Reply Brief — Cadwalader v. United States District Court for the Central District of California

ay | “ELLED-

IL ED

No. 86-1636 Jun 8 per

———

JOSEPH F. SPANION, JR.

IN THE —

Supreme Court of the United States

OCTOBER TERM, 1986

CADWALADER, WICKERSHAM & TAFT,

. Petitioner,

UNITED STATES DISTRICT COURT FOR THE

CENTRAL DISTRICT OF CALIFORNIA,

Nominal Respondent,

- and -

DANIEL M. GOTTLIEB,

Real Party in Interest.

On Petition for a Writ of Certiorari to the United States

Court of Appeals for the Ninth Circuit

REPLY BRIEF FOR THE PETITIONER

ERWIN N. GRISWOLD

(Counsel of Record)

JONES, DAY, REAVIS & POGUE

655 Fifteenth Street, N.W.

Washington, D.C. 20005-5701

(202) 879-3898

Of Counsel

GEORGE D. REYCRAFT

ROSEMARY C. BYRNE

CADWALADER, WICKERSHAM & TAFT

100 Maiden Lane

New York, New York 10038

WILSON - EPES PRINTING Co., INC. - 789-O0S6 - WASHINGTON, D.C. 20001

\

_——

TABLE OF CONTENTS

Page

cy) * Bs jigs cy eee ii

REPLY BRIEF FOR THE PETITIONER .................... 1

I. CADWALADER’S CLAIMS OF PRIVILEGE

ARE PROPERLY BEFORE THIS COURT

AND WARRANT THE ISSUANCE OF MAN-

eR ENS ERESEGY S SAEESE Seek. Ce OOO a EE 2

II. THE DECISION OF THE DISTRICT COURT

WAS CLEARLY ERRONEOUS ..........0.....00....... 5

A. The District Court Erred When It Failed To

Examine The Documents In Camera ............. 6

B. The Crime-Fraud Exception Was Incorrectly

I Ati piel ers cdetelaceaeaniceshiceeaneaink icsntancaspnaininbielaiainicans

C. The Joint-Client Exeeption Is Inapplicable.... 9

CRD | -ceesenthisitidnenbienencdiipannnnispiiininnitisaientittensiiaitioinss 10

ii

TABLE OF AUTHORITIES

CASES Page

AM International, Inc. v. Eastman Kodak Co., 100

Ae em ot ks Rt eee enna 4

Barclaysamerican Corp. V. Kane, 746 F.2d 653

Re : I tO Renee Se A 2

Bogosian Vv. Gulf Oil Corp., 738 F.2d 587 (3d Cir.

IIIT scecccoinicsienna teersnesteettenctnattedeanedtieteaadamtaiaian maa ai 2,3

Broad v. Rockwell International Corp., [1976-77

Transfer Binder] Fed. Sec. L. Rep. (CCH)

TER C.D. FO: Bee citrate 10

Coastal Corp. v. Duncan, 86 F.R.D. 514 (D. Del.

SITE snus ds-iacpaccesvicssaalscinesratsakabbdie saigusdicionasilgusdadilnmneiilaita ie teiceiati 3

Deering Milliken Research Corp. v. Tex-Elastic

Corp., 320 F. Supp. 806 (D. So. Car. 1970)........ 4

Federal Trade Commission v. Shaffner, 626 F.2d

sg es | SR ee ern ae oe 4

Garner V. Wolfinbarger, 430 F.2d 1093 (5th Cir.

1970), cert. denied, 401 U.S. 974 (1971) ............. 8,9, 10

In re Grand Jury Proceeding (Schofield), 721 F.2d

Fe Re Hs TID cine ccvtivonsenlenraualicnnianibtictesas 3

In re Grand Jury Witness (Salas), 695 F.2d 359 3

| gs | SPER Rr mr pcni Re tte 68 fBa Soe 3

Harper & Row Publishers, Inc. v. Decker, 423 F.2d

487 (7th Cir. 1970), aff’d per curiam, 400 U.S.

BD SET ED spirisssnsscdieckponretannteeniiabisna eels as 2

Heathman v. United States District Court for the

Central District of California, 503 F.2d 1032

RR Re Re eo ae 2

In re International Systems and Controls Corpora-

tion Securities Litigation, 693 F.2d 1235 (5th

| ENC EEE mu rk Sloss 7

Jenkins v. Weinshienk, 670 F.2d 915 (10th Cir.

