Pacific Pictures Corporation, et al v. USDC-CALA

Filing

FILED OPINION (ALEX KOZINSKI, DIARMUID F. O'SCANNLAIN and N. RANDY SMITH) DENIED. Judge: DFO Authoring, . FILED AND ENTERED JUDGMENT. [8142866]

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FOR PUBLICATION

UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
In re: PACIFIC PICTURES
CORPORATION; IP WORLDWIDE,
LLC; IPW, LLC; MARC TOBEROFF;
MARK WARREN PEARY; LAURA
SIEGEL LARSON; JEAN ADELE PEAVY,
PACIFIC PICTURES CORPORATION; IP
WORLDWIDE, LLC; IPW, LLC;
MARK WARREN PEARY, as personal
representative of the Estate of
Joseph Shuster; MARC TOBEROFF,
an individual; JEAN ADELE PEAVY;
LAURA SIEGEL LARSON, an
individual,
Petitioners,
v.
UNITED STATES DISTRICT
COURT FOR THE CENTRAL
DISTRICT OF CALIFORNIA, LOS
ANGELES,
Respondent,
D.C. COMICS,
Real Party in Interest.





No. 11-71844
D.C. No.
2:10-cv-03633ODW-RZ
OPINION



Petition for Writ of Mandamus
Argued and Submitted
February 7, 2012—Pasadena, California
Filed April 17, 2012
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IN RE PACIFIC PICTURES

Before: Alex Kozinski, Chief Judge,
Diarmuid F. O’Scannlain and N. Randy Smith,
Circuit Judges.
Opinion by Judge O’Scannlain

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COUNSEL
Richard B. Kendall, Kendall Brill & Klieger LLP, Los Angeles, California, argued the cause and filed the briefs for the
petitioners. With him on the briefs were Laura W. Brill, Kendall Brill & Klieger, LLP, Los Angeles, California, as well as
Marc Toberoff and Keith G. Adams, Toberoff & Associates,
P.C., Los Angeles, California.
Matthew T. Kline, O’Melveny & Myers LLP, Los Angeles,
California, argued the cause and filed the brief for the real
party in interest. With him on the brief were Daniel M. Petrocelli and Cassandra L. Seto, O’Melveny & Myers LLP as well
as Patrick T. Perkins, Perkins Law Office, P.C., Cold Spring,
New York.

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OPINION
O’SCANNLAIN, Circuit Judge:
We must decide whether a party waives attorney-client
privilege forever by voluntarily disclosing privileged documents to the federal government.
I
In the 1930s, writer Jerome Siegel and illustrator Joe
Shuster joined forces to create the character that would eventually become Superman. They ceded their intellectual property rights to D.C. Comics when they joined the company as
independent contractors in 1937.1 Since the Man of Steel
made his first appearance in 1938, he has been fighting for
“truth, justice, and the American way.” Shuster, Siegel, their
heirs (“Heirs”), and D.C. Comics have been fighting for the
rights to his royalties for almost as long.
Marc Toberoff, a Hollywood producer and a licensed attorney, stepped into the fray around the turn of the millennium.
As one of his many businesses, Toberoff pairs intellectual
property rights with talent and markets these packages to
movie studios. Having set his sights on Superman, Toberoff
approached the Heirs with an offer to manage preexisting litigation over the rights Siegel and Shuster had ceded to D.C.
Comics. He also claimed that he would arrange for a new
Superman film to be produced. To pursue these goals, Toberoff created a joint venture between the Heirs and an entity he
owned. Toberoff served as both a business advisor and an
attorney for that venture. The ethical and professional concerns raised by Toberoff’s actions will likely occur to many
readers, but they are not before this court.
1

The name and corporate structure of the real party in interest has
changed a number of times since 1938. For simplicity, we refer to it as
“D.C. Comics.”

