Appealed from United States Court of International Trade.
Friedman, Bennett, and Newman, Circuit Judges.
This is an appeal by the United States from an interlocutory order of the Court of International Trade rejecting the government's contention that it was not required to respond to discovery requests and an interrogatory of the appellee Zenith Radio Corporation (Zenith) because the information Zenith sought was privileged, and directing the government to respond. The Court of International Trade certified its order for immediate appeal and this court authorized the appeal, pursuant to 28 U.S.C. § 1292(d)(1). We reverse and remand.
This case grows out of an unsuccessful attempt by Zenith to prevent the United States from settling claims for antidumping duties and civil penalties against 22 importers of Japanese television receivers. On April 28, 1980, the United States effected a settlement of those claims under which the importers agreed to pay the United States a total of $77 million. A month later Zenith brought an action in the Court of International Trade to enjoin the settlement.
The court issued a preliminary injunction on December 9, 1980, barring the United States from implementing the settlement. In response to a motion by the United States to require Zenith to post a security bond for $11.5 million (the amount of interest the United States would earn on $77 million for one year), the court ordered a bond of $250,000 "to indemnify the defendant should it ultimately be determined that the defendant was wrongfully enjoined . . . ."
Zenith's complaint eventually was dismissed for lack of jurisdiction, and the preliminary injunction was dissolved on November 15, 1982.
The United States then filed a motion for assessment of damages of $250,000 against Zenith and the two sureties on the bond. The asserted damages cover interest the government lost because of the wrongful delay in implementing the settlement. Zenith opposed the motion, contending (1) that interest had accrued in favor of the government during the period of the injunction so that no damages were incurred, (2) that even if there were damages, the government failed to mitigate them because it had not enforced its legal and equitable right to interest from the importers, and (3) principles of equity and fairness preclude the award of damages.
Zenith served the United States with interrogatories and requests for production of documents. Prior thereto Zenith had learned that there had been a dispute between lawyers in the Department of Commerce and the Customs Service over whether the government should have sought interest from the importers. Zenith sought to obtain all documents and the substance of all communications relating to the question whether "interest would or should accrue on the importers' debts under the settlement agreements."
The United States complied extensively with the discovery requests. It stated that there had been an inter-agency dispute and that at meetings in July 1983, Commerce, Customs and Justice Department officials had decided not to seek interest from the importers. The United States, however, asserted attorney-client, work product, or executive privilege with respect to 15 documents and interrogatory 30(c) insofar as it asked for the substance of the three July meetings. Zenith moved to compel discovery, arguing that by seeking damages the United States had waived its privileges.
After examining the material in camera, the Court of International Trade held that the government had waived its privilege with respect to all but one document and one sentence in another document. The court ordered the United States to produce the nonprivileged documents and fully to answer the interrogatory.
As the Court of International Trade noted, the courts have followed three different approaches in ruling on privileges asserted by plaintiffs. The first theory, which Zenith advocates, is the so-called "automatic waiver" rule under which a party seeking judicial relief waives whatever privilege he has. See, e.g., Independent Productions Corp. v. Loew's, Inc., 22 F.R.D. 266 (S.D.N.Y. 1958). A second theory balances the need for discovery against the need ...