FTC v. Boehringer Ingelheim Pharmace , 892 F.3d 1264 ( 2018 )

United States Court of Appeals
FOR THE DISTRICT OF COLUMBIA CIRCUIT
Argued November 15, 2017 Decided June 19, 2018
No. 16-5356
FEDERAL TRADE COMMISSION,
APPELLANT
v.
BOEHRINGER INGELHEIM PHARMACEUTICALS, INC.,
APPELLEE
Consolidated with 16-5357
Appeals from the United States District Court
for the District of Columbia
(No. 1:09-mc-00564)
Mark S. Hegedus, Attorney, Federal Trade Commission,
argued the cause for appellant. With him on the briefs were
David C. Shonka, Acting General Counsel, and Joel Marcus,
Deputy General Counsel for Litigation.
Lawrence D. Rosenberg argued the cause for appellee.
With him on the briefs were Michael Sennett and Nicole C.
Henning.
John P. Elwood, Zachary J. Howe, Kate Comerford Todd,
Sheldon Gilbert, and Amar D. Sarwal were on the brief for
2
amicus curiae Chamber of Commerce of the United States of
America and Association of Corporate Counsel in support of
Boehringer Ingelheim Pharmaceuticals, Inc. Warren D.
Postman entered an appearance.
Before: KAVANAUGH and PILLARD, Circuit Judges, and
RANDOLPH, Senior Circuit Judge.
Opinion for the Court filed by Circuit Judge KAVANAUGH,
with whom Circuit Judge PILLARD and Senior Circuit Judge
RANDOLPH join.
Concurring opinion filed by Circuit Judge PILLARD.
KAVANAUGH, Circuit Judge: The pharmaceutical
company Boehringer claimed attorney-client privilege over
certain documents subpoenaed by the Federal Trade
Commission. The attorney-client privilege applies to a
communication between attorney and client if at least “one of
the significant purposes” of the communication was to obtain
or provide legal advice. In re Kellogg Brown & Root, Inc.,
756 F.3d 754, 758 (D.C. Cir. 2014). Under that standard, the
attorney-client privilege applies to the documents at issue here.
We affirm the judgment of the District Court.
I
A drug manufacturer that holds a patent has a market
advantage. When a generic drug company challenges the
validity of that patent, it threatens the patent holder’s
monopoly. Such a challenge can result in a settlement in
which the patent holder pays the challenger to drop the
challenge. That scenario is known as a “reverse payment”
settlement – so labeled because the settlement requires the
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patent holder to “pay the alleged infringer, rather than the other
way around.” FTC v. Actavis, Inc., 570 U.S. 136, 141 (2013).
In Actavis, the Supreme Court analyzed the legality of
reverse payments. If the payments are made simply to avoid
litigation costs, they may be lawful. But if “the basic reason
is a desire to maintain and to share patent-generated monopoly
profits,” then “the antitrust laws are likely to forbid the
arrangement.” Id. at 158.
In 2008, a patent negotiation occurred between Boehringer
(the name brand with the patent) and Barr (the generic seeking
to challenge the patent). Ultimately, the parties reached a
reverse payment settlement.
The Federal Trade Commission pays close attention to
reverse payment settlements to ensure that they do not run afoul
of antitrust law. In 2009, the Commission began investigating
the Boehringer-Barr settlement. During the investigation, the
Commission subpoenaed documents from Boehringer.
Boehringer claimed that the subpoenaed documents were
created by Boehringer employees for Boehringer’s general
counsel, Marla Persky, at her request. The documents allowed
Persky to analyze and navigate the treacherous antitrust issues
surrounding reverse payment settlements. Other documents
reflected communications between Persky and Boehringer
executives regarding the possible settlement. Boehringer
asserted attorney-client privilege over the documents.
The burden is on the proponent of the privilege to
demonstrate that it applies. See United States v. Legal
Services for New York City, 249 F.3d 1077, 1081 (D.C. Cir.