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While the preexisting litigation was pending, Toberoff
hired lawyer David Michaels to work for one of his companies. Michaels remained in Toberoff’s employ for only about
three months before absconding with copies of several documents from the Siegel and Shuster files. Unsuccessful in his
initial attempt to use the documents to solicit business from
the Heirs, Michaels sent the documents to executives at D.C.
Comics. While he did not include his name with the package,
he did append a cover letter, written in the form of a timeline,
outlining in detail Toberoff’s alleged master plan to capture
Superman for himself.
This happened no later than June 2006, and the parties have
been battling over what should be done with these documents
ever since. Rather than exploiting the documents, D.C. Comics entrusted them to an outside attorney and sought to obtain
them through ordinary discovery in the two ongoing lawsuits
over Superman. Considering every communication he had
with the Heirs to be privileged—regardless of whether the
communication was in his capacity as a business advisor or an
attorney—Toberoff resisted all such efforts. Ultimately, in
April 2007, a magistrate judge ordered certain documents,
including Michaels’ cover letter, turned over to D.C. Comics.
A few months later, Toberoff at long last reported the incident
to the authorities (specifically the Federal Bureau of Investigation). In December 2008, Toberoff finally produced at least
some of the documents.
In 2010, D.C. Comics filed this lawsuit against Toberoff,
the Heirs, and three entities in which Toberoff owned a controlling interest (collectively, the “Petitioners”), claiming that
Toberoff interfered with its contractual relationships with the
Heirs. Michaels’ cover letter formed the basis of the lawsuit
and was incorporated into the complaint. Toberoff has continued to resist the use of any of the documents taken from his
offices, including those already disclosed to D.C. Comics and
especially Michaels’ letter.

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About a month after the suit was filed, Toberoff asked the
Office of the United States Attorney for the Central District
of California to investigate Michaels. In response to a request
from Toberoff, the U.S. Attorney’s Office issued a grand jury
subpoena for the documents as well as a letter stating that if
Toberoff voluntarily complied with the subpoena the Government would “not provide the . . . documents . . . to nongovernmental third parties except as may be required by law
or court order.” The letter also confirmed that disclosure
would indicate that “Toberoff has obtained all relevant permissions and consents needed (if any) to provide the . . . documents . . . to the government.” Armed with this letter,
Toberoff readily complied with the subpoena, making no
attempt to redact anything from the documents.
D.C. Comics immediately requested all documents disclosed to the U.S. Attorney, claiming that the disclosure of
these unredacted copies waived any remaining privilege.
Examining the weight of authority from other circuits, the
magistrate judge agreed that a party may not selectively waive
attorney-client privilege. The magistrate judge reasoned that,
because a voluntary disclosure of privileged materials
breaches confidentiality and is inconsistent with the theory
behind the privilege, such disclosure waives that privilege
regardless of whether the third party is the government or a
civil litigant. Having delivered the documents to the government, the magistrate judge concluded, Petitioners could not
rely on the attorney-client privilege to shield them from D.C.
Comics.
However, the magistrate judge noted that this circuit has
twice declined to decide whether a party may selectively
waive the attorney-client privilege, and stayed his order to
allow Petitioners to seek review. The district court denied
review. Petitioners seek to overturn the magistrate’s order
through a writ of mandamus.

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II
A writ of mandamus is an extraordinary remedy. A party
seeking the writ has the “burden of showing that [his] right to
the issuance of the writ is clear and indisputable.” Bauman v.
U.S. Dist. Ct., 557 F.2d 650, 656 (9th Cir. 1977) (internal
quotation marks omitted). In evaluating whether a petitioner
has met that burden, we consider: (1) whether he “has no
other adequate means” of seeking relief; (2) whether he “will
be damaged or prejudiced in a way not correctable on appeal”
after final judgment; (3) whether the “district court’s order is
clearly erroneous as a matter of law”; (4) whether the order
“is an oft-repeated error”; and (5) whether the order “raises
new and important problems, or issues of first impression.”
Id. at 654-55. We have established no specific formula to
weigh these factors, but failure to show what is generally
listed as the third factor, error, is fatal to any petition for mandamus. See Burlington N. & Santa Fe. Ry. v. U.S. Dist. Ct.,
408 F.3d 1142, 1146 (9th Cir. 2005).2
III
[1] Under certain circumstances, the attorney-client privilege will protect communications between clients and their
attorneys from compelled disclosure in a court of law. See
Upjohn Co. v. United States, 449 U.S. 383, 389 (1981).
Though this in some way impedes the truth-finding process,
we have long recognized that “the advocate and counselor
2

