The opinion of the court was delivered by: CONNER
On July 15, 1975, two attorneys associated with Hogan & Hartson, Esqs., a Washington, D.C.-based law firm, appeared before a Special Grand Jury that was charged with investigating suspected securities manipulations by International Controls Corp. (ICC) and Investors Overseas Services, Ltd. (IOS). In response to a subpoena duces tecum dated November 26, 1974, the Hogan & Hartson attorneys submitted all documents described in the subpoena to be marked for identification as Grand Jury exhibits. The attorneys nonetheless refused to cede certain of those documents for Grand Jury inspection or to testify to their contents, contending that attorney-client and work-product privileges barred them from doing so. The United States Attorney thereupon applied to this Court for an order to compel production of the documents and rendition of the testimony thus withheld.
The Grand Jury exhibits at issue consist of notations and memoranda recording interviews and discussions held during a series of meetings that spanned the period from October 1972 to January 1973; the sessions thus memorialized had been prompted by a Securities and Exchange Commission (SEC) investigation, and subsequent civil action, focused upon suspected broad-ranging and highly sophisticated securities-fraud schemes involving a multitude of individuals and corporations.
These documents, delivered to the Court for in camera examination, include the following:
a) Grand Jury Exhibit 3, consisting of handwritten notes taken by Arthur J. Rothkopf, an attorney associated with Hogan & Hartson, at a meeting held in the ICC New Jersey offices on October 9, 1972. The notes recorded, inter alia, statements made by Robert L. Vesco, a named respondent in the above-mentioned SEC investigation. But for a brief hiatus that ended on October 9, 1972, Vesco held a variety of principal positions with ICC, both as an officer and as a director, during the period from 1966 to 1973; Vesco was later to be named as an individual defendant in the SEC complaint filed on November 27, 1972, in the Southern District of New York. Also present at the meeting were additional Hogan & Hartson attorneys, officers and directors of ICC, and Howard Cerny, the latter subsequently named a defendant in the SEC action.
b) Grand Jury Exhibits 1 and 1-A, consisting, respectively, of handwritten notes and a typewritten memorandum executed by Alfred J. Dougherty, a Hogan & Hartson attorney. The notes, and the memorandum based upon them, recorded, inter alia, statements made by Norman LeBlanc at a meeting held in Nassau, the Bahamas, on October 28, 1972; LeBlanc, an IOS officer and director from 1970 to the spring of 1972, had been a subject of the SEC investigation and was later to be named an individual defendant in the SEC civil action. Also present at the meeting were another Hogan & Hartson attorney; members of the law firms Paul, Weiss, Rifkind, Wharton and Garrison (Paul, Weiss), then representing Vesco; Steptoe & Johnson and Willkie, Farr and Gallagher, both firms at that time representing IOS; and several individuals who were then targets of the SEC investigation and who were subsequently named as defendants in the SEC complaint.
c) Grand Jury Exhibits 2 and 2-A, consisting, respectively, of handwritten notes and a typewritten memorandum again executed by Dougherty, recording statements made by Stanley Graze at a meeting held in Nassau on December 5, 1972; Graze, a portfolio manager for a number of mutual funds managed by IOS, was among the named individual defendants in the SEC civil action. Also present at the interview was an attorney associated with Steptoe & Johnson.
d) Grand Jury Exhibits 4 and 4-A, consisting of handwritten notes and a typewritten memorandum executed by Sherwin J. Markman, a Hogan & Hartson attorney, recording statements made by Vesco at a meeting held in New York on December 6, 1972. Paul, Weiss attorneys were also present at the interview.
e) Grand Jury Exhibits 5 and 5-A, consisting of handwritten notes and a typewritten memorandum, again executed by Markman, recording statements made by Vesco at a meeting held in Nassau on December 22, 1972. A Paul, Weiss attorney was also present at the interview.
f) Grand Jury Exhibit 6, consisting of a typewritten memorandum executed by Merle Thorpe, Jr., a Hogan & Hartson attorney, recording a discussion between the latter and Vesco in Washington, D.C., on January 10, 1973.
The Government's application with respect to the above documents is uniformly opposed by Vesco, LeBlanc, and Graze,
through their respective counsel, as well as by Hogan & Hartson. That opposition rests principally on the claim of attorney-client privilege. Under the circumstances of this case, such claim cannot succeed unless 1) the attorney-client privilege may be deemed to attach to communications made in the course, and for the advancement, of a joint defense undertaken by and for independently represented clients, 2) the statements and comments by Vesco, LeBlanc, and Graze were in fact designed to develop or further a joint defense, and 3) the documents recording those communications, if in the first instance thus cloaked by the privilege, have not been divested thereof by virtue of any waiver of that privilege.
