In re Cendant Corp. Securities Litigation
- Reporters:
- Before:
- Scirica, Ambro, Garth
SCIRICA, Chief Judge.
At issue on appeal is whether the “work product” of a non-testifying trial consultant in this case is privileged and subject to only limited discovery. Ernst & Young, LLP, and Cendant Corporation are co-defendants in a federal securities class action involving Cendant‘s alleged accounting fraud. The class action claims were settled, leaving claims asserted by Cendant and Ernst & Young against each other as the focus of the remaining litigation.1
Cendant deposed Simon Wood, a former Ernst & Young senior manager and auditor who prepared the Cendant financial statements at issue in the underlying litigation.2 At Wood‘s deposition, Cendant inquired into communications that took place between Wood, Ernst & Young‘s counsel who also represented Wood, and Dr. Phillip C. McGraw of Courtroom Sciences, Inc. Dr. McGraw is a consulting expert in trial strategy and deposition preparation who was retained as a non-testifying trial expert to assist Ernst & Young‘s counsel in anticipation of litigation.
Specifically, Cendant‘s counsel asked Wood: “Have you ever met Phil McGraw?“; “On how many occasions did you meet with Phil McGraw?“; “Did you understand Phil McGraw to be a jury consultant?“; “Did Mr. McGraw provide you with guidance in your conduct as a witness?“; “Did you rehearse any of your prospective testimony in the presence of Mr. McGraw?“; “In the course of preparing for this deposition . . . did you review any work papers?“; “Did you select the work papers that you reviewed?“; “Did you ask anyone for the opportunity to review any particular work papers?“; and “Did you ask to review work papers on any particular subject?” Ernst & Young‘s counsel objected, citing the work product doctrine and the attorney-client privilege and arguing the discovery sought related to private communications relayed in the presence of counsel and for the purpose of assisting counsel in rendering legal advice. In March 2002, the Special Discovery Master3 held:
Wood may be asked whether he has met with Dr. McGraw, the date and duration of any meetings, who was present and the purpose for same. He may not be asked what Dr. McGraw told the witness, whether testimony was practiced, whether any part of the meetings were recorded, whether the witness took any notes, or whether Dr. McGraw provided the witness
with any documents. In my view, answers to the latter questions would violate the work product doctrine. From the information developed thus far, it appears that Dr. McGraw is an expert retained by Ernst & Young‘s counsel to assist in trial preparation. He is not expected to be called as a witness and no exceptional circumstances have been cited to justify the exploration Cendant seeks.
In November 2002, the District Court reversed the Special Discovery Master‘s determination, holding the work product doctrine and attorney-client privilege did not apply. The District Court said:
[W]ork product deals with things legal, things with preparation, evaluation, strategies, tactics and it is at first limited to lawyers and then will strictly or rigidly expand it, or restrictively expand it to include people such as paralegals and maybe assistants to lawyers because of their intimacy with the lawyer.
The privilege is really that of the lawyers. . . . because he or she has a right to tell his or her client certain things. But, when we go beyond that into a person who is not dealing with the law but telling someone how to prepare it as Blumenthal v. Drudge indicates, one of the questions where the lawyer was telling this witness what to do, it‘s a question what this jury consultant [is] more or less telling that person what to do.
Let me read from . . . the Blumenthal opinion . . . .
“It is true that in some cases the attorney-client privilege may be extended to non lawyers who are employed to assist the lawyer in the rendition of professional legal services. This extension of the privilege to non lawyers, however, must be strictly confined within the narrowest possible limits consistent with the logic of its principle and should only occur when the communication was made in confidence for the purpose of obtaining legal advice from the lawyer. If what is sought is not legal advice or if the advice itself is the accountant‘s rather than the lawyers, no privilege exists.
. . . . Here it appears that Mr. Horowitz was retained for the value of his own advice, not to assist the defendant‘s attorney in providing their legal advice, and the attorney has not carried the burden of demonstrating that the privilege applies.” [W]e all know what a jury consultant does. He doesn‘t come down and tell you in the case of Expert Z you have to blah, blah and you have to be careful of the countervailing opinion in B versus J. He or she says come on now, you‘ve got to spruce up. You have to look this way and you never know what the jury may be composed of demographically. . . .
It‘s not designed to augment. It‘s not designed to substitute for legal advice. That‘s not legal advice. That‘s the cosmetic applied . . . .
(quoting Blumenthal v. Drudge, 186 F.R.D. 236, 243 (D.D.C. 1999)). Ernst & Young now appeals. We will reverse.4
II.
