatres

Incorporated, a New York Corporation; R.J. Reynolds Tobacco

Co., a New Jersey Corporation; Philip Morris Incorporated,

a Virginia Corporation; the Tobacco Institute, Petitioners.

Honorable H. Lee Sarokin, United States District Judge for

the District of New Jersey, Nominal Respondent.

No. 92-5144.

United States Court of Appeals, Third Circuit.

Argued Aug. 7, 1992.

Decided Sept. 4, 1992.

As Amended Sept. 17, 1992.

Order on Denial of Rehearing Oct. 8, 1992.

Arlin M. Adams (argued), Schnader, Harrison, Segal & Lewis, Philadelphia, Pa., for petitioners.

Marc Z. Edell (argued), Cynthia A. Walters, Budd Larner Gross Rosenbaum Greenberg & Sade, Short Hills, N.J., for respondent.

Before: GREENBERG, ALITO and ALDISERT, Circuit Judges.

OPINION OF THE COURT

ALDISERT, Circuit Judge.

Several important questions are presented in this original petition in mandamus filed by leading tobacco companies. They request us to direct the district court to vacate its order that the crime-fraud exception to the attorney-client, work product and joint defense privileges applies to various documents here, 140 F.R.D. 681, but the primary issue that we must decide is whether the district court properly exercised its reconsideration function under 28 U.S.C. § 636(b)(1)(A) of the Federal Magistrate Act, as amended.

The Act provides that "[a] judge of the court may reconsider any pretrial matter under this subparagraph (A) where it has been shown that the magistrate's order is clearly erroneous or contrary to law." In exercising its review function under this standard, the district court here considered facts that were not before the magistrate judge.

This is not an appeal from final judgment. Rather, it involves a very sensitive issue of discovery that is part of an ongoing personal-injuries action brought under diversity jurisdiction. Because this is a discovery matter, the district court's order is not immediately appealable. Borden Co. v. Sylk, 410 F.2d 843, 845 (3d Cir.1969). We must first decide the extent to which we may reach this issue in proceedings brought under the All Writs Act, 28 U.S.C. § 1651(a), which provides, "The Supreme Court and all courts established by Act of Congress may issue all writs necessary or appropriate in aid of their respective jurisdictions and agreeable to the usages and principles of law." In re School Asbestos Litig., 921 F.2d 1310, 1313 (3d Cir.1990), cert. denied, --- U.S. ----, 111 S.Ct. 1623, 113 L.Ed.2d 720 (1991). Petitioners, various tobacco companies who are defendants in the ongoing litigation, insist that matters ordered disclosed by the district court are privileged and that the crime-fraud exception does not apply.

We deem it appropriate at the outset to explain the nature of the crime-fraud exception, and to do this we refer to the Supreme Court's recent description of the attorney-client privilege's purpose and the reasons for the exception:

We have recognized the attorney-client privilege under federal law, as "the oldest of the privileges for confidential communications known to the common law." Upjohn Co. v. United States, 449 U.S. 383, 389, 101 S.Ct. 677, 682, 66 L.Ed.2d 584 (1981). Although the underlying rationale for the privilege has changed over time, see 8 J. Wigmore, Evidence § 2290 (McNaughton rev. 1961), courts long have viewed its central concern as one "to encourage full and frank communication between attorneys and their clients and thereby promote broader public interests in the observance of law and administration of justice." Upjohn, 449 U.S. at 389, 101 S.Ct. at 682. That purpose, of course, requires that clients be free to "make full disclosure to their attorneys" of past wrongdoings, Fisher v. United States, 425 U.S. 391, 403, 96 S.Ct. 1569, 1577, 48 L.Ed.2d 39 (1976), in order that the client may obtain "the aid of persons having knowledge of the law and skilled in its practice," Hunt v. Blackburn, 128 U.S. 464, 470, 9 S.Ct. 125, 127, 32 L.Ed. 488 (1888).

