USA v. DUKE ENERGY CORP.
Filing
445
MEMORANDUM OPINION AND ORDER signed by JUDGE WILLIAM L. OSTEEN JR. on 4/30/12, that Plaintiffs' motion to lift the stay of enforcement of the Magistrate Judge's 2003 Orders be GRANTED. FURTHER that the Magistrate Judge's Orders from Ap ril 11, 2003, October 22, 2003, and November 3, 2003, be AFFIRMED. While affirming the Magistrate Judge's 2003 Orders compelling discovery, however, this court explicitly finds that these documents are discoverable for purposes of this order only. Accordingly, it is therefore ORDERED that disclosure is limited solely to this litigation and any documents provided in this case may not be disclosed or used in any other litigation unless ordered by this court. (Law, Trina)
IN THE UNITED STATES DISTRICT COURT
FOR THE MIDDLE DISTRICT OF NORTH CAROLINA
UNITED STATES OF AMERICA,
Plaintiff,
ENVIRONMENTAL DEFENSE,
NORTH CAROLINA SIERRA CLUB,
and NORTH CAROLINA PUBLIC
INTEREST RESEARCH GROUP,
Plaintiff-Intervenors,
v.
DUKE ENERGY CORPORATION,
Defendant.
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1:00CV1262
MEMORANDUM OPINION AND ORDER
Osteen, Jr., District Judge
I.
FACTS
In response to Plaintiffs’ motion to compel Defendant Duke
Energy to produce communications with the Utility Air Regulatory
Group (“UARG”), Duke Energy filed a cross motion for a protective
order, arguing that the requested information was irrelevant,
protected by attorney-client privilege and work product
protection, and covered by the joint defense/common interest
UARG moved to intervene1 and, in anticipation of being
rule.
1
UARG moved to intervene for the limited purpose of
objecting to or appealing the Magistrate Judge’s April 11, 2003
allowed to intervene, also moved for a protective order, claiming
that disclosure would violate UARG’s First Amendment rights, and
argued that the documents in question were protected by attorneyclient privilege and work product protection.
In an April 11,
2003, Order (Doc. 164), an October 22, 2003, Order (Doc. 244),
and a November 3, 2003, Order (Doc. 250) (“2003 Orders”),
Magistrate Judge Eliason addressed both Duke Energy’s and UARG’s
arguments.
He denied UARG’s motion to intervene2 and found that
Duke Energy had attempted to establish attorney-client privilege
and work product protection by offering conclusory affidavits.
The Magistrate Judge observed that the affidavits of Kris W.
Knudson (Senior Technical Consultant for Air Quality at Duke
Power), Jim M. Holloway III (attorney with Hunton & Williams),
and Jeffrey F. Cherry (attorney with Hunton & Williams),
proffered by Duke Energy, failed: 1) to show that “UARG and all
of its members have any common litigation interest with respect
to a specific litigation or anticipated litigation”3 or 2) to
Order.
(Doc. 244 at 3.)
2
Although the Magistrate Judge denied UARG’s motion to
intervene, “out of an abundance of caution” he considered all of
UARG’s arguments as if they had been raised by Duke Energy.
(Doc. 244 at 8.) UARG has appealed the Magistrate Judge’s denial
of its motion to intervene to the Fourth Circuit.
3
The Magistrate Judge specifically observed that Duke
Energy, through its affidavits, had failed to show that “the UARG
members have agreed to proceed together to prosecute or defend a
shared, specific litigation interest,” to “identify a specific
litigation or threat of litigation,” and to show that “counsel
2
show that the “requisite common interest,” necessary for the
common interest rule to apply, existed.
(Doc. 164 at 20-21.)
He
explained:
In summary, the UARG appears to be a trade
association/lobbying group which at times perhaps
engages in litigation, but no specific litigation has
been identified for the documents at issue. Also, Duke
Energy does not show that the UARG members vote or
otherwise agree to take a specific litigation stance.
Nor has Duke Energy shown that the communications were
only with respect to the agreed common shared
litigation interest. It was incumbent upon Duke Energy
to come forward with specific facts showing these
matters. Conclusory statements and ambiguous evidence
will not satisfy that burden.
As a result, the Magistrate Judge granted Plaintiffs’ motion to
compel and denied Duke Energy’s motion for a protective order.
Duke Energy objected and appealed those Orders to this court.
For the reasons set forth hereafter, this court finds that the
stay of the Magistrate Judge’s 2003 Orders should be lifted and
the Orders should be affirmed.
II.
STANDARD OF REVIEW
Upon a timely objection, this court must modify or set aside
any part of a magistrate judge’s order on a non-dispositive
matter that “is clearly erroneous or is contrary to law.”
R. Civ. P. 72(a).
Fed.
Here, the parties agree that the Magistrate
Judge’s 2003 Orders should be reviewed by this court under a
for Duke Energy and the UARG appear as co-counsel in litigation
or that the UARG represents Duke Energy and the other members in
any binding sort of way.” (Doc. 164 at 20.)
3
clearly erroneous standard.
(See Doc. 413 at 4.)
“A factual
finding is clearly erroneous when [the court is] left with the
definite and firm conviction that a mistake has been committed.
Although the contrary to law standard permits plenary review of
legal conclusions, decisions related to discovery disputes . . .
are accorded greater deference.”
Stonecrest Partners, LLC v.
Bank of Hampton Roads, 770 F.Supp.2d 778, 782 (E.D.N.C. 2011)
(internal quotation marks and citations omitted).
A district
court in the Eastern District of Virginia explained,
[M]any courts have noted that decisions of a magistrate
judge concerning discovery disputes and scheduling
should be afforded ‘great deference.’ Indeed, the
fact-specific character of most discovery disputes and
the discretionary standard for resolution of discovery
disputes under the Federal Rules suggest that
magistrate judges ordinarily have ample discretionary
latitude in disposition of those matters.
In re Outsidewall Tire Litigation, 267 F.R.D. 466, 470 (E.D.Va.
2010).
III. CLAIM & ISSUE PRECLUSION
In addition to directly challenging the substance of the
Magistrate Judge’s 2003 Orders under a clearly erroneous standard
of review, Duke Energy alleges that claim and issue preclusion
bar this court from lifting the stay and enforcing the Magistrate
Judge’s Orders in light of a third-party subpoena enforcement
action in the United States District Court for the District of
Columbia (described further below).
Neither claim preclusion nor
issue preclusion were directly addressed by the Magistrate
4
Judge.4
A.
D.C. Litigation
On April 8, 2002, the United States served non-party UARG
through its counsel Hunton & Williams with two subpoenas duces
tecum, which requested documents related to cases pending in the
Southern District of Ohio against Ohio Edison and in the Middle
District of North Carolina against Duke Energy.5
Both Ohio
Edison and Duke Energy are UARG members. (Doc. 394-3 at 4.)
At
issue were 20 boxes of documents (containing approximately 3,800
documents and 74,000 pages of material).
(Doc. 394-3 at 9.)
UARG objected that the subpoenas were unduly burdensome, that
they sought irrelevant and/or privileged information, and that
production would infringe on UARG’s First Amendment rights.
(Doc. 394-3 at 5.)
The D.C. Magistrate Judge appointed a Special Master,
4
But see Doc. 244 at 4-5 n.2 (“It should also be pointed
out that the UARG’s own briefing shows that the district court in
the Southern District of Illinois ruled on a motion to compel
documents obtained from the UARG by another power company and
upheld the attorney-client privilege and work product protection.
This clearly demonstrates plaintiff’s argument that this Court’s
Order is not stare decisis, but simply involves a ruling
concerning a limited number of documents.”) (internal citations
omitted).
5
The United States also filed motions to compel production
in Ohio Edison and the present suit, and all of the parties
acknowledged that there was “most likely some overlap in the
documents requested directly from Defendants in the underlying
litigation, and documents requested under the subpoenas directed
to UARG.” (Doc. 394-3 at 5.)
5
selected by both parties, to determine if the documents were
protected.
Recognizing the potential for overlap in the
requested documents and those requested in the suits against Ohio
Edison and Duke Energy, the D.C. Magistrate Judge recommended
that if “the Special Master examines any documents that were
subject to the rulings by the Ohio and North Carolina District
Courts, the Special Master should defer to the rulings of those
District Courts.”6
(Doc. 394-3 at 15-16.)
In his Report and
Recommendation, the D.C. Magistrate Judge observed that, after
the 2003 Orders, “any documents concerning UARG that are listed
on Duke’s privilege log will be turned over to the Government,
unless UARG successfully intervenes in that case and its request
for reconsideration is granted.”
(Doc. 394-3 at 6-7.)
The Special Master randomly selected 227 documents to
examine; because twenty-one of these documents were subject to
the rulings in the Ohio Edison or Duke Energy cases, the Special
Master set them aside (along with six other documents, therefore
reviewing an even 200 documents).
(Doc. 368-14 at 4.)
He
recommended sustaining the claims of privilege, although there
6
In response to UARG’s objection that the Special Master
should defer to the Ohio Edison ruling but not the 2003 Orders,
the D.C. Magistrate Judge, finding UARG’s position “tantamount to
‘rule shopping,’” stated, “If the Special Master selects a
document, the privilege status of which has been ruled upon by
the Ohio Edison court or the Duke Energy court, the Special
Master will defer to the ruling of that court and randomly select
a replacement document to review.” (Doc. 394-4 at 9.)