The District Court had jurisdiction under
A.
The work product doctrine is governed by a uniform federal standard set forth in
In performing his various duties, it is essential that
a lawyer work with a certain degree of privacy, free from unnecessary intrusion by opposing parties and their counsel. Proper preparation of a client‘s case demands that he assemble information, sift what he considers to be the relevant from the irrelevant facts, prepare his legal theories and plan his strategy without undue and needless interference. That is the historical and the necessary way in which lawyers act within the framework of our system of jurisprudence to promote justice and to protect their clients’ interests. This work is reflected, of course, in interviews, statements, memoranda, correspondences, briefs, mental impressions, personal belief, and countless other tangible and intangible ways—aptly though roughly termed . . . as the “work product of the lawyer.” Were such materials open to opposing counsel on mere demand, much of what is now put down in writing would remain unwritten. An attorney‘s thoughts, heretofore inviolate, would not be his own. Inefficiency, unfairness and sharp practices would inevitably develop in the giving of legal advice and in the preparation of cases for trial.
It is clear from Hickman that work product protection extends to both tangible and intangible work product. Id.; Federal Practice and Procedure § 2024, at 337 (”
Subdivision (b)(3) reflects the trend of the cases by requiring a special showing, not merely as to materials prepared by an attorney, but also as to materials prepared in anticipation of litigation or preparation for trial by or for a party or any representative acting on his behalf. The rule then goes on to protect against disclosure the mental impressions, conclusions, opinions or legal theories concerning the litigation of an attorney or other representative of a party.
B.
But the work product doctrine is not an absolute bar to discovery of materials prepared in anticipation of litigation. Work product can be produced
upon a showing that the party seeking discovery has substantial need of the materials in the preparation of the party‘s case and that the party is unable without undue hardship to obtain the substantial equivalent of the materials by other means. In ordering discovery of such materials when the required showing has been made, the court shall protect against disclosure of the mental impressions, conclusions, opinions, or legal theories of an attorney or other representative of a party concerning the litigation.
Thus,
Courts have wrestled with the idea of affording opinion work product absolute immunity from discovery. Federal Practice and Procedure § 2026, at 400; 6 Moore‘s Federal Practice § 26.70[5][e], at 26-224 (Mathew Bender 3d ed.). In 1946, the Advisory Committee on Civil Rules proposed a rule that would create absolute protection against discovery into information at the core of the work product doctrine, but the Supreme Court declined to adopt it. Federal Practice and Procedure § 2026, at 400.
In Upjohn v. United States, 449 U.S. 383 (1981), the Supreme Court declined to establish a rule for discovery of core or opinion work product, noting that “some courts have concluded that no showing of necessity can overcome protection of work product which is based on oral statements from witnesses” and that other courts in “declining to adopt an absolute rule have nonetheless recognized that such material is entitled to special protection.” Id. at 401-402. Although the Supreme Court refused to “decide the issue at this time,” the Court took an expansive approach to the work product doctrine, explaining that “such work product cannot be disclosed simply on a showing of substantial need and inability to obtain the equivalent without undue hardship. While we are not prepared at this juncture to say that such material is always protected by the work-product rule, we think a far
This holding is consistent with the language of
[T]he first sentence [of Rule 26(b)(3)] requires protection against disclosure of the mental impressions, conclusions, opinions, or legal theories of an attorney or other representative of a party. The proviso introduces the first sentence of Rule 26(b)(3) (“Subject to the provisions of subdivision (b)(4) of this rule, a party may obtain discovery of documents . . . prepared in anticipation of litigation or for trial . . .“) and signifies that trial preparation material prepared by an expert is also subject to discovery, but only under the special requirements pertaining to expert discovery set forth in Rule 26(b)(4). The proviso does not limit the second sentence of Rule 26(b)(3) restricting disclosure of work product containing “mental impressions” and “legal theories.” Thus, it does not support the district court‘s conclusion that Rule 26(b)(3), protecting this category of attorney‘s work product, “must give way” to Rule
26(b)(4), authorizing discovery relating to expert witnesses.
C.
