
USCA1 Opinion

	




                           UNITED STATES COURT OF APPEALS                                FOR THE FIRST CIRCUIT                                ____________________          Nos. 97-1002               97-1003                            IN RE: GRAND JURY SUBPOENAS                                ____________________                    APPEALS FROM THE UNITED STATES DISTRICT COURT                          FOR THE DISTRICT OF MASSACHUSETTS                    [Hon. Michael A. Ponsor, U.S. District Judge]                                ____________________                                       Before                               Torruella, Chief Judge,                            Bownes, Senior Circuit Judge,                              and Lynch, Circuit Judge.                                _____________________               Michael                         W.                             Reilly, with whom   Tommasino                                                            &                                                               Tommasino and          Michael G. West were on joint brief for appellants the Client and          the Owner.               John P. Pucci, with whom Jeanne M. Kaiser and Fierst & Pucci          were on brief for appellant Law Firm.               Andrea                       N.                          Ward, Assistant United States Attorney, with whom          Donald K. Stern                        , United States Attorney, was on brief for appellee          United States.                                ____________________                                   August 13, 1997                                ____________________                    TORRUELLA, Chief                                      Judge. The case before us is a small          piece in a much larger puzzle. A federal grand jury, sitting in          Massachusetts, has been investigating possible criminal activity on          the part of a firm ("firm" or "client") and its owner ("owner").          The firm was in the business of assisting inventors in promoting          their discoveries and in obtaining patents. The government          suspected fraud and began an investigation. During the          investigation, a search warrant was executed at the business          offices of the client. As a result of some of the materials seized          during this search, the government requested and received a grand          jury subpoena directed at the custodian of records at the office of          the firm's legal representative ("law firm"). The subpoena sought          all records "pertaining to charges or billing for legal services"          performed by the law firm for the client. The information sought          included:                    1) all documents relating to the establishment                    of such entities as clients;                    2) all diary entries and other summaries                    indicating the hours worked, the hours                    charged, the nature or subject of the services                    performed, and the identity of the client; and                    3) all invoices or bills of any kind.          Subpoena to Testify Before Grand Jury, dated August 5, 1996.                    The client and the firm filed separate motions to quash          the subpoena, arguing principally that the billing records                                         On February 5, 1997, a "Consent Motion to Seal and Redact" was          granted by the district court. In accordance with Federal Rule of          Criminal Procedure 6(e)(6), no references to the parties have been          made in this opinion.  See, e.g., United                                                    States v. (Under                                                                      Seal),          748 F.2d 871 (4th Cir. 1984).                                         -2-          contained detailed descriptions of the legal work performed and          that disclosure thereof would violate the attorney-client          privilege.                    On December 18, 1996, the district court denied the          motions to quash, holding that "records of the sort exemplified by          Ex. 2 to the Offord Affidavit (attached to the Government's          Response to the Motion to Quash) are not sufficiently specific to          be protected by the attorney-client privilege."    See Motion to          Quash Subpoena, Record Appendix, at 24 (margin order). Both the          client and the law firm have appealed the denial of the motion to          quash.                             I. Appellate Jurisdiction                    As an initial matter, we must determine whether this          court has jurisdiction to hear the appeal.                    It is established that, under normal circumstances, a          party seeking to quash a subpoena cannot appeal a court order to          comply without first resisting that order and subjecting itself to          a citation for contempt. United States                                                 v.                                                     Ryan, 402 U.S. 530, 533          (1971); Cobbledick v.  United                                         States, 309 U.S. 323, 328 (1940);          Corporacion                       Insular                               de                                  Seguros v. Garcia, 876 F.2d 254, 257 (1st          Cir. 1989).                    This rule disposes of the law firm's appeal. The law          firm has not been cited for contempt and, therefore, we lack          jurisdiction to hear the appeal. The client's appeal, however,          implicates a more complex jurisdictional analysis.                                         -3-                    An exception to the rule requiring a contempt citation          prior to appeal exists when subpoenaed documents are in the hands          of a third party. In that case, the owner of the documents may          seek immediate appeal of a district court's order requiring          production of those documents. This exception, known as the          "Perlman doctrine," exists because it is unlikely that a third          party will risk contempt simply to create an appealable order for          the benefit of the owner of the documents.  See Perlman v. United          States, 247 U.S. 7, 12-13 (1918). In other words, the district          court order is effectively final with respect to a party that is          powerless to prevent compliance with the order.                    When the third party is the document owner's lawyer,          however, a different rule applies. In this circuit, the "question          [of] whether a client may appeal to the court of appeals from a          district court's order directing his attorney to testify before the          grand jury with respect to a communication allegedly covered by the          attorney-client privilege," was decided in In re Oberkoetter, 612          F.2d 15, 16 (1st Cir. 1980). In that case, an attorney had been          ordered by the district court to testify before a grand jury. He          initially declined to do so on the grounds of attorney-client          privilege. Id. The district court ordered him to testify despite          the claim of privilege. The attorney's client then filed an appeal          from the district court order. This court held that it lacked          appellate jurisdiction until such time as the attorney received a          contempt citation.                                         -4-                    The facts of the instant case fall squarely with the          scope of Oberkoetter. We believe, however, that it is time to          reconsider our holding in that case.                    We begin by noting the tension between     Perlman and          Oberkoetter. In Perlman, exhibits belonging to Perlman were in the          hands of the clerk of the district court in connection with patent          litigation. The district court subsequently ordered the clerk to          produce the exhibits for presentation to a grand jury investigating          charges that Perlman had perjured himself in the patent suit.          Perlman claimed privilege with respect to the exhibits. The          district court denied his petition to restrain their presentation          to the grand jury. Perlman appealed. The Supreme Court ruled that          his appeal should be allowed on the grounds that "Perlman was          powerless to avert the mischief of the order."  Perlman, 247 U.S.                                         Ordinarily, prior panel decisions are binding on future panels          and it is for an en banc court to reexamine the status of a prior          opinion. In rare instances, however, where it has become          relatively clear that a prior precedent of this court was          erroneously decided or is no longer good law, we have achieved the          same result more informally by circulating a proposed panel opinion          that reverses a prior panel to all the active judges of the court          for pre-publication comment.    See,  e.g., Gallagher v.   Wilton          Enters.,                    Inc., 962 F.2d 120, 124 n.4 (1st Cir. 1992);     Trailer          Marine Transp. Co. v. Rivera Vazquez, 977 F.2d 1, 9 n.4 (1st Cir.          1992);                 United States                              v.                                  Bucuvalas, 909 F.2d 593, 598 n.9 (1st Cir.          1990); see                      also Ionics,                                   Inc. v.  Elmwood                                                    Sensors,                                                             Inc., 110 F.3d          184, 187 n.3 (1st Cir. 1997) (overturning a circuit precedent in          order to comply with controlling authority). While this practice          is to be used sparingly and with extreme caution, we have employed          it in the special circumstances of this case, with the result that          a majority of the active judges of this court has approved the          overruling of Oberkoetter on the point at issue. Of course, by          resorting to this mechanism, we neither foreclose any party from          filing a formal petition for rehearing en banc nor commit any          member of the court to a position in respect to any such petition.                                         -5-          at 13. We believe that the reasoning of      Perlman is directly          applicable to this case and requires us to accept jurisdiction over          the instant appeal. Even though it is an attorney that is          subpoenaed for his or her client's records, the client here has          been denied the opportunity to avert the mischief of the order by          allowing himself to be held in contempt. The client is at the          mercy of his or her attorney and can only gain a review of the          district court's order if the attorney is prepared to risk a          contempt citation. The real possibility of a serious conflict of          interest cannot be overlooked or denied.                    We also take note of the fact that the Supreme Court has          not overruled                        Perlman. In  Oberkoetter, Judge Wyzanski stated that          "he expects the Supreme Court to ultimately overrule    Perlman."          Oberkoetter, 612 F.2d at 18. With the benefit of hindsight we know          that Perlman has not been overruled and continues to bind this          court. To whatever extent the    Oberkoetter court believed that          Perlman's applicability had faded, and to whatever extent this may          have influenced its ruling, the reasoning in     Oberkoetter was          incorrect.                    Most of our sister circuits have interpreted Perlman to          apply in instances when an attorney is ordered by a court to          produce client records in the face of a claim of privilege.   See          Conkling v. Turner, 883 F.2d 431, 433-34 (5th Cir. 1989) (order          directing the testimony of appellant's attorney is immediately          appealable); In re Grand Jury Subpoena, 784 F.2d 857, 859-60 (8th          Cir. 1986) (same); In                                  re                                     Klein, 776 F.2d 628, 630-32 (7th Cir.                                         -6-          1982) ("Like several other courts, this one has treated                                                                  Perlman as          a holding that clients always are entitled to appeal as soon as          their attorneys are required to produce documents.");                                                               United States          v.             (Under Seal)                        , 748 F.2d 871, 873 n.2 (4th Cir. 1984) ("[W]hen the          one who files the motion to quash, or intervenes, is not the person          to whom the subpoena is directed, and the movant or intervenor          claims that production of the subpoena documents would violate his          attorney-client privilege, the movant or intervenor may immediately          appeal.");                     In re Grand Jury Proceedings                                                , 722 F.2d 303, 305-07 (6th          Cir. 1983) (allowing immediate appeal of an order compelling the          testimony of movant's attorney);  In                                                re                                                    Grand                                                          Jury                                                                Proceedings,          Appeal of Twist, 689 F.2d 1351, 1352 n.1 (11th Cir. 1982) (same);          In              re                 Grand                       Jury                            Subpoena                                     Served                                            Upon                                                 Doe, 759 F.2d 968, 971 n.1          (2d Cir. 1985) (same);                                 In re Grand Jury Proceedings                                                            , 604 F.2d 798,          800 (3d Cir. 1979) (same).                    