Opinion
No. C98-1013
August, 2000
ORDER
This matter comes before the court pursuant to plaintiffs' motion to compel depositions (docket number 50), plaintiffs' motion for in camera review and order establishing crime/fraud exception (docket number 51), plaintiffs' motion to compel discovery (docket number 54), defendants' motion for a protective order (docket number 75), and plaintiffs' motion for extension of time to resist defendants' motion for a protective order (docket number 77). These discovery motions were deferred pending ruling on the jurisdictional questions presented in the defendants' motion to dismiss. Following the resolution of that motion in December of 1999, the defendants requested additional time to respond to pending discovery requests in February 2000 and that motion was granted. The defendants responded to the pending discovery motions on April 24, 2000, and a hearing was held on these motions on May 5, 2000. The plaintiffs requested until June 12, 2000, to file a resistance to defendants' April 24, 2000, motion for a protective order but no resistance has yet been filed.
These pending discovery disputes are complex. They have been made unnecessarily difficult by plaintiffs' failure to concisely set forth the discovery requests, the responses thereto, and the reasons why the plaintiffs believe that the defendants' earlier discovery responses were fraudulent. This information was not to be gleaned from a review of the motions to compel and their resistances. Rather, the court was to decipher this information from the plaintiffs' resistance to the defendants' motion for summary judgment.
On page 21 of the plaintiffs' resistance to the defendants' motion for summary judgment, plaintiffs state the following: "Plaintiffs asked about all reports, evaluations or discussions of the child restraint's ability to protect it's occupant in a crash. (See Exhibits K, L and U)." Exhibits K, L and U are 93 pages long. Thus, to resolve the issue as to whether plaintiff has made a prima facie showing of the crime fraud exception, the court could not find this information in plaintiffs' motion to compel, it could not find it in the incorporated resistance to defendant's motion for summary judgment, but had to sort through 93 pages of discovery requests simply to find out what the plaintiffs asked for in discovery. As a result, what could have been done in 15 pages had to be deciphered from many hundreds of pages. The court makes no apology for an orderly progression of motion resolution or delay caused by needless over-complication of issues.
Plaintiffs have recently filed a motion to transfer complaining about delay.
At the heart of these pending discovery disputes is the plaintiffs' claim that the defendants' assertion of attorney-client and work-product privileges are defeated by the crime/fraud exception. The parties disagree about the sequence of events necessary to resolve this claim and the showing that must be made. They further disagree over the factual basis for plaintiffs' claim.
Attorney-Client Privilege
The attorney-client privilege under federal law is the "oldest of the privileges for confidential communications known to the common law."Haines v. Liggett Group Inc., 975 F.2d 81, 84 (3d Cir. 1992) (citingUpjohn Co. v. United States, 449 U.S. 383, 389, 101 S.Ct. 677, 682, 66 L.Ed.2d 584 (1981)). It is therefore not only an interest long recognized by society but also one traditionally deemed worthy of maximum protection. Haines, supra, at 90. The purpose of the privilege is to encourage full and frank communication between attorneys and their clients and thereby promote broader public interests in the observance of law and the administration of justice. Haines, supra, at 84 (citingUpjohn, supra, at 449 U.S. 389, 101 S.Ct. at 682.) That purpose requires that clients be free to make full disclosure to their attorneys of past wrongdoings, Fisher v. United States, 425 U.S. 391, 403, 96 S.Ct. 1569, 1577, 48 L.Ed.2d 39 (1976), in order that the client may obtain the aid of persons having knowledge of the law and skilled in its practice. Hunt v. Blackburn, 128 U.S. 464, 470, 9. S.Ct. 125, 127, 32 L.Ed. 488, (1888). Timing is critical, for the prima facie showing requires that the "client was engaged in or planning a criminal or fraudulent scheme when he sought the advice of counsel to further the scheme." In Re Murphy, 560 F.2d 326, 338 (8th Cir. 1977) (citations omitted). See also Pritchard-Keang Nam Corp. v Jaworski v. International Systems Controls Corp., 751 F.2d 277, 281 (8th Cir. 1985).
