Mohawk Industries Carpenter The United States Supreme Court by jolinmilioncherie


									Volume XVII No. 1                                                                              Spring 2010

Mohawk Industries v. Carpenter: The United States
Supreme Court Limits Appellate Review of Orders
Requiring Disclosure of Attorney-Client Privileged
By Charles V. Berwanger and Matthew G. Kleiner
Gordon & Rees LLP

    T     he nightmare order arrives. It provides:
                                                        documents, the client inquires: “Can we appeal
                                                        and is there some mechanism to avoid having to
                                                        disclose the documents as ordered?”
                            Defendants’ argument                The answer in the ninth circuit before De-
                        that certain documents are      cember 8, 2009 was yes. However, on that date
                        attorney-client privileged is   the United States Supreme Court in Mohawk In-
                        rejected and defendant is       dustries, Inc. v. Norman Carpenter, ___ U.S. __,
                        directed to produce such        130 S.Ct. 599 (2009) rejected the circuit’s then
                        documents immediately.          applicable rule that immediate appellate review
                                                        was available.
                                  Your thorough in-             This article discusses Mohawk, its ra-
                         vestigation to determine       tionale, its implications, and post-Mohawk con-
                         whether or not there has       siderations in federal court. It also discusses
                         been widespread hiring of      the counterpart California judicial treatment of
                         illegal workers in your cli-   privilege claims and appellate remedies.
Charles V. Berwanger     ent’s factory is clearly la-
                         beled attorney-client privi-              Background of Mohawk
                        leged communication. The
                        investigation, prompted by              Plaintiff, Norman Carpenter, sued Mo-
                        several lawsuits, includes      hawk for wrongful termination claiming that
                        in-depth employee inter-        when he refused to recant his charge that Mo-
                        views; discussion of relevant   hawk had hired illegal immigrants Mohawk
                        documents; and its conclu-      fired him under false pretenses. Unbeknownst
                        sion that there had indeed      to Carpenter, at the time of his interview by
                        been illegal hiring. The re-    Mohawk’s counsel, there was another lawsuit
                        port also recommends cura-      pending against Mohawk brought by Mohawk
                        tive measures as well as lit-   employees charging Mohawk with conspiracy to
                        igation strategy. In a word,    drive down the pay of its legal employees’ wages
 Matthew G. Kleiner     the ordered disclosure will     by knowingly hiring undocumented workers.
                        be catastrophic.                        During the interview Carpenter refused
          The client’s response is predictable. Af-     to recant his charge and he was thereupon ter-
ter bemoaning the sorry state of the judiciary          minated. In the employees’ proceeding the court
that requires the production of such privileged         held an evidentiary hearing to determine the
                                                                                     (see “Mohawk” on page 2)
Mohawk                                                   peals outweigh whatever harm may be suffered
continued from page 1                                    by those who are erroneously forced to disclose
                                                         attorney-client privileged materials. The Court
merits of the employees’ claims. The employees           concludes: “[i]n short, the limited benefits of ap-
offered Carpenter’s contentions in support of            plying the blunt, categorical instrument of [28
their position. In response, Mohawk described            U.S.C.] section 1291 ‘collateral order appeal’ to
Carpenter’s accusations as fantasy; asserted             privilege-related orders simply cannot justify
Carpenter had engaged in improper conduct                the likely institutional costs.”
himself; and an investigation had determined                     The Court commences its analysis with
Carpenter was not to be believed.                        its acknowledgement of “the importance of the
        Carpenter, in his action, moved to com-          attorney-client privilege, which ‘is one of the
pel production of Mohawk’s counsel’s notes. The          oldest recognized privileges for confidential in-
trial court, in response to Carpenter’s motion           formation.’” The privilege encourages clients to
determined that the notes were attorney-client           make full and frank disclosures to their attor-
privileged, but that Mohawk had impliedly                neys and more candid and effective representa-
waived the privilege.                                    tion; and allows attorneys in turn to be candid
        Mohawk sought relief from that order.            and thorough in their analysis and responses.
Mohawk filed a petition for mandamus and an              The importance of the attorney-client privilege,
appeal under the collateral order doctrine.              however, is the starting point of the analysis and
        The eleventh circuit quickly disposed of         not the end.
the petition for writ of mandamus by dismiss-                    Weighed against the privilege are the
ing it. It concluded Mohawk failed to show the           values attendant the one final judgment rule
extraordinary circumstances necessary to sur-            and 28 U.S.C. section 1291 that in general ap-
mount the high hurdle necessary for such re-             peals may only be taken from judgments that
lief and that Mohawk had not shown the lower             terminate an action and that the narrow ex-
court’s privilege ruling was a judicial usurpation       ception contemplated by the collateral order
of power, a prerequisite to writ relief.                 doctrine must “never be allowed to swallow the
        Justice Sonia Sotomayor, in her maiden           general rule that a party is entitled to a single
opinion on the U.S. Supreme Court, concluded             appeal, to be deferred until final judgment has
that the eleventh circuit was correct in deter-          been entered.” This rule reflects a healthy re-
mining it lacked jurisdiction because an appeal          spect for the virtues of the final-judgment rule.
as a matter of right under the collateral order          Permitting piecemeal, prejudgment appeals un-
doctrine does not lie.                                   dermines “efficient judicial administration” and
        The collateral order doctrine permits im-        encroaches upon the prerogative of district court
