Early Appeals of Some Privileged Productions May Be at Risk

The Bottom Line

• The Perlman doctrine is an exception to the general rule that orders to produce documents aren’t immediately appealable, permitting non-subpoenaed privilege holders to appeal orders requiring production by third-party custodians.
• The Supreme Court’s 2009 Mohawk decision raises questions about the continued viability of Perlman doctrine.
• Practitioners should be mindful of the Second and Third Circuits’ competing dicta regarding the future of Perlman for grand jury subjects should the Supreme Court ever reconsider the doctrine.

Where non-subpoenaed clients object to an order compelling their former counsel to produce documents over which they continue to assert privilege to a grand jury, a recent opinion from the US Court of Appeals for the Second Circuit affirms that interlocutory appeals are available to “avert the mischief” related to that order. But attorneys should be aware this decision and a similar Third Circuit decision raise the specter that the Perlman doctrine could be vulnerable.

On Feb. 7, the Second Circuit in In re Grand Jury Subpoenas Dated September 13, 2023, exercised jurisdiction in an interlocutory appeal of an order compelling a lawyer and law firm to produce, in response to grand jury subpoenas, documents that had been withheld on the basis of attorney-client privilege. In so doing, the Second Circuit clarified the right for non-subpoenaed privilege holders to bring interlocutory appeals of district court orders compelling the disclosure of privileged documents.

Appellate Jurisdiction

Title 28 of the US Code, Section 1291, extends federal appellate jurisdiction to “appeals from all final decisions of the district courts.” In general, orders to produce documents in response to a grand jury subpoena aren’t immediately appealable because they lack finality. To obtain appellate review, the subpoenaed party must instead stand in contempt of the disclosure order and appeal the contempt order.

However, the Supreme Court, in a 1918 criminal case, carved out a “narrow exception” to the contempt rule—known as the Perlman exception—permitting non-subpoenaed privilege holders to bring interlocutory appeals of orders requiring production by third-party custodians.

The Perlman exception rests on the premise that a non-subpoenaed privilege holder doesn’t have the option of standing in contempt because the order is not directed at them. In that circumstance, the privilege holder would be effectively “powerless to avert the mischief” of the district court’s order. To prevent this result, courts treat orders requiring production by a third-party custodian as final as to the privilege holder and permit an interlocutory appeal.

In addition to contempt and Perlman appeals, some courts have permitted privilege holders to take immediate appeals of adverse privilege determinations if they satisfy the requirements of the collateral order doctrine—a different, related, exception to Section 1291’s finality requirement.

The doctrine, first announced in Cohen v. Beneficial Industrial Loan Corp., provides that there is a small class of collateral rulings that, although they don’t terminate the litigation, are appropriately deemed final under Section 1291. That small category includes only decisions (i) that are conclusive; (ii) that resolve important questions separate from the merits; and (iii) that are effectively unreviewable on appeal from the final judgment in the underlying action.

However, in Mohawk Industries, Inc. v. Carpenter, the Supreme Court in 2009 held that disclosure orders adverse to the attorney-client privilege don’t qualify for interlocutory appeal under the collateral order doctrine where the privilege holder is a party to ongoing civil litigation.

Focusing exclusively on the third requirement of the doctrine, the Mohawk court held that “collateral order appeals are not necessary to ensure effective review of orders adverse to the attorney-client privilege” where the privilege holder is a party to ongoing civil litigation because “postjudgment appeals generally suffice to protect the rights of litigants and ensure the vitality of the attorney-client privilege.” In such circumstances, “appellate courts can remedy the improper disclosure of privileged material in the same way they remedy a host of other erroneous evidentiary rulings: by vacating an adverse judgment and remanding for a new trial in which the protected material and its fruits are excluded from evidence.”

The Present Case

In In Re: Grand Jury Subpoenas Dated September 13, 2023, the Second Circuit considered the continued viability of Perlman appeals in the wake of the Supreme Court’s more recent decision in Mohawk.

The government contested the Second Circuit’s appellate jurisdiction, arguing that Mohawk controlled and Perlman didn’t apply. The non-subpoenaed sealed appellant counterargued that the Perlman exception remained viable, even after Mohawk, where a privilege-holder subject to a grand jury investigation seeks to appeal an adverse disclosure order.

The Second Circuit agreed with the sealed appellant and exercised appellate jurisdiction. The court acknowledged that Mohawk controls and the Perlman exception doesn’t apply when a non-subpoenaed privilege holder is a party to ongoing civil litigation in which the subpoena was issued, because under those circumstances a “privilege holder may seek recourse through a post-judgment appeal.”

