United States v. Mann

• Court: Court of Appeals for the Fifth Circuit
• Decided: August 3, 1995
• Docket: 94-50082
• Status: Published

Opinion

IN THE UNITED STATES COURT OF APPEALS

FOR THE FIFTH CIRCUIT

_____________________

No. 94-50082 _____________________

UNITED STATES OF AMERICA,

Plaintiff-Appellant,

versus

JAMES SCOTT MANN, III, PETER K. GALLAHER, WILLIAM M. MOORE, JULIAN C. ALSUP, and CHARLES CHRISTENSEN,

Defendants-Appellees.

_________________________________________________________________

Appeal from the United States District Court for the Western District of Texas

_________________________________________________________________ August 3, 1995

Before VAN GRAAFEILAND,* JOLLY, and WIENER, Circuit Judges.

E. GRADY JOLLY, Circuit Judge:

The district court dismissed the indictment in this case

because, after several delays in bringing the case to trial, the

government failed to comply with the district court's order to

disclose documents. The government had allowed the defendants

access to the documents upon a non-copying condition, but withdrew

access when they discovered that the defendants were copying the

documents. We hold that the documents were privileged against

disclosure under Fed. R. Crim. P. 16(a)(2), and although the

* Circuit Judge of the Second Circuit, sitting by designation. government may have conditionally waived its privilege, the

defendants breached the agreement. The government, therefore, had

the right to reassert its privilege against disclosure. Thus,

because the government properly exercised its privilege against

disclosure under Rule 16(a)(2), the district court abused its

discretion when it dismissed the indictment. Consequently, we

reverse the district court's dismissal of the indictment, and

remand the case.

I

This case has its genesis in the 1980s, during which time the

defendants were involved in a series of allegedly fraudulent

transactions regarding the sale of a Texas savings and loan

institution and the exchange of certain parcels of real estate.

The main focus of this appeal and our attention today, however, is

on the pretrial investigation and the discovery that began shortly

before most of the defendants were initially indicted in September

1991, and continued until shortly before the district court's

dismissal of the third superseding indictment in January 1994. We

now turn to examine the events shaping this controversy in greater

detail.

This case has involved a series of indictments, dismissals,

and reindictments, which evidence the complex nature of the case

against the defendants, and which contributed to the frustration of

the district court. In September 1991, the grand jury returned a

twelve-count indictment charging Peter K. Gallaher, William M.

-2- Moore, Charles M. Christensen, and Julian C. Alsup1 with filing

false corporate tax returns in violation of 26 U.S.C. § 7206(1),(2)

from 1984 through 1990. The district court set trial for April 20,

1992. The following January, the case was reassigned to the

Honorable Sam Sparks. In response to motions for continuance by

defendants Alsup and Christensen and in anticipation of a

superseding indictment, the district court set trial for July 6,

1992. As anticipated, the grand jury returned a superseding

indictment in April that added appellee J. Scott Mann to the case

and included additional charges of fraud and conspiracy in

connection with a failed savings and loan association, in violation

of 18 U.S.C. § 371. After three parties moved for a continuance,

the district court rescheduled the trial for August 17, 1992. On

August 5, however, the government dismissed the superseding

indictment. At that time, the grand jury returned a new

indictment, which contained only three counts and charged only Mann

with tax-related offenses.2 Mann's trial on these charges was

subsequently set for November 1992, with the Honorable James R.

Nowlin presiding. On October 22, Mann's case was reassigned to

1 The case against Alsup was severed by the district court on the same day in January 1994 that the court dismissed the final superseding indictment against the other parties. Alsup, therefore, is not a party to this appeal. 2 Mann was charged with violations of 26 U.S.C. § 7206(1) (false corporate tax return), 26 U.S.C. § 7203 (failure to file a corporate tax return), and 26 U.S.C. § 7206(1) (false personal income tax return).