Litigation consultants retained to aid in witness preparation may qualify as non-attorneys who are protected by the work product doctrine. See, e.g., Ford Motor Co., 110 F.3d at 967 (the work product doctrine protected materials prepared by an in-house technical assistant for meetings to be attended by an outside technical consulting firm and lawyers regarding an issue in a product liability suit); Martin v. Bally‘s Park Place Hotel & Casino, 983 F.2d 1252 (3d Cir. 1993) (a technical report prepared by a consulting firm was protected from discovery because the document was prepared in anticipation of litigation by a party‘s representative (a consultant) for that party‘s representative (the company‘s in-house lawyer)); United Coal Cos. v. Powell Constr. Co., 839 F.2d 958, 966 (3d Cir. 1988) (the work product doctrine extended beyond materials reflecting an attorney‘s mental impressions to encompass materials prepared in anticipation of litigation by a party‘s insurer); Sprague v. Director, Office of Workers’ Compensation Programs, 688 F.2d 862, 869-870 (1st Cir. 1982) (opinion letter setting forth expert‘s medical opinion was protected because it was prepared to advise counsel); see also Dennis P. Stolle et al., The Perceived Fairness of the Psychologist Trial Consultant, 20 Law & Psychol. Rev. 139, 169 (1996) (“Modern trial consulting methods typically consist of many techniques such as witness preparation, and mock trials, that clearly could not be framed as falling outside of the work product rule.“). Moreover, a litigation consultant‘s advice that is based on information disclosed during private communications between a client, his attorney, and a litigation consultant may be considered “opinion” work product which requires a showing of exceptional circumstances in order for it to be discoverable. Duplan Corp. v. Deering Milliken, Inc., 540 F.2d 1215, 1219 (4th Cir. 1976) (“[O]pinion work product immunity now applies equally to lawyers and non-lawyers alike.“); Stanley D. Davis & Thomas D. Beisecker, Discovering Trial Consultant
D.
Cendant concedes “that the work product doctrine extends to materials compiled by a non-attorney, who, as the ‘agent’ of a party or a party‘s attorney, assists the attorney in trial preparation,” and further, “that the doctrine also protects the ‘intangible’ work product of an attorney, such as testimony that would reveal counsel‘s mental impressions or trial strategy.” (Appellee Br. at 26). But Cendant contends that a non-attorney‘s advice regarding witness testimony does not fall under the work product doctrine. Cendant asserts that the jury is entitled to know the consultant‘s communications with the witness, in the same way it is entitled to know and assess all other factors that may have informed the witness‘s testimony and may affect credibility. The District Court held that the work product doctrine should be cabined to lawyers and be strictly limited when applied to a lawyer‘s agent. The District Court said:
[W]ork product deals with things legal, things with preparation, evaluation, strategies, tactics and it is at first limited to lawyers and then will strictly or rigidly expand it, or restrictively expand it to include people such as paralegals and maybe assistants to lawyers because of their intimacy with the lawyer.
The privilege is really that of the lawyers. . . . because he or she has a right to tell his or her client certain things. But, when we go beyond that into a person who is not dealing with the law but telling someone how to prepare it as Blumenthal v. Drudge indicates, one of the questions where the lawyer was telling this witness what to do, it‘s a question what this jury consultant [is] more or less telling that person what to do.
E.
As noted, the District Court held that the work product doctrine should be cabined to lawyers and be strictly limited when applied to a lawyer‘s agent. The District Court said:
I admit that if an attorney had prepped his witness like I think all of us who are single or small firms have done without the need for a jury consultant X, you‘ve got to shave, you‘ve got to do this, you got to put this question, you‘ve got to put that answer that way and all of that, I‘m quite sure anyone in his right mind would consider that part of work product and attorney-client activity and no one even tries to find out what went on.
But my problem is when you don‘t bring in a lawyer, you bring in someone who is not dealing with the law but dealing with the manner in which things are presented, then I think it may be a little bit much to expect that to be countenanced . . . .
After the District Court made this determination, Cendant conceded that it was not accusing Ernst & Young of fabricating false testimony in the meetings between Wood, his attorney, and Dr. McGraw.8 But Cendant argued
We disagree and hold that the work product of Dr. McGraw is privileged and subject to only limited discovery. Ernst & Young contends that questioning into the content of advice Dr. McGraw gave to Wood during a private consultation with Wood‘s attorney clearly calls for attorney work product protection. In retaining Dr. McGraw, Ernst & Young expected all counsel‘s communications with him to be confidential and protected from discovery. Had Ernst & Young or its counsel anticipated that counsel‘s communications with this litigation consultant would be subject to discovery, Ernst & Young asserts Dr. McGraw would not have been retained or the nature and extent of the matters counsel communicated to him would have been severely curtailed.
