The Second Circuit recently joined other circuits in misreading Mohawk to cut back on parties’ ability to take Perlman appeals.
May 21, 2020
When a court orders discovery over a claim of privilege, privilege claimants traditionally had two semi-reliable avenues for immediate appellate review. If the order directed the privilege claimant to disclose something, the claimant could appeal via the contempt route. The claimant could disobey, be held in contempt, immediately appeal the contempt, and—in that appeal—obtain review of the underlying discovery order. And if the order was directed to someone else—for example, an order directing a client’s attorney to testify before a grand jury—the privilege claimant could take what’s called a Perlman appeal. Named after the Supreme Court’s 1918 decision in Perlman v. United States, the Perlman appeal allows privilege claimants to appeal discovery orders directed to third parties.
The Perlman route has become less reliable over the last ten years. Several courts of appeals have read the Supreme Court’s 2009 decision in Mohawk Industries, Inc. v. Carpenter to mean that only non-parties to the litigation can take Perlman appeals. Parties can’t. Two weeks ago, in Rosner v. United States, the Second Circuit joined this doctrinal trend.
I wrote an entire article on this issue several years ago, creatively titled Perlman Appeals After Mohawk. In it I argued that courts were mistaken in limiting the availability of Perlman appeals. These courts have overlooked the purpose of Perlman appeals—protecting against the disclosure of confidential information—and read too much into Mohawk. In doing so, they’ve deprived parties of their reliable chance to seek immediate appellate review of certain privilege issues.
Discovery appeals generally
Appellate review of discovery orders normally must wait until after a final judgment. And for good reason. Discovery decisions are often discretionary. They’re accordingly less likely to be reversed and thus less in need of immediate review. Discovery decisions are also common and part of a district court judge’s control over pretrial litigation. Immediate appeals would disrupt district court proceedings, and well-resourced parties could use them to wear down their opponents. And district courts sometimes alter discovery decisions as litigation proceeds, which can obviate the need for an immediate appeal.
But exceptions to the general rule exist.
Contempt appeals
One exception is the contempt appeal. When a court orders privilege claimants to disclose information, they can disobey the order and risk being found in contempt. If found in contempt, they normally can immediately appeal that contempt ruling. And in that appeal, privilege claimants can challenge the underlying discovery order. So, for example, a party ordered to disclose attorney-client communications can refuse to comply, be held in contempt, and immediately appeal the ruling that the conversation is not privileged.
This isn’t a perfect avenue for appeal. One problem is that parties to a suit cannot immediately appeal being held in civil contempt. They can appeal only criminal contempt, while non-parties can immediately appeal both. And contempt can come with pretty stiff penalties. The contempt option thus asks a lot of privilege claimants. But it’s a pretty reliable way for them to obtain immediate appellate review.
Perlman appeals
Perlman appeals are another exception, and they’re closely related to contempt appeals. The Perlman option traditionally exists when a discovery order targets someone other than the privilege claimant. For example, a district court might order someone’s attorney to testify before a grand jury. The client does not have the contempt option in this scenario, as the court isn’t asking anything of the client. And there’s a real risk that the third party will comply with the discovery order rather than risk the contempt necessary to take an appeal.
The Perlman exception allows privilege claimants to appeal discovery orders directed to third parties. In Perlman itself, for example, the Supreme Court allowed a privilege claimant to immediately appeal a discovery order directed to the clerk of a district court. The claimant had deposited documents with the clerk, and he claimed that their disclosure would violate his Fourth and Fifth Amendment rights. But he could not himself disobey the order, nor could he expect the clerk to be held in contempt to facilitate an appeal. So the Supreme Court let the privilege claimant take an immediate appeal, noting that he was “powerless to avert the mischief of the order.”
Cutting back on Perlman after Mohawk
Since the Supreme Court’s 2009 decision in Mohawk Industries, Inc. v. Carpenter, the courts of appeals have been cutting back on parties’ ability to take Perlman appeals.
The Supreme Court’s decision in Mohawk
In Mohawk, the Supreme Court closed off another avenue that some courts of appeals had used to immediately review discovery orders. The Court held that parties cannot immediately appeal those orders via the collateral-order doctrine. That doctrine allows for the immediate appeal of orders that conclusively resolve an issue, are important and separate from the merits, and would be effectively unreviewable on appeal from a final judgment. Discovery orders, Mohawk held, do not satisfy the doctrine’s requirements. In particular, the Court noted that discovery orders were effectively reviewable after a final judgment, saying that “postjudgment appeals generally suffice to protect the rights of litigants and assure the vitality of the attorney-client privilege.” The Court also emphasized the existence of other avenues for seeking immediate review of discovery orders: certified appeals under 28 U.S.C. § 1292(b), writs of mandamus, and the contempt option.
