The opinion of the court was delivered by: Oliver W. Wanger United States District Judge
MEMORANDUM DECISION AND ORDER GRANTING DEFENDANT DOWNEY BRAND'S MOTION FOR RECONSIDERATION (Doc. 222), DIRECTING CLERK OF COURT TO FILE AND DOCKET DOWNEY BRAND'S SECOND CORRECTED PRIVILEGE LOG, AND DIRECTING DOWNEY BRAND TO RETAIN PRIVILEGED DOCUMENTS FOR IN CAMERA REVIEW
Before the Court is Defendant Downey Brand LLP's motion for reconsideration of the "Memorandum Decision and Order Granting in Part and Denying in Part Plaintiffs' Motion to Compel Production of Discovery and For Sanctions (Doc. 104), Denying Defendant Downey Brand's Motion for Protective Order (Doc. 106), and Denying Defendant Downey Brand's Motion for Summary Judgment Against Plaintiff Valley Gold LLC on the Issue of Attorney-Client Privilege (Doc. 96)" filed on February 1, 2010 ("February 1 Memorandum Decision"). Specifically, Downey Brand seeks reconsideration of the denial of its invocation of the work- product doctrine in response to Plaintiffs' Requests for Documents Nos. 18-21. The February 1 Memorandum Decision ruled: Here, the contested materials were prepared for a securities offering and capital raising effort. There was then no prospect of or pending litigation. The documents and materials all related to corporate fund raising to advance the interests of management and investors. Because the contested materials were not prepared in anticipation of trial or for use in litigation, this aspect of work-product privilege does not apply. Downey Brand does not describe legal strategy, mental sense impressions, legal research, or evaluation that is denied the opponent in the context of litigation. The policy objectives of the work-product doctrine are not served by withholding.
Downey Brand requests reconsideration of this ruling on the following grounds:
1. The Order did not address Downey Brand's argument that the documents were prepared in response to an investigation by the California Department of Food and Agriculture, the documents were generated more than a year after the limited offering to investors and nearly a year after Plaintiffs signed agreements to waive milk payments in return for larger equity interests in Valley Gold LLC, and, accordingly, the responsive materials were not 'prepared for a securities offering and capital raising efforts' as the Court assumed in its ruling ...; and
2. The requested material is not relevant to any claim asserted against Downey Brand, Plaintiffs concede they have the core documents requested aside from Downey Brand's work product, and Plaintiffs have made no showing of a compelling need for Downey Brand's work product.
Although the contested materials are not protected by the attorney-client privilege, whether Downey Brand can withhold under the work-product privilege must be decided because the work-product doctrine applies to the attorney, rather than the client. See Rhone-Poulenc Rorer, Inc. v. Home Indemn. Co., 32 F.3d 851, 866 (3rd Cir.1994). The work-product doctrine, originally promulgated in Hickman v. Taylor, 329 U.S. 495 (1947), recognized that public policy is served by protecting from disclosure to adverse parties, written memoranda and private and personal recollections prepared by attorneys in the course of their legal duties. Upjohn, supra, 449 U.S. at 397-98. The work-product privilege belongs to both the attorney and the client. In re Special September 1978 Grand Jury (II), 640 F.2d 49, 62 (7th Cir.1980). The work-product protection continues even after the litigation is completed. FTC v. Grolier, Inc., 462 U.S. 19, 26 (1983). The work- product privilege was substantially incorporated into F.R.Civ.P 26(b)(3)(A). Id. The pertinent portion of that rule provides:
Ordinarily, a party may not discover documents and tangible things that are prepared in anticipation of litigation or for trial by or for another party or its representative (including the other party's attorney, consultant, surety, indemnitor, insurer, or agent). (Emphasis added). Such documents may only be ordered produced upon an adverse party's demonstration of "substantial need [for] the materials" and "undue hardship [in obtaining] the substantial equivalent of the materials by other means." Id.
