In the first post-Textron decision from a federal court of appeals on the work product doctrine, the U.S. Court of Appeals for the District of Columbia held on June 29 that two documents prepared by a taxpayer and disclosed to its financial statement auditors fell under the work product doctrine protecting them from disclosure to the IRS (United States v. Deloitte LLP).  This case also provides the first example of a U.S. Circuit Court of Appeals addressing the issue of work product waiver in the context of disclosure to a financial statement auditor.  Significantly, the government had argued that the disclosure of two documents to the taxpayer’s financial statement auditor constituted a waiver of the work product doctrine.  Waiver of the work product doctrine occurs upon disclosure of potentially protected documents to an adversary or a conduit to an adversary.  The government claimed that disclosure to a financial statement auditor met this standard since there are times when financial statement auditors and their clients disagree on issues.  The Court of Appeals did not accept the government’s argument and found that the financial statement auditor was not a potential adversary in the potential tax litigation discussed in the documents at issue nor was it a conduit to an adversary. 

A third document, prepared by the taxpayer’s auditors, contained notes from a meeting that included discussions regarding possible litigation on a tax issue.  The court noted that this document could be protected, but remanded to the district court for in camera review to determine whether the contents of the document constituted work product.  The court noted that the work product doctrine codified in Rule 26(b)(3) of the Federal Rules of Civil Procedure encompasses only a portion of the documents protected by the doctrine.  Other information, namely intangible information, clearly falls within the work product doctrine summarized in the Supreme Court’s seminal opinion in Hickman v. Taylor.  “Under Hickman, however, the question is not who created the document or how they are related to the party asserting work-product protection, but whether the document contains work product-the thoughts and opinions of counsel developed in anticipation of litigation.”  The court continued, “The work product privilege does not depend on whether the thoughts and opinions were communicated orally or in writing, but on whether they were prepared in anticipation of litigation.”

The court did mention the recent Textron decision, but distinguished it by noting that Textron dealt with very specific documents not at issue in this case.  The court also cited to the dissention judge’s opinion in Textron observing that the majority’s opinion in that case could be viewed as a narrowing of the “because of” test for determining the applicability of the work product doctrine.  It will be interesting to see whether the government will appeal this decision.