Petition for Writ of Certiorari — Silva v. United States

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IN THE SUPREME COURT

OF THE

UNITED STATES

October Term, 1994

Edward Silva, Jr.; Silva Harvesting, Inc.; Ord & Norman;

E.O.C. Ord, Inc.; and Edward O.C. Ord, Petitioners

United States of America, and United States District Court

for Northern California, Respondents.

ON PETITION FOR A WRIT OF CERTIORARI

TO THE UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

PETITION FOR WRIT OF CERTIORARI

EDWARD O.C. ORD

Counsel of Record

ORD & NORMAN

650 California Street

26th Floor

San Francisco, CA 94108

415/274-3800

Counsel for Petitioners

June 1995

(VPS

QUESTIONS PRESENTED

1) Whether the denial of a motion to

quash a grand jury subpoena brought by a

target of the grand jury a final

appealable order under the Perlman

(Perlman v. United States, 247 U.S. 7

(1918)) doctrine when the subpoena is

issued to an accountant working for the

target’s attorney and the subpoena calls

for documents prepared by the accountant

in order to assist the attorney in the

defense of the target?

2) Whether the denial of a motion to

quash a grand jury subpoena in the

circumstances described above is

reviewable pursuant to a petition to the

Court of Appeals under the All Writs Act,

28 U.S.C. § 1651?

LIST OF PARTIES

The parties listed in the caption to

this application are the real parties in

interest to this case. In their petition

to the Court of Appeals for the Ninth

Circuit for an extraordinary writ under

the All Writs Act, Petitioners, in

addition to the United States of America,

also named as respondents the United

States District Court for the Northern

District of California and some of the

United States government officials

involved in the underlying grand jury

investigation. These officials were

Assistant United States Attorney Leo P.

Cunningham, Justice Department Trial

Attorney Daniel J. Graber, and Internal

Revenue Service Special Agent Robert

Scott. The Ninth Circuit in captioning

the writ petition action named only the

United States District Court as

Respondent, with the United States of

America as real party in interest,

apparently removing the individuals as

Respondents. However, aS a matter of

courtesy and in an abundance of caution,

Petitioners will serve Mr. Cunningham, Mr.

Graber, and Mr. Scott. In the Ninth

Circuit, the United States of America (and

presumably the other originally named

respondents) was represented by Attorneys

Cunningham and Graber. In the District

Court, the subpoenaed witness, Charles D.

Bailin, joined in the petitioners’ motion

to quash the grand jury subpoena, but he

was not a party to the appeal.

1ii

TABLE OF CONTENTS

QUESTIONS PRESENTED ; ........ i

el ee ©

TABLE OF CONTENTS . . .: «© «© © « « S44

TABLE OF AUTHORITIES ........vi

eee te a a a a ae

JURISDICTION a a ae ee ee ee ee

STATUTORY PROVISION INVOLVED .... 2

STATEMENT er ee ae er ee ae ee ee a

A. The District Court

PreceeGings ...:+++e §

B. Proceedings in the Court

et ne eee, a eT

REASONS FOR GRANTING THE PETITION .. 11

I. The Ninth Circuit’s

Decision Clearly Conflicts with

Decisions of Other Circuits.

Procedures For Appellate Review

of the Invasion of Privilege by

Grand Juries Must Be Uniform

Among the Circuits. ......11

II. The Decision of the Court

of Appeals Was Erroneous and

Violates Perlman and other

Decisions of this Court. .... 24

III. The Decision of the Court

of Appeals Poses Serious

Consequences for the Criminal

Justice System, and the Legal

and Accounting Professions, Because

it, Practically Speaking, Allows

the United States to Invade

Validly-Established Communicative

and Work-Product Privileges Prior

to any Appellate Review, Thus

Prejudicing the Defendant’s Right

to Counsel and the Preparation

a eee ee ee

IV. The Ninth Circuit’s Denial

of Petitioners’ Petition for a

Writ of Mandamus Conflicts with

Other Circuits’ Rulings Recognizing

that Mandamus Is Appropriate

to Review Validly-Asserted

Privileges Prior to Compelled

Disclosure. ek ane ig ene oo Canoe en

CONCLUSION ee oe ee ee ee Le ak

APPENDIX

1. Opinion of Court of

Pn 23 i ad eg se a eas

2. District Court Memorandum

Of Decision and other

a ea - 20a

3. Initial Stay Order by

Court of Appeals ..... 35a

4. Court of Appeals Denial

Of Retiearing ....... 3% r

TABLE OF AUTHORITIES

CASES

Admiral Ins. Co. v. United States

District Court, 881 F.2d 1486

(9th Cir. 1989) yg ee ae ee eee ee

Bogosian v. Gulf Oil Corp., 738

F.2d 587 (3d Cir. 1984) is « « Be

Castle v. Sangamo Weston, Inc.,

744 F.2d 1464 (11th Cir.

1964) (per curiam) ...... 39n

Chase Manhatten Bank, N.A. v.

Turner & Newhall, PLC, 964

F.2d 159 (2d Cir. 1992) .. 57-58

Church of Scientology v. United

States, U.8. , ‘

113 §$.Ct. €47, 121 &.8a.2d

a2 {h9eal «7s. 4k Ss a ee ee

City of Las Vegas v. Foley, 747

F.2d 1294 (9th Cir. 1984) ss « Be

City of Los Angeles v. Williams,

438 F.2d 522

(Sth Cir. 1972) ae ak ae Sin, 52

Cobbledick v. United States,

309 U.S. 323 (1940) ee a ee

Conkling v. Turner, 883 F.2d

431 (Sth Cir. 1989) i. & a ee oe

Corporacion Insular de Seguros

v. Garcia, 876 F.2d 254

(206 Civ. Seer: s+ 2 as & ee ee

Diversified Industries, Inc. v.

Meredith, 572 F.2d 596

(8th Cir. 1977) “a wis oe ee ee |

Eastland v. United Servicemen’s

Fund, 421 U.S. 491 (1975) : 27-28

Elkins v. United States,

364 U.S. 206 (1960) ay ee

Fisher v. United States,

425 U.S. 391 (1976) ‘oe ee eee ec

Florida v. Rodriguez, 469

U.S. 1 (1984) (Stevens,

J., Giegenting) ........ 20

Grand Jury Subpoena Duces

Tecum Dated Jan. 2, 1985,

767 F.2d 26 (2d Cir. 1985) ...417

Gravel v. United States,

408 U.S. 606 (1972) Oe ae te oS 6 ee

Haines v. Liggett Group,

Inc., 975 F.2d 81

(3rd Cir. 1992) ie) eae SS, BF

Hanna v. Plumer, 380 U.S. 460

(1965) Se et oe oe oa

Harper & Row Publishers, Inc.

v. Decker, 423 F.2d 487

(2d Cir. 1970), affirmed

by an equally divided court,

400 U.S. 348 (1971) Sag wal be eae ee

Harris v. United States, 413 F.2d

316 (9th Cir. 1969) eee ee ee 39n

vii

re Burlington Northern,

Inc., 822 F.2d 518 (5th Cir.

1987) cert. den. 484 U.S.

1007 (1987) S48 ee ae oe a eee

re Burlington Northern, Inc.,

679 F.2d 762 (8th Cir. 1982)

re Doe, 662 F.2d 1073

(4th Cir. 1981)

re Fink, 876 F.2d 84

(llth Cir. 1989)

re Grand Jury (C. Schmidt &

Sons), 619 F.2d 1022

(3d Cir. 1980)

re Grand Jury Investigation

of Ocean Transportation, 604

F.2d 672 (D.C. Car. 1979)

re Grand Jury Proceedings, 867

F.2d 562 (9th Cir. 1989), cert.

den., 493 U.S. 906, rehearing

den. 493 U.S. 985 (1989) . 15,

re Grand Jury Proceedings

(Cianfrani), 563 F.2d 577

(3d Cir. 1977)

re Grand Jury Proceedings

(Damore), 689 F.2d 1351

(ath Cae. 2968) 55°. » « « 5,

re Grand Jury Proceedings

(Doe), 831 F.2d 222

(lith Cir. 1987)

re Grand Jury Proceedings

(Fine), 641 F.2d 199

(Sth Cir. 1981) o « « « 8, 38,

viii

39n

15n

SAH nee, ms

In re Grand Jury Proceedings (FMC

Corporation), 604 F.2d 798

(am Gane - 2979) 6 ees ue eK. 13

In re Grand Jury Proceedings

-Gordon, 722 F.2d 303

COEG--C5F; 2003) - 66 2 kw. ss 4, 19

In re Grand Jury Proceedings

(Katz), 623 F.2d 122

Cee eee lOO? 654 6 kkk ee « 2

In re Grand Jury Proceedings

(Malone), 655 F.2d 882

(8th Cir. 1981) ia e o ea See AD

In re Grand Jury Proceedings

(Manges), 745 F.2d 1250

(SEn Civs 1964) ..... ss. 38n

In re Grand Jury Proceedings

(Schofield), 721 F.2d 1221

Swom Gals 2900) esc. es ee. 4

In re Grand Jury Proceedings,

Subpoena to Testify to Wine,

841 F.2d 230 (8th Cir. 1988) .. 14

In re Grand Jury Proceedings,

Subpoena to Vargas, 723 F.2d

1461 (10th Cir. 1983), cert.

den. 469 U.S 819 (1984) .. 15, 62

In re Grand Jury Subpoena 92-1

(SJ}, 31 F.3d 826

SPUR Car, 1988) fees 6 ce. «ek. 18

In re Grand Jury Subpoena Issued

to Bailin, 51 F.3d 203

(9th Cir. 1995) s-3 « & Ry SG~RSe

re Grand Jury Subpoena Dated

Dec. 10, 1967, 926 F.2d 847

(9th Cir. 1991) sa « u-e « a@s 89

re Grand Jury Subpoena Dated

June 5, 1985, 825 F.2d 231

(9th Cir. 1987) se. =e w 2 oe BS, Se

Re Grand Jury Subpoena

(DeGuerin), 926 F.2d 1423

(Sim - Gaes 20PRP sk es 8 oe Ee

re Grand Jury Subpoena Duces

Tecum, 769 F.2d 52

2G Cat. 2SGe) il wuss sh

re Grand Jury Subpoena Served

Upon Niren, 784 F.2d 939

(9th Cir. 1986) . 2 ep Be 2a, 42

re Grand Jury Subpoenas, April

1978, at Baltimore, 581 F.2d

1203 S400 CES. 298. <« -aes e

Re Grand Jury Subpoenas Duces

Tecum (Lahodny), 695 F.2d 363

(S00 City oeeeeo ke + ee ees 13

re International Systems &

Controls Corp. Securities

Litigation, 693 F.2d 1235

(Sth Cir. 1982) prea ra a) a 38n

re Oberkoetter, 612 F.2d 15

(lst Cir. 1980) «al 28, 368, 129

re Oswalt, 607 F.2d 645

(Sth Cir. 1979) ne ee See ee es

re Sealed Case, 655 F.2d 1298

(D.C.Cir. 1981) ea + ae Sey ae

‘

In re Societe National Industrial

Aerospatiale, 782 F.2d 120

(8th Cir. 1986), vacated on

other grounds, 482 U.S. $22

(1987) Tot ee ee er ee 54-55

In re Special Grand Jury No. 81-1,

676 F.2d 1005 (4th Cir. 1982) » aa

In re Steinhardt Partners, L.P.,

9 F.3d 230 (2d Cir. 1993) .. ww,

In re United States, 872 F.2d 472

(D.C.Cir. 1989), cert. dism’d.

493 U.S. 960 (1989) eo. Sh) eels 59-60

In re von Bulow, 828 F.2d 94

(2a Cir. BCD 6 wl a & een 41, 54

Iowa Beef Processors, Inc. v.

Bagley, 601 F.2d 949

(9th Cir. 1979) es -w « @2, $5, ° 60

Klitzman, Klitzman and Gallagher

Vv. Krut, 744 F.2d 955

(oe Cee; SOOO es a Gl ge

Lampman v. United States District

Court, 418 F.2d 215 (9th Cir.