6
were “several groups of documents” for which he recommended
overruling the privilege claims or claims of work product
protection.7
(Doc. 368-14 at 6.)
Because of the burden of
separating the protected and non-protected documents, however,
the Special Master explained that the court might, as “a
practical matter,” decline to order production of the documents.
Based on the D.C. Magistrate Judge’s recommendation that
(Id.)
the Special Master’s report be adopted, the district court
adopted the report and quashed the subpoenas for all 3,800
documents except for one “clearly not privileged” Prevention of
Significant Deterioration (“PSD”) modification outline.
B.
Claim Preclusion (Res Judicata)
“Res judicata, also known as claim preclusion, bars a party
from relitigating a claim that was decided or could have been
decided in an original suit” and was “designed to protect
‘litigants from the burden of relitigating an identical issue
with the same party or his privy and [to promote] judicial
economy by preventing needless litigation.’”
7
Laurel Sand &
These included: lists of future UARG meetings and meeting
locations, attendance sheets from meetings, lists of UARG
committee members and attorneys designated to work with those
committees, and meeting agendas. (Doc. 368-14 at 6.) The
Special Master also identified documents where he disagreed “in
whole or part with the claims of attorney-client and/or work
product” (for example documents that were publicly available),
but he questioned whether “the need of the United States is great
enough to outweigh the time and resources needed to cull out and
disclose these documents.” (Doc. 368-14 at 8.)
7
Gravel, Inc. v. Wilson, 519 F.3d 156, 161-62 (4th Cir. 2008)
(quoting Parklane Hosiery Co. v. Shore, 439 U.S. 322, 326
(1979)).
The Fourth Circuit has explained,
Generally, claim preclusion occurs when three
conditions are satisfied: 1) the prior judgment was
final and on the merits, and rendered by a court of
competent jurisdiction in accordance with the
requirements of due process; 2) the parties are
identical, or in privity, in the two actions; and, 3)
the claims in the second matter are based upon the same
cause of action involved in the earlier proceeding.
In re Varat Enterprises, Inc., 81 F.3d 1310, 1315 (4th Cir.
1996).
Whether two causes of action are identical for claim
preclusion purposes depends on “whether the claim presented in
the new litigation arises out of the same transaction or series
of transactions as the claim resolved by the prior judgment.”
Laurel Sand & Gravel, Inc., 519 F.3d at 162 (internal quotation
marks omitted).
As the proponent of claim preclusion, Duke Energy bears the
burden of establishing all of its elements.
First, Duke Energy
must establish that there was a final judgment on the merits.
Courts that have addressed the issue agree that a magistrate
judge’s order, before its adoption by a district court, does not
qualify as a final judgment.8
Because the Magistrate Judge’s
8
Although the Fourth Circuit has never addressed whether a
magistrate judge’s order is a final order prior to adoption by a
district court, in Maryland Cas. Co. v. Armco, Inc., 822 F.2d
1348, 1355 (4th Cir. 1987), the court stated, “We decline to hold
that the recommendations of a special master, which have been
vacated, rise to the level of a ‘final judgment’ in order to
8
2003 Orders have yet to be adopted by a district court, they were
not final for purposes of claim preclusion when the D.C.
litigation occurred.
Therefore, the D.C. litigation is the prior
final judgment on the merits.
See Jewish War Veterans of the
United States of America, Inc. v. Gates, 506 F.Supp.2d 30, 41
(D.D.C. 2007) (referencing a line of authority that has “declined
to treat a Magistrate Judge’s order as final until ‘the district
court makes it final’”); Stripling v. Jordan Production Co., LLC,
234 F.3d 863, 868 (5th Cir. 2000) (“We conclude that the
magistrate judge’s order did not qualify as a final judgment,
such that it would provide a preclusive collateral estoppel
effect.”).
For purposes of claim preclusion, the order in which
two actions are commenced is irrelevant.
Westwood Chemical Co.,
Inc. v. Kulick, 656 F.2d 1224, 1227 (6th Cir. 1981) (“Where two
actions involving the same issue are pending between the same
parties, ‘irrespective of which action or proceeding was first
brought, it is the first final judgment rendered in one of the
courts which becomes conclusive in the other as res judicata.’”).
Therefore, it makes no difference that the 2003 Orders were
actually brought and decided prior to the D.C. litigation, and
Duke Energy has sufficiently established the final judgment
requirement for claim preclusion.
Second, Duke Energy must establish that the parties were
estop the present litigation.”
9
identical or in privity in the two actions.
“Persons who are not
parties to an action ordinarily are not bound by the judgment in
that action.”
Cir. 1987).9
Klugh v. United States, 818 F.2d 294, 300 (4th
Here, Duke Energy argues that the same parties are
present in both suits - the EPA on one side and UARG and Duke
Energy on the other side.
Plaintiffs, however, argue that the
same parties are not present in both suits because the
Environmental Defense, North Carolina Sierra Club, and North
Carolina Public Interest Research Group, who intervened in the
present suit, were not parties to the D.C. litigation.
Although
Plaintiffs are technically correct, if Duke Energy successfully
establishes the other elements of claim preclusion, only
Plaintiff-Intervenors, and not the United States, could pursue
these same discovery requests.
Third, to meet the requirements for claim preclusion, Duke
Energy must establish that the claims in the second matter are
based upon the same cause of action involved in the earlier
proceeding.
See Croskey v. United States Office of Special
Counsel, 132 F.3d 1480, 1997 WL 702364, at *3 (D.C. Cir. Oct. 17,
1997) (holding that res judicata did not apply to two sets of
documents when both sets were part of the plaintiff’s
9
See id. (explaining that the doctrine of virtual
representation “must cautiously be applied” only where the
parties’ rights are “so closely aligned in interest as to justify
precluding relitigation” and there exists “at least the tacit
approval of the court”).
10
investigative file at the United States Office of Special
Counsel, but they were different documents and the document
sought in the plaintiff’s second suit was not even in existence
at the time of the plaintiff’s original discovery request); Wrenn
v. Shalala, No. 95-5198, 1995 WL 225234, at *1 (D.C. Cir. Mar. 8,
1995) (“[T]o the extent the complaint involves Freedom of
Information Act (“FOIA”) requests that were the subject of
Wrenn’s previous litigation . . . those claims are barred by the
doctrine of res judicata.
However, to the extent Wrenn has
raised new FOIA claims that were not and could not have been
litigated in that prior action . . . dismissal on res judicata
grounds was not warranted.”) (internal citations omitted); In re
Am. Tobacco Co., 880 F.2d 1520, 1527 (2d Cir. 1989) (holding that
res judicata did not apply to a second set of subpoenas that were
“plainly narrower” than an earlier set of subpoenas that had been
quashed for being overly broad and burdensome and therefore the
“two sets of subpoenas are significantly different” for purposes
of preclusion); Berbson v. Interstate Commerce Commission, 625
F.Supp. 13, 15 (D.Mass. 1985) (holding that res judicata applied
when the exact same documents were requested in an earlier and a
later suit and the same basis for non-disclosure existed in both
cases); see also Westwood Chemical Co., Inc., 656 F.2d at 1227
(observing that a party was precluded under res judicata from
taking the depositions of several corporate officers when a prior
11
court had already determined that a different set of officers
were protected and “[i]n each instance, it is the construction of
the same ‘General Release’ which denies [] the right to engage in
discovery of . . . [the] officers”).
Duke Energy argues, “If claim preclusion does not apply in
these circumstances, the number of times UARG’s privilege could
be subject to re-litigation would be limited only by the number
of UARG members EPA could subpoena.”
(Doc. 368 at 13.)
Plaintiffs, however, argue that Duke Energy’s preclusion
arguments fail because the D.C. litigation “involved a different
dispute over a different set of documents.”10
(Doc. 373 at 5.)
The D.C. litigation addressed discovery that the D.C. Plaintiffs
sought from UARG in separate suits against Duke Energy, Ohio
Edison Co., Cinergy Corp., and American Electric Power Service
Corp., totaling approximately 3,800 documents.
The Magistrate
Judge’s 2003 Orders, in contrast, addressed 285 documents, two of
which were found to be protected, that Plaintiffs sought directly
from Duke Energy.
(Doc. 373 at 9.)
Because the D.C. Special
Master never examined any of the 285 documents requested in this
case, Duke Energy cannot establish that claim preclusion
10
Plaintiffs make the additional argument that even if the
D.C. litigation and the 2003 Orders had involved the same
documents, the D.C. Plaintiffs’ voluntary dismissal in the D.C.
suit means that enforcement of the 2003 Orders would not be
barred.
12
applies.11
C.
ISSUE PRECLUSION (COLLATERAL ESTOPPEL)
Duke Energy also claims that issue preclusion applies in
this case.
Issue preclusion, also known as collateral estoppel,
bars “‘successive litigation of an issue of fact or law actually
litigated and resolved in a valid court determination essential
to the prior judgment,’ even if the issue recurs in the context
of a different claim.”
