Grand Jury Investigation V. ( 2016 )

FOR PUBLICATION
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
IN RE GRAND JURY INVESTIGATION, No. 15-50450
D.C. No.
UNITED STATES OF AMERICA, 2:15-cm-01014-
Plaintiff-Appellee, UA-1
v.
OPINION
CINDY OMIDI; MICHAEL OMIDI;
SURGERY CENTER MANAGEMENT; 1-
800-GET-THIN, LLC; VALENCIA
AMBULATORY SURGERY CENTER,
LLC; SAN DIEGO AMBULATORY
SURGERY CENTER, LLC; JULIAN
OMIDI,
Respondents-Appellants.
Appeal from the United States District Court
for the Central District of California
Philip S. Gutierrez, District Judge, Presiding
Argued and Submitted
December 7, 2015—Pasadena, California
Filed January 14, 2016
2 IN RE GRAND JURY INVESTIGATION
Before: Ronald M. Gould and Marsha S. Berzon, Circuit
Judges, and George Caram Steeh III,* Senior District
Judge.
Opinion by Judge Gould
SUMMARY**
Crime-Fraud Exception
The panel vacated the district court’s order granting the
government’s ex parte motion to compel production of
attorney-client documents, and remanded for the district court
to inspect the subpoenaed documents in camera to determine
which specific documents contain communications in
furtherance of the crime-fraud exception to the attorney-client
privilege.
The panel held that while in camera review is not
necessary to establish a prima facie case that the client was
engaged in or planning a criminal or fraudulent scheme when
it sought the advice of counsel to further the scheme, a
district court must examine the individual documents
themselves to determine that the specific attorney-client
communications for which production is sought are
*
The Honorable George Caram Steeh III, Senior District Judge for the
U.S. District Court for the Eastern District of Michigan, sitting by
designation.
**
This summary constitutes no part of the opinion of the court. It has
been prepared by court staff for the convenience of the reader.
IN RE GRAND JURY INVESTIGATION 3
sufficiently related to and were made in furtherance of the
intended, or present, continuing illegality.
COUNSEL
Robert A. Kashfian, Ryan D. Kashfian (argued), Kashfian &
Kashfian LLP, Century City, California, for Respondents-
Appellants Cindy Omidi, et al.
Robert J. Rice, Los Angeles, California, for Respondent-
Appellant Julian Omidi.
Kristen A. Williams, Evan J. Davis, Assistant United States
Attorneys, Major Frauds Section; Consuelo S. Woodhead
(argued), Assistant United States Attorney, Criminal Appeals
Section, Los Angeles, California, for Plaintiff-Appellee.
OPINION
GOULD, Circuit Judge:
This appeal concerns the district court’s order granting the
government’s ex parte motion to compel production of
attorney-client documents. In a memorandum disposition
filed concurrently with this opinion, we affirm that we have
jurisdiction to review this issue, and we affirm the district
court’s conclusion that the government produced sufficient
evidence to invoke the “crime-fraud” exception to attorney-
client privilege. For the reasons stated herein, we vacate the
order and remand for the district court to inspect the
subpoenaed documents in camera to determine which specific
4 IN RE GRAND JURY INVESTIGATION
documents contain communications in furtherance of the
crime-fraud and must be produced.
I
1-800-GET-THIN was a call center that marketed the
LapBand—a surgically inserted device designed to treat
obesity—for surgical medical facilities. In December 2010,
the director and health officer for Los Angeles County Public
Health, Dr. Jonathan Fielding, sent a letter to the FDA raising
concerns that 1-800-GET-THIN advertisements (large
billboards, bus placards, and direct mail) were “inadequately
inform[ing] consumers of potential risks” of LapBand
surgery. After 1-800-GET-THIN received Fielding’s letter
from a local columnist, the company—through counsel
Robert Silverman—sent its own letter to the FDA disputing
many of Fielding’s assertions and attempting in various ways
to dissuade the FDA from investigating.
Despite Silverman’s letter, the FDA opened an
investigation and sent warning letters to 1-800-GET-THIN
and a few surgery centers in California. The letters stated that
the FDA believed 1-800-GET-THIN’s LapBand advertising
violated the Food, Drug, and Cosmetic Act (FDCA) by not
providing “relevant risk information regarding the use of the
LapBand, age and other qualifying requirements for the
LapBand procedure, and the need for ongoing modification
of eating habits.” As new counsel for 1-800-GET-THIN,
Peter Reichertz responded by letter to the FDA warning letter.
Attorney Konrade Trope responded on behalf of the surgery
centers.
The government alleged that these responses contained
false statements designed to obstruct the FDA investigation.
IN RE GRAND JURY INVESTIGATION 5
Under the crime-fraud exception to attorney-client privilege,
grand jury subpoenas were issued to the three lawyers to
produce “(1) all communications relating to their
correspondence to the FDA, including documents and notes
showing the information received and identifying the sources
of information for the statements and representations made
and (2) retainer agreements and billing records identifying the
client(s) who retained and paid for their services in
communicating with the FDA on the subject matter of the
correspondence.” The attorneys provided some information,
but they did not fully comply with the subpoenas.
