You, the trial lawyer, tell Jimmy, your client's outside auditor, many of your Deep Thoughts about how to handle a thorny federal income tax issue that will likely produce a lawsuit with the Internal Revenue Service.

Jimmy records his own Deep Thoughts in a memo to the file.  He includes yours also.

You didn't tell Jimmy to write the memo or to include your Deep Thoughts in it.  He didn't say he'd reduce your strategery to writing, and neither did he promise to keep your Deep Thoughts a secret.  And of course you and your client have never seen the memo and, really, have no use for it, in litigation or otherwise.

Does the work product doctrine shield Jimmy's memo from the IRS, which has now sued your client over the very issue you gave your Deep Thoughts about?

The D.C. Circuit said yesterday it likely does.  

In United States v. Deloitte LLP, No. 09-5171, slip op. at 3 (D.C. Cir. June 29, 2010), the panel rejected the IRS's effort to lay hands on "a 1993 draft memorandum prepared by Deloitte that summarizes a meeting between Dow [Chemical] employees, Dow's outside counsel, and Deloitte employees about the possibility of litigation over [tax treatment of a partnership], and the necessity of accounting for such a possibility in an ongoing audit."  

The IRS subpoenaed Deloitte, which moved for protection on the ground that the work product doctrine made the memo off-limits.  Dow intervened to support the Deloitte position.  The district court granted protection without looking at the memo in camera.  The IRS pressed an appeal.  The D.C. Circuit affirmed.

The thinking behind the ruling doesn't persuade Blawgletter.  Yes, the court said, the Rule 26(b)(3) limits on whose labor can create protectable work product — the party's lawyers and its representatives — exclude an auditor.   But Hickman v. Taylor, 329 U.S. 495 (1947), per the panel, goes beyond the rule and moots the question of "who created the document or how they are related to the party asserting work-product protection".  Hickman, the panel ruled, asks only "whether the document contains work product — the thoughts and opinions of counsel developed in anticipation of litigation."  Id. at 8-9.

The court also said axed the idea that the main purpose of the memo — to do work necessary for the audit — negated work product status.  "In short, a document can contain protected work-product material even though it serves multiple purposes, so long as the protected material was prepared because of the prospect of litigation."  Id. at 13.

The decision seems to mean that only your reasons for creating the work product matter.  You, the trial lawyer, can blab to third parties — including ones who owe no duty of confidentiality — about your Deep Thoughts.  You can do the blabbing solely for a reason other than helping prepare for trial.  

That seems so wrong to us.

We'd guess that Dow's outside counsel met with Deloitte mainly to deal with whether Dow needed to set up a reserve — and take a hit to income — due to a reasonably probable and estimatable loss in the IRS lawsuit under Financial Accounting Standards Board's Statement No. 5, Accounting for Contingencies.  Why does that meeting deserve more protection than, say, a chat with Dow's biggest shareholders?  Stock analysts?  Fox News?

The ruling fits with a trend of increasing the ability to disclose publicly what counsel thinks and says privately without waiving privilege.  See, e.g., Fed. R. Evid. 502(d) (allowing federal court to limit waiver in proceedings in other state and federal courts).

While we empathize with our corporate brethren and sisteren on their desire for broad work product protection, we wonder whether the societal benefits outweigh the costs.  Or, more accurately, we doubt that they do.