Mohawk Industries, Inc. v. Carpenter

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Argued October 5, 2009. Decided December 8, 2009.

Authorship: Jake Phillips of Berkeley Law School (with Akin Gump's Jonathan Eisenman analysing the opinion)

Docket: 08-678

Issue: Whether a party may immediately appeal a discovery order to disclose materials said to be covered by the attorney-client privilege.

Contents

Briefs and Documents

Decision

AFFIRMED in an opinion by Justice Sotomayor. (December 8, 2009)

Oral Argument

Transcript(October 5, 2009)

Merits Briefs

Amicus Briefs

Cetiorari-Stage Documents

Opinion Recap

On December 8, the Court issued its opinion—the first authored by Justice Sotomayor—in Mohawk Industries, Inc. v. Carpenter. Resolving a split among the courts of appeals, the Court held that an order requiring the disclosure of information protected (arguably) by the attorney–client privilege is not immediately appealable under the collateral order doctrine. The collateral order doctrine, progeny of the Court’s ruling in Cohen v. Beneficial Industrial Loan Corp., allows for the immediate appellate review of an order that fulfills three criteria: first, the order must conclusively determine the disputed question; second, it must resolve an important issue completely separate from the merits of the case; and third, the order must be effectively unreviewable, were a party to wait for the final judgment in a case. Concluding, as did the Eleventh Circuit, that an order requiring the disclosure of allegedly privileged information can manageably be reviewed on appeal from a final judgment, the Court held that the collateral order doctrine does not allow the immediate appeal of such an order.

The facts of the case are straightforward. Mohawk was born of two separate lawsuits. In one, a group of employees sued Mohawk Industries over an alleged conspiracy to drive down their wages by knowingly hiring lower-paid undocumented workers. Without knowledge of that lawsuit, Carpenter allegedly complained to Mohawk’s human resources department about the company’s employment of undocumented aliens. Mohawk sent Carpenter to talk to the counsel defending the employees’ suit, and Carpenter alleged that the attorney pressed him to recant his accusations. Carpenter claimed that he refused to recant, and Mohawk terminated him as a result. So began the second case, in which Carpenter sued Mohawk. The plaintiffs in the wage suit, having learned of the alleged reason for Carpenter’s termination, sought an evidentiary hearing on the matter in their litigation. Opposing such a hearing, Mohawk raised issues grounded in Carpenter’s communication with Mohawk’s counsel. This, in turn, led Carpenter to demand the production of information related to his meeting with Mohawk’s counsel. When Mohawk asserted the privilege against Carpenter, the district court deemed it waived as a result of Mohawk’s representations in the wage suit. Seeking appellate review via the collateral order doctrine, Mohawk sought to prevent the disclosure of the arguably privileged communications. The Eleventh Circuit found the first two Cohen criteria satisfied, but not the third: Mohawk’s position could be vindicated on appeal from a final judgment through, e.g., an order remanding the case for re-trial, sans the improperly disclosed information.

Writing for seven of her colleagues (Justice Thomas concurred in the judgment and in one part of opinion), Justice Sotomayor recognized the historical importance of the attorney-client privilege. But notwithstanding the importance of the interest protected by the privilege, the question remains whether “deferring review until final judgment so imperils the interest as to justify the cost of allowing immediate appeal of the entire class of relevant orders.” The majority observed that other “rights central to our adversarial system” cannot be vindicated on appeal until after a final judgment, such as the appeal of an order disqualifying one’s counsel in either a civil or a criminal case. The disclosure of privileged information, the majority concluded, can be remedied on appeal in the same way that other erroneous evidentiary rulings can be corrected. Moreover, the majority was skeptical of the proposition that allowing disclosures to go unaddressed until after a final judgment would chill clients’ willingness to speak freely with their attorneys; it reasoned that “clients and counsel are unlikely to focus on the remote prospect of an erroneous disclosure order, let alone the timing of a possible appeal,” when deciding what information to share with one another. And whether an appeal is interlocutory or post-judgment, orders requiring the disclosure of information—whether because a party waived the privilege or the privilege never actually applied—are reviewed with a great deal of deference to the trial court. It is that fact, and not the timing of a possible appeal, for which parties must account in their dealings with counsel.