2001). In a thorough and careful opinion, the District Court
agreed with Boehringer that the documents at issue here are
covered by the attorney-client privilege. To the extent the
4
Commission challenges the legal test employed by the District
Court, our review is de novo. To the extent the Commission
challenges the facts found by the District Court, our review is
for clear error.
II
As relevant here, the attorney-client privilege applies to a
confidential communication between attorney and client if the
communication was made for the purpose of obtaining or
providing legal advice. See Upjohn Co. v. United States, 449
U.S. 383 (1981); In re Kellogg Brown & Root, Inc., 756 F.3d
754, 757 (D.C. Cir. 2014). The privilege covers both (i) those
communications in which an attorney gives legal advice; and
(ii) those communications in which the client informs the
attorney of facts that the attorney needs to understand the
problem and provide legal advice.
In the corporate context, the attorney-client privilege
applies to communications between corporate employees and a
corporation’s counsel made for the purpose of obtaining or
providing legal advice. The privilege applies regardless of
whether the attorney is in-house counsel or outside counsel.
The application of the attorney-client privilege can
become more complicated when a communication has multiple
purposes – in particular, a legal purpose and a business
purpose. In this case, for example, the communications had a
legal purpose: to help the company ensure compliance with the
antitrust laws and negotiate a lawful settlement. But the
communications also had a business purpose: to help the
company negotiate a settlement on favorable financial terms.
In a situation like this where a communication has multiple
purposes, courts apply the “primary purpose” test to determine
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whether the communication is privileged. See Kellogg, 756
F.3d at 759. In Kellogg, this Court recently explained that
courts applying the primary purpose test should not try “to find
the one primary purpose” of a communication. Attempting to
do so “can be an inherently impossible task” when the
communications have “overlapping purposes (one legal and
one business, for example).” Id. “It is often not useful or
even feasible to try to determine whether the purpose was A or
B when the purpose was A and B.” Id. Rather, courts
applying the primary purpose test should determine “whether
obtaining or providing legal advice was one of the significant
purposes of the attorney-client communication.” Id. at 760
(emphasis added); see 1 RESTATEMENT (THIRD) OF THE LAW
GOVERNING LAWYERS § 72, Reporter’s Note, at 554 (2000).
Our approach to this issue, as we explained in Kellogg,
helps to reduce uncertainty regarding the attorney-client
privilege. Reducing uncertainty is important in the privilege
context because, as the Supreme Court has stated, an “uncertain
privilege, or one which purports to be certain but results in
widely varying applications by the courts, is little better than
no privilege at all.” Upjohn, 449 U.S. at 393.
In this case, the question therefore is whether obtaining or
providing legal advice was one of the significant purposes of
the communications at issue. The answer is yes.
The relevant communications consist primarily of the
transmission of factual information from Boehringer’s
employees to the general counsel, at the general counsel’s
request, for the purpose of assisting the general counsel in
formulating her legal advice regarding a possible settlement.
Other communications were between the general counsel and
the corporation’s executives regarding the settlement. All of
those communications are protected by the attorney-client
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privilege because one of the significant purposes of the
communications was “obtaining or providing legal advice” –
namely, settlement and antitrust advice. Kellogg, 756 F.3d at
758.
To be sure, the communications at issue here also served a
business purpose. The decision whether and at what price to
settle ultimately was a business decision as well as a legal
decision for Boehringer. But as we stated in Kellogg, what
matters is whether obtaining or providing legal advice was one
of the significant purposes of the attorney-client
communications. Here, as the District Court correctly
concluded, one of the significant purposes of these
communications was to obtain or provide legal advice. It
follows that Boehringer’s general counsel was acting as an
attorney and that the communications are privileged.
In so ruling, we emphasize that the attorney-client
privilege “only protects disclosure of communications; it does
not protect disclosure of the underlying facts by those who
communicated with the attorney.” Upjohn, 449 U.S. at 395.
