United States Court of Appeals For the First Circuit

No. 99-1788

FEDERAL DEPOSIT INSURANCE CORPORATION, AS SUCCESSOR IN INTEREST TO NEW ENGLAND MERCHANTS LEASING CORPORATION, ETC.,

Plaintiff, Appellee,

v.

OGDEN CORPORATION, ET AL.,

Defendants, Appellants.

APPEAL FROM THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF MASSACHUSETTS

[Hon. Richard G. Stearns, U.S. District Judge]

Before

Selya, Circuit Judge,

Bownes, Senior Circuit Judge,

and Boudin, Circuit Judge.

James W. Stoll, with whom M. Frederick Pritzker and Brown, Rudnick, Freed & Gesmer were on brief, for appellants. Thomas C. Bahlo, with whom Ann S. DuRoss, Assistant General Counsel, Robert G. McGillicuddy, Supervisory Counsel, R. Alan Fryer, and Peabody & Arnold LLP were on brief, for appellee. February 7, 2000 SELYA, Circuit Judge. The district court ordered a law

firm, Dickstein, Shapiro, Morin & Oshinsky, LLP ("Dickstein"),

not itself a party to the underlying action, to produce

documents that the appellants, Ogden Corporation and Ogden

Martin Systems of Haverhill, Inc. (collectively, "Ogden"), claim

are within the attorney-client privilege. The appellee, Federal

Deposit Insurance Corporation ("FDIC"), asserts that the so-

called "joint client exception" trumps the privilege and, thus,

legitimates the order. After providing necessary context,

surmounting a jurisdictional obstacle, and charting the

parameters of both the privilege and the exception, we affirm

the turnover order.

I. BACKGROUND

In 1978, Citicorp North America, Inc. ("Citicorp") and

New England Merchants Leasing Corp. ("NEMLC") formed a general

partnership ("SBR Associates") to develop a refuse-to-energy

facility in Haverhill, Massachusetts. Each nominated a wholly-

owned subsidiary to serve as a general partner: CIC Omega

Lease, Inc., for Citicorp, and NEMLC Alpha, Inc., for NEMLC. In

the early 1980s, the partners (hereinafter, with their parents

and successors, sometimes collectively called "the banks")

designed and built the facility and leased it to an independent

operator, Refuse Fuels, Inc. ("RFI"), on condition that RFI

-3- purchase insurance policies ("the efficacy insurance") to

protect against operational glitches leading to shortfalls in

revenue.

The hedge proved prudent; from the moment that the

facility went on line, it was plagued with problems. In an

effort to protect their investment, the banks terminated the

arrangement with RFI and brought Ogden into the venture. The

details of the transaction are unimportant at this juncture,

save to say that by virtue of a series of complicated

agreements, Ogden acquired the banks' interests in SBR

Associates and assumed sole control of the business on December

23, 1986.

The operational difficulties that the facility

encountered had given rise to claims under the efficacy

insurance, and the parties sought to tie up this loose end.

They entered into a specific agreement ("the restated assignment

agreement") with regard to those claims. Under that agreement,

Ogden was to direct the recovery effort against the efficacy

insurers and pay portions of the realized proceeds (net of fees

and expenses) to the banks. Betimes, Ogden would keep the banks

apprised of progress. Finally, the agreement contained a

mechanism whereby the banks could redeem Ogden's interest and

take direct control of the recovery effort should Ogden wish to

-4- consummate a settlement with the efficacy insurers that the

banks deemed unacceptable.

Ogden retained Dickstein to handle the claims against

the efficacy insurers. Meanwhile, it continued to operate the

Haverhill facility, incurring additional losses (which furnished

a basis for further insurance claims). The facility shut down

sometime in 1990. On January 6, 1991, NEMLC's parent company,

Bank of New England, N.A., was adjudged insolvent, and the FDIC

was appointed as receiver (thus becoming, in effect, successor

in interest to NEMLC and NEMLC Alpha).