-3- Judge Sparks. At a hearing on November 5, Judge Sparks allowed

Mann to substitute his counsel and was informed by the government

that it was seeking another superseding indictment. Subsequently,

the court granted Mann's motion for a continuance, rescheduling the

trial for December 21. At a December 11 motions hearing, the

government informed the court that it was still working on the

superseding indictment. On December 18, Mann's counsel filed a

motion for a continuance to allow him more time to examine the

evidence. On December 22, the court granted Mann's motion for

continuance, and set the case for trial on March 1, 1993. On

February 24, 1993, the district court filed an amended order,

rescheduling the trial for March 29, 1993. At docket call on

March 1, the government told the court that it was still pursuing

a superseding indictment, expected by July. On March 11, the

district court entered an order rescheduling Mann's trial for

July 5 because his counsel needed additional time to prepare his

defense. On June 30, the grand jury issued the thirty-nine count

superseding indictment that is the subject of this appeal.3 After

3 The indictment charged all the defendants, Gallaher, Moore, Alsup, Christensen, and Mann with thirty-nine counts based upon the following code violations: (1) 18 U.S.C. § 371 (conspiracy to defraud a savings and loan, the Federal Home Loan Bank Board, and the Internal Revenue Service); (2) 18 U.S.C. § 1006 (false entries in savings books); (3) 18 U.S.C. § 1014 (false statements to banks); (4) 26 U.S.C. § 7206 (false tax returns); (5) 18 U.S.C. § 657 (misapplication of savings funds); (6) 18 U.S.C. § 1006 (fraudulent participation in savings transactions); (7) 18 U.S.C. § 215(a) (receipt of commission for procuring loan); and (8) 26 U.S.C. § 7203 (willful failure to file tax return).

-4- a discovery motion hearing on September 24, 1993, the court set the

trial date as January 4, 1994.

In the meantime, plea negotiations were ongoing. Before the

first indictment had issued in September 1991, the government had

met with the defendants and their attorneys on several occasions to

discuss the case. As a part of these discussions, the government

had allowed the defendants to inspect portions of government

agents' reports4 that included assessments of the strength of the

case, and that were otherwise not discoverable under Rule 16(a)(2).

In addition to the exposure of these documents, Agent Mazur copied

approximately 150 pages of his report, termed the "evidence" or

"factual" section and placed it on file with the government's other

evidence to which the defendants were given access in order to

allow the defendants to better understand the cases against them.

Apparently, a portion of Agent Brooks's report was also deposited

with the government's evidence, composed of hundreds of volumes of

materials.

Although the record does not contain a formal agreement

governing access to these documents and the agents' reports, the

record reflects that early in the discovery process certain "rules

of engagement" were established. The district court was aware of

these rules because on several occasions the government referenced

these informal rules in its pleadings and correspondence. For

4 These were the reports of the Internal Revenue Service's Special Agents Walter Mazur and Howard Brooks.

-5- instance, in its January 24, 1992 Response to Pretrial Motions

Filed by Defendant William Moore, the government stated that it had

agreed to informally provide all discovery to which Defendant Moore is entitled pursuant to the Federal Rules of Criminal Procedure and the laws and Constitution of the United States. Further, the government has informally agreed to provide discovery of materials to which Defendant Moore is not entitled under the above cited authorities.

Supplemental Record on Appeal, Vol. I, at 103. In its January 24,

1992 Response to Pretrial Motions Filed by Defendant Peter

Gallaher, the government states that "[i]t is the policy of the

prosecutor assigned to this case to facilitate discovery whenever

possible. To that end, counsel for Mr. Gallaher . . . has been

allowed to examine the Special Agent's report prepared by Walter

Mazur of the Internal Revenue Service." Id. at 105.

In other pleadings, the government was more specific as to the

parameters of the rules, using the same language to describe access

to the materials on two different occasions:

[t]he government will voluntarily allow all defendants in this cause to examine and copy evidence which the government has accumulated during its investigation. The only exceptions are items submitted to the government with a reservation of the attorney- client privilege. Counsel for the defendants may examine the government's files at the Federal Building, 300 East 8th Street, Austin, Texas. The files are in the custody of Walter Mazur, Special Agent, Internal Revenue Service, Criminal Investigation Division. . . . A copier is available to the defendants' attorneys. A fee of 10 cents per page will be charged. The government has previously allowed attorneys to examine Agent Mazur's report. The government will continue to allow counsel to review the factual portion of the report, but the report may not be copied and must

-6- remain on government premises at 300 East Eighth Street, Austin, Texas.

