Tennenbaum v. Deloitte & Touche

• Decision Date: 29 February 1996
• Docket Number: Nos. 94-56242,94-56292,s. 94-56242
• Citation: 77 F.3d 337
• Parties: , 43 Fed. R. Evid. Serv. 826, 96 Cal. Daily Op. Serv. 1323, 96 Daily Journal D.A.R. 2256 Michael E. TENNENBAUM; Barry A. Porter; Marylyn Hoenemeyer; Robert C. Becker, Jr., et al., Plaintiffs-Appellees, v. DELOITTE & TOUCHE, Defendant-Appellee, and Thomas P. WILLIAMS, Chapter 7 Trustee, Appellant.
• Court: U.S. Court of Appeals — Ninth Circuit

Page 337

77 F.3d 337

33 Fed.R.Serv.3d 1107, 43 Fed. R. Evid. Serv. 826,

96 Cal. Daily Op. Serv. 1323,

96 Daily Journal D.A.R. 2256

Michael E. TENNENBAUM; Barry A. Porter; Marylyn Hoenemeyer; Robert C. Becker, Jr., et al Plaintiffs-Appellees, v. DELOITTE & TOUCHE, Defendant-Appellee and Thomas P. WILLIAMS, Chapter 7 Trustee, Appellant.

Nos. 94-56242, 94-56292.

United States Court of Appeals, Ninth Circuit.

Argued and Submitted Feb. 6, 1996.

Decided Feb. 29, 1996.

Jeanne E. Irving, Hennigan, Mercer & Bennett, Los Angeles, California, for appellant.

Jeffery D. McFarland, Milbank, Tweed, Hadley & McCloy, Los Angeles, California, for plaintiffs-appellees Michael E. Tennenbaum, et al.

Cheryl D. Justice and Leanne J. Fisher, Gibson, Dunn & Crutcher, Los Angeles, California, for defendant-appellee Deloitte & Touche.

Before: POOLE, WIGGINS, and RYMER, Circuit Judges.

RYMER, Circuit Judge:

We must decide whether a promise by a holder of the attorney-client privilege to waive the privilege, contained in a written settlement agreement in one lawsuit, waives the holder's right to claim that privilege in a separate lawsuit, in the absence of the holder's disclosure of a privileged communication.

Thomas P. Williams, the Chapter 7 Bankruptcy Trustee for several related Glen Ivy corporate entities, appeals the district court's order requiring Glen Ivy's former lawyer, Maurice Hart, to answer plaintiff Michael E. Tennenbaum's deposition questions that ask him to reveal privileged communications. ¹ The district court concluded that Williams waived his right to claim the privilege as to these questions by agreeing, in settlement of a related state court action, that he "will waive the attorney-client privilege as to pre-petition communications with all counsel."

We hold that Williams's mere agreement to waive the privilege in the Kester action, unaccompanied by a disclosure of privileged documents, did not constitute a waiver of his right to claim that privilege subsequently. As we have jurisdiction over Williams's appeal of the district court's order pursuant to the Interlocutory Appeals Act, 28 U.S.C. § 1292(b), see Transamerica Computer Co. v. IBM, 573 F.2d 646, 647-48 (9th Cir.1978), we reverse.

I

Before filing bankruptcy, Glen Ivy, through its authorized representatives, had numerous confidential communications with its lawyers, both orally and in writing, regarding various legal matters. There is no dispute that these communications, when made, satisfied each element of the attorney-client privilege and, therefore, that the holder of the privilege at that time--Glen Ivy--could have claimed the privilege to prevent their disclosure outside the lawyer-client relationship.

Shortly thereafter, the bankruptcy court appointed Thomas P. Williams as Trustee for Glen Ivy. About one year later, a class of all owners of fractional timeshare interests in Glen Ivy-owned or-operated resorts brought a state court action against Glen Ivy's major banking creditors (the "Kester" action) alleging a massive conspiracy to oversell timeshares. Within months, the plaintiffs, the banking defendants, and Williams as Trustee agreed to settle. Paragraph 8 of the settlement agreement, entitled "Cooperation/Waiver of Attorney Client Privilege," provides in pertinent part that "... the Trustee will waive the attorney-client privilege as to pre-petition communications with all counsel...." The parties agree, and the district court noted, that Williams hasn't disclosed any privileged communications pursuant to paragraph 8, nor have the plaintiffs in Kester had physical access to the communications or even requested that Williams make a disclosure or grant access.