Taylor v. Sturgell, 553 U.S. 880, 892
(2008) (quoting New Hampshire v. Maine, 532 U.S. 742, 748-49
(2001)).
For issue preclusion to apply, the proponent, in this
case Duke Energy, must establish that
(1) the issue sought to be precluded is identical to
one previously litigated; (2) the issue must have been
actually determined in the prior proceeding; (3)
determination of the issue must have been a critical
and necessary part of the decision in the prior
proceeding; (4) the prior judgment must be final and
valid; and (5) the party against whom estoppel is
asserted must have had a full and fair opportunity to
litigate the issue in the previous forum.12
11
Additionally, even assuming that the 285 documents
requested in this case were examined by the D.C. Special Master,
some ambiguity remains as to the full extent to the record before
the D.C. Special Master on which he based his findings of
privilege and work-product protection.
12
Because none of the Plaintiff-Intervenors in this suit
were parties in the D.C. litigation, they never had “a full and
fair opportunity to litigate the issue in the previous forum,”
and therefore should not be precluded from relitigating any of
the four issues Duke Energy claims are precluded. See Ritter v.
Mount St. Mary’s College, 814 F.2d 986, 994 (4th Cir. 1987)
(“[E]xtension of the doctrine of collateral estoppel to
situations not involving the identical parties to the prior suit
13
Sedlack v. Braswell Servs. Group, 134 F.3d 219, 224 (4th Cir.
1998).
Issue preclusion is a “judge-made rule, capable of
flexible interpretation to serve the interests of judicial
economy by preventing needless relitigation.
This flexibility is
constantly limited by the overriding principle that the courts
should protect a litigant’s right to a full and fair opportunity
to litigate his claims.”
Ritter v. Mount St. Mary’s College, 814
F.2d 986, 994 (4th Cir. 1987); see also E.E.O.C. v. Morgan
Stanley & Co., Inc., 132 F.Supp.2d 146, 159 (S.D.N.Y. 2000) (“At
the outset, there is reason to doubt that issue preclusion could
ever apply in connection with the intensely fact-specific and
discretionary balancing of the equities involved in determining
the desirability of a protective order with respect to two
different subpoenas.”).
According to Duke Energy, issue preclusion applies to four
issues decided in the D.C. litigation: 1) that UARG, an
unincorporated association, is entitled to attorney-client
privilege over communications with its counsel, Hunton &
Williams, regarding the New Source Review (“NSR”) requirements of
the Clean Air Act; 2) that the privilege covering UARG’s
communications with Hunton & Williams has not been waived by
Hunton & Williams’ direct communications with UARG’s
has rightly been undertaken with great caution.”)
14
approximately fifty members; 3) that documents prepared by UARG’s
counsel about NSR regulations (like those at issue in the present
discovery dispute) are protected from discovery by attorneyclient privilege; and 4) that documents prepared by UARG’s
counsel regarding EPA rulemaking under the Clean Air Act (like
those at issue in the present discovery dispute) were prepared in
anticipation of litigation for purposes of work product
protection.
(Doc. 368 at 13-14.)
As the proponent of issue preclusion, Duke Energy bears the
burden of establishing all of its elements.
Duke Energy,
however, fails to meet its burden of showing that the issues, and
the requested documents, are identical in both the D.C.
litigation and the Magistrate Judge’s 2003 Orders.
With regard
to Duke Energy’s first claim of preclusion, that UARG is entitled
to attorney-client privilege, the Magistrate Judge’s 2003 Orders
never held that UARG was not capable of having an attorney-client
privilege with Hunton & Williams, but simply held that Duke
Energy had failed to meet its burden of establishing privilege in
this instance.
Therefore, the issue of whether or not UARG could
hold attorney-client privilege is not disputed.
Furthermore,
Duke has failed to show that the record before the D.C. Special
Master is the same as that before the Magistrate Judge in this
case.
With regard to Duke Energy’s second claim of preclusion,
15
Plaintiffs argue that issue preclusion does not apply to its
waiver argument because the D.C. Magistrate Judge, Special
Master, and district court never addressed whether UARG had
waived any privilege by sharing documents among its members.
(Doc. 373 at 13.)
Duke Energy, however, argues that the entire
waiver discussion in the Magistrate Judge’s 2003 Orders “stems
from [the] erroneous conclusion of law that an organization like
UARG has no privilege.”
(Doc. 368 at 15.)
According to Duke
Energy, the “EPA cannot avoid issue preclusion by making waiver
arguments that could have been made in the DC Court.”
at 16.)
(Doc. 368
As stated above, however, the Magistrate Judge never
found that UARG had no privilege - he simply found that Duke
Energy had failed to meet its burden of establishing this
privilege.
Finally, with regard to Duke Energy’s third and fourth
claims of preclusion, both of which involve documents prepared by
UARG’s counsel, Duke Energy cannot establish the documents are
precluded because the D.C. Special Master never examined any of
the documents addressed in the Magistrate Judge’s 2003 Orders.13
13
Duke Energy, while observing that “[o]ne purpose of issue
preclusion is to avoid inconsistent results,” argues that it
would have been impossible for the D.C. Special Master to apply
deference to the earlier decisions in both Duke Energy and Ohio
Edison, because six documents it examined appeared in the
privilege logs in both cases, with the Ohio Edison court
determining that privilege applied and the Duke Energy court
determining that privilege did not apply. (Doc. 368 at 17 and
n.11.)
16
Determining whether issue preclusion applies to the Magistrate
Judge’s 2003 Orders requires determining whether or not the two
sets of discovery documents are “essentially identical.”
See
McQueen v. United States, 264 F.Supp.2d 502, 514 (S.D. Tex. 2003)
(refusing to apply claim preclusion to requests for information
that “may not be essentially identical”); Nat’l Treasury
Employees Union v. Internal Revenue Serv., 765 F.2d 1174, 1178
n.7 (D.C. Cir. 1985) (finding that issue preclusion applied when
the parties stipulated that the allegedly privileged information
deleted on a second form, which was identical to the first form
except for the date, was of the “same kind” ordered redacted from
the earlier form).
In In re Subpoena Duces Tecum Issued to Commodity Futures
Trading Comm’n, 439 F.3d 740 (D.C. Cir. 2006), a plaintiff sought
a series of documents addressing the Commodity Futures Trading
Commission’s investigation of and settlement with the defendant.
When the defendant withheld some documents, claiming they were
privileged, the plaintiff moved to compel disclosure and a
magistrate judge found that the withheld documents were
protected.
Id. at 742.
The plaintiff then served the Commission
with a third-party subpoena to produce the defendant’s documents
in its possession.
The defendant objected and argued that the
plaintiff was collaterally estopped by the magistrate judge’s
prior ruling.
The district court, however, granted the
17
plaintiff’s motion to compel, and the D.C. Circuit affirmed.
Id.
The D.C. Circuit held that the magistrate judge’s finding of
privilege was not entitled to preclusive effect under the
principle of collateral estoppel.14
It explained that the
defendant had failed to meet its burden of showing that the same
documents were being contested in both suits.
Id. at 747.
The
D.C. Circuit reasoned that neither the court in the prior suit
nor the court in the subsequent suit “appear[ed] to have examined
the withheld documents or the privilege log” and “[t]hus [the
defendant] has been unable to show that the specific documents
[the plaintiff] seeks in the D.C. district court already have
been determined to be privileged by the Magistrate.”
Id.
According to the D.C. Circuit, “This court is not in a position
to determine with confidence that the withheld documents ruled by
the Magistrate to be protected . . . are the same documents [the
defendant] sought to have withheld in the D.C. district court
proceedings.”15
Id.
In In re Subpoena, the D.C. Circuit found that the defendant
14
See id. at 746 (refusing to address whether a
magistrate’s order could be a final order for purposes of
collateral estoppel and instead “[a]ssuming finality”).
15
Id. at 748 (“The Magistrate’s Order does not address
whether [the documents at issue] were included within the scope
of its ruling,” and “[h]ence, nothing on the record before this
court shows with a reasonable degree of certainty that the
privilege found by the Magistrate reached the eight sets of
documents at issue in the D.C. district court”).
18
failed to establish the elements of collateral estoppel when it
did not demonstrate that the two orders specifically addressed
the same documents.
Here, it remains unclear how many of the
documents that Plaintiffs seek from Duke Energy overlap with the
20 boxes of documents from the D.C. litigation.
It is clear,
however, that the D.C. Special Master purposefully did not
examine any of the documents sought in either the Ohio Edison or
the Duke Energy suits.
(Doc. 373 at 9.)
As Plaintiffs argue,
“The only thing that can be said with certainty about the two
document sets is that they both contain UARG documents, and that
none of the documents subject to the 2003 discovery orders were
reviewed by the DC Court.”
(Doc. 373 at 10 n.5.)