In this case, therefore, the attorney-client privilege did not and
does not prevent the FTC’s discovery of the underlying facts
and data possessed by Boehringer and its employees. Nor did
it prevent the FTC’s discovery of pre-existing business
documents. But the attorney-client privilege does protect the
communication of facts by corporate employees to the general
counsel when, as here, the communications were for the
purpose of obtaining or providing legal advice. As the Upjohn
Court noted, discovery “was hardly intended to enable a
learned profession to perform its functions . . . on wits
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borrowed from the adversary.” Id. at 396 (quoting Hickman
v. Taylor, 329 U.S. 495, 516 (1947)). 1
***
In its landmark decision in Upjohn Co. v. United States,
449 U.S. 383 (1981), the Supreme Court explained the
importance of the attorney-client privilege in the business
context: The “vast and complicated array of regulatory
legislation” requires corporations to “constantly go to lawyers
to find out how to obey the law . . . particularly since
compliance with the law in this area is hardly an instinctive
matter.” Id. at 392. So it was in this case. We affirm the
judgment of the District Court.
So ordered.
1
For a few documents sought by the FTC, Boehringer asserted
only the work product privilege and not the attorney-client privilege.
This Court’s prior decision in this case analyzed the work product
issue. FTC v. Boehringer Ingelheim Pharmaceuticals, Inc., 778
F.3d 142 (D.C. Cir. 2015). On remand, the District Court applied
that decision. In a cross-appeal in this case, Boehringer challenges
the District Court’s decision on the work product privilege. But
Boehringer forthrightly recognizes that this panel is bound by the
prior panel’s decision. Boehringer’s real beef is with the prior
decision. We find no reversible error in the District Court’s
application of our prior decision.
PILLARD, Circuit Judge, concurring: I agree with the
opinion of the court as far as it goes. I write separately to
emphasize why the spare elegance of the court’s opinion
should not be mistaken for an expansion of the attorney-client
privilege recognized in our prior precedents: In short, the
district court engaged extensively with the disputed documents
and the bases for the privilege claims, and followed certain
truncated procedures only with the parties’ consent.
As an exception from the general presumption in favor of
discovery, the “attorney-client privilege must be strictly
confined within the narrowest possible limits consistent with
the logic of its principle.” In re Lindsey, 158 F.3d 1263, 1272
(D.C. Cir. 1998) (quoting In re Sealed Case, 676 F.2d 793, 807
n.44 (D.C. Cir. 1982)); see 1 Paul R. Rice, Attorney-Client
Privilege in the U.S. § 2:3. The party asserting attorney-client
privilege must prove that “each communication” sought to be
withheld merits the privilege. United States v. Legal Servs. for
N.Y.C., 249 F.3d 1077, 1081-82 (D.C. Cir. 2001) (rejecting
unparticularized assertion of attorney client privilege); see
Attorney-Client Privilege in the U.S. § 11:11. Under settled
law, the burden of establishing that privilege applies rests with
the party claiming it. See Op. 3; Legal Servs. for N.Y.C., 249
F.3d at 1081-82; Lindsey, 158 F.3d at 1270; In re Sealed Case,
737 F.2d 94, 99 (D.C. Cir. 1984) [hereafter Sealed Case
(1984)]; FTC v. TRW, Inc., 628 F.2d 207, 213 (D.C. Cir. 1980).
The proponent must, that is, show that a “significant” purpose
of every individual “communication” for which it asserts
privilege is to secure or provide “legal advice.” See In re
Kellogg Brown & Root, 756 F.3d 754, 759-60 (D.C. Cir. 2014);
Sealed Case (1984), 737 F.2d at 98-99.
Clients claiming privilege may seek to shield information
supplied in confidence to their lawyers. When a client’s
confidences are a “significant and inseparable part” of the
lawyer’s advice, they are protected as they appear within
privileged communications between lawyer and client. Sealed
2
Case (1984), 737 F.2d at 99. As the court emphasizes,
however, the attorney-client privilege “only protects disclosure
of communications; it does not protect disclosure of the
underlying facts by those who communicated with the
attorney.” Op. 6 (quoting Upjohn Co. v. United Stated, 449
U.S. 383, 395 (1981)).
The FTC does not dispute the status of the documents as
“communications” between lawyer and client, Oral Argument
Tr. at 12, instead focusing on the magistrate judge’s conclusion
that Boehringer had met its burden to show that the
communications at issue had a significant legal purpose.