REE EEE RN eT. SORAREMIC fel eros | se cee es 2

In re John Doe Corp., 675 F.2d 482 (2d Cir. 1982).. 7

Kerr v. United States District Court for the North-

ern District of California, 426 U.S. 394 1976).. 3

New York Dock Co. v. Steamship Posnan, 274 U.S.

ID Shcsiiensnissaedsusinacbsebiinlcpmaieaeneaems a 8

iii

TABLE OF AUTHORITIES—Continued

Northrop Corp. Vv. McDonnell Douglas Corp., 751

ID I, Me ND os smcsavvestesconencsseanennes

Panter v. Marshall Field & Co., 80 F.R.D. 718

EET ee eee

Renfield Corp. v. E. Remy Martin & Co., 98 F.R.D.

I I ois oc rcceneprctedeustanssenseanngnoseases nae

Schlagenhauf v. Holder, 379 U.S. 104 (1964)........

Securities & Exchange Commission v. Dresser In-

dustries, Inc., 453 F. Supp. 573 (D. D.C. 1978),

aff'd, 628 F.2d 1368 (D.C. Cir.), cert. denied,

Se, os scmncnianoesentoniciantannens

In re Sentinel Financial Instruments, 553 F. Supp.

71 (S.D.N.Y.), aff'd mem., 714 F.2d 113 (2d Cir.

1982), cert. denied, 459 U.S. 1208 (1983) ........

In re Sentinel Government Securities, 530 F. Supp.

793 (S.D.N.Y.), petition for mandamus denied,

697 F.2d 297 (2d Cir.), cert. denied, 456 U.S. 977

a EELS Sc

In re Shopping Carts Antitrust Litigation, 95

I NY I, Th, RO occ cscccccnnsnnccnessassocene

Shirvani v. Capital Investing Corp., Inc., 112

fe 8 ee: | een

In re Special September 1983 Grand Jury, 608 F.

Supp. 538 (S.D. Ind.), aff'd, 776 F.2d 628 (7th

IEEE EEL ELLA AAA OO RCC

Stix Products, Inc. v. United Merchants & Mfrs.,

Ine., 47 F.R.D. 384 (S.D.N.Y. 1969) .....................

United States v. Exxon Corp., 87 F.R.D. 624 (D.

ac sussnsinieosenbispetiinenes

United States v. Robertson, 706 F.2d 253 (8th Cir.

a nadilctiniinninsinns

United States v. Tratner, 511 F.2d 248 (7th Cir.

ra he ath OS SR ne ee

United States v. West, 672 F.2d 796 (10th Cir.),

cert. denied, 457 U.S. 1133 (1982) ................0......

Valente v. Pepsico, Inc., 68 F.R.D. 361 (D. Del.

1975)

Page

10

iv

TABLE OF AUTHORITIES—Continued

Page

Washington-Baltimore Newspaper Guild Local 35

v. Washington Star Co., 543 F. Supp. 906 (D.

EERIE ARAN OD a Se et STO SO 10

Weil v. Investment/Indicators, Research & Man-

agement, Inc., 647 F.2d 18 (9th Cir. 1981)........ 8

STATUTES AND RULES

California Corporations Code Sec. 25110 (West

SUE dedi cka ost epencinsndbienagibebdatotencipstitanscalcvasebamasitaieiibibelahs betes

Federal Rules of Civil Procedure, Rule 34 ..............

© oO

IN THE

Supreme Court of the United States

OCTOBER TERM, 1986

No. 86-1636

CADWALADER, WICKERSHAM & TAFT,

. Petitioner,

UNITED STATES DISTRICT COURT FOR THE

CENTRAL DISTRICT OF CALIFORNIA,

Nominal Respondent,

- and -

DANIEL M. GOTTLIEB,

Real Party in Interest.

On Petition for a Writ of Certiorari to the United States

Court of Appeals for the Ninth Circuit

REPLY BRIEF FOR THE PETITIONER

Petitioner Cadwalader, Wickersham & Taft (‘‘Cad-

walader’’) respectfully submits this Reply Brief in fur-

ther support of its petition for a writ of certiorari to

the United States Court of Appeals for the Ninth Circuit.