Because the
documents requested by Plaintiffs in the present suit were never
examined by the Special Master in the D.C. litigation, Duke
Energy cannot meet its burden of showing that the issues in the
two cases are essentially identical for purposes of claim
preclusion.16
Additionally, the Special Master and D.C. court’s
concern with the extremely burdensome nature of complying with
the discovery requests (20 boxes of material) is not applicable
here - where Plaintiffs have already received and returned the
16
Plaintiffs further argue, “Even assuming that the special
master’s privilege determinations were correct, Duke has made no
showing that the types of materials found by the special master
to be privileged included the general PSD updates, summaries, and
explanation of regulatory interpretations at issue in this case.”
(Doc. 394 at 13.)
19
283 “non-protected” documents.17
IV.
RELEVANCE
In addition to its allegations of claim and issue
preclusion, Duke Energy also claims that the requested documents
are irrelevant and protected by attorney-client privilege, the
common interest rule, and work product protection.
“For good cause, the court may order discovery of any matter
relevant to the subject matter involved in the action.
Relevant
information need not be admissible at the trial if the discovery
appears reasonably calculated to lead to the discovery of
admissible evidence.”
Fed. R. Civ. P. 26(b)(1).
The Fourth
Circuit has stated that “deposition-discovery rules are to be
accorded a broad and liberal treatment.”
Ralston Purina Co. v.
McFarland, 550 F.2d 967, 973 (4th Cir. 1977).
According to the
North Carolina District Court in Spell v. McDaniel,
Rules 26 through 37 of the Federal Rules have been
interpreted liberally to allow maximum discovery. It
is clear that what is relevant in discovery is far
different from what is relevant at trial, in that the
17
Plaintiffs point out that the D.C. Court quashed the
United State’s subpoenas with respect to 3,600 documents that the
Special Master never even reviewed - not based upon privilege
evaluations (since none were made) but “presumably [based on] the
same ‘burden’ concerns that caused the special master to
recommend against segregating non-privileged portions of the 200
documents that he did review.” (Doc. 373 at 13.) The discovery
requests in this case involve only 283 documents, making these
same burden concerns inapplicable.
20
concept at the discovery [stage] is much broader.
Discovery is designed to define and clarify the issues.
If requested materials are reasonably calculated to
lead to discovery of admissible evidence, the discovery
request is relevant. Therefore, discovery requests
should be complied with if there is a reasonable
possibility that the information sought may be relevant
to the subject matter of the action.
591 F.Supp. 1090, 1114, 40 Fed.R.Serv.2d 508 (E.D.N.C. 1984)
(internal citations omitted).
“Furthermore, the burden of
showing that the requested discovery is not relevant to the
issues in the case is on the party resisting discovery.”
Flora
v. Hamilton, 81 F.R.D. 576, 578, 26 Fed.R.Serv.2d 783 (M.D.N.C.
1978).
Therefore, Duke Energy bears the burden of showing that
the requested discovery is not relevant as that term applies in
discovery.
In its attempt to meet this burden, Duke Energy argues that
Duke Energy’s or UARG’s subjective understanding of the
regulations at issue cannot show that the Government provided
fair notice of its interpretation of the disputed regulation.
In
contrast, Plaintiffs argue that the documents are relevant to
potentially shed light on Duke Energy’s defense that it did not
receive fair notice of the EPA’s interpretation of the
regulations.
(Doc. 164 at 4.)
Duke Energy cites United States v. Ohio Edison Co., 2002 WL
1585597 (S.D.Ohio July 11, 2002), in support of its argument.
Ohio Edison, however, an Ohio district court found that
21
In
information regarding Ohio Edison’s interpretation of the EPA’s
regulations was in fact relevant, but some of this information
was inadmissible because it was protected by attorney-client
privilege.
The court explained,
The Court assumes that information which Ohio Edison
learned about the interpretation of these regulations
from sources other than its own attorneys, even if
those sources were not the EPA, has been disclosed.
For discovery purposes, that type of information meets
the broad relevance test set forth in Fed.R.Civ.P.
26(b) even if the District Judge ultimately determines
that it is only the agency’s official pronouncements
which “count” with respect to the defenses raised.
Id. at *6.
Plaintiffs and the Magistrate Judge cite United States v.
Hoechst Celanese Corp., 128 F.3d 216 (4th Cir. 1997), in which
the Fourth Circuit explained that minutes from a defendant
company’s meeting supported the conclusion that the EPA’s
communications not only should have but actually did put the
company on notice of the EPA’s interpretation.
Id. at 229 (“It
is well established that ‘even if the agency has not given notice
in the statutorily prescribed fashion, actual notice will render
that decision harmless.’”)
Furthermore, Plaintiffs cite Fluor
Constructors, Inc. v. Occupational Safety and Health Review
Comm’n, 861 F.2d 936, 940-42 (6th Cir. 1988), for the proposition
that a common understanding in the industry may constitute
constructive notice of a regulation’s interpretation.
22
Id. at 942
(finding that the defendant had received sufficient notice to
satisfy the Due Process clause when the “common understanding in
the construction industry” provided clarity about an OSHA
regulation).
This court, in light of the Fourth Circuit’s opinion in
Hoechst, considering the minutes of a company’s meeting in its
analysis of notice, as well as the Ohio district court’s opinion
in Ohio Edison, finding the communications between UARG and Ohio
Edison to be relevant, holds that Duke Energy has failed to meet
its burden of establishing that the Magistrate Judge was clearly
erroneous in finding the discovery at issue to be relevant.
As
the Magistrate Judge observed in his Orders, “It is important to
remember that the Court is not deciding the admissibility of
evidence [for trial purposes], but rather need only determine
whether the proposed evidence ‘is relevant to the claim or
defense of any party.’” (Doc. 164 at 6 (quoting Fed. R. Civ. P.
26(b)(1)).)
V.
ATTORNEY-CLIENT PRIVILEGE
As the proponent of attorney-client privilege, Duke Energy
bears the “burden of persuasion as to each element of the
privilege.”
Santrade, Ltd. v. Gen. Elec. Co., 150 F.R.D. 539,
542 (E.D.N.C. 1993) (quoting Republican Party of North Carolina
v. Martin, 136 F.R.D. 421, 426 (E.D.N.C. 1991)).
privilege only applies if:
23
Attorney-client
(1) the asserted holder of the privilege is or sought
to become a client; (2) the person to whom the
communication was made (a) is a member of the bar of a
court, or his subordinate and (b) in connection with
the communication is acting as a lawyer; (3) the
communication relates to a fact of which the attorney
was informed (a) by his client (b) without the presence
of strangers (c) for the purpose of securing primarily
(i) an opinion of law or (ii) legal services or (iii)
assistance in some legal proceeding, and not (d) for
the purpose of committing a crime or tort; and (4) the
privilege has been (a) claimed and (b) not waived by
the client.
North Carolina Elec. Membership Corp. v. Carolina Power & Light
Co., 110 F.R.D. 511, 513 (M.D.N.C. 1986).
The Fourth Circuit has explained that attorney-client
privilege, while it has a “venerable pedigree,” remains
“inconsistent with the general duty to disclose and impedes the
investigation of the truth.”
United States v. Under Seal, 748
F.2d 871, 875 (4th Cir. 1984).
be strictly construed.”
Therefore, this privilege “must
Id.
Any disclosure inconsistent with maintaining the
confidential nature of the attorney-client relationship
waives the attorney-client privilege. Any voluntary
disclosure by the client to a third party waives the
privilege not only as to the specific communication
disclosed, but often as to all other communications
relating to the same subject matter.
United States v. Jones, 696 F.2d 1069, 1072 (4th Cir. 1982).
Duke Energy argues that the Magistrate Judge based his 2003
Orders on a “fundamental misunderstanding” that UARG could not
have attorney-client privilege.
(Doc. 367-3 at 4.)
24
This
statement oversimplifies the Magistrate Judge’s findings,
however, which directly, although briefly, rejected Duke’s
“unsupported” argument that the court should “treat the UARG as
if it were a corporation so that all communications among members
would be as between officers of a corporation” before addressing
the question of whether UARG and its members met the requirements
for the joint defense/common interest rule.
(Doc. 164 at 10.)
(See Doc. 244 at 14-15 (“In requesting reconsideration, the UARG
again asserts that it and its members should be viewed as being
one entity so that legal matters of one member become legal
matters of the other members with respect to attorney-client
privilege and work product protection.
The Court previously
rejected that argument.”).)
When a client is an unincorporated association, establishing
privilege becomes more complex.
See Reed v. Baxter, 134 F.3d
351, 357 (6th Cir. 1998) (“[T]here is little authority about
which agents of an organizational client are the client for
purposes of the attorney-client privilege.”)
Duke Energy argues,
“Because UARG is not a natural person, no communication from H&W
[Hunton & Williams] could go to the client without going to the
UARG members.”
(Doc. 367-3 at 10.)
This statement is overly
broad, however, because Hunton & Williams could presumably
communicate with representatives of UARG without communicating
with the power companies and trade associations that make up its
25
membership.
In Bell v. Ivory, cited by Duke Energy, a district
court found that communications between the chair of an
organization’s board of directors and the organization’s attorney
were likely privileged but did not actually address wider
dissemination of information among regular members.
966 F.Supp.
23, 32 n.19 (D.D.C. 1997) (“Of course, Spielberg [the
organization’s attorney] and IIJP [the special interest
organization] had an attorney-client relationship.