May 13, 1992 Response to Pre-Trial Motions Filed by Defendants Mann

and Gallaher, Supplemental Record on Appeal, Vol. II, at 274-75

(emphasis added); June 9, 1992 Response to Pre-Trial Motions Filed

by Defendant Christensen, Supplemental Record on Appeal, Vol. II,

at 421-22 (emphasis added). Moreover, early in the discovery

process, the government orally told the court that it was giving

the defendants restricted access to portions of the special agents'

reports. In a June 10, 1992 pretrial motion hearing, the

government stated that

we have given the attorneys access to Mr. Mazur's investigative reports. . . . We intend to give the attorneys access throughout [the discovery process] to the factual portions of that report. Now there's some theory and that sort of thing in there that we are going to hold back, but the factual portions that will lead them into the evidence, that the government has accumulated, will remain open to them.

Record on Appeal, Vol. V at 12 (emphasis added).

As the record reflects, the defendants were allowed to examine

the evidence portion of the investigative reports, but specifically

were prohibited from copying these reports. Up to July 1992, the

defendants had access to these investigative reports, as well as

documentary evidence in the basement of the federal government

building in Austin, Texas. On July 6, however, the government

discovered a representative of one of the defendants hand-copying

verbatim from the evidence portion of one of the reports, in direct

contravention to the informal rules of access established for the

-7- documents. This act prompted the government to deny access to the

agents' reports to all defendants in the case.5 The government,

nevertheless, continued to offer access to the other documents

involved in the case. Apparently, the defendants did not raise an

immediate objection to this denial of access.

On August 4, 1992, the indictment under which this discovery

had been proceeding was voluntarily dismissed by the government.

A superseding indictment against only Mann was issued in mid-

August6 so that Gallaher, Moore, Alsup, and Christensen, at that

point, were no longer involved in discovery. The government

allowed Mann to have access to government documents, but withheld

access to the special agents' reports. The record does not reflect

that Mann expressed any objection to this denial of access.

On June 30, 1993, almost one year later, the government

obtained the superseding indictment that is at issue in this case.

See Note 3 supra. In connection with this indictment, the

government continued to practice the open discovery policy it had

previously employed with these defendants. The government agent

5 The government, however, made an exception to this rule for Gallaher's substituted counsel, whom the court had appointed on July 30, 1993, to replace previous counsel. Because the counsel came into the case late, the government gave him access to the special agents' reports on several occasions so that he could understand the nature of the government's case. The government also made clear to him that it would not allow the reports to be copied. 6 See Note 2 supra.

-8- reports, however, were not among the documents to which the

defendants were given access.

On October 5, 1993, over one year after access to the

government agents' reports was curtailed, appellee Moore filed a

motion for discovery, inspection, and copying of exculpatory

evidence, in an effort to obtain the investigative reports. Moore

contended that the government had waived any privilege by

disclosing the reports during earlier plea negotiations. After a

hearing on November 19, the district court found that the

government, "by appropriately cooperating with defense counsel in

the discovery process, has allowed the defendants' counsel to

inspect the notebook and therefore has waived any work product

privilege." Thus, the district court granted Moore's motion on

November 24 and ordered the government to present the reports for

an in camera inspection so that the court could determine what

parts of the agents' reports, if any, could be redacted pursuant to

a protective order. When the government tendered the reports to

the court on December 10 for the inspection, it asked the court to

reconsider its disclosure order, reminding the court that Fed. R.

Crim. P. 16(a)(2) specifically makes these reports undiscoverable.

On December 17, the court held another hearing and orally denied

the government's motion for reconsideration. As a result, the

court again ordered the government to disclose the agents' reports

because the previous disclosures had been inconsistent with the

government's work product privilege, even though the government had

-9- argued that these documents were exempt from disclosure under Rule

16(a)(2). The court then scheduled an evidentiary hearing for

December 28 to determine which documents had been disclosed. After

this hearing, rather than consider the alternative of holding the

government in contempt, the district court entered an order on

December 29 requiring the government to produce the reports, having

stated in the hearing that even if there were rules governing

access to the documents, the government had waived any privilege it

had to the documents. See Record at Vol. XII, p. 97. The court

also warned that it would dismiss the indictment if the government

did not comply with its order. The government did not comply, and

the court dismissed the indictment on January 3, 1994. This appeal

followed.