Restricting Perlman in the courts of appeals
Shortly after Mohawk, the courts of appeals began to read the decision to cut back on the availability of Perlman appeals. They have read Mohawk to mean that parties can no longer take Perlman appeals. After all, Mohawk said that “postjudgment appeals generally suffice to protect the rights of litigants.” (Emphasis added.) Litigants, these courts reason, accordingly don’t need things like Perlman appeals. Only non-litigants/non-parties do.
This doctrinal development began with the Seventh and Ninth Circuits’ suggesting—but not holding—that only non-parties could avail themselves of Perlman appeals. Ruminating on the scope of Perlman after Mohawk, the Seventh Circuit declared that “[o]nly when the person who asserts a privilege is a non-litigant will an appeal from the final decision be inadequate.” And the Ninth Circuit, in the course of allowing a non-party to take a Perlman appeal, emphasized that “neither the privilege holder nor the custodian of the relevant documents are parties to the underlying criminal proceedings.”
Eventually the Sixth Circuit became the first court to squarely hold that only non-parties can take Perlman appeals. Quoting the Ninth Circuit at length, the Sixth Circuit held that parties could “ultimately . . avail themselves of a post-judgment appeal which, under Mohawk, suffices ‘to protect the rights of the litigants and preserve the vitality of the attorney-client privilege.’” The Tenth and Eleventh Circuits soon followed suit, and the Ninth Circuit eventually held (rather than just suggested) the same. The Fourth Circuit has also suggested that only non-parties can take Perlman appeals.
Rosner v. United States
The most recent decision in this line of cases came a few weeks ago in Rosner v. United States.
The plaintiff in Rosner sought a tax refund, but his request for the refund was late. He argued that his tardiness was excused due to his mental disability, and in support he offered letters from his therapists that he suffered from post-traumatic stress disorder and other conditions. The IRS rejected the plaintiff’s claim as untimely. So he sued. The government then sought discovery from the plaintiff’s therapists. And the district court refused to quash this discovery request, holding that the plaintiff waived the psychotherapist-privilege privilege by relying on his mental health. The plaintiff then appealed.
The Second Circuit held that it lacked jurisdiction over the appeal. It first held that the collateral-order doctrine did not apply. The court saw no reason to not extend Mohawk’s holding regarding the attorney-client privilege to the psychotherapist-patient privilege.
The court went on to hold that the plaintiff also could not appeal under the Perlman doctrine. The court provided little new analysis, instead citing to many of the above-mentioned decisions. The Second Circuit “agree[d] with the reasoning in these cases and f[ound] that the Perlman exception does not apply where, as here, the disclosure order was issued in a litigation to which the privilege holder is a party.” The plaintiff was “not ‘powerless to avert the mischief’ of the district court’s order” but instead had “‘several potential avenues of review,’ including mandamus and certification under 28 U.S.C. § 1292(b), in addition to appellate review following a final judgment.”
The mistaken cutting back on Perlman appeals
Courts’ cutting back on the availability of Perlman appeals is mistaken. There are at least two problems with it.
First, it fails to recognize the purpose of Perlman appeals. These appeals, like contempt appeals, exist to protect against the wrongful disclosure of confidential information. Once this information is disclosed, its secrecy is forever lost. Given the unique harm that can come with discovery orders involving allegedly privileged information, special appeal rules exist. When the target of the discovery order holds the privilege, the target can take a contempt appeal. When someone other than the target holds the privilege, the privilege claimant can take a Perlman appeal. These two kinds of appeals complement one another.
Given this underlying purpose, the party/non-party status of a privilege claimant is irrelevant to Perlman appeals. Party or non-party, the harm is the same, as is the inability to take a contempt appeal. And party or non-party, an appeal after a final judgment cannot repair the loss of secrecy that comes with wrongfully disclosed information.
Second, the cases cutting back on Perlman appeals read too much into Mohawk. Granted, Mohawk said that “postjudgment appeals generally suffice to protect the rights of litigants.” But that line must be read in context. In concluding that a privilege claimant could not immediately appeal an adverse discovery order under the collateral-order doctrine, Mohawk emphasized the alternative avenues for immediate review. As the Court saw things, those alternatives rendered appeals under the collateral-order doctrine unnecessary. And those alternatives included the contempt option.
The contempt option thus was part of the reason why the Supreme Court concluded that appeals after a final judgment generally suffice for parties. Privilege claimants in this situation have means to seek immediate review—including the contempt option—when appeal after a final judgment won’t suffice. Perlman is the stand-in for contempt appeals when the contempt route is unavailable. So the availability of Perlman appeals actually supports the reasoning in Mohawk. To use that holding to then cut back on Perlman is perverse.
For more about Perlman appeals
As I mentioned at the beginning, I wrote an entire article on this issue several years ago. In that article, I go into much more depth on the circuit decisions and why they’re mistaken. If you find this topic interesting, you might want to check it out.
Rosner v. United States, 2020 WL 2296864 (2d Cir. May 8, 2020), available at [the Second Circuit], Google Scholar and Westlaw.