Alaska Employment Law

The United States Supreme Court recently held that an order granting a motion to compel and declining an assertion of the attorney-client privilege is not an order that may be immediately appealed. The case is Mohawk Industries, Inc. v. Carpenter, ___ U.S. ___ (2009).

Norm Carpenter reported to his employer’s (Mohawk Industries’) human resources department that Mohawk was employing undocumented aliens. Carpenter did not know that Mohawk was already facing class action litigation in which the allegation was that it was driving down employees’ wages by hiring illegal aliens. The HR manager directed Carpenter to discuss his allegations with counsel. Counsel allegedly pressured Carpenter to recant his report. When he refused, he was fired. Carpenter sought to compel production of counsel’s notes. Mohawk argued that the notes were protected by the attorney-client privilege. The district court agreed that the notes were protected but concluded that the privilege had been impliedly waived by inadvertent production of the notes in the pending class action case. Mohawk sought an immediate appeal of the order compelling production of the notes. The Eleventh Circuit dismissed the appeal for lack of jurisdiction, reasoning that the district court’s order was not an order that could be immediately appealed.

On further review, the United States Supreme Court affirmed. The Court instructed that only final orders can be reviewed. Some orders that are not final may be reviewed under the collateral order doctrine. See Cohen v. Beneficial Industrial Loan Corp., 337 U.S. 541, 546 (1949). To qualify for immediate review as a collateral order, the order must (1) conclusively resolve the disputed issue, (2) the issue must be an important issue that is separate from the merits of the action, and (3) the issue must be one that would otherwise be effectively unreviewable on appeal from a final judgment on the merits. The Mohawk Court reasoned that the discovery order in question failed the third part of this test since any question as to the order could be reviewed on appeal from a final judgment if the order actually affected the merits.

For lawyers and human resources managers in the Ninth Circuit this is a particularly significant decision in that, until now, an order declining to honor the attorney-client privilege in a discovery dispute could be immediately appealed as a collateral order in the Ninth Circuit. The most recent case upholding this rule was In re Napster Copyright Litigation, 479 F.3d 1078, 1087-88 (9th Cir. 2007). These cases have now been overruled.

In reaching its decision, the Court did not see any reason to protect against the chill that potential disclosure may have on effective communications between counsel and clients. However, as a practical matter, employers, HR managers, and their attorneys should take particular care to review their interview and document retention procedures – particularly in the context of ongoing or threatened litigation.

The Court also emphasized that its order focused only on application of the collateral order doctrine to seek immediate review of a order compelling production of documents over assertion of an attorney-client privilege. The Court explained that parties could still seek a writ of mandamus with circuit courts of appeal or, in extreme cases, could refuse to comply with a district court order and then appeal any sanctions order. These suggested alternates, however, seem unrealistic in both scope and application. Mandamus is an extremely rare procedural option that is seldom granted. See, e.g., Burlington Northern & Santa Fe Rwy. V. USDC, 408 F.3d 1142 (9th Cir. 2005). Defying sanctions as a means of securing review creates conflicts of interest between attorneys and their clients.