USCA1 Opinion
UNITED STATES COURT OF APPEALS
FOR THE FIRST CIRCUIT
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No. 97-1287
No. 97-1382
UNITED STATES OF AMERICA,
Petitioner-Appellee, Cross-Appellant,
v.
MASSACHUSETTS INSTITUTE OF TECHNOLOGY,
Respondent-Appellant, Cross-Appellee.
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APPEALS FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MASSACHUSETTS
[Hon. George A. O'Toole, Jr., U.S. District Judge]
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Before
Boudin, Circuit Judge,
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Hill,* Senior Circuit Judge,
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and Pollak,** Senior District Judge.
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Jeffrey Swope with whom Matthew P. Schaeffer and Palmer & Dodge
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LLP were on brief for respondent.
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Sara S. Holderness, Tax Division, Department of Justice, with
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whom Loretta C. Argrett, Assistant Attorney General, Donald K. Stern,
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United States Attorney, and Charles E. Brookhart, Tax Division,
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Department of Justice, were on brief for petitioner.
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November 25, 1997
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*Of the Eleventh Circuit, sitting by designation.
**Of the Eastern District of Pennsylvania, sitting by designation.
BOUDIN, Circuit Judge. This case concerns an attempt by
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the Massachusetts Institute of Technology to assert the
attorney-client privilege and work-product doctrine in
response to a document request by the Internal Revenue
Service. The most important issue presented is whether MIT's
disclosure of certain of the documents to another government
agency caused it to lose the privilege. The background facts
are essentially undisputed.
MIT is a famous university with tax-exempt status under
26 U.S.C. 501(c)(3). In 1993, the IRS conducted an
examination of MIT's records to determine whether MIT still
qualified for exempt status and to determine whether it was
complying with provisions relating to employment taxes and
the reporting of unrelated business income. In aid of this
examination, the IRS requested from MIT copies of the billing
statements of law firms that had represented MIT and minutes
of the MIT Corporation and its executive and auditing
committees.
In response, MIT supplied the documents requested but
redacted information claimed to be covered by the attorney-
client privilege or the work-product doctrine or both. In
mid-1994 the IRS requested that the redacted information be
supplied, and MIT declined. At this point the IRS sought to
obtain the same documents in unredacted form from the Defense
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Contract Audit Agency ("the audit agency"), the auditing arm
of the Department of Defense.
It appears that the same billing statements and possibly
some or all of the minutes sought by the IRS had earlier been
provided to the audit agency pursuant to contracts between
MIT and components of the Department of Defense. The audit
agency helps entities in the Department of Defense review
contract performance to be sure that the government is not
overcharged for services. Not surprisingly, the audit agency
often reviews the private contractor's books and records.
In November 1994, the audit agency advised the IRS that
it would not turn over the documents provided to it by MIT
without the latter's consent, which MIT declines to give.
The audit agency had made no unconditional promise to keep
the documents secret, but its regulations and practices
offered MIT some reason to think that indiscriminate
disclosure was unlikely. The IRS then served an
administrative summons on MIT in December 1994 seeking
specific unredacted minutes of nine meetings of the MIT
Corporation and auditing and executive committees in 1990 and
1991, and attorneys' billing statements for almost all legal
expenses paid or incurred by MIT from July 1, 1990, through
June 30, 1991. 26 U.S.C. 7402(b), 7604(a).
When MIT declined to comply, the IRS in early 1996
petitioned the district court to enforce the summons. The
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district court obtained briefs, heard arguments and
considered the matter without an evidentiary hearing on the
basis of the declaration filed by the IRS and an affidavit
submitted by MIT. In January 1997, the district court issued
a memorandum and order enforcing the IRS administrative
summons as to the unredacted legal bills and the unredacted
versions of most of the minutes sought by the IRS.
The district court held that the disclosure of the legal
bills to the audit agency forfeited the attorney-client
privilege. As to the minutes, the district court said that
the privilege remained available because the government had
not proved that the minutes had been disclosed to the audit
agency. After reviewing the minutes in camera, the court
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found that three contained privileged material and ordered
MIT to turn over the others as unprivileged or because MIT
had lost the privilege by disclosing the substance of the
minutes in its now unprivileged legal bills.
The district court followed a different path in
resolving MIT's work product objection. The court held that
neither the legal bills nor the minutes were "prepared in
anticipation of litigation or for trial." Fed. R. Civ. P.
26(b)(3). It ruled that they were therefore discoverable as
ordinary business records. Accordingly, the court did not
discuss whether work product protection was waived by
disclosure to the audit agency.
