High Court Limits Disclosure Order Appeals In Mohawk

By Erin Marie Daly

Law360, New York (December 08, 2009) -- The U.S. Supreme Court has handed down a ruling in an employee’s battle with Mohawk Industries Inc. that curbs parties' ability to immediately appeal discovery orders that require the disclosure of documents covered by the attorney-client privilege, resolving a circuit split on the issue.

Tuesday's decision that disclosure orders adverse to the attorney-client privilege do not qualify for immediate appeal under the collateral order doctrine came in the case of Norman Carpenter, who claims Mohawk fired him for reporting to the company's human resources department that several workers from a temporary agency were illegal immigrants.

In 2007, the U.S. District Court for the Northern District of Georgia granted Carpenter’s bid to compel disclosure of records of his conversation with a company lawyer on the grounds that the Georgia-based flooring giant had implicitly waived its privileges when it discussed the attorney in its response to another suit.

The U.S. Court of Appeals for the Eleventh Circuit agreed, dismissing the appeal for lack of jurisdiction.

In its Supreme Court appeal, Mohawk contended that rulings implicating the attorney-client privilege differ in kind from run-of-the-mill discovery orders because of the important institutional interests at stake.

According to Mohawk, the right to maintain attorney-client confidences is “irreparably destroyed absent immediate appeal” of adverse privilege rulings.

In its ruling Tuesday, the high court said the crucial question was not whether an interest is important in the abstract, but rather 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.

“We routinely require litigants to wait until after final judgment to vindicate valuable rights, including rights central to our adversarial system,” the court said. “Post-judgment appeals generally suffice to protect the rights of litigants and assure the vitality of the attorney-client privilege.”

Appellate courts, the high court noted, can remedy the improper disclosure of privileged material in the same way they remedy a host of other erroneous evidentiary rulings: by vacating an adverse judgment and remanding for a new trial in which the protected material and its fruits are excluded from evidence.

“That a fraction of orders adverse to the attorney-client privilege may nevertheless harm individual litigants in ways that are 'only imperfectly reparable' does not justify making all such orders immediately appealable as of right,” the Supreme Court said.

Timothy Coates, a partner at appellate boutique Greines Martin Stein & Richland LLP, said he wasn't necessarily surprised by the Supreme Court's stance on the issue.

“There has been a continuing trend in recent years where the Supreme Court has narrowed the types of orders that are immediately appealable,” he said. “This was a straightforward application of the court's precedence, and at the end of the day, what carried it for the court was the institutional notion that we can't flood courts with these types of appeals. The institutional interests trump the concerns for individual lawyers or clients.”

Coates added that the ruling may not have the severe impact some critics have predicted because in many jurisdictions, the decision won't change anything.

“The reality is that in many jurisdictions, and even in some state courts, attorney-client privilege is already not immediately appealable,” he said. “The heavens have not fallen, and you don't see a wholesale erosion of privilege just because of this ruling.”

What will change, Coates said, is that there will be an uptick in lawyers attempting to take advantage of the certification and writ relief procedures, because the Supreme Court has emphasized that those are appropriate ways to get the issue to an appellate court.

“If you have a good case, review will be available,” he said.

Bennett Cooper, a partner at Steptoe & Johnson LLP, said he didn't expect the ruling to drastically affect the scope of litigation in terms of the information parties decide to seek.

“Parties don't usually look ahead to the availability of review; they're looking first at what the trial court is going to do,” he said. “So it's not unusual that the Supreme Court didn't want to open up a rather large can of worms by categorically allowing appeals of privilege rulings as a right, because that would have had a disruptive effect on litigation.”

Moreover, Cooper pointed out, only the Third, Ninth and District of Columbia circuits have held that orders rejecting attorney-client privilege claims are immediately appealable — and those decisions were all very recent.

“In those circuits, the Supreme Court has essentially reinstated what was formerly the law,” he said. “You might say this ruling brings to an end what could be described as a short-lived experiment.”

The Supreme Court, he added, had admitted that while other alternative avenues to pursuing an appeal might not be satisfactory in individual cases, those alternatives do exist, and can be pursued in extraordinary cases in which, for example, the information at issue is of far broader significance than the litigation itself.

“This ruling puts back on the party the decision of whether seeking such an appeal is critical in a particular case, such as when the information has to do with a strategy for a series of cases, or the interests of the party aren't limited to the litigation itself,” Cooper said.

But Tuesday's ruling has also raised the eyebrows of some experts who say the absence of collateral order appeals of adverse privilege rulings could put litigants at risk.

Prudent defense lawyers will have to be extremely careful during the witness interview process in light of the Supreme Court's decision, according to Mike Lackey, a partner at Mayer Brown LLP.

“Defense lawyers are already a careful bunch, but this will make us a touch more risk-averse,” he said. “It could potentially chill how we conduct those interviews, and what we write down.”

Lackey noted that the Mohawk case illustrates the problem that oftentimes, judges are more or less sympathetic to privilege claims, making it easier to manufacture issues that raise a challenge. And once documents are turned over to opposing counsel, he said, “it's very difficult to unring that bell.”

“You're essentially informing your opponent about your litigation strategy, and getting into the thoughts and communications of the other side,” Lackey said.

He added that in this case, Carpenter claimed the company's lawyers were pressuring him to change his story — a contention he said raised questions.

“If lawyers are asking you skeptical questions, they're usually just doing their job, which is to find out whether your story holds up,” he said.

Going forward, Lackey said the plaintiffs' bar now had a new tool to make opposing counsel very uncomfortable — though he clarified that it's not just plaintiffs' attorneys who will take advantage of the ruling, just that privilege issues are more likely to affect the defense side due to investigations.

Now that they know it's extremely unlikely for a lawyer to get appellate review of a decision, if they have a judge who's just a little skeptical of privileges, they can bring tremendous pressure to bear — and even increase the settlement value of the case, he said.

“It's always your nightmare that you'll get an adverse attorney-client ruling,” he said. “We had all hoped we could come up with a more rational way of doing this, short of having the lawyer go to jail because it's the only way to get a review of the ruling. But they've thrown us back to the bad old days. My advice is when you go to court, pack a toothbrush.”

Mohawk is represented by Alston & Bird LLP.

Carpenter is represented by Koskoff Koskoff & Bieder PC.

The case is Mohawk Industries Inc. v. Carpenter, case number 08-678, in the U.S. Supreme Court.