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.

The Senate Judiciary Committee lists these folks who'll testify for/against/about the nomination of Elena Kagan to replace Associate Justice John Paul Stevens:

American Bar Association Witnesses

Kim Askew, Chair, Standing Committee
William J. Kayatta, Jr., First Circuit Representative

Majority Witnesses

Professor Robert C. Clark, Harvard University Distinguished Service Professor, Austin Wakeman Scott Professor of Law, and former Dean, Harvard Law School
Justice Fernande "Nan" Duffly, on behalf of the National Association of Women Judges
Greg Garre, Partner, Latham & Watkins, former Solicitor General of the United States
Jennifer Gibbins, Executive Director, Prince William Soundkeeper
Professor Jack Goldsmith, Professor of Law, Harvard University
Marcia Greenberger, Founder and Co-President, National Women's Law Center
Jack Gross, plaintiff, Gross v. FBL Financial Services Inc.
Lilly Ledbetter, plaintiff, Ledbetter v. Goodyear Tire
Professor Ronald Sullivan, Edward R. Johnston Lecturer on Law, Director of the Criminal Justice Institute, Harvard Law School
Kurt White, President, Harvard Law Armed Forces Association

Minority Witnesses

Robert Alt, Senior Fellow and Deputy Director, Center for Legal and Judicial Studies, The Heritage Foundation
Capt. Pete Hegseth, Army National Guard
Commissioner Peter Kirsanow, Benesch Law Firm
David Kopel, Esq., Research Director, Independence Institute
Colonel Thomas N. Moe, United States Air Force (ret.)
David Norcross, Esq., Blank Rome
William J. Olson, Esq., William J. Olson, P.C.
Tony Perkins, President, Family Research Council
Stephen Presser, Raoul Berger Professor of Legal History, Northwestern University School of Law
Ronald Rotunda, The Doy & Dee Henley Chair and Distinguished Professor of Jurisprudence, Chapman University School of Law
Ed Whelan, President, Ethics and Public Policy Center
Dr. Charmaine Yoest, President & CEO, Americans United for Life
Capt. Flagg Youngblood, United States Army

The U.S. Supreme Court handed down four decisions today.  As the hour has grown late, Blawgletter will give just a thumbnail for each:

Snappy sings.  She doesn't know what her song means.  She doesn't know where it will lead.  She lets it come.

Bitey listens.  He adores Snappy's voice.  He likes her lyrics.

Snappy conjures them, Bitey believes.  They don't exist until Snappy makes them.

Snappy and Bitey live in a slough — where they also work.

Of course they practice law.  Most alligators do.

Today, the U.S. Supreme Court twice took a narrow view of liability under federal law for fraudulent conduct.

In one case, the Court held that section 10(b) of the Securities Exchange Act of 1934 doesn't apply to overseas purchases and sales of securities.  That the fraud started in or affected the U.S. didn't defeat the presumption that federal statutes govern domestic conduct only.  "When a statute gives no clear indication of an extraterritorial application, it has none."    Morrison v. Nat'l Australia Bank Ltd., No. 08-1191, slip op. at 6 (U.S. June 24, 2010) (Scalia, J.).  Post on Second Circuit decision here.

The Court also gave Enron's former CEO, Jeff Skilling, a partial win.  By a 5-4 margin, the Court ruled against Skilling on his point that pretrial publicity and a short voir dire resulted in an unfair trial.  Skilling v. United States, No. 08-1394 (U.S. June 24, 2010).

But seven Justices joined in holding that the "honest services" piece of the federal wire and mail fraud statute see 18 U.S.C. 1346, applies only to bribery and kickbacks.  Because Skilling didn't take a bribe or a kickback and instead gained by his fraud through other means, the majority held, his conviction for conspiracy couldn't stand.  The Court remanded to the Fifth Circuit to determine whether the mistake in submitting the honest services questions to the jury amounted to harmless error and therefore didn't require a new trial.

WSJ reports here.  NYT here.

The unconscionable arbitration clause in your job contract says you agree that only the arbitrator may decide the question of unconscionability.

