United States v. Gulf Oil Corp., 5-108.

• Decision Date: 29 March 1985
• Docket Number: No. 5-108.,5-108.
• Citation: 760 F.2d 292
• Parties: UNITED STATES of America, Petitioner/Appellant, v. GULF OIL CORPORATION, Respondents/Appellee, and Cities Service Oil & Gas Corporation, Intervenor/Appellee.
• Court: U.S. Temporary Emergency Court of Appeals Court of Appeals

760 F.2d 292

UNITED STATES of America, Petitioner/Appellant, v. GULF OIL CORPORATION, Respondents/Appellee, and Cities Service Oil & Gas Corporation, Intervenor/Appellee.

No. 5-108.

Temporary Emergency Court of Appeals.

Argued October 26, 1984.

Decided March 29, 1985.

Mona S. Butler, with Carolyn B. Kuhl and Surell Brady, Dept. of Justice, Washington, D.C.; and David A. Engels and Charles Cope, of Counsel, Dept. of Energy, Washington, D.C., were on the brief for petitioner/appellant U.S. of America.

Charles O. Murray, III, with whom John W. Castles, III and Banks Brown, of counsel, Lord, Day & Lord, New York, New York, were on the brief for respondents/appellee Gulf Oil Corp.

Lynn R. Coleman, Douglas G. Robinson and Richard L. Brusca of Skadden, Arps, Slate, Meager & Flom, Washington, D.C.; and Louis Nizer, Gerald F. Phillips, Arthur D. Rheingold and Michael J. McNamara of Phillips, Nizer, Benjamin, Krim & Ballon, New York City; and Gerald H. Barnes Cities Service Oil and Gas Corp., Tulsa, Okl., were on the brief for intervenor/appellee Cities Service Oil and Gas Corp.

Before GARZA, THORNBERRY and MAXWELL, Judges.

GARZA, Judge.

This appeal follows the district court's refusal to enforce a Department of Energy ("D.O.E.") subpoena against Gulf Oil Corporation ("Gulf"). The subpoena sought production of documents Gulf had received from Cities Service Oil & Gas Corporation ("Cities") pursuant to a merger agreement between Gulf and Cities. The documents can be generally categorized into two groups: those prepared by or on behalf of Cities in preparation for litigation with the D.O.E., and those prepared by or on behalf of Cities for its auditors, Arthur Young & Company ("Arthur Young"). The district court found that all of the documents at issue were immune from discovery under the work product doctrine, and were therefore not subject to discovery by the D.O.E. We affirm the district court's ruling as to those documents generated in preparation for litigation with the D.O.E.; we reverse in part, however, as to those documents prepared at the request of Arthur Young.

I.

In June, 1982, Cities and Gulf entered into a merger agreement. Under the terms of the agreement each company was permitted full access to the business records of the other. The agreement also provided that:

In the event of the termination of this Agreement, each party will, and will cause its representatives to, deliver to the other all documents, work papers and other material, and all copies thereof, obtained by such party or on its behalf from the other party as a result of this Agreement or in connection herewith, whether so obtained before or after the execution hereof, and will hold in confidence all confidential information until such time as such information is otherwise publicly available or to such extent as has been or may be separately agreed in writing by the parties.

Rec. at 247. The merger was ultimately terminated in August, 1982. However, Gulf obtained the documents at issue in the appeal pursuant to the merger agreement and retained microfilmed copies of the documents subsequent to the termination of the merger agreement.

In May, 1983, the D.O.E. instituted an investigation into certain crude oil pricing transactions Cities had engaged in during 1979 and 1980. The legality of these pricing transactions had been the subject of a declaratory judgment action brought by Cities against the D.O.E. in 1980. See Cities Service Co. v. Department of Energy, 520 F.Supp. 1132 (D.Del.1981). At that time, however, the D.O.E. had "expressly declined to take a final position regarding the lawfulness of Cities' transactions." Id. at 1140. Consequently, the district court concluded that Cities' claim was not ripe for judicial review and dismissed the case. This court affirmed. See T.E.C.A. No. 3-28 (Temp.Emer.Ct.App. August 27, 1982). All of the documents involved in this appeal were generated in connection with, or as the result of, the 1980 declaratory judgment suit, and obtained by Gulf pursuant to the merger agreement between Cities and Gulf.

Cities prepared a number of documents in connection with the 1980 declaratory judgment action against the D.O.E. These documents included letters and memoranda setting forth Cities' in-house and retained counsel's mental impressions and analyses regarding the status of the suit;¹ and documents prepared for presenting the merits of the suit.² The D.O.E. concedes that these documents are attorney work product but argues that the work product privilege was waived when the documents were disclosed to Gulf pursuant to the merger agreement.