Accordingly,
any information passed on to Spielberg by Harvey in her role as
chair of IIJP’s Board of Directors would likely be subject to the
attorney-client privilege.”)
Contrary to Duke’s argument, Bell
suggests that to remain privileged, the communication should be
evaluated with regard to the organizational structure as opposed
to the membership structure.
Some district courts have found communications between an
unincorporated association and its members to be privileged.
See
Schwartz v. Broadcast Music, Inc., 16 F.R.D. 31, 32-33 (S.D.N.Y.
1954) (“Each individual member of the [unincorporated]
association is a client of the association’s lawyer.
If,
therefore, the conversation was one in which plaintiff Moore was
seeking Mr. Finklestein’s legal advice and if the communications
were confidential, plaintiff Moore may properly invoke
privilege.”); United States v. American Radiator & Standard
Sanitary Corp., 278 F. Supp. 608, 614 (W.D.Pa. 1967) (finding
26
that an attorney-client relationship existed between an
association’s counsel and a corporation that was a member of the
association and refusing to determine whether an attorney-client
relationship existed between the association’s counsel and an
employee or officer of the client corporation).
In United States v. Am. Society of Composers, Authors and
Publishers (“ASCAP”), 129 F.Supp. 2d 327, 337 (S.D.N.Y. 2001),
however, a New York district court explained that the “mere
status of being a member of an unincorporated association no
longer makes one a client of the association’s attorneys.”
See
Willig, Williams & Davidson v. Walters, 1993 WL 224723, at *3
(E.D.Pa. June 22, 1993) (explaining that pursuant to the entity
theory of representation, “an attorney who represents an
organization does not automatically represent its individual
members.
A case by case review on the representation issue is
appropriate”); City of Kalamazoo v. Michigan Disposal Serv., 151
F.Supp.2d 913, 917-18 (W.D.Mich. 2001) (finding that the attorney
for a joint defense group had an attorney-client relationship
with each of the members of the group because “unlike the typical
union or trade association, the association at issue here was not
an ongoing concern but rather was formed by a group of defendants
for the limited purpose of presenting a joint defense on issues
common to the defendants” and “existed solely within the confines
of [the specific litigation] and had no existence or purpose
27
apart from the litigation”).
The general issue in ASCAP was
conflict of interest, not attorney-client privilege, and the
court addressed whether ASCAP’s counsel could defend ASCAP in a
suit brought by one of its members.18
38.
ASCAP, 129 F.Supp. at 337-
In fact, in ASCAP, the district court acknowledged that
“ASCAP has even conceded that ‘ASCAP’s general counsel is the
attorney for each of ASCAP’s members for purposes of invoking the
attorney-client privilege against a third party, where a member
has requested association-related legal advice.’”
Id. at 337.
In Robinson v. Texas Auto. Dealers Ass’n, 214 F.R.D. 432
(E.D.Tex. 2003), vacated in other part, 2003 WL 21911333 (5th
Cir. 2003), a Texas district court examined communications
between chief counsel for the Texas Automobile Dealers
Association (“TADA”) and TADA members, ultimately determining
that TADA had failed to establish the existence of attorneyclient privilege.
The district court rejected the holdings in
Schwartz v. Broadcast Music and United States v. American
Radiator (above), explaining that “such a blanket rule does not
18
The New York district court considered a variety of
factors, including: “the nature of disclosures to the attorney;
the member’s expectations of the attorney; the reasonableness of
those expectations; whether the attorney had affirmatively
assumed a duty to represent the member; whether the member had
independent representation; whether the attorney represented the
member prior to representing the association; and whether the
member relied upon the attorney’s representation of its
individual interest . . . [t]he size of the association can also
be a factor in assessing the reasonableness of the member’s
expectations.” Id. at 338.
28
adequately consider the variability in the character of trade
associations and their relationships with their members.”
451.
Id. at
Instead, the court reasoned, “[W]hile members of a trade
association may certainly establish an attorney-client
relationship with the trade association’s attorney(s), it must be
determined on a case-by-case basis whether those members actually
took the necessary action to do so.”
Id. at 452.
In Robinson, the Texas district court explained, “Absent
some showing that all TADA members intended to make Karen Coffey
[TADA’s attorney] their attorney, other than joining the TADA and
receiving mailings, Defendants have failed to carry their burden
of establishing that all TADA members were Coffey’s clients.”
Id. at 453.
The district court found that the defendants’
evidence that Coffey had sent members of TADA information about
litigation that they may or may not have participated in, that
Coffey believed that all TADA members considered her to be their
attorney, and that some of the TADA members believed her to be
their attorney, to be “facially insufficient” to establish
attorney-client privilege.19
Id. at 452.
19
The court emphasized
The Texas district court explained, “Examples of the type
of evidence that might satisfy that burden would include a
provision in the TADA membership agreement or other literature
which indicates that membership in TADA creates an attorneyclient relationship, discussions between Coffey and TADA members
regarding the creation of such a relationship, or written
agreements such as engagement or authorization letters signed by
individual TADA members.” Id. at 452.
29
that it remained the defendants’ burden, as the proponents of the
privilege, to establish that “each TADA member who received these
communications was Coffey’s client or sought to become her client
at the time the communication occurred.”
Id. at 453 (expressing
concern that “many of the recipients [of the communications at
issue] had, at the time the communications were sent, failed to
return a requested ‘authorization’ to be represented by TADA and
failed to make requested contributions to the TADA Legal Defense
Fund”); see also, United States v. Exxon Corp., 87 F.R.D. 624,
638 (D.D.C. 1980) (“Wide dissemination does indicate a likelihood
that the communication was not confidential, though it is surely
not determinative. . . .
Accordingly, the court will consider
dissemination as one factor in any decision concering specific
documents.”) (internal citation omitted).
Both the Southern District of Illinois and the Southern
District of Ohio (as well as the D.C. court - as addressed above)
have found the communications between UARG and its members to be
privileged.
In United States v. Illinois Power Co., the district
court explained, “No one denies that UARG and its members
possessed an expectation of privacy in the information provided
by Hunton & Williams, so that requirement is met.
Production of
the documents would, at the very least, reveal the kinds of
subjects upon which UARG members sought legal advice.”
25593221, at *3 (S.D.Ill. April 24, 2003).
30
2003 WL
Unfortunately, it is
unclear from the district court’s opinion whether it considered
UARG and its members to be one client for purposes of privilege
or whether it applied the joint-defense/common-interest rule.20
Id. at *3-*4.
The court found that
the requested documents were distributed to a defined
group of recipients - the member companies of UARG.
These companies were likely all concerned with the same
issue of how the EPA was interpreting regulations and
rulings, and together as UARG sought legal advice on
these matters. There was no waiver of privilege
through disclosure to third parties because UARG’s
members were joined in a common interest in current and
potential litigation.
Id. at *4.
Thus, the district court found the communications to
be both privileged and protected by the joint defense/common
interest rule, despite dissemination among members.
The Seventh
Circuit, however, unlike the Fourth Circuit, has explicitly
stated that no “threat of litigation” is required for the common
interest rule to apply.
In United States v. Ohio Edison Co., an Ohio district court
explained,
There is no dispute that Hunton & Williams is legal
counsel to UARG and may be consulted by UARG members
for legal advice on issues which are common to some or
all of the members. There is also no dispute that
Hunton & Williams authored 39 of the 40 documents at
20
In Illinois Power Co., the United States had argued that
the “supposed presence of other companies at meetings of UARG
destroys confidentiality by the ‘wide distribution’ of the
requested documents, or in the alternative, that such companies
are not engaged in a joint defense.” Id. at *4.
31
issue. Further, it is apparent that issues relating to
whether UARG members are in compliance with federal
environmental regulations and whether those regulations
apply to specific projects being considered by the
members are matters about which legal advice can
properly be rendered. Given these undisputed matters,
the only remaining issue is whether there is enough
evidence from which the Court can conclude that, in
these documents, Hunton & Williams actually rendered
protected legal advice.
Opinion and Order, United States v. Ohio Edison Co., No. C2-991181 at 5 (S.D. Ohio Jan. 6, 2003).
While acknowledging that
Ohio Edison’s affidavit stated “in a rather conclusory fashion
that UARG documents ‘contain or reflect confidential attorneyclient communications,’” the district court concluded that Ohio
Edison had presented sufficient evidence to establish privilege.
Id.
The court explained that the most significant question was
“whether communications initiated by Hunton & Williams occurred
in response to a request of legal advice from UARG or any of its
members.”
Id.
“[T]hese communications from Hunton & Williams
would at least arguably reveal client confidences, including the
types of subjects about which the UARG members sought legal
advice.”
Id. at 8.
In Ohio Edison, the Ohio district court
accepted, without discussing, the idea that UARG and its members
were clients of Hunton & Williams for purposes of attorney-client
privilege.
Therefore, the court did not elaborate on whether the
privilege had been waived by dissemination among UARG’s
32
members.21
In contrast to the courts in Illinois Power and Ohio Edison,
the Magistrate Judge in this case found that Duke Energy had
failed to establish the existence of attorney-client privilege.
(See Doc. 164 at 10; Doc. 244 at 14-15.)
