Grand Jury Investigation

FOR PUBLICATION FILED
UNITED STATES COURT OF APPEALS JAN 14 2016
FOR THE NINTH CIRCUIT MOLLY C. DWYER, CLERK
U.S. COURT OF APPEALS
In re: GRAND JURY INVESTIGATION, No. 15-50450
D.C. No. 2:15-cm-01014-UA-1
UNITED STATES OF AMERICA,
Appellee, OPINION
v.
DOE APPELLANTS AND
CORPORATIONS,
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
Before: Ronald M. Gould and Marsha S. Berzon, Circuit Judges, and George
Caram Steeh III,* Senior District Judge.
Opinion by Judge Gould
GOULD, Circuit Judge:
*
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 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 documents contain communications in
furtherance of the crime-fraud and must be produced.
I
Appellant Corporation1 was a call center that marketed a surgical device for
medical facilities. In December 2010, the director and health officer for Los
Angeles County Public Health sent a letter to the FDA raising concerns that the
Corporation’s advertisements (large billboards, bus placards, and direct mail) were
“inadequately inform[ing] consumers of potential risks” of the surgical device.
After the Corporation received this letter from a local columnist, the
1
All documents in this matter have been filed under seal to protect the
secrecy of the ongoing grand jury proceedings. The true names of the appellants,
appellant corporations, and their former attorneys are not revealed in this opinion.
2
company—through counsel—sent its own letter to the FDA disputing many of the
letter’s assertions and attempting in various ways to dissuade the FDA from
investigating.
Despite the attorney’s letter, the FDA opened an investigation and sent
warning letters to the Corporation and a few medical centers in California. The
letters stated that the FDA believed the Corporation’s advertising violated the
Food, Drug, and Cosmetic Act (FDCA) by not providing “relevant risk information
regarding the use of the [device], age and other qualifying requirements for the
[surgical] procedure, and the need for ongoing modification of [lifestyle] habits.”
New counsel for the Corporation responded by letter to the FDA warning letter. A
third attorney responded on behalf of the medical centers.
The government alleged that these responses contained false statements
designed to obstruct the FDA investigation. 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
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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., 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
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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 to
make false statements to the FDA. No evidence has been presented regarding the
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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,2 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
2
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).
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in determining whether a prima facie violation had been made” (step one), in
camera review “is mandated to determine the scope of the 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
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documents in camera to determine the proper scope of the production order, i.e.,
which documents contained communications in furtherance of the crime-fraud.
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Counsel Page
Robert A. Kashfian, Ryan D. Kashfian (argued), Kashfian & Kashfian LLP,
Century City, California, for respondent-appellants.
Robert J. Rice, Los Angeles, California, for respondent-appellant.
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
United States of America.
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