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A divided panel of the 2nd U.S. Circuit Court of Appeals has refused to block a lower court order that compelled the deposition of the general counsel of the Michigan-based Dow Corning Corp. in a shareholder suit against the company. But in remanding the matter, In Re: Dow Corning Corp., 00-3036, to the district court, the 2nd Circuit was deeply skeptical of the decision by federal Judge Thomas P. Griesa of the U.S. District Court for the Southern District of New York, which found that the general counsel could be forced to testify on communications with Dow Corning’s board of directors, notwithstanding the company’s valid assertion of attorney-client privilege. The two-judge majority of 2nd Circuit Judge Robert A. Katzmann and Southern District federal Judge Charles L. Brieant, sitting by designation, criticized at length Griesa’s reasoning and the slim record in the case. But they found that Dow Corning had not demonstrated the “clear entitlement” required to justify the extraordinary relief of a writ of mandamus. Dow Corning, which is jointly and equally owned by The Dow Chemical Company and Corning Inc., filed for Chapter 11 bankruptcy in the wake of an avalanche of product liability suits in the 1980s related to its manufacture of silicone gel-filled breast implants. In the instant class action, the shareholder plaintiffs argued that the directors of Dow Chemical and Corning violated federal securities law by failing to warn their respective shareholders that Dow Corning faced the threat of extensive silicone implant litigation. The shareholders first moved to compel unredacted minutes from Dow Corning’s board of directors’ meetings from 1984 to 1992, at which the company’s general counsel, James R. Jenkins, advised the board about the pending litigation. Although recognizing that Dow Corning’s attorney-client privilege and work-product doctrine covered the board meeting minutes, Judge Griesa granted the motion last year. He ordered the minutes produced under a protective order intended both to shield Dow Corning’s privileges and to prevent additional dissemination. The order held that the minutes would be shown only to lead counsel and other “Authorized Persons,” used only in the instant litigation and returned after a judgment was entered. It also stipulated that production of the minutes would not constitute a waiver of the attorney-client or work-product privileges. Part of the rationale for Griesa’s order was that the production of the minutes was vital to resolving summary judgment motions filed by Dow Chemical and Corning. Heeding the order, those companies — but not Dow Corning — produced the unredacted board minutes. The shareholder plaintiffs also moved to depose Jenkins about his communications with the Dow Corning board. That motion was opposed by Dow Chemical and Corning, which argued that the facts of Dow Corning’s 1980s-era litigation exposure had already been produced to the plaintiffs. Dow Corning also objected, asserting its attorney-client privilege and attorney work-product doctrine in connection with Jenkins’ testimony. Judge Griesa again acknowledged Dow Corning’s privilege with respect to Jenkins’ communications with the board, but he nevertheless granted the motion to compel, under the auspices of a protective order essentially the same as the one issued for the minutes. The judge argued that since Dow Corning was entitled to assert the privilege but Dow Chemical and Corning were not, the protective order struck a balance between the plaintiff shareholders’ right to discovery and Dow Corning’s valid privilege. MOTION TO VACATE Dow Corning then filed the instant petition for a writ of mandamus to vacate Griesa’s order, arguing that the judge was mistaken in his conclusion that the privileged communications were relevant to the shareholders’ claims, and in his finding that the protective order adequately protected Dow Corning’s interests. The company’s argument before the 2nd Circuit was largely persuasive but still ultimately unsuccessful. The panel, noting the bedrock sanctity of the attorney-client privilege, found that Griesa might well have erred in ordering the disclosure of the communications. And it found no authority to refute “the common sense observation that such a protective order is an inadequate surrogate for the privilege.” “The district court, once it found that the privilege applies, should not then have ordered the deposition of Jenkins without a prior finding that Dow Corning had waived the privilege or that an exception applied to withdraw the communications at issue from the purview of the privilege,” the majority wrote. “However, the district court’s ruling does not necessarily lead us to conclude that a writ of mandamus should issue.” Noting that the standard for mandamus requires a showing of clear and indisputable relief from the petitioner, the 2nd Circuit majority concluded that “the scanty record” in the case (which did not include the board meeting minutes at issue) left the judges unable to determine the proper scope of the attorney-client privilege for statements by Jenkins, and therefore unable to issue a writ of mandamus. But the majority made clear that Judge Griesa should tread lightly with respect to attorney-client privilege on remand. “We leave it to the district court in the first instance to address and resolve these difficulties,” the judges wrote. “The district court should consider, however, that relevance without more does not override the privilege, and that a protective order will not adequately safeguard the privilege holder’s interests such that the attorney-client privilege may be neglected.” Second Circuit Judge Fred I. Parker dissented on the question of relief, finding that the case — as “an issue of critical importance to the preservation of the privilege and an issue of first impression in this Circuit” — did meet the admittedly strict standard for mandamus relief. “Accordingly, I would issue the writ of mandamus and vacate the discovery order at issue, while making it clear that the district court could revisit the issue on remand.” Hugh R. Whiting and Richard I. Werder Jr. of Cleveland’s Jones, Day, Reavis & Pogue represented Dow Corning. Jeffrey A. Klafter of Manhattan’s Bernstein Litowitz Berger & Grossman represented the Corning investor plaintiffs. M. Richard Komins of Philadelphia’s Barrack, Rodos & Bacine represented the Dow Chemical investor plaintiffs. Jeremy G. Epstein and Alice D. Keane of Manhattan’s Shearman & Sterling and Herbert L. Zarov and Bennett W. Lasko of Chicago’s Mayer, Brown & Platt filed a brief in support of Dow Corning on behalf of Corning and Dow Chemical.

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