1969), cert. den. 397 U.S.

919, 935 (1970) ae the oe ae 51n

Mallory v. United States,

354 U.S. 449 (1957) eae ee ee See

Matter of Grand Jury Subpoena,

569 N.E.2d 852

(Mass.App. 1991) ...... . 38n

Matter of International Horizons,

Inc., 689 F.2d 996

(Lith Cir. 21962) a ee a te oe ey

National Mortgage Equity Corp.

Mortgage Pool Certificates

Litigation, 857 F.2d 1238

(9th Cir. 1988) 23

National Super Spuds, Inc. v.

New York Mercantile

Exchange, 591 F.2d 174

(24 Cir. 1979) ... + 146M, 39n, 424

Nixon v. Sirica, 487 F.2d 700

(D.€. Gas. 3973) os ae ee

Oklahoma Press Pub. Co. v. Walling,

327 U.S. 186 (1946) es *» 2 oe

Perlman v. United States,

247 U.S. 7 (1918) a. Os kee ee

7p ae > Pe) ee

25, 28n, 38

Reisman v. Caplin, 375 U.S. 440

(1964) 22, 32-34

Schlagenhauf v. Holder, 379 U.S. 104

(1964) ee eee eee ee

Sporck v. Peil, 759 F.2d 312

(3d Cir. 1985), cert. den.,

474 U.S. 903 (1985) era se

Trammel v. United States,

445 0.8. 40 t29eer «2s. ae

United States v. Davis, 1 F.3d 606

(7th Cir. 1993) we we: a? Se re ee

United States v. Jones, 696 F.2d

2069 (66h Cas. 3900) «© « = « «se Oe

United States v. Morton Salt Co.,

338 U.S. 632 (1950) a re 32n

£13

United States

418 U.S.

United States

422 U.S.

United States

379 U.S.

United States

1183 (3d

United States

402 U.S.

United States

District

(9th Cir.

United States

District

(4th Cir.

352 U.S.

United States

3 F.3d 571

United States

554

United States

v. Brimmer,

(Em.App.

S72 U.S.

Upjohn Co. v.

449 U.S.

(1989)

Nixon,

(1974)

Vv.

683 25

v. Nobles,

225 (1975) 35-36

Vv. Powell,

48 (1964) 32n

V. RMI Co., 599 F.2d

Cir. 1979) 61

v. Ryan,

530 (1970) 12

v. United. States

Court, 717 F.2d 478

1983)

v. United States

Court, 238 F.2d 713

1956), cert. den.

981 (1957) 62

Victoria-21,

(2d Cir. 1993)

491 U.S.

v. Zolin,

21-22

Dep’t. of Energy

776 F.2d 1554

1985), cert. den.

1045 (1986) 40, 60

United States,

383 (1981) 44-49

Velsicol Chemical Corp. v.

Parsons,

(7th Cir.

401 U.S.

denied,

(1978)

561 F.2d 671

1977), cert.

942

14, 18-19

xiii

Westinghouse Electric Corp. v.

Republic of Philippines,

951 F.2G@ 14346 (3G Cat. 2992)... OF

Will v. United States,

3853. U.e. Be. Saget. « 25 S52, 56n

Wm. T. Thompson Co. v. General

Nutrition Corp., 671 F.2d 100

(30 C205 Bee? 2 See ee ee

STATUTES, REGULATIONS AND RULES

20 U.3.6. © Ree we: 6 ee de ae 2

420 U.8:%s § eee 65 tS eS -St5 eee a

26 U.S.C. § 2652 ee ee Se ee ee

Cal. Bus. & Prof. Code § 5100(f)

(Deaexinue 29es).. es eos 3. Vs ae

Cal. Bus. & Prof. Code § 5101

(Deerings 1993) 6 wie’: baa he oe eee

Cal. Bus. & Prof. Code § 6068 (e)

(peerings 1993). .-%-« 4's « — 23-28

Cal. Code of Regulations

cit. 16, 3:36 p Yes we ee Os eee

Cal. Code of Regulations

~€3€. 265.“ Ro eee se ee ee eee

Supreme Court Rule 10.1.(a) ... 16, 21

OTHER AUTHORITIES

C.A. Wright, et al., 15B Federal

Practice and Procedure § 3914.23

at 132-133 (2d ed. 1992) .. 55, 56

Xiv

C.A. Wright, et al., 16 Federal

Practice and Procedure § 3934

at 235 (1977) ee ee on eee oe 56-57

C.A. Wright, et al., 16 Federal

Practice and Procedure § 3935

at 246-251 (1977) ee tee ee ee

C.A. Wright, et al., 16 Federal

Practice and Procedure § 3935

Se @67°G8 (i077) <a « «© «© « «> 82

J. Wigmore, 8 Evidence § 2290

(McNaughton rev. 1961) ..... 47

R.L. Stern, et al., Supreme Court

Practice § 4:15 at 191-92

(vou is BEE? 6 eee a ee xo s

Petitioners, Edward Silva, Jr., Silva

Harvesting, Inc., Ord & Norman, E.O.C.

Ord, Ine. ; and Edward o.f. Ord,’*

respectfully petition for a writ of

certiorari to review the judgment of the

United States Court of Appeals for the

Ninth Circuit in this case.

OPINIONS BELOW

The opinion of the Court of Appeals

(App., infra, 2a-19a) is published at In

re Grand Jury Subpoena Issued to Bailin,

S51 F.3d 203 (9th Cir. 1995). The order of

the Court of Appeals denying Petitioners’

motion for rehearing (App., infra, 39a) is

unreported. The opinions and orders of

the District Court (App., infra, 20a-34a)

are unreported.

JURISDICTION

The Ninth Circuit filed its opinion

1 Silva Harvesting, Inc. and E.O.C.

Ord, Inc. do not have any parent or

subsidiary corporations or companies.

on March 28, 1995. App., infra, 3a. This

Court’s jurisdiction is invoked under 28

U.S.C. § 1254(1). This petition is timely

filed because it is being filed within 90

days of the Ninth Circuit’s denial of

Petitioners’ motion for rehearing with

Suggestion for rehearing en banc, entered

June 7, 1995. (App., infra, 39a).

STATUTORY PROVISION INVOLVED

The All Writs Act, 28 U.S.C. § 463i,

provides, in pertinent part, that:

"(a) The Supreme Court and all courts

established by Act of Congress may

issue all writs necessary or

appropriate in aid of their

respective jurisdiction and agreeable

to the usages and principles of law."

STATEMENT

This case arises out of a criminal

tax investigation of Petitioners, Edward

Silva, Jr. and Silva Harvesting, Inc.

(hereafter collectively the "Clients"), in

which they are represented by Petitioners,

Ord & Norman, E.0O.C. Ord, ine., a

professional law corporation, and Edward

O.C. Ord, Attorney at Law (hereafter

collectively "Ord").

On March 15, 1994, a grand jury

subpoena was served on the Salinas,

California outside, independent accounting

firm of Bailin, Stanford & Lavorato, Inc.

through Charles D. Bailin, a Certified

Public Accountant (CPA) and a shareholder

and officer of the firm. The firm and

Bailin had previously worked as tax

preparers for the Clients, and had been

contractually retained by Ord in April

1992 tc provide accounting and other

assistance in defending the Clients

against the IRS investigation. App.,

infra, 20a-23a. The subpoena called for

the production of certain work papers and

records of Bailin that had been prepared

pursuant to Bailin’s engagement by Ord.

Specifically, the subpoena called for work

papers and records concerning a cash

tracing project Bailin undertook at Ord’s

direction. The original impetus for the

project came from a suggestion made by an

Internal Revenue Service (IRS) agent that

Bailin look into certain payments. App.,

infra, 23a-24a.

Approximately two years earlier, the

IRS had began an administrative

investigation of the Clients’ tax returns

for specific years. After being contacted

by an IRS agent, Bailin recommended to the

Clients that they hire a tax attorney to

represent them in the IRS investigation.

App., infra, 2la-22a. In April 1992, the

Clients hired Ord to represent them. Id.

at 22a. Ord then hired Bailin to assist

in the representation. Id.

The Clients’ case was formally

referred to the IRS's Criminal

Investigation Division for investigation

of possible criminal tax violations.

During this administrative criminal

investigation, Bailin was served with an

IRS administrative summons to appear

before an IRS Special Agent. He appeared,

accompanied by Ord, but refused to answer

some questions based on the assertion of

the attorney-client and/or attorney work-

product privileges. Instead of seeking an

enforcement order for the IRS summons in

District Court, the next year, the United

States Attorney served the grand jury

subpoena on Bailin, tracking the contents

of the IRS summons.

A. The District Court Proceedings

Ord and the Clients jointly moved in

the United States District Court for the

Northern District of California to quash

the subpoena based on claims of attorney-

client and work-product privilege. The

District Court had 28 U.S.C. § 1331

jurisdiction over this case. It held an

evidentiary hearing on September 19, 1994.

On September 21, 1994, the Court denied

the Petitioners’ motion and ordered Bailin

to comply with the subpoena. See App.,

infra, 20a-3la.

The District Court found that: (See

App., infra, 20a-26a.)

(a) As of April 15, 1992, Bailin was

employed by Ord as his sub-agent in the

performance of his legal work for the

Clients.

(b) After the IRS agent suggested

that Bailin trace several cash payments in

the corporate books, Bailin met with the

agent and "pursuant to direction and

control of his principal, Attorney Ord,"

disclosed that he could trace only two of

the ten cash payments.

Bailin was initiated not by Ord but by the

Internal Revenue Service vr an ~ 39

extremely doubtful whether the results of

Bailin’s search" are covered by attorney-

client privilege.

(d) Even if privilege -—were

applicable, "the attorney-client privilege

was waived by the distlosure made at Ord’s

direction on December 14, 1992."

(e) Since Bailin’s inquiry was

initiated by the IRS "and not by any

inquiry germane to Ord’s representation of

Movants, the work product privilege never

attached."

The District Court granted a

temporary stay to allow application for a

stay to the Court of Appeals. App.,

infra, 32a-34a. In the stay order, the

issue of the Perlman doctrine was

addressed, and the Court found that the

Ninth Circuit’s "current attorney"

exception to Perlman did not apply because

"[n]o case places non-attorney sub-agents

of the attorney in [the category of

current attorney]." App., infra, 33a.

B. Proceedings in the Court of Appeals

Petitioners filed a timely Notice of

Appeal with the United States Court of

Appeals for the Ninth Circuit. On October

4, 1994, the Ninth Circuit issued an order

granting a stay of the District Court’s

order pending appeal, denying the United

States’ motion to dismiss the appeal on

jurisdictional grounds, and setting an

expedited briefing schedule. App., infra,

34a-38a. The order specifically stated

that "a substantial question" existed as

to whether the appeal falls within the

Perlman doctrine, and ordered the parties

to brief the issue of its jurisdiction.

Id.at 36a.?

Petitioners also filed a petition,

under the All Writs Act (28 U.S.C. §

1651), for a writ of mandamus with the

. The United States in its reply

brief in the Court of Appeals sought to

sidestep the jurisdiction issue by urging

the Court to take jurisdiction under the

doctrine of "hypothetical jurisdiction."

See App., infra, 16a-17a. The Ninth

Circuit declined. Id. at 17a.

Ninth Circuit. App., infra, 5a. The

direct appeal and the writ petition were

consolidated and oral argument was held

regarding both the appeal and the writ

petition. The Ninth Circuit filed its

opinion on March 28, 1995. App., infra,

2a-19a.

The Ninth Circuit dismissed the

appeal for lack of subject matter

jurisdiction, and also denied the petition

for a writ. App., infra, 3a, 6a. The

Ninth Circuit acknowledged that an

exception to the rule that the denial of a

motion to quash a grand jury subpoena is a

nonappealable, interlocutory order exists

where the subpoena is directed to a third

party who cannot be expected to risk a

contempt citation in order to preserve the

movant’s right to appeal. App., infra,

lla, citing Perlman v. United States, 247

U.S. 7 (2936).