The remaining documents involved in this appeal were prepared for, and at the request of, Arthur Young. These documents consisted of letters from Cities' general counsel to Arthur Young, and a letter from Cities' general counsel to its controller, a copy of which had been sent to Arthur Young.³ These documents were generated in response to Arthur Young's request for legal opinions concerning the financial implications of the declaratory judgment suit. Arthur Young required this information in order to complete its annual audit of Cities' financial reports which Cities, as a publicly held corporation, was required to file under the federal securities laws. See 15 U.S.C. § 78m.

In July, 1983, having begun its investigation into Cities' pricing transactions, the D.O.E. issued a subpoena to Gulf requesting production of "documents relating or referring to crude oil purchases, sales and exchanges between Cities Service and crude oil resellers and/or traders during the period January 1978 through December 1980." Rec. at 308-310. Gulf, after consulting with Cities, produced a number of documents responsive to the subpoena, but refused to produce documents in which Cities asserted a privilege.

Subsequently, on February 1, 1984, the D.O.E. filed a Petition for Enforcement of Subpoena in the district court for the Southern District of Texas. The district court permitted Cities to intervene. Following a hearing, the district court enforced the subpoena as to those documents in which Cities asserted only an attorney-client privilege; the court refused to enforce the subpoena, however, as to those documents in which Cities asserted a work product privilege. See Rec. at 2. The D.O.E. brought this appeal.⁴

II.

Although the court below did not conduct an in camera review of the documents at issue in this case, its order was based, in part, on the conclusion that the documents were in fact attorney work product. Except as to the documents originally prepared at the request of Arthur Young, the D.O.E. does not challenge this conclusion. To the contrary, the D.O.E. "assumes," and apparently concedes, that the written communications between Cities and its outside counsel⁵ and the documents generated for the purpose of presenting the merits of the declaratory judgment action⁶ are attorney work product. The D.O.E. contends, however, that any privilege enjoyed by these documents was waived by Cities when it disclosed the documents to Gulf pursuant to the merger agreement and permitted Gulf to retain copies of the documents following the termination of the merger agreement. We do not agree.

The work product privilege, like the attorney-client privilege, may be inadvertently waived through disclosure. The standard for determining whether a waiver has occurred varies, however, depending on which privilege is involved. This distinction was explained in United States v. American Tel. and Tel. Co., 642 F.2d 1285 (D.C.Cir.1980) ("AT & T"):

The attorney-client privilege exists to protect confidential communications, to assure the client that any statements he makes in seeking legal advice will be kept strictly confidential between him and his attorney; in effect, to protect the attorney-client relationship. Any voluntary disclosure by the holder of such a privilege is inconsistent with the confidential relationship and thus waives the privilege.

By contrast, the work product privilege does not exist to protect a confidential relationship, but rather to promote the adversary system by safeguarding the fruits of an attorney's trial preparations from the discovery attempts of the opponent. The purpose of the work product doctrine is to protect information against opposing parties, rather than against all others outside a particular confidential relationship, in order to encourage effective trial preparation.... A disclosure made in the pursuit of such trial preparation, and not inconsistent with maintaining secrecy against opponents, should be allowed without waiver of the privilege.

Id. at 1299 (footnotes and emphasis deleted); see also Bogosian v. Gulf Oil Corp., 738 F.2d 587, 593 (3rd Cir.1984). The court further explained that in determining whether a disclosure is fatally inconsistent with maintaining the privilege, the existence of "common interests" between the transferor and transferee should be considered. See AT & T, 642 F.2d at 1299. A transfer made to a party with "strong common interests in sharing the fruit of trial preparation efforts," or such a transfer made concurrently with a guarantee of confidentiality, does not necessarily constitute a waiver of the work product privilege. Id. at 1299-1300.

Applying these guidelines to the instant case, it is apparent that Cities did not waive the work product privilege attached to these documents by disclosing the documents to Gulf pursuant to the merger agreement. Gulf and Cities were obviously not adversaries at the time of the disclosure. To the contrary, they were in the initial stages of becoming parent and subsidiary. Consequently, Gulf had a legitimate, nonadversarial, interest in reviewing Cities' attorneys' work product generated in connection with the declaratory judgment action. Had the merger been consummated, the common interests would have been even stronger. Moreover, the disclosure was made pursuant to a...