Free Motion for Reconsideration - District Court of Colorado - Colorado

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IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLORADO Judge Robert E. Blackburn Civil Case No. 01-cv-01451-REB-CBS (Consolidated with Civil Action Nos. 01-cv-01472-REB-CBS, 01-cv-01527-REB-CBS, 01-cv-01616-REB-CBS, 01-cv-01799-REB-CBS, 01-cv-01930-REB-CBS, 02-cv00333-REB-CBS, 02-cv-00374-REB-CBS, 02-cv-00507-REB-CBS, 02-cv-00658-REBCBS, 02-cv-00755-REB-CBS; 02-cv-00798-REB-CBS; and 04-cv-00238-REB-CBS)

In re QWEST COMMUNICATIONS INTERNATIONAL, INC. SECURITIES LITIGATION

ORDER CONCERNING RULE 72 OBJECTIONS Blackburn, J This matter is before me on two FED . R. CIV. P. 72 objections to orders entered by Magistrate Judge Shaffer: 1) lead plaintiffs' objection [#647], filed May 3, 2005, to Judge Shaffer' April 19, 2005, order; and 2) Qwest Communications' s objection [#691], filed June 14, 2005, to Judge Shaffer' May 31, 2005, order. Under 28 U.S.C. § s 636 (b) and FED . R. CIV. P. 72 (a), I may modify or set aside any portion of a magistrate judge' order which I find to be " s clearly erroneous or contrary to law." I. APRIL 19, 2005, ORDER Judge Shaffer' April 19, 2005, order concerns the lead plaintiffs' s motion to compel discovery relevant to the advice of counsel defense asserted by some of the individual defendants. Some of the discovery potentially at issue in this motion includes documents that may fall within Qwest' attorney client and work-product s privileges. Judge Shaffer denied the motion to compel without prejudice, and directed that the parties engage in certain actions that will help to focus the factual and legal

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issues relevant to this motion. In essence, the plaintiffs argue that they are entitled to have their motion to compel granted immediately. I conclude that Judge Shaffer has ordered the parties to follow a procedural protocol that is carefully designed and crafted to reach a well focused and timely resolution of a complex issue. Judge Shaffer' approach well serves the goal of securing " just, speedy, and s the inexpensive determination of every action." FED . R. CIV. P. 1. I conclude that Judge Shaffer' April 19, 2005, order is not clearly erroneous or contrary to law. s II. MAY 31, 2005, ORDER In his May 31, 2005, order, Judge Shaffer ordered Qwest to produce two groups of documents. First, he ordered Qwest to produce documents that Qwest had provided to government agencies that were investigating Qwest. Qwest has refused to produce these documents to the plaintiffs, asserting claims of attorney-client privilege and work-product privilege. Second, Judge Shaffer also ordered Qwest to produce a draft report, dated March 21, 2002, and a final report, dated March 29, 2002, prepared by Qwest' outside counsel, Boies, Schiler & Flexner. I will refer to these s documents collectively as the BSF Report. Qwest has refused to produce the BSF Report, asserting claims of attorney-client privilege and work-product privilege. With regard to the first group of documents, Judge Shaffer concluded that Qwest waived its attorney-client and work-product privileges as to these documents when Qwest disclosed the documents to the government agencies. I agree with Judge Shaffer' analysis of the facts and the law on this issue. I find that Judge s Shaffer' May 31, 2005, order that Qwest produce documents that Qwest had s, 2

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provided to government agencies that were investigating Qwest is not clearly erroneous or contrary to law. Judge Shaffer concluded also that Qwest had waived its attorney-client and work-product privileges as to the Boies, Schiler & Flexner Report (BSF Report) because Qwest' then Controller, Brian Treadway, had disclosed the contents of the s report to Qwest' then auditor, Mark Iwan, of Aurther Andersen. In addition, Judge s Shaffer concluded that Qwest waived its privileges as to the BSF Report when Qwest produced to the plaintiffs a memo written by Iwan that contained a summary of the conclusions in the Report. To the extent Judge Shaffer concluded that Qwest waived the protections given to opinion work-product in the BSF Report, I respectfully disagree. On this point, I reiterate the opinion work-product analysis I used in resolving a nearly identical issue in U.S. v. Graham, No. 03-CR-089-RB (D. Colo.) (order re: motion to quash [#261], filed December 2, 2003). Otherwise, I find that Judge Shaffer' May 31, 2005, order is not clearly erroneous or contrary to law. s A. Work-Product Privilege The work-product privilege protects from compelled disclosure " writings which reflect an attorney' mental impressions, conclusions, opinions or legal theories." s Hickman v. Taylor, 329 U.S. 495, 508 (1947). The work-product privilege is based on the recognition that [p]roper preparation of a client' case demands that [the attorney] s 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. This is the historical and the necessary way in which lawyers act within the 3

