Steinhardt Partners, L.P., In re

• Decision Date: 08 November 1993
• Docket Number: No. 873,D,873
• Citation: 9 F.3d 230
• Parties: , Fed. Sec. L. Rep. P 97,818, 27 Fed.R.Serv.3d 726 In re STEINHARDT PARTNERS, L.P., Steinhardt Management Co., Inc., and Michael Steinhardt, Defendants-Petitioners. SALOMON BROTHERS TREASURY LITIGATION, Plaintiff-Respondent, v. STEINHARDT PARTNERS, L.P., Steinhardt Management Co., Inc., and Michael Steinhardt, Defendants-Petitioners, Securities and Exchange Commission, Amicus Curiae. ocket 93-3079.
• Court: U.S. Court of Appeals — Second Circuit

Page 230

9 F.3d 230

62 USLW 2318, Fed. Sec. L. Rep. P 97,818,

27 Fed.R.Serv.3d 726

In re STEINHARDT PARTNERS, L.P., Steinhardt Management Co.,

Inc., and Michael Steinhardt, Defendants-Petitioners.

SALOMON BROTHERS TREASURY LITIGATION, Plaintiff-Respondent, v. STEINHARDT PARTNERS, L.P., Steinhardt Management Co., Inc., and Michael Steinhardt, Defendants-Petitioners, Securities and Exchange Commission, Amicus Curiae.

No. 873, Docket 93-3079.

United States Court of Appeals, Second Circuit.

Argued Oct. 15, 1993.

Decided Nov. 8, 1993.

Frederick P. Schaffer (argued), Schulte Roth & Zabel, New York City, for defendants-petitioners Steinhardt Partners, L.P., Steinhardt Management Co., Inc. and Michael Steinhardt.

Theodore V. Wells, Jr., Lowenstein, Sandler, Kohl, Fisher & Boylan, Roseland, NJ, for defendant-petitioner Michael Steinhardt.

Karen Morris (argued), Morris & Morris, Wilmington, DE, Stanley M. Grossman, Pomerantz Levy Haudek Block & Grossman, Jules Brody, Stull, Stull & Brody, New York City, for plaintiff-respondent Salomon Bros. Treasury Litigation.

Paul Gonson, Solicitor, S.E.C., Washington, DC, for amicus curiae S.E.C.

Before: NEWMAN, Chief Judge, KEARSE, Circuit Judge, and TENNEY ¹, District Judge.

TENNEY, Senior District Judge.

Defendants-petitioners Steinhardt Partners, L.P., Steinhardt Management Co. and Michael Steinhardt (collectively "Steinhardt") are codefendants with several other parties in a civil class action suit alleging manipulation of the market for two-year Treasury notes during the Spring and Summer of 1991. In answer to a discovery request in the class action suit, Steinhardt identified as responsive a memorandum prepared by its attorneys and previously submitted to the Securities and Exchange Commission (SEC). Steinhardt declined to produce the memorandum, claiming that the memorandum was attorney work product. Plaintiffs moved to compel production. The district court granted the motion to compel, holding that the prior disclosure of the memorandum to the SEC waived the claim for work product protection. Steinhardt filed this petition for a writ of mandamus to prevent discovery of the document. The court's jurisdiction arises under 28 U.S.C. Sec. 1651 and the petition is denied.

Background

This petition for a writ of mandamus arises out of highly publicized allegations of wrongdoing in the market for Treasury notes. In June 1991, the SEC began an informal investigation of the Treasury markets. As part of this informal investigation, the SEC asked Steinhardt, among many others, to provide certain documents related to its trading activities. In August of 1991, the SEC began a formal investigation of the Treasury markets, and issued subpoenas to Steinhardt and others. Steinhardt complied with these subpoenas.

In the Spring of 1992, the SEC's Enforcement Division solicited Steinhardt's views regarding several issues in the investigation. The SEC explained to counsel that it had not yet decided whether to initiate enforcement proceedings against Steinhardt. Apparently, existing case law did not provide complete answers to some of the possible legal bases for an enforcement action in the Treasury markets. After two meetings between the SEC and Steinhardt, the Enforcement Division asked Steinhardt's counsel to submit a memorandum that would address the facts and issues involved in the case and discuss the relevant legal theories. Steinhardt claims that the SEC stated that this would not be a so-called Wells submission, although the SEC's amicus brief now characterizes the memorandum as a Wells submission. See 17 C.F.R. Sec. 202.5(c). We do not address the question of whether the memorandum was in fact a Wells submission, since we do not believe that characterizing the memorandum as such alters our conclusion.

Counsel prepared and submitted a memorandum and accompanying exhibits to the SEC on June 26, 1992. A notice reading "FOIA Confidential Treatment Requested" appeared on the document. Steinhardt does not dispute the SEC's assertion that there was no agreement that the SEC would maintain the confidentiality of the memorandum. See Amicus Brief of SEC at 8. To date, the SEC has not brought any enforcement proceedings against Steinhardt related to its trading activities in the Treasury markets during 1991.

