Excepts of Transcript of Oral Argument in United States v. Deloitte, 623 F. Supp. 2d 39 (D.D.C. 2009), aff'd in part, vacated in part, and remanded, 610 F.3d 129 (D.C. Cir. 2010).

[Setting the stage:  Deloitte prepared certain documents during its financial audit of Dow Chemical Co.  Dow claimed that the documents were protected under the attorney work-product doctrine.  The government filed a motion to compel Deloitte to produce documents in response to a subpoena; that motion was denied.  The government then filed a motion to state the basis for the ruling.  That motion was granted and Judge Leon (in the D.C. district court) stated that the basis for the ruling was that the documents were privileged and so Deloitte was not compelled to disclose the documents.  Judge Leon's decision was appealed to the D.C. Circuit.  Oral argument occurred on February 26, 2010, before Chief Judge David Sentelle, Judge Janice Rogers Brown, and Judge Thomas Griffith.]

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[The following excerpt also illustrates the importance of (i) appropriately defining the issues, (ii) having comprehensive knowledge of the record, and (iii) maintaining your position in the face of aggressive questioning by the judge.]

Ms. Judith HAGLEY:  May it please the Court…..The issue in this case is whether documents that an independent auditor prepares or relies on during its audit of a company's financial statements are work product.

Judge SENTELLE:  That's a much broader issue than I think is necessary to decide this case.  The issue is whether one particular document, well actually, two---two kinds of documents involved, one of which I think you can see is work product…. The ones that are called the Dow documents that …. were shared with Deloitte.  Right?

HAGLEY:  That's correct.

Judge SENTELLE:  You concede that that's work product?

HAGLEY:  The two, the two---

Judge SENTELLE:  The other document has to do with a document prepared by the outside auditor but containing information from legal counsel, right?

HAGLEY:  That's correct.

Judge SENTELLE: So the issue is not nearly as broad as what you first stated…This is not going to be a sweeping precedent---you use the term sweeping in your brief---that all outside auditor documents can be protected by work product.  It's a very fact specific question, is it not?

HAGLEY:  Though in this case, the district court's ruling is in a sense sweeping…

Judge SENTELLE:  Can you quote the part of that opinion that you are relying upon in this moment?

HAGLEY:  The Court's finding---

Judge SENTELLE: I've got the opinion in front of me, and I'm not sure I find anything as sweeping as what you are arguing in your brief.

HAGLEY:  What the Court says, and this is on page 156 of the record in footnote 1-that the third document was prepared because of the prospect of litigation…

Judge SENTELLE: So all we're really dealing with is those documents, which although prepared by the auditor, contain the thoughts of the legal counsel, right?

Judge GRIFFITH:  And what do you understand that to mean---thoughts of Dow's counsel regarding the prospect of litigation?  That doesn't seem to follow any of the formulas that have been used since Hickman and Rule 26.  What does that mean?

HAGLEY:  What it means is in the context of the audit of the financial statements. And what every public company has to do when it's auditing its financial statements…..

Judge GRIFFITH:  I understand that

HAGLEY:….is analyze---

Judge GRIFFITH:  It doesn't say litigation strategy, does it?

HAGLEY:  It does not say litigation strategy……

Judge GRIFFITH:  I don't know what this means---thoughts about the prospect of litigation.

HAGLEY:  Well, it is vague.

Judge GRIFFITH:  Is it your view that the district court order is sufficiently clear, that we know what we are reviewing here?

HAGLEY:  We have not argued that there should have been more analysis, but that what the Court said is insufficient under this Court's case law.  The work product test does not extend work product protection to documents created by lawyers in the ordinary course of business or for non-litigation purposes.

Judge GRIFFITH:  The purpose of the meeting that the document was created for was not litigation, but, during the course of the meeting there were discussions about litigation strategy that were memorialized in the document-that's a different matter, right?  Memorializing that discussion would be intangible work product under Hickman, right?

HAGLEY:  Well it certainly would be different than the facts in this case, which as you point out……

Judge GRIFFITH:  Well do we know? Do we know? What do we know about them?  What do we know about the facts in this case?

HAGLEY:  We don't because we haven't seen the documents, so I can't tell you what it says.  But I can tell you that it is your position that if in that meeting, the sole purpose of which is to determine whether the financial statements are accurate, it doesn't matter what it said.  If they're planning litigation strategy or if they're saying we have no uncertain tax positions

Judge SENTELLE: That's the part where you may have trouble with your audience here, is when you say it doesn't matter what it said.  If it says our litigation strategy in defense of litigation will be x, y, and z why would that not be protected as work product?