In his brief, third-party defendant and real party in

interest Daniel M. Gottlieb (“Gottlieb”) argues basically

1 Gottlieb’s brief purports to be submitted on behalf of himself

and plaintiff Allan Carr (“Carr”). Yet, the document request and

2

two points: (1) that the issues presented by Cadwalader’s

petition are not properly before this Court, and (2) that

the decision of the court below was not clearly erroneous.

Both arguments are without merit.

I

CADWALADER’S CLAIMS OF PRIVILEGE

ARE PROPERLY BEFORE THIS COURT AND

WARRANT THE ISSUANCE OF MANDAMUS

Gottlieb argues that discovery orders involving claims

of privilege enjoy no special status in considering an ap-

plication for a writ of mandamus. Yet, the law is clear

that mandamus should issue where, as here, the petitioner

shows that an order will escape effective appellate review

at a later date and disclosure involves questions of sub-

stantial importance to the administration of justice. Bar-

claysamerican Corp. v. Kane, 746 F.2d 658, 655 (10th

Cir. 1984); Bogosian v. Gulf Oil Corp., 738 F.2d 587,

591 (3d Cir. 1984) (and cases cited therein) ; Heathman

v. United States District Court for the Central District

of California, 503 F.2d 1032, 1033 (9th Cir. 1974). See

Schlagenhauf v.- Holder, 379 U.S. 104, 110 (1964). In

cases involving privilege, disclosure generally makes

meaningful review impossible at a later date because

after disclosure the privilege is irretrievably lost. United

States v. West, 672 F.2d 796, 799 (10th Cir.), cert.

denied, 457 U.S. 1133 (1982); Jenkins v. Weinshienk,

670 F.2d 915, 917 (10th Cir. 1982); Harper & Row

Publishers, Inc. v. Decker, 423 F.2d 487 (7th Cir. 1970),

the motion to compel at issue were filed on behalf of Gottlieb, and

Gottlieb alone. Notwithstanding his relationship to Carr, Gottlieb

is himself a third-party defendant in this action. Hence, it is

Gottlieb’s right to these documents which is at issue in this pro-

ceeding. Any claimed right of Carr to the documents was never

raised in or addressed by the court below and is not properly before

this Court. See United States v. Robertson, 706 F.2d 258, 255 (8th

Cir. 1983).

3

aff'd per curiam, 400 U.S. 848 (1971) ; Bogosian v. Gulf

Oil Corp., supra. Important questions are raised in this

case regarding the scope of the attorney-client privilege

in civil litigation following a criminal conviction.

Gottlieb next argues that Cadwalader’s claim of priv-

ilege should not be considered by this Court because

Cadwalader did not submit an index of the documents

as to which privilege was asserted and because it did not

actually deliver the documents for inspection by the lower

court in camera. On the latter point, the record is clear

that Cadwalader offered the documents to the district

court for inspection. See Petition at 5 n.2; Brief In

Opposition at 24.

Under the circumstances of this case, an index was

unnecessary and Cadwalader’s failure to provide such

an index clearly was not the basis asserted by either the

magistrate or the district court for determining that the

documents were not privileged. See Petition, Appendix

A&C. Neither the Federal Rules of Civil Procedure nor

the Local Rules for the Central District of California

require an index or other specific identification of priv-

ileged documents before a privilege can properly be as-

serted. See Fed. R. Civ P. 34. The purpose of a list of

privileged documents is to provide the court with suffi-

cient information from which it can reasonably conclude

whether or not a privilege applies, 2.e., that the com-

munication involved legal advice between a client and

his attorney. Coastal Corp. v. Duncan, 86 F.R.D. 514,

521 (D. Del. 1980) ; In re Grand Jury Proceeding (Scho-

field), 721 F.2d 1221, 1223 (9th Cir. 1983) ; In re Grand

Jury Witness (Salas), 695 F.2d 359, 362 (9th Cir. 1982).

As this Court noted in Kerr v. United States District

Court for the Northern District of California, 426 U.S.