By mid-1996, Dickstein had recovered $18,700,000 from

the efficacy insurers. On August 2, 1996, a Dickstein partner,

Leslie Cohen, wrote to the banks, notifying them of their

allocable shares of the funds collected. Both Citicorp and the

FDIC protested the proposed allocation, arguing that they were

being shortchanged and that the terms of the restated assignment

agreement were not being followed. Each demanded substantially

more money.1 Ogden balked. Dickstein continued to prosecute the

underlying litigation — at the time the parties submitted their

appellate briefs, the total amounts recovered on the insurance

1The crux of the dispute appears to be whether, under the restated assignment agreement, the parties are to share only the proceeds of claims accrued against the efficacy insurance as of the closing date of their transaction, or also the proceeds of claims that arose thereafter.

-5- claims exceeded $60,000,000 — but it refused to become entangled

in the internecine squabble over the allocation of the proceeds.

Citicorp and the FDIC sued Ogden in the district court

for breach of contract and unfair business practices. In due

course, the FDIC served Dickstein with a subpoena duces tecum

that, inter alia, commanded production of communications between

it and Ogden. Dickstein objected, citing the attorney-client

privilege. The FDIC moved to compel, contending that no

privilege attached because Dickstein had represented Ogden and

the banks jointly in connection with the litigation against the

efficacy insurers. The district court granted this motion by

endorsement. Ogden appealed the order, and the district court

stayed production pending resolution of the appeal.

II. APPELLATE JURISDICTION

There is a threshold issue here. Ogden premises

appellate jurisdiction on

, which provides for

jurisdiction over appeals taken from "final" decisions and

orders of the district courts. Since the order from which Ogden

purports to appeal does not conclude the litigation on the

merits, it is not final in the stereotypical sense. See United

States v. Metropolitan Dist. Comm'n,

(1st Cir.

1988). Nevertheless, some orders that do not themselves end

litigation are deemed final (and thus immediately appealable)

-6- under the collateral order doctrine. See Cohen v. Beneficial

Indus. Loan Corp.,

(1949).

To qualify for this sanctuary, an order must

conclusively resolve an important question distinct from the

merits and yet be unreviewable, as a practical matter, in a

conventional end-of-case appeal. See Cunningham v. Hamilton

County,

(1999); Swint v. Chambers County

Comm'n,

(1995). The compass of this exception

is "narrow," Quackenbush v. Allstate Ins. Co.,

(1996), and discovery orders generally are not thought to come

within it.2 See Insurers Syndicate for the Joint Underwriting

of Medico-Hosp. Prof'l Liab. Ins. v. Garcia,

(1st Cir. 1988).

One reason that most discovery orders do not fall

within the collateral order exception is because they do not

meet the "otherwise effectively unreviewable" requirement; the

2 At an earlier stage of this litigation, the FDIC filed a request for production of documents in Ogden's possession relating to the efficacy insurance litigation. See Fed. R. Civ. P. 34. Ogden objected to furnishing communications between it and Dickstein, asserting attorney-client privilege. The FDIC moved to compel production, and the district court granted the motion. We dismissed Ogden's attempted appeal without prejudice for want of appellate jurisdiction (though the disputed documents have yet to be produced). This is a perfect example of a discovery order that is not immediately appealable: Ogden, after all, can refuse to comply with the order and thus invite a finding of contempt (or some equivalent sanction).

-7- party resisting the discovery order "can gain the right of

appeal . . . by defying it, being held in contempt, and then

appealing from the contempt order, which would be a final

judgment as to [him]." Corporacion Insular de Seguros v.

Garcia,

(1st Cir. 1989). This praxis —

insisting upon disobedience followed by contempt as a condition

to reviewability — is commonly called the Cobbledick rule. See

Cobbledick v. United States,

(1940). The rule

serves efficiency interests because it encourages reflection

both by the party seeking discovery and by the party resisting

it. See 15B Charles Alan Wright, et al., Federal Practice and

Procedure § 3914.23, at 154 (2d ed. 1992).

The rationale underlying the Cobbledick rule is

distorted, however, when a discovery order runs to someone other

than an adverse party (a phenomenon that occurs when, say, a

court enforces a subpoena duces tecum served upon a non-party).