Only three other circuits have determined that an order          directing an attorney to testify regarding material that is alleged          to be privileged is not automatically appealable. The Ninth          Circuit allows an appeal if the attorney no longer represents the          owner of the documents, but does not allow immediate appeal where          the attorney is currently representing the owner.                                                            See,                                                                 e.g.,                                                                       In re          Grand                 Jury                      Subpoenas                                Dated                                      December                                                10,                                                    1987, 926 F.2d 847, 853          (9th Cir. 1991). The District of Columbia Circuit has ruled that          such an order is appealable when "circumstances make it unlikely          that an attorney would risk a contempt citation in order to allow          immediate review of a claim of privilege." In re Sealed Case                                                                      , 754                                         -7-          F.2d 395, 399 (D.C. Cir. 1985). The Tenth Circuit does not allow          the appeal of district court orders compelling the testimony of an          attorney who claims privilege unless the attorney has accepted a          contempt citation or the owner of the records can "prove that the          attorney will produce the records rather than risk contempt."  In          re Grand Jury Proceedings, Subpoena to Vargas                                                     , 723 F.2d 1461, 1464-          66 (10th Cir. 1983).                    No circuit outside of our own has adopted a rule as          extreme as the Oberkoetter rule, which bars an appeal until the          lawyer is cited for contempt.                    In addition to the persuasive case law from other          circuits, we are troubled by the tenuous logic of                                                            Oberkoetter. In          particular, that opinion assumed that "[a]n attorney, in his          client's interest and as proof of his own stout-heartedness, might          be willing to defy a testimonial order and run the risk of a          contempt proceeding." In re Oberkoetter                                                 , 612 F.2d at 18. Although          we do not doubt that some lawyers would accept a contempt citation          in order to provide their clients with the opportunity to appeal,          we are persuaded by the following reasoning of the Fifth Circuit:                      Although we cannot say that attorneys are                      in general more or less likely to submit                      to a contempt citation rather than violate                      a client's confidence, we can say without                      reservation that some significant number                      of client-intervenors might find                      themselves denied all meaningful appeal by                      attorneys unwilling to make such a                      sacrifice. That serious consequence is                      enough to justify a holding that a client-                      intervenor may appeal an order compelling                      testimony from the client's attorney.                                         -8-          In re Grand Jury Proceedings in Matter of Fine, 641 F.2d 199, 203          (5th Cir. 1981). Mindful that it would be unduly optimistic to          anticipate that all attorneys will accept contempt rather than          compromise their clients' appeal, we think it unwise to require          such an action before permitting an appeal.                    Oberkoetter relies heavily on the premise that the          appellate review will interfere with the normal course of          litigation. The greatest of these concerns, in the eyes of the          Oberkoetter court, appears to have been the delay caused by an          appeal. While there is something to this argument, it ultimately          fails to justify a total bar on appeals in cases such as this. A          party who accepts contempt is permitted to appeal the contempt          citation and, thereby, seek review of the order compelling          testimony. Granting the same opportunity to appeal to a party who          does not have the option of accepting contempt is unlikely to lead          to greater delay than exists in cases that have featured a contempt          citation.                    Finally, we add that allowing an appeal only if the          attorney accepts a contempt citation pits lawyers against their          clients in a manner that we do not believe is in the interests of          justice. See generally                                                                  United States                                               v.                                                  Edgar, 83 F.3d 499, 507-08          (1st Cir. 1996). A lawyer should not be required to choose between          the interests of his or her client and his or her own interests.          A rule that promotes conflicts of interest hinders the fair          representation of the client and makes it less likely that clients          will be well served by their attorneys.                                         -9-                    In light of the above discussion, therefore, we overrule          In re Oberkoetter, 612 F.2d 15 (1st Cir. 1980). In its place, we          adopt the majority rule and apply the Perlman exception to those          cases wherein a client seeks immediate appeal of an order          compelling production of a client's records from his attorney.                    Appellee advances one additional argument in support of          its claim that we lack jurisdiction over this appeal. It claims          that there is no jurisdiction unless the facts of the case, in          addition to being an appeal from the denial of a motion to quash a          subpoena directed at the law firm, meet the requirements of the          collateral order doctrine. See                                          United States                                                       v.                                                           Billmyer, 57 F.3d          31, 34 (1st Cir. 1995). We are unpersuaded by the government's          argument. It cites to no authority, nor do we find any, that          states that the denial of a motion to quash is reviewable only if,          in addition to meeting the requirements of the                                                        Perlman doctrine, it          also meets the requirements of the collateral order doctrine. We          decline to adopt such a rule in this context.                           