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In re Grand Jury Proceedings

decided: July 18, 1979.

IN RE: GRAND JURY PROCEEDINGS; FMC CORPORATION, DOUGLAS E. KLIEVER AND CLEARY, GOTTLIEB, STEEN & HAMILTON, APPELLANTS


APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF PENNSYLVANIA (D.C. Misc. No. 79-0149)

Before Hunter, Weis and Garth, Circuit Judges.

Author: Weis

Opinion OF THE COURT

The crime-fraud exception to the attorney-client privilege permits the disclosure of otherwise protected material. In this case, the district court applied the same rule of disclosure to documents covered by the work product privilege. Finding that the government had presented a prima facie case to support the allegation of the commission of a crime, the district court ordered counsel for the corporate client to produce the documents for a grand jury's inspection. We agree with the court's reasoning but remand for a more specific factual determination as to when the alleged crime occurred.

In 1977, a grand jury sitting in Philadelphia began an investigation into allegations that FMC Corporation had made false statements to the Environmental Protection Agency (EPA) in connection with the discharge of carbon tetrachloride into the Kanawha River in West Virginia. No indictments were returned by that grand jury but a new one was convened in January, 1979. It issued subpoenas Duces tecum and Ad testificandum to Douglas Kliever, an attorney and partner in the firm of Cleary, Gottlieb, Steen & Hamilton, which had been retained by FMC. The firm represented FMC in its negotiations with the EPA bearing on pollution problems in the Kanawha River near South Charleston, West Virginia, the site of the corporation's carbon tetrachloride manufacturing facilities.

Kliever produced a number of the subpoenaed documents for the grand jury but asserted the attorney-client and work product privileges as to 31 of them. The government filed a motion to compel production of the withheld documents, to which FMC and Kliever responded. Although FMC did not file a formal petition, it was treated as an intervenor by the district court. The documents were submitted to the district judge for his review In camera, and he heard an ex parte In camera presentation by the government. Following these proceedings, the court directed that all of the documents be produced. In his bench opinion, the district judge assumed for purposes of his ruling that the attorney-client privilege had been properly claimed by FMC. He denied the use of the privilege, however, because the government had "presented prima facie evidence that a crime has been committed by FMC personnel."

The district judge expressed some doubts about the applicability of the work product privilege because the documents were prepared in anticipation of civil matters rather than the grand jury investigations.*fn1 Assuming that issue in favor of the appellants, the court nonetheless ruled that the work product privilege could not be recognized because of the crime-fraud exception, and because the government had "made a showing of substantial need" for the documents. Both FMC and Kliever promptly filed appeals and petitioned this court for a stay of the order directing Kliever to testify, asserting that the attorney would not disobey the district court nor would FMC ask him to do so. We granted the stay, and consolidated this appeal with two others growing out of the same grand jury investigation.*fn2

I.

We turn first to the question of appealability and the standing of the parties to raise certain privileges. Mr. Kliever has not been adjudged in contempt and thus comes within the ambit of United States v. Ryan, 402 U.S. 530, 91 S. Ct. 1580, 29 L. Ed. 2d 85 (1971), and Cobbledick v. United States, 309 U.S. 323, 60 S. Ct. 540, 84 L. Ed. 783 (1940). Those cases hold that unless and until a witness has been held in contempt, he has no standing to appeal from an order directing him to testify or produce documents before a grand jury. The policy, though at times a harsh one, was formulated to discourage appeals in all but the most serious cases. Indeed, in this instance the candid representation by Mr. Kliever that he would not disobey the court order is an example of the prudential considerations underlying the rule. We conclude, therefore, that we have no jurisdiction to consider the appeal on Mr. Kliever's behalf.

FMC, however, stands in a different posture because it has not been subpoenaed to produce the documents and therefore would not be held in contempt were they not produced. The company contends that it comes within the exception to the Cobbledick rule applicable to the owner of a privilege or property who may appeal a production order as an intervenor. As we said in In re Grand Jury Proceedings (Cianfrani), 563 F.2d 577, 580 (3d Cir. 1977), "reasoning pragmatically that a witness will not usually undergo the penalties of contempt in order to preserve someone else's privilege, the courts permit appeal by an intervenor without the necessity of a sentence for contempt." See United States v. Nixon, 418 U.S. 683, 691, 94 S. Ct. 3090, 41 L. Ed. 2d 1039 (1974); Perlman v. United States, 247 U.S. 7, 15, 38 S. Ct. 417, 62 L. Ed. 950 (1918); Velsicol Chemical Corp. v. Parsons, 561 F.2d 671, 673-74 (7th Cir. 1977), Cert. denied, 435 U.S. 942, 98 S. Ct. 1521, 55 L. Ed. 2d 538 (1978); In re Grand Jury Empanelled January 21, 1975 (Freedman), 541 F.2d 373, 377 (3d Cir. 1976); United States v. Doe, 455 F.2d 753, 756- 57 (1st Cir.), Vacated and remanded sub nom., Gravel v. United States, 408 U.S. 606, 92 S. Ct. 2614, 33 L. Ed. 2d 583 (1972). See generally National Super Spuds, Inc. v. New York Mercantile Exchange, 591 F.2d 174, 176-81 (2d Cir. 1979).*fn3

FMC appeals as the nonsubpoenaed holder of the attorney-client privilege and asserts a right to raise the work product privilege as well. It is clear that the attorney-client privilege is one that is owned by the client, Garner v. Wolfinbarger, 430 F.2d 1093, 1096 n.7 (5th Cir. 1970), Cert. denied, 401 U.S. 974, 91 S. Ct. 1191, 28 L. Ed. 2d 323 (1971); Tillotson v. Boughner, 350 F.2d 663, 665 (7th Cir. 1965), and that he has standing to appeal an order directed to his attorney that affects the privilege. Velsicol Chemical Corp. v. Parsons, supra at 674. We thus conclude that the court has jurisdiction to entertain this appeal.

Although FMC owns the attorney-client privilege, its entitlement to the work product privilege is not as clear. We discussed the work product doctrine in In re Grand Jury Investigation (Sun Co.), 599 F.2d 1224 (3d Cir. 1979), noting its application in the civil field, Hickman v. Taylor, 329 U.S. 495, 505-14, 67 S. Ct. 385, 91 L. Ed. 451 (1947), and its inclusion in the criminal law as well, United States v. Nobles, 422 U.S. 225, 236, 95 S. Ct. 2160, 45 L. Ed. 2d 141 (1975), including grand jury proceedings, In re Grand Jury Proceedings (Duffy), 473 F.2d 840, 842-43 (8th Cir. 1973). Essentially, the privilege is designed to prevent disclosure of the attorney's legal theories, research, and certain factual material gathered in preparation for proper representation of the client, Hickman v. Taylor, supra at 508-13, 67 S. Ct. 385.

The parameters of the privilege are still developing but in general the "work product" label fairly conveys the substance of the concept. It is distinct from and broader than the attorney-client privilege, which protects only communications between the attorney and his client. A lawyer may assert the work product privilege, In re Grand Jury Proceeding (Duffy), supra; indeed, it has been said that he alone may invoke it. Hercules, Inc. v. Exxon Corp., 434 F. Supp. 136, 152 (D.Del. 1977). We are not inclined to accept quite that narrow an application, however. It is not realistic to hold that it is only the attorney who has an interest in his work product or that the principal purpose of the privilege to foster and protect proper preparation of a case is not also of deep concern to the client, the person paying for that work. To the extent a client's interest may be affected, he, too, may assert the work product privilege.*fn4 In In re Grand Jury Proceeding (Sun Co.), supra, we considered at length a client's objections to ...


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