Dorf & Stanton Communications, Inc. And Hill, Holliday, Connors, Cosmopulous, Inc., Third-Party and John Labatt Limited, Labatt Brewing Company Limited, Labatt's USA Inc., and Labatt Importers, Inc. v. Molson Breweries, Molson Breweries U.S.A. Inc., Miller Brewing Co., Martlett Importing Co., and Molson Breweries of Canada Ltd.
Docket: 95-1374
Court: Court of Appeals for the Third Circuit; January 9, 1997; Federal Appellate Court
Dorf. Stanton Communications, Inc. appeals a January 19, 1995, order from the U.S. District Court for the Southern District of New York, which required the firm to produce documents it claims are protected by attorney-client privilege. The case involves a motion filed by Molson Breweries and its affiliates, seeking the production of certain documents related to ongoing lawsuits between Labatt's and Miller in the Eastern District of Michigan, where Dorf. Stanton is not a party.
The documents at issue are notes taken by three employees of Dorf. Stanton during a May 9, 1994, meeting attended by representatives from Labatt's and Dorf. Stanton, among others. The Federal Circuit's panel requested the documents from Dorf. Stanton's attorneys and deferred action on the appeal pending review. After obtaining and reviewing 114 pages of material, the panel identified three relevant documents, totaling 13 pages, despite Miller's reference to four documents, which is attributed to a misunderstanding related to the descriptions in Dorf. Stanton's privilege log. The court ultimately determined that the district court did not abuse its discretion in ruling that the documents are not protected by attorney-client privilege and upheld the order for production.
The appendices to the opinion include two privilege logs: Log 1, the original log pertinent to Miller's motion to compel, and Log 2, an expanded version. Log 1 identifies four documents (a, b, d, and A) that Miller sought to obtain. During a hearing on November 22, 1994, Judge Patterson indicated he would review the documents in camera but determined they were not entitled to privilege based on Log 1 alone. Following this, Dorf. Stanton produced documents a, b, and d but withheld document A, which pertains to a May 9, 1994 meeting, and instead filed a motion to modify the order to protect document A from production. They argued for the privilege of documents A, B, and C, the latter two being handwritten notes from the meeting by Stanton, Jabick, and Soper, respectively. Prior to Miller's motion, documents B and C had been produced in redacted form.
On December 8, 1994, Miller received Log 2, which included documents A, B, and C along with six additional documents not listed previously. Dorf. Stanton subsequently submitted documents A, B, and C to the court under seal, marking the first time the court had reviewed these particular documents. Dorf. Stanton claimed all notes from the May 9 meeting were privileged, although Miller only contested document A. On January 4, 1995, the court held a hearing on the modification motion, and on January 19, 1995, it reaffirmed its earlier order, noting that Dorf. Stanton had not demonstrated that a privilege existed for the documents, nor that legal advice was sought during the May 9 meeting.
The documents in question do not demonstrate either the pursuit of legal advice or their confidentiality. The district court ordered the unsealing and production of documents (A, B, and C) to Miller by January 23, 1995, indicating an expansion of a prior order that initially required only document (A) to be produced. This interpretation aligns with representations made by Dorf. Stanton's attorney in a 1996 letter describing the relevance of the three documents to the appeal.
Dorf. Stanton contends that the standard of review for the attorney-client privilege should be de novo, while Miller argues for the abuse of discretion standard. The court agrees that Second Circuit law should guide the review of discovery orders, noting that trial courts have broad discretion in handling pre-trial discovery, which can only be overturned upon a clear showing of abuse.
Upon reviewing documents (A, B, and C), the court found no clear abuse of discretion by Judge Patterson in ordering their production. Dorf. Stanton did not adequately argue that document (A) was privileged in earlier proceedings, failing to present relevant documents during the initial hearing. It was only after being compelled to produce document (A) that Dorf. Stanton attempted to assert privilege for it and the related documents (B and C). The district court was not convinced by Dorf. Stanton's claims, which reflected a lack of consistent treatment of the documents and insufficient efforts to rectify earlier failures. This situation was not due to inadvertent omissions but rather a failure to comply with local rules and to consistently assert privilege until it was too late.
