Special September 1978 Grand Jury (II), In re

• Decision Date: 19 December 1980
• Docket Number: No. 79-1218,79-1218
• Citation: 640 F.2d 49
• Parties: 6 Fed. R. Evid. Serv. 616 In re SPECIAL SEPTEMBER 1978 GRAND JURY (II). Appeal of UNITED STATES of America.
• Court: U.S. Court of Appeals — Seventh Circuit

Page 49

640 F.2d 49

6 Fed. R. Evid. Serv. 616

In re SPECIAL SEPTEMBER 1978 GRAND JURY (II) Appeal of UNITED STATES of America.

No. 79-1218.

United States Court of Appeals Seventh Circuit.

Argued Oct. 31, 1979.

Decided Dec. 19, 1980. ^*

Larry C. Willey, U. S. Dept. of Justice, Washington, D.C., for appellant.

Jerold S. Solovy, Jenner & Block, Wilber H. Boies, Chicago, Ill., for appellee.

Before FAIRCHILD, Chief Judge, SWYGERT, Circuit Judge, and GRANT, Senior District Judge. ^**

SWYGERT, Circuit Judge.

This appeal involves two grand jury subpoenas duces tecum, one served on the Chicago law firm of Jenner & Block and the other on the Chicago law firm of McDermott, Will & Emery, for production of files and documents relating to the firms' representation of the Community Currency Exchange Association of Illinois ("the Association") which is the subject of a federal grand jury investigation. At issue is whether the district court erred when it quashed the Jenner & Block subpoena because of the attorney-client privilege and the work product doctrine, and when it quashed the McDermott, Will & Emery subpoena on the basis of the work product doctrine. A preliminary issue raised by appellees Jenner & Block and the Association is whether the Government's in camera submission of Grand Jury material to show prima facie fraud was violative of due process.

We hold that the district court correctly concluded, in the circumstances of this case, that in camera submission was appropriate. After examining the documents submitted in camera by the Government to support its assertion that ongoing fraud by the Association dissipated the attorney-client privilege, we have concluded that a prima facie showing of fraud was made and that the trial judge abused his discretion in upholding the attorney-client privilege with respect to the Jenner & Block subpoena. ¹ Further we hold that the work product doctrine also may not be asserted by the Association because of its ongoing fraud. ² The work product doctrine may be invoked by the Jenner & Block law firm but only to prevent the disclosure of the attorneys' mental impressions, conclusions, opinions, and legal theories about the case. If the Government is able to show extraordinary need, however, the work product doctrine may not bar disclosure. Because the issue of need was not addressed by the trial judge, we remand for that determination.

The trial judge found that there was ongoing client fraud by the Association in connection with the McDermott subpoena and therefore held that the attorney-client privilege was waived. ³ That ruling was not appealed. The McDermott subpoena was quashed because the trial judge held that the work product doctrine prevented enforcement. Because we have concluded that the subpoenaed documents were not prepared in anticipation of litigation, we reverse.

I

The Association is a not-for-profit corporation which serves as a trade association for the Illinois currency exchange industry. ⁴ Its membership includes approximately 550 currency exchange locations and approximately 350 owners. In November 1976, the Special November 1975 Grand Jury served Jack Swirsky, secretary and custodian of records of the Association, with a subpoena calling for a list of all contributions made by the Association or its members to any individual holding an official position in Illinois. ⁵ Before that time the Grand Jury had been investigating the handling of food stamps by Illinois currency exchanges. After the expiration of the 1975 Grand Jury, the currency exchange investigation was transferred to the Special September 1978 Grand Jury and in April 1979, the 1978 Grand Jury returned a thirteen-count indictment, based on allegedly improper political contributions against seventeen currency exchange owners and the Association.

