Putnam Investments v. Siedle

• Court: Court of Appeals for the First Circuit
• Decided: June 18, 1998
• Docket: 98-1109
• Status: Published

Opinion

USCA1 Opinion

                 United States Court of Appeals

                     For the First Circuit


No. 98-1109


EDWARD A.H. SIEDLE,



                       Plaintiff, Appellee,



                                v.



                    PUTNAM INVESTMENTS, INC.,



                      Defendant, Appellant.


APPEAL FROM THE UNITED STATES DISTRICT COURT



                FOR THE DISTRICT OF MASSACHUSETTS



           [Hon. Joseph L. Tauro, U.S. District Judge]


Before



                      Selya, Circuit Judge,

                                

            Campbell and Cyr, Senior Circuit Judges.


Dennis M. Kelleher, with whom Andrew J. Hachey and Skadden,

Arps, Slate, Meagher & Flom LLP were on brief, for appellant.

     Morris M. Goldings, with whom Richard S. Jacobs and Mahoney,

Hawkes & Goldings were on brief, for appellee.


June 16, 1998


SELYA, Circuit Judge.  Like competing centrifugal and

centripetal forces, the presumptive right of public access to

judicial records and the duty of confidentiality that an attorney

owes to a former client push and pull in this appeal.  Reconciling

these important interests, we hold that the district court abused

its discretion when it summarily unsealed all the filings in an

action brought by a lawyer against his former client.

I.  BACKGROUND

  Defendant-appellant Putnam Investments, Inc. (Putnam)

operates a large, multifaceted financial services business.  It

employed plaintiff-appellee Edward A.H. Siedle as an in-house

counsel at its Boston headquarters in the mid-1980s.  Siedle's

responsibilities included monitoring Putnam's compliance with

federal and state securities laws and with the company's self-

imposed code of ethics.

  The circumstances surrounding Siedle's departure from

Putnam's ranks are conflicted.  For present purposes, it suffices

to say that disagreements between Siedle and senior management

rendered a continuing employment relationship infeasible.  Putnam

and Siedle parted company on October 21, 1988, and Siedle promptly

retained counsel to iron out various wrinkles incident to the

severing of this tie.  Negotiations  produced a termination

agreement (the Agreement), signed on February 14, 1989, in which

the parties agreed that Siedle's departure had come about by mutual

consent, that each would "refrain from making any adverse public or

private comment about the other," and that Siedle would not

disclose any "non-public documents, materials or information in

whatever form" obtained in the course of his employment.  The

parties specifically acknowledged that this last obligation was

cumulative of Siedle's duties under the "Code of Professional

Responsibility and the common law governing the attorney-client

privilege."

  Notwithstanding his departure, Siedle elected to maintain

a retirement account with Putnam.  In early 1997, Putnam informed

him that, due to a clerical bevue, it had erroneously credited

Siedle's account to the tune of approximately $15,000.  Putnam

unilaterally deducted the alleged overpayment from Siedle's account

balance.  This action proved to be the wind that fanned the still-

smoldering embers of the failed relationship. A conflagration

erupted.

  In short order, Siedle told his tale to Pensions &

Investments (P&I), a prominent weekly trade magazine.  In a May

1997 issue, P & I published an article captioned "Putnam, Ex-

Employee At Odds Over Benefits."  The story attributed to Siedle

some unflattering comments about Putnam's administration of

retirement accounts.  Putnam promptly criticized the article for

"tak[ing] an isolated record-keeping dispute between Putnam and a

lawyer the company fired nine years ago and suggest[ing] a whole

range of questions about our performance and capabilities."  P&Ipublished Putnam's rejoinder as a "letter to the editor" in its May

26 issue.

     Siedle took umbrage and sued Putnam in a Massachusetts

state court for breach of contract, interference with advantageous

business relationships, and conversion.  Noting the parties'

diverse citizenship and Siedle's large ad damnum, Putnam removed

the action to the federal district court, see 28 U.S.C.  1332(a),

1441, and asserted a coterie of counterclaims.

     Siedle's complaint shapes the contours of the current

controversy.  It contains a paragraph that, in Putnam's view,

needlessly divulges information obtained in the course of the

parties' attorney-client relationship.  Putnam contends that the

applicable disciplinary rule, Massachusetts Supreme Judicial Court

(SJC) Rule 3:07, Canon 4, DR 4-101 (West 1997), requires that

Siedle hold the contents of this scarlet paragraph in strictest

confidence.  Moreover, Putnam insists that this breach of trust

was hardly a slip of the pen; to bolster this point, a Putnam

executive signed an affidavit in which he swore that Siedle

threatened to disclose other privileged materials unless the

company knuckled under and effected a lucrative settlement of

Siedle's lawsuit.