394, 400 (1976), the party claiming a privilege must

merely specify which “documents or class of documents

are privileged” (emphasis added). Gottlieb requested

4

whole classes of documents which were prima facie priv-

ileged including, for example, all documents containing

communication between Senft and Cadwalader (Request

Nos. 1, 2, 3) and all documents reflecting representations

made by Sentinel to Cadwalader in connection with the

preparation of the Private Placement Memorandum (Re-

quest No. 23). It requires no identification of specific

documents to conclude that these requests call for pro-

duction of a class of privileged documents reflecting com-

munication between an attorney and his client relating

to legal advice.”

Even the cases relied upon by Gottlieb do not require

a listing of documents where documents are sought from

an attorney and involve communications with the at-

torney’s client. See Federal Trade Commission v. Shaff-

mer, 626 F.2d 32, 37 (7th Cir. 1980); In re Shopping

Carts Antitrust Litigation, 95 F.R.D. 299, 306 (S.D.N.Y.

1982) (“it must be remembered that these interroga-_

tories were directed at the corporate defendants and not

to their attorneys”). In Securities & Exchange Commis-

sion V. Dresser Industries, Inc., 453 F. Supp. 573 (D.

D.C. 1978), aff'd, 628 F.2d 1868 (D.C. Cir), cert. denied,

449 U.S. 993 (1980), and AM International, Inc. v. East-

2In circumstances involving a discovery request to an attorney,

courts have noted that requiring an index with date and subject

matter may defeat the purpose of the privilege, by requiring the

disclosure of confidential information, such as the general nature

of the communication or when an attorney and a client consulted

about a given matter. See Deering Milliken Research Corp. v. Tex-

Elastic Corp., 320 F. Supp. 806, 809 (D. So. Car. 1970) ; Stix Prod-

ucts, Inc. Vv. United Merchants & Mfrs., Inc., 47 F.R.D. 334, 339

(S.D.N.Y. 1969) (rejecting need for index). In circumstances

where an index may itself reveal privileged information, in camera

review by the-court becomes particularly important, id., United

States v. Tratner, 511 F.2d 248, 252 (7th Cir. 1975), and submis-

sion of the documents in camera rather than an index is the appro-

priate procedure following a blanket claim of privilege. See In re

Special September 1983 Grand Jury, 608 F. Supp. 538, 542 (S.D.

Ind.), aff'd, 776 F.2d 628 (7th Cir. 1985).

5

man Kodak Co., 100 F.R.D. 255, 257 (N.D. Ill. 1981),

also cited by Gottlieb, the courts rejected a blanket asser-

tion of privilege because the corporate witness (not an

attorney) had failed to show that any specific materials

were subject to privilege or that the materials were gen-

erated for the purpose of securing legal advice. Even the

index discussed in United States v. Exxon Corp., 87

F.R.D. 624, 687 (D. D.C. 1980), relied upon by Gottlieb,

required only the source of communication, whether the

communication occurred in confidence and whether the

source was an attorney. There is no dispute that each of

the categories or classes of documents at issue here were

confidential communications to or from an attorney.

In sum, the claims of privilege were properly asserted

by Cadwalader in the district court.

II

THE DECISION OF THE DISTRICT COURT

WAS CLEARLY ERRONEOUS

The decisions of the magistrate and the district court

were as clear and unambiguous as they were erroneous.

The magistrate concluded that the Cadwalader docu-

ments requested by Gottlieb must be produced, even

though privileged, simply because they appeared relevant

and Gottlieb had a need for them. This was plainly

error. The district court did not address these conclu-

sions but instead found that the crime-fraud and joint-

client exceptions abrogated any privilege. On the record

and the law this was equally incorrect. Moreover, neither

court reviewed these documents in camera, notwithstand-

ing the offer by Cadwalader to make them available.*

8 Contrary to Gottlieb’s assertions (Brief in Opposition at 6 n.3)

at no point did Cadwalader refuse to make any or all of the privi-

leged documents available for review by the magistrate or the

district court. See also p. 3, supra.

P

A. The District Court Erred When It Failed To Examine

The Documents In Camera

Gottlieb ignores the decisions of this Court and of at

least four circuits which establish that the district court

should have reviewed the documents in camera before

authorizing their disclosure. Petition at 7-11. Rather,

he relies on a series of cases which are inapposite.

Renfield Corp. v. E. Remy Martin & Co., 98 F.R.D.