In In re Grand Jury Subpoena (Mark Torf/Torf Environmental Management), 357 F.3d 900 (9th Cir.2004), the Ninth Circuit addressed application of the work-product doctrine to dual purpose documents, joining those Circuits in employing the "because of" standard articulated in the Wright & Miller Federal Practice treatise. Id. at 907. The EPA informed Ponderosa Paint Manufacturing, Inc. that it was under investigation for violating federal waste management laws. Ponderosa hired attorney McCreedy to advise and defend it in anticipated civil and criminal litigation with the Government. McCreedy, on behalf of Ponderosa, hired Torf, an environmental consultant, to assist him in preparing a legal defense for Ponderosa and as an environmental consultant on Ponderosa's cleanup efforts at the sites that aroused the EPA's suspicions. Seeking to avoid litigation, Ponderosa submitted numerous documents to the EPA pursuant to an Information Request from the EPA and an Administrative Consent Order between Ponderosa and the EPA. Many of these documents were prepared by Torf. The EPA was satisfied that Ponderosa complied with both the Information Request and the Consent Order. However, a grand jury investigating Ponderosa issued a subpoena to Torf for "any and all records relating in any way to any work" regarding "the disposal of waste material ... from Ponderosa Paint[.]" Id. at 907. In adopting the "because of" standard, the Ninth Circuit stated:
This formulation states that a document should be deemed prepared 'in anticipation of litigation' and thus eligible for work product protection under Rule 26(b)(3) if 'in light of the nature of the document and the factual situation in a particular case, the document can be fairly said to have been prepared or obtained because of the prospect of litigation." Charles Alan Wright, Arthur B. Miller, and Richard L. Marcus, 8 Federal Practice & Procedure, § 2024 (2nd ed. 1994) ....
Id. The Ninth Circuit cited United States v. Adlman, 134 F.3d 1194 (2nd Cir.1998) as presenting a comprehensive discussion of the "because of" standard:
The 'because of' standard does not consider whether litigation was a primary or secondary motive behind the creation of a document.
Rather, it considers the totality of the circumstances and affords protection when it can fairly be said that the 'document was created because of anticipated litigation, and would not have been created in substantially similar form but for the prospect of that litigation[.]' Adlman, 134 F.3d at 1195. Here, there is no question that all of the documents were produced in anticipation of litigation. McCreedy hired Torf because of Ponderosa's impending litigation and Torf conducted his investigations because of that threat. The threat animated every document Torf prepared, including the documents prepared to comply with the Information Request and Consent Order, and to consult regarding the cleanup.
Id. at 908. The Ninth Circuit rejected the Government's argument that the withheld documents would have been created in substantially similar form in any event to comply with the Information Request and the Consent Order, and, therefore, were not protected by the work product doctrine:
The question of entitlement to work product protection cannot be decided simply by looking at one motive that contributed to a document's preparation. The circumstances surrounding the document's preparation must also be considered. In the 'because of' Wright & Miller formulation, 'the nature of the document and the factual situation of the particular case' are key to a determination of whether work product protection applies.
Wright & Miller § 2024 (emphasis added). When there is a true independent purpose for creating a document, work product protection is less likely, but when two purposes are profoundly interconnected, the analysis is more complicated.
Here, Ponderosa's response to the Information Request and its accession to the Consent Order were done under the direction of an attorney in anticipation of litigation. By cooperating with the EPA, Ponderosa sought to avoid litigation ... Having chosen to pursue a criminal investigation, the government now seeks to capitalize on Ponderosa's earlier cooperation and obtain all of Torf's documents pertaining to the disposal of Ponderosa's waste material. The withheld documents, however, just like the others, were prepared by Torf, at least in part, to help McCreedy advise and defend Ponderosa in anticipated litigation with the government. Thus, the withheld documents fall within the broad category of documents that were prepared for the overall purpose of anticipated litigation.