mediate appeals where the court order (1) con-           judges, to play a “special role” in the manage-
clusively determines the disputed question; (2)          ment of ongoing litigation. This enables the
resolves an important issue completely separate          trial court to operate more effectively by appel-
from the merits of the action; and (3) is effec-         late courts not repeatedly intervening to second-
tively unreviewable on appeal from the final             guess prejudgment rulings.
judgment. The Court determined that the third                    Returning to factor number three, con-
element had not been satisfied. The Court rea-           cludes the Court, an appeal from the final judg-
soned that a privilege claimant either has rem-          ment as well as other remedies available to the
edies that are available to undo the disclosure          party ordered to disclose attorney-client materi-
should the claimant determine to disclose or ad-         als “generally suffice to protect the rights of liti-
equate remedies on appeal from final judgment            gants and ensure the vitality of attorney-client
after disclosure of the privileged matter.               privilege.” Appellate courts can remedy improp-
                                                         er disclosure in the same way they remedy other
              Mohawk’s Reasoning:                        evidentiary rulings: by vacating an adverse judg-
                                                         ment and remanding for a new trial in which the
       The Court concludes that judicial insti-          protected material and its fruits are excluded
tutional issues raised by allowing interim ap-           from evidence.
                                                                                        (see “Mohawk” on page 3)
Mohawk                                                     of witnesses and documents generally. However,
continued from page 2                                      a thorough analysis by counsel of an issue may
                                                           very well highlight a particular witness or docu-
        The Court gives short shrift to Mohawk’s           ment and provide guidance to opposing counsel
argument that the privilege does not simply bar            on what to look for, what questions to ask, and
use of the protected information at trial but pro-         other such details. Moreover, attorney-client
vides a right not to disclose that information.            privileged documents often disclose strategy
        Moreover, the Court concludes that attor-          which once disclosed cannot be undisclosed. In
neys and clients have options other than appel-            the words of the ninth circuit in In Re Naptster,
late review. First a party may request certifica-          Inc. Copyright Litigation, 479 F.3d 1078, 1088
tion of an interlocutory appeal under 28 U.S.C.            (9th Cir. 2007), “[o]nce privileged materials are
section 1292(b). Second, a party may seek man-             ordered disclosed, the practical effect of the or-
damus; and third, a party may disobey a lower              der is often ‘irreparable by any subsequent ap-
court’s ruling and suffer court imposed sanctions          peal.’”
and appeal those sanctions.                                         In addition, requiring the disclosure of
                                                           attorney-client privileged material bearing on
        California Law By Comparison                       litigation may effectively coerce a client into
                                                           settlement. Moreover, given Mohawk, one can
        California law is similar to Mohawk by             envision clients being both reticent to disclose
refusing to allow an appeal from an order to               information and not to put such information into
compel production of documents. Generally, in              written form.
the interest of expediting trial of the action, dis-                The Court suggests that there are plen-
covery orders are reviewable only on appeal from           tiful remedies to parties ordered to disclose
a final judgment in the action. (Pacific Tel. &            attorney-client materials. In actuality, those
Tel. Co. v. Super. Ct. (Duke) (1970) 2 Cal.3d 161,         remedies are ineffectual at best and dangerous
169.) Writ relief is not favored because the de-           at worst. For example, the Court suggests that
lay causes greater harm than the enforcement of            a permissive appeal under 28 U.S.C. section
an improper discovery order. Writ relief is only           1292(b) provides an option to avoid disclosure.
available in exceptional circumstances.                    This option requires the trial court to determine
        California differs from Mohawk as to the           that there is a novel legal issue and an appeal
availability of writ relief from the forced produc-        may materially advance the ultimate determi-
tion of attorney-client privileged communica-              nation of the litigation--criteria most difficult to
tions. California courts recognize that forced             satisfy.
production of attorney-client privileged docu-                      The second remedy offered by the Court
ments generally constitute “exception circum-              is mandamus. It is equally unavailable and un-
stances.” (Id.) The attorney-client privilege “de-         availing. Mandamus is granted quite rarely and
serves a particularly high degree of protection”           only where a disclosure order “amount[s] to judi-
because it provides the “only adequate remedy to           cial abuse of power or a clear abuse of discretion”
prevent attorneys from forced disclosure of client         or otherwise works a manifest injustice. It is
confidences. . . .” (Titmas v. Super. Ct. (Iavarone)       noteworthy that given the Court’s expressed at-
(2001) 87 Cal.App.4th 738, 744, fn. 4.)                    titude on the adequacy of an appeal to deal with
                                                           an erroneous order requiring disclosure that
       Mohawk’s Remedies Are Illusory                      such would appear to make such an interim or-
                                                           der as a matter of law not a “manifest injustice”
        In the real world, attorney-client com-            because an erroneous order which if reversed on
munications, even if excluded at a follow up               appeal can be rectified at a new trial – at least
trial, nonetheless once disclosed substantially            per Mohawk.
prejudice the disclosing party. Communications                      Another unsatisfactory remedy offered
often identify witnesses, anticipated testimony,           by the Court for the party who wishes to avoid
documents, recommendations and strategies. It              disclosure is to defy the order and incur “court
is true that discovery may require the disclosure          imposed sanctions.” Such sanctions may include
                                                       3                                 (see “Mohawk” on page 4)
continued from page 3

