                             In the
 United States Court of Appeals
               For the Seventh Circuit
                          ____________

No. 02-2460
DOROTHY JEAN BURDEN-MEEKS and SHERYL PEREZ,
                                              Plaintiffs-Appellees,
                                 v.

DWIGHT WELCH and CITY OF COUNTRY CLUB HILLS,
                                                        Defendants.

APPEAL OF:
  INTERGOVERNMENTAL RISK MANAGEMENT AGENCY
                  ____________
            Appeal from the United States District Court
       for the Northern District of Illinois, Eastern Division.
             No. 99 C 4754—Milton I. Shadur, Judge.
                          ____________
 ARGUED DECEMBER 11, 2002—DECIDED FEBRUARY 10, 2003
                   ____________


  Before COFFEY, EASTERBROOK, and DIANE P. WOOD,
Circuit Judges.
   EASTERBROOK, Circuit Judge. Plaintiffs used to be
employees of Country Club Hills, a city in Illinois. They
contend in this suit under 42 U.S.C. §1983 that Mayor
Dwight Welch fired them for political reasons, violating the
first amendment as it has been understood since Elrod v.
Burns, 427 U.S. 347 (1976). Resolution of that claim has
been delayed by a dispute about access to a document pre-
2                                                No. 02-2460

pared for the Intergovernmental Risk Management Agency
(IRMA), a body created by modestly sized municipalities in
northeastern Illinois to pool their liability risks. The
Constitution of Illinois (see Art. VII §10) permits municipal-
ities to form intergovernmental cooperative agencies, of
which IRMA is one.
  The document in question was written by IRMA’s lawyers
after it asked them to investigate whether Country Club
Hills is doing enough to curtail litigation exposure. This is
a vital question, for insurance creates moral hazard: when
someone else pays the tab, the insured will take additional
risks and may incur costs deliberately. The other 72 mem-
bers of IRMA do not want to make it cheap for the Mayor of
Country Club Hills to violate the Constitution, knowing
that only 1/73 of the consequences will be borne by the local
taxpayers. Plaintiffs believe that the report contains infor-
mation that will help them prevail against the City. IRMA
responded to the plaintiffs’ subpoena, see Fed. R. Civ. P.
34(c), 45, by invoking the attorney-client privilege. Because
plaintiffs’ claim arises under federal law, this assertion of
privilege also depends on federal law. See Fed. R. Evid. 501.
  Federal law extends the privilege to communications
about legal subjects, and it is hard to see why a business
evaluation meets that description. Hiring lawyers to do
consultants’ work does not bring a privilege into play. But
the district judge did not decide whether this report had a
component of legal advice, because he held that IRMA had
waived any claim of privilege by sharing the report with the
Mayor—the defendant in this suit. Knowing disclosure to
a third party almost invariably surrenders the privilege
with respect to the world at large; selective disclosure is not
an option. See, e.g., Dellwood Farms, Inc. v. Cargill, Inc.,
128 F.3d 1122, 1126-27 (7th Cir. 1997); United States v.
Hamilton, 19 F.3d 350, 353 (7th Cir. 1994). (One court of
appeals thinks that disclosure to a regulatory body does not
surrender the privilege with respect to other private per-
No. 02-2460                                                 3

sons, see Diversified Industries, Inc. v. Meredith, 572 F.2d
596 (8th Cir. 1977) (en banc); see also In re Columbia/HCA
Healthcare Corp. Billing Practices Litigation, 293 F.3d 289,
307-14 (6th Cir. 2002) (Boggs, J., dissenting); but the
majority view is otherwise, and at all events the Mayor of
Country Club Hills was not acting as IRMA’s regulator.)
Disclosure to the Mayor also took care of IRMA’s contention
that the report was covered by a “self-critical analysis
privilege”—a privilege never recognized in this circuit, and
pointless if it too was waived. The district judge added for
good measure that the report was not self-critical—it
examined the operations of Country Club Hills, not the
operations of IRMA itself—and ordered IRMA to give plain-
tiffs a copy.
  Instead of either complying or refusing to do so as a pre-
lude to a citation in contempt of court, the normal way to
obtain appellate review of such an order, see United States
v. Ryan, 402 U.S. 530 (1971); Cobbledick v. United States,
309 U.S. 323 (1940), IRMA immediately filed a notice of
appeal. Because the district court’s order is not a final
decision under normal standards, see 28 U.S.C. §1291, we
directed the parties to file supplemental briefs addressing
the question whether we have appellate jurisdiction. IRMA
analogized the situation to that in Perlman v. United
States, 247 U.S. 7 (1918), which held that a party claiming
a privilege may appeal immediately when the judge directs
a non-party holding the documents to disclose them. The
idea behind Perlman is that someone who is neither a party
to the suit nor a person aggrieved by the disclosure cannot
be expected to put his own neck on the chopping block,
standing in contempt of court just to help the privilege
holder obtain appellate review. See Church of Scientology
v. United States, 506 U.S. 9, 18 n.11 (1992) (“a discovery
order directed at a disinterested third party is treated as an
immediately appealable final order because the third party
presumably lacks a sufficient stake in the proceeding to
4                                                No. 02-2460

