Seibel v. Eighth Jud. Dist. Ct. , 2022 NV 73 ( 2022 )

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138 Nev., Advance Opinion 73
IN THE SUPREME COURT OF THE STATE OF NEVADA
ROWEN A. SEIBEL; MOTI PARTNERS, No. 83723
LLC; MOTI PARTNERS 16, LLC; LLTQ
ENTERPRISES, LLC; LLTQ
ENTERPRISES 16, LLC; TPOV a a
ENTERPRISES, LLC; TPOV 16 FP LL
ENTERPRISES, LLC; FERG, LLC; .
FERG 16, LLC; R SQUARED GLOBAL NOV 23 2022
SOLUTIONS, LLC; DNT
ACQUISITION, LLC; GR BURGR, LLC;
AND CRAIG GREEN,
Petitioners,
vs.
THE EIGHTH JUDICIAL DISTRICT
COURT OF THE STATE OF NEVADA,
IN AND FOR THE COUNTY OF
CLARK; AND THE HONORABLE
TIMOTHY C. WILLIAMS, DISTRICT
JUDGE,
Respondents,
and
DESERT PALACE, INC.; PARIS LAS
VEGAS OPERATING COMPANY, LLC;
PHWLV, LLC; AND BOARDWALK
REGENCY CORPORATION,
Real Parties in Interest.
Petition for extraordinary writ relief challenging a district court
order compelling the disclosure of privileged documents under the crime-
fraud exception to the attorney-client privilege.
Petition denied.
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Bailey Kennedy and Joshua P. Gilmore, John R. Bailey, Dennis L. Kennedy,
and Paul C. Williams, Las Vegas,
for Petitioners.
Pisanelli Bice PLLC and Jordan T. Smith, James J. Pisanelli, Debra L.
Spinelli, and M. Magali Mercera, Las Vegas,
for Real Parties in Interest.
BEFORE THE SUPREME COURT, HARDESTY, STIGLICH, and
HERNDON, JJ.
OPINION
By the Court, HARDESTY, J.:
We elect to hear this petition to address a matter of first
impression before this court regarding the procedures and burden of proof
required to establish the crime-fraud exception to the attorney-client
privilege. Because the district court did not err in ordering an in camera
review of the privileged communications at issue here, and because it did
not abuse its discretion in ultimately ordering the disclosure of those
communications, we deny this petition for extraordinary relief.
FACTS AND PROCEDURAL HISTORY
Petitioner Rowen Seibel, through his limited liability
companies, entered into development agreements with Caesars to operate
restaurants for various Caesars properties.! When Caesars discovered that
‘Petitioners Seibel, his affiliated entities, and Craig Green are
collectively referred to as “Seibel” in this opinion. Real parties in interest
are four properties operated by Caesars Entertainment, Inc., and are
collectively referred to as “Caesars” in this opinion.
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Seibel had been convicted of tax fraud, it terminated the agreements, citing
a term that appeared in all the parties’ contracts that allowed Caesars to
terminate if its relationship with Seibel could jeopardize Caesars’ gaming
licenses. Seibel sued one of the Caesars properties, Planet Hollywood in
Las Vegas, for breach of contract and related claims. Seibel claimed that he
had cured any potential risk by creating an irrevocable family trust and
assigning his contractual rights and interests under the development
agreements to newly formed business entities owned and managed by
independent trustees. He asserted that he was neither a trustee nor a
beneficiary of the trust and was no longer affiliated with the business
entities that were assigned the development agreements. Planet Hollywood
counterclaimed that Seibel had fraudulently attempted to hide his
unsuitability to conduct business with a gaming licensee, causing it
damages. Other Caesars properties later sued Seibel, seeking declaratory
relief and damages, and these actions were consolidated.