While the SEC investigated the Treasury markets, civil suits commenced against Steinhardt and numerous other defendants. Now consolidated as a class action, the suits allege various acts of fraud and manipulation in the Treasury markets, and have not reached a hearing on the merits. During discovery, plaintiffs requested all documents previously produced by defendants to any investigating government agency. Steinhardt identified the June 26, 1992 memorandum as responsive to the request, but declined to produce the document, citing the work product doctrine. On June 3, 1993, plaintiffs moved to compel production of the memorandum. After hearing the parties on June 17, 1993, the district court granted the motion to compel on June 30, 1993. Steinhardt promptly filed a petition for mandamus. This court entered a stay of the order compelling production, pending consideration of the petition for mandamus.

Discussion

I.

As a threshold matter, the court must determine whether it will use mandamus to review the district court's order compelling production of the memorandum. We have consistently expressed reluctance to use mandamus as a means to circumvent the general rule that pretrial discovery orders are not appealable. In re W.R. Grace & Co., 984 F.2d 587, 589 (2d Cir.1993). "Unlike other circuits, we have rarely used the extraordinary writ of mandamus to overturn a discovery order involving a claim of privilege." Chase Manhattan Bank, N.A. v. Turner & Newall, PLC, 964 F.2d 159, 163 (2d Cir.1992). The circuit will use mandamus to review discovery orders involving a claim of privilege only when:

(i) an issue of importance and of first impression is raised; (ii) the privilege will be lost in the particular case if review must await a final judgment; and (iii) immediate resolution will avoid the development of discovery practices or doctrine undermining the privilege.

W.R. Grace, 984 F.2d at 589, quoting Turner & Newall, 964 F.2d at 163.

This dispute presents one of the very rare circumstances permitting the use of mandamus to review a district court order. The circuit has not previously resolved the important question of whether disclosure of attorney work product in connection with a government investigation waives the privilege in later civil discovery. The district courts of the circuit have addressed similar questions, arriving at different results. See Enron Corp. v. Borget, 1990 WL 144879 (S.D.N.Y. Sept. 22, 1990) (no waiver of work product protection); Teachers Ins. & Annuity Ass'n v. Shamrock Broadcasting Co., 521 F.Supp. 638 (S.D.N.Y.1981) (disclosure to SEC waived attorney-client privilege); Byrnes v. IDS Realty Trust, 85 F.R.D. 679 (S.D.N.Y.1980) (applying Eighth Circuit law and holding attorney-client privilege not waived); GAF Corp. v. Eastman Kodak Co., 85 F.R.D. 46 (S.D.N.Y.1979) (no waiver of work product protection). The circuits have also split on this issue. Compare Westinghouse Elec. Corp. v. Republic of the Philippines, 951 F.2d 1414 (3rd Cir.1991) (waiver of work product and attorney-client privilege upon voluntary disclosure of information to SEC and Department of Justice) and In re Subpoenas Duces Tecum, 738 F.2d 1367 (D.C.Cir.1984) (waiver of work product and attorney-client privilege upon voluntary disclosure of information to SEC) with Diversified Indus., Inc. v. Meredith, 572 F.2d 596, 606 (8th Cir.1977) (en banc) (no waiver of attorney-client privilege).

In addition, the alleged privilege will be lost if review must await final judgment. Disclosure of the memorandum will destroy the alleged privilege and moot the question. As to the final part of the Turner & Newall test, Steinhardt's argument that the district court's order will lead to discovery practices undermining the privilege is not a mere conclusory allegation, but is supported by the decisions of at least one circuit. See Diversified, 572 F.2d at 611. Given the fact that this court is yet to resolve this important issue, a decision from at least one circuit supporting petitioner's argument that the district court's order undermines the privilege, and the need for immediate resolution before the alleged privilege is lost, this petition satisfies the conditions of the Turner & Newall test.

II.

On the merits, we apply a stringent standard of review to petitions for mandamus. The petitioner must show that he or she lacks an adequate alternative means to obtain the relief sought, and must demonstrate a clear and indisputable right to the issuance of the writ, amounting to a clear abuse of discretion or a usurpation of judicial power. Mallard v. United States District Court, 490 U.S. 296, 309, 109 S.Ct. 1814, 1822, 104 L.Ed.2d 318 (1989). This standard requires a showing of an "extreme need for reversal." In re Weisman, 835 F.2d 23, 27 (2d Cir.1987). It is not enough that the court of appeals might disagree with the district judge's decision were it a conventional appeal from a final judgment. Id. " '[E]ven if the judge was wrong, indeed very wrong ... that is not enough.' " Id., quoting United States v. DiStefano, 464 F.2d 845, 850 (2d Cir.1972).

In considering the merits, we do not address the question of whether the memorandum actually constituted attorney work product. The record does not state that the district judge conducted an in camera review of the memorandum to determine whether it was indeed work product. Believing the question of waiver dispositive of the motion, the district court stated that "[t]he present motion involves only whether the protection of the work-product doctrine has been waived as to the Memorandum, not whether the protection ever existed." A66. The record...