The Court then applied an exception

SEA eas Pe HR Nite K 9

4 ete tinal

Sane PI, WR ted AFF cS eA I RTT! RR sie i

als

Sain stele:

to the Perlman doctrine that it had

sometimes applied to third parties who are

participants in the confidential

relationship on which the movant’s claim

of privilege is based, and over which the

movant can be expected to exercise

control. App., infra, 1la-14a. The Court

had previously applied this exception to

the narrow circumstance of an attorney who

is currently representing the movant. Id.

at lla-l2a.

The Court’s opinion extended this

exception, for the first time, to non-

attorney agents (independent contractors)

hired by an attorney to assist him or her

in performing the legal defense work in a

particular case. App., infra, 14a-1l6a.

The opinion states that the appealability

of such an order where the subpoenaed

party is a non-attorney agent is a

question of first impression in the

circuit. App., infra, 10a. Specifically,

the Court found that because the

accounting firm and the CPAs within it

were brought under the umbrella of

privilege through their retention by Ord,

they ipso facto have the same legal duties

and obligations of the attorney to commit

contempt to protect the privileged

relationship. App., infra, 15a. It also

rejected the use of the All Writs Act (28

U.S.C. § 1651) to review the validity of

this invasion of privilege and "as a means

to avoid the final judgment rule in the

context of motions to quash grand jury

subpoenas." App., infra, 18a. The Court

also found that there was no "“usurption of

power." Id. Petitioners filed a timely

motion for rehearing with suggestion for

rehearing en banc, which was denied on

June 7, 1995. App., infra, 39a.

REASONS FOR GRANTING THE PETITION

I. The Ninth Circuit’s Decision Clearly

Conflicts with Decisions of Other

Circuits. Procedures For Appellate Review

—*

of the Invasion of Privilege by Grand

Juries Must Be Uniform Among the Circuits.

Appeal from a denial of a motion to

quash a grand jury subpoena typically does

not lie until the person to whom the

subpoena is directed has first resisted

the order, committed, and been adjudged in

contempt. United States v. Ryan, 402 U.S.

530 (1970); Cobbledick v. United States,

309 U.S. 323 (1940). This is because

finality is a condition for appellate

jurisdiction, Cobbledick, 309 U.S. at 324-

25, and a denial of a motion to quash a

grand jury subpoena is generally not

considered a final, appealable order.

Ryan, 402 U.S. at 532-33.

In Ryan, however, this Court

recognized an exception to the finality

rule for a "limited class of cases where

denial of immediate review would render

impossible any review whatsoever of an

individual’s claims." 402 U.S. at 533.

With regard to this class of cases, the

Ninth Circuit explained in In Re Grand

Jury Subpoenas Duces Tecum (Lahodny), 695

F.2d 363, 365 (9th Cir. 1982) that:

"{A]n immediate appeal is proper

when the subpoena is directed to

a third party ... because that

party normally will not be

expected to risk a contempt

citation but will instead

surrender the sought-after

information, thereby precluding

effective appellate review at a

later stage." (emphasis added.)

This rule and rationale has been

followed with regard to attorneys in many

federal circuits. See, e.g., In re Grand

Jury Proceedings (Katz), 623 F.2d 122,

124-25 (2d Cir. 1980); In re Grand Jury

Proceedings (FMC Corporation), 604 F.2d

798, 800-01 (3d Cir. 1979); United States

v. Jones, 696 F.2d 1069 (4th Cir. 1982) ;°

3 See also, In re Doe, 662 F.2d 1073,

1076 (4th Cir. 1981), in which the Fourth

Circuit allowed an attorney/grand jury

target to immediately appeal the denial of

his motion to quash a grand jury subpoena

directed to his law partnership in order

to preserve his assertion of the attorney

In re Special Grand Jury No. 81-1, 676

F.2d 1005, 1008 (4th Cir. 1982) (stating

that the vast majority of circuits have

allowed appeals of orders involving grand

jury subpoenas to attorneys); Conkling v.

Turner, 883 F.2d 431, 433-34 (Sth Cir.

1989); In re Grand Jury Proceedings

(Fine), 641 F.2d 199, 201-03 (5th Car.

1981); In re Grand Jury Proceedings -

Gordon, 722 F.2d 303, 305-07 (6th Car.

1983); United States v. Davis, 1 F.3d 606,

607 (7th Cir. 1993); Velsicol Chemical

Corp. v. Parsons, 561 F.2d 671, 673-74

(7th Cir. 1977), cert. denied, 401 U.S.

942 (1978); In re Grand Jury Proceedings,

Subpoena to Testify to Wine, 841 F.2d 230,

232-33 (8th Cir. 1988); In re Grand Jury

Proceedings (Malone), 655 F.2d 882, 884-85

(8th Cir. 1981); In re Grand Jury Subpoena

92-1 (SJ), 31 F.3d 826 (9th Cir. 1994); In

work product doctrine.

re Grand Jury Proceedings, 867 F.2d 562,

564 (9th Cir. 1989), cert. den., 493 U.S.

906, rehearing den. 493 U.S. 985 (1989) ;

In re Grand Jury Proceedings (Schofield),

721 F.2d 1221, 1222 (9th Cir. 1983); In re

Grand Jury Proceedings (Damore), 689 F.2d

1351, 1352 (11th Cir. 1982) .‘

At least three circuits do not permit

clients to take immediate appeals from

orders compelling testimony or documents

from their attorneys. See In re Sealed

Case, 655 F.2d 1298, 1300-02 (D.C.Cir.

1981); In re Oberkoetter, 612 F.2d 15, 16-

18 (lst Cir. 1980); In re Grand Jury

Proceedings, Subpoena to Vargas, 723 F.2d

1461, 1464-66 (10th Cir. 1983), cert. den.

469 U.S 819 (1984). Resolving this

* This case may have been overruled

by the Eleventh Circuit’s later decision

in In re Grand Jury Proceedings (Doe), 831

F.2d 222 (11th Cir. 1987). However, it is

doubtful that Doe overruled Damore because

Doe involved a subpoena ad testificandum

and Damore involved a subpoena duces

tecum.

SN ee

fundamental conflict between the circuits,

standing alone, requires granting

certiorari.” See Supreme Court Rule

$0.2. (a).

The Ninth Circuit appears to

sometimes make a distinction between

current and former attorneys for the

purposes of applying the Periman doctrine.

See In re Grand Jury Subpoena Served Upon

Niren, 784 F.2d 939 (9th Cir. 1986); In re

Grand Jury Subpoena Dated June 5, 1985,

825 F.2d 231 (9th Cir. 1987); In re Grand

Jury Subpoena Dated Dec. 10, 1987, 926

F.2d 847 (9th Cir. 1991). Other Circuits

have not made this distinction. See,

e.g., Conkling v. Turner, 883 F.2d 431,

433-34 (Sth Cir. 1988) (holding that,

’ Moreover, the First Circuit in

Oberkoetter (612 F.2d at 16-18) and the

Second Circuit in National Super Spuds,

Inc. v. New York Mercantile Exchange, 591

viae’ - 78, 181 (oe Cie. 1979), both

questioned the soundness of the Perlman

doctrine, exhibiting an even deeper

conflict in this area.

under Perlman, a district court’s order

directing a party’s present and former

attorneys to submit to limited depositions

was a final, appealable order)*; Grand

Jury Subpoena Duces Tecum Dated Jan. 2,

1965, T67 F.26. 26, 29 (26 Cae. 1965) 3.20

re Grand Jury Proceedings-Gordon, 722 F.2d

at 305-07 (6tn... Cas. 1983) (present

attorney in grand jury proceeding

investigating possible tax crimes); In re

Grand Jury Proceedings (Malone), 655 F.2d

882, 884-85 (8th Cir. 1981); In re Grand

Jury Proceedings (Damore), 689 F.2d 1351,

1352 (11th Cir. 19862) (appears to be

present attorney).

The distinction between former and

® See also, In Re Grand Jury Subpoena

(DeGuerin), 926 F.2d 1423, 1429-30 &n. 4

(Sth Cir. 1991), where the Fifth Circuit

stated that the denial of a motion to

quash a subpoena issued to the present

attorney of a criminal defendant was

immediately appealable, but dismissed the

appeal as moot because the district court

denied the government’s motion to hold the

attorney in contempt.

present attorneys iS an unwarranted

exception to the Perlman doctrine, and is

violative of common sense. As the Fifth

Circuit observed:

"We suspect that the willingness of a

lawyer to protect a client’s

privilege in the face of a contempt

citation will vary greatly, and have

a direct relationship to the value of

the client’s business and the power

of the client in relation to the

attorney. We are reluctant to pin

the appealability of a district court

order upon such precarious

considerations.

* * * * *

Although we cannot not say that

attorneys in general are more or less

likely to submit to a _ contempt

citation rather than violate a

client’s confidence, we can _ say

without reservation that some

significant number of client-

intervenors might find themselves

denied all meaningful appeal by

attorneys unwilling to make such a

sacrifice. That serious consequence

is enough to justify a holding that a

client-intervenor may appeal an order

compelling testimony from the

client’s attorney."

In re Grand Jury Proceedings (Fine), 641

F.2d 199, 202-03 (5th Cir. 1981) (footnote

omitted; emphasis added). For similar

reasoning, see Velsicol Chemical Corp. v.

Parsons, 561 F.2d 671, 674 (7th Cir.

1977), stating that "[iJt is one thing,

however, for a lawyer to invoke the

(attorney-client) privilege when called to

testify...and quite another to expect an

attorney to defy a court order directing

him stify,”" (emphasis added) and that

the subpoenaed attorney should not be

expected to resist the court’s order

compelling him to testify.

The Fifth Circuit in Fine also

disagreed with the First Circuit’s

reasoning in Oberkoetter, supra, 612 F.2d

at 18, that a "stouthearted" attorney

might be willing to risk a contempt

citation to protect his client’s interest.

See 641 F.2d at 202. As discussed below,

a non-attorney, independent contractor

accounting firm working on a single-shot

engagement is not going to commit contempt

and the right of the client to appeal

should not turn on such precarious

considerations. However, such a

"precarious consideration" is central to

the Ninth Circuit’s decision.

One of this Court’s functions is to

Supervise lower federal courts. Justice

Stevens has observed that;

"As the Court of last resort in the

federal system, we have supervisory

authority and therefore must

occasionally perform a pure error-

correcting function in federal

litigation."

Florida v. Rodriguez, 469 U.S. 1, 7 (1984)

(Stevens, J., dissenting).

This supervisory role has been voiced

aS a ground in granting certiorari. See,

for example, Mallory v. United States, 354

U.S. 449, 450 (1957); Elkins v. United

States, 364 U.S. 206, 208 (1960)

(certiorari granted to consider a

"question of importance for the

administration of federal justice"); Hanna

v. Plumer, 380 U.S. 460, 463 £(1965)

(granting certiorari because of the

"threat to the goal of uniformity of

federal procedure posed by the decision

below"). Supreme Court Rule 10.1.(a) also

recognizes the appropriateness of granting

certiorari in this type of case. See R.L.

Stern, et al., Supreme Court Practice §

4:15 at 191-92 (7th ed. 1993).

This case involves an important

question of federal appellate jurisdiction

under a rule that was established by a

decision of this Court. Thus, given the

non-uniformity of the application of the

Perlman doctrine among the circuits, this

Court should grant the writ and establish

a uniform rule among the circuits for the

pre-disclosure appellate review of

validly-asserted privileges. This Court

has recognized the importance of, and has

gone to great pains to establish, uniform

procedures in situations where privileged

communications and documents are affected.

See, for example, United States v. Zolin,

491 U.S. 554 (1989), establishing uniform

Procedures for invasion of the attorney-

client privilege where the crime/fraud

exception to the Privilege is raised.

Also see, Reisman v. Caplin, 375 U.S. 440

(1964), creating the due process

procedures for IRS administrative

summonses, including the right of the

taxpayer to intervene to assert privileges

when the accounting firm’s workpapers were

summoned and that the summons enforcement

order is a final, appealable order, i.e. a

uniform pre-disclosure appellate review

procedures. See below for further

discussion.

