U.S. v. Doe

• Decision Date: 13 December 1999
• Docket Number: Docket No. 99-6311,DEFENDANT-APPELLANT
• Citation: 219 F.3d 175
• Parties: (2nd Cir. 2000) IN RE: GRAND JURY PROCEEDINGS UNITED STATES OF AMERICA, APPELLEE, v. JOHN DOE,August Term 1999 Argued:
• Court: U.S. Court of Appeals — Second Circuit

Page 175

219 F.3d 175 (2nd Cir. 2000)

IN RE: GRAND JURY PROCEEDINGS

UNITED STATES OF AMERICA, APPELLEE, v. JOHN DOE, DEFENDANT-APPELLANT.

Docket No. 99-6311

August Term 1999

UNITED STATES COURT OF APPEALS FOR THE SECOND CIRCUIT

Argued: December 13, 1999

July 21, 2000

Appeal from order of the United States District Court for the Southern District of New York (Preska, J.) granting the government's motion to compel disclosure of certain documents and communications designated as privileged by appellant John Doe corporation. Appellant is the subject of a grand jury investigation on charges of unlawful sale of firearms and related items in violation of 18 U.S.C. § 922 et seq. Appellant claims that it has not waived its attorney-client and work-product privileges as a result of several statements made by witnesses in the grand jury. Vacate and remand for further consideration in light of this opinion. [Copyrighted Material Omitted]

[Copyrighted Material Omitted]

[Copyrighted Material Omitted] Mark J. Hulkower, Washington D.C. (steptoe & Johnson Llp, of counsel; Reid H. Weingarten, Bruce C. Bishop, on the brief), for appellant.

Alexandra A. E. Shapiro, New York, N.Y. (Mary Jo White, United States Attorney for the Southern District of New York, of counsel; Andrea L. Weiss, David D. Finn, on the brief), for appellee.

Feinberg, Cardamone, Leval, Circuit Judges.

FEINBERG, Circuit Judge.

This appeal raises significant questions of first impression in this court regarding application of the attorney-client and work-product privileges in the corporate context. The questions are (1) whether a corporate officer can impliedly waive the corporation's attorney-client and work-product privileges in his grand jury testimony, even though the corporation has explicitly refused such a waiver; and if the answer is yes, (2) what factors a district court should consider in deciding whether a waiver has occurred. We hold there can be such a waiver, and discuss below the relevant criteria in deciding its scope.

This case arises out of an ongoing grand jury investigation into allegedly illegal sales of firearms and other contraband by John Doe Corporation (Doe Corp.).¹ Doe Corp. appeals from an order of the United States District Court for the Southern District of New York, Loretta A. Preska, J., entered in October 1999, directing it to produce documents subpoenaed by the grand jury for which Doe Corp. has claimed the attorney-client and work-product privileges. The district court found that statements made by a corporate officer and by in-house counsel to the grand jury waived the corporation's privileges because they unfairly, selectively and deliberately disclosed privileged communications for exculpatory purposes. On appeal, Doe Corp. argues that there was no waiver of either privilege as a result of the grand jury testimony. Further, Doe Corp. argues that even if some of the testimony could be construed as a waiver, the district court erred in failing to narrow the scope of discovery to cover only the disclosed subject matter. For reasons set forth below, we vacate the order of the district court and remand for further proceedings consistent with this opinion.

I. Background

Beginning in 1998, Doe Corp. learned that it was involved in facilitating transactions involving the sale of firearms and related items. Consequently, several representatives of Doe Corp. met with officials of the Bureau of Alcohol, Tobacco and Firearms (ATF) to discuss whether Doe Corp. should be concerned about any legal liabilities as a result of these sales. Doe Corp. claims that it was advised by the ATF officials that it need not be concerned about legal liability because of its limited role in the transactions.

Since approximately January 1999, a grand jury in the Southern District of New York has been investigating Doe Corp.'s firearms transactions. In June 1999, the grand jury issued a subpoena in which it formally requested Doe Corp. to waive its attorney-client and its work-product privileges and produce "communications with attorneys regarding its policies and practices with regard to the sale... of firearms...." The subpoena required Doe Corp. to produce a privilege log if it elected not to waive the privileges. After several discussions with the government regarding waiver, Doe Corp. decided not to waive its privileges and so notified the government. In July 1999, the government subpoenaed four Doe Corp. employees, including its chief in-house counsel, to testify before the grand jury. In response to the subpoenas, Doe Corp.'s outside counsel contacted the government to discuss the scope of witnesses' testimony in light of Doe Corp.'s refusal to waive its privileges and the likelihood that several areas of inquiry before the grand jury would implicate privileged communication. The government rebuffed Doe Corp.'s offer to engage in proffer sessions, and stated that the witnesses were free to assert the privileges in the grand jury.