442, 445 (D. Del. 1982) holds only that a party opposing

a claim of privilege has no right to an in camera inspec-

tion where the party asserting privilege files an unre-

butted affidavit setting forth the facts establishing the

privilege. Clearly, that case is of no import here. Simi-

larly, Northrop Corp. v. McDonnell Douglas Corp., 751

F.2d 395 (D.C. Cir. 1984), holds that a court need not

examine in camera documents as to which the state se-

crets privilege is asserted before determining that docu-

ments should not be disclosed. Neither of these cases

contradicts the authorities holding that in camera review

should be undertaken prior to disclosure of documents

as to which the attorney-client privilege is asserted.

See Petition at 7-11.

B. The Crime-Fraud Exception Was Incorrectly Applied

In arguing that the district court properly applied the

crime-fraud exception, Gottlieb ignores the numerous and

uniform authorities which establish that a party seeking

to rely on the crime-fraud exception must satisfy both

parts of a two-pronged test, demonstrating: (1) that

there is prima facie evidence that a crime or fraud has

been committed, and (2) that the attorney was con-

sulted in furtherance of that crime or fraud. Petition

at 13-14.

Gottlieb’s argument focuses on the purported prima

facie evidence that a crime was committed by SGS and

Senft. He continues to ignore the point that, even if a

7

crime was committed relating to SGS, there was no evi-

dence that Cadwalader was consulted to further that

crime. Unless this requirement is satisfied, the crime-

fraud exception is inapplicable. See In re International

Systems and Controls Corporation Securities Litigation,

693 F.2d 1235, 1242 (5th Cir. 1982); accord In re John

Doe Corp., 675 F.2d 482, 491 (2d Cir. 1982).

As to the first element of the test, Gottlieb’s reliance

on Senft’s conviction on the conspiracy count of the in-

dictment is misplaced. See Petition at 14-15. Gottlieb

notes that Joseph Antonucci, a defendant in the criminal

case, sought to have his conviction on the conspiracy

count overturned because he left SFI before SGS was

formed. The Second Circuit in United States v. Senft

affirmed Antonucci’s conviction on the conspiracy count,

concluding that the evidence was sufficient to support a

jury determination that a single conspiracy existed. Con-

trary to Gottlieb’s argument, this ruling does not require

the conclusion that a crime relating to SGS was com-

mitted. Rather, the Second Circuit’s opinion compels the

conclusion that the only conspiracy the jury reasonably

could have found on Count 1 of the Indictment related

to SFI, and not to SGS. See Brief in Opposition, Appen-

dix D. The Second Circuit noted that the jury was in-

structed to disregard evidence concerning SGS in deter-

mining Antonucci’s guilt. Brief in Opposition, Appendix

D at 19a.

Thus, the only conclusion that can be reached from

Antonucci’s conviction on the conspiracy count by a jury

instructed not to consider any evidence relating to SGS,

is that the jury found that Antonucci was part of a

single conspiracy involving SFJ—not SGS. Brief in Op-

position at 6; Petition at 2-8. Thus, there was no basis

4 As previously shown (Petition at 3), this view of the jury’s

verdict is also supported by the fact that there was no conviction

on any count relating to the SGS limited partners, including the

one relating to Carr’s investment.

8

for the conclusion below that the conspiracy conviction

necessarily involved a finding of a crime relating to SGS.

In his brief to this Court, Gottlieb raises for the first

time a claim that he has made a prima facie showing

of a crime or fraud because SGS offered 150 limited part-

nership interests for sale within California without qual-

ifying them, as plaintiff claims was required by Section

25110 of the California Corporations Code. This belated

proffer of a different “fraud,” devoid of evidence or cita-

tion in the record to establish it, is not a prima facie

showing. It was never raised in the courts below and is

certainly not so “plain or apparent” as to warrant this

Court’s consideration. New York Dock Co. v. Steamship

Poznan, 274 U.S. 117, 123 (1927).> In this case, neither

Gottlieb (nor Carr) is maintaining any action on behalf

of the partnership, nor were they acting as trustees for

the partnership. See Weil v. Investment Indicators, Re-

search & Management, Inc., 647 F.2d 18 (9th Cir. 1981)

(Garner inapplicable where shareholder action is not a

derivative suit).