This Court, and some circuit courts

of appeals, have recognized that the

Perlman doctrine applies to appeals

involving subpoenas and orders to produce

documents in grand jury proceedings. See

Gravel v. United States, 408 U.S. 606, 608

n.2 (1972) (U.3s. Senator was allowed to

intervene in district court proceedings to

quash subpoena issued to his assistant,

and was allowed to appeal denial of his

motion to quash under the Perlman

doctrine; this Court noted that’ the

government did not challenge the propriety

of the appeal and that the Senator might

be powerless to avert damage if not

permitted to appeal). See also, In re

Grand Jury Proceedings (Cianfrani), 563

F.2d 577, 580 (3d Cir. 1977) (similar

facts to Gravel); National Mortgage Equity

Corp. Mortgage Pool Certificates

Litigation, 857 F.2d 1238, 1240 (9th Cir.

1968) (stating that "the reason for

allowing review of such orders in the

Grand jury context is that there are

aspects of independence from the main

course of any prosecution that render the

order collateral"). This certainly

applies to validly-asserted privileges,

which once disclosed will be lost forever.

II. The Decision of the Court of Appeals

Was Erroneous and Violates Perlman and

other Decisions of this Court.

In Perlman (247 U.S. 7 (1918)),

documents belonging to Perlman and his

corporation were impounded by a district

court clerk in an unrelated civil case.

The United States Attorney instituted

grand jury proceedings against Perlman and

requested that the documents be turned

over to him. The District Court so

ordered. Perlman challenged the order and

the United States argued on appeal that

the order was not final. 247 U.S. at 12-

‘& 2 This Court rejected that argument,

stating that it was unable to concur that

Perlman, although powerless to avert the

mischief of the order, must accept its

incidence and seek a remedy at some other

time and in some other way. Thus, the

District Court’s order was immediately

appealable. Id. at 13.

This Court affirmed the Perlman

doctrine’s vitality of in United States v.

Nixon, 418 U.S. 683, 691 (1974). See

also, Church of Scientology v. United

States, U.S. ; » aoe Br Gen Sets

452 n. 11, 121 L.Ed.2d 313 (1992), stating

that "under the so-called Perlman

doctrine,..., a discovery order directed

at a disinterested third party is treated

as an immediately appealable final order

because the third party presumably lacks a

sufficient stake in the proceedings to

risk contempt by refusing compliance."

(citation omitted.) This certainly

applies to an independent accounting firm

hired on a one-shot engagement. It will

not commit contempt so an appeal can be

brought.

In California, attorneys are required

by law to "maintain inviolate the

confidence, and at every peril to himself

or herself to preserve the secrets, or his

or her client." Cal. Bus. & Prof. Code §

Pt Sl TES el tt Se eG Rica Negitlltn aah ae E N le aS SOT A De NC OO ns ati te alan. int it ety tty AEB ain A iit neat. sonteitee e oN

6068(e) (Deerings 1993). Accountants are

in a different situation. They are under

a mandatory, statutory duty to comply with

subpoenas ordered enforced by a court

under pain of license revocation and

fines.’ Cal. Code of Regulations tit. 16,

§ 54 requires that no information obtained

by a licensee, in his or her professional

Capacity, concerning a client or a

7 In California, an accountant who

violates the regulation requiring

disclosure of client materials pursuant to

a court order could be subject to a number

of disciplinary penalties. For instance,

he or she could be subject to fines of

$200 to $2000. Cal. Code meg. tit. 16, §

95.2. An accountant could also be subject

to suspension or revocation of a permit or

certificate required for practice. Cal.

Bus. & Prof. Code § 5100(f) (Deerings

1993). Violation of § 5100(f) could also

result in fines of $500 to $2500. Cal.

Code Reg. tit. 16, § 95.2. Moreover, the

revocation or suspension of a partner’s

right to practice accountancy could result

in the revocation, suspension, or refusal

to renew the permit of an accountancy

partnership. Cal. Bus. & Prof. Code § ,

5101 (Deerings 1993). For the sake of

brevity, Petitioners are omitting

discussion of what professional discipline

can result from the criminal conviction of

an accountant.

prospective client shall be disclosed

without the permission of the client or

prospective client, except for (a)

disclosures made in compliance with a

subpoena or a summons enforceable by order

of a court; and (b) disclosures made in

response to an official inquiry from a

federal or state regulatory agency.

Thus, the Ninth Circuit incorrectly

required the accounting firm to commit

contempt in order to obtain review of the

District Court’s order. The Ninth Circuit

is essentially counseling accountants to

break the law. It is clear that the

accounting firm squarely falls within the

Perlman rule and the District Court’s

order is final and appealable.

Instructive on the issue of whether a

third-party witness should be expected to

commit contempt is this Court’s opinion in

Eastland v. United Servicemen’s Fund, 421

U.S. 491, 501 n.14 (1975), noting that the

cnsur-7

toe wares

Court of Appeals for the District of

Columbia had properly distinguished

between a subpoena that seeks information

directly from a party and one that seeks

the same information from a third person.

In the former case, the party can resist

and test the subpoena; but in the latter,

compliance by the third person could

frustrate any judicial review.’

In opposition to Petitioners’ motion

for a stay in the District Court, the

United States cited three Ninth Circuit

cases it argued held that where the third

party subpoena is issued to the current

attorney of a grand jury target, the

attorney, because of his or her

® See also, J. Marshall’s concurrence

in that opinion, 421 U.S. at 514, in which

he cites Perlman and states that the

district court properly entertained the

action in order to provide a forum in

which the respondent could assert its

constitutional objections to the subpoena,

Since "a neutral third party could not be

expected to resist the subpoena by placing

itself in contempt."

relationship to the client/target, should

be willing to commit contempt in order to

create a final, appealable order. See

Citations, supra, at 16. The United

States argued that these cases, by

analogy, applied to the instant situation

and supported its position that the order

in this matter was not final for purposes

of appeal.

In granting Petitioners’ request for

a temporary stay, however, the District

Court noted that these cases were

distinguishable from this case because

they "find current attorneys of the person

asserting the privilege to be persons

expected to risk a contempt citation

App., infra, 33a (emphasis added). This

is correct. Bailin and his firm are third

party independent accountants under a

limited engagement that does not include

er i ines

Pe eae eee

agreeing to commit contempt and go to jail

so that Petitioners can appeal. There is

no evidence in the record to the contrary.

Moreover, no independent, third party CPA

in his or her right mind would agree in

advance to such a condition as part of an

engagement. In fact, such an agreement

would violate California law and would be

a void, unenforceable contract,

Analysis of the cases cited by the

United States reveals clear distinctions

between them and the instant case. See In

re Grand Jury Subpoena Served Upon Niren,

Supra, 784 F.2d 939; In re Grand Jury

Subpoena Dated June 5, 1985, supra, 825

F.2d 231; In re Grand Jury Subpoena Dated

Dec. 10, 1987, supra, 926 F.2d 847. This

narrow carve-out of the Perlman doctrine

for current attorneys is inapplicable to

the facts of this case because Bailin is

not the target’s attorney, he is an

independent contractor hired by the

attorney for the instant investigation.

None of these cases involves a similar or

analogous situation.

In Niren, for example, the attorney-

witness was in-house counsel to the grand

jury target. Therefore, the attorney was

the equivalent of a common-law employee of

the target and under the target’s control.

In fact, The Ninth Circuit analogized

Niren’s situation to that of an employee

in making its holding. 784 F.2d at 940-

941. This case presents a different

Situation. The witness is an independent

contractor CPA hired to perform specific

duties for the attorney on a one-shot

basis. The level of control exercised by

Petitioners is not even close to the level

of control exercised by an employer over a

common-law employee, such as the in-house

counsel in Niren. The other two case are

equally inapplicable.

Authority for the appealability of

ee oe ee

the District Court’s order may also be

found in this Court’s decision in Reisman

v. Caplin, supra, 375 U.S. 440. In

Reisman, the IRS was seeking to subpoena

the workpapers of an accounting firm that

had been hired by an attorney to work with

him in the defense of his client in

Ongoing criminal and civil tax matters.

The accounting firm was served with the

equivalent of a grand jury subpoena--an

administrative summons to appear before an

IRS Special Agent.*® Id. at 443-444. The

attorney tried to intervene and object to

the compliance with the summons. The

District Court ordered enforcement of the

° In United States v. Powell, 379 U.S.

48, 57 (1964), this Court hel that an IRS

administrative summons is_ the legal

equivalent of a grand jury subpoena, and

the same rules apply. Powell relied on

prior decisions of this Court involving

summonses issued by other governmental

agencies holding that this type of process

is the same as a grand jury subpoena. See

United States v. Morton Salt Co., 338 U.S.

632, 642-43 (1950); Oklahoma Press Pub.

Co. v. Walling, 327 U.S. 186 (1946).

IRS summons against the accountant. This

Court ruled that any person affected by

the disclosures or production could

intervene and raise objections on any

appropriate ground, including privilege.

This Court also ruled that the order

compelling compliance by the accountant

was a final appealable order. Id. at 449.

The instant case is factually and

procedurally the same as Reisman. As in

Reisman, the IRS is conducting a criminal

investigation here. The attorney in

Reisman, as in this case, hired an

independent accounting firm to assist in

the defense of the tax investigation. The

instant dispute started with an IRS

summons seeking the very information now

sought by the grand jury subpoena.

Petitioners intervened at the

administrative level and asserted

privileges as expressly authorized by

Reisman.

The United States, however, did not

seek enforcement of the IRS summons in the

District Court. It issued a grand jury

subpoena, which is the legal equivalent of

an IRS summons. See fn. 9, supra.

Petitioners moved to intervene in the

District Court and to assert again their

privilege objections. Thus, Reisman

compels the same result in this case--an

immediate appeal of the privilege issues.

The United States should not be allowed to

avoid enforcement of the administrative

summons by issuing a grand jury subpoena,

and thus to deprive Petitioners of the

Opportunity to test the legality of the

order to the accountant to turn over the

proven-privileged documents that they

clearly would have had under Reisman if

the United States had sought enforcement

of the original summons. The Ninth

Circuit’s opinion ignores this dispositive

case, because it cannot distinguish it.

It is important to note that a grand

jury subpoena and an IRS summons end up in

the same place for enforcement--the

District Court using itS powers via a

court order to compel compliance. It is

this enforcement order that is appealed.

So it should make no difference for

purposes of appellate jurisdiction if the

order enforces a grand jury subpoena or

its legal equivalent--an IRS summons.

III. The Decision of the Court of Appeals

Poses Serious Consequences for the

Criminal Justice System, and the Legal and

Accounting Professions, Because at,

Practically Speaking, Allows the United

States to Invade Validly-Established

Communicative and Work-Product Privileges

Prior to any Appellate Review, Thus

Prejudicing the Defendant’s Right to

Counsel and the Preparation of a Defense.

In United States v. Nobles, 422 U.S.

225, 238 (1975), this Court observed that

"Co]ne of those realities [of litigation

in our adversary system] is that attorneys

must often rely on the assistance of

investigators and other agents in the

compilation of materials in preparation

for trial." Since 1975, this statement

has come to even more accurately describe

the modern practice of law. As our world

becomes more complicated, the less able

attorneys are to investigate the facts of

a case and prepare for trial by

themselves. In many litigations, large

and small, a cadre of independent

contractors assist the attorney to

understand the facts and prepare for trial

or settlement negotiations. Most of these

agents are independent contractors.

The Ninth Circuit’s opinion creates a

dangerous precedent because attorneys will

be less willing to hire needed outside

personnel, such as accountants and other

investigators. Also, independent

contractor agents will be less willing to

accept litigation support work. If the

independent contractor agent is subpoenaed

to testify about his or her work for the

attorney, the opposing party (i.e., the

United States) will be able to invade

privilege and to secure privileged

documents and communications. This is

true because few independent contractors

will be willing to commit contempt, and

suffer fines, jail or license revocation,

in order to preserve the attorney’s and

the client’s appeal rights. This, in

turn, denies a defendant the needed

technical help in defense of a criminal

investigation.