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framework of our system or jurisprudence to promote justice and to protect their client' interests. This work is reflected, of course, s in interviews, statements, memoranda, correspondence, briefs, mental impressions, personal beliefs, and countless other tangible and intangible ways . . . . Id. at 511. The work-product privilege is broader than the attorney-client privilege. See, e.g., In re Sealed Case, 676 F.2d 793, 809-09 (D.C. Cir. 1982). Like the attorneyclient privilege, the work-product privilege applies equally to civil and criminal proceedings. United States v. Nobles, 422 U.S. 225, 238 (1975). There are two kinds of protected work-product: " fact"(or non-opinion) workproduct and " opinion"work-product. Frontier Refining Inc. v. Gorma-Rupp Co., 136 F.3d 695, 704 n.12 (10th Cir. 1998). Disclosure of fact work-product may only be obtained by a third party who satisfies the " substantial need/undue burden test"by demonstrating 1) a substantial need for the material; and 2) an inability to develop the information otherwise without undue hardship. E.g., id. at 702-03. In contrast, opinion work-product is subject to enhanced and heightened protection, which approaches absolute protection. See, e.g., In re Cendant Corp. Sec. Litig., 2003 WL 22133429, At *5 (3d Cir. 2003); United Kingdom v. United States, 238 F.3d 1312, 1322 (11th Cir. 2001); Baker v. General Motors Corp., 209 F.3d 1051, 1054 (8th Cir. 2000); Chaudhry v. Gallerizzo, 174 F.3d 394, *403 (4th Cir. 1999); cf. Upjohn, 449 U.S. at 401 (holding that opinion work-product " cannot be disclosed simply on a showing of substantial need and inability to obtain the equivalent without undue hardship" Hickman, 329 U.S. at 508 (" there should be a rare situation justifying ); If production of [attorney interviews of witnesses], petitioner' case is not of that type." s ); 4

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Holmegren v. State Farm Mut. Auto Ins. Co., 976 F.2d 573, 577 (9th Cir. 1992) (holding that opinion work-product may be discovered only where mental impressions are at issue and need for material is compelling); In re Sealed Case, 676 F.2d 793, 809-10 (D.C. Cir. 1982). The courts have generally and consistently recognized a difference between fact work-product and opinion work-product. See generally 6 Moore's Federal Practice § 26.70[5][b], [e] (Daniel R. Coquillette et al. eds., 3d ed.1997). The circuits are divided on whether there is absolute protection for opinion work-product. Some courts have held that opinion work-product is absolutely protected; others have concluded it may be discovered under compelling circumstances. Compare Holmgren v. State Farm Mut. Auto. Ins. Co., 976 F.2d 573, 577 (9th Cir.1992) (holding opinion work-product may be discovered only when mental impressions are at issue and need for material is compelling), and In re Sealed Case, 676 F.2d 793, 809-10 (D.C.Cir.1982) (requiring showing of extraordinary justification to overcome protection of opinion work-product), with Duplan Corp. v. Moulinage et Retorderie de Chavanoz, 509 F.2d 730, 735 (4th Cir.1974) (holding opinion work-product to be absolutely protected). The Supreme Court has not yet decided whether opinion workproduct is absolutely immune from discovery. Cf. Upjohn Co. v. United States, 449 U.S. 383, 401-02, 101 S.Ct. 677, 688-89 (1981) (declining to decide whether any showing of necessity can overcome opinion work-product protection, but stating that showing of substantial need and inability to obtain information without undue hardship is insufficient to compel disclosure). 5

