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E.I. du Pont de Nemours & Co. v. Forma-Pack, Inc., No. 99, 1997 Term DISCOVERY -- Attorney/Client Privilege -- Work/Product Privilege -- Neither attorney/client privilege nor work/product privilege prevents discovery of documents transmitted between a corporation's in house legal department and a debt collection agency hired to collect a corporate debt.

Circuit Court for Anne Arundel County Case # C-97-36415

IN THE COURT OF APPEALS OF MARYLAND No. 99 September Term, 1997 ________________________________________

E.I. du PONT de NEMOURS & CO. v. FORMA-PACK, INC.

________________________________________

Bell, C. J. Eldridge Rodowsky Chasanow Raker Wilner Cathell JJ. _______________________________________ Opinion by Chasanow, J. Eldridge, Raker, & Wilner, JJ., dissent ________________________________________ Filed: October 8, 1998

The issue in this case is whether the work product doctrine and/or the attorney-client privilege protects from discovery documents that were transmitted between a creditor corporation's in-house legal department and an outside debt collection agency. To be protected, such documents must have been produced in anticipation of litigation or in rendition of legal services. The Circuit Court for Anne Arundel County rejected both claims of privilege in this case, finding that E. I. du Pont de Nemours & Co. (DuPont) failed to meet its burden of proof as to the existence of any privilege. We affirm the judgment of the trial court denying DuPont's motion for a protective order and hold that neither the work product doctrine nor the attorney-client privilege protects the documents in question from discovery by Forma-Pack, Inc. (Forma-Pack), as they were not produced in anticipation of litigation or in rendition of legal services, but instead were produced for the purely business purpose of debt collection.

I. BACKGROUND This appeal arises from an order of the Circuit Court for Anne Arundel County denying a motion for a protective order filed by DuPont. DuPont noted a timely appeal to the Court of Special Appeals, and the order of the circuit court was stayed pending a decision by the intermediate appellate court. We granted certiorari on our own motion prior to consideration by the Court of Special Appeals. In accordance with Maryland Rule 8-207(a)(2),1 the parties filed the following agreed Maryland Rule 8-207(a)(2) states: "Statement of case and facts. Within 15 days after the filing of the joint election, the parties shall file with the Clerk four copies of an agreed
1

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statement of the case and facts: "DuPont and Forma-Pack are parties to a lawsuit pending in the Superior Court for the State of California in and for the County of San Joaquin, entitled E. I. DuPont, Inc. v. Forma-Pack, Inc., Case No. 292630 (filed March 11, 1996) (the "California Action"). During the course of discovery in the California Action, Forma-Pack had two deposition subpoenas duces tecum issued by the Circuit Court for Anne Arundel County and served them on R. P. Ehrlich and his employer, Kaplan & Kaplan [(Kaplan)]. Forma-Pack sought to take the depositions of, and receive documents from, Mr. Ehrlich and Kaplan & Kaplan in Anne Arundel County. Kaplan & Kaplan is a collection agency which had been retained by DuPont's legal department in November, 1992 to undertake collection efforts against FormaPack and ultimately to retain a San Francisco attorney, Stanley Peck, to file the underlying California Action against FormaPack seeking collection of the alleged debt. In response to Forma-Pack's subpoenas, DuPont filed a motion for protective order to prevent the disclosure of communications and documents which it believes are protected by the attorney/client privilege and the work-product doctrine. Forma-Pack opposed DuPont's motion maintaining that the communications between DuPont's attorneys and its collection agents were not protected by either privilege. Both parties filed supplemental memoranda prior to the hearing before the trial court, which occurred on August 7, 1997. Along with its motion and memorandum, DuPont submitted the affidavits of two DuPont employees which stated that DuPont's legal department did not typically receive delinquent accounts, such as the Forma-Pack account, until after the appropriate DuPont business unit had attempted to collect the account.... Upon receipt of the Forma-Pack account, DuPont's legal department retained Kaplan & Kaplan to assist in the collection of the account and, if necessary, to retain counsel to file suit. The affidavits submitted further stated that

statement of the case, including the essential facts, as prescribed by Rule 8-413(b)...."