Petitioners assert that, because this case presents an issue of first
impression, they must demonstrate simple rather than clear error. We have
not always been precise as to whether we look for “error” or “clear error”
where our sister circuits have addressed an issue, but we have not. Compare Anon. Online Speakers v. U.S. Dist. Ct., 661 F.3d 1168 (9th Cir.
2011) (applying the clear error standard in a circuit split situation), with
San Jose Mercury News, Inc. v. U.S. Dist. Ct., 187 F.3d 1096 (9th Cir.
1999) (applying the simple error standard when other circuits had weighed
in on parts of an issue). We assume but do not decide that Petitioners need
show only error.

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[needs] to know all that relates to the client’s reasons for
seeking representation” if he is to provide effective legal
advice. Trammel v. United States, 445 U.S. 40, 51 (1980); see
also 8 John Henry Wigmore, Evidence § 2290 (John T.
McNaughton, ed. 1961). As such, we recognize the privilege
in order to “encourage full and frank communication between
attorneys and their clients and thereby promote broader public
interests in the observance of law and administration of justice.” Upjohn Co., 449 U.S. at 389.3
[2] Nonetheless, because, like any other testimonial privilege, this rule “contravene[s] the fundamental principle that
the public has a right to every man’s evidence,” Trammel, 445
U.S. at 50 (internal alterations and quotation marks omitted),
we construe it narrowly to serve its purposes, see, e.g., United
States v. Martin, 278 F.3d 988, 999 (9th Cir. 2002).4 In particular, we recognize several ways by which parties may waive
the privilege. See, e.g., Hernandez v. Tanninen, 604 F.3d
1095, 1100 (9th Cir. 2010). Most pertinent here is that voluntarily disclosing privileged documents to third parties will
generally destroy the privilege. Id. The reason behind this rule
is that, “ ‘[i]f clients themselves divulge such information to
third parties, chances are that they would also have divulged
it to their attorneys, even without the protection of the privilege.’ ” Comment, Stuffing the Rabbit Back into the Hat: Limited Waiver of the Attorney-Client Privilege in an
3

Because Petitioners have never challenged the district court’s application of federal law, we assume but do not decide that this was correct even
though this case involves diversity claims to which state privilege law
would apply. Lewis v. United States, 517 F.2d 236, 237 n.2 (9th Cir. 1975)
(per curiam).
4
Because no one challenges whether these communications would have
been privileged absent waiver, we do not address that issue. For example,
we assume but do not decide that these communications were all made for
the purpose of obtaining legal as opposed to business advice. Cf. United
States v. Ruehle, 583 F.3d 600, 608 n.8 (9th Cir. 2009) (noting that business advice does not fall within the purview of attorney-client privilege
even if the advisor is a lawyer).

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Administrative Agency Investigation, 130 U. Pa. L. Rev. 1198,
1207 (1982). Under such circumstances, there simply is no
justification to shut off judicial inquiry into these communications.
Petitioners concede that this is the general rule, but they
assert a number of reasons why it should not apply to them.
A
[3] Petitioners’ primary contention is that because Toberoff disclosed these documents to the government, as opposed
to a civil litigant, his actions did not waive the privilege as to
the world at large. That is, they urge that we adopt the theory
of “selective waiver” initially accepted by the Eighth Circuit,
Diversified Industries, Inc. v. Meredith, 572 F.2d 596 (8th
Cir. 1978) (en banc), but rejected by every other circuit to
consider the issue since, see In re Qwest Commc’ns Int’l, 450
F.3d 1179, 1197 (10th Cir. 2006); Burden-Meeks v. Welch,
319 F.3d 897, 899 (7th Cir. 2003); In re Columbia/HCA
Healthcare Corp. Billing Practices Litig., 293 F.3d 289, 295
(6th Cir. 2002) [hereinafter “In re Columbia“]; United States
v. Mass. Inst. of Tech., 129 F.3d 681, 686 (1st Cir. 1997);
Genentech, Inc. v. United States Int’l Trade Comm’n, 122
F.3d 1409, 1416-18 (Fed. Cir. 1997); In re Steinhardt Partners, L.P., 9 F.3d 230, 236 (2d Cir. 1993); Westinghouse Elec.
Corp. v. Republic of Philippines, 951 F.2d 1414, 1425 (3d
Cir. 1991); In re Martin Marietta Corp., 856 F.2d 619,
623-24 (4th Cir. 1988); Permian Corp. v. United States, 665
F.2d 1214, 1221 (D.C. Cir. 1981).
As the magistrate judge noted, we have twice deferred
judgment on whether we will accept a theory of selective
waiver. United States v. Bergonzi, 403 F.3d 1048, 1050 (9th
Cir. 2005) (per curiam); Bittaker v. Woodford, 331 F.3d 715,
720 n.5 (9th Cir. 2003) (en banc). But we share the concerns
expressed by many of our sister circuits about the cursory
analysis behind the Diversified rule. The Eighth Circuit—the

