MATTER OF GRAND JURY SUBPOENA, ETC., NOV. 16, 1974

Decision Date13 November 1975
Docket NumberNo. M 11-188.,M 11-188.
Citation406 F. Supp. 381
PartiesIn the Matter of a GRAND JURY SUBPOENA DUCES TECUM DATED NOVEMBER 16, 1974.
CourtU.S. District Court — Southern District of New York

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Thomas J. Cahill, U. S. Atty., by Elliot G. Sagor, Asst. U. S. Atty., New York City, for the Government.

David A. Ross, S. E. C., Washington, D. C., Samuel Krieger, New York City, for S. E. C.

Bob Glen Odle, Washington, D. C., for Hogan & Hartson, Respondent.

Lord, Day & Lord, by John W. Castles, III, New York City, for Hogan & Hartson.

Williams, Connolly & Califano, by Pierce O'Donnell, John G. Kester and Robert L. Weinberg, Washington, D. C., for Robert L. Vesco.

Squadron, Gartenberg Ellenoff & Plesent, by Neal M. Goldman, New York City, for Stanley Graze.

Robert D. Foglia, New York City, for Norman E. LeBlanc.

MEMORANDUM AND ORDER

CONNER, District Judge:

On July 15, 1975, two attorneys associated with Hogan & Hartson, Esqs., a Washington, D.C.-based law firm, appeared before a Special Grand Jury that was charged with investigating suspected securities manipulations by International Controls Corp. (ICC) and Investors Overseas Services, Ltd. (IOS). In response to a subpoena duces tecum dated November 26, 1974, the Hogan & Hartson attorneys submitted all documents described in the subpoena to be marked for identification as Grand Jury exhibits. The attorneys nonetheless refused to cede certain of those documents for Grand Jury inspection or to testify to their contents, contending that attorney-client and work-product privileges barred them from doing so. The United States Attorney thereupon applied to this Court for an order to compel production of the documents and rendition of the testimony thus withheld.

The Grand Jury exhibits at issue consist of notations and memoranda recording interviews and discussions held during a series of meetings that spanned the period from October 1972 to January 1973; the sessions thus memorialized had been prompted by a Securities and Exchange Commission (SEC) investigation, and subsequent civil action, focused upon suspected broad-ranging and highly sophisticated securities-fraud schemes involving a multitude of individuals and corporations.1 These documents, delivered to the Court for in camera examination, include the following:

a) Grand Jury Exhibit 3, consisting of handwritten notes taken by Arthur J. Rothkopf, an attorney associated with Hogan & Hartson, at a meeting held in the ICC New Jersey offices on October 9, 1972. The notes recorded, inter alia, statements made by Robert L. Vesco, a named respondent in the above-mentioned SEC investigation. But for a brief hiatus that ended on October 9, 1972, Vesco held a variety of principal positions with ICC, both as an officer and as a director, during the period from 1966 to 1973; Vesco was later to be named as an individual defendant in the SEC complaint filed on November 27, 1972, in the Southern District of New York. Also present at the meeting were additional Hogan & Hartson attorneys, officers and directors of ICC, and Howard Cerny, the latter subsequently named a defendant in the SEC action.
b) Grand Jury Exhibits 1 and 1-A, consisting, respectively, of handwritten notes and a typewritten memorandum executed by Alfred J. Dougherty, a Hogan & Hartson attorney. The notes, and the memorandum based upon them, recorded, inter alia, statements made by Norman LeBlanc at a meeting held in Nassau, the Bahamas, on October 28, 1972; LeBlanc, an IOS officer and director from 1970 to the spring of 1972, had been a subject of the SEC investigation and was later to be named an individual defendant in the SEC civil action. Also present at the meeting were another Hogan & Hartson attorney; members of the law firms Paul, Weiss, Rifkind, Wharton and Garrison (Paul, Weiss), then representing Vesco; Steptoe & Johnson and Willkie, Farr and Gallagher, both firms at that time representing IOS; and several individuals who were then targets of the SEC investigation and who were subsequently named as defendants in the SEC complaint.
c) Grand Jury Exhibits 2 and 2-A, consisting, respectively, of handwritten notes and a typewritten memorandum again executed by Dougherty, recording statements made by Stanley Graze at a meeting held in Nassau on December 5, 1972; Graze, a portfolio manager for a number of mutual funds managed by IOS, was among the named individual defendants in the SEC civil action. Also present at the interview was an attorney associated with Steptoe & Johnson.
d) Grand Jury Exhibits 4 and 4-A, consisting of handwritten notes and a typewritten memorandum executed by Sherwin J. Markman, a Hogan & Hartson attorney, recording statements made by Vesco at a meeting held in New York on December 6, 1972. Paul, Weiss attorneys were also present at the interview.
e) Grand Jury Exhibits 5 and 5-A, consisting of handwritten notes and a typewritten memorandum, again executed by Markman, recording statements made by Vesco at a meeting held in Nassau on December 22, 1972. A Paul, Weiss attorney was also present at the interview.
f) Grand Jury Exhibit 6, consisting of a typewritten memorandum executed by Merle Thorpe, Jr., a Hogan & Hartson attorney, recording a discussion between the latter and Vesco in Washington, D. C., on January 10, 1973.