During litigation, Caesars obtained through discovery a copy of
a prenuptial agreement between Seibel and his wife, which had been
executed contemporaneously to Seibel’s trust and allowed Seibel to benefit
from the trust. Caesars concluded that Seibel had used legal counsel to
create both the trust and the prenuptial agreement so that he could secretly
retain the benefits of the development agreements while tricking Caesars
into thinking that he had dissociated from them. On this suspicion, Caesars
moved to compel discovery of over 100 documents from Seibel’s attorney-
chent privilege log under Nevada’s crime-fraud exception. The district court
granted this motion in two orders. The first granted in camera review of
the documents after determining that Caesars had met its burden of
showing that Seibel was engaged in an attempt to deceive Caesars when he
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sought the advice of legal counsel for the creation of his trust and prenuptial
agreement. The second order granted the motion to compel disclosure of all
the documents after finding, through in camera review, that the documents
were sufficiently related to and made in furtherance of Seibel’s attempted
fraudulent scheme.
Seibel petitions this court for a writ of prohibition or mandamus
preventing the district court from compelling disclosure of the documents
and ordering the district court to find the documents undiscoverable. Seibel
argues primarily that the district court erred in finding that Caesars had
met its initial burden of demonstrating that Seibel was engaged in a
fraudulent scheme when he sought legal advice regarding his trust and
prenuptial agreement, and that the district court erred in further
concluding that all of Seibel’s privileged communications regarding the
trust and prenuptial agreement were sufficiently related to and made in
furtherance of that fraud.
DISCUSSION
Writ relief
Extraordinary writ relief is available only where there is no
“plain, speedy and adequate remedy in the ordinary course of law.” NRS
34.330. Although writ relief is generally not available to review discovery
orders, this court will consider writ petitions challenging orders that compel
the disclosure of privileged information because in such cases “a later
appeal would not remedy any improper disclosure of the information.”
Wynn Resorts, Lid. v. Eighth Judicial Dist. Court, 133 Nev. 369, 374, 399
P.3d 334, 341 (2017).
Writ relief is also appropriate to clarify an important issue of
law, such as the parameters of a privilege. See Canarelli v. Eighth Judicial
Dist. Court, 136 Nev. 247, 250-51, 464 P.3d 114, 119 (2020) (entertaining a
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petition for writ of prohibition to clarify whether Nevada recognizes the
petitioner’s asserted exception to the attorney-client privilege). We elect to
entertain this petition, treating it as one for prohibition, because Seibel
challenges a discovery order compelling disclosure of privileged
information, and prohibition, not mandamus, is the “appropriate remedy to
correct an order that compels disclosure of privileged information.” Las
Vegas Dev. Assocs., LLC v. Eighth Judicial Dist. Court, 130 Nev. 334, 338,
325 P.3d 1259, 1262 (2014).
Standard of review
We review the district court’s legal determinations regarding
the crime-fraud exception de novo. See Humboldt Gen. Hosp. v. Sixth
Judicial Dist. Court, 132 Nev. 544, 547, 376 P.3d 167, 170 (2016) (reviewing
legal questions de novo on petition for writ of mandamus). “Discovery
matters are within the district court’s sound discretion,” and factual
findings “are given deference and will not be set aside unless they are
clearly erroneous or not supported by substantial evidence.” Canarelli, 136
Nev. at 251, 464 P.3d at 119 (internal quotation marks omitted).
Application of Nevada’s crime-fraud exception to the attorney-client privilege
Nevada’s attorney-client privilege and crime-fraud exception
are statutory. Under NRS 49.095, the attorney-client privilege grants
clients “a privilege to refuse to disclose, and to prevent any other person
from disclosing, confidential communications” between the client (or
representative) and his or her lawyer (or representative), and between the
client’s lawyer and the lawyer’s representative. But per NRS 49.115(1),
Nevada’s crime-fraud exception allows documents otherwise privileged
under NRS 49.095 to be disclosed when “the services of the lawyer were
sought or obtained to enable or aid anyone to commit or plan to commit
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what the client knew or reasonably should have known to be a crime or
fraud.”
Neither NRS 49.095 nor NRS 49.115(1) establishes the
procedure or burden of proof that courts are to use when determining
whether the crime-fraud exception should apply, however, and this court
has not clarified those issues before. Both statutes “are taken without
substantive change from” Rule 5-03 of the Preliminary Draft of Proposed
Rules of Evidence for the United States District Courts and Magistrates,
submitted by the Advisory Committee on Rules of Evidence, reprinted in 46
F.R.D. 161, 249-51 (1969), which is widely considered federal common law.?