About one month after Swirsky was served with the subpoena requesting information about Association campaign contributions, an article appeared in the Chicago Sun-Times stating that Irving Gottlieb, a currency exchange owner and Association member, had made certain contributions to Illinois politicians for which he was reimbursed by other Association members. The article, dated December 9, 1976, began: "A powerful currency exchange trade group funneled thousands of dollars in illegal contributions to Illinois politicians through its former general counsel, a Sun-Times investigation shows." After learning of the Sun-Times article, Richard Anderson, Chief of Public Disclosure of the Illinois State Board of Elections, sent Gottlieb a letter directing his attention to the reporting requirements of a 1974 Illinois law requiring disclosure of campaign contributions, Ill.Rev.Stat. ch. 46, § 9. Gottlieb referred Anderson's letter to Jenner & Block which thereafter prepared, and on January 31, 1977, filed a report with the Illinois State Board of Elections. ⁶ The report was filed in the name of "an ad hoc group" and not in the name of the Association. An amended report also was filed by the ad hoc group on April 15, 1977.

The trial judge found that the reported workings of the ad hoc group were in fact the "modus operandi of the Association. The reports described monthly contributions of $75 by group members into a fund used to reimburse the members for their individual state and local political contributions. Not disclosed in the reports was a second cash fund also used to reimburse members for political contributions. This second fund ("$300 fund") was composed of $300 collected from each currency exchange at the beginning of each state legislative session.

Two identical subpoenas duces tecum issued to Jenner & Block, one, from the Special November 1975 Grand Jury in February 1978 and the second, from the Special September 1978 Grand Jury in October 1978. The subpoenas directed a representative of the law firm to appear and produce files and documents concerning Jenner & Block's representation of its clients in connection with the reports filed with the Illinois State Board of Elections. ⁷ After receiving the first subpoena, Jenner & Block moved to quash, asserting that the materials requested were protected by the attorney-client privilege and the work product doctrine, and that the subpoena was overbroad, oppressive, and premature. The Government moved to enforce the subpoena, and submitted affidavits stating that the materials would give information as to the states of minds of individual currency exchange owners and the Association and that there was no alternative source of the information because potential witnesses were asserting their Fifth Amendment privileges and would not testify. The Government also submitted a number of in camera exhibits to the district court in support of its assertion that the Association had purposely filed false reports and hence could not avail itself of the attorney-client privilege because of the ongoing fraud exception. Some Association members sought and were granted leave to intervene. The intervenors and Jenner & Block moved for discovery of the documents submitted in camera by the Government.

When the 1975 Grand Jury expired, the trial court had not ruled on the motions to quash the Jenner & Block subpoena nor on the motions for discovery of the in camera material. The Grand Jury then issued an identical subpoena duces tecum. The first subpoena was quashed as moot by the trial court, and the previously-filed pleadings and papers were permitted to stand in relation to Jenner & Block's motion to quash the second subpoena. In January 1979, the court quashed the second subpoena on the basis of the attorney-client privilege and the work product doctrine. The judge found that the Government had failed to make a prima facie showing of ongoing client fraud in the filing of the Board of Elections reports, and that the attorney-client privilege barred disclosure. He also held that the work product doctrine prevented enforcement of the subpoena. In addition, appellees' request to review the Government's in camera submissions was denied. The Government submitted additional in camera exhibits at an ex parte meeting with the district judge, which the Government stated were intended not to change the district court's ruling but which were necessary in order to complete the record. Government counsel and the judge had two other ex parte meetings concerning the supplemental in camera exhibits. The trial judge subsequently filed a slightly revised memorandum opinion and order that preserved his earlier ruling.

The law firm of McDermott, Will & Emery was originally retained by the Association in 1970 after the Association lost its tax exempt status. The McDermott law firm represented the Association before the Internal Revenue Service from mid-1970 to mid-1974, during which time it negotiated the payment of federal tax deficiencies and regained the tax exempt status of the Association. McDermott, Will & Emery continues to represent the Association in tax matters.

Identical subpoenas duces tecum issued from the 1975 Grand Jury in July 1978 and then in October 1978 from the 1978 Grand Jury to the McDermott law firm seeking documents pertaining to the tax status of the Association. ⁸ The law firm produced some documents but refused to produce others, asserting the attorney-client privilege and the work product doctrine. The Government filed a motion to compel production of the withheld documents. Various individuals and the Association were granted leave to intervene, and memoranda were filed by the Government, the law firm and the Association. Included were in camera documents from both the law firm and the Government. The trial judge found that the Association had used the McDermott firm to file fraudulent tax returns during the period for which documents were subpoenaed. On that basis he held that the attorney-client privilege was waived as to the McDermott subpoena; however, he held that the work product doctrine...