The Government's application with respect to the above documents is uniformly opposed by Vesco, LeBlanc, and Graze,2 through their respective counsel, as well as by Hogan & Hartson. That opposition rests principally on the claim of attorney-client privilege. Under the circumstances of this case, such claim cannot succeed unless 1) the attorney-client privilege may be deemed to attach to communications made in the course, and for the advancement, of a joint defense undertaken by and for independently represented clients, 2) the statements and comments by Vesco, LeBlanc, and Graze were in fact designed to develop or further a joint defense, and 3) the documents recording those communications, if in the first instance thus cloaked by the privilege, have not been divested thereof by virtue of any waiver of that privilege.

I.

This Court begins its inquiry mindful, as it must be, that the attorney-client privilege both serves and disserves the administration of justice. Thus, on the one hand, confidences between a client and his counsel need be preserved lest the course of legal representation founder in the absence of the client's "subjective freedom of mind * * * in seeking legal advice." 8 J. Wigmore, Evidence § 2317 (McNaughton rev. ed. 1961); In re Colton, 201 F.Supp. 13, 15 (S.D.N.Y.1961). Nevertheless, at the same time, there remains the competing principle that the public is entitled "to every man's evidence." 8 Wigmore, supra, § 2192 at 70.

The tension between both principles, always pressing whatever the legal context, is perhaps exacerbated in cases such as the present one. Thus, as the Supreme Court recently observed, in Branzburg v. Hayes, 408 U.S. 665, 688, 92 S.Ct. 2646, 2660, 33 L.Ed.2d 626 (1972),

"because its task is to inquire into the existence of possible criminal conduct and to return only well-founded indictments a grand jury's investigative powers are necessarily broad. * * * Although the powers of the grand jury are not unlimited * * *, the longstanding principle that `the public * * * has a right to every man's evidence,' except for those persons protected by a constitutional, common-law, or statutory privilege, * * * is particularly applicable to grand jury proceedings."

This Court, then, is perforce placed in the role of mediator, charged with ensuring that there be no abuse done by or to the privilege, on the one hand, or the necessarily expansive range of the grand jury inquest, on the other.

II.

The sine qua non of the attorney-client privilege is, of course, a confidence reposed—and effectively imposed—for the purpose of obtaining or furthering legal assistance. It therefore must follow, and in general principle it is universally acknowledged, that communications between a client and his counsel in the presence of a "third party," i. e., one who stands in a neutral or adverse position vis-a-vis the subject of the communication, bespeaks the absence of such confidentiality and thus belies any subsequent claim to the privilege. See, e. g., C. McCormick, Evidence § 91 at 188 (2d ed. 1972); Wigmore, supra, § 2311 at 601-03; Annotation, 141 A.L.R. 553 (1942); cf. In re Horowitz, 482 F.2d 72 (2d Cir. 1973); United States v. Tellier, 255 F.2d 441, 447-48 (2d Cir. 1958).

Those cases in which the privilege has been sustained in relation to communications among, or made in the presence of, two or more lay persons and one or more attorneys may be regarded as clarifications of, rather than exceptions to, the rule set forth above. Thus, for example, where there is consultation among several clients and their jointly retained counsel, allied in a common legal cause, it may reasonably be inferred that resultant disclosures are intended to be insulated from exposure beyond the confines of the group; that inference, supported by a demonstration that the disclosures would not have been made but for the sake of securing, advancing, or supplying legal representation, will give sufficient force to a subsequent claim to the privilege. United States v. United Shoe Machinery Corporation, 89 F.Supp. 357 (Mass.1950); see McCormick, supra, § 91 at 189; 8 Wigmore, supra, § 2312 at 603 & n. 1.

To be sure, what is divulged by and to the clients present at such a meeting cannot be deemed to be confidential inter sese; in any later controversy between or among those clients, the privilege could not stand as a bar to full disclosure at the instance of any one of them.3 See, e. g., Grand Trunk Western R. R. Co. v. H. W. Nelson Co., 116 F.2d 823, 835 (6th Cir. 1941); McCormick, supra, § 91 at 189-90; 8 Wigmore, supra, § 2312 at 605-06; cf. ...

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