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MIT now appeals, arguing that disclosure of the billing
statements to the audit agency should not forfeit the
privilege; MIT no longer claims work product protection for
the billing statements. The government has cross-appealed
from the district court's refusal to order production of the
three remaining minutes; it says that the burden was on MIT
to prove that the minutes had not been disclosed to the audit
agency. MIT responds that the privilege was not waived even
if the minutes were disclosed to the audit agency, and that
the minutes remain protected by the work product doctrine.
On an appeal respecting a privilege claim, the standard
of review depends on the issue. Rulings by the district
court on issues of law are reviewed de novo; fact findings
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are tested under a clear error standard; and discretionary
judgments such as evidentiary rulings are reviewed for abuse
of discretion. See United States v. Wilson, 798 F.2d 509,
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512 (1st Cir. 1986). On the principal issue before us--
forfeiture by disclosure--this case goes about as far as
possible in posing an abstract issue of law and review is
plenary.
The question whether MIT forfeited protection in
disclosing documents to the audit agency is not governed by
any federal constitutional provision, federal statute, or
rule prescribed by the Supreme Court. Nor is the enforcement
of an IRS summons a matter with respect to which state law
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supplies a rule of decision. Accordingly, the scope of the
privilege is "governed by the principles of the common law as
they may be interpreted by the courts of the United States in
the light of reason and experience." Fed. R. Evid. 501. See
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also United States v. Zolin, 491 U.S. 554, 562 (1989).
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MIT's Appeal. We begin with the attorney-client
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privilege. That privilege has been familiarly summed up by
Wigmore in a formula that federal courts have often repeated:
(1) Where legal advice of any kind is
sought (2) from a professional legal
adviser in his capacity as such, (3) the
communications relating to that purpose,
(4) made in confidence (5) by the client,
(6) are at his instance permanently
protected (7) from disclosure by himself
or by the legal adviser, (8) except the
protection be waived.
8 J. Wigmore, Evidence 2292, at 554 (McNaughton rev. 1961).
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The government argues, and the district court agreed, that by
its disclosure to the audit agency, MIT waived the privilege
to whatever extent that it might otherwise have protected the
billing statements and various of the minutes.
The attorney-client privilege is well-established and
its present rationale straightforward: by safeguarding
communications between lawyer and client, it encourages
disclosures by client to lawyer that better enable the client
to conform his conduct to the requirements of the law and to
present legitimate claims or defenses when litigation arises.
See Upjohn Co. v. United States, 449 U.S. 383, 389-90 (1981).
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Waiver issues aside, the contours of the privilege are
reasonably stable.
Quite a different scene presents itself when one turns
to the problem of "waiver," a loose and misleading label for
what is in fact a collection of different rules addressed to
different problems. Cases under this "waiver" heading
include situations as divergent as an express and voluntary
surrender of the privilege, partial disclosure of a
privileged document, selective disclosure to some outsiders
but not all, and inadvertent overhearings or disclosures.
See McCormick on Evidence 93, at 341-48 (J.W. Strong ed.,
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4th ed. 1992).
Even where the cases are limited to those involving a
deliberate and voluntary disclosure of a privileged
communication to someone other than the attorney or client,
the case law is far from settled. But decisions do tend to
mark out, although not with perfect consistency, a small
circle of "others" with whom information may be shared
without loss of the privilege (e.g., secretaries,
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interpreters, counsel for a cooperating co-defendant, a
parent present when a child consults a lawyer).1
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1See, e.g., United States v. Bay State Ambulance & Hosp.
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Rental Serv., Inc., 874 F.2d 20, 28 (1st Cir. 1989); Kevlik
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v. Goldstein, 724 F.2d 844, 849 (1st Cir. 1984); Indian Law
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Resource Center v. Department of the Interior, 477 F. Supp.
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144, 148 (D.D.C. 1979); J. Weinstein & M. Berger, Weinstein's
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Federal Evidence 503.08[2], at 503-36 (J. McLaughlin ed.,
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2d ed. 1997).
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Although the decisions often describe such situations as
ones in which the client "intended" the disclosure to remain
confidential, see, e.g., Kevlik v. Goldstein, 724 F.2d 844,
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849 (1st Cir. 1984), the underlying concern is functional:
that the lawyer be able to consult with others needed in the
representation and that the client be allowed to bring
closely related persons who are appropriate, even if not
vital, to a consultation. Cf. Westinghouse Elec. Corp. v.
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Republic of the Philippines, 951 F.2d 1414, 1424 (3d Cir.