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Attorney work-product summarizing oral statements from or interviews of witnesses, such as the witness interviews in the BSF Report, may constitute opinion work-product. See, e.g. Upjohn, 449 U.S. at 401-02; In re Sealed Case, 856 F.2d 268, 273 (D.C. Cir. 1988); In re Grand Jury Investigation, 599 F.2d 1224, 1231 (3d Cir. 1979), cited in Upjohn, 449 U.S. at 401; In re Grand Jury Proceedings, 473 F.2d 840, 848 (8th Cir. 1973), cited in Upjohn, 449 U.S. at 401; In re Grand Jury Investigation, 412 F. Supp. 943, 94 (E.D. Pa. 1976), cited in Upjohn, 449 U.S. at 401. Assuming arguendo that the Tenth Circuit would hold that opinion work-product is not absolutely protected, still the plaintiffs have not satisfied their heavy and enhanced burden to establish either that the mental impressions of the attorneys are at issue, or that an extraordinary or a compelling justification beyond substantial need/undue burden exists. B. Waiver A privilege holder may waive the attorney-client privilege or the work-product privilege by implication under the common law doctrine of implied waiver. E.g., In re Sealed Case, 676 F.2d 793, 807 (D.C. Cir. 1982). However, because of the different purposes central to the two privileges, the rules governing waiver differ for each privilege. The work-product privilege exists to " promote the adversary system by safeguarding the fruits of an attorney' trial preparations from the discovery attempts s of the opponent."United States v. American Tel. & Tel. Co., 642 F.2d 1285, 1298 (D.C. Cir. 1980). Contrastingly, the attorney-client privilege exists to protect a confidential relationship. Id. 6

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The subject-matter waiver rule apposite to the attorney-client privilege provides that a client' voluntary disclosure of documents otherwise protected by the attorneys client privilege breaches the confidentiality of the attorney-client relationship and effects a waiver of the privilege not only as to the disclosed documents, but also as to all documents relating to the subject matter of the disclosed documents. See, e.g., In re Sealed Case, 676 F.2d at 809; Roberts Aircraft Co. v. Kern, 1997 WL524894, at *4 (D. Colo. 1997). The subject-matter waiver rule for the work-product privilege is significantly more limited. " [B]ecause [the work-product privilege] looks to the vitality of the adversary system rather than simply seeking to preserve confidentiality, the workproduct privilege is not automatically waived by any disclosure to a third party. . . . The purposes of the work-product privilege are more complex [than the attorney-client privilege], and they are not inconsistent with selective disclosure ­ even in some circumstances to an adversary."In re Sealed Case, 676 F.2d at 809, 818. A fortiori, the subject-matter waiver rule does not extend to opinion work-product. Cox v. Administrator United States Steel & Carnegie, 17 F.3d 1386, 1422-23 (11th Cir. 1994); In re Martin Marietta Corp., 856 F.2d 619, 626 (4th Cir. 1988). C. Conclusion The BSF Report was created by Qwest attorneys, inter alia, to summarize oral statements made by Qwest employees. Accordingly, they are ostensibly, if not presumptively, opinion work-product. See, e.g., Upjohn, 449 U.S. at 401; Sealed Case, 856 F.2d at 273. However, additional analysis of the records sought by the plaintiffs is necessary to discern their quintessential character. In attempting to 7

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differentiate between " fact"and " opinion"work-product in the context of documents and information relating to or resulting from employee interviews conducted by employer counsel, the analysis employed by the Fourth Circuit in In re Martin Marietta Corp. is heuristic. There, the Fourth Circuit distinguished between " fact"(or non-opinion) work-product which may be ordered produced if counsel has waived work-product protection, and " opinion"work-product consisting of " pure mental impressions severable from the underlying data and arguably not subject to subject matter waiver."In re Martin Marietta Corp., 856 F.2d at 626. Thus, to the extent that during the interviews reflected in the BSF Report an attorney made contemporaneous notes which purport to report or record, either in whole or in part by direct quote or paraphrase, statements made by a witness, then those statements constitute " fact"work-product subject to discovery, as opposed to " opinion"work-product, which consists of the mental or thought processes of an attorney, which, for good reason, are not subject to disclosure. Id. Thus, if the statement was recorded to preserve it as representing what the witness said as opposed to what the attorney thought about what the witness said, then it is " fact,"not " opinion"work-product. Id. The legal significance of the distinction is twofold: 1) " fact" work-product is subject to the subject matter waiver rule, while " opinion"work-product is not; and 2) " fact"work-product has evidentiary value for either substantive (necessary to the construction of a defense) or impeachment (necessary to the impugnment of witness veracity) purposes, while " opinion"work-product has no intrinsic evidentiary value, but instead, represents expressions of attorney 8

