United States v. Mann ( 1995 )

IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
_____________________
No. 94-50082
_____________________
UNITED STATES OF AMERICA,
Plaintiff-Appellant,
versus
JAMES SCOTT MANN, III, PETER K. GALLAHER,
WILLIAM M. MOORE, JULIAN C. ALSUP, and
CHARLES CHRISTENSEN,
Defendants-Appellees.
_________________________________________________________________
Appeal from the United States District Court for the
Western District of Texas
_________________________________________________________________
August 3, 1995
Before VAN GRAAFEILAND,* JOLLY, and WIENER, Circuit Judges.
E. GRADY JOLLY, Circuit Judge:
The district court dismissed the indictment in this case
because, after several delays in bringing the case to trial, the
government failed to comply with the district court's order to
disclose documents. The government had allowed the defendants
access to the documents upon a non-copying condition, but withdrew
access when they discovered that the defendants were copying the
documents. We hold that the documents were privileged against
disclosure under Fed. R. Crim. P. 16(a)(2), and although the
*
Circuit Judge of the Second Circuit, sitting by designation.
government may have conditionally waived its privilege, the
defendants breached the agreement. The government, therefore, had
the right to reassert its privilege against disclosure. Thus,
because the government properly exercised its privilege against
disclosure under Rule 16(a)(2), the district court abused its
discretion when it dismissed the indictment. Consequently, we
reverse the district court's dismissal of the indictment, and
remand the case.
I
This case has its genesis in the 1980s, during which time the
defendants were involved in a series of allegedly fraudulent
transactions regarding the sale of a Texas savings and loan
institution and the exchange of certain parcels of real estate.
The main focus of this appeal and our attention today, however, is
on the pretrial investigation and the discovery that began shortly
before most of the defendants were initially indicted in September
1991, and continued until shortly before the district court's
dismissal of the third superseding indictment in January 1994. We
now turn to examine the events shaping this controversy in greater
detail.
This case has involved a series of indictments, dismissals,
and reindictments, which evidence the complex nature of the case
against the defendants, and which contributed to the frustration of
the district court. In September 1991, the grand jury returned a
twelve-count indictment charging Peter K. Gallaher, William M.
-2-
Moore, Charles M. Christensen, and Julian C. Alsup1 with filing
false corporate tax returns in violation of 26 U.S.C. § 7206(1),(2)
from 1984 through 1990. The district court set trial for April 20,
1992. The following January, the case was reassigned to the
Honorable Sam Sparks. In response to motions for continuance by
defendants Alsup and Christensen and in anticipation of a
superseding indictment, the district court set trial for July 6,
1992. As anticipated, the grand jury returned a superseding
indictment in April that added appellee J. Scott Mann to the case
and included additional charges of fraud and conspiracy in
connection with a failed savings and loan association, in violation
of 18 U.S.C. § 371. After three parties moved for a continuance,
the district court rescheduled the trial for August 17, 1992. On
August 5, however, the government dismissed the superseding
indictment. At that time, the grand jury returned a new
indictment, which contained only three counts and charged only Mann
with tax-related offenses.2 Mann's trial on these charges was
subsequently set for November 1992, with the Honorable James R.
Nowlin presiding. On October 22, Mann's case was reassigned to
1
The case against Alsup was severed by the district court on
the same day in January 1994 that the court dismissed the final
superseding indictment against the other parties. Alsup,
therefore, is not a party to this appeal.
2
Mann was charged with violations of 26 U.S.C. § 7206(1)
(false corporate tax return), 26 U.S.C. § 7203 (failure to file a
corporate tax return), and 26 U.S.C. § 7206(1) (false personal
income tax return).