In any event, the majority observed, parties have other ways to avoid the disclosure of arguably privileged information: they can, for example, seek certification for interlocutory review under 28 U.S.C. 1291; in extraordinary circumstances, seek a writ of mandamus; ignore an order, incur sanctions, and seeking review later; or ignore an order, suffer a punitive contempt sanction, and immediately appeal that. With these factors all weighed in the balance, the majority concluded, the limited benefits of allowing interlocutory appeals like Mohawk’s are outweighed by the burden that hearing such appeals would place on the courts.

Finally, in the portion of the opinion joined by all nine Justices, the Court added that the expansion of the class of orders subject to interlocutory appeal would best be done, if at all, by promulgation of a rule. The 1990 amendments to the Rules Enabling Act allow the Court to promulgate just such a rule; in light of that alternative, acting through a judicial opinion would be, in the Court’s eyes, an inferior method of proceeding. For precisely that reason, Justice Thomas, while concurring with the result, deemed the rest of the majority’s opinion harmful surplusage. If the policy of determining which orders should be subject to interlocutory appeal is best served by rulemaking, he contended, there is no reason for the Court to opine on the merits of one particular type of interlocutory appeal—and given the weight that could be placed on the majority’s opinion in any subsequent rulemaking, the Court should have begun and concluded by pointing to its rulemaking authority and refusing to go further.

Oral Argument Recap

At oral argument in Mohawk Industries, Inc. v. Carpenter, the primary issue came down to whether the attorney-client privilege is sufficiently important to warrant interlocutory appeal when balanced against the policy interests of the finality rule. The Court also questioned the practical effects of granting an interlocutory appeal in the present case as well as whether it was necessary in light of Section 1292(b).

Justices Scalia and Sotomayor led with a line of questioning analogizing the attorney-client privilege to other privileged communications, such as trade secrets. Why is anti-disclosure in this context more important than in others? And why couldn’t the privileged disclosures here be preserved in the same way as trade secrets that are revealed in the course of litigation – that is, by issuing a protective order limiting access to counsel? Justice Breyer extended the trade secret analogy to include other protected communications such as those of spouses or psychiatrist and patient, again asking why these privileges are less important than the attorney-client privilege. Petitioner’s counsel, Mr. Randall L. Allen, explained that for other kinds of privileged communications, the harm can be mitigated by limiting access to counsel (e.g., if the secret formula for Coke is disclosed to the opposing counsel, no real harm is done so long as the attorney does not reveal the secret formula to his clients at Pepsi); but for attorney-client privilege cases, the harm comes from revealing the privileged communication specifically to the opposing counsel. Without reliable protection of the attorney-client privilege, the adversary system in this country, which depends on open and frank communication between a lawyer and his client, would be undermined. Chief Justice Roberts asserted that lack of such openness would undermine the very rule of law. But Justice Sotomayor questioned the practical effect of affording the attorney-client privilege special protection in this case since other exceptions would still exist and therefore “the damage is already done.” Justice Scalia echoed these sentiments.

Justice Ginsburg questioned whether it was necessary to extend Cohen to grant an interlocutory appeal in the present case given that Section 1292(b), which was enacted after Cohen, now provides similar protection. Moreover, the second Cohen factor is likely to be implicated in most attorney-client privilege cases because such a question is usually (even if not here) “fact-bound.” Finally, Ginsburg drew a distinction between Cohen and the present case, noting that there the interlocutory appeal could have brought an end to the lawsuit, whereas here the suit will go on regardless of whether the interlocutory appeal is granted.