A. The Grand Jury Proceedings

The government contends that Doe Corp. lost its attorney-client and work-product privileges primarily as a result of the grand jury testimony of two Doe Corp. witnesses: its in-house counsel (Counsel), and its founder, chairman and controlling shareholder (Witness). Counsel's testimony before the grand jury concerned the meeting with the ATF officials. The government argues that after recounting in detail what had transpired at that meeting, Counsel refused to turn over his notes of the meeting, improperly invoking the work-product privilege. Counsel claimed that the notes, although taken by his non-lawyer assistant, constitute work-product.

The government's claim of waiver, however, is principally based on Witness's day-long testimony before the grand jury.² Witness, like Counsel, was subpoenaed to testify individually, as opposed to being proffered by the corporation as its representative. Witness's own counsel, as well as counsel for Doe Corp., were present outside the grand jury room during his testimony. According to both Doe Corp. and Witness, Witness knew that Doe Corp. had asserted the attorney-client and work-product privileges and that he was not authorized to divulge the contents of any privileged communications during his testimony. Doe Corp. had instructed Witness to invoke the privileges as necessary in the grand jury. Witness was also instructed that he could leave the grand jury room to consult with his attorney during questioning -- an option he exercised at least once.

The government points to eight statements in Witness's testimony that, it argues, amount to a waiver of the attorney-client and work-product privileges of Doe Corp. Most of the statements can be characterized as generalized references to counsel's advice, such as "our approach was validated by counsel," "[our control of items for sale was validated] as a result of conversations with counsel," "everything I heard from counsel before the ATF meeting, everything afterwards... supports the fact that we are not legally responsible." A number of the statements, however, were more specific: one concerns counsel's recommendation about the use of credit cards as identification tools, another concerns counsel's advice about whether the company should monitor individual sales, and yet another refers to a report prepared by in-house counsel supporting the continuation of Doe Corp.'s current practices. Doe Corp. argues that the government is using at least some of these statements out of context, and that, in some instances, Witness had no choice but to refer to his counsel's advice in order to provide a complete answer. The government responds that its questions were not improper and were not calculated to "trick" Witness into disclosing privileged information. Indeed, one question by the government directed Witness to avoid discussing counsel's advice, yet he referred to counsel in his answer to that question. The parties agree that on several other occasions Witness did invoke the attorney-client privilege.

B. The district court proceedings

Two months after Witness's grand jury testimony, the government moved to compel production of all of Doe Corp.'s withheld documents, to bar the company from asserting the attorney-client or work-product privileges as to any document that bears on the grand jury investigation, and to require Doe Corp. to respond to any questions previously unanswered on the ground of privilege. The government argued that because Witness repeatedly referred to advice-of-counsel in attempting to justify Doe Corp.'s actions to the grand jury, fairness demanded full disclosure of that advice. Additionally, the government submitted ex parte an affidavit setting forth its need for Doe Corp.'s work-product material.

Doe Corp. responded with a number of arguments. First, neither Witness nor Counsel could waive Doe Corp.'s privileges without its authorization. Second, there was no implied waiver of the attorney-client privilege because the corporation did not raise an "advice-of-counsel" defense, nor did it take any other affirmative steps that would support a finding of waiver. Third, even if some disclosure of privileged communications took place, the district court should limit the disclosure to cover only the narrow subject matter covered in the Witness's testimony. Finally, the work-product privilege was not waived and the government had not shown compelling need justifying disclosure of work-product.

Ruling from the bench, the district court held with regard to the corporation's attorney-client privilege that "[u]nder the facts of this case... there has been a selective disclosure of the substance of the attorney's advice by the chairman, founder and CEO of the company in his grand jury testimony in an exculpatory manner, and accordingly,... such action waive[d] the privilege." The court found that Witness had volunteered privileged information even when the question did not call...