Can a court still declare the unconscionable clause unconscionable, now that you learned your employer may have discriminated against you and people like you on grounds of race? 

Or must the court send you to Do Your Best in an unconscionable arbitration? 

Which arbitration may result in a wrong ruling by the arbitrator, who earns a fee for allowing the arbitration to go forward and whose rulings must stand unless he or she does something like name his or her horse the decision-maker?

The U.S. Supreme Court held this week, 5-4, that courts lack power to strike down unconscionable arbitration clauses whose drafters had the Good Sense to bar court review.  Rent-A-Center, West, Inc. v. Jackson, No. 09-497 (U.S. June 21, 2010).

The case didn't involve British Petroleum . . . but you kind of feel it really did involve BP.  It should concern the "beyond petroleum" company.  At least.

The Supreme Court of Florida held last week that commercial fisherpeople stated statutory and common law claims against a company that spilled phosphates into Tampa Bay six years ago.  Curd v. Mosaic Fertilizer, LLC, No. SC08-1920 (Fla. June 17, 2010). 

The Court rejected the notion that anglers couldn't recover due to the fact they don't own Tampa Bay.  Or the fish.

BP spilled huge amounts of oil in the Gulf of Mexico.  Some of it will end up in Florida waters.  Therefore Socrates is mortal. 

And so is BP.

Per the U.S. Judicial Panel on Multidistrict Litigation's website, their honors (all seven of them) will next convene at the James A. McClure Federal Building and United States Courthouse in Boise, Idaho.

The Panel hasn't yet issued its Hearing Session Order for next month.  But Blawgletter expects the list will include the great many lawsuits over Deepwater Horizon.

So we wonder:  will the cases go to New Orleans?  Gulfport, Mississippi?  Mobile, Alabama?  Or Houston, Texas?

A Great Many Years Ago (in 1982), we wrote a Recent Development about a U.S.-Mexico treaty that resulted, too late, from the Ixtoc I blowout, which spewed as many as 30,000 barrels a day into the Gulf of Mexico (Bay of Campeche) back in 1979-80.  The gusher kept going for 10 months. 

We recall the tarballs that washed up on the shores of Galveston months and years later.

Which says nothing about where the litigation resulting from the Deepwater Horizon disaster ought to end up.  We'll follow with interest how the Panel chooses the pretrial venue for handling the biggest mess in the Gulf since Ixtoc I.

This week — as vast slicks of oil fowled beaches from Louisiana to Florida — the U.S. Supreme Court held against beachfront property owners.  The fight involved the question of who owns seven miles of sand touching the Gulf of Mexico in the Florida Panhandle.

The startling thing?  Four Justices voted to deem property rulings by state courts of last resort subject to "takings" review under the fifth amendment to the U.S. Constitution.  Stop the Beach Renourishment, Inc. v. Florida Dept. of Environmental Protection, No. 08-1151 (U.S. June 17, 2010).

The case arose from a Sunshine State law that allowed towns and counties to convert ocean into beach.  The City of Destin and County of Walton — both now under siege from Deepwater Horizon's wandering petroleum — got permits under the law to restore shoreline that storms had eaten away.  They used dredges to harvest sand offshore and then placed it in water along seven miles of beach, turning wet to dry. 

People who owned beachfront land didn't like the project because it cut their tracts off from direct contact with water.  They also claimed that the "accretion" seaward changed the boundary between public and private property, from the mean high-tide mark, which might vary over time, to a new "erosion-control" line, which might never change.

All the voting justices (Justice Stevens didn't participate in the case) agreed that neither the accretion nor the conceptual change in what defined the public-private boundary resulted in an unconstitutional taking of property.  But Their Honors split half and half on a key idea — whether a judicial ruling that alters property rights can count as a "taking" under the fifth amendment. 

Chief Justice Roberts and Justices Scalia (author), Alito, and Thomas said yes; Justices Kennedy (author) and Sotomayor said maybe but not in this case; and Justices Breyer (author) and Ginsburg said probably no.

NYT editorial here.

No word yet on who owns the oil once it washes up on the beaches.  But you can bet the complaining landowners don't mind not having to clean it up.