As discussed above (see pp. 13-16),

the circuits are undecided as to whether

an attorney, who has an obligation to

protect his or her client’s confidences at

his or her own risk, should be willing to

disobey a court order to disclose

privileged material. Common sense

dictates that other professionals, such as

accountants, who do not have the same

professional obligations to maintain

client confidences (see fn. 7, ante), will

be even less willing to risk contempt by

disobeying a court order to disclose

privileged material. As the Fifth Circuit

has noted, supra at 18, appealability of

such orders should not turn on such a

"Capricious circumstance."

This is further demonstrated by the

fact that the Perlman doctrine has been

applied to non-attorney third-party record

keepers. This includes accountants and

accounting firms,’ medical

*° See, for example, Wm. T. Thompson

Co. v. General Nutrition Corp., 671 F.2d

100, 102-03 (3d Cir. 1982); In re Grand

Jury Proceedings (Manges), 745 F.2d 1250,

1253: n.2 (Sth cir. 1984) ; In re

International Systems & Controls Corp.

Securities Litigation, 693 F.2d 1235, 1238

n.1 (Sth Gar. 1982) ; Matter of

International Horizons, Inc., 689 F.2d

996, 1000-02 & n. 11 (11th Cir. 1982).

But see, Matter of Grand Jury Subpoena,

S69 N.E.2d 852, 854 (Mass.App. 1991),

declining to apply the Perlman doctrine to

an independent accounting firm.

professionals,*? corporate employees, ~*

banks,’? and governmental agencies.**

Thus, the Court of Appeals’ opinion raises

serious questions affecting more than the _

12 See In re Grand Jury Proceedings,

867 F.2d 562, 564 (9th Cir. 1989), cert.

den., 493 U.S. 906, rehearing den. 493

U.S. 985 (1989) (grand jury target could

appeal an order denying motions to quash

subpoenas issued to her psychiatrist and

two hospitals).

” See, e.g., In re Grand Jury

Subpoena Duces Tecum, 769 F.2d 52, 54-56

(2d Cir. 1985); In re Grand Jury (C.

Schmidt & Sons), 619 F.2d 1022, 1024-25

(3a Cig. 2960). But see, Corporacion

Insular de Seguros v. Garcia, 876 F.2d

254, 258-60 (list Cir. 1989); In re

Burlington Northern, Inc., 679 F.2d 762,

767-68 (8th Cir. 1982); National Super

Spuds v. New York Mercantile Exchange, 591

F.2d 174 (2d Cir. 1979), all holding that

employees could be expected to _ risk

contempt to secure appellate review of

their employer’s claim of privilege. This

is yet another example of the confusion

Surrounding the scope of the Perlman

doctrine and how the circuits are split

over many aspects of its application.

13 Harris v. United States, 413 F.2d

316, 316-17 (9th Cir. 1969).

4 ~—s Castle v. Sangamo Weston, Inc.,

744 F.2d 1464, 1465-66 (llith Cir. 1984)

(per curiam).

constitutional rights and immediate

interests of the parties involved. All

professionals who supply litigation

support services are potentially affected.

Once, disclosure of privileged

material has occurred, "the bell cannot be

unrung." Thus, Bailin’s compliance would

moot, prejudice and waive the question of

the application of the attorney-client and

work-product privileges. See, eé.g.,

Admiral Ins. Co. v. United States District

Court, 881 F.2d 1486, 1491 (9th Cir. 1989)

(granting juded bit ive writ and citing the

"irreparable harm a party likely will

suffer if erroneously required to disclose

privileged material or communications") ;

United States Dep’t. of Energy v. Brimmer,

776 F.2d 1554, 1558-59 (Em.App. 1985),

cert. den. 475 U.S. 1045 (1986) (stating

that mandamus is appropriate to review

substantial claims of privilege because

review by later appeal cannot undo harm

done by disclosure); Iowa Beef Processors,

Inc. v. Bagley, 601 F.2d 949, 955 fn. 7

(9th Cir. 1979) (stating that "disclosure

of allegedly privileged or confidential

information renders impossible any

meaningful appellate review of claim of

privilege or confidentiality"); In re

Grand Jury | Investigation of Ocean

Transportation, 604 F.2d 672, 674 (D.C.

Cir. 1979) (stating that without prior

appellate review of claim of attorney-

client privilege, party would be subjected

to "the irreparable loss of its right to

claim the attorney-client privilege"); In

re von Bulow, 828 F.2d 94, 98 (2d Cir.

1987) (stating that compliance with

discovery order against claim of privilege

destroys the right sought to be

protected.) Compliance with the District

Court’s order would clearly result in

irreparable injury to the attorney-client

relationship between Ord and the Clients.

The Ninth Circuit’s decision is

dangerous because it equates independent

contractors with employees by invoking

National Super Spuds Vv. New York

Mercantile Exchange, 591 F.2d 174 (2d Cir.

1979), and other cases involving employees

(including in-house counsel). See App.,

infra, at 4a. If Bailin, an independent

contractor hired on a project-by-project

basis, is the equivalent of the high

ranking Commodity Futures Trading

Commission official in National Super

Spuds, or the in-house counsel in Niren,

supra, at 31, any person hired to assist

an attorney is placed in the same position

as an employee of the attorney, or of the

client. That Bailin and his firm had also

been the Clients’ tax preparer is of no

import, because this past role was

separate from their role as Ord’s

independent contractor.

The Ninth Circuit’s opinion is also

° 42

dangerous because it has the potential to

allow the United States to invade the

attorney-client privilege and the attorney

work-product doctrine with impunity. All

the United States and the IRS need do is

determine who assisted the attorney in

preparing for litigation and subpoena that

person before the grand jury, rather than

using an administrative summons, the

judicial enforcement of which results ina

final appealable order. The witness will

not commit contempt and suffer fines and

jail to preserve the clients’ and the

attorneys’ privileges and appeal rights.

This situation puts at risk decades

of court decisions protecting the

attorney-client privilege and the attorney

worx-product doctrine. It runs counter to

federal courts’ attempts to zealously

protect documents within the scope of the

attorney-client privilege. See Haines v.

Liggett Group, Inc., 975 F.2d 81, 90 (3rd

Gar. 1992); Klitzman, Klitzman and

Gallagher v. Krut, 744 F.2d 955, 960 (3d

Cir. 1984). It also has ramifications for

the right to counsel, because it could

create an atmosphere of distrust between

the client and the attorney and the

attorney’s agents.

For example, this Court held in

Upjohn Co. v. United States, 449 U.S. 383

(1981), a case with parallel, but less

compelling, facts, that the attorney-

client privilege covers information

communicated to counsel by corporate

employees for the purpose of enabling

counsel "to give sound and informed

advice" to the corporation. Id., at 390.

In Upjohn, private accountants did an

internal audit and discovered possible

illegal payments to foreign officials.

Similarly, in this case, the impetus for

the internal corporate investigation came

from an outside source. The accountants

informed the corporation’s general

counsel, who conducted an internal

investigation of these "Questionable

payments." Similarly, in this case, the

company conducted an internal

investigation into "questionable" cash

payments. It is the work product of this

investigation, conducted by the accounting

firm hired by the attorney, that the

United States seeks in this case.

During the investigation, Upjohn’s

general counsel and corporate employees

generated communications and

documentation. The investigation involved

a questionnaire sent to all the

corporation’s "foreign general and area

managers," and interviews with the

recipients of the questionnaire and some

33 other Upjohn officers or employees.

Upjohn then made a public filing with

the Securities and Exchange Commission in

the form of a "preliminary" report

oe ey

disclosing certain questionable payments.

It simultaneously served a copy on the

IRS. This triggered an investigation.

Just as in this case, the IRS issued

an administrative summons seeking

production of all the files, records,

memoranda and notes underlying the

corporation’s internal investigation. In

reviewing an appeal from the subsequent

IRS summons enforcement order, this Court

rejected the Sixth Circuit’s limited view

of the attorney-client privilege, opting

for broad application of the privilege in

order not to discourage persons’ in

corporations from providing information

and generating documents to pass on to

corporate counsel. This allows

corporations to receive proper advice

during an ongoing investigation and to

comply with the law on an ongoing basis.

449 U.S. at 390-93 & fn. 2.

In reaching its holding, this Court

recognized the importance of the attorney-

client privilege to the public interest

and to the administration of justice:

"The attorney-client privilege

is the oldest of the privileges

for confidential communications

known to the common law. S a.

Wigmore, Evidence § 2290

(McNaughton rev. 1961). Its

is to encourage frank

and full communication between

attorneys and their clients and

thereby promote broader public

interests in the observance of

law and administration of

justice. The privilege

recognizes that sound legal

advice or advocacy serves public

ends and that such advice or

advocacy depends of the lawyer’s

being fully informed by the

client. As we stated last Term

in Trammel v. United States, 445

U.S. 40, 51 (1980): ‘The lawyer-

client privilege rests on the

need for the advocate and

counselor to know all that

relates to the client’s reasons

for seeking representation if

the professional mission is to

be carried out.’ And in Fisher

v. United States, 425 U.S. 464,

470 (1976), we recognized the

purpose of the privilege to be

‘to encourage clients to make

full disclosure to their

attorneys.’" 449 U.S. at 389.

(emphasis added.)

This Court also held that counsel’s

en ew eh A. hots Mesos

notes and memoranda were work product

based on oral statements of the witnesses.

Where they revealed communications by

witnesses, they were protected by the

attorney-client privilege. 449 U.S. at

397-401. To the extent that the notes and

memoranda do not reveal witness

communications, they reveal counsel’s

mental processes in evaluating the

communications, and thus were protected

from disclosure by the attorney-work

product doctrine. Id.

This Court also noted that the United

States in Upjohn was not without recourse

in the face of the company’s valid

assertions ‘of privilege. It noted that

the government was free to duplicate the

company’s investigation and question the

employees who communicated with counsel.

449 U.S. at 396 (emphasis added). The

United States in this appeal is also free

to conduct its own investigation. It

should not be able to secure the

privileged work product of an accounting

firm hired by the corporate attorney by

the simple expedient of subpoenaing the

accountant, knowing that the firm will not

and cannot commit contempt in order to

preserve privileges belonging to. the

hiring attorney and his client. The Ninth

Circuit’s opinion could potentially allow

the IRS to achieve this result and to

circumvent this Court’s rulings regarding

the attorney-client and work-product

privileges in Upjohn and other cases.

Finally, because the underlying

factual pattern involves a common factual

Situation in IRS investigations--the IRS

suggesting possible lines of inquiry for

taxpayers--the District Court’s decision

will chill taxpayer cooperation in tax

investigations. The District Court’s

opinion is revolutionary because it holds

that an accountant and his firm working

hl _ Cwatt eateht ER A oS OS ee

for the attorney in an investigation are

actually working for the IRS when

answering an IRS agent’s questions. Thus,

neither the work product behind the answer

nor the internal communications and advice

behind answering the questions of the IRS

agent are covered by privilege. When

confronted with such a Situation, many

taxpayers will be unwilling to cooperate

in any investigation. Voluntary

cooperation in civil audits and litigation

will greatly diminish. This is because in

answering any question Suggested or posed

by the IRS, the taxpayer or his agents may

be deemed to be working for the IRS and

thus all communication and work product

behind the answer would not covered be by

the law of privilege. Thus, the District

Court’s opinion is clearly wrong,

dangerous and should have been reviewed by

the Court of Appeals, either through

direct appeal or through a writ of

mandamus, see Part IV., infra.

IV. The Ninth Circuit’s Denial of

Petitioners’ Petition for a Writ of

Mandamus Conflicts with Other Circuits’

Rulings Recognizing that Mandamus Is

Appropriate to Review Validly-Asserted

Privileges Prior to Compelled Disclosure.

The Ninth Circuit’s denial of

Petitioners’ petition for a writ of

mandamus focuses too narrowly on two older

cases that denied writs of mandamus to

review denials of motions to quash grand

jury subpoenas,’° and also ignores

numerous later court decisions finding

that mandamus iS proper to- review

questions of privilege before disclosure

of the privileged materials to avoid

waiver of the privilege. Mandamus has

also be used to review disputes arising in

grand jury proceedings. The Ninth

18 See App., infra, at 18a, citing

Lampman v. United States District Court,

418 F.2d 215 (9th Cir. 1969), cert. den.

397 U.S. 919, 935 (1970) and City of Los

Angeles v. Williams, 438 F.2d 522 (9th

Cae. 2974}.

