Last term, the Supreme Court concluded that an order requiring the production of privileged materials cannot typically be appealed as a final judgment under the rule of Cohen v. Beneficial Indus. Loan Corp., 337 U.S. 541 (1949). Mohawk Industries, Inc. v. Carpenter, 130 S.Ct. 599 (2009). Cohen is the predicate for the so-called collateral order doctrine. Under that doctrine, an order may be viewed as final for purposes of appeal under 28 U.S.C. § 1291 if it is collateral to the litigation and fully resolves an issue. In Mohawk Industries, the Court rejected claims that an order requiring the production of privileged materials comes within the limited exception provided by Cohen and its progeny. The Court reasoned that review at the conclusion of the litigation would be sufficient. The Court buttressed its conclusion by noting that there may be other avenues of review such as non-compliance and appealing the resulting order of contempt.

In U.S. v. Krane, No. 10-30247 (9th Cir. Oct. 29, 2010), the Ninth Circuit concluded that Mohawk Industries does not foreclose the use of the Perlman exception. In Krane, an appeal was taken by intervenor Quellos Group LLC from an order directing the law firm of Skadden Arps to produce certain privileged materials. Skadden was former counsel to Quellos. The government issued a pre-trial subpoena to the law firm in anticipation of the criminal trial of two former Quellos executives. The defendants were accused of creating a fraudulent tax shelter. Key to the sale of that tax shelter was opinions from reputable law firms attesting to the fact that it was more likely than not that the tax shelter would survive IRS scrutiny.

When the district court authorized the issuance of the subpoena, the company informed Skadden that it was asserting attorney client privilege. The firm did not produce the documents. When the government to compel, Quellos requested and obtained leave to intervene. The company opposed the motion.

Subsequently, the defendants entered into plea agreements. Nevertheless, the government issued a second, identical subpoena, arguing the materials were necessary for sentencing. Quellos filed a suggestion of mootness, which was opposed by the government. The motion to compel was granted.

On appeal, the Ninth Circuit concluded that it properly had jurisdiction. Under Section 1291 of Title 28, appeals may only be taken from final judgments, the Court began. Typically, an order compelling compliance with a subpoena can only be appealed from a resulting contempt citation. Although Skadden has not been held in contempt under Perlman v. U.S., 247 U.S. 7 (1918), the appeal here is proper. Under Perlman, a discovery order requiring the production of privileged materials from a third party is immediately appealable. This is because the third party does not have a sufficient interest in the proceeding and most likely would produce the documents, rather than challenge the order by submitting to a contempt citation.

Here, Skadden is a disinterested third party because it is now the former counsel of Quellos. In contrast, if Skadden continued to be counsel to Quellos, it would be deemed an interested party, the Court held, and the Perlman rule would not apply.

Finally, it is clear that Perlman survives Mohawk Industries, the Circuit Court stated. The latter “forecloses interlocutory appeal of some district court orders in reliance on the fact that post judgment appeals generally suffice to protect the rights of litigants and assure the vitality of the attorney-client privilege;” quoting Mohawk Industries. This is not the case under the Perlman rule, because it only applies to third parties who would have no interest in appealing the ruling.

Ultimately the Court adopted the suggestion of mootness. The appeal was dismissed as moot and the district court’s order compelling compliance was vacated. The case was remanded to the district court.