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1991). An intent to maintain confidentiality is ordinarily
necessary to continued protection, but it is not sufficient.
On the contrary, where the client chooses to share
communications outside this magic circle, the courts have
usually refused to extend the privilege.2 The familiar
platitude is that the privilege is narrowly confined because
it hinders the courts in the search for truth. See Fisher v.
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United States, 425 U.S. 391, 403 (1976); 8 Wigmore, supra,
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2291, at 554. Fairness is also a concern where a client is
permitted to choose to disclose materials to one outsider
while withholding them from another. See, e.g., Permian
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Corp. v. United States, 665 F.2d 1214, 1221 (D.C. Cir. 1981).
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2In addition to the cases cited in note 3 below, see In
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re Grand Jury Proceedings, 78 F.3d 251, 254 (6th Cir. 1996);
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United States v. Jones, 696 F.2d 1069, 1072 (4th Cir. 1982);
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In re Sealed Case, 676 F.2d 793, 818 (D.C. Cir. 1982); In re
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Horowitz, 482 F.2d 72, 81 (2d Cir.), cert. denied, 414 U.S.
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867 (1973); McCormick on Evidence, supra, 93, at 347-48.
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Should this inclination not to protect a document
disclosed outside the circle apply where, as here, the
initial disclosure was to and at the request of a government
agency? This problem has presented itself to six circuits.
The most common cases have been disclosures of otherwise
privileged attorney-client communications to the Securities
and Exchange Commission by corporations during voluntary
internal investigations or in response to SEC subpoenas. The
Eighth Circuit, en banc but without more than a paragraph of
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analysis, treated this kind of disclosure as not comprising a
total waiver of the privilege. See Diversified Indus., Inc.
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v. Meredith, 572 F.2d 596, 611 (8th Cir. 1978) (en banc).
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Subsequently, the Second, Third, Fourth, Federal and D.C.
Circuits took the opposite view and ruled that such limited
disclosures do destroy the privilege.3
The primary argument in favor of the Eighth Circuit
position is that loss of the privilege may discourage the
frank exchange between attorney and client in future cases,
wherever the client anticipates making a disclosure to at
least one government agency. We put to one side the interest
of the government agency in obtaining voluntary disclosures;
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3See Genentech, Inc. v. United States Internat'l Trade
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Comm'n, 122 F.3d 1409, 1417 (Fed. Cir. 1997); In re
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Steinhardt Partners, L.P., 9 F.3d 230, 235 (2d Cir. 1993);
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Westinghouse, 951 F.2d at 1424-26; In re Martin Marietta
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Corp., 856 F.2d 619, 623-24 (4th Cir. 1988), cert. denied,
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490 U.S. 1011 (1989); Permian, 665 F.2d at 1220-21.
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such agencies usually have means to secure the information
they need and, if not, can seek legislation from Congress.
By contrast, the safeguarding of the attorney-client
relationship has largely been left to the courts, which have
a comparative advantage in assessing consequences in this
sphere.
But MIT, like any client, continues to control both the
nature of its communications with counsel and the ultimate
decision whether to disclose such communications to third
parties. The only constraint imposed by the traditional rule
here invoked by the government--that disclosure to a third
party waives the privilege--is to limit selective disclosure,
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that is, the provision of otherwise privileged communications
to one outsider while withholding them from another. MIT has
provided no evidence that respecting this constraint will
prevent it or anyone else from getting adequate legal advice.
Admittedly, the arguments on the other side are far from
overwhelming. The IRS' search for truth will not be much
advanced if MIT simply limits or recasts its disclosures to
the audit agency. But the general principle that disclosure
normally negates the privilege is worth maintaining. To
maintain it here makes the law more predictable and certainly
eases its administration. Following the Eighth Circuit's
approach would require, at the very least, a new set of
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difficult line-drawing exercises that would consume time and
increase uncertainty.