risk contempt by refusing compliance”) (emphasis added).
IRMA, however, is not disinterested; it asserts a privilege on
its own behalf.
  When documents are sought from the entity that claims
the privilege, there is every reason to insist that it go
through the contempt process, which by raising the stakes
helps the court winnow strong claims from delaying tactics
that, like other interlocutory appeals, threaten to com-
plicate and prolong litigation unduly. See Powers v. Chicago
Transit Authority, 846 F.2d 1139 (7th Cir. 1988). And,
independent of how we may evaluate arguments pro and
con, there is the holding of Ryan that (subject to the
Perlman proviso and another exception limited to the
President of the United States, see United States v. Nixon,
418 U.S. 683, 690-92 (1974)) non-parties must wait for a
contempt citation. Cf. Kerr v. United States District Court,
426 U.S. 394 (1976) (mandamus not available to escape the
rule barring appeal of orders requiring the production of
documents said to be privileged). Courts recognize one dis-
tinction between appeals by parties and appeals by non-
parties: parties must wait until the end of the case or a
finding of criminal contempt, while non-parties may appeal
from a finding of civil contempt. See Charles Alan Wright,
Arthur R. Miller & Edward H. Cooper, 15B Federal Practice
and Procedure §3914.23 at 140, 143 & n.44 (2d ed. 1992)
(collecting authority). IRMA has not been found in any kind
of contempt, however; it has done nothing to demonstrate
that it possesses the sort of vital interest that justifies
prolongation of a suit by interlocutory review.
  Despite all of this, IRMA still holds a trump card:
Dellwood Farms holds that non-parties always may appeal
immediately when they contest discovery orders. The dis-
cussion is brief—just a single sentence—but it is a square
holding. We wrote: “When the order is directed against a
nonparty, as it is here, [the nonparty] has no appellate
No. 02-2460                                                 5

remedy at the end of the litigation, so he is entitled to
appeal immediately.” 128 F.3d at 1125. Dellwood Farms did
not discuss the possibility of obtaining review through the
contempt process, nor did it mention Ryan, Cobbledick, or
similar decisions. Nor did it recognize that other circuits
have resolved the same question against appellate jurisdic-
tion. See, e.g., In re Grand Jury Subpoenas, 123 F.3d 695,
698 (1st Cir. 1997) (collecting cases); In re Attorney General
of the United States, 596 F.2d 58 (2d Cir. 1979) (holding
that even a member of the Cabinet must be cited for con-
tempt of court before a court of appeals will review a dis-
covery order). Instead Dellwood Farms cited three appellate
opinions—Ivey v. Harney, 47 F.3d 181, 183 (7th Cir. 1995);
Frazier v. Cast, 771 F.2d 259, 262 (7th Cir. 1985); and
Boughton v. Cotter Corp., 10 F.3d 746, 749 (10th Cir.
1993)—that suggest the risks of excessive generalization.
  Ivey did not entail a discovery dispute; instead a warden
was appealing from a writ of habeas corpus ad testifican-
dum, and to the extent the issues were related to discovery
it was cousin to Perlman (for the warden, having no in-
terest in the underlying suit, was not about to risk a
contempt citation). Frazier likewise did not concern the
assertion of privilege by a party resisting discovery; it took
up an appeal by a lawyer sanctioned for violating Fed. R.
Civ. P. 11. What is more, after we issued Dellwood Farms
the Supreme Court scuttled Frazier (and decisions like it in
other circuits) by holding that an attorney may not appeal
immediately from an award of sanctions. See Cunningham
v. Hamilton County, 527 U.S. 198 (1999). Boughton, alone
of the three opinions cited by Dellwood Farms, deals with
an interlocutory appeal by someone whose claim of privilege
has been rejected by a district judge—but it holds that
courts of appeals lack jurisdiction in this situation. The
Tenth Circuit collected decisions from many federal appel-
late courts to the effect that neither the collateral order
doctrine nor a related “pragmatic finality doctrine” enables
6                                                No. 02-2460