S52

Circuit’s refusal to allow review by writ

in this case illustrates the conflict

among the circuits with regard to the

application of mandamus to these areas.

Moreover, one case relied on by the

Ninth Circuit used an_ unreasonably

expansive reading of one of this Court’s

decisions to find that mandamus is not

available to review denial of motions to

quash grand jury subpoenas. City of Los

Angeles v. Williams, 438 F.2d 522 (9th

Cir. 1971), cited by the Ninth Circuit at

App., infra, 18a-19a, hinged on the Ninth

Circuit’s erroneous reasoning that this

Court’s decision in Will v. United States,

389 U.S. 90 (1967) held that privilege

does not enjoy a special status in

considering a petition for an

extraordinary writ. See 438 F.2d at 522-

$33. Not only do Petitioners not read

Will as containing such a holding or even

such an implied holding or dicta, later

cases (see discussion, infra) have shown

that mandamus is particularly appropriate

to review orders compelling disclosure of

information claimed to be protected by the

Constitution, privilege, or more general

interests of society. See, generally,

C.A. Wright, et al., 16 Federal Practice

and Procedure § 3935 at 247-48 (1977).

Thus, the principle underpinning Williams

and the Ninth Circuit’s opinion, which

relies on Williams, is based on too

expansive a reading of Will. Certiorari

is appropriate for this Court to determine

the application of mandamus to court

orders compelling disclosure of privileged

materials and communications.

| Many courts have found mandamus to be

appropriate to secure appellate review of

discovery orders involving important

questions of law. See, for example, In re

Burlington Northern, Inc., 822 F.2d 518,

522 (Sth Cir. 1987), cert. den. 484 U.S.

1007 (1987), stating that "(T]he

difficulty of obtaining effective review

of discovery orders, the serious injury

that sometimes results from such orders,

and the often recurring nature of

discovery issues support use of mandamus

in exceptional cases." See also,

Schlagenhauf v. Holder, 379 U.S. 104

(1964) (mandamus proper to review novel

question involving Federal Rules); In re

von Bulow, 828 F.2d 94, 97 (2d Cir. 1987);

United States v. United States District

Court, 717 F.2d 478, 481-82 (9th Cir.

1983) (mandamus used to set aside order in

criminal proceeding requiring the

government to produce documents under the

Freedom of Information Act); In re Societe

National Industrial Aerospatiale, 782 F.2d

120, 123 (8th Cir. 1986), vacated on other

grounds, 482 U.S. 522 (1987) ("mandamus is

appropriate to provide guidelines for the

resolution of novel and important

questions presented in the discovery order

that are likely to recur"); Iowa Beef

Processors, Inc. v. Bagley, 601 F.2d 949,

953-55 & fn. 7 (9th Cir. 1979) (stating

that a rationale for invoking mandamus to

review privilege questions is that

"disclosure of allegedly privileged or

confidential information renders

impossible any meaningful appellate review

of the claim of privilege or

confidentiality"). See, generally, C.A.

Wright, et al., 15B Federal Practice and

Procedure § 3914.23 at 132-133 (2d ed.

1992), 16 Federal Practice and Procedure §

3935 at 246-251 (1977).

Orders regarding discovery matters

are uniquely suited to mandamus review

because they are generally considered to

be interlocutory and non-appealable. See

City of Las Vegas v. Foley, 747 F.2d 1294,

1296-97 (9th Cir. 1984). This is because

the finality rule often prevents appellate

review of even oft-occurring discovery

problems that plague district courts. See

C.A. Wright, et al., 15B Federal Practice

and Procedure § 3914.23 at 132-133 (2d ed.

1992). Thus, mandamus, because of its

extraordinary and discretionary nature and

its use in a supervisory or advisory

role,*® presents the most direct and

advantageous way to provide appellate

review of discovery orders when such

review is needed. See C.A. Wright, et

al., 16 Federal Practice and Procedure §

3934 at 235 (1977), stating that

"{ilmportant questions of procedure are

often difficult to review by appeal, and

- See Will v. United States, 389

U.S. at 107 (mandamus serves a "vital

corrective and didactic function"). See

also, C.A. Wright, et al., 16 Federal

Practice and Procedure § 3934 at 235

(1977), wherein the authors state that the

statements in Will "seem to reiterate the

Court’s acceptance of writ review...by

which courts of appeals may supervise

practice on issues that otherwise may

elude prompt or effective appellate

scrutiny."

at times may demand appellate intervention

to secure uniformity between different

judges, or simply bring the balancing

perspective that appellate review is

intended to provide in controlling the

practice as well as the substantive

decisions of trial courts."

Many courts have also found mandamus

to be an appropriate remedy to deal with

questions regarding the attorney-client

privilege because "maintenance of the

attorney-client privilege up to its proper

limits has substantial importance to the

administration of justice, and because an

appeal after disclosure of the privilege

communication is an inadequate saneie*

Harper & Row Publishers, Inc. v. Decker,

423 F.2d 487, 492 (2d Cir. 1970), affirmed

by an equally divided court, 400 U.S. 348

(1971). See also, Haines v. Liggett

Group, Inc., 975 F.2d 81, 88-91 (3rd Cir.

1992); Chase Manhatten Bank, N.A. v.

Turner & Newhall, PLC, 964 F.2d 159, 163

(2d Cir. 1992); Admiral Ins. Co. v. United

States District Court, 881 F.2d 1486, 1491

(9th Cir. 1989), and the cases cited

therein; Diversified Industries, Inc. v.

Meredith, 572 F.2d 596, 606 (8th Cir.

1977) ("where a claim of attorney-client

privilege has been raised in and rejected

by a district court,... mandamus is

available as a means of immediate

appellate review"). Mandamus has also

been held to be appropriate for review of

orders requiring discovery of information

claimed to be privileged under other

theories or where other important

interests are at stake, on the grounds

that irreparable harm will occur if the

information is disclosed. See, e.g., In

re Steinhardt Partners, L.P., 9 F.3d 230,

233 (2d Cir. 1993) (question of whether

work-product protection iS waived by

voluntary disclosure to government agency

presents "one of those rare circumstances

permitting the use of mandamus to review a

district court order"); United States v.

Victoria=2i,. 3 F.3@ S7i, S75 ‘ee. Cit.

1993); Westinghouse Electric Corp. vv.

Republic of Philippines, 951 F.2d 1414,

1422 (3d Cir. 1991) (mandamus found to be

suitable means of reviewing order

compelling discovery on ground that prior

disclosure to different adversary had

waived privileges); In re Fink, 876 F.2d

84 (11th Cir. 1989) ("{iJn the context of

discovery orders which will compromise a

claim of privilege or invasion of privacy

rights, mandamus has been found

appropriate due to the importance of the

privilege, the seriousness of the injury

if discovery is obtained, and the

difficulty of obtaining effective review

once the privileged information has been

made public"); In re United States, 872

F.2d 472 (D.C.Cir. 1989), cert. dism’d.

493 U.S. 960 (1989) (mandamus was proper

to review district court’s determination

that claim of state secrets privilege

should be decided on item-by-item basis) ;

United States Dep’t. of Energy v. Brimmer,

776 F.2d 1554, 1558-59 (Em.App. 1985),

cert. den. 475 U.S. 1045 (1986) (order to

produce internal government documents,

rejecting claim of governmental privilege,

set aside by mandamus); Sporck v. Peil,

759 F.2d 312, 314-15 (3d Cir. 1985), cert.

den., 474 U.S. 903 (1985) (mandamus was

appropriate to set aside an order to

product a set of documents selected by

counsel to prepare for deposition; the

work product questions presented invoked

mandamus’ instructional goals and

discharge of the court’s supervisory

function); Bogosian v. Gulf Oil Corp., 738

F.2d 587 (3d Cir. 1984); Iowa Beef

Processors, Inc. v. Bagley, 601 F.2d 949,

953-54 (9th Cir. 1979), and the cases

cited therein.

Because of its appropriateness for

review of discovery orders and orders

affecting privilege, a number of circuit

courts of appeals have used mandamus to

review orders inv iving grand jury

disputes. See, for example, In re Oswalt,

607 F.2d 645, 648 (Sth Cir. 1979)

(mandamus issued to correct order that

authorized direct seizure of documents

subpoenaed by grand jury); United States

v. RMI Co., 599 F.2d 1183, 1185-87 (3d

Cir. 1979) (mandamus was proper method to

challenge district court’s refusal to

consider request for protective order

against disclosure of documents that non-

party produced before grand jury); In re

Grand Jury Subpoenas, April 1978, at

Baltimore, 581 F.2d 1103, 1106-1110 (4th

Cir. 1978); Nixon v. Sirica, 487 F.2d 700,

707 (D.C.Cir. 1973) (mandamus used to

review propriety of district court order

to produce allegedly-privileged documents

in camera); United States v. United States

District Court, 238 F.2d 713 (4th Cir.

1956), cert. den. 352 U.S. 981 (1957)

(holding that courts of appeals may grant

relief by way of writ of mandamus to order

a district court to vacate an order

quashing a subpoena for production of

records before a grand jury).

One Circuit has even commented that

mandamus would be an appropriate route for

clients seeking to challenge a District

Court’s denial of their motion to quash a

grand jury subpoena without having to wait

fora contempt citation. See In re Grand

Jury Proceedings, Subpoena to Vargas,

Supra, 723 F.2d at 1464-66.

Mandamus is an appropriate avenue to

assure that important questions of

privilege arising in the grand jury

context are reviewed by appellate courts

prior to court-enforced disclosure of the

privileged materials or communications.

This avoids waiver of privileges and

allows early resolution of privilege

questions without the necessity of

proceeding through a criminal prosecution

before the questions can be heard by the

appellate court.

ONCL ON

This Court must establish a uniform

procedure for the pre-disclosure appellate

review of validly-asserted privileges,

either through appeal by right or by writ.

For all the reasons given above, this

Court should grant this Petition for Writ

of Certiorari.

Respectfully submitted,

EDWARD 0O.C. ORD

Counsel of Record

ORD & NORMAN

650 California Street,

26th Floor

San Francisco, CA 94108

415/274-3800

Counsel for Petitioners

June 1995

APPENDIX

1. Opinion of Court of Appeals

2. District Court Memorandum of

Decision and other Orders

3. Initial Stay Order by

Court of Appeals

4. Court of Appeals Denial of

Rehearing

Be lala ee SRLS Ltt Cate ashes adn alee et

FOR PUBLICATION

UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

IN RE: GRAND JURY )

SUBPOENA ISSUED TO )

CHARLES D. BAILIN

EDWARD SILVA, JUR.;

SILVA HARVESTING

INC.; EDWARD O.C.

ORD, INC.; ORD &

NORMAN,

Appellants,

Vv.

UNITED STATES

OF AMERICA,

Appellee.

EDWARD SILVA, JR.

an individual;

SILVA HARVESTING

INC.; et al.,

Petitioners,

UNITED STATES

DISTRICT COURT

FOR THE NORTHERN

DISTRICT OF

CALIFORNIA,

Respondent,

UNITED STATES

OF AMERICA,

)

eee eee

No. 94-16684

D.¢c. HO.

CV-94-7008-WAI

No. 94-70757

D.¢. Be.

CV-94-7008-MISC

OPINION

Real Party )

in Interest. _)

Appeal from the

United States District Court

for the Northern District of California

William A. Ingram, Chief Judge, Presiding

Argued and Submitted

December 12, 1994

San Francisco, California

Filed March 28, 1995

Before: J. Clifford Wallace,

Chief Judge; Harry Pregerson

and Robert R. Beezer, Circuit Judges.

Opinion by Judge Beezer

SUMMARY

Criminal Law

and Procedure/Discovery/Appeals

The court of appeals dismissed an

appeal and denied a petition. The court

held that it lacked jurisdiction over an

appeal of the district court’s denial of a

motion to quash a grand jury subpoena

directed at the movant’s tax accountant.