a court order striking pleadings; directing that           envision a trial lawyer who would believe that
certain matters be taken as fact; prohibiting the          the appeal remedy has any potential and that
disobedient party from offering certain claims;            the interim remedies proposed by the Court have
and the list goes on. (F.R.C.P. 37.) In other              any merit. In other words, having disclosed sig-
words, the Court is inviting parties to effectively        nificant and devastating attorney-client privi-
bet their case on whether they are correct on the          leged materials in litigation does not encourage
privilege issue and that the court of appeals will         clients to continue to incur expense in the litiga-
agree.                                                     tion with the odds stacked against the client in
         Finally, the Court suggests that parties          the lawsuit based upon the hope and the dream
may risk contempt and appeal from any sanc-                that the court of appeals will determine that the
tion imposed. Such a disagreeable option is not            order was improper and thus remand the matter
attractive. First, one cannot predetermine what            back to the trial court for a new trial excluding
a trial court will do if an order is defied. Sec-          the privileged documents and its fruits. Such a
ond, appeal lies only from a criminal contempt             scenario has absolutely no appeal. s
order. Civil contempt is not a basis for imme-
diate appeal. The trial court has the discretion               Charles V. Berwanger is a partner and ap-
to determine which to impose. That leaves the              pellate lawyer at Gordon & Rees specializing in
trial lawyer and the client with an unattractive           business and real estate litigation. Matthew G.
choice: risk contempt and be prey to the judge’s           Kleiner, Senior Counsel at Gordon & Rees, is also
determination of whether or not to impose civil            an appellate lawyer.
or criminal sanctions? Who will be led away in
handcuffs? The client? The lawyer? Both?
         The U.S. Supreme Court by its decision
has effectively made federal trial court rulings
on attorney-client privilege claims final. The
trial court having ruled that a matter must be
disclosed, a client must decide whether to dis-
close or not to disclose and, that in turn is driven
by the impact of the disclosure on the litigation.
Very often a disclosed attorney-client privileged
communication will change the analysis of the
litigation substantially to the disadvantage of
the disclosing party. It is almost impossible to


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