The attorney-client privilege is not without its costs. Cf. Trammel v. United States, 445 U.S. 40, 50,100 S.Ct. 906, 912, 63 L.Ed.2d 186 (1980). Since the privilege has the effect of withholding relevant information from the fact finder, it applies only where necessary to achieve its purpose. Fisher, supra, 425 U.S. at 403, 96 S.Ct. at 1577. The privilege extends to verbal statements, documents and tangible objects conveyed by both individual and corporate clients to an attorney in confidence for the purpose of any legal advice. Haines, supra, at 90.
The attorney-client privilege must necessarily protect the confidences of wrongdoers, but the reason for that protection — the centrality of open client and attorney communication to the proper functioning of our adversary system of justice — ceases to operate at a certain point, namely, where the desired advice refers not to prior wrongdoing, but to future wrongdoing. 8 Wigmore,§ 2298, P. 573. See also Haines,supra, at 84; Clark v. United States, 289 U.S. 1, 15, 53 S.Ct. 465, 469, 77 L.Ed. 993 (1933). It is the purpose of the crime-fraud exception to the attorney-client privilege to assure that the "seal of secrecy" between lawyer and client does not extend to communications "made for the purpose of getting advice for the commission of a fraud" or crime.O'Rourke v. Darbishire, [1920] A.C. 581, 604 (P.C.); see also United States v. Zolin, 491 U.S. 554, 562-63, 109 S.Ct. 2619, 2626, 105 L.Ed.2d 469 (1989). The seal is broken when the lawyer's communication is meant to facilitate future wrongdoing by the client. Haines, supra, at 90. Where the client commits a fraud or crime for reasons completely independent of legitimate advice communicated by the lawyer, the seal is not broken, for the advice is, as the logicians explain, non causa pro causa. The communication condemned and unprotected by the attorney-client privilege is advice that is illicit because it gives direction for the commission of a future fraud or crime. Id. The advice must relate to future illicit conduct by the client; it is the causa pro causa, the advice that leads to the deed. Id.
When the In-Camera Analysis Comes Into Play
In Zolin v. United States, the Court held that before engaging in in camera review to determine the applicability of the crime-fraud exception, the judge should require a showing of a factual basis adequate to support a good faith belief by a reasonable person . . . that in camera review of materials may reveal evidence to establish the claim that the crime-fraud exception applies. In Re Grand Jury Subpoena As To C97-216, 187 F.3d 996, 997 (8th Cir. 1999). Zolin further established that only non-privileged material may be used to make the threshold determination that triggers the in camera review. Zolin, supra, 491 U.S. at 574, 109 S.Ct. at 2632.
The Court said that at the behest of the party opposing the claim of privilege, the district court may conduct an in camera review of the materials in question. Zolin, supra, 491 U.S. at 557, 109 S.Ct. at 2623.
We hold that in camera review may be used to determine whether allegedly privileged attorney-client communications fall within the crime fraud exception. We further hold, however, that before a district court may engage in in camera review at the request of the party opposing the privilege, that party must present evidence sufficient to support a reasonable belief that in camera review may yield evidence that establishes the exception's applicability. Finally, we hold that the threshold showing to obtain in camera review may be met by using any relevant evidence, lawfully obtained, that has not been adjudicated to be privileged. Zolin, supra, at 574-575.