Therefore, this court finds federal caselaw interpreting the federal common-
law attorney-client privilege and crime-fraud exception persuasive in
interpreting NRS 49.095 and NRS 49.115(1). See, e.g., In re 2015-2016
Jefferson Cty. Grand Jury, 410 P.3d 53, 59 (Colo. 2018) (following United
States v. Zolin, 491 U.S. 554, 562-63 (1989), and Upjohn Co. v. United
States, 449 U.S. 383, 389 (1981), when interpreting Colorado’s attorney-
client privilege and crime-fraud exception); People v. Radojcic, 998 N.E.2d
1212, 1221-23 (Ill. 2013) (same).
2NRS 49.095 (subcomm.’s cmt.); NRS 49.115 (subcomm.’s cmt.).
Specifically, Rule 503 of the Draft Federal Rules of Evidence or “Supreme
Court Standard 503” is widely regarded as the common law crime-fraud
exception’s enumeration. 3 Mark S. Brodin et al., Weinstein’s Federal
Evidence §§ 503-1, 503.01-10 (2d ed. 2022); accord United States v. Spector,
793 F.2d 932, 9388 (8th Cir. 1986) (“Although Congress did not adopt
[Supreme Court Standard 503], courts have relied upon it as an accurate
definition of the federal common law of attorney-client privilege... .”). And
federal common law, such as Supreme Court Standard 503, is binding over
claims of privilege in the federal context under the Federal Rules of
Evidence. Fed. R. Evid. 501 (stating that “[t]he common law ... governs a
claim of privilege,” unless federal law provides otherwise).
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Federal courts “have recognized the attorney-client privilege
under federal law as ‘the oldest of the privileges for confidential
communications known to the common law.” Zolin, 491 U.S. at 562(quoting Upjohn, 449 U.S. at 389). The privilege exists to ensure that
clients can freely and confidentially communicate with their legal counsel,
which is central “to the proper functioning of our adversary system of
justice.” Id. However, “[slince the privilege has the effect of withholding
relevant information from the factfinder, it applies only where necessary to
achieve its purpose” and is therefore subject to limited exceptions such as
the crime-fraud exception. Jd. at 562-63 (internal quotation marks
omitted); see also NRS 49.115(1).
In determining whether the crime-fraud exception should
apply, the United States Court of Appeals for the Ninth Circuit utilizes a
two-part test, which reflects the prevailing approach among federal circuits.
E.g., United States v. Boender, 649 F.3d 650, 655-56 (7th Cir. 2011); In re
Richard Roe, Inc., 168 F.3d 69, 71 (2d Cir. 1999). Under this approach, a
party seeking to invoke “the crime-fraud exception 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.”
In re Napster, Inc. Copyright Litig., 479 F.3d 1078, 1090 (9th Cir. 2007)
(alteration in original) (citation omitted) (quoting In re Grand Jury
Proceedings, 87 F.3d 377, 381, 382-83 (9th Cir. 1996) (internal quotation
marks omitted)), abrogated in part on other grounds by Mohawk Indus., Inc.
v. Carpenter, 558 U.S. 100 (2009).
We find these authorities persuasive, and we thus adopt the
two-part test utilized by the Ninth Circuit for determining whether the
crime-fraud exception should apply. As the Napster court concluded, in civil
matters, the moving party bears the burden of proving both prongs of the
test by a preponderance of the evidence for the crime-fraud exception to
apply. Jd. at 1094-95.
In some circumstances, the district court may determine that
in camera review of the privileged documents is necessary before deciding
whether the crime-fraud exception applies. In such instances, the district
court must first require the moving party to show “a factual basis adequate
to support a good faith belief by a reasonable person,’ that in camera review
of the materials may reveal evidence to establish the claim that the crime-
fraud exception applies.” Zolin, 491 U.S. at 572 (citation omitted) (quoting
Caldwell v. Dist. Court, 644 P.2d 26, 33 (Colo. 1982)). Generally, “[o]nce
that showing is made, the decision whether to engage in in camera review
rests in the sound discretion of the district court.” Jd. But when the
privileged communications are documents, the district court must do an in
camera review. In re Grand Jury Investigation, 810 F.3d 1110, 1114 (9th
Cir. 2016). During its in camera review, the district court must determine
to which documents specifically the second step applies. Jd. Particularly,
[w]hile in camera review is not necessary during
step one..., 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.
