ML19344A083

Memorandum Discussing Elements of atty-client Privilege & Suggesting That Dow Has Waived Privilege from Outside Counsel Other than MR Wessel.Certificate of Svc Encl

ML19344A083
Person / Time
Site:	Midland
Issue date:	07/03/1979
From:	Olmstead W NRC OFFICE OF THE EXECUTIVE LEGAL DIRECTOR (OELD)
To:	Atomic Safety and Licensing Board Panel
References
NUDOCS 8007290963
Download: ML19344A083 (4)

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' l UNITED STATES OF AMERICA i-NUCLEAR REGULATORY COMMISSION 1BEFORE THE ATOMIC SAFETYAND LICENSING BOARD

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InIthe Matter of

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Docket Nos. 50-329 CONSUMERS POWER COMPANY

.50-330 (Midland-Plant, Units'1 and 2)

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NRC STAFF MEMORiNDUM ON ATTORNEY-CLIENT PRIVILEGE I.

Introduction During the discovery. taken in preparation for the evidentiary hearing which commenced on July 2, 1979, Intervenor the Dow Chemical Company (hereafter Dow),' asserted the attorney-client privilege with respect to legal advice it had received in late 1976 relating to Dow's intent with respect to its -

contract with Censumers Power Company (hereafter Consumers Power). The l

privilege was asserted.at pages 19, 32 and 66 of the deposition of James F.

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a iHanes taken at Midland,-Michigan on Monday, May 14, 1979. Mr. Hanes stated

. that Dow had. retained outside counsel to write legal. opinions regarding Dow's position subsequent to the -Court of Appeals remand and both before and after the Dow c'orporate review.

(Tr. 67-68).

When asked further questions concerning the name of the attorney and other details, Mr. Hanes asserted the attorney.-client privilege.

Thel purpose'of this' memo is to discuss tile eierents of the attorney-client privilege, to suggest to the Board that the privilege has been waived and, in the' event the Board believes the record needs to be supplemented'with respect

to the privilege. issue, to:suggest the. appropriate procedure, i

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'(t II.

The Att'orney-Client Privilege.

The case most frequ'ently; cited. for the~ essential elements of'the attorney.

client j privilege.is.U'..S.1v. United Shoe Machinery Corp., 89 F.Supp. 357 (1950).. h At pa'ge 358,Jthe Court stated:

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(1)1The. asserted holder of the privilege:is.or.

_ sought to become.a client;:(2);the person.to whom-the coranunication was made (a) is La member of the bar.

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- of a court,.or his subordinate and (b) in connection with this communication.is~ acting as ailawyer;-(3) the a

communication relates.to a fact.of.which the. attorney was -informed ~(a) by.his client -(b).without

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the presence of strangers -(c) for the purpose a

of securing-primarily 'either,(i) an opinien on

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claw or (ii)-legal services or. (iii) assistance in some legal-proceeding, and.not (d) fo. the purpose'of comitting a-crime or. tort; and (4)'

- the; privilege has been (a) claimed and '(b) not waived by.the client.

c The attorney-client privilege pplies. to corporations 3. The Neredith ca.se-h

~ describes 'two tests developed;in. the Federal: Courts for the application of j

the attorney-client privilege to; corporations._-

Two' itests have developed in the federal ' courts.

The.

first isithe "c.ontrol. group" test formulated in. City

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'of Philadelphia:v. Westinghouse Electric Corp. 210

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-F. Supp. 483:(E.D.Pa.), mandamus and prohibition denied-sub~ nom,? General Electric Co. v.rXirkpatrick, 312

.1F.2d1742-(3rd.Cir.-1962), cert." denied, 372 U.S.

" '943, 83.S.Ct. 937,-9.L.Ed.2d 969.(1963).- In this_ test,

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an' employee's ~statementLis'not considered a corporate s.

communication;unless th'e employee."is-in a position

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to controllo

decision ~ abo.r even to takeja. substantial part in-a; ut any action which the. corporation may.

.'takeuupon(thej advice"of: the! attorney, orgif he is an ~

' authorized' member' fs a bodylor groupJwhich has that.

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- authori ty[. ]" ~ : Id 2 ;a t' 485'.'

.-It'is the most widely used

!' test.+VirginiaTlectric &' Pow. CoEv. Sun Shipbuilding

& D. D; L Co.,,68 F.R.D.. 397,90 :(E. D.Va.,1975).

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g ' Diversified industri$s,fInc./vbMeredith,572 F.2nd 596'-(1978)'.

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s e ?The'second~ test is that formulated Jin Harper' & Row _

Publishers,1Inc. v. - Decker,.423 F.2d 487 -(7th Cir.

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1970),-aff'd by an' equally divided court',.400 U.S.

~ 348, - 91 S.Ct. 479, 27 L~.Ed. 2d 433 (1971).. In this-L

. test, "an employee 'ofia. corporation, though not a

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member o.f its. control group, is sufficiently ide~ntified 1with-the corporation * *

• where the employee makes the

. communication at the direction of his: superiors in the corporation end where.the subject matter upon which

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~ he' attorney's advice is scught by the corporation and t

dealt with'in the. communication is the performance by the employee of. the duties 1of his employment."