The government filed a motion to compel compliance
with the subpoenas. Without reviewing any documents in
camera, the district court determined from independent, non-
privileged evidence that the government had established a
prima facie case that the lawyers’ services were obtained “in
furtherance of and . . . sufficiently related to ongoing” crimes,
i.e., false statements to and obstruction of the FDA. See In re
Grand Jury Proceedings, 87 F.3d 377, 382 (9th Cir. 1996).
The district court rejected the argument that in camera review
of the privileged documents was necessary to determine
whether the government established a prima facie case of
crime-fraud. The district court granted the government’s
motion to compel production of all “matters identified in the
subpoenas.”
II
While the attorney-client privilege is “arguably most
fundamental of the common law privileges recognized under
Federal Rule of Evidence 501,” it is “not absolute.” In re
Napster, Inc. Copyright Litig., 479 F.3d 1078, 1090 (9th Cir.
2007), abrogated in part on other grounds by Mohawk Indus.,
6 IN RE GRAND JURY INVESTIGATION
Inc. v. Carpenter, 558 U.S. 100 (2009). Under the crime-
fraud exception, communications are not privileged when the
client “consults an attorney for advice that will serve him in
the commission of a fraud” or crime. Id. (quoting Clark v.
United States, 289 U.S. 1, 15 (1933)). To invoke the crime-
fraud exception, a party must “satisfy a two-part test”:
First, the party must show that “the client was
engaged in or planning a criminal or
fraudulent scheme when it sought the advice
of counsel to further the scheme.” Second, it
must demonstrate that the attorney-client
communications for which production is
sought are “sufficiently related to” and were
made “in furtherance of [the] intended, or
present, continuing illegality.”
Id. (quoting In re Grand Jury Proceedings, 87 F.3d at
381–83) (alteration and emphasis added in In re Napster).
Appellants first contend that the district court could not
find a prima facie case of crime-fraud without examining the
privileged documents in camera. The district court correctly
rejected this contention. District courts may find a prima
facie case of crime-fraud either by examining privileged
material in camera or by examining independent, non-
privileged evidence. See, e.g., In re Napster, 479 F.3d at
1093; United States v. Chen, 99 F.3d 1495, 1503 (9th Cir.
1996).
As In re Napster stated, however, the existence of a prima
facie case is only step one of the inquiry. In this case, the
government relied on independent, non-privileged evidence
to establish reasonable cause that the attorneys were enlisted
IN RE GRAND JURY INVESTIGATION 7
to make false statements to the FDA. No evidence has been
presented regarding the second step in the analysis: whether
“the attorney-client communications for which production is
sought are ‘sufficiently related to’ and were made ‘in
furtherance of [the] intended, or present, continuing
illegality.’” In re Napster, 479 F.3d at 1090 (emphasis
omitted) (quoting In re Grand Jury Proceedings, 87 F.3d at
382–83). Thus far, the litigation has not focused on any
individual documents. Instead, the district court broadly
ordered the attorneys to produce everything identified in the
government’s subpoenas, without first examining any specific
documents in camera to determine whether they contained
communications in furtherance of the asserted crime-fraud.
Id.
This was erroneous. Although we do not have a
published opinion on this point,1 other circuits have
concluded that district courts must review documents in
camera before deciding whether they should be produced
under the crime-fraud exception. See In re BankAmerica
Corp. Sec. Litig., 270 F.3d 639, 644 (8th Cir. 2001); In re
Antitrust Grand Jury, 805 F.2d 155, 168–69 (6th Cir. 1986).
The Sixth Circuit explained the difference between in camera
review during step one and step two of the analysis: While in
camera review “could . . . assist[] the court in determining
whether a prima facie violation had been made” (step one),
in camera review “is mandated to determine the scope of the
1
The government claimed at oral argument that two of our cases have
upheld crime-fraud orders without requiring examination of individual
documents, but those cases both involved district court orders for
attorneys to testify, not produce documents. See In re Grand Jury
Proceedings, 87 F.3d at 379; In re Grand Jury Proceedings, 867 F.2d 539,
540 (9th Cir. 1989).
8 IN RE GRAND JURY INVESTIGATION
order,” i.e. “to determine whether [the documents] reflect
communications or work product made in furtherance of a
contemplated or ongoing” crime-fraud (step two). In re
Antitrust Grand Jury, 805 F.2d at 168–69 (emphases added);
see also United States v. Zolin, 842 F.2d 1135, 1138 (9th Cir.
1988) (Beezer, J., dissenting from vacatur of order granting
rehearing en banc) (urging the Ninth Circuit to adopt this
rule).
We agree with the Sixth Circuit. While in camera review
is not necessary during step one to establish a prima facie
case that “the client was engaged in or planning a criminal or
fraudulent scheme when it sought the advice of counsel to
further the scheme,” a district court must examine the
individual documents themselves to determine that the
specific attorney-client communications for which production
is sought are “sufficiently related to” and were made “in
furtherance of the intended, or present, continuing illegality.”
See In re Napster, 479 F.3d at 1090.
For these reasons, we VACATE and REMAND the order
compelling production of all subpoenaed documents so the
district court may examine the documents in camera to
determine the proper scope of the production order, i.e.,
which documents contained communications in furtherance
of the crime-fraud.