Where a privilege claimant has closely intertwined purposes—
a legal purpose as well as a business purpose—it must still
establish to a “reasonable certainty,” Sealed Case (1984), 737
F.2d at 99, that “obtaining or providing legal advice was one of
the significant purposes” animating each communication
withheld, Kellogg Brown & Root, 756 F.3d at 758-59. Neither
a general statement that the lawyer wore both lawyer and
businessperson “hats” during the communications nor a
blanket assertion of legal purpose is enough. See Sealed Case
(1984), 737 F.3d at 99; Lindsey, 158 F.3d at 1270. Nor is it
sufficient to offer as support privilege logs with bare,
conclusory assertions that the listed communications were
made for the purpose of securing legal advice. See Legal Servs.
for N.Y.C., 249 F.3d at 1081-82; accord Equal Employment
Opportunity Commission v. BDO USA, LLP, 876 F.3d 690, 696
(5th Cir. 2017). The claimant must instead “present to the court
sufficient facts to establish the privilege” so that the court is in
a position independently to review the legal-purpose assertion
for each relevant communication. Sealed Case (1984), 737
F.2d at 99.
The magistrate judge, having personally “reviewed in
camera all the documents at issue,” found that Boehringer met
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that considerable burden in this case. FTC v. Boehringer
Ingelheim Pharm., Inc., 180 F. Supp. 3d 1, 6 (D.D.C. 2016).
That decision is not clearly erroneous. The burden-of-proof
issue is, to be sure, somewhat obscured on this record because
of the special process the parties adopted. In response to the
FTC’s 2009 subpoena, Boehringer initially produced
approximately 9,500 documents to the FTC and withheld
approximately 2,400 on the basis of work-product protection
and/or attorney-client privilege. See Appellee Br. at 14. The
FTC challenged the application of those shields to over 600
documents listed in Boehringer’s privilege log. Id. Faced with
hundreds of disputed documents, a magistrate judge in 2011
ordered Boehringer to choose a representative sample of
documents for in camera review. See FTC v. Boehringer
Ingelheim Pharm., Inc., 286 F.R.D. 101, 106 (D.D.C. 2012);
Oral Argument Tr. at 31. Boehringer submitted a supporting
affidavit with specific explanations of its claims of privilege
for each of the documents in the sample. Sealed App’x 473-
85. At oral argument, Boehringer explained—and the FTC did
not contest—that Boehringer offered to supplement or amend
the original privilege logs to provide more support for its
privilege assertions. The FTC passed on that offer. See Oral
Argument Tr. at 31-32, 42.
In light of our 2015 decision in this case clarifying the
standard for work-product protection, see FTC v. Boehringer
Ingelheim Pharmaceuticals, 778 F.3d 142 (D.C. Cir. 2015), the
magistrate judge on remand reviewed not only residual work
product claims but also assertions that documents we held not
protected as work product were nonetheless privileged
attorney-client communications, see Boehringer, 180 F. Supp.
3d 1. Boehringer again offered to supplement the record with
additional briefing and ex parte affidavits, but the court held
that no additional materials were necessary or appropriate. See
id. at 22-23, 28. In view of the parties’ original briefing on
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attorney-client privilege, the sample documents reviewed in
camera, and the record, which included Boehringer’s
supporting ex parte affidavit and its privilege logs, the court
sustained Boehringer’s claims of attorney-client privilege. It
determined that Boehringer offered more than conclusory
assertions that each of the disputed communications had a legal
purpose and, after confirming those assertions through its own
review of the documents, credited Boehringer’s contention that
obtaining legal advice was a significant purpose animating
each communication. Id. at 29-30.
The court enjoys considerable discretion in making that
determination in the first instance, and we owe its fact-finding
appreciable deference. See Boehringer, 778 F.3d at 148; Fed.
R. Civ. P. 52(a)(6) (“Findings of fact . . . must not be set aside
unless clearly erroneous.”). Because I see no clear error in the
district court’s finding, I concur.