Judge Patterson's order on November 22 mandated the production of document (A), ruling that Dorf. Stanton waived its attorney-client privilege by not complying with Local Civil Rule 46(e) and Federal Rules of Civil Procedure 45(d)(2) and 26(b)(5). Specifically, Dorf. Stanton failed to provide a complete privilege log justifying its claim of privilege. During a hearing on January 4, 1995, Dorf. Stanton attempted to shield documents (B) and (C), which were not included in its initial privilege log, but the court found those claims insufficient as well. On January 19, 1995, the district court upheld its waiver ruling, affirming that privilege was similarly waived for documents (B) and (C). The Second Circuit reviews such waiver findings under an abuse of discretion standard, referencing United States v. Bilzerian. The court found no error in the district court's ruling, thus affirming the order to produce documents (A, B, and C). Circuit Judge Newman dissented on these findings. The case involved subpoenas related to ongoing patent and trademark litigation where Dorf. Stanton and its agents were involved in discussions about the litigation strategy and public relations. The documents in question included handwritten notes detailing legal strategies and advice, which were argued to be protected by attorney-client privilege.
The panel majority concludes that the notes and meeting in question do not qualify for attorney-client privilege or work product immunity. However, the dissenting opinion argues that the notes contain confidential legal advice related to litigation, exchanged between Labatt's attorneys and agents to protect Labatt's legal interests. Under Federal Rule of Civil Procedure 26(b)(3), the court must safeguard the mental impressions and legal theories of attorneys concerning ongoing litigation.
It is established that communications between a lawyer and a client's agents do not negate privilege if relevant to the agency's function. Citing Second Circuit law, the dissent emphasizes that privileged communications can occur between a client’s attorney and agents acting on the client's behalf, without losing the privilege merely because an agent is involved. This principle is supported by precedent, which shows that the presence of outside consultants does not waive privilege when communications are for legal advice purposes.
The dissent maintains that the attorney-client privilege encompasses communications involving agents, as they help the client implement legal advice. The meeting between Labatt's advertising and public relations agents with Labatt’s attorney was intended to ensure legally compliant actions on behalf of Labatt, thus falling under the protection of the privilege. Additionally, the dissent disagrees with the majority's assertion that privilege was lost due to non-compliance with local rules, asserting that the procedures followed do not justify such a conclusion.
Miller Brewing issued a discovery subpoena to Dorf. Stanton, seeking depositions on various topics related to 'ice beer' and the Ice Litigation, including any work performed for Labatt. The subpoena required all documents pertaining to these matters, including communications, plans, and instructions from Labatt. Dorf. Stanton responded within the 14-day period allowed, asserting attorney-client privilege and work-product protection, while producing non-privileged documents and detailing four withheld privileged documents.
Miller Brewing subsequently moved to compel the production of documents identified in the privilege log, which the trial judge ordered. Although Dorf. Stanton produced three of the four documents, it provided a more detailed privilege log that included two previously redacted documents not listed initially. The trial judge found the privilege log inadequate as per Local Rule 46(e), which necessitates specific information about documents claimed as privileged.
Miller Brewing contended that Dorf. Stanton's failure to provide a complete privilege log within the two-week timeframe constituted non-compliance and resulted in a loss of privilege. However, the argument was deemed flawed since Dorf. Stanton had asserted privilege in a timely manner and made corrections without causing any claimed prejudice to Miller Brewing. The local rules did not mandate a complete privilege log within 14 days, and even if initial compliance was lacking, the privilege would not be automatically waived if the deficiencies were corrected without prejudice. Relevant case law supports that failure to comply with privilege log requirements does not inherently result in a waiver of privilege.
In evaluating the denial of a privilege claim, it is essential to assess the nature of the proposed discovery and the contents of the withheld documents. Dorf. Stanton submitted five affidavits to support its claims of privilege for three specific documents. The panel majority failed to address the local rule compliance, the subject matter of the challenged documents, and the lack of prejudice, all of which are critical considerations before rejecting the attorney-client privilege based on an alleged local rule violation. Therefore, the decision to deem the privilege waived is contested.
The affidavits indicate that Labatt's USA, Inc. organized a meeting, not Dorf. Stanton. A revised document log includes additional documents not originally listed, omitting those produced in response to a prior court order. Dorf. Stanton, in its motion to modify the earlier order, provided the court with the documents under seal for the first time. They claimed privilege over notes taken by their employees at the meeting; however, objections were raised only regarding one employee's notes, while the others' notes were submitted to demonstrate privilege.
During a hearing on January 4, 1995, the district court maintained its original order, stating Dorf. Stanton failed to establish that privilege existed for the documents, as there was no indication that legal advice was sought during the meeting. The court also noted the documents did not suggest confidentiality. Furthermore, the court's decision referenced documents B and C when ordering the unsealing of documents submitted under seal, thereby broadening the order to include these related documents. This interpretation aligns with the descriptions provided by Dorf. Stanton's attorneys in subsequent correspondence.