     In rapid sequence, Putnam obtained a temporary

restraining order, a seal order, and a preliminary injunction. 

Collectively, these edicts impounded virtually all the pleadings,

directed the parties to submit all future filings under seal, and

prohibited Siedle from disclosing any information that was subject

to the attorney-client privilege or the confidentiality

requirements of the Agreement.    Siedle did not oppose any of

these requests for interim relief, and they remained in effect for

the next several months.

     On January 12, 1998, the New York Times sought and

received, without opposition from either party, access to the seal

order.  At a February 6 scheduling conference, a lawyer for the

newspaper appeared and requested that the court lift the seal. 

With surprisingly little fanfare, the court acquiesced and opened

the case file.  Putnam moved for reconsideration in the district

court and, when that motion failed, successfully sought an

appellate stay.  We set an expedited briefing schedule on motion of

the New York Times and issued an order allowing public access to

most (but not all) of the parties' past filings, preserving the

confidentiality of only five specific documents (or portions of

documents) that Putnam asserts contain privileged information.  We

also installed a redaction procedure, discussed infra note 6,

referable to future filings.

     For reasons that were never explained, the New York Timesmoved to withdraw as an intervenor approximately three weeks prior

to the date set for oral argument.  We granted its motion.  Siedle

presses on, opposing any reimposition of the district court's seal

order.

II.  DISCUSSION

     Unsealing orders usually warrant immediate review under

the collateral order doctrine.  See FTC v. Standard Fin. Mgmt.

Corp., 830 F.2d 404, 407 (1st Cir. 1987).  After all, certain

interests only can be preserved by a seal order, and the interest

that Putnam asserts here   its desire to ensure that materials

subject to the attorney-client privilege are shielded from the

public eye   is of that genre.  When, as now, a seal order is

granted to protect such an interest, and then revoked, an immediate

appeal will lie.  Compelling a party that disputes an unsealing

order to forgo an appeal until the conclusion of the underlying

litigation would "let the cat out of the bag, without any effective

way of recapturing it if the district court's directive was

ultimately found to be erroneous."  Irons v. FBI, 811 F.2d 681, 683

(1st Cir. 1987); accord Standard Fin. Mgmt., 830 F.2d at 407. 

Hence, we have jurisdiction over this interlocutory appeal.

     The common law presumes a right of public access to

judicial records.  See Nixon v. Warner Communications, Inc., 435

U.S. 589, 597 (1978); Anderson v. Cryovac, Inc., 805 F.2d 1, 13

(1st Cir. 1986).  This presumption stakes out the battleground on

which this appeal must be fought.  It stems from the premise that

public monitoring of the judicial system fosters the important

values of "quality, honesty and respect for our legal system." 

Standard Fin. Mgmt., 830 F.2d at 410 (citation and internal

quotation marks omitted).  The presumption extends to records of

civil proceedings.  See id. at 408 n.4.

     Though the public's right of access to such materials is

vibrant, it is not unfettered.  Important countervailing interests

can, in given instances, overwhelm the usual presumption and defeat

access.  See id. at 410.  It follows that when a party requests a

seal order, or, as in this case, objects to an unsealing order, a

court must carefully balance the competing interests that are at

stake in the particular case.  See Nixon, 435 U.S. at 599; In re

Globe Newspaper Co., 920 F.2d 88, 96 (1st Cir. 1990).

     The trial court enjoys considerable leeway in making

decisions of this sort.  Thus, once the trial court has struck the

balance, an appellate court will review its determinations only for

mistake of law or abuse of discretion.  See Standard Fin. Mgmt.,

830 F.2d at 411.  In these purlieus, as elsewhere, a district court

may abuse its discretion by ignoring a material factor that

deserves significant weight, relying on an improper factor, or,

even if it mulls only the proper mix of factors, by making a

serious mistake in judgment.  See Henry v. INS, 74 F.3d 1, 4 (1st

Cir. 1996); Independent Oil & Chem. Workers of Quincy, Inc. v.

Procter & Gamble Mfg. Co., 864 F.2d 927, 929 (1st Cir. 1988).