-3-
Judge Sparks. At a hearing on November 5, Judge Sparks allowed
Mann to substitute his counsel and was informed by the government
that it was seeking another superseding indictment. Subsequently,
the court granted Mann's motion for a continuance, rescheduling the
trial for December 21. At a December 11 motions hearing, the
government informed the court that it was still working on the
superseding indictment. On December 18, Mann's counsel filed a
motion for a continuance to allow him more time to examine the
evidence. On December 22, the court granted Mann's motion for
continuance, and set the case for trial on March 1, 1993. On
February 24, 1993, the district court filed an amended order,
rescheduling the trial for March 29, 1993. At docket call on
March 1, the government told the court that it was still pursuing
a superseding indictment, expected by July. On March 11, the
district court entered an order rescheduling Mann's trial for
July 5 because his counsel needed additional time to prepare his
defense. On June 30, the grand jury issued the thirty-nine count
superseding indictment that is the subject of this appeal.3 After
3
The indictment charged all the defendants, Gallaher, Moore,
Alsup, Christensen, and Mann with thirty-nine counts based upon the
following code violations: (1) 18 U.S.C. § 371 (conspiracy to
defraud a savings and loan, the Federal Home Loan Bank Board, and
the Internal Revenue Service); (2) 18 U.S.C. § 1006 (false entries
in savings books); (3) 18 U.S.C. § 1014 (false statements to
banks); (4) 26 U.S.C. § 7206 (false tax returns); (5) 18 U.S.C. §
657 (misapplication of savings funds); (6) 18 U.S.C. § 1006(fraudulent participation in savings transactions); (7) 18 U.S.C.
§ 215(a) (receipt of commission for procuring loan); and (8) 26
U.S.C. § 7203 (willful failure to file tax return).
-4-
a discovery motion hearing on September 24, 1993, the court set the
trial date as January 4, 1994.
In the meantime, plea negotiations were ongoing. Before the
first indictment had issued in September 1991, the government had
met with the defendants and their attorneys on several occasions to
discuss the case. As a part of these discussions, the government
had allowed the defendants to inspect portions of government
agents' reports4 that included assessments of the strength of the
case, and that were otherwise not discoverable under Rule 16(a)(2).
In addition to the exposure of these documents, Agent Mazur copied
approximately 150 pages of his report, termed the "evidence" or
"factual" section and placed it on file with the government's other
evidence to which the defendants were given access in order to
allow the defendants to better understand the cases against them.
Apparently, a portion of Agent Brooks's report was also deposited
with the government's evidence, composed of hundreds of volumes of
materials.
Although the record does not contain a formal agreement
governing access to these documents and the agents' reports, the
record reflects that early in the discovery process certain "rules
of engagement" were established. The district court was aware of
these rules because on several occasions the government referenced
these informal rules in its pleadings and correspondence. For
4
These were the reports of the Internal Revenue Service's
Special Agents Walter Mazur and Howard Brooks.
-5-
instance, in its January 24, 1992 Response to Pretrial Motions
Filed by Defendant William Moore, the government stated that it had
agreed to informally provide all discovery to which
Defendant Moore is entitled pursuant to the Federal Rules
of Criminal Procedure and the laws and Constitution of
the United States. Further, the government has
informally agreed to provide discovery of materials to
which Defendant Moore is not entitled under the above
cited authorities.
Supplemental Record on Appeal, Vol. I, at 103. In its January 24,
1992 Response to Pretrial Motions Filed by Defendant Peter
Gallaher, the government states that "[i]t is the policy of the
prosecutor assigned to this case to facilitate discovery whenever
possible. To that end, counsel for Mr. Gallaher . . . has been
allowed to examine the Special Agent's report prepared by Walter
Mazur of the Internal Revenue Service." Id. at 105.
In other pleadings, the government was more specific as to the
parameters of the rules, using the same language to describe access
to the materials on two different occasions:
[t]he government will voluntarily allow all
defendants in this cause to examine and copy evidence
which the government has accumulated during its
investigation. The only exceptions are items submitted
to the government with a reservation of the attorney-
client privilege. Counsel for the defendants may examine
the government's files at the Federal Building, 300 East
8th Street, Austin, Texas. The files are in the custody
of Walter Mazur, Special Agent, Internal Revenue Service,
Criminal Investigation Division. . . . A copier is
available to the defendants' attorneys. A fee of 10
cents per page will be charged.
The government has previously allowed attorneys to
examine Agent Mazur's report. The government will
continue to allow counsel to review the factual portion
of the report, but the report may not be copied and must
-6-
remain on government premises at 300 East Eighth Street,
Austin, Texas.