As stated above, Duke
Energy, as the proponent of attorney-client privilege, bears the
burden of persuasion as to each element of the privilege.
In
Byrnes v. Jetnet Corp.,22 a district court for the Middle
District of North Carolina explained, “It is incumbent upon the
proponent [of the privilege] to specifically and factually
support his claim of privilege, usually by affidavit, to satisfy
this burden, and an improperly asserted privilege is the
equivalent of no privilege at all.”23
111 F.R.D. 68, 71
21
Instead, the court’s sole discussion of waiver occurs in
a single paragraph where the court concludes that the privilege
has not been waived because of the single unauthorized disclosure
(in violation of UARG’s guidelines) of a memo to non-members of
UARG in 1989. Id. at 9.
22
Magistrate Judge Eliason was the Magistrate Judge in both
the Order in Byrnes and the 2003 Orders at issue.
23
The court explained that the proponent of the privilege
must
disclose the identity and position of all in attendance
at the joint meetings, and [] establish that the
meetings were, in fact, between attorneys and their
respective “corporate clients,” as opposed to simply
witnesses. . . . [and] explicitly define the nature
and scope of the interest (identical or merely similar)
it allegedly has in common with [the other parties] and
specify the extent any legal interests overlapped with
commercial interests or other conversations.
33
(M.D.N.C. 1986) (finding that the court could not determine
whether attorney-client privilege existed because the proponent
of the privilege had failed to establish “the necessary factual
predicate”).
In Byrnes, the district court found that the
proponent’s reliance on “counsel’s conclusory allegation” that
the communications in question were based on common interests and
were thus privileged was “clearly insufficient” to establish
attorney-client privilege.
Id. at 72; see also Brown v. American
Partners Federal Credit Union, 183 N.C.App. 529, 536-37, 645
S.E.2d 117, 123 (2007).
Here, like in Byrnes, Duke Energy
offered affidavits with conclusory allegations.
The Magistrate
Judge’s holding, that those facts failed to establish the
existence of attorney-client privilege, is not clearly erroneous.
VI.
JOINT DEFENSE OR COMMON INTEREST RULE
The Fourth Circuit recognizes an exception to waiver of
attorney-client privilege in the joint defense rule, now “more
properly identified as the ‘common interest rule.’”24
In re
Grand Jury Subpoenas 89-3 and 89-4, 902 F.2d 244, 249 (4th Cir.
Id. at 71-72.
24
Although originally limited to the context of criminal
co-defendants, the joint defense/common interest rule has been
expanded to the civil context because “[t]he need to protect the
free flow of information from client to attorney logically exists
whenever multiple clients share a common interest about a legal
matter.” Under Seal, 902 F.2d at 248-49.
34
1990) (quoting United States v. Schwimmer, 892 F.2d 237, 243 (2d
Cir. 1989)).
Although not a privilege in and of itself, the rule
applies to material covered by attorney-client privilege and work
product protection.
Id.
According to the Fourth Circuit,
Whether an action is ongoing or contemplated, whether
the jointly interested persons are defendants or
plaintiffs, and whether the litigation or potential
litigation is civil or criminal, the rationale for the
joint defense rule remains unchanged: persons who share
a common interest in litigation should be able to
communicate with their respective attorneys and with
each other to more effectively prosecute or defend
their claims.
Id.
Despite the Fourth Circuit’s elaboration on and even
expansion of the rule, litigation remains a central component.25
The Fourth Circuit referred to “ongoing or contemplated” actions,
“defendants or plaintiffs,” “litigation or potential litigation,”
and a “common interest in litigation.”
Id.
As a district court
for the Eastern District of Virginia observed,
In every case cited by the Fourth Circuit to support
its broad reading of the privilege in Under Seal, both
parties claiming the common interest privilege were
involved in some type of litigation. It is true that
the prospect for litigation could be so remote that it
involved ‘potential co-parties to prospective
25
The Fourth Circuit warned against promoting form over
substance when applying the joint defense rule and explained that
the underlying rationale of the rule “focuses not on when
documents were generated, but on the circumstances surrounding
the disclosure of privileged documents to a jointly interested
third party.” Id. at 249.
35
litigation,’ but the prospect of litigation still had
to be there.
Fed. Election Comm’n v. Christian Coal., 178 F.R.D. 61, 73
(E.D.V.A. 1998) (internal citations omitted), aff’d in part and
modified in part, 178 F.R.D. 456 (E.D.Va. 1998).
In United States v. Aramony, the Fourth Circuit explained,
“To be entitled to the protection of this [joint defense]
privilege the parties must first share a common interest about a
legal matter.
But it is unnecessary that there be actual
litigation in progress for this privilege to apply.”26
88 F.3d
1369, 1392 (4th Cir. 1996) (internal citations omitted); see also
Sheet Metal Workers Int’l Ass’n. v. Sweeney, 29 F.3d 120, 124
(4th Cir. 1994).
The Fourth Circuit in Aramony held that the
joint defense rule did not protect a defendant’s communications
with his employer’s attorneys because he and his employer
“clearly did not share a common interest about a legal matter”
despite the defendant’s claims that he and his employer shared a
common strategy, which included investigating and preparing
defenses to accusations against the defendant, “with respect to
26
See Hanson v. United States Agency for Int’l Dev., 372
F.3d 286, 292 (4th Cir. 2004) (“[T]he common interest doctrine
applies when two or more parties consult or retain an attorney
concerning a legal matter in which they share a common interest.
In this context the communications between each of the clients
and the attorney are privileged against third parties, and it is
unnecessary that there be actual litigation in progress for this
privilege to apply.”) (internal citations omitted).
36
the press inquiries and any potential litigation to which the
press reports could give rise.”
Aramony, 88 F.3d at 1392.
The
Fourth Circuit explained,
The development of defenses to allegations against
Aramony simply is not a legal matter concerning UWA.
Although these defenses could help preserve UWA’s
reputation, the preservation of one’s reputation is not
a legal matter. If the allegations concerning Aramony
could have subjected UWA to civil or criminal
liability, Aramony’s claim would be stronger. But,
because Aramony has not shown how UWA would be affected
(apart from the stain of its reputation) by the
allegations concerning him, the joint defense privilege
is inapplicable here.
Id.
The Fourth Circuit, while acknowledging that “it is
unnecessary that there be actual litigation in progress for this
privilege to apply,” has not clarified how attenuated the
prospect of litigation can be for the common interest rule to
still apply.
Aramony, 88 F.3d at 1392.
The cases where the
Fourth Circuit has recognized a common interest privilege,
however, have all involved existing or at least pending
litigation.
See In re Grand Jury Subpoenas 89-3 and 89-4, 902
F.2d 244 (joint prosecution of a claim and joint defense of a
counterclaim); Hanson v. United States Agency for Int’l Dev., 372
F.3d 286 (4th Cir. 2004) (construction dispute); see also In Re
Grand Jury Subpoena: Under Seal, 415 F.3d 333, 341 (4th Cir.
2005) (affirming the district court’s refusal to apply the joint
37
defense privilege prior to the time the parties actually
cooperated in a common defense, when there was no joint-defense
agreement, no evidence that the parties were pursuing a common
legal strategy, one party was in the “early stages of its
internal investigation,” and interviews with the proponent of the
privilege were to “gather information” rather than to
“formulat[e] a joint defense”); Fed. Election Comm’n, 178 F.R.D.
at 73 (finding the common interest rule did not apply when the
record showed no evidence “any actual, contemplated, or
prospective litigation” at the time the privileged information
was shared and the third party was involved in the litigation
only to the extent that he supplied information to prepare for an
IRS audit, he did not receive any benefit from the shared
information, and he was not “directly” effected by the outcome of
the litigation); Front Royal Ins. Co. v. Gold Players, Inc., 187
F.R.D. 252, 258 (W.D.Va. 1999) (“While the Fourth Circuit has
recognized this common interest rule, it appears that the Fourth
Circuit cases recognizing this rule have all involved privileged
materials which were shared with parties which were directly
involved in litigation.”) (internal citations omitted).
The Fourth Circuit most recently addressed the subject of
the common interest rule in Hunton & Williams v. United States
Dep’t of Justice, 590 F.3d 272 (4th Cir. 2010), within the
context of a suit under the Freedom of Information Act
38
(“FOIA”).27
The Fourth Circuit explained, “The common interest
doctrine requires a meeting of the minds, but it does not require
that the agreement be reduced to writing or that litigation
actually have commenced.”
Id. at 287.
The court distinguished
between an agreement to undertake a joint legal strategy and an
“agreement to exchange information in order to make an
assessment.”28
Id. at 285.
According to the Fourth Circuit,
First, although a common interest agreement can be
inferred where two parties are clearly collaborating in
advance of litigation, mere “indicia” of joint strategy
as of a particular point in time are insufficient to
demonstrate that a common interest agreement has been
formed. Second, it is not clear that the particular
“indicia” identified by the district court [that the
parties “agreed to exchange declarations, other
proposed pleadings, and their views on issues relating
to the effect of any injunction”] pointed to an actual
common interest agreement, as opposed to a mere
confidentiality agreement.
Id. at 284-85.