II

The parties raise three issues on appeal. All of the

appellees, except Gallaher, first contend that this court is

without jurisdiction to hear this appeal. The government, as

appellant, presents two contentions: first, it contends that the

district court erred in ordering the government to provide the

defendants with copies of the special agents' reports that were

exempt from pretrial discovery under Fed. R. Crim. P. 16(a)(2);

second, it argues that the district court abused its discretion in

dismissing the indictment based on the government's refusal to

provide copies of the agents' reports to the defendants.

We will address each issue in turn.

-10- III

A

We first must address the defendants' argument that this court

does not have appellate jurisdiction over this matter. This

argument plainly lacks merit. This appeal is authorized by 18

U.S.C. § 3731, which permits the government to appeal from "an

order of a district court dismissing an indictment," providing,

however, "no appeal shall lie where the double jeopardy clause of

the United States Constitution prohibits further prosecution." The

defendants argue that the double jeopardy clause prohibits this

appeal. The defendants concede, as they must, that jeopardy has

not attached because a jury has not yet been empaneled and sworn.

See United States v. Juarez-Fierro, 935 F.2d 672, 675 (5th Cir.

1991). They cite no authority in support of their argument, but

urge this court to adopt a functional approach to double jeopardy

analysis. As stated above, this argument has no merit.

Accordingly, because the government's appeal is authorized by §

3731, we have appellate jurisdiction.

B

Now let us determine whether the district court erred when it

ordered the government to produce documents in question. We review

the district court's actions in this discovery setting for an abuse

of discretion. United States v. Sarcinelli, 667 F.2d 5 (5th Cir.

1982).

-11- We begin with an examination of the plain language of Rule

16(a)(2). Under the heading, "Information Not Subject to

Disclosure," Rule 16(a)(2) states that, with exceptions not

relevant here, "this rule does not authorize the discovery or

inspection of reports, memoranda, or other internal government

documents made by the attorney for the government or other

government agents in connection with the investigation or

prosecution of the case." (Emphasis added). As an internal

government document produced by government agents in connection

with the investigation of this case, the reports at issue clearly

fall within the ambit of this rule, and thus are exempted from

discovery.

The Advisory Committee Notes cast more light on the purpose of

the rule. The 1974 Amendment Notes state that the phrase "reports,

memoranda, or other internal government documents made by the

attorney for the government" was meant to incorporate the "work

product" language of Hickman v. Taylor, 329 U.S. 495 (1947), into

the rule to ensure that government attorneys' litigation

preparations are protected from discovery. The Notes, however, say

nothing about the work product privilege, as it is understood in

Hickman, being made applicable to the internal government documents

produced by other government agents.

The defendants argue that United States v. Nobles, 422 U.S.

225 (1975), made the work product privilege fully applicable to

criminal cases, and, thus, its waiver rules apply here. It is true

-12- that the work product privilege does apply in criminal cases. We

disagree, however, with the defendants' characterization of the

extent to which Nobles expands this privilege to cover documents

made expressly nondiscoverable in Rule 16(a)(2). Nobles was

concerned only with the defendant's work product. The scope of

pre-trial discoverability of internal government documents, as set

forth in Rule 16, was not at issue. Put another way, Nobles, which

was not concerned with Rule 16(a)(2), cannot be read to alter the

plain language of a rule it did not address. We should further

observe that at the time of the Nobles decision, the work product

language that the defendants assert to support their argument had

not yet been incorporated into Rule 16(a)(2). In short, we do not

think that Nobles expands the attorney work product privilege to

other government agent internal reports, such as those contemplated

in Rule 16(a)(2).

Although we decline to extend the rules of the waiver of

attorney work product privilege to the context of the case before

us, we find that the general rules regarding waiver are applicable.

See United States v. Mezzanatto, 115 S.Ct. 797, 801-02 (1995)(The

provisions of the Federal Rules of Criminal Procedure are

"presumptively waivable" by a voluntary agreement of the parties.).

"A waiver is a voluntary and intentional relinquishment of a known

right or conduct that warrants an inference of such a

relinquishment." Highlands Ins. Co. v. Allstate Ins. Co., 688 F.2d

398, 404 (5th Cir. 1982); see also Birdwell v. Skeen, 983 F.2d

-13- 1332, 1340 (5th Cir. 1993). Rule 16(a)(2) clearly exempts certain

types of government materials from discovery, with the reports at

issue being among them. The defendants argue that when the

government allowed them to inspect the agents' reports, it waived

the privilege against disclosure. The district court agreed and

found that notwithstanding the establishment of any conditions

governing the access to the special agents' reports, the government

waived the privilege of nondiscoverability upon once disclosing the

reports to the defendants. After looking at the general principles

of waiver and the government's conduct in this proceeding, we

conclude that the district court erred.