This Court begins its inquiry mindful, as it must be, that the attorney-client privilege both serves and disserves the administration of justice. Thus, on the one hand, confidences between a client and his counsel need be preserved lest the course of legal representation founder in the absence of the client's "subjective freedom of mind * * * in seeking legal advice." 8 J. Wigmore, Evidence § 2317 (McNaughton rev. ed. 1961); In re Colton, 201 F. Supp. 13, 15 (S.D.N.Y. 1961). Nevertheless, at the same time, there remains the competing principle that the public is entitled "to every man's evidence." 8 Wigmore, supra, § 2192 at 70.
The tension between both principles, always pressing whatever the legal context, is perhaps exacerbated in cases such as the present one. Thus, as the Supreme Court recently observed, in Branzburg v. Hayes, 408 U.S. 665, 688, 33 L. Ed. 2d 626, 92 S. Ct. 2646 (1972),
"[because] its task is to inquire into the existence of possible criminal conduct and to return only well-founded indictments [a grand jury's] investigative powers are necessarily broad. * * * Although the powers of the grand jury are not unlimited * * *, the longstanding principle that 'the public * * * has a right to every man's evidence,' except for those persons protected by a constitutional, common-law, or statutory privilege, * * * is particularly applicable to grand jury proceedings."
This Court, then, is perforce placed in the role of mediator, charged with ensuring that there be no abuse done by or to the privilege, on the one hand, or the necessarily expansive range of the grand jury inquest, on the other.
The sine qua non of the attorney-client privilege is, of course, a confidence reposed -- and effectively imposed -- for the purpose of obtaining or furthering legal assistance. It therefore must follow, and in general principle it is universally acknowledged, that communications between a client and his counsel in the presence of a "third party," i.e., one who stands in a neutral or adverse position vis-a-vis the subject of the communication, bespeaks the absence of such confidentiality and thus belies any subsequent claim to the privilege. See, e.g., C. McCormick, Evidence § 91 at 188 (2d ed. 1972); Wigmore, supra, § 2311 at 601-03; Annotation, 141 A.L.R. 553 (1942); cf. In re Horowitz, 482 F.2d 72 (2d Cir. 1973); United States v. Tellier, 255 F.2d 441, 447-48 (2d Cir. 1958).
Those cases in which the privilege has been sustained in relation to communications among, or made in the presence of, two or more lay persons and one or more attorneys may be regarded as clarifications of, rather than exceptions to, the rule set forth above. Thus, for example, where there is consultation among several clients and their jointly retained counsel, allied in a common legal cause, it may reasonably be inferred that resultant disclosures are intended to be insulated from exposure beyond the confines of the group; that inference, supported by a demonstration that the disclosures would not have been made but for the sake of securing or supplying legal representation, will give sufficient force to a subsequent claim to the privilege. United States v. United Shoe Machinery Corporation, 89 F. Supp. 357 (Mass. 1950); see McCormick, supra, § 91 at 189; 8 Wigmore, supra, § 2312 at 603 & n.1.
To be sure, what is divulged by and to the clients present at such a meeting cannot be deemed to be confidential inter sese ; in any later controversy between or among those clients, the privilege could not stand as a bar to full disclosure at the instance of any one of them.
See, e.g., Grand Trunk Western R.R. Co. v. H. W. Nelson Co., 116 F.2d 823, 835 (6th Cir. 1941); McCormick, supra, § 91 at 189-90; 8 Wigmore, supra, § 2312 at 605-06; cf. Garner v. Wolfinbarger, 430 F.2d 1093, 1103 (5th Cir. 1970). Nonetheless, in the absence of such event and in relation to the rest of the world, the attorney-client communications issuing from such a joint conference are invested with an absolute secrecy.
The Government urges here that the privilege attending joint conferences does not extend to the present case, i.e., where statements have been made, ostensibly for the advancement of a common defense, in the presence of co-defendants or potential co-defendants and their independently retained attorneys. In support of its contention, the Government cites a number of cases involving communications between defendants and their co-defendants' counsel in which claims to the privilege have been disallowed, see Smale v. United States, 3 F.2d 101 (7th Cir. 1924); Leonia Amusement Corp. v. Loew's, Inc., 13 F.R.D. 438 (S.D.N.Y. 1953); State v. Hodgdon, 89 Vt. 148, 94 A. 301 (Vt. 1915); Vance v. State, 190 Tenn. 521, 230 S.W.2d 987 (Tenn.), cert. denied, 339 U.S. 988, 94 L. Ed. 1389, 70 S. Ct. 1010 (1950). Those cases, however, do not determine the joint defense issue now before this Court, for in none was there demonstrated to have been a joint defense in fact -- or, therefore, an attendant confidentiality -- upon which the attorney-client privilege might arguably have been based.
Indeed, the guidance of precedent in this precise area is rather unexpectedly spare. This is not to say, however, that decisional precedent is wholly lacking. Thus, the Ninth Circuit's opinions in Continental Oil Company v. United States, 330 F.2d 347 (9th Cir. 1964), and Hunydee v. United States, 355 F.2d 183 (9th Cir. 1965), are particularly instructive.