Furthermore, the fact that the parties later
concluded that they shared each other’s interest failed to shield
“communications between the two before that decision was made.”
Id. at 286.
27
While the Fourth Circuit elaborated on the proper use of
the rule, it also referred to the “judicial skepticism that FOIA
demands,” making it unclear whether the same level of scrutiny
would be applied to contexts outside of the FOIA. Id. at 287.
28
The Fourth Circuit explained, “While agreement need not
assume a particular form, an agreement there must be. If RIM was
simply approaching DOJ over the prospect that there might one day
be a joint litigation effort, such contacts and discussions seem
too preliminary to remove from disclosure under Exemption 5 [of
the FOIA].” Id. at 285.
39
In Hunton & Williams, the Fourth Circuit observed that,
based on the fact that the attorney representing DOJ “routinely”
created common interest agreements, his delay in creating a
written common interest agreement may have indicated that DOJ had
not yet made a final decision about becoming involved in the
litigation.
Id. at 286.
Here, although UARG and its members’
failure to create a written common interest agreement is not
dispositive, it may indicate that no such agreement existed.
According to the Fourth Circuit, the fact that two or more
parties may have different motivations for pursuing their common
interest is irrelevant in determining whether the common interest
rule applies.
Id. at 282-83.
The court explained that
the agreement between RIM and DOJ . . . makes it clear
that RIM and DOJ had committed to working together to
achieve that goal. . . . It does not matter that RIM
was motivated by the commercial benefit that would
accrue to it if it succeeded in opposing the BlackBerry
injunction while the government was motivated by
concern for the public interest. What matters is that
there was a unity of interest in preserving a nondisruptive pattern of governmental BlackBerry use, and
RIM and DOJ could rely on one another’s advice, secure
in the knowledge that privileged communications would
remain just that.
Id. at 282-83.
“A fair interpretation of a common interest
agreement, however, must leave room for the parties to debate the
means by which they will secure their common end.”
Id. at 283
n.1.
While the Fourth Circuit has yet to explicitly address
40
whether there must be actual or pending litigation in order for
the common interest rule to apply, other circuits are split on
this issue.
In In re Santa Fe Int’l Corp., the Fifth Circuit
held that there must be a “palpable threat of litigation at the
time of the communication, rather than a mere awareness that
one’s questionable conduct might some day result in litigation,
before communications between one possible future co-defendant
and another . . . could qualify for protection.”
711 (5th Cir. 2001).
272 F.3d 705,
In contrast, in United States v. BDO
Seidman, LLP, the Seventh Circuit held that the common interest
doctrine applies “where the parties undertake a joint effort with
respect to a common legal interest” and, though the rule is
strictly limited to “those communications made to further an
ongoing enterprise,” communications “need not be made in
anticipation of litigation to fall within the common interest
doctrine.”
492 F.3d 806, 815-16 (7th Cir. 2007) (affirming the
district court’s finding that the common interest doctrine
applied when two companies “acting as joint venturers, shared a
common legal interest ‘in ensuring compliance with the new
regulation issued by the IRS,’ and in making sure that they could
defend their product against potential IRS enforcement actions”)
(internal citations omitted).
In his 2003 Orders, the Magistrate Judge found that the
Fourth Circuit “would likely proceed cautiously” in expanding the
41
privilege and therefore adopted the standard employed by the
Fifth Circuit in Santa Fe International Corp. that a “palpable
threat of litigation” was required before the common interest
doctrine could be invoked.
(Doc. 164 at 13-14.)
The Magistrate
Judge explained that for Duke Energy to meet its burden of
showing that the common interest rule applied, it must
demonstrate “an agreement among all members of the UARG to share
information as a result of a common legal interest relating to
ongoing or contemplated litigation.”
(Doc. 164 at 14.)
According to the Magistrate Judge, “contemplated litigation”
meant a “palpable threat of litigation,” which he interpreted as
“at least as stringent as the anticipation of litigation standard
used for work product.”
(Doc. 164 at 14.)
The Magistrate Judge found that Duke Energy’s conclusory
statements failed to meet this standard.
(Doc. 164 at 22.)
The
affidavits submitted by Duke Energy failed to establish that the
documents in question were created in anticipation of litigation.
(Doc. 164 at 16.)
The affidavits submitted by Duke Energy failed
to identify any specific litigation at issue, although one
affidavit from an attorney at Hunton & Williams argued that all
UARG communications about rulemaking were privileged because
“almost every EPA rulemaking under the Clean Air Act results in a
judicial challenge.”
(Doc. 164 at 18.)
These general
statements, however, do not establish “anticipated” litigation
42
with the necessary specificity.
Because the Fourth Circuit has
not clarified the exact parameters of the common interest rule
and has in fact emphasized that claims of privilege should be
strictly construed, Duke Energy has failed to establish that the
Magistrate Judge committed clear error in either determining that
a palpable threat of litigation was required for the common
interest rule to apply or in holding that Duke Energy’s
conclusory affidavits failed to establish this palpable threat.29
VII. WORK PRODUCT PROTECTION
To be eligible for work product protection, a “document must
be prepared because of the prospect of litigation when the
preparer faces an actual claim or a potential claim following an
actual event or series of events that reasonably could result in
litigation.”30
Nat’l Union Fire Ins. Co. v. Murray Sheet Metal
29
This court further notes that a “palpable threat of
litigation” or a similar standard assists in determining a common
interest. Absent some indicia of the type of common interest, it
is simply not clear whether the various individual members of
UARG share a common interest in litigation or a common interest
in industry and business decisions.
30
Duke Energy and UARG argue that the Magistrate Judge
should have applied the “inevitable litigation” standard, used in
cases involving the Freedom of Information Act. “[T]he law
permits the invocation of Exemption 5 [of the FOIA] to protect
attorney work product in the presence of ‘some articulable claim,
likely to lead to litigation. Indeed, if litigation was
inevitable, there is no need to identify a specific claim.” See
Judicial Watch, Inc. v. Reno, 154 F.Supp.2d 17, 18 (D.D.C. 2001)
(internal citations omitted) (finding that, while it appeared
that litigation over INS’s decision to return Elian Gonzalez to
Mexico was “likely,” it was not so obvious that the district
court could simply take judicial notice of it and a “barebones,
43
Co., Inc., 967 F.2d 980, 984 (4th Cir. 1992) (emphasis in
original).
Documents prepared in the ordinary course of business
do not qualify for this privilege.31
Id.
In Nat’l Union Fire
Insurance Company, the Fourth Circuit explained,
We take notice of the fact that members of society tend
to document transactions and occurrences to avoid the
foibles of memory and to perpetuate evidence for the
resolution of future disputes. And because litigation
is an ever-present possibility in American life, it is
more often the case than not that events are documented
with the general possibility of litigation in mind.
Yet, “[t]he mere fact that litigation does eventually
ensue does not, by itself, cloak materials” with work
product immunity.
conclusory” declaration did not establish that litigation was
inevitable). As explained above, however, the Magistrate Judge
correctly applied binding authority from Nat’l Union Fire Ins.
Co. v. Murray Sheet Metal Co., 967 F.2d 980.
Duke Energy and UARG also urged the Magistrate Judge to find
that documents “prepared in contemplation of participating in
rulemaking deserve work product protection.” The Magistrate
Judge refused, however, and correctly observed that in “the cases
cited by the UARG . . . there is an actual institution of an
investigation so that the threat of litigation is, in fact,
imminent.” (Doc. 244 at 19-20.)
31
The Fourth Circuit quoted with approval the opinion in
Janicker v. George Washington Univ., which stated, “The fact that
a defendant anticipates the contingency of litigation resulting
from an accident or an event does not automatically qualify an
‘in house’ report as work product.” 94 F.R.D. 648, 650 (D.D.C.
1982); see Hennessey v. United States Agency for Int’l Dev., 121
F.3d 698, 1997 WL 537998, at *6 (4th Cir. Sept. 2, 1997) (holding
that a district court erred in finding a report, created after a
company was threatened with litigation, to be protected by work
product protection when the report was intended to be shared with
the opposing party and was commissioned to further the completion
of the project - not “because of the prospect of litigation”).
44
Id. at 984.
“Determining the driving force behind the
preparation of each requested document is therefore required in
resolving a work product immunity question.”
Id.
Duke Energy, the party asserting work product protection,
bears the burden of proof of establishing that it is entitled to
this protection.
Sandberg v. Virginia Bankshares, Inc., 979 F.2d
332, 355 (4th Cir. 1992), vacated pursuant to joint agreement by
the parties, 1993 WL 524680 (4th Cir. April 7, 1993); see North
Carolina Elec. Membership Corp. v. Carolina Power & Light Co.,
110 F.R.D. 511, 515 (M.D.N.C. 1986) (“The proponent must provide
the court with enough information to enable the court to
determine privilege, and the proponent must show by affidavit
that precise facts exist to support the claim of privilege.”)
In
Suggs v. Whitaker, a North Carolina district court explained,
In meeting this burden, such party [the proponent of
the protection] may not rely on conclusory allegations
or mere statements in briefs. . . . Rather, it is
incumbent upon the party to come forward with a
specific demonstration of facts supporting the
requested protection. Such demonstration should
preferably be made through affidavits from
knowledgeable persons. Failure to so satisfy this
burden, even though affidavits have been submitted,
will lead to denial of the motion.