Since a third person "presumably lacks a sufficient stake in the

proceeding to risk contempt by refusing compliance," Church of

Scientology v. United States,

, 18 n.11 (1992), this

circumstance justifies a different approach. Under what has

been termed the Perlman rule, a discovery order addressed to a

non-party sometimes may be treated as an immediately appealable

final order vis-à-vis a party who claims to hold an applicable

-8- privilege. See id.; see also Perlman v. United States,

(1918). Courts frequently have invoked Perlman when a

client (who is herself a party or a grand jury target) seeks to

appeal an order compelling her attorney (who is neither a party

nor a target) to produce allegedly privileged materials. See,

e.g., In re Sealed Case,

(D.C. Cir. 1998); In

re Grand Jury Subpoenas,

(1st Cir. 1997);

Conkling v. Turner,

(5th Cir. 1989); In re

Grand Jury Subpoena Duces Tecum,

, 1036 n.3 (2d

Cir. 1984).

On its face, this appeal appears to fit the classic

Perlman mold: the FDIC directed a subpoena duces tecum at the

law firm (a non-party); the district court enforced the subpoena

and ordered the firm to produce the disputed documents;

compliance with that order will let the cat out of the bag, thus

rendering an end-of-case appeal nugatory; and the client,

although a party to the case, has no way of testing the order by

allowing itself to be held in contempt. In this sense, the

client (Ogden) is at the mercy of its quondam counsel, and an

immediate appeal offers the only vehicle by which it can gain

effective review of the privilege issue.

Despite this apparent match, we proceed with

circumspection. Some tension exists in our precedents as to

-9- whether the availability of immediate review in cases such as

this should be gauged by the Perlman rule or by the more

encompassing Cohen collateral order doctrine. In the past few

years, two different panels of this court have furnished

divergent answers to this question. Compare United States v.

Billmyer,

, 34 & n.1. (1st Cir. 1995), with In re

Grand Jury Subpoenas,

.

Although these decisions do not fit tongue in groove,

the distinction between them does not affect reviewability in

this case.3 Under either approach, a substantial privilege claim

that cannot effectively be tested by the privilege-holder

through a contemptuous refusal ordinarily will qualify for

immediate review if the claim otherwise would be lost. This is

such a case. Moreover (as we shortly shall explain), the scope

of review here essentially involves what are more nearly

categorized as clear-cut questions of law, reviewable no matter

whether the appeal is viewed through the lens of Cohen or

Perlman. Thus, Billmyer, fairly read and applied, does not

3 The principal difference lies in the fact the Perlman rule arguably contains no limitation on the scope of review, while review under the collateral order doctrine arguably is limited to "clear-cut legal error" as opposed to challenges that seek to test either factual determinations or the application of a settled legal rule to the particular facts. Billmyer,

. But, as the panel's actions in Billmyer evince, see

(addressing waiver issue on the merits), the scope-of- review limitation is flexible.

-10- remove the order sub judice from the class of orders that are

immediately appealable under In re Grand Jury Subpoenas and the

Perlman rubric.4 Consequently, we have jurisdiction to hear and

determine Ogden's appeal.

III. STANDARD OF REVIEW

Trial judges enjoy broad discretion in the handling of

interstitial matters, such as the management of pretrial

discovery. As a result, an appellate court will intervene in

such matters "only upon a clear showing of manifest injustice,

that is, where the lower court's discovery order was plainly

wrong and resulted in substantial prejudice to the aggrieved

party." Mack v. Great Atlantic & Pacific Tea Co.,

(1st Cir. 1989).

Ogden invites us to abandon this abuse-of-discretion

standard in favor of plenary review because the district court

granted the motion to compel by endorsement, without elaborating

upon its thinking. We decline the invitation. Although a lower

4 With regard to the tension between Billmyer and In re Grand Jury Subpoenas, we note that two recent developments favor the latter. Billmyer relied in part on In re Oberkoetter,

(1st Cir. 1980), a decision that this court subsequently overruled in In re Grand Jury Subpoenas,

n.2, 699. Billmyer likewise relied to some extent on the decision in In re Grand Jury Proceedings,

(5th Cir. 1994), a decision that the Fifth Circuit since has qualified or abandoned. See In re Grand Jury Subpoena,

, 384 n.11 (5th Cir. 1999), petition for cert. filed, ___ U.S.L.W. ___ (U.S. Dec. 20, 1999) (No. 99-1046).

-11- court's elucidation of its reasoning invariably eases the

appellate task, motions often are decided summarily. We have

thus far refused to insist upon a rigid rule to the contrary.

See, e.g., Camilo-Robles v. Hoyos,

(1st Cir.