In fashioning a standard for determining when in camera review is appropriate, the Zolin court began with the observation that in camera inspection . . . is a smaller intrusion upon the confidentiality of the attorney-client relationship than is public disclosure. Zolin, supra, 491 U.S. at 572, 109 S.Ct. at 2631. "We therefore conclude that a lesser evidentiary showing is needed to trigger the in camera review than in required ultimately to overcome the privilege. The threshold we set, in other words, need not be a stringent one." Id. See also Pritchard-Keang Nam Corp. v. Jaworski v. International Systems Controls Corp., 751 F.2d 277, 284 (8th Cir. 1985) (decisions regarding the attorney-client privilege should not be based on a rigid analysis). The Supreme Court has expressly declined to specify the "quantum of proof" required to establish the crime-fraud exception. Zolin, supra, 491 U.S. 563 n. 7, 109 S.Ct. at 2619. Accordingly, the Court left this question to the district court, recognizing that Zolin dictates a higher standard of proof for public disclosure than for in camera review. In Re General Motors Corp., 153 F.3d 714 (8th Cir. 1998). (Noting it was unclear what burden of proof the Zolin showing required, see In Re General Motors Corp., supra, at 716, the district court applied a clear-and-convincing standard.)
Once a showing is made, the decision whether to engage in in camera review rests with the sound discretion of the district court. The court should make that decision in light of the facts and circumstances of the particular case, including, among other things, the volume of materials the district court has been asked to review, the relative importance to the case of the alleged privileged information, and the likelihood that the evidence produced through in camera review, together with other available evidence then before the court, will establish that the crime-fraud exception does apply. The district court is also free to defer its in camera review if it concludes that additional evidence in support of the crime-fraud exception may be available that is not allegedly privileged, and that production of the additional evidence will not unduly disrupt or delay the proceedings. Zolin, supra, 491 U.S. at 572, 109 S.Ct. at 2631.
For in camera inspection, it would be sufficient for the district court, in its discretion, to consider only the presentation made by the party challenging the privilege. The court may decide on this submission alone whether a factual basis is present to support a good faith belief by a reasonable person that the materials may reveal a crime or fraud.Haines, supra, at 96. Where a fact finder undertakes to weigh evidence in a civil proceeding seeking an exception to the privilege, the party invoking the privilege has the absolute right to be heard by testimony and argument. Id. at 97.
Discovery Requests At Issue
The primary discovery requests at issue include Interrogatory No. 2 which requested information, among other things, about all claims made for personal injury against these defendants arising out of the use of the Kantwet 401 Child Car Safety Seat, all testing done by the defendants or their agents to evaluate design changes, modification or attempted improvement of the seat, and any and all discussions, evaluations, comments or reviews of the child safety seat to protect its occupant during automobile crashes.
Interrogatory No. 6 asked whether the defendants had any claims made against them for personal injuries allegedly due to any defects in the design or manufacture of the seat. Interrogatory No. 11 asked for a detailed description of occupant protection, structural integrity, or durability testing done with respect to the Kantwet 401. Interrogatory No. 14 asked for all tests, analyses, or evaluations that the defendants had done on the Kantwet 401 which demonstrated, analyzed or studied the placement of the motor vehicle seatbelt or shoulder harness relative to the child seat. Interrogatory No. 16 requested the names, addresses, and telephone numbers of all persons with discoverable knowledge concerning the automobile crash in the case, any contested matter concerning damages claimed, the defendants' state-of-the-art defense, and other factual allegations in dispute. Interrogatory No. 19 requested information concerning the net worth of Spalding and Evenflo Companies, Inc.
Request for Production of Documents No. 2 sought all documents regarding claims for personal injury arising out of the use of the Kantwet 401, all discussions, reports, evaluations, or analyses of the ability of the Kantwet 401 to protect its occupant in an auto collision, all discussions, evaluations, reports, or analyses of any proposed or actual recall of any portion of the Kantwet 401 and any discussions, evaluations, or analyses of the method by which the Kantwet 401 should be secured to the vehicle in which it is being used.
In response to Interrogatory No. 2, the only information provided concerning product testing pertained to sled tests. The defendants did not reveal that they maintained a warehouse of car seats that had been involved in accidents that had been examined and evaluated by the defendants including in-house counsel Robert Potter and employee/consultant Jerry Koziatek. In response to Interrogatory No. 6 concerning claims, the defendants revealed that claims involved lawsuits, letters from consumers and their attorneys which did not result in lawsuits and notification from consumers that a Kantwet 401 was in use at the time of an automobile accident. Again, the defendants did not reveal that the safety seats had been retained, inspected, and evaluated.