To the extent that Adlman suggests there is no work product protection when, viewed in isolation of the facts of the case, a document can be said to have been created for a nonlitigation purpose, we believe the better view is set forth in two Seventh Circuit cases. In the first, In re Special September 1978 Grand Jury, 640 F.2d 49 (7th Cir.1980)('Special September'), the court extended work product protection to materials that were produced both in anticipation of litigation and for the filing of Board of Education reports required under state law. Work product protection was proper because, by the time the law firm's client received the Board's request for the required reports, the client had already received a subpoena from a federal grand jury. The so-called 'independent' purpose of complying with the Board's request was grounded in the same set of facts that created the anticipation of litigation, and it was the anticipation of litigation that prompted the law firm's work in the first place. United States v. Frederick In the later case, , 182 F.3d 496, 501-02 (7th Cir.1999), the Seventh Circuit held that 'a dual-purpose document - a document prepared for use in preparing tax returns and for use in litigation - is not privileged; otherwise, people in or contemplating would be able to invoke, in effect, an accountant's privilege, provided that they used their lawyer to fill out their tax returns.' does not discuss or distinguish Frederick Special September , but the two cases can be reconciled by the extent to which the so-called independent purpose is truly separable from the anticipation of litigation. In Frederick, at issue were accountants' worksheets, albeit prepared by a lawyer, in preparation of his clients' tax returns. Although his clients were under investigation (which the court acknowledged was a 'complicating factor'), work product protection was ultimately inappropriate because tax return preparation is a readily separable purpose from litigation preparation and 'using a lawyer in lieu of another form of tax preparer' does nothing to blur that distinction. Frederick Special September , 182 F.3d at 501. In , on the other hand, the materials used to prepare the Board of Elections reports were complied by lawyers and were necessarily created in the first place because of impending litigation. Similarly here, by hiring McCreedy who in turn hired Torf, Ponderosa was not assigning an attorney a task that could just as well have been performed by a non-lawyer. The company hired McCreedy only after learning that the federal government was investigating if for criminal wrongdoing; a circumstance virtually necessitating legal representation. Torf assisted McCreedy in preparing Ponderosa's defense. He also acted as an environmental consultant on the cleanup.
Although in that capacity he could have been retained by Ponderosa directly, this circumstance does not preclude the application of the work-product privilege to documents produced in that capacity, if the documents were also produced 'because of' litigation. The challenged documents were prepared under the direction of McCreedy, who was providing legal advice to Ponderosa in anticipation of the impending litigation. We conclude that the withheld documents, notwithstanding their dual purpose character, fall within the ambit of the work product doctrine. The documents are entitled to work product protection because, taking into account the facts surrounding their creation, their litigation purpose so permeates any non-litigation purpose that the two purposes cannot be discretely separated from the factual nexus as a whole.
In contending that the requested documents were prepared "because of the prospect of litigation," Downey Brand asserts that it was first contacted about the milk for equity agreements in June, 2004 when it received a fax from counsel for Valley Gold, Anthony Cary, regarding a California Department of Food and Agriculture audit of Valley Gold. Downey Brand contends that documents responsive to Requests 18-21 in Downey Brand's files were generated in response to an investigation of Valley Gold by the Department of Food and Agriculture and constitute documents that were prepared in anticipation of litigation in the form of administrative proceedings within the ambit of Torf, supra:
As in Torf, counsel for Valley Gold asked Downey Brand for assistance in responding to the Department's investigation/audit of Valley Gold in conjunction with the milk for equity agreements. Plaintiffs respond that Downey Brand's work was "transactional," rather than prepared in anticipation of a regulatory investigation:
The Milk for Equity Contracts clearly were a transactional proposal that was [sic] prepared for business reasons. It is true that the Department of Food and Agriculture requested copies of the transactional documents; and it is true that Mr. Colaw wanted the assistance of Downey Brand's attorneys in cleaning up and making the transactional documents as legally binding as possible. But Downey Brand's assignment was not to deal with the Department of Food and Agriculture or to prepare ...