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October Term, 2009

December 8, 2009

Today the Supreme Court issued two decisions, described below, of interest to the business community.

Interlocutory Appeal—Claims of Attorney-Client Privilege

Mohawk Industries, Inc. v. Carpenter, No. 08-678 (previously discussed in the January 26, 2009 Docket Report).

In the first decision authored by Justice Sotomayor since her elevation to the Court, the Supreme Court held today that orders compelling disclosure of material allegedly protected by the attorney-client privilege are not subject to immediate appeal under the collateral order doctrine.    

In this case, the plaintiff sought discovery of materials relating to an internal investigation conducted by counsel for the defendant, Mohawk Industries, Inc. Mohawk objected to the discovery request on the ground that the requested materials were protected by the attorney-client privilege. Although the district court agreed that the materials were confidential, it nevertheless ordered their disclosure, holding that Mohawk had waived the attorney-client privilege with respect to the documents in question. Mohawk filed an interlocutory appeal challenging the court’s disclosure order. The Eleventh Circuit dismissed the appeal, holding that it lacked subject matter jurisdiction because the disclosure order was neither a final order within the meaning of 28 U.S.C. § 1291 nor covered by the collateral order doctrine established in Cohen v. Beneficial Industrial Loan Corp., 337 U.S. 541 (1949). In its decision today, the Supreme Court affirmed.

Section 1291 of the Judicial Code grants federal courts of appeals authority to review “final decisions of the district courts.” 28 U.S.C. § 1291. With certain exceptions, the courts of appeals lack jurisdiction to hear interlocutory appeals from non-final orders. The collateral order doctrine, first recognized in Cohen, creates an exception to section 1291’s finality requirement and allows interlocutory appeal from an order that conclusively determines the disputed question, resolves an important issue separate from the merits of the action, and is effectively unreviewable on appeal from a final judgment. In today’s decision, the Supreme Court refused to extend the collateral order doctrine to permit immediate appeal from an order requiring disclosure of information a party contends is protected by the attorney-client privilege. According to the Court, most orders adverse to the attorney-client privilege—like typical pre-trial discovery orders—can be adequately reviewed in a post-judgment appeal without unduly jeopardizing the fundamental interests at stake. Moreover, it concluded, the limited benefit of permitting parties to immediately appeal such rulings cannot justify the institutional costs of additional litigation.  

Justice Thomas concurred in part and concurred in the judgment. He agreed that the collateral order doctrine should not be expanded to cover orders compelling discovery; however, he would avoid attempting to apply the collateral order doctrine at all, and instead leave the issue of permissible interlocutory appeals entirely to the rulemaking process, as provided in the Rules Enabling Act. 

The Court’s decision, which exposes privileged material to disclosure without effective pre-trial review, is likely to have a significant impact on how attorneys involved in corporate litigation conduct factual investigations. As a result of this decision, parties may be less likely to make full and frank disclosures to their attorneys for fear that privileged information will become part of the public domain prior to appeal, and prudent defense counsel will be even more circumspect when conducting internal investigations.

Railway Labor Act—Prerequisites to Arbitration—Scope of Judicial Review

Union Pacific Railroad Co. v. Brotherhood of Locomotive Engineers and Trainmen, No. 08-604 (previously discussed in the February 23, 2009 Docket Report).

Today, in Union Pacific Railroad Co. v. Brotherhood of Locomotive Engineers and Trainmen, No. 08-604, the Supreme Court held that the requirement that parties to railroad labor disputes conference before seeking arbitration before the National Railroad Adjustment Board is not jurisdictional. In reaching this decision, the Court declined to resolve a split among federal courts of appeals concerning whether the Railroad Labor Act (“RLA”) permits judicial review of alleged due process violations by the Board. 

In order to promote the peaceful and efficient resolution of labor disputes, the Railway Labor Act mandates the arbitration of “minor disputes” before five-member panels drawn from the 34 members of the National Railroad Adjustment Board (“Board”), which is composed of equal numbers of labor and industry representatives. The panels are composed of two members from each group, and an additional neutral arbitrator that is chosen either by the panel members or by the National Mediation Board. The RLA requires employees and carriers to make two attempts to resolve their disputes before resorting to arbitration. First, parties must exhaust the grievance procedures specified in their collective-bargaining agreement. 45 U.S.C. § 153 First (i). If those so-called “on-property” proceedings fail to resolve the dispute, the RLA directs the parties to then attempt to settle the dispute through a “conference” between their respective designated representatives. Id. § 152 Second, Sixth. 

This case arose when a union, the Brotherhood of Locomotive Engineers and Trainmen, initiated grievance proceedings on behalf of five members who had been disciplined by their employer, the Union Pacific Railroad Co. When the parties failed to resolve the dispute through the on-property grievance proceedings, the union sought arbitration before the Board. After the parties had made their submissions to the Board and just prior to the hearing before a five-member panel, one of the industry arbitrators objected that, in violation of Board regulations, the submissions did not contain any proof that the parties had conferenced. The railroad then adopted this objection. Refusing to accept the union’s subsequently proffered evidence that the parties had in fact conferenced, the panel concluded that the failure to prove conferencing deprived the Board of jurisdiction and required dismissal of the employees’ claims.

After a federal district court upheld the Board’s decision, the union appealed to the Seventh Circuit on two alternative grounds. First, the union argued that the failure to prove conferencing does not deprive the Board of jurisdiction under either the RLA itself or the Board’s implementing regulations. Second, the union argued that the Board violated due process when it entertained the railroad’s untimely failure-to-prove-conferencing objection. Concluding that conferencing is not a prerequisite to arbitration before the Board, the Seventh Circuit reversed, basing its decision on due process rather than statutory grounds. 522 F.3d 746, 750 (2008).

The Supreme Court affirmed the Seventh Circuit’s decision, but based its ruling on statutory rather than due process grounds. The Court explained that the RLA’s conferencing requirement and the Board’s regulation requiring proof of conferencing are “claims-processing, not jurisdictional, rules.” Slip op. 16. Accordingly, the Court held, the Board improperly dismissed the employees’ claims.

By basing its decision on the text of the RLA, the Court avoided a question that has divided courts of appeals—namely, whether the narrow grounds of judicial review specified in the RLA, 45 U.S.C. § 153(q), preclude federal courts from reviewing Board decisions for failure to comply with due process. Moreover, because the Court’s decision rests on statutory grounds, it is not likely have a significant impact on arbitration outside the railway labor arena.

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