In response to Interrogatory No. 14 regarding tests, analyses, and evaluations regarding the placement of the seatbelt or shoulder harness relative to the child seat, again the defendants revealed only the sled tests.
With respect to Interrogatory No. 16, the defendants identified persons with knowledge of the automobile crash which gave rise to the case. Other than that, only Mr. Koziatek is identified as a witness having knowledge of the case. In response to Production of Documents No. 2, the defendants stated that, "The documents, evaluations, reports and analyses of the ability of the Kantwet 401 to protect its occupant in an automobile collision are all contained in the sled test results which have previously been produced. Request for Production of Documents No. 5 sought copies of all claims for personal injury against the defendants arising out of the use of the Kantwet 401. The defendants stated that the documents referred to in Answer to Interrogatory No. 2(e) were the only documents defendants have that are responsive to Request for Production of Documents No. 5.
The plaintiffs further contend that the crime fraud exception to the attorney-client and work-product protection is triggered by the defendants' claim at trial that the defendants' net worth, measured by shareholders' equity was $36,000,000 when in fact Mr. Potter testified in another case that the shareholders' equity of Evenflo Company, Inc. in 1996 was $49,522,000. The plaintiffs contend that the independent auditor's report shows that "There are a number of very important bookkeeping and accounting entries which effect the net shareholders' equity. Neither the Court or the Plaintiffs were provided with any of this information on June 7 or June 10, 1996."
The plaintiffs erroneously refer to Exhibit FF in this regard.
The court finds that the plaintiffs have made the prima facie showing necessary for an in camera review of documents for which a claim of privilege has been made. The in camera review, however, will only relate to documents touching on the subject matters for which the prima facie showing has been made. The alleged fraud can be found at page 7 and page 29 of plaintiffs' July 2, 1999, resistance to defendants' motion for summary judgment. Specifically, it relates to the withholding of discovery relating to testing, evaluation, and analysis of returned car seats, claims by consumers relating to these car seats, and the production of corporate financial information on the issue of punitive damages. The court will examine in camera any document heretofore withheld on a claim of privilege relating in any way to the production of discovery on these issues. Depositions of Mr. Koziatek and Mr. Potter shall be taken at a mutually convenient time within the next 30 days. The plaintiff shall be given access to the so-called warehouse of returned car seats in Piqua, Ohio.
Upon the foregoing,
IT IS ORDERED
1. Plaintiffs' motion to compel depositions of Robert Potter and Jerome Koziatek (docket number 50) is granted. These depositions shall be scheduled at a mutually convenient time in the next thirty (30) days.
2. Plaintiffs' motion for in camera review and order establishing crime fraud exception (docket number 52) is granted to the extent set forth in the text above.
3. Plaintiffs' motion to compel discovery (docket number 54) is granted as follows. The defendants shall produce documents previously withheld on a claim of privilege responsive to Request for Production of Documents 1, 2, 3, 5, 7, 13, and 14 for in camera inspection to the extent that they reveal any information concerning defendants' production, refusal to produce, or failure to produce documents relating to the testing, evaluation, and analysis of returned car seats, the claims regarding those returned car seats, and the corporate financial information used for determination of punitive damages. The motion to compel is granted with respect to Request for Production of Documents 4 for information pertaining to the five years preceding the trial of the underlying lawsuit in this case. The motion to compel is granted with respect to the access to returned child seats in Requests 6 and 9. The motion to compel is granted with respect to Request for Production of Document 10 for Kantwet 401/402 car seats. The motion to compel is denied as overly broad and unduly burdensome with respect to Request for Production of Documents 8, 12, and 15 through 17. The motion to compel is denied with respect to Request for Production of Documents Number 11.
4. All documents compelled for in camera inspection for the plaintiffs shall be produced on or before September 8, 2000.
5. Defendants' motion for protective order (docket number 75) is denied.
6. Plaintiffs' application for extension of time (docket number 77) is denied as moot.