Stanton argues for a de novo review standard regarding the attorney-client privilege in discovery disputes, citing that this presents a mixed question of law and fact. He believes the Second Circuit's standards should be applied, while Miller contends that the abuse of discretion standard remains applicable. The document acknowledges that the Second Circuit law applies to discovery orders, affirming that trial courts have wide discretion in pre-trial discovery, which is only overturned on clear abuse of discretion.
The court reviewed documents A, B, and C, concluding that Judge Patterson did not clearly abuse his discretion in ordering their production. Dorf Stanton failed to convincingly argue that document A was privileged, neglecting to present the documents for in camera review during the initial hearing. It was only after being ordered to produce document A that Dorf Stanton began to analyze it and realize inconsistencies in the treatment of related documents B and C. The court noted that Dorf Stanton had multiple chances to substantiate its claimed privilege but did not effectively utilize these opportunities.
Furthermore, Judge Patterson ruled that Dorf Stanton waived its privilege claim by not adhering to Local Civil Rule 46(e) and relevant Federal Rules of Civil Procedure, specifically for failing to provide a complete privilege log. This failure was significant enough to justify the order compelling the production of document A.
Stanton attempted to protect documents (B) and C, which were not included on Log 1, asserting that they were insufficient to claim privilege. The district court's ruling on January 19, 1995, denied reconsideration of an earlier waiver ruling, concluding that the attorney-client privilege was waived for documents (B) and C. The Second Circuit reviews a district court's waiver finding under an abuse of discretion standard, as established in United States v. Bilzerian. The court found no error in the district court's determination of waiver concerning documents A, B, and C, affirming the order to compel their production. Circuit Judge Newman dissented, noting that the case involved third-party subpoenas related to patent and trademark litigation between Miller Brewing Company and Labatt. The appeal concerned attorney-client privilege claims over handwritten notes from a meeting involving Labatt's lawyers and representatives from Dorf. Stanton and Hill, Holliday, which contained confidential legal advice and litigation strategies. The majority opinion held that these notes did not warrant attorney-client privilege or work product immunity, a conclusion Judge Newman disagreed with, arguing that the notes contained essential legal information directly related to ongoing litigation.
Federal Rule of Civil Procedure 26(b)(3) mandates that courts protect the mental impressions, conclusions, opinions, or legal theories of attorneys related to litigation. The ongoing dispute involves the mental insights of Labatt's attorneys, prompting dissent against the majority's view that such privilege does not exist or has been waived. Established case law confirms that communications between a client’s attorney and their agents, when necessary for the client’s legal interests, maintain their privileged status. Notable rulings, including United States v. Kovel and U.S. v. Schwimmer, affirm that the attorney-client privilege extends to agents assisting the client, provided the communications pertain to legal matters. The presence of outside consultants does not negate this privilege if their involvement is aimed at obtaining legal advice. The attorney-client privilege protects communications with agents employed by the client to act in relation to legal and litigation matters, as demonstrated in H.W. Carter & Sons, Inc. v. The William Carter Co., where the court ruled that a public relations consultant's presence did not compromise privilege. Additionally, dissent is expressed against the majority's determination that the privilege was lost due to non-compliance with local rules, emphasizing that the procedures followed were adequate. The case notes that Miller Brewing issued a broad discovery subpoena related to depositions of unspecified individuals regarding work done by Dorf.
The subpoena requested all documents related to Dorf Stanton's involvement with "ice beer," particularly Labatt Ice, and the Ice Litigation, including communication and publicity plans. Dorf Stanton responded within the mandated 14 days, asserting attorney-client privilege and work-product protection, while producing non-privileged documents and issuing a brief description of four withheld privileged documents. Miller Brewing sought to compel the production of the listed documents, and the trial judge ordered compliance. Dorf Stanton subsequently produced three of the four documents and provided an updated privilege log, which included previously redacted documents not listed earlier. The trial judge deemed this log insufficient per Local Rule 46(e), which outlines required information for document requests.
Miller Brewing argued that the failure to provide a complete privilege log within two weeks constituted a waiver of privilege, a claim contested by Dorf Stanton. The court held that compliance with Local Rule 46 did not necessitate a complete privilege log within the initial timeframe, and even if initial compliance was inadequate, any remedy without prejudice did not automatically result in loss of privilege. Dorf Stanton submitted five affidavits supporting its privilege claims for the three documents in question. The panel majority did not address the local rule's compliance, the nature of the documents, or the lack of prejudice, leading to a disagreement on the waiver of privilege. It was noted that Labatt's USA, Inc. organized the meeting in question, not Dorf Stanton.