Gottlieb contends that no citation of authority is neces-

sary to apply this inapplicable theory to this action in-

volving a limited partner’s attempt to obtain disclosure

of privileged communication between the general partner,

the partnership and its counsel. No authority is offered

because none is available. Moreover, the rationale of

Garner V. Wolfinbarger, 430 F.2d 1093 (5th Cir. 1970),

cert. denied, 401 U.S. 974 (1971), has been rejected by

at least one court which noted that the so-called share-

5 Relying on In re Sentinel Financial Instruments, 553 F. Supp.

71, 76 (S.D.N.Y.), aff'd mem., 714 F.2d 113 (2d Cir. 1982), cert.

denied, 459 U.S. 1208 (1983) and In re Sentinel Government Secu-

rities, 580 F. Supp. 793 (S.D.N.Y.), petition for mandamus denied,

697 F.2d (2d Cir.) ¢-cert-denied, 456 U.S. 977 (1982), Gottlieb

urges that privilege claims similar to those asserted by Cadwalader

were rejected in the criminal case. Neither of those decisions dis-

cuss the crime-fraud exception and in neither of those actions were

documents of Cadwalader at issue.

9

holder/fiduciary exception may undercut the very pur-

pose of the privilege and lead to less, rather than more,

open disclosure:

The Garner problem is perhaps that the shareholder

or other owed a duty of trust becomes too readily

and artificially recognized as the “client” for pur-

poses of privilege.

Although corporate management is expected to act

ultimately for the shareholder’s benefit, a hasty re-

sort to Garner concepts will confuse who corporate

counsel’s clients realistically are, and ignore the

genuine need of management in the ordinary course

for confidential communication and advice.

Shirvani v. Capital Investing Corp., Inc., 112 F.R.D. 389,

390-91 (D. Conn. 1986).

C. The Joint-Client Exception is Inapplicable

Cadwalader has demonstrated that the so-called joint-

client exception relied upon by the district court did not

justify disclosure because Gottlieb was never a client of

Cadwalader. Cadwalader has also shown that Carr, as a

limited partner, was not in any confidential relationship

with Cadwalader or the partnership. Petition at 11-12.

Gottlieb now argues that the attorney-client privilege is

inapplicable when suit is brought against a fiduciary.

This argument is equally inapplicable to any attempt

by Gottlieb to obtain documents. Gottlieb was not a part-

ner in SGS and neither the partnership nor Cadwalader

owed him any fiduciary duty. In addition, none of the

eases relied upon by Gottlieb relate, even remotely, to a

situation such as this, where a limited partner has

brought an action against the general partner, the part-

nership and the partnership’s attorney. The majority of

cases adopting the exception now urged by Gottlieb,

(which has never been recognized by this Court). applied

it in shareholder derivative actions, where the share-

holder sued on behalf of the corporation possessing the

10

privilege, or where the attorney was representing a trus-

tee of an employee benefit plan.®

CONCLUSION

A writ of certiorari should be granted to review the

decision of the Court of Appeals of the Ninth Circuit.

Respectfully submitted,

ERWIN N. GRISWOLD

(Counsel of Record)

JONES, DAY, REAVIS & POGUE

655 Fifteenth Street, N.W.

Washington, D.C. 20005-5701

(202) 879-3898

Of Counsel

GEORGE D. REYCRAFT

ROSEMARY C. BYRNE

CADWALADER, WICKERSHAM & TAFT

100 Maiden Lane

New York, New York 10038

June, 1987

6 See Garner V. Wolfinbarger, 430 F.2d 1093 (5th Cir. 1970),

cert. denied, 401 U.S. 974 (1971); Panter v. Marshall Field & Co.,

80 F.R.D. 718 (N.D. Ill. 1978); Broad v. Rockwell International

Corp., [1976-77 Transfer Binder] Fed. Sec. L. Rep. (CCH) § 95,894

(N.D. Tex. 1977) (corporation’s communication with its attorney

available in shareholder derivative action upon showing of good

cause); Valente v. Pepsico, Inc., 68 F.R.D. 361 (D. Del. 1975);

Washington-Baltimore Newspaper Guild Local 35 Vv. Washington

Star Co., 543 F. Supp. 906, 909 (D. D.C. 1982) (attorney’s com-

munication with trustee of employee benefit plan not privileged

because the trustee was acting solely for the beneficiaries).