1998), cert. denied,

(1999); Domegan v. Fair,

(1st Cir. 1988). While it is sometimes

necessary to remand for specific findings when confronted with

an opaque ruling, see, e.g., Francis v. Goodman,

(1st Cir. 1996); Pearson v. Fair,

(1st Cir.

1986) (per curiam), we are aware of no authority that would

allow us automatically to vary the standard of review depending

on whether a district court has taken the time to explain its

rationale. In all events, the question is academic here, as the

record before us permits a clear understanding of why the

district court ruled as it did.

IV. THE MERITS

In a discovery dispute, the burden to establish an

applicable privilege rests with the party resisting discovery.

See United States v. Construction Prods. Research, Inc.,

(2d Cir. 1996). If the privilege is established and

the question becomes whether an exception to it obtains, the

devoir of persuasion shifts to the proponent of the exception.

See McMorgan & Co. v. First Cal. Mortgage Co.,

,

-12- 701 (N.D. Cal. 1996). We look to Massachusetts law to determine

the scope of both the asserted privilege and the exception in

this case. See Fed. R. Evid. 501; 6 James Wm. Moore et al.,

Moore's Federal Practice § 26.47[4] (3d ed. 1999). As to

matters about which the Supreme Judicial Court of Massachusetts

has not spoken, we take a predictive approach and seek guidance

from other persuasive case law, learned treatises, and pertinent

public policy considerations. Cf. Blinzler v. Marriott Int'l,

Inc.,

(1st Cir. 1996) (endorsing such an

approach for use in diversity cases).

The privilege at issue here — the attorney-client

privilege — serves important ends. Its root purpose is "to

encourage full and frank communication between attorneys and

their clients and thereby promote broader public interests in

the observance of law and administration of justice." Upjohn

Co. v. United States,

(1981). The privilege

springs from the attorney-client relationship. In

Massachusetts, such a relationship comes into being "when (1) a

person seeks advice or assistance from an attorney, (2) the

advice or assistance sought pertains to matters within the

attorney's professional competence, and (3) the attorney

expressly or impliedly agrees to give or actually gives the

desired advice or assistance." DeVaux v. American Home Assur.

-13- Co.,

(Mass. 1983); accord Sheinkopf v.

Stone,

(1st Cir. 1991) (applying

Massachusetts law); Bays v. Theran,

(Mass.

1994). The privilege that attends the attorney-client

relationship "extends to all communications made to an attorney

or counsellor, duly qualified and authorized as such, and

applied to by the party in that capacity, with a view to obtain

his advice and opinion in matters of law, in relation to his

legal rights, duties and obligations." Hatton v. Robinson,

, 421 (Mass. 1833).

Despite its venerable provenance, the attorney-client

privilege is not absolute. One recognized exception renders the

privilege inapplicable to disputes between joint clients. See

Beacon Oil Co. v. Perelis,

(Mass. 1928).

Thus, when a lawyer represents multiple clients having a common

interest, communications between the lawyer and any one (or

more) of the clients are privileged as to outsiders but not

inter sese. See Eureka Inv. Corp. v. Chicago Title Ins. Co.,

(D.C. Cir. 1984); 8 John Henry Wigmore,

Wigmore on Evidence § 2312 at 603-09 (McNaughton rev. ed. 1961).

As one leading treatise explains,

When two or more persons, each having an interest in some problem, or situation, jointly consult an attorney, their confidential communications with the

-14- attorney, though known to each other, will of course be privileged in a controversy of either or both of the clients with the outside world, that is, with parties claiming adversely to both or either of those within the original charmed circle. But it will often happen that the two original clients will fall out between themselves and become engaged in a controversy in which the communications at their joint consultation with the lawyer may be vitally material. In such a controversy it is clear that the privilege is inapplicable.

1 Kenneth S. Broun et al., McCormick on Evidence § 91 at 335-36

(4th ed. 1992).

In determining whether parties are "joint clients,"

courts may consider multiple factors, including but not limited

to matters such as payment arrangements, allocation of

decisionmaking roles, requests for advice, attendance at

meetings, frequency and content of correspondence, and the like.

See McMorgan,

; In re Colocotronis Tanker

Secs. Litig.,

(S.D.N.Y. 1978); Connelly

v. Dun & Bradstreet, Inc.,

(D. Mass. 1982).