HAGLEY: Because the purpose for which it was revealed in that meeting was for a non-litigation purpose.

Judge SENTELLE:  What purpose would the government want-what are you looking for?

HAGLEY: What we are looking for---we explain this in our opening brief…

Judge SENTELLE:  You didn't explain it well enough for me. What is it you're looking for here?

HAGLEY:  Well let me try again.  We are looking for the business purpose of the transaction

Judge SENTELLE: You're looking for the attorney's opinion, are you not?

HAGLEY: No, we are looking for analysis of this business transaction.

Judge SENTELLE: You're looking for the attorney's analysis of this business transaction, right?

HAGLEY: We're looking for any analysis in Deloitte's files about the transaction.

Judge SENTELLE: The reason you want these documents is to get the attorney's opinion of that, right?

HAGLEY: What we've explained that we're asking for is, listen, if you let me just explain for one minute. This case involves a complicated, in our view, abusive tax shelter transaction…..

Judge SENTELLE: Don't tell me what this case involves. Are you looking for anything other than the attorney's opinion as you're trying to get this document?

HAGLEY:  Yes we are. We're hoping that Dow and its attorney would need to analyze the substance of the transaction to give the background of whether the partnership was a legitimate partnership.

Judge SENTELLE: … What you want here is the attorney's opinion on that subject, right?

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[The following excerpt illustrates (i) the fluidity of oral argument and anticipating additional time to address matters of concern to the court, (ii) knowing the details of the cases cited in briefs submitted to the court, and (iii) having a clear understanding of the authorities that support (or undermine) your case.]

HAGLEY: Unless the Court has any further questions on work product, I was going to move on to waiver.

Judge SENTELLE:  Move on to, to what?

Judge BROWN:  To the waiver.

Judge SENTELLE: Okay-your time is running. Let's add five minutes, because waiver may be the most important part of the case.  Go ahead counsel.

HAGLEY:  In this case, we think that the waiver ruling is also flawed because the district court failed to recognize that the independent auditor can be a potential adversary…because like the agency auditor in the MIT case, the independent auditor's function…

Judge GRIFFITH:  In that case, wasn't the auditor representing an agency with whom they had done business, and if the audit didn't come out right they were going to owe them money?  That isn't quite what happens in a lawyer - auditor situation.  Is that your best case?  That's your strongest case?

HAGLEY: That's one of our strong cases….

Judge GRIFFITH: What's your best case? What, what's your best case?

HAGLEY: The Medinol and Diasonics decisions-and why we think those two courts reach the correct conclusion is because they followed and cited to the majority opinion in the Supreme Court Arthur Young decision……

Judge SENTELLE:  The Supreme Court in Arthur Young was not addressing this issue.  I mean, you…..

HAGLEY: We've been candid about that in our brief.

Judge SENTELLE: Right.

HAGLEY: But it did set the rule that an independent auditor's work papers do not need to be protected….

Judge SENTELLE:  Nobody has argued that in and of itself, the auditor's work product is protected.  Arthur Young is, everybody can say Arthur Young is fine.  It's wonderful. (Indiscernible) decided at the Supreme Court.  They control. But that still leaves us with the question of whether the independent auditor's notation or memorialization of counsel's opinions are privileged.

HAGLEY:  That's correct. But that is…..

Judge SENTELLE:  So Arthur Young really doesn't ask, it really doesn't bear on this case very much at all, does it?

HAGLEY:  Well I think it does…

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[The following exchange illustrates how appellate judges, even in tax cases, are particularly concerned about the impact of the court's decision on other cases outside the tax realm.]

Judge GRIFFITH:  But your waiver analysis is contingent upon the idea that the auditor is going to be potentially adverse to the law firm.  And the only case that you cite is one that doesn't have any…..


Judge GRIFFITH……anything to do with this case.   You're asking us to take a step that would have pretty significant consequences, and you don't have a case to cite, so you're asking us to break new ground here, right?  

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[Postscript:  The appellate court (in an opinion by Judge SENTELLE) held that merely because the auditor, rather than counsel, drafted the memorandum did not exclude the possibility that the memorandum contained attorney work product.  Moreover, the court held that the fact that the memo was generated as part of the audit process did not exclude the possibility that it contained work product.  The court also held that the evidence was insufficient to support the district court's finding that the memo was purely work product.  And, as a matter of apparent first impression, the appellate court held that the corporation did not waive work-product protection by disclosing it to the auditor.  Accordingly, the D.C. Circuit affirmed in part, vacated in part, and remanded to the district court.]