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first court of appeals to consider the issue—adopted what has
become a highly controversial rule only because it concluded
that “[t]o hold otherwise may have the effect of thwarting the
developing procedure of corporations to employ independent
outside counsel to investigate and advise them in order to protect stockholders.” Diversified, 572 F.2d at 611. This apprehension has proven unjustified. Officers of public
corporations, it seems, do not require a rule of selective
waiver to employ outside consultants or voluntarily to cooperate with the government. See, e.g., Westinghouse Elec. Corp.,
951 F.2d at 1426.
More importantly, such reasoning does little, if anything, to
serve the public good underpinning the attorney-client privilege. That is, “selective waiver does not serve the purpose of
encouraging full disclosure to one’s attorney in order to
obtain informed legal assistance; it merely encourages voluntary disclosure to government agencies, thereby extending the
privilege beyond its intended purpose.” Id. at 1425.
It may well be that encouraging cooperation with the government is an alternative route to the ultimate goal of promoting adherence to the law. In re Columbia, 293 F.3d at 311
(Boggs, J., dissenting). And there are those who assert that
“an exception to the third-party waiver rule need [not] be
moored to the justifications of the attorney-client privilege.”
Id. at 308 (emphasis omitted). We disagree. If we were to
unmoor a privilege from its underlying justification, we
would at least be failing to construe the privilege narrowly.
Cf. Univ. of Pa. v. EEOC, 493 U.S. 182, 189 (1990) (citing
Trammel, 445 U.S. at 50; United States v. Bryan, 339 U.S.
323, 331) (1950)). And more likely, we would be creating an
entirely new privilege. In re Qwest Commc’ns Int’l, 450 F.3d
1179; Westinghouse, 951 F.2d at 1425.
It is not beyond our power to create such a privilege. Univ.
of Pa., 493 U.S. at 189 (noting that Fed. R. Evid. 501 provides certain flexibility to adopt privilege rules on a case-by-

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case basis). But as doing so requires balancing competing
societal interests in access to evidence and in promoting certain types of communication, the Supreme Court has warned
us not to “exercise this authority expansively.” Id.; see also
United States v. Nixon, 418 U.S. 683, 710 (1974). Put simply,
“[t]he balancing of conflicting interests of this type is particularly a legislative function.” Univ. of Pa., 493 U.S. at 189.
[4] Since Diversified, there have been multiple legislative
attempts to adopt a theory of selective waiver. Most have
failed. Report of the Advisory Committee on Evidence Rules,
May 15, 2007, at 4, available at http://www.uscourts.gov/
uscourts/RulesAndPolicies/rules/Reports/2007-05-Committee
_Report-Evidence.pdf (reporting the selective waiver provision separately from the general proposed rule); SEC Statement in Support of Proposed Section 24(d) of the Securities
Exchange Act of 1934, 16 Sec. Reg. & L. Rep. 461 (Mar. 2,
1984). But see H.R. Rep. No. 870, 96th Cong., 1st Sess.
(1980), codified at 15 U.S.C. § 1312. Given that Congress has
declined broadly to adopt a new privilege to protect disclosures of attorney-client privileged materials to the government, we will not do so here. Univ. of Pa., 493 U.S. at 189
(requiring federal courts to be particularly cautious when legislators have “considered the relevant competing concerns but
[have] not provided the privilege”).
B
Petitioners next assert that even if we reject selective
waiver as a general matter, we should enforce a purported
confidentiality agreement based upon the letter from the U.S.
Attorney’s Office. Though no circuit has officially adopted
such a rule, at least two have “left the door open to selective
waiver” where there is a confidentiality agreement. In re
Columbia, 293 F.3d at 301 (discussing Steinhardt and Dellwood Farms, Inc. v. Cargill, 128 F.3d 1122 (7th Cir. 1997));
see also In re Qwest Commc’ns Int’l, 450 F.3d at 1192-94