Id. at ' 491 -492.

i Secause of Dow's refusal to allow discovery on the priv'ilege issue, the L

existing record does not permit a conclusion as to whether the result would vary l

' depen' ing on which of these two tests were applied.. The privilege, of d

course, enjoys -le:s protection' under the "most~ widely used" " control group" test because the group from whom the communication can come is more I

restricted. The Staff's position that the: privilege has been waived, as q

i discussed below,'is not affected by the choice of the above tests.

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III. Waiver It is the Staff's view that.the privilege has:been waived.

The record shows

-that Dow sought advice from=outside counsel (Mr. Wessel and another unnamed

' counsel)Lwith respect' to its ' legal obligations concerning its contract with L

' Consumers. Power'(see pp.19,; 32 and 66-70 of the Hanes ~ deposition). As to radvice on this' subject fr'om.Mr. Wessel.Dow has waived the privilege (see the

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deposition' of Milton :R. ' Wessel,EWashington, D. - C., May 16 and 17,1979, the-eight

-: page drhft pleading ~ (" Action for Declaratory Judgment") prepared by Mr. Wessel-1 land referred to'at pp. ;26-27 'of his deposition, and Mr. Wessel's letter to Mr.

' lute; dated: September L15,il976). L As to advicefon th'e same subject, Dow has:

< asserted-the priv'ilege es"to'other outside counsel.,

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'Dow also. waived the privilege as to advice on this same subject with respect 3

to in-house counsel James F. Hanes and Leslie F. Nute (see depositions of May '14 and-15,e1979, June 5 and 6,1979, the Nute notes, and:Mr. Nute's note

.to J.: Temple dated August 5, 1.976). With respect.to the attorney-client privilege, the. cases make no ' distinction between in-house and outside counsel.

See Burlinoton Industries v. Exxon Corporation, 65 F.R.D. 26 at 36-7 (1974) and United States v.. United Shoe Machinery Corporation, 89'F.Supp. 357 at 360(1950). A point of clarification must be made. The attorney-client privilege is. usually couched in terms of confidential communications from the

.i client to the attorney.

Here the privilegefis claimed with respect to a cummunication from tF- 'ttorney to.the client.

The privilege extends to attorney to client communications."...only to the extent that they reveal confidential information' communicated by-the client to the lawyer".1/

Thus, Dow can only claim the privilege as to legal advice from unnamed outside counsel to the' extent that the legal advice included confidential information-Dow conveyed in. seeking legal advice concerning its contract with Consumers Power. The privilege has been waived, however, as to that subject matter when Dow diu not assert.the privilege as'to advice from three of its other counsel on'the same subject. Wigmore, Evidence Section 2327 discusses waiver of the attorney-client privilege as follows:

1/ ; United-States v. International Business Machines Corporation, 66 F.R.D.

206,.212s (1974).

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- A privileged ' person: would. seldom be found to waive,

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.if his intention not to abandon could alone. control

'the situation. There is always also the. objective-

' consideration that when his-conduct touches'a certain point'of disclosure, fairness requires thatihis

-privilege shall cease'whether he intended that: result Jor-not. 'He cannot be allowed, after disclosing as.

much;as he pleases, to withhold the remainder.

He

- may elect -to withhold -or to. disclose, but after a

.certain point 1his-election.must remainffinal.

.It is the Staff's ~ view'since Dow-has waived the privilege as to information it conveyed 'to three ofLits counsel in seeking legal. advice, it has waived the privilege as. to.information conveyed to a fourth counsel when seeking legal advice on.the same subject matter.

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- IV.. Procedure If this Boa'd is' satisfied-that Dow has waived the attorney-client privilege-r as 'to outside counsel: other than Mr. Wessel,.this issue is resolved.

If this A

l-Board is not satisfied,in that regard, the Staff suggests that-the record should.

. be developed'to -determine-facts relevant to 'the existence and waiver of the

privilege. :The Staff has been Lprecluded from developing that record because of Dow's refusal to answer more than prelimina'ry questions with respect-to advice fromloutside counsel other than Mr. Wessel.

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In Morthern States Power Company (Monticello Nuclear Generating Plant, Unit'1),-

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ALAB-10, 4 AEC 390 at 392-3 (1970), the Appeal Board addressed, at length, the procedures to be followed when a ' party asserts privilege in abdicatory

proceedings. ' As relevant to current rules of practice, Monticello would first require'this Board to determine whether the information is of a type gerarally dis-coverable.E The record shows'the legal advice to be relevant and therefore discoverable unliss privileged.2_/

Cnce relevancy has been determined A-Licensing Board must, consistent with our adjudicatory process, determine initially whether the data sought fall within a properly privileged category, and must do this without forcing a disclosure of the very thing the privilege is designed to protect.6]

[ Footnote 6: Courts as well as regulatory agencies have adopted in camera inspection as the' procedure-for accommodatTng claims of privilege with the demand for production.