May 13, 1992 Response to Pre-Trial Motions Filed by Defendants Mann
and Gallaher, Supplemental Record on Appeal, Vol. II, at 274-75
(emphasis added); June 9, 1992 Response to Pre-Trial Motions Filed
by Defendant Christensen, Supplemental Record on Appeal, Vol. II,
at 421-22 (emphasis added). Moreover, early in the discovery
process, the government orally told the court that it was giving
the defendants restricted access to portions of the special agents'
reports. In a June 10, 1992 pretrial motion hearing, the
government stated that
we have given the attorneys access to Mr. Mazur's
investigative reports. . . . We intend to give the
attorneys access throughout [the discovery process] to
the factual portions of that report. Now there's some
theory and that sort of thing in there that we are going
to hold back, but the factual portions that will lead
them into the evidence, that the government has
accumulated, will remain open to them.
Record on Appeal, Vol. V at 12 (emphasis added).
As the record reflects, the defendants were allowed to examine
the evidence portion of the investigative reports, but specifically
were prohibited from copying these reports. Up to July 1992, the
defendants had access to these investigative reports, as well as
documentary evidence in the basement of the federal government
building in Austin, Texas. On July 6, however, the government
discovered a representative of one of the defendants hand-copying
verbatim from the evidence portion of one of the reports, in direct
contravention to the informal rules of access established for the
-7-
documents. This act prompted the government to deny access to the
agents' reports to all defendants in the case.5 The government,
nevertheless, continued to offer access to the other documents
involved in the case. Apparently, the defendants did not raise an
immediate objection to this denial of access.
On August 4, 1992, the indictment under which this discovery
had been proceeding was voluntarily dismissed by the government.
A superseding indictment against only Mann was issued in mid-
August6 so that Gallaher, Moore, Alsup, and Christensen, at that
point, were no longer involved in discovery. The government
allowed Mann to have access to government documents, but withheld
access to the special agents' reports. The record does not reflect
that Mann expressed any objection to this denial of access.
On June 30, 1993, almost one year later, the government
obtained the superseding indictment that is at issue in this case.
See Note 3 supra. In connection with this indictment, the
government continued to practice the open discovery policy it had
previously employed with these defendants. The government agent
5
The government, however, made an exception to this rule for
Gallaher's substituted counsel, whom the court had appointed on
July 30, 1993, to replace previous counsel. Because the counsel
came into the case late, the government gave him access to the
special agents' reports on several occasions so that he could
understand the nature of the government's case. The government
also made clear to him that it would not allow the reports to be
copied.
6
See Note 2 supra.
-8-
reports, however, were not among the documents to which the
defendants were given access.
On October 5, 1993, over one year after access to the
government agents' reports was curtailed, appellee Moore filed a
motion for discovery, inspection, and copying of exculpatory
evidence, in an effort to obtain the investigative reports. Moore
contended that the government had waived any privilege by
disclosing the reports during earlier plea negotiations. After a
hearing on November 19, the district court found that the
government, "by appropriately cooperating with defense counsel in
the discovery process, has allowed the defendants' counsel to
inspect the notebook and therefore has waived any work product
privilege." Thus, the district court granted Moore's motion on
November 24 and ordered the government to present the reports for
an in camera inspection so that the court could determine what
parts of the agents' reports, if any, could be redacted pursuant to
a protective order. When the government tendered the reports to
the court on December 10 for the inspection, it asked the court to
reconsider its disclosure order, reminding the court that Fed. R.
Crim. P. 16(a)(2) specifically makes these reports undiscoverable.
On December 17, the court held another hearing and orally denied
the government's motion for reconsideration. As a result, the
court again ordered the government to disclose the agents' reports
because the previous disclosures had been inconsistent with the
government's work product privilege, even though the government had
-9-
argued that these documents were exempt from disclosure under Rule
16(a)(2). The court then scheduled an evidentiary hearing for
December 28 to determine which documents had been disclosed. After
this hearing, rather than consider the alternative of holding the
government in contempt, the district court entered an order on
December 29 requiring the government to produce the reports, having
stated in the hearing that even if there were rules governing
access to the documents, the government had waived any privilege it
had to the documents. See Record at Vol. XII, p. 97. The court
also warned that it would dismiss the indictment if the government
did not comply with its order. The government did not comply, and
the court dismissed the indictment on January 3, 1994. This appeal
followed.
II
The parties raise three issues on appeal. All of the
appellees, except Gallaher, first contend that this court is
without jurisdiction to hear this appeal. The government, as
appellant, presents two contentions: first, it contends that the
district court erred in ordering the government to provide the
defendants with copies of the special agents' reports that were
exempt from pretrial discovery under Fed. R. Crim. P. 16(a)(2);
second, it argues that the district court abused its discretion in
dismissing the indictment based on the government's refusal to
provide copies of the agents' reports to the defendants.