In addition, the joint client exception presupposes that

communications have been "made in the course of the attorney's

joint representation of a 'common interest' of the two parties."

Eureka,

. The term "common interest" typically

entails an identical (or nearly identical) legal interest as

opposed to a merely similar interest. See, e.g., McMorgan, 931

-15- F. Supp. at 701; NL Indus. v. Commercial Union Ins. Co.,

(D.N.J. 1992). Thus, the proponent of the

exception must establish cooperation in fact toward the

achievement of a common objective. See Shamis v. Ambassador

Factors Corp.,

(S.D.N.Y. 1999).

In this case, it cannot be gainsaid that Dickstein and

Ogden enjoyed an attorney-client relationship in respect to the

war being waged against the efficacy insurers. The record

attests that the banks also were Dickstein's clients in that

struggle. They, like Ogden, had a pecuniary interest in the

avails of the insurance — interests that were identical in

character (albeit different in amount). They, like Ogden,

desired to press for those proceeds, through litigation if

necessary. The banks pooled their interests with Ogden's and

authorized Ogden to secure the services of a law firm to mount

a unified offensive to prosecute their joint claims against the

insurers. The assistance that Ogden sought on behalf of itself

and the banks fell well within the purview of Dickstein's

professional competence, and Dickstein actually rendered the

desired services.

In undertaking the enterprise, Dickstein unequivocally

committed itself to joint representation. When it brought suit

against the efficacy insurers it entered an appearance not only

-16- for Ogden, but also for the wholly-owned subsidiary of NEMLC

(and it still represents both in that litigation). These

entries of appearance themselves constitute persuasive evidence

of a joint client relationship.

Dickstein's subsequent actions confirm that impression.

Early on (in February 1987), it wrote to both NEMLC and

Citicorp, describing an executive summary of the strategy that

it proposed to pursue on behalf of Ogden and the banks in the

unified litigation. The words "ATTORNEY CLIENT PRIVILEGED

COMMUNICATION" were emblazoned at the head of the first page of

each letter. The text of the letter sent to NEMLC (which was

materially identical to the one sent to Citicorp) stated in

relevant part:

This firm has been engaged to represent the beneficiaries of a proposed claim against the efficacy insurers covering the referenced Project. We have prepared a substantive Memorandum and Executive Summary detailing our review of the matter and the potential for recovery under the efficacy policies. Before we provide this material to you, however, in order to protect and maintain its privileged and confidential nature, we need to confirm, and obtain your acknowledgment, that with regard to the proposed efficacy claim, there exists, between New England Merchants Leasing Corporation ("NEMLC") and NEMLC Alpha Inc. on the one hand and this firm on the other, an attorney-client relationship. As you are aware, under the terms of the [restated assignment agreement], NEMLC and NEMLC Alpha Inc. stand to benefit from any recovery from

-17- the efficacy insurers. As such, we have been retained to represent the interests of NEMLC and NEMLC Alpha Inc. as well as all other beneficiaries under the referenced agreements.

The letter went on to request that the recipient "acknowledge

the applicability of the attorney-client privilege to our

relationship, and provide assurances that the contents of the

referenced documents, and any others prepared by this firm, will

be treated as confidential and not disclosed to anyone who is

not a 'client' of this firm in this matter." Finally, the

letter provided a means for signifying the recipient's agreement

to the formation of the attorney-client relationship. Both

NEMLC and Citicorp executed and returned copies of the

engagement letters to Dickstein, 5 which then furnished the

strategic assessment to them.

If more were needed — and we doubt that it is — a

surfeit of other evidence indicates the existence of a joint

attorney-client relationship. We offer three examples. The

record contains (1) copious notes taken by a Citicorp

representative during a telephone conference with Attorney

5 Ogden argues that Dickstein merely intended these engagement letters to protect certain documents from discovery by the efficacy insurers — but it has cited no respectable authority for this kind of "limited" or "nominal" attorney- client privilege, and we dismiss the notion out of hand. A law firm that says one thing and induces confidences as a result cannot later be heard to profess that it meant another.