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once the legal department received the Forma-Pack account, DuPont presumed that litigation might be necessary (which in fact it was) and that all communications with Kaplan & Kaplan were intended to be privileged. The privilege log submitted by DuPont describes the pertinent documents, including two internal Kaplan & Kaplan documents, as reflecting communications between Kaplan & Kaplan and/or attorneys involved in this litigation or the California Action. As a result, DuPont argued that the collection of the Forma-Pack account, once it was referred to DuPont's legal department, was a purely legal function, and that communications made in the course of the engagement of Kaplan & Kaplan to aid in its collection efforts w[ere] protected by the attorney/client privilege. DuPont also argued that the documents and communications between its legal department and Kaplan & Kaplan were protected by the work-product doctrine because the communications were made in anticipation of litigation. DuPont also invited the court to conduct an in camera inspection of the documents listed on the privilege log. Forma-Pack disagreed with DuPont's position. FormaPack maintained that the attempted collection of the disputed debt in the underlying California Action was a business, not a legal, activity. Forma-Pack pointed out that DuPont's attempts to collect the disputed debt pre-dated the filing of the underlying action by several years. Forma-Pack also submitted the prior deposition testimony of one of DuPont's own affiants, Susan F. Herr, who stated that, "[I]t may have been a business approach on behalf of DuPont in the collection of the debt." Forma-Pack maintained that this business approach to the collection of the debt was directly at issue in the underlying litigation and an area of inquiry to which Forma-Pack is entitled to discovery. By Memorandum Opinion and Order dated August 13, 1997, the trial court denied DuPont's motion for protective order. The court adopted Forma-Pack's argument[,] ruling that the attorney/client privilege did not apply because the collection of a debt is a business function and not a legal function. The court also ruled that the work-product doctrine did not apply because it believed that the work performed by Kaplan &

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Kaplan for DuPont was not done with the belief that there was some possibility that litigation might result." (Footnotes and internal citations omitted). The issues before this Court are set forth in the trial judge's opinion: "In bringing this action, Dupont makes two arguments in support of its Motion for a Protective Order. First, Dupont argues that Kaplan is an agent of Dupont's legal department and that any communication between the two is not discoverable under the attorney-client privilege. In addition, Dupont argues that communications between Dupont and Kaplan in their efforts to collect a debt from Forma-Pack are not discoverable under the work-product doctrine. The Court finds these arguments unpersuasive and will deny Plaintiff's Motion for the reasons stated below." DuPont does not dispute that its arguments were correctly framed by the trial judge. Forma-Pack maintains that the circuit court was correct in finding that the hiring of a collection agency by a creditor corporation constitutes a business approach, not a legal approach, to debt collection and that Kaplan is not DuPont's agent for purposes of litigation. As such, Forma-Pack argues that the communications between DuPont and Kaplan are not shielded from discovery under either the work product doctrine or the attorney-client privilege. We are called upon to decide whether the trial judge was clearly erroneous in finding, after a full evidentiary hearing, that DuPont failed to meet its burden of proof as to the existence of either privilege and thus was not entitled to a protective order based on privilege. While there is no doubt that some of the documents might violate Kaplan's attorney-client privilege, in particular the items pertaining to communications between Kaplan and its own attorney, the communications between Kaplan and DuPont are not

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privileged for the reasons stated infra, and it is only DuPont and not Kaplan that is claiming these privileges. Also important to our holding is that DuPont hired a non-lawyer company to handle the debt collection matter, rather than an attorney or law firm, which leads us to conclude that legal advice and assistance were not DuPont's intent in retaining Kaplan.