We will address each issue in turn.
-10-
III
A
We first must address the defendants' argument that this court
does not have appellate jurisdiction over this matter. This
argument plainly lacks merit. This appeal is authorized by 18
U.S.C. § 3731, which permits the government to appeal from "an
order of a district court dismissing an indictment," providing,
however, "no appeal shall lie where the double jeopardy clause of
the United States Constitution prohibits further prosecution." The
defendants argue that the double jeopardy clause prohibits this
appeal. The defendants concede, as they must, that jeopardy has
not attached because a jury has not yet been empaneled and sworn.
See United States v. Juarez-Fierro, 935 F.2d 672, 675 (5th Cir.
1991). They cite no authority in support of their argument, but
urge this court to adopt a functional approach to double jeopardy
analysis. As stated above, this argument has no merit.
Accordingly, because the government's appeal is authorized by §
3731, we have appellate jurisdiction.
B
Now let us determine whether the district court erred when it
ordered the government to produce documents in question. We review
the district court's actions in this discovery setting for an abuse
of discretion. United States v. Sarcinelli, 667 F.2d 5 (5th Cir.
1982).
-11-
We begin with an examination of the plain language of Rule
16(a)(2). Under the heading, "Information Not Subject to
Disclosure," Rule 16(a)(2) states that, with exceptions not
relevant here, "this rule does not authorize the discovery or
inspection of reports, memoranda, or other internal government
documents made by the attorney for the government or other
government agents in connection with the investigation or
prosecution of the case." (Emphasis added). As an internal
government document produced by government agents in connection
with the investigation of this case, the reports at issue clearly
fall within the ambit of this rule, and thus are exempted from
discovery.
The Advisory Committee Notes cast more light on the purpose of
the rule. The 1974 Amendment Notes state that the phrase "reports,
memoranda, or other internal government documents made by the
attorney for the government" was meant to incorporate the "work
product" language of Hickman v. Taylor, 329 U.S. 495 (1947), into
the rule to ensure that government attorneys' litigation
preparations are protected from discovery. The Notes, however, say
nothing about the work product privilege, as it is understood in
Hickman, being made applicable to the internal government documents
produced by other government agents.
The defendants argue that United States v. Nobles, 422 U.S.
225 (1975), made the work product privilege fully applicable to
criminal cases, and, thus, its waiver rules apply here. It is true
-12-
that the work product privilege does apply in criminal cases. We
disagree, however, with the defendants' characterization of the
extent to which Nobles expands this privilege to cover documents
made expressly nondiscoverable in Rule 16(a)(2). Nobles was
concerned only with the defendant's work product. The scope of
pre-trial discoverability of internal government documents, as set
forth in Rule 16, was not at issue. Put another way, Nobles, which
was not concerned with Rule 16(a)(2), cannot be read to alter the
plain language of a rule it did not address. We should further
observe that at the time of the Nobles decision, the work product
language that the defendants assert to support their argument had
not yet been incorporated into Rule 16(a)(2). In short, we do not
think that Nobles expands the attorney work product privilege to
other government agent internal reports, such as those contemplated
in Rule 16(a)(2).
Although we decline to extend the rules of the waiver of
attorney work product privilege to the context of the case before
us, we find that the general rules regarding waiver are applicable.
See United States v. Mezzanatto, 115 S.Ct. 797, 801-02 (1995)(The
provisions of the Federal Rules of Criminal Procedure are
"presumptively waivable" by a voluntary agreement of the parties.).
"A waiver is a voluntary and intentional relinquishment of a known
right or conduct that warrants an inference of such a
relinquishment." Highlands Ins. Co. v. Allstate Ins. Co., 688 F.2d
398, 404 (5th Cir. 1982); see also Birdwell v. Skeen, 983 F.2d
-13-
1332, 1340 (5th Cir. 1993). Rule 16(a)(2) clearly exempts certain
types of government materials from discovery, with the reports at
issue being among them. The defendants argue that when the
government allowed them to inspect the agents' reports, it waived
the privilege against disclosure. The district court agreed and
found that notwithstanding the establishment of any conditions
governing the access to the special agents' reports, the government
waived the privilege of nondiscoverability upon once disclosing the
reports to the defendants. After looking at the general principles
of waiver and the government's conduct in this proceeding, we
conclude that the district court erred.