     In this case, the district court rescinded the seal order

after a brief colloquy with counsel for Putnam, Siedle, and the New

York Times.  The court did not write a decision or otherwise detail

its reasons for lifting the seal order.  Thus, our review proceeds

from the historical facts (which, insofar as pertinent here, are

largely uncontested), coupled with the rather meager statements

found in the transcript of the conference.

     The relevant facts include Siedle's service as Putnam's

in-house counsel (giving rise to an attorney-client privilege) and

the nature of his duties (lending plausibility to the claim that

the passages about which Putnam complains reflect information

acquired during and in the course of the attorney-client

relationship).  The pertinent portions of the transcript are less

informative.  Once the newspaper's attorney requested that the

court abrogate the seal order, the district judge asked Putnam's

counsel:  "[W]hat is it about this case that merits the sealing of

the documents?  Just because it is going to be a news story, why is

that different from hundreds of other cases that w[i]nd their way

through the Federal Court?"  Putnam's lawyer responded with a

narrative history of the case and noted that Siedle's filings

included privileged attorney-client information.  The judge

replied:  "That is another lawsuit, maybe."  He then observed that

the allegedly privileged material seemed necessary to establish

Siedle's claim and stated his intention to lift the seal order. 

Later in the conference, Putnam's counsel beseeched the judge to

revisit his decision and offered a brief on the point.  The judge

declined the proffer and advised counsel that an order unsealing

the case file would issue forthwith.

     At some level, the transcript suggests that the district

court viewed Putnam's justification for retaining the seal order as

based upon nothing more than fear of adverse publicity.  If that

were so, lifting the seal order would have been proper.  The mere

fact that judicial records may reveal potentially embarrassing

information is not in itself sufficient reason to block public

access.  See, e.g., Central Nat'l Bank of Mattoon v. United States

Dep't of Treasury, 912 F.2d 897, 900 (7th Cir. 1990); Brown &

Williamson Tobacco Corp. v. FTC, 710 F.2d 1165, 1179-80 (6th Cir.

1983).  Here, however, it is crystal clear that Putnam put forward

a valid legal reason, apart from any generalized concerns about

notoriety, for championing a seal order:  it sought to prevent

Siedle from unilaterally placing its privileged attorney-client

information in the public domain.

     The critical role that attorney-client privilege plays in

facilitating the administration of justice is beyond question, see,

e.g., Upjohn Co. v. United States, 449 U.S. 383, 389 (1981);

Whitehouse v. United States Dist. Court for the Dist. of R.I., 53

F.3d 1349, 1360 (1st Cir. 1995), and we need not wax longiloquent

in its defense.  Suffice to say that the interest in preserving a

durable barrier against disclosure of privileged attorney-client

information is shared both by particular litigants and by the

public, and it is an interest of considerable magnitude.  Indeed,

this is precisely the kind of countervailing concern that is

capable of overriding the general preference for public access to

judicial records.  See Publicker Indus., Inc. v. Cohen, 733 F.2d

1059, 1073 (3d Cir. 1984); Crystal Grower's Corp. v. Dobbins, 616

F.2d 458, 461-62 (10th Cir. 1980).

     In this instance, we discern no evidence that the

district court identified and balanced the interests at stake, or

that the court endeavored to determine whether any information

contained in Siedle's filings actually fell within the ambit of the

attorney-client privilege.  In the circumstances at hand, these

omissions amount to an abuse of discretion.  We explain briefly.

     The information that Putnam wishes to keep under seal

appears on its face to be subject to both the attorney-client

privilege and the parallel confidentiality requirements imposed by

the Agreement.  In the idiom of DR 4-101, the information is

seemingly of the type "gained in the professional relationship,"

and is matter "that the client has requested be held inviolate" and

that "would likely . . . be detrimental to the client" if revealed. 

Supreme Judicial Court Rule 3:07, Canon 4, DR 4-101.  Indeed,

Siedle does not seriously contend that the information falls beyond

the ken of these requirements.  He urges instead that an exception

governs here because disclosure of the information is necessary "to

defend himself . . . against an accusation of wrongful conduct." 

Id. DR 4-101(C)(4).  We find this argument unpersuasive.