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(describing such a rule as a “leap” but declining to reject it
completely).
[5] Assuming that this letter constitutes a confidentiality
agreement, Petitioners have provided no convincing reason
that post hoc contracts regarding how information may be
revealed encourage frank conversation at the time of the
advice. Indeed, as the Sixth Circuit has noted, while this
approach “certainly protects the expectations of the parties to
the confidentiality agreement, it does little to serve the ‘public
ends’ of adequate legal representation that the attorney-client
privilege is designed to protect.” In re Columbia, 293 F.3d at
303. Instead, recognizing the validity of such a contract
“merely [adds] another brush on an attorney’s palette [to be]
utilized and manipulated to gain tactical or strategic advantage.” Steinhardt, 9 F.3d at 235; cf. Permian Corp., 665 F.2d
at 1221. And it would undermine the public good of promoting an efficient judicial system by fostering uncertainty and
encouraging litigation. Upjohn, 449 U.S. at 393 (noting that
an “uncertain privilege . . . is little better than no privilege at
all”).
[6] The only justification behind enforcing such agreements would be to encourage cooperation with the government. But Congress has declined to adopt even this limited
form of selective waiver. See Statement of Congressional
Intent Regarding Rule 502 of the Federal Rules of Evidence,
154 Cong. Rec. H. 7817 (2008), reprinted in Fed. R. Evid.
502 addendum to comm. n subdivision (d) (noting that Rule
502 “does not provide a basis for a court to enable parties to
agree to a selective waiver of the privilege, such as to a federal agency conducting an investigation”). As such, we reject
such a theory here.
C
[7] Petitioners next aver that, because Toberoff was the
victim of the crime rather than the target of the grand jury

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probe, his disclosure should be treated differently. But if it is
unnecessary to adopt a theory of selective waiver to encourage potential defendants to cooperate with the government, In
re Qwest Commc’ns Int’l, 450 F.3d at 11; Westinghouse, 951
F.2d at 1425, it is even less necessary to do so to encourage
victims to report crimes to the government. The desire to see
the crime prosecuted is sufficient impetus to cooperate.
We are unconvinced by Petitioners’ argument that adopting
such a rule will drastically impair law enforcement attempts
to investigate espionage against “attorneys, financial institutions, medical providers, national security agencies, judges,
large corporations, or law firms.” This has not occurred
despite near universal rejection of a selective waiver rule. Furthermore, most of these documents are not covered by
attorney-client privilege because they do not represent communications between a lawyer and his client for the purpose
of obtaining legal advice. Cf. Ruehle, 583 F.3d 608-09 & n.8
(rejecting a presumption of privilege even when a communication involves a lawyer). And, even if they were originally
covered by the privilege, they would eventually have to be
made public if they are to become evidence in a criminal trial.
To the extent that timing is a concern, it can be ameliorated
by properly seeking a protective order. Fed. R. Evid. 502(d).
We are similarly unpersuaded that, because Toberoff was
a victim of the crime, Petitioners have a common interest with
the government. Rather than a separate privilege, the “common interest” or “joint defense” rule is an exception to ordinary waiver rules designed to allow attorneys for different
clients pursuing a common legal strategy to communicate
with each other. See Hunydee v. United States, 355 F.2d 183,
185 (9th Cir. 1965); see also In re Grand Jury Subpoenas,
902 F.2d 244, 249 (4th Cir. 1990) (collecting cases). However, a shared desire to see the same outcome in a legal matter
is insufficient to bring a communication between two parties
within this exception. Id. Instead, the parties must make the
communication in pursuit of a joint strategy in accordance