MIT says that even if we are not prepared to follow the
Eighth Circuit onto new ground, MIT's disclosure to the audit
agency should be regarded as akin to the disclosure by a
client's lawyer to another lawyer representing another client
engaged in a common defense. Invoking the concept of "common
interest," MIT seeks to compare its situation to cases where
disclosure has been allowed, without forfeiting the
privilege, among separate parties similarly aligned in a case
or consultation (e.g., codefendants, insurer and insured,
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patentee and licensee).4
In a rather abstract sense, MIT and the audit agency do
have a "common interest" in the proper performance of MIT's
defense contracts and the proper auditing and payment of
MIT's bills. But this is not the kind of common interest to
which the cases refer in recognizing that allied lawyers and
clients--who are working together in prosecuting or defending
a lawsuit or in certain other legal transactions--can
exchange information among themselves without loss of the
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4Compare In re Regents of Univ. of Cal. 101 F.3d 1386,
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1390-91 (Fed. Cir. 1996), cert. denied, 117 S. Ct. 1484
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(1997), and Hewlett-Packard Co. v. Bausch & Lomb, Inc., 115
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F.R.D. 308, 310 (N.D. Cal. 1987), and Roberts v. Carrier
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Corp., 107 F.R.D. 678, 687-88 (N.D. Ind. 1985), with In re
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Grand Jury Subpoena Duces Tecum, 112 F.3d 910, 922-23 (8th
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Cir.), cert. denied, 117 S. Ct. 2482 (1997), and Linde
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Thomson Langworthy Kohn & Van Dyke, P.C., v. Resolution Trust
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Corp., 5 F.3d 1508, 1515 (D.C. Cir. 1993).
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privilege. To extend the notion to MIT's relationship with
the audit agency, which on another level is easily
characterized as adversarial, would be to dissolve the
boundary almost entirely.
MIT further argues that the disclosure to the audit
agency was not "voluntary" because of the practical pressures
and the legal constraints to which it was subject as a
government contractor. The extent of those pressures and
constraints is far from clear,5 but assuming arguendo that
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they existed, MIT chose to place itself in this position by
becoming a government contractor. In short, MIT's disclosure
to the audit agency resulted from its own voluntary choice,
even if that choice was made at the time it became a defense
contractor and subjected itself to the alleged obligation of
disclosure. See In re John Doe Corp., 675 F.2d 482, 489 (2d
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Cir. 1982).
Anyone who chooses to disclose a privileged document to
a third party, or does so pursuant to a prior agreement or
understanding, has an incentive to do so, whether for gain or
to avoid disadvantage. It would be perfectly possible to
carve out some of those disclosures and say that, although
the disclosure itself is not necessary to foster attorney-
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5MIT's main citation for its duty to disclose is not to
a statute or regulation but to a procedures manual maintained
by the audit agency. There is no actual evidence that MIT
would have been denied payment if it had sought to negotiate
some lesser disclosure.
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client communications, neither does it forfeit the privilege.
With rare exceptions, courts have been unwilling to start
down this path--which has no logical terminus--and we join in
this reluctance.
We add, finally, a word about reliance and fair warning.
MIT may have had some reason to think that the audit agency
would not disclose the documents to the IRS (and the agency
did not do so). But MIT had far less reason to think that it
could disclose documents to the audit agency and still
maintain the privilege when IRS then sought the same
documents. See note 3, above. The choice to disclose may
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have been reasonable but it was still a foreseeable gamble.
The IRS Appeal. We turn now to the government's cross-
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appeal. Here, the IRS challenges the district court's
refusal to require MIT to produce three specific minutes.
The refusal reflected the district court's view that the
documents contained privileged material, and that there was
no waiver because MIT had not been shown to have disclosed
those minutes to the audit agency. On the latter point, MIT
effectively concedes error, and properly so.
Where privilege is claimed and the opponent alleges a
specific disclosure, the burden of proof is upon the claimant
to show nondisclosure wherever that is material to the
disposition of the claim. Cf. United States v. Wilson, 798
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F.2d 509, 512-13 (1st Cir. 1986). Here, MIT concedes that it
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cannot prove that the minutes in question were withheld from
the audit agency. Instead, it proffers alternative grounds
for sustaining the district court's judgment as to these
minutes, namely, that the minutes were protected under the
attorney-client privilege and the work product doctrine and
that these protections were not waived even though the
minutes were turned over to the audit agency.
A party may defend a judgment in its favor on any
legitimate ground without appealing from the judgment on that
issue. Martin v. Tango's Restaurant, Inc., 969 F.2d 1319,
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1325 (1st Cir. 1992). Our discussion of the billing
statements disposes of MIT's argument that the protection of
the attorney-client privilege survived disclosure to the
audit agency. We therefore turn to the work product
doctrine. In doing so, we reject the government's claim that
MIT waived this work product argument by only raising it in
its reply brief; MIT's "reply" brief was effectively its
answering brief on the government's cross appeal, and the
government filed its own "reply" in turn.
The district court assumed that work product protection
did not apply because the minutes were not prepared "in
anticipation of litigation," as required by Fed. R. Civ. P.