The Internal Revenue Service (IRS)

investigated cash payments received by

appellant Edward Silva, Jr. Silva

retained an attorney in connection with

the investigation. The attorney retained

Charles Bailin, Silva’s tax accountant, to

aid him in representing Silva.

An IRS agent met with Bailin and gave

him a list of cash transactions which she

stated had been paid to Silva’s company.

She requested that Bailin trace the

payments into Silva's records to determine

whether they had been reported as income.

Bailin did the investigation.

A criminal investigation ensued. The

United States Attorney initiated a grand

jury investigation. The grand jury issued

a subpoena duces tecum to Bailin demanding

production of all of his workpapers

relating to the cash tracing and all of

his notes of his conversations with the

IRS agent, Silva and Silva’s employees

relating to the investigation.

Silva filed a motion to quash the

subpoena directed at allegedly privileged

records of Bailin. The district court

denied the motion.

Silva appealed. Silva also attempted

to obtain review of the district court’s

ruling through a petition for an

extraordinary writ under the All Writs

Act. The government moved to dismiss the

appeal for lack of jurisdiction.

[1] The order at issue in this case

was not appealable. [2] Generally, the

denial of a motion to quash a subpoena is

a monappealable interlocutory order.

There is a narrow exception to this rule

where the subpoena is directed at a third

party who "cannot be expected to risk a

contempt citation" in order to preserve

the movant’s right to appeal. [3] The

exception did not apply in this case.

Bailin was retained by Silva’s attorney to

‘represent Silva in a confidential,

fiduciary capacity. He has remained

+ i

“a

Silva’s agent throughout the proceedings

and is, therefore, subject to Silva's

control to some degree. More importantly,

Bailin is necessarily a party to the

relationship upon which Silva’s entire

claim of privilege is based. In such

circumstances, a third party can be

expected to risk contempt in order to

protect the privileged relationship. [4]

It did not matter that Bailin is an

accountant rather than an attorney.

[5] This case was not an appropriate

one in which to apply the doctrine of

"hypothetical jurisdiction." The

‘government ’s own arg ment revealed that

resolving the appeal on the merits, rather

than dismissing 3 for lack of

jurisdiction, would affect the outcome.

[6] Silva’s petition for review of

the district court’s order by

extraordinary writ also failed. The Ninth

circuit has rejected attempts to use the

All Writs Act as a means of avoiding the

final judgment rule in the context of

motions to quash grand jury subpoenas.

(7] There was no judicial "usurpation of

power" in this case.

COUNSEL

Edward 0O.C. Ord, Ord & Norman, San

Francisco, California, for the appellants-

petitioners.

Leo P. Cunningham and Daniel Graber,

Assistant United States Attorneys, San

Jose, California, for the appellee-real

party in interest.

OPINION

BEEZER, Circuit Judge:

Edward Silva, Silva Harvesting Inc.

(collectively "Silva"), Edward 0.C. Ord,

Inc. and Ord & Norman appeal the district

court’s denial of their motion to quash a

grand jury subpoena duces tecum directed

at allegedly privileged records of Charles

Bailin, Silva’s tax accountant. Silva

also attempts to obtain review of the

district court’s ruling through a petition

for an extraordinary writ under the All

Writs Act, 28 U.S.C. § 1651. We dismiss

the appeal for lack of subject matter

jurisdiction and deny the petition.

Bailin has been Silva's tax

accountant for several years. In mid-

1992, Bailin became aware that an agent of

the Internal Revenue Service ("IRS"),

Elizabeth Davis, was investigating a large

number of cash payments received by Silva.

Bailin recommended to Silva that Silva

retain attorney Edward 0.C. Ord iin

connection with the investigation, which

Silva did in April 1992. Shortly

thereafter, Ord retained Bailin to aid him

in representing Silva in the

investigation. Bailin testified that all

actions he took after Ord was retained

were at Ord’s direction. The district

court found that Bailin was Ord’s agent at

all times relevant to these proceedings.

In July 1992, Davis met with Bailin

and gave him a list of ten cash

transactions which she stated had been

paid to Silva Harvesting. She requested

that Bailin trace the payments’ into

Silva’s records to determine whether they

had been reported as income. She candidly

informed Bailin that she suspected Silva

of using the cash illegally. Bailin did

the investigation, and apparently could

not trace all of the payments into Silva’s

books. Bailin revealed this fact to Davis

at Ord’s direction.

A criminal investigation ensued, and

eventually the United States Attorney

initiated a grand jury investigation. The

grand jury issued a subpoena duces tecum

to Bailin demanding production, among

other things, of all of his workpapers

relating to the cash tracing, and all of

his notes of his conversations with Davis,

Silva and Silva’s employees relating to

the investigation. Silva initiated the

instant action in response to the

subpoena.

The district court denied Silva’s

motion to quash the subpoena. The United

States moved to dismiss the appeal for

lack of jurisdiction.

[1] Silva contends that the district

court’s denial of the motion to quash the

Subpoena is appealable because Bailin was

a "third party." The appealability of

such an order where the subpoenaed party

is a nonattorney agent of the movant is a

question of first impression in this

circuit. We hold that the order at issue

here is not appealable.

10a

[2] Generally, the denial of a motion

to quash a subpoena is a nonappealable

interlocutory order. United States v.

Ryan, 402 U.S. 530, 532-33 (1971). In

order to appeal the order, the person

subpoenaed must refuse to comply and

contest the validity of the subpoena by

appealing a contempt determination. Id.

There is, however, a narrow exception to

this rule where the subpoena is directed

at a third party who "cannot be expected

to risk a contempt citation" in order to

preserve the movant’s right to appeal. In

re Grand Jury Subpoena Served Upon Niren,

784 F.2d 939, 941 (9th Cir. 1986) (citing

Perlman v. United States, 247 U.S. 7, 15

(1918)).

We have previously held that the

Perlman exception does not apply where the

subpoena is directed at an attorney who is

currently representing the party moving to

quash the subpoena in connection with the

lla

grand jury proceedings. Niren, 784 F.2d

at 941; In re Grand Jury Subpoena Dated

June 5, 1985, 628 F.2d 231, 237 (Sta Cir.

1987). On the other hand, the denial of a

aektin to quash a subpoena directed at the

movant’s former attorney is appealable.

In re Grand Jury Subpoenas Duces Tecum

(Lahodny), 695 F.2d 363, 365 (9th Cir.

1982). Although In re Grand Jury Subpoena

92-1 (SJ), 31 F.3d 826 (9th Cir. 1994),

concluded that the denial of a motion to

quash a subpoena directed at a movant’s

attorney was immediately appealable

without expressly discussing whether the

attorney was still representing the

movant, the opinion’s citation to Grand

Jury Subpoenas Dated Dec. 10, 1987, 926

F.2d 847, 852-53 (9th Cir. 1991) (order

immediately appealable because attorney

was no longer representing the target of

the subpoenas), indicates that the

attorney was no longer representing the

12a

movant. See Subpoena 92-1 (SJ), 31 F.3d

at 828-29. Also, an order denying a

motion to quash a subpoena directed at an

attorney representing the movant on a

matter unrelated to the grand jury

investigation is immediately appealable.

In re Subpoena to Testify Before the Grand

Jury (Alexiou), 39 F.3d 973, 975 (9th Cir.

1994).

In Niren we expressed two reasons for

the limitation of the Perlman exception:

(1) the exception is intended to protect

only those movants who are "powerless" to

control the actions of the subpoenaed

third party; and (2) it is particularly

inappropriate to extend the exception to

third-parties who are participants in the

confidential relationship upon which the

avin’ Claim of privilege is based.

Niren, 784 F.2d at 941 (citing National

Super Spuds, Inc. v. New York Mercantile

Exch., 591 F.2d 174, 179-80 n.7 (2d Cir.

13a

1979) (Friendly, J.)). These factors

become decisively strong in the situation

where the subpoenaed party is actively

representing the movant in connection with

the grand jury investigation. Subpoena

Dated June 5, 1985, 825 F.2d at 237; cf.

Alexiou, 39 F.3d at 975.

[3] Under the above rationale, the

Perlman exception does not apply here.

Bailin was retained by Ord, Silva's

attorney to represent Silva in a

confidential, fiduciary capacity. He has

remained Silva’s agent throughout these

proceedings, and is therefore subject to

Silva’s control to some degree. More

importantly, Bailin is necessarily a party

to the relationship upon which Silva’s

entire claim of privilege is based. It is

in precisely these circumstances that a

third party can be expected to risk

contempt in order to protect the

14a

privileged relationship.?

[4] It does no matter that Bailin is

an accountant rather than an attorney.

Our cases declining to extend the Perlman

exception to this situation have not

relied on any special fiduciary

obligations of attorneys, but rather on

the present, confidential nature of the

movant’s agency relationship with the

third party, and the fact that the

relationship was related to the grand jury

investigation. See Niren, 784 F.2d at

941; National Super Spuds, 591 F.2d at 179

(third party was nonattorney employee of

‘eles Subpoena Dated June 5, 1985, 825

F.2d at 237. This is consistent with a

strict application of the final judgment

rule in the grand jury process, designed

‘We noted in WNiren that, where a

principal directs his or her agent to

resist a court order to comply with a

subpoena, it may be appropriate for the

contempt sanctions to be directed at the

principal. 784 F.2d at 941-42.

15a

ORL ES OS ALR POM ES ee ee ee

to prevent parties from taking frivolous

appeals for the purpose of delay.

Subpoena Dated June 5, 1985, 825 F.2d at

236-37.

Although the United States argues

that we have no subject matter

jurisdiction over Silva’s appeal, it

nevertheless urges us to avoid the

jurisdictional question and apply the

doctrine of "hypothetical jurisdiction" in

order to affirm on the merits. We decline

to extend "hypothetical jurisdiction" to

this case.

We have applied "hypothetical

jurisdiction" in certain cases. where

jurisdiction is disputed to assume,

without deciding, the existence of subject

matter jurisdiction in order to reach the

merits of an appeal. Clow v. United

States Dep’t of Housing and Urban Dev.,

948 F.2d 614, 616-17 n.2 (Sth Cir. 1991).

16a

The doctrine has several required

elements: (1) the jurisdictional question

must be difficult; (2) the merits of the

appeal must be insubstantial; (3) the

appeal must be resolved against the party

asserting jurisdiction; and (4)

undertaking a resolution on the merits as

opposed to dismissing for lack of

jurisdiction must not affect the outcome.

Id.

[5] This case is not an appropriate

one in which to apply this doctrine. it

is sufficient to observe that the

government’s own argument reveals that

resolving the appeal on the merits, rather

than dismissing it for lack of

jurisdiction, will affect the outcome.

Because, as the government argues, we have

no subject matter jurisdiction over this

appeal, we cannot substantively alter the

Situation of the parties by deciding the

appeal on the merits.

17a

III

(6) Silva’s eleventh-hour petition

for review of the district court’s order

by extraordinary writ also fails. We have

rejected attempts to use the All Writs Act

as a means of avoiding the final judgment

rule in the cpntext of motions to quash

grand jury subpoenas. Lampman v. United

States Dist. Court, 418 F.2d 215, 217 (9th

Cir. 1969), cert. denied, 397 U.S. 919

(1970); City of Los Angeles v. Williams,

438 F.2d 522, 522-23 ($8th cir. 1971).

[7] In order to justify review by

extraordinary writ, the district court’s

ruling on a motion to quash a grand jury

subpoena must amount to ae judicial

"usurpation of power." Lampman, 418 F.2d

et 217. No such usurpation is present

here; it was obviously within the district

court’s jurisdiction to rule on Silva’s

motion to quash, and to decide whether the

18a

subpoenaed materials are privileged.*<

Williams, 438 F.2d at 523.

Our focusing on our earlier cases of

Lampman and Williams concerning the

standards for the issuance of

extraordinary writs should not

Strued as establishing a rule different

from that set forth in Bauman v. District

ourt, 557 F.2d 650 (9th Cir. 1977) (five

factor framework for deciding petitions

for extraordinary writs). It is clear

that petitioner cannot succeed under

Lampman and Williams. An application of

the Bauman factors would not compel a

different result.

