572 F.2d 596 (8th Cir. 1977)
Diversified Industries, Inc., a Delaware corporation with its principal place of business in Clayton, Missouri, manufactured and processed nonferrous metals.1 Weatherhead, an Ohio corporation with its principal place of business in Cleveland, manufactured and sold brass and brass products and for many years purchased large quantities of copper from Diversified.2
In 1974 and 1975, during proxy fight litigation involving Diversified, facts surfaced indicating that Diversified may have maintained a slush fund to bribe purchasing agents of companies with which it dealt, including possibly Weatherhead.3 On July 9, 1976, Weatherhead filed a complaint in the United States District Court for the Eastern District of Missouri alleging that Diversified conspired with Weatherhead employees to sell inferior grade copper in exchange for bribes from the slush fund, that Diversified tortiously interfered with Weatherhead's employment contracts, and that Diversified violated section 4 of the Clayton Act.4
As a result of the disclosures in the proxy litigation, Diversified's Board of Directors passed a resolution authorizing the General Counsel to engage the Washington, D.C. law firm of Wilmer, Cutler & Pickering to conduct an investigation and inquiry, to elicit facts, make findings, and provide a report possibly containing recommendations so the Board could discharge its duties; the resolution also authorized the firm to obtain assistance from accounting firms and directed all officers and employees to cooperate fully.5 The firm was subsequently directed to report to the Board rather than the Audit Committee, and the company President advised employees that he would take any steps necessary to ensure cooperation.6
The law firm interviewed several Diversified employees, including some who were not in a position to control or take a substantial part in corporate decisions based on the firm's advice, and prepared a report dated December 1975 that summarized the interviews, analyzed accounting data, evaluated employee conduct, drew conclusions about the propriety of that conduct, and made recommendations.7 The September 3, 1975, February 3, 1976, and March 3, 1976 corporate minutes and a January 30, 1976 letter from Diversified's President restated critical portions of the report.8 The firm had also prepared a memorandum dated June 19, 1975.9 Weatherhead sought discovery of the December report, the minutes, and the letter.10 The district court ordered production.11 Diversified petitioned the Eighth Circuit for a writ of mandamus.12 A panel initially denied the petition on the merits, after which the court granted en banc review.13
Diversified had voluntarily surrendered the documents to the SEC pursuant to a subpoena in a separate nonpublic investigation.14 After oral argument, Weatherhead obtained a copy of the December 1975 report from Diversified's SEC filings.15
Whether a writ of mandamus is available for immediate appellate review of a district court order compelling production of documents claimed to be protected by the attorney-client privilege?16
Yes. The district court ordered production of the December 1975 report, corporate minutes, and January 30 letter after Weatherhead sought discovery in its antitrust and tort action against Diversified.19 Upon the district court's January 6, 1977 order compelling production, Diversified petitioned the Eighth Circuit for a writ of mandamus.20 A panel initially denied the petition on the merits.21
The court granted en banc review because of the important issues raised with respect to the proper application of the attorney-client privilege.22 The en banc court left untouched its earlier opinion insofar as it holds that mandamus is available as a means of immediate appellate review.23 This procedural posture confirms that mandamus serves as the appropriate vehicle for immediate review when privileged materials are at risk of irreversible disclosure.24
Mandamus is available for immediate appellate review.25
Whether the June 19, 1975 memorandum prepared by Wilmer, Cutler & Pickering is protected from discovery?26
No. The June 19, 1975 memorandum was prepared by Wilmer, Cutler & Pickering for Diversified.2930 The en banc court left untouched its earlier opinion insofar as it holds that the June 19, 1975 memorandum is unprotected because the memorandum contained no confidential information.31 Therefore the memorandum is not entitled to protection under the attorney-client privilege and must be produced.32
The June 19, 1975 memorandum is not protected from discovery.33
Whether the December 1975 report prepared by Wilmer, Cutler & Pickering, along with related corporate minutes and the January 30, 1976 letter, is protected from discovery under the attorney-client privilege?34
The attorney-client privilege applies to a corporation when an employee's communication satisfies five requirements.35 The requirements are that the communication was made for the purpose of securing legal advice, that the employee making the communication did so at the direction of his corporate superior, that the superior made the request so that the corporation could secure legal advice, that the subject matter of the communication is within the scope of the employee's corporate duties, and that the communication is not disseminated beyond those persons who because of the corporate structure need to know its contents.36