152 F.R.D. 501, 504-05 (M.D.N.C. 1993) (internal citations
omitted).
“[C]laims that litigation became a realistic
possibility at a certain time will normally have to be supported
by affidavits which give specific factual detail for that
45
conclusion.”
Pete Rinaldi’s Fast Foods, Inc. v. Great Am. Ins.
Companies, 123 F.R.D. 198, 203 (M.D.N.C. 1988); see also
Neuberger Berman Real Estate Income Fund, Inc. v. Lola Brown
Trust No. 1B, 230 F.R.D. 398, 418 (D.Md. 2005) (“Moreover, the
Court will not speculate as to the reasons the documents were
created or construct a scenario under which the documents could
arguably be privileged.
Just as in the case of attorney-client
privilege, the proponent must provide specific factual support
for its assertion.”)
In Sandberg, the Fourth Circuit held that the work product
doctrine did not protect notes taking by a company’s general
counsel.
The court explained,
Although the general counsel’s affidavit indicates the
purposes of the April 20 meeting [where the notes were
taken], it does not indicate her purpose in making the
notes. The mere fact that a lawsuit was pending does
not transform an attorney’s notes into material
prepared in anticipation of litigation. . . . her
purpose in taking the notes is not self-evident.
Sandberg, 979 F.2d at 356; see also Neuberger, 230 F.R.D. at 418
(“The fact that defendant anticipated litigation with plaintiff
does not make all documents thereafter ‘generated by or for its
attorneys subject to work product immunity.
A party claiming
work product immunity must still establish the underlying nexus
between the preparation of the document and the specific
litigation.’”) (quoting Burton v. R.J. Reynolds Tobacco Co., 175
46
F.R.D. 321, 328 (D.Kan. 1997)); see also Taroli v. Gen. Elec.
Co., 114 F.R.D. 97, 99 (N.D. Ind. 1987) (“[A]lthough [the claims
examiner] stated that she had ‘sufficient factual information’ to
determine that litigation was a realistic possibility, her
affidavit did not specify what information was available to her
prior to making that determination. . . .
The insurance company
cannot expect a court to rubberstamp its decision based upon a
sketchy affidavit.”)
Similarly, in Portsmouth Redevelopment & Hous. Auth. v. BMI
Apartments Associates, a Virginia district court found that the
proponent of work product protection had failed to carry its
“burden of establishing that each document for which it seeks
work-product protection was prepared in anticipation of
litigation.”
155 F.R.D. 136, 139 (E.D. Va. 1994), vacated
pursuant to settlement (Jul. 25, 1994).
According to the court,
the fact that “a few of the documents contain the notation
‘because of the likelihood of litigation concerning this matter’”
did not meet the proponent’s burden.
Id. at 139-40.
Also, the
proponent’s “broad, conclusory assertion that the likelihood of
litigation was obvious” failed to meet its burden.
Finally, the
proponent failed to meet its burden when it submitted an
affidavit from its general counsel, which stated that “[a]ll of
the work [he] performed was with the expectation that litigation
might result” and that he had been assigned to offer advice about
47
“any possible liability arising from the [] inquiry [at issue]
and about the type of response, if any, to make.”
Id.
According
to the court, these “conclusory remarks” only reflected that
counsel had “the general possibility of litigation in mind” when
he prepared the documents and did not establish work product
protection.
Id.
Here, the Magistrate Judge was not clearly erroneous in
finding that, like the proponents of work product protection in
both Sandberg and Portsmouth, Duke Energy has failed to establish
that the “driving force behind the preparation of each requested
document” is litigation.
984.
Nat’l Union Fire Ins. Co., 967 F.2d at
According to the Magistrate Judge, Duke Energy supports its
assertion of work product protection with a series of “conclusory
assertions in affidavits.”
(Doc. 164 at 16.)
These assertions
include statements by one of UARG’s attorneys that all UARG
communications related to rulemaking are privileged because
“almost every EPA rulemaking under the Clean Air Act results in
judicial challenge.”
(Doc. 164 at 18.)
According to the
Magistrate Judge, Duke Energy’s main problem is that, despite its
conclusory assertions, it cannot identify any particular
litigation, existing or anticipated, in which Duke Energy was
involved.32
The Magistrate Judge found that Duke Energy
32
But see Illinois Power Co., 2003 WL 25593221, at *5
(finding that the documents in question were created in
“anticipation of litigation” because they “make references to
48
essentially argues that “whenever a business group bands together
for a common purpose of making their will known to government
regulators, all attorney communication with the group is
privileged and/or work product.”
(Doc. 164 at 19-20.)
Based on
the Fourth Circuit’s holding in National Union Fire Insurance
Company, Duke Energy fails to meet its burden of showing that the
Magistrate Judge committed clear error when he found that Duke
Energy had failed to establish the requirements of work product
protection.
IV.
UARG’S FIRST AMENDMENT ARGUMENT
Out of an abundance of caution, this court, like the
Magistrate Judge, also addresses UARG’s arguments for a
protective order.
(See Doc. 244 at 8 (“Duke Energy’s other
ground for reconsideration relies on all of the motions filed by
the UARG. . . .
Therefore, out of an abundance of caution, the
Court will consider all of the UARG’s motions as if they had been
raised by Duke Energy.”).)
In addition to reiterating Duke
Energy’s claims, UARG argues that “compelling Duke Energy to
produce UARG communications given to Duke Energy infringes on the
‘enforcement initiative’ and ‘possible agency investigation.’
Given the actions taken by the EPA against several electric
utility companies prior to and during 1998, it is hardly
unreasonable to believe that these documents were caused by the
anticipation of at least some articulable claim EPA had against
Defendants, and that such claim was likely to lead to
litigation”).
49
UARG’s First Amendment right as a ‘legal advocacy group,’”
compelling disclosure of UARG’s “political associations and
beliefs.”
(Doc. 244 at 9.)
The cases cited by UARG in support of its argument are both
non-binding and distinguishable from the present case.
See
Federal Election Comm’n v. Machinists Non-Partisan Political
League, 655 F.2d 380, 388 (D.C.Cir. 1981) (seeking “all available
materials which concern a certain political group’s ‘internal
communications,’” including membership and volunteer lists);
Wyoming v. U.S. Dep’t of Agric., 208 F.R.D. 449, 455 (D.D.C.
2002), appeal dismissed as moot, 414 F.3d 1207 (seeking
“extraordinarily broad” and “irrelevant” information from nonparties and where plaintiff failed to indicate that it had made
reasonable efforts to obtain the information elsewhere);
Austrialia/Eastern U.S.A. Shipping Conference v. United States,
537 F.Supp. 807, 811-12 (D.D.C. 1982), appeal dismissed as moot,
1986 WL 1165605 (seeking “petitioners’ contacts and
communications with governmental agencies” among other things and
making no “showing of need supportive of other than an ‘official
curiosity’ standard”); see Doc. 244 at 10 (“Those cases are
inapposite, in that a wide range of information was sought with
respect to parties’ political activities or influencing
efforts.”).
In North Carolina Elec. Membership Corp. v. Carolina Power &
50
Light Co., the plaintiffs, during discovery, had requested
production of “each document relating to existing, contemplated
or proposed state legislation affecting the area in which an
electric utility may market electric power and each document
relating to contemplated or proposed federal legislation
regulating the supply of electric power in bulk or power exchange
services.”
666 F.2d at 51.
The defendants, two utility
companies, objected, claiming that the documents were both
privileged and “constitutionally protected.”
Id.
The Fourth
Circuit explained that the “contention that the discovery of this
material would have a chilling effect is without merit.”
The
court cited Herbert v. Lando, 441 U.S. 153 (1979), where the
Supreme Court held that discovery of a producer’s “behind the
scene” planning conference for a news special would not have a
chilling effect upon the news organization’s first amendment
rights.
See id. at 53 (“If discovery into the internal affairs
of a news organization does not have a chilling effect, then
neither would discovery in this case.”).
In light of the Fourth
Circuit’s holding in North Carolina Elec. Membership Corp. v.
Carolina Power & Light Co., Duke Energy has failed to meet its
burden to show that the Magistrate Judge committed clear error by
finding that compelling discovery did not violate UARG’s First
Amendment rights.
51
V.
CONCLUSION
IT IS THEREFORE ORDERED that Plaintiffs’ motion to lift the
stay of enforcement of the Magistrate Judge’s 2003 Orders be
GRANTED.
It is FURTHER ORDERED that the Magistrate Judge’s
Orders from April 11, 2003, October 22, 2003, and November 3,
2003, be AFFIRMED.
While affirming the Magistrate Judge’s 2003
Orders compelling discovery, however, this court explicitly finds
that these documents are discoverable for purposes of this order
only.
Accordingly, it is therefore ORDERED that disclosure is
limited solely to this litigation and any documents provided in
this case may not be disclosed or used in any other litigation
unless ordered by this court.
This the 30th day of April 2012.
__________________________________
United States District Judge
52
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