26(b)(3). MIT argues that the minutes contained substantive
information that did represent attorney work product even if
the minutes had a more general function. There is little law
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in this area--partly, one suspects, because work product
usually remains embodied in documents unquestionably prepared
for litigation or, if given to the client, in documents
independently protected by the attorney client privilege.
The government has chosen in its brief to assume that,
to the extent that the minutes contained "the mental
impressions, conclusions, opinions, or legal theories" of
MIT's attorneys, Fed. R. Civ. P. 26(b)(3), the district
court erred in concluding that work product lost its
protection when repeated in another confidential document not
prepared in anticipation of litigation. A Third Circuit
precedent supports this assumption, which MIT presses and the
government does not resist. See In re Ford Motor Co., 110
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F.3d 954, 967 (3d Cir. 1997). In view of the government's
concession, we will take the point as settled for this case.
Nevertheless, the government claims that any such
protection was lost when the minutes were turned over to the
audit agency, MIT having conceded that it cannot prove that
the minutes were not so disclosed. One might wonder why the
standard of waiver for the attorney-client privilege--that
any voluntary disclosure outside the magic circle constitutes
waiver--would not also apply to the work product doctrine.
Equivalent waiver standards would make easier the resolution
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of evidentiary disputes where, as often happens, the two
objections are raised together.
Nonetheless, the cases approach uniformity in implying
that work-product protection is not as easily waived as the
attorney-client privilege. The privilege, it is said, is
designed to protect confidentiality, so that any disclosure
outside the magic circle is inconsistent with the privilege;
by contrast, work product protection is provided against
"adversaries," so only disclosing material in a way
inconsistent with keeping it from an adversary waives work
product protection. At least five circuits have adopted this
rule in some form.6 See also 8 C. Wright, A. Miller & R.
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Marcus, Federal Practice and Procedure 2024, at 368-69
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(1994) (citing cases).
Perhaps such formulations simply beg the question. If
one wanted to explain the discrepant outcomes, it might be
more persuasive to say that the privilege is strictly
confined because it is absolute; on the other hand, work
product protection (with certain qualifications) can be
overcome by a sufficient showing of need. See Fed. R. Civ.
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P. 26(b)(3). In all events, it would take better reason than
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6See Westinghouse, 951 F.2d at 1428-29; Steinhardt
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Partners, 9 F.3d at 234-35; In re Subpoenas Duces Tecum, 738
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F.2d 1367, 1371-75 (D.C. Cir. 1984); Martin Marietta Corp.,
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856 F.2d at 625; In re Chrysler Motors Corp. Overnight
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Evaluation Program Litig., 860 F.2d 844, 846-47 (8th Cir.
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1988).
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we have to depart from the prevailing rule that disclosure to
an adversary, real or potential, forfeits work product
protection.
MIT's disclosure to the audit agency was a disclosure to
a potential adversary. The disclosures did not take place in
the context of a joint litigation where the parties shared a
common legal interest. The audit agency was reviewing MIT's
expense submissions. MIT doubtless hoped that there would be
no actual controversy between it and the Department of
Defense, but the potential for dispute and even litigation
was certainly there. The cases treat this situation as one
in which the work product protection is deemed forfeit. See,
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e.g., Steinhardt Partners, 9 F.3d at 234; Westinghouse, 951
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F.2d at 1428-31; In re Subpoenas Duces Tecum, 738 F.2d at
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1372 (D.C. Cir. 1984).
In closing, it may be helpful to stress that--with
regard to both the attorney-client privilege and the work
product doctrin
ine--we are concerned only with loss of protection
as to the very documents already disclosed to the audit
agency. Nothing in this opinion is intended to be directed
to the different and difficult question when disclosure of
one document warrants forfeiture of protection for a
different but related document. That issue was touched on in
the district court but has not been pursued on appeal.
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Similarly, even where work product can be discovered,
the governing rule directs that "the court shall protect
against disclosure of the mental impressions, conclusions,
opinions, or legal theories of an attorney or other
representative of a party concerning the litigation." Fed.
R. Civ. P. 26(b)(3). Conceivably, the strong policy
underlying this reservation might serve to protect such
materials, even if protection of ordinary work product
materials were deemed waived because of selective disclosure.
This possibility has not been briefed or argued to us; it may
or may not be pertinent in this case; and we mention it only
to stress that we are not deciding the issue.
Accordingly, on MIT's appeal, the judgment of the
district court is affirmed. On the government's cross-
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appeal, the judgment of the district court refusing to order
production of three specified minutes is vacated, and the
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matter is remanded to the district court for further
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proceedings consistent with this opinion.
It is so ordered.
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