Yes. Diversified's Board of Directors passed a resolution authorizing Wilmer, Cutler & Pickering to conduct an investigation into possible slush fund activities to elicit facts, make findings, and provide a report with recommendations so the Board could discharge its duties.37 The law firm interviewed employees at the direction of their superiors in the corporation.38 The subject matter of the communications concerned the performance of the employees' corporate duties.39
The corporation limited dissemination to those who needed to know the results.40 The December report summarized the interviews, analyzed accounting data, evaluated employee conduct, drew conclusions, and made recommendations.41 The en banc court concluded that these employee interviews are confidential communications of the corporate client and entitled to the attorney-client privilege under the modified Harper & Row test.42 Thus the report and the portions of the corporate minutes and January 30 letter are also privileged because disclosure would reveal directly or inferentially the contents of the interviews.43
The December 1975 report, related corporate minutes, and January 30, 1976 letter are protected from discovery under the attorney-client privilege.44
Related opinions on this issue
Judge Henley dissents from the majority's holding that the December 1975 report is protected by the attorney-client privilege.45 He concludes that Law Firm was not employed to provide legal services or advice but rather to make a factual investigation and business recommendations that could have been performed by non-lawyers aided by accountants.46
After reviewing the in camera materials, Judge Henley finds that the work performed by Law Firm lacked the requisite legal character.47 The majority's premise that Diversified employed Law Firm as its attorney to give legal advice cannot be accepted.48 He notes that the report consists of factual findings and recommendations that any investigator could make.49 The recommendations regarding accounting procedures and personnel changes do not require legal expertise.50 He would dismiss the petition in its entirety.51
Chief Judge Gibson concurs in the majority's analysis granting the writ insofar as it relates to the December 1975 report from Wilmer, Cutler.52 He agrees that the report is protected.53 However, he dissents from protecting the corporate minutes.54
He concludes that publication of protected material in minutes required by statute and open to shareholder inspection constitutes a waiver of the privilege because continued confidentiality is a predicate for operation of the privilege.55 Corporations are required to keep minutes by statute.56 Minutes are available for inspection by shareholders.57 This shareholder right strengthens his view that the minutes cannot be considered privileged.58
Whether Diversified's voluntary production of the documents to the SEC pursuant to subpoena effected a waiver of any attorney-client privilege that otherwise attached?59
No. Diversified voluntarily surrendered the documents to the SEC pursuant to a subpoena in a separate nonpublic investigation.62 The en banc court concludes that only a limited waiver of the privilege occurred.63 To hold otherwise may have the effect of thwarting the developing procedure of corporations to employ independent outside counsel to investigate and advise them to protect stockholders, potential stockholders and customers.64 Therefore the voluntary production did not effect a complete waiver.65
Diversified's voluntary production to the SEC effected only a limited waiver and did not waive the privilege for purposes of this private litigation.66
Whether the controversy became moot after Weatherhead obtained a copy of the December 1975 report from SEC filings?67
No. After oral argument Weatherhead obtained a copy of the December 1975 report from Diversified's SEC filings.70 The en banc court declines to dismiss the petition on grounds of mootness.71 On remand, the District Court may determine what further action, if any, is appropriate in the light of this Court's holding that the report is privileged.72 Therefore the controversy is not moot.73
The controversy did not become moot after Weatherhead obtained the report from SEC filings.74
Related opinions on this issue
Judge Bright dissents on the ground that the controversy is moot.75 He notes that Weatherhead has obtained the information from Diversified's reports filed with the SEC and concludes that this change in circumstances renders improper any issuance of a writ of mandamus.76 Although reluctant to express an opinion on the merits because of mootness, he agrees in the main with the dissenting views of Judge Henley.77
Had the court been willing to dismiss this appeal on the ground of mootness, he would have concurred gladly.78