Defendant Compels Production Of Company Records Provided To Earlier Government Investigation

D.C. Circuit remands case for district court to determine which company records, including from an internal investigation, were material to the defendant’s defense “and to protect against the public disclosure of material documents in a manner consistent with Thompson’s right to a fair trial,” in United States v. Thompson, 562 F.3d 387 (D.C. Cir. April 17, 2009) (No. 08-5203)

What happens when a company seeks to cooperate with the government and share confidential documents with the government with the understanding that the government will not disclose the records to any third parties, but later an indicted defendant seeks the records based on constitutional rights and the discovery rules? This issue was before the D.C. Circuit. The opinion highlights the parameters of the issue, although the case was remanded to the district court for further findings.

In the case, the government commenced an investigation of The Williams Companies, its subsidiary (collectively “WPC”), and other energy companies, concerning trading practices during the California energy crisis. In a letter, the government reminded WPC that “‘full Cooperation’ would entail disclosing the results of WPC’s internal” investigation. WPC produced documents to the government which included “attorney notes from interviews of WPC employees, data analyses and reports of natural gas transaction data developed under WPC’s attorneys’ supervision, and presentations to prosecutors by WPC attorneys aimed at ‘influenc[ing] the government’s charging decisions.’” Thompson, 562 F.3d at 390 (citation omitted). In producing the records, the company noted that it was not waiving “any privilege as to any party other than the United States, and” the production “will not be considered a waiver as to any other subject or issue.” Thompson, 562 F.3d at 398 .

In early 2006, the government entered into a Deferred Prosecution Agreement with the company which agreed to “cooperate fully.” Defendant Thompson and others were subsequently charged with conspiracy, wire fraud and gas price manipulation. He filed a motion to compel the government to produce “information that is material to preparing his defense” and that was provided by WPC, as required under Brady v. Maryland, 373 U.S. 83 (1963), and Fed. R. Crim. P. 16(a)(1)(E)(i). The government opposed the motion claiming that WPC had not waived its rights to any third parties and the government had agreed to these terms. WPC also opposed the motion to compel. The district court granted the motion and denied a requested stay. The district ordered the government to “produce to defendant all materials disclosed to the Government by [WPC] pursuant to [WPC’s] cooperation with the federal investigations that resulted, ultimately, in the indictment of the defendant, Scott Thompson.” Thompson, 562 F.3d at 396. The circuit granted an emergency motion for a stay. WPC filed a third-party appeal on the discovery order compelling production of “all materials disclosed” by the third party pursuant to its cooperation with the government.

The D.C. Circuit noted the posture of the case: “The third party [WPC] now seeks to enforce its agreement with the government that the government would hold the documents in confidence ‘to the extent possible’ in view of the third-party’s claims of privilege.” Thompson, 562 F.3d at 390. After concluding that WPC could take an interlocutory appeal under the Perlman Doctrine, the circuit noted that WPC had “standing to protect its interest in confidentiality, albeit in a manner consistent with Thompson’s right to a fair trial and the government’s Brady and Rule 16 obligations to Thompson.” Thompson, 562 F.3d at 396.

The district court did not determine which documents were material to the defendant’s defense. Consequently, the circuit remanded “the case for the district court to make that assessment and to protect against the public disclosure of material documents in a manner consistent with Thompson’s right to a fair trial.” As the circuit directed:

“It remains for the district court on remand to determine which of the documents at issue are material to Thompson’s ability to prepare his defense, and upon identifying those documents to afford appropriate protection to WPC against public disclosure in a manner that is consistent with Thompson’s right to a fair trial and the government’s confidentiality agreement with WPC. Given the scope of the confidentiality agreement, WPC cannot preclude discovery by Thompson of the documents it produced to the government as are material to Thompson’s defense, but Brady and Rule 16 contemplate a role for the district court.… Because the government’s criminal investigation was far broader than WPC and its employees and did not focus on Thompson alone, discovery by Thompson must proceed in a manner that avoids a fishing expedition, as the district court’s order of production suggests. Upon remand the district court can flesh out the details as to which documents must be disclosed because material to Thompson’s preparation of a defense and determine whether a protective order should be issued with respect to any of those documents.”
Thompson, 562 F.3d at 397. In light of the remand, the circuit did not reach certain issues, including “WPC’s contention that its production of documents was involuntary due to government coercion” and “that the documents at issue are entitled to protection under a common-law, federal settlement privilege.” Thompson, 562 F.3d at 398.

The Thompson case arises against the ongoing issue of what happens to corporate records provided to the government. Last August, the Department of Justice revised its policies concerning corporate investigations. Under the new policies, the corporation may voluntarily share information protected by the attorney-client privilege or work product doctrine, but prosecutors may not ask for such waivers. The department policy, located in the U.S. Attorney’s Manual §§ 9-28.000 to 9-28.1300. For more information, see Revised DOJ Corporate Prosecution Guidelines Issued.

In the new Congress, Senator Specter, of Pennsylvania, has re-introduced the Attorney Client Privilege Protection Act. The legislation would generally bar federal attorneys in criminal and civil enforcement actions from requesting or using communications protected by the attorney-client privilege or materials covered by the work product doctrine. See Attorney-Client Privilege Protection Act of 2009 Is Introduced In the Senate (S. 445).

Also on the privilege front, last year, Congress enacted new FRE 502 concerning the waiver of the attorney-client privilege and the work product doctrine. See Pub. L. No. 110-322, 122 Stat. 3537 (Sept. 19, 2008). The new rule establishes a presumption against subject matter waiver, resolves the issue of inadvertent disclosure, provides for confidentiality orders and supports party agreements, among other issues. The Federal Evidence Review has established a FRE 502 Resource Page, which provides background and legislative materials on the new rule and will monitor new cases applying the rule.

Federal Rules of Evidence