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with some form of agreement—whether written or unwritten.
Cf. Continental Oil Co. v. United States, 330 F.2d 347, 350
(9th Cir. 1964).
[8] There is no evidence that Toberoff and the Office of
the U.S. Attorney agreed before the disclosure jointly to pursue sanctions against Michaels. Toberoff is not strategizing
with the prosecution. He has no more of a common interest
with the government than does any individual who wishes to
see the law upheld. Furthermore, the statements here were not
“intended to facilitate representation” of either Toberoff or the
government. Hunydee, 355 F.2d at 185 (limiting privilege to
those circumstances); accord United States v. BDO Seidman,
492 F.3d 806, 816 (7th Cir. 2007) (same).
D
[9] Petitioners also argue that they should be treated differently because Toberoff produced these documents subject to
a subpoena. Involuntary disclosures do not automatically
waive the attorney-client privilege. United States v. De La
Jara, 973 F.2d 746, 749-50 (9th Cir. 1992). But without the
threat of contempt, the mere existence of a subpoena does not
render testimony or the production of documents involuntary.
Westinghouse Elec. Corp., 951 F.2d at 1414; see also United
States v. Plache, 913 F.2d 1375, 1380 (9th Cir. 1990).
Instead, whether the subpoenaed party “chose not to assert the
privilege when it was appropriate to do so is [also] relevant
to the waiver analysis.” In re Grand Jury Proceedings, 219
F.3d 175, 187 (2d Cir. 2000); cf. In re Subpoenas Duces
Tecum, 738 F.2d 1367, 1369-70 (D.C. Cir. 1984).
[10] Toberoff both solicited the subpoena and “chose not
to assert the privilege when it was appropriate to do so. . . .”
In re Grand Jury Proceedings, 219 F.3d at 187. That is, even
though the subpoena specifically contemplated that Toberoff
may choose to redact privileged materials, he did not. Petitioners assert that the U.S. Attorney would not have been sat-

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isfied with redacted documents, but we will never know
because Toberoff never tried. As such, we conclude that the
district court properly treated the disclosure of these documents as voluntary.5
E
[11] Finally, Petitioners asserted for the first time in oral
argument that these documents should remain confidential
because the Heirs themselves did not take the affirmative step
to disclose the documents. We generally do not consider
issues raised for the first time during oral argument, unless
“failure to do so would result in manifest injustice” and the
appellee would not be prejudiced by such consideration.
United States v. Ullah, 976 F.2d 509, 514 (9th Cir. 1992)
(internal quotation marks and emphasis omitted). There are
several instances in which an attorney’s behavior may waive
the privilege, even without an explicit act by the client. See,
e.g., Himmelfarb v. United States, 175 F.2d 924, 939 (9th Cir.
1949); see generally 8 Wigmore, Evidence § 2325 (listing
actual and implied consent as well as theft of documents from
the attorney’s office). As many of these documents fall within
these situations, we do not consider it a manifest injustice to
hold Petitioners to their apparent acceptance of Toberoff’s
authority to waive the privilege on behalf of his clients, who
have never disputed his authority to do so.6
5

As these preexisting documents were “sought for [their] own sake
rather than to learn what took place before the grand jury” and as their
“disclosure will not compromise the integrity of the grand jury process,”
Petitioners’ argument that the disclosure was protected by Federal Rule of
Criminal Procedure 6(e)(2)(B) is similarly without merit. United States v.
Dynavac, Inc., 6 F.3d 1407, 1411-12 (9th Cir. 1993).
6
Indeed, there is even circumstantial evidence that the Heirs affirmatively consented to Toberoff’s actions. There is also evidence that Toberoff should himself be treated as a co-client. After all, Toberoff represented
all of the Petitioners, including a joint venture between the Heirs and himself in which he had a controlling interest. As such, he likely had authority
unilaterally to waive the privilege on at least some of these documents.
Restatement (Third) of Law Governing Lawyers § 76 cmt. g; see also In
re Teleglobe Commc’ns Corp., 493 F.3d 345, 363 (3d Cir. 2007).

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IV
Because Petitioners have not established error, we need not
discuss the other Bauman factors. The petition for mandamus
is DENIED.