In Continental Oil, subpoenas duces tecum served upon respective counsel for Standard Oil and Continental Oil Companies ordered the production before a Grand Jury of certain memoranda recording counsels' interviews with Standard and Continental employees. The interviews had been conducted both prior to and after those employees' appearances before the Grand Jury, then investigating the companies' activities. Counsel for Standard had interviewed Standard's employees, who were also their individual clients; counsel for Continental had interviewed the Continental employees, also their individual clients. In anticipation of possible litigation involving jointly their respective individual and corporate clients, and as preparation therefor, the attorneys exchanged copies of the memoranda.
Motions to quash the subpoenas were denied by the district court. On appeal, the Ninth Circuit reversed, ruling that the attorney-client privilege placed the memoranda beyond the Grand Jury's reach. The exchange of documents between the Standard and Continental attorneys, the appellate court concluded, had not destroyed the confidence in which those documents had originally been prepared. That conclusion was in large measure impelled by the force of the following language from a Minnesota trial court opinion written some two decades earlier and echoed by the Continental court:
"Where an attorney furnishes a copy of a document entrusted to him by his client to an attorney who is engaged in maintaining substantially the same cause on behalf of other parties in the same litigation, * * * the communication is made not for the purpose of allowing unlimited publication and use, but in confidence, for the limited and restricted purpose to assist in asserting their common claims. * * * For the occasion, the recipient of the copy stands under the same restraints arising from the privileged character of the document as the counsel who furnished it * * *. [ Schmitt v. Emery, 211 Minn. 547, 2 N.W. 2d 413 (Minn. 1942).]"
The Government herein argues that Continental and kindred cases are not square with our own. But the divergence underscored by the Government, although perceptible to be sure, is nonetheless not critical. In Continental, a privilege concededly once established was ruled not to have been waived; in the present case, by contrast, the very genesis of the privilege is itself at issue. But, in practical terms, the dissimilarity between the two cases pares down to nothing more than the factual difference between disclosures made indirectly and disclosures made directly. If the attorney-client privilege may properly be retained under the former circumstance, its initial availability surely is no less reasonable under the latter.
The Ninth Circuit itself is clearly in accord with the above conclusion. Thus, in Hunydee v. United States, supra, the privilege was ruled to cover communications made during a joint conference among two parties, both at the time under Grand Jury investigation, and their respective counsel. Noting that those communications had the purpose and effect of "[influencing] the course of [the respective attorneys'] representation," the Hunydee court concluded that its own case was entirely receptive to the rule prescribed by Continental, i.e., that
"where two or more persons who are subject to possible indictment in connection with the same transactions make confidential statements to their attorneys, these statements, even though they are exchanged between attorneys, should be privileged to the extent that they concern common issues and are intended to facilitate representation in possible subsequent proceedings." 355 F.2d at 185. Thus, the Hunydee opinion -- specifically addressed to a joint conference situation -- confirmed that the "exchange between attorneys," within the comprehension of the rule set forth above, might equally be effected through the clients' direct communication as well as through the attorneys' reciprocal transfer of documents recording such communications. See Pettibone Corp. v. Caterpillar Tractor Co., 1974-2 Trade Cas. P 75,419 at 98,383-84 (D.C. Neb. 1974).
Although the Ninth Circuit's rulings, supra, are not necessarily binding here, this Court is persuaded that those rulings are logically consistent with the policy underlying the attorney-client privilege and I thus elect to follow them; at least one decision in this District has intimated a similar disposition. See Transmirra Products Corp. v. Monsanto Chemical Co., 26 F.R.D. 572, 576-77 (S.D.N.Y. 1960).
The privilege is, after all, born of the law's own complexity. The layman's course through litigation must at least be evened by the assurance that he may, without penalty, invest his confidence and confidences in a professional counsellor. See United States v. Kovel, 296 F.2d 918, 921 (2d Cir. 1961). That assurance is no less important or appropriate where a cooperative program of joint defense is helpful or, a fortiori, necessary to form and inform the representation of clients whose attorneys are each separately retained. Hence the following observations, in dicta issuing a century ago from a Virginia appellate court:
"The parties were jointly indicted for a conspiracy * * *. They might have employed the same counsel, or they might have employed different counsel as they did. But whether they did the one thing or the other, the effect is the same, as to their right of communication to each and all of the counsel, and as to the privilege of such communication. They had the same defence to make, the act of one in furtherance of the conspiracy, being the act of all, and the counsel of each was in effect the counsel of all * * *. They had a right, all the accused and their counsel, to consult together about the case and the defence, and it follows as a necessary consequence, that all the information, derived by any of the counsel from such consultation, is privileged * * *."
Chahoon v. The Commonwealth, 62 Va. (21 Gratt) 822, 841-42 (1871).
For the reasons stated above, I conclude that the attorney-client privilege covers communications to a prospective or actual co-defendant's attorney when those communications are engendered ...