Justice Ginsburg also raised the practical argument that permitting such appeals as the present one could potentially open the appellate courts to a flood of interlocutory appeals. When Ms. Judith Resnik made a similar argument later for the respondent, however, Justice Alito countered that in his eight years on the Third Circuit, which allows interlocutory appeals of this kind, he didn’t remember a single case involving this issue. Mr. Allen asserted that there have only been eleven such appeals in all three of the circuits that allow them.

Finally, Chief Justice Roberts questioned the respondent’s argument that the disobedience and contempt option provides a sufficient alternative because such a course would lead an attorney to face the difficult question of whether to violate an ethical obligation or go to jail. The Chief Justice also seemed to give considerable weight to the amicus brief filed by the American Bar Association in support of petitioner, in which the ABA argued that denying interlocutory appeal in the present case would undermine the attorney-client privilege.

Pre-Argument Articles

Under the collateral order doctrine, interlocutory appeals are permitted only when the three criteria established by the Court in Cohen v. Beneficial Industrial Loan Corp. are met – viz., (1) the district court order has conclusively determined the issue, (2) the issue is both important and collateral to (i.e. separate from) the merits, and (3) the issue would be effectively unreviewable upon appeal from a final decision. On October 5, 2009, in No. 08-678, Mohawk Industries, Inc. v. Carpenter, the Court will consider whether a district court’s order to waive the attorney-client privilege to compel production of privileged materials is immediately appealable under the collateral order doctrine.'

Argument Preview

Merits Briefing

In its brief on the merits, Mohawk expands on the arguments made in its petition for certiorari. First, it emphasizes that the collateral order doctrine is not so much an exception to the final decision rule as a “practical construction” of it, permitting interlocutory appeals for a narrow class of decisions that are treated as final even though they do not end the litigation. Crucial to this analysis is comparing the importance of the legal right at issue—here, the attorney-client privilege—with the efficiency arguments militating against an interlocutory appeal.

Second, Mohawk reiterates that the district court’s discovery order satisfies the three Cohen factors. The brief again emphasizes both the importance of the issue and the extent to which it is distinct from the merits, asserting that it is “well-settled that the attorney-client privilege plays an essential and foundational role in the American legal system” and that a court could “resolve the privilege issues . . . without deciding the merits of the case.” As to the third Cohen factor, Mohawk emphasizes that the district court’s order is effectively unreviewable after a final judgment because “there is no way to unscramble the egg scrambled by the disclosure.” The knowledge gained by the opposing counsel cannot be erased, so it could still be used to develop evidentiary leads, make strategic decisions, and generally aid in litigation efforts even if it is no longer admissible in the courtroom.

Third, Mohawk emphasizes that neither “disobedience and contempt” nor mandamus provide adequate alternatives to the collateral order doctrine. Since immediate appeal is only available following a finding of criminal contempt, a policy of relying on disobedience to safeguard the attorney-client privilege encourages parties to “affirmatively seek” criminal sanctions, which is undesirable. Mandamus also falls short both because its standard of review is too limited to be effective and because the very availability of the collateral order doctrine necessarily precludes mandamus, which is an option only when there is no other remedy.

Finally, Mohawk argues that allowing interlocutory appeals for this narrow class of cases would not open the floodgates to a high volume of appeals. Indeed, it emphasizes that although collateral order review is available for such cases in three circuits, the number of such appeals has in fact been extremely low.

In his merits brief, Carpenter first argues that the Court has consistently rejected immediate appeals from pretrial orders relating to discovery, privilege, and the attorney-client relationship.

Second, he reiterates (and augments) an argument he made in opposing certiorari – that pretrial orders in this context are not immediately appealable under the Cohen test. The district court has not “conclusively” decided the issue, because contempt proceedings offer the chance for a “second look” at the question. Moreover, regardless of the facts of this specific case, appealability depends on the entire category of cases, in which waiver of the attorney-client privilege is often intertwined with the merits. As to the “importance” of the issue, Carpenter questions whether the attorney-client privilege is more important than, for example, constitutional issues for which the Supreme Court has denied immediate appeals.

