In 2009, the United States Court of Appeals for the First Circuit, sitting en banc, found that tax accrual workpapers prepared by in-house tax attorneys did not constitute work product. (1) The decision was widely panned. One prominent law firm described the Textron decision as "merrily roll[ing] over established notions of work-product," (2) while a representative for the Association of Corporate Counsel-an organization for in-house attorneys--described the case as "eviscerat[ing] the work-product doctrine." (3)
Only months later, the United States Court of Appeals for the District of Columbia Circuit revived the work-product doctrine and found that audit workpapers can receive protection. (4) Unlike Textron, the United States v. Deloitte LLP decision was well reasoned and well received: one prominent law firm described the decision as "redeem[ing]" the work-product doctrine and "rebuff[ing]" Textron. (5) Public companies--particularly their general counsels--breathed a sigh of relief.
The Deloitte decision contributes to work-product case law in three respects: (1) it is the first federal circuit court decision on the work-product doctrine as applied to audit workpapers following the First Circuit's much maligned Textron decision; (2) it is the first federal appellate court decision to comment on the waiver of work product in the context of financial statement audits; and (3) it affects the rules of evidence in the United States Tax Court.
This Note will analyze the current status of the work-product doctrine and review positively Deloitte's impact on the law, arguing that the opinion, unlike Textron, provides a sound legal framework rooted in statute and longstanding case law.
Part I of this Note provides a foundational background of the work-product doctrine as applied to audit workpapers. Part II analyzes the Deloitte decision's effect on what constitutes work product, and Part III discusses the decision's effect on work-product waiver.
Finally, in Part IV, this Note analyzes the policy and legal arguments for and against the discoverability of audit workpapers and positively critiques the Deloitte decision.
I. THE WINDING ROAD FROM HICKMAN TO TEXTRON:. THE WORKPRODUCT DOCTRINE AND TAX ACCRUAL WORKPAPERS
A. The Journey Begins: Hickman and Rule 26(b)(3)
The Supreme Court established the work-product doctrine in 1947 in Hickman v. Taylor. (6) In Hickman, the Court held that an attorney's notes taken during interviews with witnesses in anticipation of litigation are not discoverable. (7) To prepare for litigation, the Court said, our system must enable an attorney to "sift what he considers to be the relevant from the irrelevant facts, prepare his legal theories and plan his strategy without undue and needless interference." (8) Such "work is reflected ... in interviews, statements, memoranda, correspondence, briefs, mental impressions, personal beliefs, and countless other tangible and intangible ways" that are undiscoverable. (9) The work-product doctrine, as envisioned in Hickman, precludes opposing counsel from gaining access to an attorney's thoughts, trial strategies, and legal theories.
The Supreme Court based its decision primarily on public policy concerns. Asserting that lawyers would be less likely to put their thoughts in writing if they were discoverable, the Court said the "effect on the legal profession [of permitting discovery] would be demoralizing" and the "interests of the clients and the cause of justice would be poorly served." (10) Work-product protection would encourage robust legal analysis by disallowing parties from litigating "on wits borrowed from the adversary." (11)
The Hickman decision became partially codified by Federal Rule of Civil Procedure 26(b)(3), which provides that "a party may not discover documents and tangible things that are prepared in anticipation of litigation or for trial by or for another party or its representative" unless a substantial need can be shown. …