II. ANALYSIS The current Maryland discovery rules are premised on a philosophy encouraging liberal disclosure. See Balto. Transit v. Mezzanotti, 227 Md. 8, 13, 174 A.2d 768, 771 (1961). Indeed, the State's discovery rules are deliberately designed to be broad,

comprehensive in scope and liberally construed. Id. In Kelch v. Mass Transit Adm., 287 Md. 223, 411 A.2d 449 (1980), this Court stated: "[A]mong the basic objectives in providing for discovery is <to require disclosure of facts by a party litigant to all of his adversaries, and thereby to eliminate, as far as possible, the necessity of any party to litigation going to trial in a confused or muddled state of mind, concerning the facts that give rise to the litigation.' Klein v. Weiss, 284 Md. 36, 55, 395 A.2d 126, 137 (1978). Further, `[i]n order to accomplish the above purposes, the discovery rules are to be liberally construed.' *** Baltimore Transit Co. v. Mezzanotti, 227 Md. 8, 13-14, 174 A.2d 768, 771 (1961)...." 287 Md. at 229-30, 411 A.2d at 453. See also Rubin v. Weissman, 59 Md. App. 392, 401, 475 A.2d 1235, 1239 (1984)(noting that "the discovery rules are to be liberally construed")(quoting Balto. Transit, 227 Md. at 13, 174 A.2d at 771); Barnes v. Lednum, 197 Md. 398, 406, 79 A.2d 520, 524 (1951)(stating that "[m]odern discovery statutes or rules are

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intended to facilitate discovery"). The main purposes to be served by allowing pretrial discovery of documents are "(i) to acquire accurate and useful information with respect to testimony which is likely to be presented by an opponent, (ii) to obtain information which appears reasonably calculated to lead to the discovery of admissible evidence, and (iii) to use as an aid in cross-examining the opponent's witnesses." Kelch, 287 Md. at 231, 411 A.2d at 454. In administering the discovery rules, trial judges "`are vested with a reasonable, sound discretion in applying them, which discretion will not be disturbed in the absence of a showing of its abuse.'" Kelch, 287 Md. at 229, 411 A.2d at 453 (quoting Balto. Transit, 227 Md. at 13-14, 174 A.2d at 771 (footnote omitted)). Moreover, the party who is resisting discovery and is asserting a protective privilege bears the burden of establishing its existence and applicability. See Maxima v. 6933 Arlington Dev., 100 Md. App. 441, 456, 641 A.2d 977, 984 (1994); In re Criminal Investigation No. 1/242Q, 326 Md. 1, 11, 602 A.2d 1220, 1225 (1992). With these principles in mind, particularly as they pertain to Md. Rule 2-402 and Maryland Code (1974, 1995 Repl. Vol.), Courts and Judicial Proceedings Article, 9-108, infra, we now turn to our analysis of the work product doctrine and the attorney-client privilege as they pertain to the case before us. As we examine the work product doctrine and the attorney-client privilege, it is helpful to note the following distinctions between the two. First, while they appear to embrace the same concepts of confidentiality and zealous client advocacy, the work product doctrine is separate and distinct from the attorney-client

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privilege. Pratt v. State, 39 Md. App. 442, 446 n.2, 387 A.2d 779, 782 n.2 (1978). The attorney-client privilege as applied in judicial proceedings is narrowly construed, whereas the work product doctrine is broader in scope. Leonen v. Johns-Manville, 135 F.R.D. 94, 96 (D. N.J. 1990). Indeed, even though it is often referred to as a privilege, the work product doctrine is not a privilege at all, but is "merely a requirement that very good cause be shown if the disclosure is made in the course of a lawyer's preparation of a case." City of Philadelphia v. Westinghouse Electric Corp., 210 F. Supp. 483, 485 (E.D. Pa. 1962). Second, the work product doctrine is "historically and traditionally a privilege of the attorney and not that of the client." Radiant Burners, Inc. v. American Gas Association, 207 F. Supp. 771, 776 (N.D. Ill. 1962). In contrast, it is the client who is the holder of the attorney-client privilege. Trupp v. Wolff, 24 Md. App. 588, 609, 335 A.2d 171, 184 (1975). See also 5 LYNN MCLAIN, MARYLAND EVIDENCE

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