     Massachusetts narrowly construes the exceptions to an

attorney's duty to guard client confidences.  See GTE Prods. Corp.v. Stewart, 653 N.E.2d 161, 166-67 (Mass. 1995).  To be sure, DR 4-

101(C)(4)'s disclosure provisions empower an attorney to reveal

information that ordinarily would be sacrosanct in order to defend

himself against charges of ineffective assistance, see Commonwealthv. Woodberry, 530 N.E.2d 1260, 1261 (Mass. App. Ct. 1988), or

professional malpractice, see Glenn v. Aiken, 569 N.E.2d 783, 788

(Mass. 1991).  While Woodberry illustrates that the "accusation of

wrongful conduct" of which DR 4-101(C)(4) speaks need not

necessarily involve an actual suit filed by a quondam client

against his former attorney, it cannot be gainsaid that DR 4-

101(C)(4) creates a defensive mechanism for lawyers under siege. 

Siedle has not pointed us to, and our research has failed to

unearth, a single reported case from any jurisdiction in which an

attorney has been permitted to use confidential information

offensively when the attorney chafed at the client's criticism of

his work (even if the attorney viewed that criticism as

defamatory).  The only reported case dealing with a similar factual

situation holds precisely to the contrary.  See Eckhaus v. Alfa-

Laval, Inc., 764 F. Supp. 34, 37-38 (S.D.N.Y. 1991).

     We believe that the exception is designed to function

only as a shield, not as a sword.  Consequently, interpreting DR 4-

101(C)(4) to allow disclosure under the circumstances of this case

would work a substantial and detrimental change in the integrity of

the attorney-client privilege as that privilege has been enunciated

in Massachusetts.  In our judgment, such a change would be

antithetic to applicable ethical rules.  Moreover, the

Massachusetts courts have cautioned against reading exceptions to

the duty of confidentiality too broadly and that caution counsels

convincingly against an unprecedented expansion of DR 4-101(C)(4)

along the lines advocated by Siedle.  Cf. Carlton v. Worcester Ins.

Co., 923 F.2d 1, 3 (1st Cir. 1991) (cautioning that federal courts

exercising diversity jurisdiction generally should avoid steering

state law into uncharted waters).

     The inapplicability of Siedle's claimed exception to his

duty of confidentiality brings us full circle.  Without further

factfinding, we are left at this stage of the litigation with

information in various filings that appears to fall within the

attorney-client privilege.  There is no hint of waiver; indeed,

Putnam has vigorously pressed its attorney-client privilege

throughout.  The fact that the allegedly privileged information may

be necessary to permit Siedle to plead his claim with the requisite

specificity   a fact alluded to both by Siedle and by the lower

court    is beside any pertinent point.  Merely sealing that

information would not in any way render Siedle's complaint

inadequate.  Finally, if the appropriate parts of the record do not

remain sealed for the time being, Putnam irretrievably will lose

the benefit of a privilege that, on the face of things, appears to

attach.

     When an attorney and a former client embroil themselves

in adversarial litigation, the right of public access to judicial

records stands in sharp contrast to the lawyer's duty to hold

information obtained from the client during the course of

representation in the strictest confidence.  A delicate balance

must be struck between these competing concerns.  We hold that the

court below misgauged this balance.  Putnam has made a sufficient

showing that various filings contain privileged information, and

without either an adjudication of the privilege question or an

appropriate seal order, Putnam will lose the entire benefit of the

putative privilege.  We cannot countenance such a result.  SeeStandard Fin. Mgmt., 830 F.2d at 407; Irons, 811 F.2d at 683-84.

     Let us be perfectly clear.  We do not hold that the

materials which Putnam claims are privileged necessarily must

remain under permanent seal.  As the record develops and additional

facts are adduced, the district court may find that Putnam's claims

of privilege are unsupported or that some applicable exception

penetrates the attorney-client shield.  Until such time, however,

we hold that Putnam's unrebutted prima facie showing that the

attorney-client privilege applies entitles it to protection.  Cf.Publicker Indus., 733 F.2d at 1073 (suggesting that, to ensure the

benefit of the privilege, a court may enjoin the disclosure of

information "arguably within the attorney-client privilege").

     We need go no further.  We reverse the district court's

unsealing order and remand for further proceedings consistent

herewith, including the entry of an appropriate seal order.  To

this end, we note that on March 6, 1998, this court issued an order

designed to protect Putnam's claim of attorney-client privilege

during the pendency of its appeal.  We commend the basic framework

of this order to the court below, as we believe that it provides an

appropriate (and minimally intrusive) model for protecting arguably

privileged material while at the same time minimizing the

concomitant curtailment of the public's right of access to court

filings.  Until the district court enters a fresh seal order, our

March 6 order shall remain in force.



     We reverse the order unsealing the record in this case

and remand for the entry of a seal order consistent with this

opinion.  Costs to appellant.