From the very first, the government put certain conditions on
the defendants' access to these reports. During plea negotiations
in 1991, the government attorneys and special agents were present
when the defendants and their attorneys reviewed the reports.
Furthermore, the defendants were only given access to a portion of
the reports. Although other documents were allowed to be copied,
with the government even providing a copying machine, the
government made clear that these reports, which are indeed
protected by Rule 16(a)(2), could not be copied.7 Moreover, along
7
The defendants argue that the government's rules governing
the copying of the reports are ambiguous. They assert that the
rules are susceptible to an interpretation allowing hand-copying,
but disallowing photocopying. We reject this argument out of hand.
The plain language of the correspondence from the government
disallows "copying," which would include any manner of
reproduction.
-14-
with other documents, the government controlled the access to the
reports and would not allow the parties to transport them from
government facilities. From the start, the defendants agreed to
the terms of this restrictive arrangement. So long as the
defendants complied, the government permitted access. Only when
the government discovered one of the parties hand-copying,
verbatim, from the reports did it withdraw the restricted access to
these reports that it had granted earlier. In the light of these
facts, we conclude that, even assuming the government's conduct
satisfies the principles of waiver generally, the government did
not waive its Rule 16(a)(2) privilege absolutely. Instead, it
waived the rule's protections conditionally; that is, the
government agreed to suspend Rule 16(a)(2) so long as the
defendants did not copy the privileged materials. When this
condition was breached, however, the obligation of the government
terminated, the parties returned to the status quo ante, and the
government was, therefore, free to reassert its Rule 16(a)(2)
privilege against disclosure.
Although this particular question of waiver has seldom been
addressed, courts that have been confronted with a Rule 16(a)(2)
question have read the rule to prohibit forced disclosure of this
type of government work product. See United States v. Lov-It
Creamery, Inc., 704 F.Supp. 1532 (E.D. Wisc. 1989); see also United
States v. Williams, 998 F.2d 258, 268 n.23 (5th Cir. 1993)("[Rule
16(a)(2)] specifically provides that `internal' memoranda and
-15-
reports prepared by the government in the preparation of its case
are not discoverable."). Furthermore, other courts have recognized
the binding power of these informal discovery agreements. See
United States v. Cole, 857 F.2d 971, 976 (4th Cir. 1988). Other
cases have held that although the government allowed defendants to
view certain documents covered by Rule 16(a)(2), or a similar state
rule, no waiver of the privilege against disclosure occurred. See
United States v. Penix, 516 F.Supp. 248 (W.D. Okla. 1981); Indiana
ex rel. Keaton v. Circuit Court of Rush County, 475 N.E. 2d 1146(Ind. 1985).
C
Finally, in the light of our opinion above, the district
court's error in dismissal of the indictment is now self-evident,
considering our conclusion that the government did not waive
absolutely its Rule 16(a)(2) privilege against nondisclosure.
Because we hold that the government acted within its Rule 16(a)(2)
protections, the court was without the power to impose the extreme
penalty of dismissal of the indictment. Consequently, the district
court abused its discretion, and the order of dismissal must be
reversed.
IV
To sum up, we hold that we have jurisdiction to entertain this
appeal. Furthermore, we hold that the government properly asserted
its privilege against disclosure under Rule 16(a)(2). Thus, the
district court abused its discretion when it ordered a dismissal of
-16-
the indictment.8 For the foregoing reasons, the district court's
order dismissing the indictment is
REVERSED and REMANDED.
8
When the district court dismissed the indictment, it also
noted that the government had engaged in other unjustifiable delay.
The court further indicated that this background of additional
delay had influenced its decision to dismiss the indictment. It is
nevertheless clear, however, that only the added factor of the
government's refusal to disclose moved the judge actually to
dismiss the indictment. No record was made that would allow us to
review the court's finding of fault against the government for
other delays encountered during the case. Thus, the only issue we
decide in this appeal is that the district court erred by
dismissing the indictment based on the government's failure to
disclose the agents' reports. This opinion does not affect the
right of the district court to reconsider on remand any other
alleged misconduct on the part of the government and, if justified,
to take appropriate action.
-17-