From the very first, the government put certain conditions on

the defendants' access to these reports. During plea negotiations

in 1991, the government attorneys and special agents were present

when the defendants and their attorneys reviewed the reports.

Furthermore, the defendants were only given access to a portion of

the reports. Although other documents were allowed to be copied,

with the government even providing a copying machine, the

government made clear that these reports, which are indeed

protected by Rule 16(a)(2), could not be copied.7 Moreover, along

7 The defendants argue that the government's rules governing the copying of the reports are ambiguous. They assert that the rules are susceptible to an interpretation allowing hand-copying, but disallowing photocopying. We reject this argument out of hand. The plain language of the correspondence from the government disallows "copying," which would include any manner of reproduction.

-14- with other documents, the government controlled the access to the

reports and would not allow the parties to transport them from

government facilities. From the start, the defendants agreed to

the terms of this restrictive arrangement. So long as the

defendants complied, the government permitted access. Only when

the government discovered one of the parties hand-copying,

verbatim, from the reports did it withdraw the restricted access to

these reports that it had granted earlier. In the light of these

facts, we conclude that, even assuming the government's conduct

satisfies the principles of waiver generally, the government did

not waive its Rule 16(a)(2) privilege absolutely. Instead, it

waived the rule's protections conditionally; that is, the

government agreed to suspend Rule 16(a)(2) so long as the

defendants did not copy the privileged materials. When this

condition was breached, however, the obligation of the government

terminated, the parties returned to the status quo ante, and the

government was, therefore, free to reassert its Rule 16(a)(2)

privilege against disclosure.

Although this particular question of waiver has seldom been

addressed, courts that have been confronted with a Rule 16(a)(2)

question have read the rule to prohibit forced disclosure of this

type of government work product. See United States v. Lov-It

Creamery, Inc., 704 F.Supp. 1532 (E.D. Wisc. 1989); see also United

States v. Williams, 998 F.2d 258, 268 n.23 (5th Cir. 1993)("[Rule

16(a)(2)] specifically provides that `internal' memoranda and

-15- reports prepared by the government in the preparation of its case

are not discoverable."). Furthermore, other courts have recognized

the binding power of these informal discovery agreements. See

United States v. Cole, 857 F.2d 971, 976 (4th Cir. 1988). Other

cases have held that although the government allowed defendants to

view certain documents covered by Rule 16(a)(2), or a similar state

rule, no waiver of the privilege against disclosure occurred. See

United States v. Penix, 516 F.Supp. 248 (W.D. Okla. 1981); Indiana

ex rel. Keaton v. Circuit Court of Rush County, 475 N.E. 2d 1146

(Ind. 1985).

C

Finally, in the light of our opinion above, the district

court's error in dismissal of the indictment is now self-evident,

considering our conclusion that the government did not waive

absolutely its Rule 16(a)(2) privilege against nondisclosure.

Because we hold that the government acted within its Rule 16(a)(2)

protections, the court was without the power to impose the extreme

penalty of dismissal of the indictment. Consequently, the district

court abused its discretion, and the order of dismissal must be

reversed.

IV

To sum up, we hold that we have jurisdiction to entertain this

appeal. Furthermore, we hold that the government properly asserted

its privilege against disclosure under Rule 16(a)(2). Thus, the

district court abused its discretion when it ordered a dismissal of

-16- the indictment.8 For the foregoing reasons, the district court's

order dismissing the indictment is

REVERSED and REMANDED.

8 When the district court dismissed the indictment, it also noted that the government had engaged in other unjustifiable delay. The court further indicated that this background of additional delay had influenced its decision to dismiss the indictment. It is nevertheless clear, however, that only the added factor of the government's refusal to disclose moved the judge actually to dismiss the indictment. No record was made that would allow us to review the court's finding of fault against the government for other delays encountered during the case. Thus, the only issue we decide in this appeal is that the district court erred by dismissing the indictment based on the government's failure to disclose the agents' reports. This opinion does not affect the right of the district court to reconsider on remand any other alleged misconduct on the part of the government and, if justified, to take appropriate action.

-17-