A few months before Kester was filed, a group of sophisticated private investors, investment bankers, and venture capitalists who had purchased subordinated notes and shares of stock in Glen Ivy--led by one of Glen Ivy's former directors, Michael E. Tennenbaum--sued Deloitte and three former officers of Glen Ivy. During discovery in this action, the district court, over Williams's attorney-client privilege objection, ordered Glen Ivy's former counsel to answer Tennenbaum's deposition questions calling for disclosure of certain privileged communications. The district court reasoned that Williams waived his right to claim the privilege when he signed the written settlement agreement in Kester that contained the promise of waiver. The district court certified its order pursuant to 28 U.S.C § 1292(b), and we agreed to hear Williams's interlocutory appeal. ²

II

Whether a holder has waived the right to claim the attorney-client privilege is a mixed question of law and fact which we review de novo. The Home Indem. Co. v. Lane Powell Moss and Miller, 43 F.3d 1322, 1326 (9th Cir.1995). We do not review merely for "clear error," as Tennenbaum suggests that we should, unless, unlike here, the parties agree on the scope of the privilege but disagree about the material facts. See, e.g., United States v. Zolin, 809 F.2d 1411, 1417 (9th Cir.1987).

III

Tennenbaum does not dispute that his deposition questions ask Hart to reveal communications that fall squarely within the scope of the attorney-client privilege. Nor does Tennenbaum contend that Williams isn't the holder of the privilege as to those communications or that Williams failed to claim the privilege in this case in a timely and procedurally proper manner. Rather, both parties agree that the principal issue before us is whether Williams waived his right to claim the privilege when he signed the settlement agreement in Kester, solely because in paragraph 8 of that agreement he promises to waive the privilege.

Williams maintains that his promise to waive the privilege, even though embodied in a written settlement agreement, did not waive his right to claim the privilege in response to Tennenbaum's inquiries because he never disclosed any privileged communications pursuant to his promise. Tennenbaum, on the other hand, argues that Williams lost his right to claim the privilege in any context once he signed the agreement to waive the privilege, without regard to whether Williams ever kept his promise, because the mere act of agreeing to waive the privilege evidenced his desire and intent not to maintain the confidentiality necessary to keep the privileged communications privileged.

Because the lawsuit from which this privilege issue arises is grounded exclusively in the federal securities laws, we look first to the federal common law of privilege. See Dole v. Milonas, 889 F.2d 885, 889 n. 6 (9th Cir.1989) (citing Fed.R.Evid. 501). We may also look to state privilege law--here, California's--if it is enlightening. See Lewis v. United States, 517 F.2d 236, 237 (9th Cir.1975) ("In determining the federal law of privilege in a federal question case, absent a controlling statute, a federal court may consider state privilege law. But the rule ultimately adopted, whatever its substance, is not state law but federal common law."). And we may seek guidance from the proposed Federal Rules of Evidence, which the Supreme Court prescribed and approved but ultimately Congress didn't adopt, because "the proposed rules constitute 'a convenient comprehensive guide to the federal law of privilege as it now stands.' " Transamerica Computer Co., 573 F.2d at 651 (quoting United States v. Mackey, 405 F.Supp. 854, 857-58 (E.D.N.Y.1975)).

Although there is no authority that squarely addresses this waiver issue, federal caselaw, California Evidence Code section 912(a), and Rule 511 of the proposed Federal Rules of Evidence convince us that Williams's mere promise to waive the privilege, without a disclosure of privileged communications, did not waive his right to claim the privilege. ³

The doctrine of waiver of the attorney-client privilege is rooted in notions of fundamental fairness. Its principal purpose is to protect against the unfairness that would result from a privilege holder selectively disclosing privileged communications to an adversary, revealing those that support the cause while claiming the shelter of the privilege to avoid disclosing those that are less favorable. See 8 J. Wigmore, Evidence § 2327 at 636 (McNaughton rev. 1961). For this reason we have admonished that the focal point of privilege waiver analysis should be the holder's disclosure of privileged communications to someone outside the attorney-client relationship, not the holder's intent to waive the privilege. We held in Weil v. Investment/Indicators, Research & Management, 647 F.2d 18 (9th Cir.1981), for example, that a holder's disclosure of privileged communications during discovery waives the holder's right to claim the privilege as to communications about the matter actually disclosed, despite the holder's "bare assertion that it did not subjectively intend to waive the privilege" when it made the disclosure. Id. at 25; see also United States v. Mendelsohn, 896 F.2d 1183, 1188-89 (9th Cir.1990) (a client's disclosure of the purported legal advice received from his lawyer waived his right to claim the privilege to prevent his lawyer from testifying as to the actual advice given, and his "intent or lack of intent to waive the attorney-client privilege is not dispositive"); Chevron Corp. v. Pennzoil Co., 974 F.2d 1156, 1162 (9th Cir.1992) (refusing to extend the scope of a waiver beyond the few privileged documents actually disclosed).

It follows from Weil and its progeny that a mere intention to waive the...