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Id. (internal quotation marks omitted) (following In re Antitrust Grand
Jury, 805 F.2d 155, 168-69 (6th Cir. 1986)).
The district court did not err in granting in camera review of Seibel’s
privileged documents
As to step one in the analysis, the district court found that
Caesars had established by a preponderance of the evidence that Seibel was
engaged in or planning a criminal or fraudulent scheme when he sought the
advice of legal counsel in the drafting of the prenuptial agreement. The
district court based its findings on the prenuptial agreement, the trust, and
other evidence before it. While Seibel takes issue with the district court’s
factual findings, we defer to those findings, as they are supported by
substantial evidence in the record and are not clearly erroneous. See
Canarelli, 136 Nev. at 251, 464 P.3d at 119 (noting that factual findings
“are given deference and will not be set aside unless they are clearly
erroneous or not supported by substantial evidence”). Accordingly, the
district court properly proceeded to step two, conducting an in camera
review to determine if the documents were “sufficiently related to and were
made in furtherance of the intended, or present, continuing illegality.” Jn
re Grand Jury Investigation, 810 F.3d at 1114 Gnternal quotation marks
omitted).
The district court did not abuse its discretion in ordering the disclosure of
Seibel’s privileged communications after conducting an in camera review
After conducting an in camera review, the district court found
that the crime-fraud exception applied to all of Seibel’s privileged
documents. Seibel argues that the district court’s order was overbroad in
disclosing every document. We disagree. While Seibel argues that the
district court erred in only quoting from three documents in its order
granting Caesars’ motion to compel, he does not specifically argue which of
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the privileged documents were improperly disclosed or why. Walker v.
Second Judicial Dist. Court, 136 Nev. 678, 680, 476 P.3d 1194, 1196-97
(2020) (explaining that the burden is on the party seeking extraordinary
writ relief to establish that such relief is warranted). Further, we are aware
of no legal authority that requires district courts to make specifically
enumerated factual findings regarding each document or communication
reviewed in camera.
Rather, after reviewing the privileged documents in camera
ourselves, we conclude that the district court did not act outside of its
jurisdiction in finding that the documents were sufficiently related to and
made in furtherance of Seibel’s ongoing scheme. We therefore conclude that
the district court properly granted disclosure of the privileged documents
after conducting an in camera review under Nevada’s crime-fraud exception
to the attorney-client privilege. Canarelli, 136 Nev. at 251, 464 P.3d at 119
(“Discovery matters are within the district court’s sound discretion... .”
(internal quotation marks omitted)). As the district court acted within its
jurisdiction, we deny writ relief.*
CONCLUSION
Having determined that the district court properly granted an
in camera review of Seibel’s privileged communications, and that it did not
err in conducting that in camera review, we conclude that Seibel has failed
to demonstrate that extraordinary relief is warranted in the form of a
‘We also deny Seibel’s petition to the extent that it asks this court to
order the sequestration of the district court’s minute order that contains
quotations from three of the privileged documents, as Caesars’ motion to
compel was properly granted with respect to every document.
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petition for a writ of prohibition. We further deny Seibel’s petition to the
extent that it asks for judicial reassignment.’
(inlet, Jd.
Hardesty
We concur:
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4While this court may order reassignment of a judge under certain
circumstances, we determine that such circumstances are not present here.
See FCH1, LLC v. Rodriguez, 130 Nev. 425, 4385, 335 P.3d 183, 190 (2014)
(reassigning judge who formed conclusion on the merits based on
improperly admitted evidence); Leven v. Wheatherstone Condo. Corp., 106
Nev. 307, 310, 791 P.2d 450, 451 (1990) (reassigning a judge who made
numerous errors suggesting favoritism). Further, this court lifts the stay of
the proceedings in the district court that was granted in part on November
10, 2021.
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