The attorney-client privilege is not without its costs. Cf. Trammel v. United States, 445 U.S. 40, 50, 100 S.Ct. 906, 912, 63 L.Ed.2d 186 (1980). "[S]ince the privilege has the effect of withholding relevant information from the factfinder, it applies only where necessary to achieve its purpose." Fisher, 425 U.S. at 403, 96 S.Ct. at 1577. The attorney-client privilege must necessarily protect the confidences of wrongdoers, but the reason for that protection--the centrality of open client and attorney communication to the proper functioning of our adversary system of justice--"ceas[es] to operate at a certain point, namely, where the desired advice refers not to prior wrongdoing, but to future wrongdoing." 8 Wigmore, § 2298, p. 573 (emphasis in original); see also Clark v. United States, 289 U.S. 1, 15, 53 S.Ct. 465, 469, 77 L.Ed. 993 (1933). It is the purpose of the crime-fraud exception to the attorney-client privilege to assure that the "seal of secrecy," ibid., between lawyer and client does not extend to communications "made for the purpose of getting advice for the commission of a fraud" or crime. O'Rourke v. Darbishire, [1920] A.C. 581, 604 (P.C.).

United States v. Zolin, 491 U.S. 554, 562-63, 109 S.Ct. 2619, 2626, 105 L.Ed.2d 469 (1989) (footnotes omitted).

The traditional and practical importance of the privilege and the proper application of the exception are at the heart of petitioners' arguments. In addition to challenging the application of section 636(b)(1), petitioners contend that the district court erred in considering the crime-fraud exception: that it applied an evidentiary standard at odds with that set forth in Zolin and that it compounded its error by quoting publicly, before any review process was completed, portions of petitioners' documents claimed to be privileged. Finally, because of certain statements made by the district court in the opinion accompanying its ruling--statements criticizing the tobacco industry that generated widespread attention in the media--petitioners request that the ongoing district court proceedings be assigned to another judge "to preserve justice and the appearance of impartiality." Mandamus Petition at 3 (hereinafter "Pet.").

I.

Susan Haines, administratrix of the estate of the deceased, Peter F. Rossi, a 40- year smoker, filed this personal injury action against petitioners, Liggett Group, Inc., Loew's Theatres, Inc., R.J. Reynolds Tobacco Co., Philip Morris Incorporated and the Tobacco Institute. She alleges claims of product liability, tort and conspiracy and seeks relief under concepts approved in Cipollone v. Liggett Group, Inc., --- U.S. ----, 112 S.Ct. 2608, 120 L.Ed.2d 407 (1992).

As part of her case, Haines seeks discovery of certain documents relating to the Council for Tobacco Research ("the Council" or "CTR"). She argues that these documents are relevant to issues of liability, because they may constitute admissions, may bear on the credibility of parties and witnesses and may support the conspiracy theory.

The Council is the successor to the Tobacco Industry Research Committee, which was formed by several cigarette manufacturers to conduct scientific research on potential health hazards from smoking and to disseminate information to the public regarding this research. The Council did not conduct original research; rather, it funded independent research through a grant program directed by the Scientific Advisory Board. Pet. at 12.

Following the release of the 1964 Surgeon General's Advisory Committee Report on smoking and health, and the subsequent congressional hearings leading to the enactment of the Federal Cigarette Labeling and Advertising Act, 15 U.S.C. § 1331, et seq., the tobacco companies' lawyers advised the companies to fund independent scientific and medical investigations to assist in litigating future claims against the companies. This led to the creation of "CTR special projects," which "were different and separate in procedure, scope, and substance from the research funded by the Advisory Board grant program." Pet. at 13. Each time a research project was proposed that might be of assistance in litigation, the companies consulted with their lawyers and decided, on a project-by-project basis, whether to fund the research as a special project. The approved projects were funded by the Council's accounting department, although some projects were co-funded by other funding institutions.

Haines acknowledges that the special projects were "administered, in large part, by attorneys for the cigarette companies." Respondent's Answer to Petition at 13 (hereinafter "Ans."). Haines contends that the documents sought may show that the Council was a fraudulent public relations ploy. While presented as an independent research organization, its actual function was to assist the tobacco industry in various ways. Ans. at 1-2. Haines contends that the special projects department funded research suggesting that no definite link had been established between smoking and disease. Id.

II.

On July 1, 1988, approximately four years after Haines filed her complaint, she served her third discovery request upon petitioners, seeking documents related to the Council and the Council's Special Projects. According to petitioners, respondent was prompted to request the discovery of these documents because of evidence that had been disclosed in Cipollone v. Liggett Group, Inc., 683 F.Supp. 1487 (D.N.J.1988), a related case also pending before the same district judge.

On July 5, 1990, in answer to respondent's third discovery request, petitioners claim to have produced:

over 2000 responsive documents. Specifically, petitioners produced (1) all correspondence, memoranda, research proposals, and research results prepared by the...