II. Attorney-Client Privilege                    Having overturned Oberkoetter, we have jurisdiction to          entertain this appeal. Upon review of the record and the briefs on          appeal, we are of the opinion that there is simply not enough          information for us to form a reasoned judgment as to whether the          records at issue are privileged.                    Appellant alleges that the records at issue contain, in          part, substantive descriptions of legal work rendered. We          certainly agree that the documents are not per se non-privileged                                        -10-          merely because they were intended primarily for billing purposes.          What matters is not the form of the information, but its content.          See, e.g., United                             States v. Olano, 62 F.3d 1180, 1205 (9th Cir.          1995);                 In re Grand Jury Proceedings                                            , 896 F.2d 1267, 1273 (11th Cir.          1990); Matter                         of                            Witnesses                                      Before                                             Special                                                     March                                                           1980                                                                Grand                                                                       Jury,          729 F.2d 489, 495 (7th Cir. 1984). Whatever the form of the          information, it is privileged if: (1) the client was, or sought to          be, a client of the law firm; (2) the lawyer acted as a lawyer in          connection with the information at issue; (3) the information          relates to facts communicated for the purpose of securing a legal          opinion, legal services, or assistance in a legal proceeding; and          (4) the privilege has not been waived.     See  United                                                                   States v.          Wilson, 798 F.2d 509, 512 (1st Cir. 1986).                    On the other hand, based on the one unredacted invoice          that was submitted to the district court by appellants, we do not          believe it is possible to determine whether the documents, as a          group, are privileged. The submitted invoice includes several          entries that are clearly not privileged, and one entry that names          the former accountant and chief financial officer of the client and          that reads "IRS Power of Atty. forms and corp. penalty abatements;          Correspondence to client." From this information, appellants urge          this court to conclude that the records at issue are privileged,          pointing out that the parties would expect to be able to discuss          IRS corporate penalty abatements and power of attorney forms          without the IRS learning about it. Appellee, on the other hand,          claims that this entry, described as "typical" of the group of                                        -11-          records, demonstrates that there is no privilege. We cannot agree          with either argument.                    It is at least arguable that the entry meets the criteria          of a privileged communication. Furthermore, when taken as a group,          it is possible that the bills would reveal considerable privileged          information. This possibility is compounded by the fact that the          government has already seized the client's business records, making          it more likely that the government can deduce the privileged          substance of the notations of the records.  See In                                                              re                                                                 Grand                                                                        Jury          Proceedings, 517 F.2d 666, 674 (5th Cir. 1975) ("[I]nformation, not          normally privileged, should also be protected when so much of the          substance of the communications is already in the government's          possession that additional disclosures would yield substantially          probative links in an existing chain of inculpatory events or          transactions.").                    We cannot, however, base our decision on this mere          possibility. We believe that further inquiry into the question of          privilege is necessary.                    Given that an                                  in camera                                           review of the documents was never          conducted, we are uncertain as to how the district court arrived at          its conclusion that the documents are not privileged. Appellants,          at bottom, ask us to accept their statements that the records          contain privileged information, while appellees urge us to assume          that they do not. We are unwilling to base our decision on such          assertions. See                           United States                                        v.                                           Wujkowski, 929 F.2d 981, 984 (4th          Cir. 1991).                                        -12-                    Accordingly, we vacate the district court's ruling on the          privilege issue and remand with instructions that the district          court conduct a more complete inquiry into the question.      See          Icicle Seafoods, Inc.                               v.                                   Worthington, 475 U.S. 709, 714 (1986) ("If          the Court of Appeals believed that the District Court had failed to          make findings of fact essential to a proper resolution of the legal          question, it should have remanded to the District Court to make          those findings."). We also note that, in light of                                                            Oberkoetter, the          parties and the district court may have been operating under the          assumption that no appeal from the district court's ruling would be          possible. Based on this reasonable, though ultimately incorrect,          assumption, those involved may have failed to produce a record          sufficient for appellate purposes. Our remand allows for the          production of such a record.   Cf.  Millipore                                                         Corp. v.  Travelers          Indemnity Co., 115 F.3d 21, 34 (1st Cir. May 30, 1997).                    Appellants also argue that the subpoena is the fruit of          an impermissible violation of the attorney-client relationship.          This issue was raised by both parties below but was not decided by          the district court. Accordingly, we need not reach the issue. We          leave the issue to be decided, in the first instance, by the          district court on remand.                                   III. Conclusion                    For the foregoing reasons, we  dismiss the law firm's          appeal,                  vacate the district court ruling as to the client's appeal,          and remand for further proceedings.                                        -13-