The procedure s emits the deciding body to consider the privilege-without initially forcing disclosure.

The Commission's rule against ex parte communications (10 C.F.R. Sections 2.719 aiid -2.780) does not apply.to.such an in camera procedu're, followed by-s courts and agencies to deal with privilege controversies under similar circumstances. See,

-e.g., Westinghouse Electric Corporation v. City of Burlington, 358 lsic - apparently should be 351]

F.2,; 762, 766 (D.C. Cir.1965)].3_/

. _lf Rule.2.741, as discussed in Monticello- (1970) required a showing of good

.cause. That requirement has been eliminated.

j See. Rules of Practice, Section 2.740(b) - Scope of Discovery.

3/' ? Northern States Power Comoany.(Monticello Nuclear Generating Plant, Unit

' ' si),. ALAB 10, 4 AEC 390 at 392-3 (1970).

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L There is -at-least one alternacive to';the Board itself.considering this issue

' in, camera. - In the Toledo Edison Company, et. al,.(Dayis-Besse Nuclear Power

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. Station), ALAB-300,.2.NRC 752 (1975) the Appeal Board approved the Licensing

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Board's:referenceiof'a claim of privilege to a "special master", to be heard in camera.

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'V.

Conclusion The existing record shows that Dow's claim of privilsge as. to legal advice from,outside counsel other than Mr. Wessel has been waived.

In the event the Board determines the record needs to be supplemented with respect to thist issue, further-proceedings should be held:in camera.

Respectfu'lly ubmitted, d'

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. V illiam J. Olmstead Counsel for NRC Staff

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• ated at Bethesda, Maryland-j

..his 3rd day-of July,-1979 w

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UNITED STATES OF AMERICA NUCLEAR-REGULATORY COMMISSION 7

BEFORE THE ATOMIC SAFETY AND LICENSING BOARD j

In the Matter of '

CONSUMERS' POWER COMPANY.

)

Docket Nos. 50-329

)

50-330

'(Midland Plant, Units-1 and 2)

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(RemandProceeding)

CERTIFICATE OF SERVICE I nereby certify that copies of "NRC STAFF MEMORANDUM ON ATTORNEY-CLIENT PRIVILEGE" dated July 3,1979 in the above-captioned proceeding, have been served on the following, by deposit in the United States mail, first class, or as indicated by an asterisk through deposit in the Nuclear Regulatory Commission's internal mail system,-' this 5th day of July,1979.

(This document was handed to the Board and those parties who were present at the evidentiary hearing on July 3,1979.)

• Marshall E. Miller, Esq.

Ms. Mary Sinclair i

Atomic Safety and Licensing Board 5711 Summerset Street U. S. Nuclear Regulatory Commission Midland, Michigan 48640 Washington, D. C.

20555 Harold F. Reis, Esq.

' Dr. J. Venn Leeds, Jr.

Robert Lowenstein, Esq.

Atomic Safety and Licensing Board Lowenstein, Newman, Reis and 10807 Atwell Axel rad Houston, Texas 77096 1025 Connecticut Avenue l

.

• Dr. Emmeth A. Luebke l'

Washington, D. C.

20036 Atomic Safety and Licensing Board Gerald Charnoff, Esq.

U. S. Nuclear Regulatory Commission Shaw, Pittman, Potts & Trowbridge Washington, D. C.

20555 1800 M Street, N.W.

Washington, D. C.

20036 TJudd L. Bacon, Esq.

l-Legal. Department Mr. Steve Gadler

. Consumers Power Company 2120 Carter Avenue 212 West Michigan Avenue St. Paul, Minnesota 55108 Jackson, Michigan :49201 Grant J. Merritt, Esq.

• . Docketing and Service Section Thompson, Nielsen, Klaverkamp.

Office of the Secretary

& James..

U. S. Nuclear Regulatory Commission

~~80 Sc Eighth Street Washington,'D. C.

20555

- Minneapolis, Minn. - 55402 j

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- - Michael I. Miller, Esq..

R. L. Davis, Esq.

ji Ronald G.:Zamarin, Esq.

J. E. Dicks, Esq.

. Martha E.~Gibbs,.Esq.

L.-F. Nute, Esq.

JCaryl A. Bartalman, Esq.

The Dow Chemical Company:

Isham, Lincoln & Beale Legal Dept., 47 Bldg.

One First National, Plaza Midland, Michigan 48640 142nd Floor -

. Chicago, Illinois 60603

• Atomic Safety _and Licensing Board Panel U.S. Nuclear Regulatory Commission Washington, D. C.

20555'

• -Atomic Safety and" Licensing

. Appeal Panel' U.S. Nuclear. Regulatory Conmission Washington, D. C.

20555 William..C. Potter, Jr.

Fischer, Franklin, Ford, Simon' & Hogg

'1700 Guardian Building Detroit, Micnigan 48226-liyron M.~ Cherry, Esq.

1 IBM-Plaza.

Chicago,-Illinois 60611 William J. Olmstead ll Counsel for NRC Staff

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