-18- Leveridge (a Dickstein partner) on March 30, 1988, in regard to

litigation strategy; (2) copies of correspondence from Leveridge

to the banks asking for assistance in responding to discovery

requests and soliciting suggestions for dealing with the

efficacy insurers; and (3) a copy of a letter written by a

Dickstein lawyer, Paul Taskier, on September 16, 1991,

responding to an inquiry from Citicorp and furnishing a detailed

interpretation of the allocation provision contained in the

restated assignment agreement (an interpretation starkly at odds

with the interpretation that Dickstein urged upon the banks in

August of 1996).

This evidence points clearly and convincingly to a

joint client relationship. See Bays,

; DeVaux,

. The entries of appearance and the engagement

letters alone constitute powerful proof, and the correspondence

evinces a coordinated legal strategy sufficient to lead a

reasonable person standing in NEMLC's shoes to infer that

Dickstein had become its attorney. See Sheinkopf,

; Shamis,

. Courts customarily

determine the existence vel non of an attorney-client

relationship by evaluating whether the putative client's belief

that such a relationship existed was objectively reasonable

under all the circumstances. See Sheinkopf,

;

-19- Sky Valley L.P. v. ATX Sky Valley, Ltd.,

(N.D. Cal. 1993). Here, the reasonableness of the banks'

professed belief that Dickstein had become their attorney in

regard to the efficacy insurance litigation is manifest.

Ogden's attempt to persuade us to a different view

lacks force. It claims that no joint client relationship could

have been forged because of the uncertainty about the eventual

allocation of the litigation proceeds. This "intrinsic"

adversity, Ogden says, destroyed the requisite identity of

interests. See McMorgan,

(explaining that

mere similarity in interests is not enough to establish a joint

client relationship).

This argument is spun from whole cloth. At the crucial

time — the time when Dickstein and the banks tied the attorney-

client knot — no one had expressed the view that the allocation

provision in the restated assignment agreement was inscrutable,

and there was no reason to believe that the beneficiaries of the

insurance would part company when it came time to divide the

proceeds. For aught that appeared, Ogden's interest was

entirely congruent with NEMLC's and Citicorp's. No more was

exigible: the mere possibility of a future dispute did not

prevent the formation of a valid joint client relationship. See

Sky Valley,

.

-20- In a related vein, Ogden asseverates that even if a

joint client relationship initially existed, the relationship

was dissolved once it (and, presumably, Dickstein) realized that

its interests had become adverse to the banks. This

asseveration rests on a false premise. A joint attorney-client

relationship remains intact until it is expressly terminated or

until circumstances arise that readily imply to all the joint

clients that the relationship is over.6 See Flynt v. Brownfield,

Bowen & Bally,

(6th Cir. 1989). Here,

the record reveals no hint of any circumstances existing prior

to Dickstein's August 2, 1996 letter (proposing a particular

allocation of proceeds) from which the banks reasonably could

have inferred that their interests had become inimical to

Ogden's.

In sum, the FDIC has adduced substantial evidence to

support its assertion that Ogden and the banks sought and

6 Contrary to Ogden's importuning, Eureka does not stand for a different rule. There, the communications at issue were made after the interests of the joint clients diverged and their attorney, aware of the divergence, undertook separate representation of one client, distinct from the joint representation. See

. The court's holding addresses whether the content of these communications pertained to the common interest that formed the basis of the joint representation. See

We decline to read Eureka as holding that a joint client relationship evaporates whenever one client unilaterally determines that its interests have diverged from those of its co-clients.

-21- received legal advice from Dickstein with regard to a common

interest — the efficacy insurance litigation — thereby

establishing that all three had forged a joint attorney-client

relationship with Dickstein. See Sheinkopf,

;

Bays,

. Since that relationship remained whole

until the banks received Dickstein's letter of August 2, 1996,

the joint client exception to the attorney-client privilege

applies. See Beacon Oil,

. It follows

inexorably that the claim of attorney-client privilege is

impuissant with respect to documents generated on or before

August 2, 1996.7

Affirmed.

7 In its present posture, this appeal requires us only to pass upon Ogden's global claim of attorney-client privilege. To the extent (if at all) that other grounds for resisting production attach to particular documents (say, that a given item is wholly unrelated to Dickstein's representation of the joint clients' common interest or originated after August 2, 1996), the district court, in its discretion, may consider those objections and may, if necessary, review specific documents in camera.

-22-