parties to appeal immediately. In passing, Boughton re-
marked that an earlier decision, Covey Oil Co. v. Continen-
tal Oil Co., 340 F.2d 993 (10th Cir. 1965), had permitted
appeal by a non-party—but it also observed that Covey and
similar decisions are of doubtful value in light of Ryan.
  The most one can say for Dellwood Farms is that Covey
Oil and similar cases in the Tenth Circuit, though ques-
tioned in Boughton, have not been overruled. That may not
have been enough (given Ryan and the many decisions in
other circuits applying it beyond the grand jury context) to
justify our adopting the approach of Covey Oil, but it
counsels against our overruling Dellwood Farms—for, un-
less the Tenth Circuit also overrules decisions along Covey
Oil’s lines, a conflict will remain. Indeed, no matter what
we (or the Tenth Circuit) do, a conflict will persist—for in
recent years some circuits have allowed even parties to
appeal immediately from orders rejecting assertions of
privilege. Non-parties, which cannot appeal from the final
decision following sanctions, other than contempt, under
Fed. R. Civ. P. 37, logically have appellate rights at least as
extensive as parties do. The most recent of these decisions
is United States v. Philip Morris Inc., 2003 U.S. App. LEXIS
138 (D.C. Cir. Jan. 7, 2003), in which a divided panel held
that a party’s inability to appeal from an order of civil
contempt justifies allowing it to appeal from the discovery
order itself. The D.C. Circuit recognized that it was adopt-
ing a minority view, and like Dellwood Farms it cited
neither Ryan nor any of the Supreme Court’s other cases
limiting appeals from discovery orders. Left to our own de-
vices, we would be inclined to agree with Judge Randolph’s
dissent in Philip Morris. But the existence of this decision,
and a few like it elsewhere, means that we cannot bring
harmony by overruling Dellwood Farms. Appellate ap-
proaches to this topic are now so disparate that only
Congress or the Supreme Court could clear the air. So in-
No. 02-2460                                                   7

stead of fussing over jurisdiction, we take circuit law as we
found it and resolve the appeal.
  The merits are not complex: the district judge was on the
mark, for the reasons he gave. When IRMA showed the
Mayor a copy of the report, it waived any privilege it pos-
sesses—which makes it unnecessary to decide whether a
“self-critical analysis privilege” exists or (if it does) covers
criticism of an organization’s members. Many decisions
caution against the creation of new privileges, even for
what appear to be good reasons, see University of Pennsyl-
vania v. EEOC, 493 U.S. 182, 189 (1990), but even the most
powerful reasons for a novel privilege would not carry the
day once the document had been disclosed voluntarily.
  IRMA  contends that each of its members is really part of
IRMA,  and that passing a document around within an
organization (say, to a corporation’s board of directors, or
the executive committee of a partnership) does not relin-
quish any privilege otherwise available. That’s true enough
for dissemination within the top echelon of a single organi-
zation, but Welch is Mayor of Country Club Hills, not
Mayor (or any other officer) of IRMA. Welch does not wield
any executive authority in IRMA either ex officio or other-
wise.
  Illinois treats IRMA as a public entity rather than an
insurer and thinks of the municipalities more like members
of a reinsurance pool than like normal insureds. See
Lombard v. IRMA, 288 Ill. App. 3d 1003, 1012, 681 N.E.2d
88, 94-95 (2d Dist. 1997); Aetna Casualty & Surety Co. v.
James J. Benes & Associates, Inc., 229 Ill. App. 3d 413, 593
N.E.2d 1087 (2d Dist. 1992). Yet this does not imply that
IRMA and its members are alter egos—and, without that
equation, disclosure to Mayor Welch was disclosure outside
IRMA. Illinois permits risk pools to expel members (consid-
eration of this possibility is why IRMA ordered up the re-
port), which establishes that IRMA and the City are differ-
8                                                No. 02-2460

ent entities. A neighborhood is part of a city; but a city is
not “part of” IRMA in any remotely similar way. IRMA
concedes that the Mayor was not entitled to see the report,
which is another strong indicator that IRMA and the City
are distinct for purposes of Illinois law. Finally, whether or
not a judgment entered against Country Club Hills in this
case could be enforced directly against assets IRMA holds, it
could not be enforced by executing on the assets of IRMA’s
other 72 member cities. This demonstrates that Illinois
does not treat IRMA and its participants as alter egos or
even as a partnership. Consequently, there is no way the
City can have the report while plaintiffs do not. IRMA’s
concern that its members would not cooperate in investiga-
tions if it could not conceal investigatory reports from
outsiders is unjustified for two reasons: first, a noncoop-
erator can be ejected on that account; second, IRMA is free
to reveal to a city the substance of the attorney’s conclu-
sions while keeping the report itself secret.
                                                   AFFIRMED

A true Copy:
       Teste:

                        ________________________________
                        Clerk of the United States Court of
                          Appeals for the Seventh Circuit




                   USCA-02-C-0072—2-10-03