But the appeals court disagreed that the same reasoning would apply in the context of a grand jury subpoena, which is the central context of Perlman. Because the Mohawk court neither discussed, mentioned, nor cited Perlman, the Second Circuit agreed with the Third Circuit in declining to hold that the Supreme Court narrowed the scope of Perlman doctrine—to exclude interlocutory appeals by subjects of grand jury investigations—sub silentio.

The Second Circuit ruled that its Perlman jurisprudence was undisturbed. It heeded the Supreme Court’s repeated instruction that a court of appeals should follow the case which directly controls, leaving to the Supreme Court the prerogative of overruling its own decisions—even when that case appears to rest on reasons rejected in some other line of decisions.

In a footnote, however, the Second Circuit noted in dicta that—even if it were permitted to anticipate the Supreme Court’s future overruling of Perlman—the high court would likely hold that Perlman remains good law because it is “significantly distinguishable” from Mohawk. The Second Circuit reasoned that whereas the interests of parties to ongoing civil litigation can be remedied by an appeal of an adverse judgment in that litigation, subjects to a grand jury investigation suffer a prejudicial and “present harm” warranting immediate appeal when their privileged materials are disclosed to a grand jury.

The Third Circuit, also in dicta, expressed some doubt that Perlman and Mohawk are so distinguishable. The Third Circuit viewed an order requiring the disclosure of privileged materials arguably to be as effectively reviewable, absent an immediate appeal, for subjects of a grand jury investigation as it is for parties in civil litigation.

The court reasoned: If the grand jury’s investigation leads to an indictment and later a conviction, an appellate court can remedy an improper disclosure of privileged material “by vacating the adverse judgment and remanding for a new trial in which the protected material and its fruits are excluded from evidence.”

While the Third Circuit acknowledged that a subject of a grand jury investigation may not actually have an opportunity for post-conviction review of a disclosure order (i.e., he may never be indicted, the charges may be dismissed, or he may be acquitted), it noted that the same is often true in civil litigation—where a civil litigant may settle, obtain summary judgment, or win a favorable verdict after an unfavorable privilege order, leaving the privilege broken and the district court’s ruling unchallenged.

For those reasons, the Third Circuit noted that, if and when the Supreme Court next hears a case involving the Perlman doctrine, “it may well hold that the doctrine does not allow grand jury subjects to receive immediate appellate review of adverse privilege determinations.” Citing the need for judicial efficiency in the criminal context, the Third Circuit noted that “such a decision may be justifiable.”

Implications

Where non-subpoenaed clients object to an order compelling their former counsel to produce documents over which they continue to assert privilege to a grand jury, the Second Circuit continues to provide an avenue for interlocutory appeal. In such circumstances, interlocutory review under Perlman is available because clients have no power to protect their privilege by standing in contempt. Though there is no express circuit split on the issue, practitioners should be mindful of the Second and Third Circuits’ competing dictum regarding the future of Perlman for grand jury subjects should the Supreme Court ever reconsider the doctrine.

In the context of civil litigation, it is less clear whether third-party appellants objecting to disclosure orders adverse to an asserted attorney-client privilege in the face of civil subpoenas are entitled to interlocutory review. The Second Circuit doesn’t appear to strictly confine the Perlman doctrine to criminal cases, but its application in civil cases for third-party appellants may be in tension with Mohawk.

Although the Second Circuit hasn’t expressed an opinion on whether Mohawk’s reasoning applies with equal force to parties and non-parties in ongoing civil litigation, other courts of appeals have—holding, after applying Mohawk, that nonparties can’t immediately appeal a discovery order and instead must appeal from a civil contempt citation (which are immediately appealable when imposed on nonparties) or file a petition for a writ of mandamus.

On balance, practitioners should be aware of In Re: Grand Jury Subpoenas Dated September 13, 2023, its implications, and the potential for changes in the law. Many in the criminal defense bar will be happy to see the Second Circuit’s clarification of the right to interlocutory review of adverse privilege determinations in the face of grand jury subpoenas. But future litigation regarding Perlman appeals may determine whether the decision was truly a victory for the defense bar, or merely one step forward and two steps back.

Although there are friendly ears in the Second and Third Circuits, it only takes one appellate panel to create a circuit split that may get the attention of the Supreme Court to reconsider the Perlman doctrine.

The case is In re Grand Jury Subpoenas Dated September 13, 2023, 2d Cir., No. 24-1588, decided 2/7/25.

This article does not necessarily reflect the opinion of Bloomberg Industry Group, Inc., the publisher of Bloomberg Law and Bloomberg Tax, or its owners.

Author Information

Alex Willscher is deputy managing partner of Sullivan & Cromwell’s criminal defense and investigations group.

Sam Bonafede is an associate at Sullivan & Cromwell.

Write for Us: Author Guidelines