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ratiocination or legal theory. Id. In other words where the attorney was acting as scrivener, not as analyst, then the resulting recorded statement constitutes " fact" work-product subject to subject matter waiver. Id. Admittedly, there will be many instances when notes prepared by an attorney during a witness interview will contain both " fact"and " opinion"work-product. Therefore, to preserve the plaintiffs' right to discover " fact"work-product when subject matter waiver has occurred while simultaneously preserving the right of an attorney to preserve inviolate " opinion"work-product, the " opinion"work-product must be separated by redaction from the " fact"work-product. The question then becomes who should perform the redaction: the attorney or the court? The initial reaction is to conclude that the court should serve as editor to eschew opportunity by an attorney to redact or excise too much to the detriment of the plaintiffs. This per force assumes that the attorney will be dissembling in his role as editor. However, if this assumption is correct, then having the court serve as editor does not ameliorate the problem because the dissembling attorney will simply withhold en toto those documents which reveal too much. Thus, assuming arguendo that the attorney-editor will discharge his editorial duties as an officer of the court consistent with the apposite ethical requirements and court orders, there is no reason for the court to undertake or superintend the redaction in camera. Having an attorney-editor eschews the inefficiencies inherent to an in camera review by the court, which is detrimental both to considerations of judicial economy constrained by limited judicial resources and of preservation of the documents in some safe place to be provided by the court. 9

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In sum, by disclosing the BSF Report to Iwan, Qwest has impliedly waived the work-product privilege as to all " fact"(or non-opinion) work-product on the same subject matter as that disclosed in the memoranda. However, Qwest has not waived the work-product privilege as to " opinion"work-product in the BSF Report. To the extent Judge Shaffer concluded that Qwest had waived the protection of opinion workproduct, I conclude that his order [#671], filed May 31, 2005, is contrary to law. III. ORDERS THEREFORE, IT IS ORDERED as follows: 1. That lead plaintiffs' objection [# 647], filed May 3, 2005, to Judge Shaffer' s April 19, 2005, order, is OVERRULED and DENIED; 2. That Qwest Communications' objection [# 691], filed June 14, 2005, to Judge Shaffer' May 31, 2005, order, is SUSTAINED to the extent Judge Shaffer s concluded that Qwest has waived the protection of opinion work-product reflected in the BSF Report; 3. That accordingly, the portion of paragraph (b) on page 12 of Judge Shaffer' s order [#671], filed May 31, 2005, that requires Qwest to produce the BSF Report is VACATED to the extent that paragraph requires production of material in the BSF Report which constitutes opinion work-product; 4. That counsel for Qwest, acting as officers of the court, SHALL REVIEW the draft report, dated March 21, 2002, and the final report, dated March 29, 2002, prepared by Qwest' outside counsel, Boies, Schiler & Flexner (BSF Report), and s

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SHALL REDACT from the BSF Report all matter that constitutes " opinion"workproduct, as defined in this order; 5. That after such redaction and on or before September 9, 2005, Qwest SHALL PRODUCE to plaintiffs all portions of the BSF Report that constitute " fact"(or non-opinion) work-product, as defined in this order; 6. That Qwest Communications' objection [#691], filed June 14, 2005, to Judge Shaffer' May 31, 2005, order, otherwise is OVERRULED and DENIED. s Dated August 15, 2005, at Denver, Colorado. BY THE COURT:

s/ Robert E. Blackburn Robert E. Blackburn United States District Judge

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