Third, Carpenter points out the circularity of Mohawk’s argument regarding mandamus. That is, if the collateral order doctrine is not available, mandamus can step in as a substitute precisely because it is only available when there is no other remedy. He also explains that 28 U.S.C. § 1292(b) provides an additional safety valve of “early appellate determination” for certain unusual cases concerning the attorney-client privilege.

Finally, Carpenter argues that expanding the Cohen doctrine would be a “slippery slope” with no limiting principle. Contrary to the arguments made by Mohawk, such an expansion has in fact proven “unworkable” in the three circuits where it has been applied.

The United States filed an amicus brief in support of Carpenter, which crystallizes two main points. First, the collateral order doctrine is extremely limited in scope and should only apply to sufficiently compelling public interest issues, such as constitutional questions. Second, discovery orders requiring disclosure of privileged materials do not, as a class, rise to the necessary level of public interest. Holding that they do rise to such a level could lead to costly and unwarranted threats of appeal. Moreover, such orders—again, as a class—do not satisfy the second and third Cohen factors because they usually require scrutiny of the underlying dispute, “a sufficient number of such orders are enmeshed in the merits,” and a number of effective remedies are available upon appeal from a final judgment. Finally, certain privileges, such as those protecting Presidential communications and state secrets, do implicate a sufficient public interest concern so as to qualify for immediate appeal under the collateral order doctrine even though the attorney-client privilege does not.

Grant Write-Up

Background

In March 2007, respondent Norman Carpenter filed this lawsuit after he was fired by petitioner Mohawk Industries. Carpenter contends that he was let go because he refused to recant a report indicating that many of Mohawk’s temporary employees were illegal aliens; the report could have been damaging to Mohawk, which was the defendant in a class action suit pending at that time. Mohawk, on the other hand, claims that Carpenter urged the company to hire a particular illegal worker, which he justified by stating that “90% of the people that come through the temp do not have good papers.” Mohawk conducted an internal investigation, during which Carpenter was interviewed by an outside attorney who was also representing Mohawk in the class action suit. Shortly thereafter, Mohawk fired Carpenter, who then brought suit against the company for conspiring to deter him by intimidation or threat from providing truthful testimony in the pending class action suit, under 42 U.S.C. § 1985(2) and various Georgia laws.

During discovery, Carpenter filed a motion to compel information related to his interview with Mohawk’s outside counsel during the internal investigation and Mohawk’s subsequent decision to terminate his employment. The district court ordered Mohawk to provide the information, concluding that although the information was protected by the attorney-client privilege, Mohawk had waived that privilege when it put the attorney’s actions “in issue” in a response it filed in the class action case.

Mohawk filed an interlocutory appeal, which the Eleventh Circuit dismissed for lack of jurisdiction. Acknowledging a circuit split on the issue, the court held that Mohawk’s challenge satisfied the first two factors of the collateral order doctrine, but that the third was not met because the discovery order at issue could effectively be reviewed upon appeal from a final judgment.

Mohawk filed a petition for certiorari, which was granted on January 26, 2009.

Petition for Certiorari

In its petition, Mohawk identified three primary reasons for granting certiorari. First, there is a clear circuit split on this issue, with three circuits favoring application of the collateral order doctrine in similar circumstances and seven (including the Eleventh Circuit in this case) opposing it. Second, the issue raises an important question for which other avenues of review—such writs of mandamus—are insufficient. Third, the district court’s order satisfies all three Cohen factors.

Carpenter’s brief in opposition urged that the Court deny certiorari for three reasons. First, the collateral order doctrine only applies to a very narrow class of cases, which does not include discovery orders related to the attorney-client privilege. Moreover, the issue does not create a significant circuit split because the three minority decisions “effectively ignored this Court’s admonitions about expanding the Cohen doctrine.” Second, the question is not sufficiently important to justify interlocutory review because the attorney-client privilege is already “fully and completely” protected by other means. Third, the district court’s discovery order is not immediately appealable because it fails to satisfy the second and third Cohen factors.

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