Ernst & Young asserts that, based upon the expectation of confidentiality, Dr. McGraw participated in frank and open discussions with Ernst & Young‘s counsel regarding counsel‘s view of the important facts of the case, the contentions of the parties, and Ernst & Young‘s trial themes, theories, and strategies. These discussions were at all times understood and intended to be confidential by all participants. Furthermore, in connection with these discussions, Dr. McGraw was provided with documents prepared by Ernst & Young‘s counsel reflecting counsel‘s mental impressions, opinions, conclusions, and legal
IV.
Compelled disclosure of the substance of conversations between Wood, his counsel, and Dr. McGraw would require disclosure of communications protected by the work product doctrine. The communications took place during a consultation that focused on those issues that counsel and Dr. McGraw perceived to be central to the case. Moreover, the communications were intended to be confidential and made in anticipation of litigation. As such, the communications are at the core of the work product doctrine and are only discoverable upon a showing of rare and exceptional circumstances. The issue on appeal is whether the District Court erred in concluding that communications between Dr. McGraw, Wood, and counsel are not protected from discovery by any privilege or immunity.
We hold that the District Court erred and that the Special Discovery Master‘s ruling is essentially correct. These communications merit work product protection. The Special Discovery Master properly found that no exceptional circumstances were cited to justify the exploration sought by Cendant. Nonetheless, we believe Wood may be asked whether his anticipated testimony was practiced or rehearsed. But this inquiry should be circumscribed. As with all discovery matters, we leave much to the sound discretion of the District Court.
I concur fully with the analysis and holding of the Court‘s opinion authored by Chief Judge Scirica. There is no question but that
I am also in accord with Chief Judge Scirica‘s holding that the Special Discovery Master‘s ruling and directions as to limited discovery are correct. In my view, that ruling and those directions should govern the further discovery proceedings.
I write separately, however, for I am also of the opinion that the discovery which was sought in the instant context was precluded as well by the attorney-client privilege—an issue not reached by Chief Judge Scirica in his opinion. See Maj. Op. at 6 n.5. The parties extensively briefed, and presented oral argument on, the applicability of the attorney-client privilege.
While I recognize that in certain respects the attorney-client privilege has more narrow parameters than the work product doctrine, see, e.g., United States v. Nobles, 422 U.S. 225, 238 n.11 (1975), I nevertheless am satisfied that the attorney-client privilege was operative when Dr. McGraw, the client Wood, and E&Y‘s counsel were engaged in contemporaneous and simultaneous discussions concerning the instant litigation. As counsel for E&Y stated in its brief, “the District Court‘s attempt to ‘carve out’ allegedly non-privileged ‘two-way’ communications between a client and a trial consultant during a ‘three-way’ meeting among counsel, the client, and the trial consultant is . . . impossible to execute.” (E&Y Br. at 15.) That view was expressed even more forcefully in Stanley D. Davis & Thomas D. Beisecker, Discovering Trial Consultant Work Product: A New Way to Borrow an Adversary‘s Wits?, 17 Am. J. Trial Advoc. 581, 626-27 (1994) (explaining that communications between a client practicing testimony and a consultant are not discoverable because “[i]ntertwined with the client‘s responses to mock questions, and the consultant‘s reactions thereto, will inevitably be client communications . . . which are . . . intended by the client
The attorney-client privilege operates to protect from disclosure communications among the client, counsel, and in circumstances such as are present here, a third party (here, Dr. McGraw) who was assisting E&Y‘s counsel in the formulation of legal advice. Thus, I am persuaded that in addition to the work product privilege, the attorney-client privilege also protected communications voiced at the meetings of Wood‘s counsel and Dr. McGraw. As I cannot conceive of how this three-way interchange of views among these three participants at their strategy conferences could be dissected or parsed, leaving only E&Y‘s questions and advice, I would also hold that the attorney-client privilege was implicated.
A True Copy:
Teste:
Clerk of the United States Court of Appeals for the Third Circuit
Notes
Subject to the provisions of subdivision (b)(4) of this rule, a party may obtain discovery of documents and tangible things otherwise discoverable under subdivision (b)(1) of this rule and prepared in anticipation of litigation or for trial by or for another party or by or for that other party‘s representative (including the other party‘s attorney, consultant, surety, indemnitor, insurer, or agent) only upon a showing that the party seeking discovery has substantial need of the materials in the preparation of the party‘s case and that the party is unable without undue hardship to obtain the substantial equivalent of the materials by other means. In ordering discovery of such materials when the required showing has been made, the court shall protect against disclosure of the mental impressions, conclusions, opinions, or legal theories of an attorney or other representative of a party concerning the litigation.