We DISMISS Silva’s appeal for lack of

subject matter jurisdiction. Silva’s

petition for relief under the all Writs

Act is DENIED.

“We expresS no opinion on the

correctness or incorrectness of the

district court’s determinations.

19a

(STAMP)

FILED

SEP 21, 1994

RICHARD W. WIEKING

CLERK, U.S. DISTRICT COURT

NORTHERN DISTRICT OF CALIFORNIA

SAN JOSE

IN THE UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF CALIFORNIA

IN RE GRAND JURY NO. C-94-7008-WAI

SUBPOENA DUCES TECUM,

)

DATED MARCH 15, 1994, ) MEMORANDUM OF

ISSUED TO CHARLES ) DECISION

)

BAILIN.

The motion of Edward Silva, Jr. and

Silva Harvesting, Inc. to quash or modify

subpoena issued to Charles Bailin is

In this matter Items 3-6 of the

Subpoena to Testify Before Grand Jury

served upon Charles Bailin are involved.

The court conducted an evidentiary hearing

upon this motion on September 19, 1994,

and now makes the following findings:

ee Charles Bailin is and at all

20a

EE ————

times herein relevant was an accountant in

Salinas, California, and since

approximately 1972 had performed

accounting services including the

preparation o

movants herein.

about March 26, 1992,

Revenue Agent Davis made contact with

Movants with respect to an audit of the

1989 individual income tax return of

Movant Edward Silva and his wife. Agent

Davis was referred to Mr. Bailin, the

Silvas’ accountant.

2. On April 7, 1992, Agent Davis

contacted Accountant Bailin to advise him

that the 1990 tax form 1120 for Movant

Silva Harvesting would be added to the

audit.

4, Because Bailin recognized Agent

Davis as a person who handled large

matters and because multiple tax years

were then involved in the audit, Bailin

21a

recommended to the Silvas that they employ

a tax attorney. Sometime prior to June

yy B 1992, Bailin introduced Attorney

Edward 0.C. Ord to Mr. Silva at Bailin’s

office, left them alone together and

subsequently was advised by Mr. Ord that

he, Ord, had been employed by Silva as the

latter’s attorney. At that same date and

place Bailin testified that Ord employed

Bailin and his accounting firm to act as

his sub-agent in the performance of his

legal work for the Silvas.

5. Mr. Bailin testified that his

employment occurred on or about April 7,

1992, but there appears to be _- some

uncertainty with respect to the exact

date. The employment, however, is

corroborated by a statement for services

dated July 22, 1992, and mailed to Movant

Silva in care of Ned Ord at the latter’s

address in San Francisco purporting to

cover services performed within 30 days

22a

prior to the date of the statement. Based

upon this, I find that the evidence

supports the performance of some work by

Bailin commencing on or after June 22,

1992. There is no evidence with respect

to the date of employment of Bailin by Ord

other than the testimony of Bailin. Ina

Q and A taken by Special Agent Scott of

Bailin, Mr. Ord was present and stated on

the record that he could not remember the

precise date. Nothing was offered in

evidence to corroborate the date of the

employment other than the July 22

Statement contained within Exhibit 10b.

Bailin testified that he did not know the

exact date in April upon which he was

employed by Ord and I, therefore, find in

the absence of any contradictory evidence

that April 15, 1992, can reasonably be

treated as the date of employment in this

matter.

6. On July 21, 1992, Agent Davis

met with Accountant Bailin and gave him a

isting ten cash payments which

schedule

she stated had been made to Movant Silva

Harvesting, (Ex. 3), and asked Bailin to

trace the cash payments in the corporate

books.

a On December 14, 1992, Agent

Davis and Accountant Bailin met and Bailin

stated to Davis that he could trace only

two of the ten cash payments included on

Exhibit 3. He stated that he made this

disclosure and representation to Agent

Davis pursuant to direction and control of

his principal, Attorney Ord. Further

discussion ensued between Bailin and

Davis. I find that, as just stated, the

inquiry resulting in the search conducted

by Bailin was initiated not by Attorney

Ord but by the Internal Revenue Service.

Therefore since one claiming privilege

must make a threshold showing that the

information purported to be privileged was

24a

communicated by the client to the lawyer

in confidence and in order to seek legal

advice, United States _v. Abrahams, 905

P.24. 12376, 12803 . (9th. Circ 29307, 32 is

extremely doubtful whether the results of

Bailin’s search after the Internal Revenue

Service inquiry is privileged at all in

that it does not constitute a confidential

communication between attorney and client.

However, even if privilege is applicable,

I find that when Ord was employed as

Movant’s attorney in April of 1992 and

Bailin was then employed as Ord’s_ sub-

agent for the purposes of that

representation any activities undertaken

on the part of Bailin in behalf of Ord

therefore became subject to the attorney-

client and/or work product privileges and

that the attorney-client privilege was

waived by the disclosure made at Ord’s

direction on December 14, 1992. Inasmuch

as the initial investigation by Bailin

25a

into the ten purported cash payments

received by Movant Silva Harvesting was

initiated by an inquiry by an agent of the

Internal Revenue Service and not by any

inguiry germane to Ord’s representation of

Movants, the work product privilege never

attached. Counsel for Movants has argued

based upon § 41.1 of Jefferson Evidence

Bench Book that any disclosure made at

that time by Bailin thus waiving the

attorney-client privilege must be limited

to the words then spoken by Bailin and

would not waive any privilege with respect

to work product features of underlying

documents, if any. This was characterized

by counsel and by Jefferson as derivative

privilege and is not applicable here

Since, as has been pointed out, the

inquiries were conducted by reason of

Internal Revenue Service inquiry and not

by any inquiry generated to Bailin by Ord.

CONCLUSION

26a

——

In accordance with the above, the

court concludes that a preponderance of

the evidence favors the employment of

Bailin by Ord to perform consultive expert

services to Ord on April 15, 1992. Th

attorney-client privilege asserted by

Movants with respect to disclosures made

by Bailin to Davis concerning the ten cash

payments as privileged is without merit

for the reasons just stated.

With respect to Items 3, 4, and 5 of

Exhibit 9, Bailin shall produce the

matters therein requested in compliance

with the subpoena. With respect to

Request No. 6 of Exhibit 9 relating to

work papers incident to the preparation o

income tax returns, there is no evidence

before the court that any of t he

disclosures with

personal income tax returns and the tw

corporate returns reterrea to in Re

(

ee.

No. 6 we:

by Movants in confidence and were thereby

privileged. Items such as work papers and

underlying materials utilized in preparing

tax returns and revealing the same to the

Internal Revenue Service are not

privileged unless some evidence indicates

that such underlying information was

expressed in confidence as a request for

legal advice or otherwise and is,

therefore, entitled to protection as

privileged. United States v. Abrahams,

905 F.2d 1276 (9th Cir. 1990); United

States v. Gurtner, 474 F.2d 297 (9th Cir.

1973). Therefore the underlying papers

requested and other materials concerning

the 1992 personal return and the two

corporate returns shall be produced by

Bailin pursuant to the said subpoena.

With respect to the 1991 personal income

tax return of Movant Edward Silva and

wife, work papers underlying the

preparation of that return were conveyed

28a

to Bailin prior to his employment by Ord

and, therefore, no question of privilege

can exist with respect to those documents

and they shall be forthwith produced by

Bailin.

The 1992 personal income tax return

of Edward J. Silva and Evelyn Silva, (Ex.

8), claims the Fifth Amendment privilege

with respect to the source of funds listed

in Schedule 6. Bailin shall forthwith and

within ten days comply with the provisions

of paragraphs 3, 4, 5 and 6 of the

subpoena duces tecum EXCEPT THAT he shall

not be required to produce any work papers

or other material whatever which reveal

the source of the income listed in

Schedule 6 of Movants’ personal income tax

return for the year 1992.

Late in the day of September 20,

1994, counsel for defense filed a

Supplemental Memorandum of Points and

Authorities for consideration by the

29a

court. The following areas were discussed

in the Memorandum:

: ae The Q and A containing

Statements of Revenue Agent Davis is

double hearsay and should not have been

admitted. Whether it should have been

admitted or not is arguable but the fact

is that the court did not consider the Q

and A for that purpose or any other

purpose other than one statement

attributable to Mr. Ord who was not a

witness or under oath.

as That the Government is bound by

the Declaration testimony of Attorney Ord

because the Government introduced his

declaration as a part of its case. No

authority is cited for this unusual

contention nor could there be.

: # Bailin had no duty to respond on

a voluntary basis to an Internal Revenue

Service inquiry. Whether he did have such

a duty or did not, the fact is that he

30a

4. The request for a stay on appeal

not timely and is made without notice

the adverse party.

DATED: 9-21-94 (handwritten)

LLS//

WILLIAM A. INGRAM

United States District Judge

(STAMP)

I hereby certify that the

annexed instrument is a true

and correct copy of the

Original on file in my office

ATTEST

RICHARD W. WIEKING

Clerk, U.S. District Court

Northern District of

California

By _//s// -

Deputy Clerk

Date 9-21-94 (handwritten)

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32a

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(STAMP)

FILED

OCT 4, 1994

CATHY A. CATTERSON, CLERK

U.S. COURT OF APPEALS

ITED STATES COURT OF APPEALS

FOK THE NINTH CIRCUIT

IN RE SUBPOENA ) No. 94-16684

DUCES TECUM, dated

March 16, 1992.

DC# CV-94-7008-WAI

EDWARD SILVA, UR., ) Northern California

et al., ) (San Jose)

Appellants,

) ORDER

vs. )

UNITED STATES )

OF AMERICA, )

Appellees. )

Before: BROWNING, FARRIS and LEAVY,

Circuit Judges

An appeal from the denial of a motion

to quash a subpoena duces tecum is an

interlocutory degree over which this court

lacks jurisdiction. To obtain appellate

review, the person moving to quash the

subpoena must first refuse to comply with

the court’s order and then must be held in

35a

Dated Dec 10, 1968/7, 9426 F.42G 647, §53-

sth Car. 1991

In Perlman v. United States, 247 U.S.

7, 15 (1918), the Court recognized an

mpt citation in order to protect the

interests of a third party who is the

4 wae = ee

take an immediate appeal from the order

denying the motion to quash the subpoena.

In re Grand Jury Subpoenas Duces Tecum

Lahodny), 695 F.2d 363, 365 (9th Cir

1982)

Because there is a substantial

question whether this appeal falls within

the Perlman exception, appellee’s motion

to dismiss for lack of jurisdiction is

denied. See United States v. Hooton, 693

F.2d 857, 858 (9th cir. 1982) (summary

36a

adjudication only appropriate when issues

are "so insubstantial as not to need

further argument"). The parties shall

address the jurisdictional issue in their

briefs

| ’ * £ ~ - = o~ + ~

Appellant’s motion for a stay of tne

a an a / - oo

qgistrict court's oraer requiring

this appeal.

Appellee’s alternative request to

expedite the appeal is granted.

Appellant’s opening brief and excerpts of

record are due October pk 1994;

appellee’s brief is due October 24, 1994;

he reply brief

No extensions of time shall be

granted absent a written showing of

xtraordinary and compelling

circumstances. Sth Cir. R. 31-2.3.

Appellant shall monitor the issuance of

37a

38a

(STAMP)

FILED

JUN 7, 1995

CATHY A. CATTERSON, CLERK

U.S. COURT OF APPEALS

NOT FOR PUBLICATION

UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

IN RE: GRAND JURY

SUBPOENA ISSUED TO

CHARLES D. BAILIN

EDWARD SILVA, JR; No. 94-16684

SILVA HARVESTING

INC.; EDWARD O.C.

ORD, INC.; and

ORD & NORMAN,

i el

D.C. No.

DV-94-7008-WAI

Appellants,

Vv.

UNITED STATES

OF AMERICA, ORDER

Appellee.

Before: WALLACE, Chief Judge, PREGERSON

and BEEZER, Circuit Judges

The panel has voted to deny the

petition for rehearing and to reject the

suggestion for rehearing en banc.

The full court has been advised of

39a

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This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.