A federal court of appeals has rejected an interlocutory appeal of a district court order upholding grand jury subpoenas issued to a lawyer accused of extorting millions from a large hospital. In In re: Grand Jury Subpoenas 2021, Nos. 22-1654, 22-1655, 22-1656 (4th Cir. Nov. 22, 2023), the U.S. Court of Appeals for the Fourth Circuit found that certain discovery privileges did not apply, that it lacked jurisdiction to hear an interlocutory appeal, and held that the matter should be taken up at the conclusion of the lawyer’s criminal case. ABA Litigation Section leaders recognize that slightly different facts could have led to a very different outcome and caution practitioners to be aware of when privileges might not apply when criminal proceedings are involved.
The underlying case involved a Maryland attorney who filed a medical malpractice lawsuit on behalf of the widow of a hospital patient. The attorney conducted settlement negotiations with the hospital seeking $25 million for the plaintiff but made any settlement contingent on his personal receipt of an additional $25 million as a retention to become a private consultant for the hospital. The attorney also threatened to create an “internet bomb” if the hospital did not meet his demands.
A grand jury indicted the attorney in the U.S. District Court for the District of Maryland, charging him with attempted extortion in violation of 18 U.S.C. §§ 1951 and 1952. At the government’s request, the grand jury issued multiple subpoenas duces tecum to the lawyer and firms that had assisted in the lawyer’s representation of the widow plaintiff. The district court denied a motion to quash those subpoenas and granted the government’s motion to compel responses to them. The lawyer and other targets of the subpoenas then pursued an interlocutory appeal.
The appellants framed their appeal pursuant to 28 U.S.C. § 1291, which provides appellate court jurisdiction to review “all final decisions of the district courts of the United States.” In rebuttal, the government argued that the appellate court could not review the underlying decision because it was the result of an interlocutory order as opposed to a final judgment. The court noted two exceptions to this final judgment general rule—the Collateral-Order Doctrine and the Perlman Doctrine.
Non-final orders can be reviewed under the Collateral-Order Doctrine when they conclusively determine a disputed question, resolve an important issue separate from the merits, and are not reviewable on appeal from final judgment. Under the Perlman Doctrine, a discovery order directed at a disinterested third party is treated as an immediately appealable final order because the third party presumably could otherwise exercise the long-recognized option to not respond to the discovery order and then immediately appeal the inevitable criminal contempt citation.
The appellate court found that it lacked jurisdiction to hear the arguments under either doctrine because privilege interests can be reviewed on post-judgment appeal without resorting to the subjugation of the final-judgment rule, and an aggrieved litigant can still pursue a direct appeal. The court also noted that it could have exercised jurisdiction under 28 U.S.C. § 1292(b), which explicitly provides for the ability to appeal interlocutory decisions, but the appellants had appealed under 28 U.S.C. § 1291.
The court also discussed whether the attorney-client and work-product privileges might apply to any of the requested discovery. The court held that the attorney-client privilege was waived by the widow by voluntarily participating in an interview during the attorney discipline investigation. Maryland Rule 19-707(b)(1) provides that confidentiality extended only “until Bar Counsel files a petition for disciplinary or remedial action.”
The court also recognized that the crime-fraud exception to the work-product privilege applied and found that the otherwise protected material was discoverable because it was used in furtherance of a crime or fraud, and the widow had little personal stake as those claims were settled. The court added that privilege does not apply to the consultancy agreement between the lawyer and the hospital. During his disciplinary proceedings, the attorney repeatedly described that agreement as separate from the litigation, which the court took to mean that the agreement was not made in anticipation of litigation.
Litigation Section leaders note that the results may have been different under a different set of facts. The work-product doctrine may “have applied if the lawyer was not engaged in a criminal scheme, and the innocent client’s legal interests were in jeopardy if those documents did not remain confidential,” says Jeanne M. Huey, Dallas, TX, Co-Chair of the Section’s Ethics & Professionalism Committee. “The work-product doctrine analysis may have been different if litigation was ongoing,” adds Joseph V. Schaeffer, Pittsburgh, PA, Co-Chair of the Section’s Pretrial Practice & Discovery Committee.
