IAR Systems v. Super. Ct.

Filed 6/30/17 (unmodified opn. attached)
CERTIFIED FOR PUBLICATION
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
FIRST APPELLATE DISTRICT
DIVISION THREE
IAR SYSTEMS SOFTWARE, INC. et al.,
Petitioners,
v. A149087
THE SUPERIOR COURT OF SAN
MATEO COUNTY, (San Mateo County
Super. Ct. No. SC083255A)
Respondent;
NADIM SHEHAYED et al., ORDER MODIFYING OPINION
AND DENYING REHEARING,
Real Parties in Interest. CHANGE IN JUDGMENT
THE COURT:
It is ordered that the opinion filed herein on June 5, 2017, and reported in the Official
Reports (2017 Cal. App. LEXIS 512) be modified in the following particulars.
1. In the opinion filed June 5, 2017 at page 5, the strikeouts shown below are deleted
and the underlined words are added:
IAR asked Steven Smith, who had provided basic accounting and tax services to
IAR since in 2011 2012, to provide the needed information and expertise to
understand defendant‘s crimes.
2. In the opinion filed June 5, 2017 at page 5, the strikeouts shown below are deleted
and the underlined words are added:
Subsequently, IAR, not Valla, retained Smith to serve as expert witness in the civil
action against defendant.[fn omitted.] Smith testified at the preliminary hearing in this
matter, after being prepared to do so by reviewing the evidence with the district
attorney.
1
3. In the opinion filed June 5, 2017 at page 5, the strikeouts shown below are deleted:
Later, Valla provided the district attorney with a copy of defendant‘s deposition
transcript with portions underlined; however, there was no evidence that the
district attorney requested this evidence, or that Valla underlined portions of the
transcript for, or at the request of, anyone in law enforcement.
4. In the opinion filed June 5, 2017 at page 6, the underlined words are added:
Following this call, the district attorney, who lacked a background in civil law,
asked for citations ―to the cases and statutes [that Purcell] mentioned were on
point with the Shehayed criminal case,‖ and Valla complied by emailing the
district attorney copies of statutes from the Civil Code that included case citations
and some analysis of Valla’s thoughts on the ratification defense.
5. In the opinion filed June 5, 2017 at page 16, the underlined words are added:
For example, with respect to the sharing of legal authority, it appears Valla did no
more than share a handful of legal citations and some analysis relating to Valla’s
thoughts on the ratification defense based on the research the firm had already
undertaken in the civil action it was pursuing against defendant on its client‘s
behalf – a task that took only about five or 10 minutes.
6. In the opinion filed June 5, 2017 at page 16, the strikeouts shown below are
deleted and the underlined words are added:
Contrary to the trial court‘s finding, however, the firm did not undertake on behalf
of, or provide to, or at the direction of the district attorney any legal analysis, the
sort of cooperation that, under the case law, might place a private party under the
prosecution-team umbrella.
7. In the opinion filed June 5, 2017 at page 16, the strikeouts shown below are
deleted and the underlined words are added:
Further, the accountant ultimately retained by IAR , Steven Smith, had provided
routine accounting and tax services to IAR since in 2011 2012 (to wit, before law
enforcement began investigating the underlying crimes in this case), and had been
was designated by IAR as an expert witness in the civil action against defendant in
2013.
2
8. In the opinion filed June 5, 2017 at page 17, the strikeouts shown below are
deleted and the underlined words are added:
While it is true that Valla later gave law enforcement a copy of defendant‘s
deposition transcript with certain portions underlined, there is no evidence that
Valla asked any question during defendant‘s deposition at the direction of the
police, or shared or highlighted deposition testimony for any reason other than its
own preparation in the civil matter at the request or direction of the police.
9. In the opinion filed June 5, 2017 at page 21, the strikeouts shown below are
deleted and the underlined words are added. Since this occurs in the disposition
part of the opinion, we deem this to be a change in judgment.
A peremptory writ of mandate is entered directing the trial court to set aside and
vacate its order of February 8 August 16, 2016, with the instruction to enter a new
order finding that petitioner Valla & Associates is not part of the prosecution team
in this case for purposes of Brady v. Maryland (1963) 373 U.S. 83, 87.
This modification changes the judgment. The Petition for Rehearing is denied.
DATE: ____________________ __________________________Acting P. J.
3
Filed 6/5/17 (unmodified version)
CERTIFIED FOR PUBLICATION
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
FIRST APPELLATE DISTRICT
DIVISION THREE
IAR SYSTEMS SOFTWARE, INC. et al.,
Petitioners,
v. A149087
THE SUPERIOR COURT OF SAN
MATEO COUNTY, (San Mateo County
Super. Ct. No. SC083255A)
Respondent;
NADIM SHEHAYED et al.,
Real Parties in Interest.
In these writ proceedings, petitioners IAR Systems Software, Inc. (IAR) and Valla
and Associates, Inc. (Valla), seek a writ of mandate ordering the trial court to vacate its
finding of June 30, 2016, that Valla, a law firm, should be deemed part of the
―prosecution team‖ prosecuting Nadim Shehayed for embezzlement. In addition,
petitioners request that we set aside the related order granting the motion of defendant
and real party in interest, Nadim Shehayed (defendant) to order Valla, as part of the
prosecution team, to disclose material, exculpatory evidence in its possession in
accordance with Brady v. Maryland (1963) 373 U.S. 83 (Brady). For reasons addressed
below, we agree the trial court erred, first, in imposing a duty under Brady to disclose
material, exculpatory evidence directly on Valla, as opposed to on the prosecution, and,
second, in finding Valla to be part of the prosecution team. Accordingly, we grant the
requested relief.
1
FACTUAL AND PROCEDURAL BACKGROUND
Defendant served as Chief Executive Officer of IAR for nearly 20 years.1
Sometime around 2012, IAR discovered evidence that defendant had embezzled large
sums of money from the corporation by, among other things, paying personal debts from
the corporation‘s bank accounts and paying salary and retirement benefits to his wife,
who was not an IAR employee. Accordingly, on September 7, 2012, IAR, represented by
Valla, filed a civil lawsuit against defendant in San Mateo County Superior Court. In
October 2012, Valla, on behalf of IAR, made contact with the Foster City Police
Department to report the suspected crime(s). Trial in the civil case was then set for
September 9, 2013. Just days before this first trial date, the San Mateo District Attorney
(district attorney) charged defendant with felony embezzlement.2
On May 18, 2015, following an extensive preliminary hearing, the People filed
this criminal action, charging defendant by information with six counts of embezzlement
(Pen. Code, § 504), enhanced with allegations of excessive taking within the meaning of
Penal Code sections 1203.045, subdivision (a), and 12022.6, subdivision (a).3
On July 19, 2015, defendant served its first subpoena on Valla, requesting 19
categories of documents. On August 12, 2015, at a scheduled hearing, Valla responded
in part to this subpoena by producing over 600 documents in electronic form, while
moving to quash other document requests on attorney-client privilege grounds. The
motion to quash was ultimately resolved when defendant agreed to narrow his document
requests. He then filed a second subpoena on September 29, 2015, that demanded
production of documents relating to a February 6, 2014 email from the district attorney to
Valla. Valla, in turn, responded by moving for a protective order with respect to
documents protected by either the attorney-client or work-product privilege.
1
IAR is the American subsidiary of parent corporation, IAR Sweden, which is not a
party to these proceedings.
2
After several continuances, a jury trial in this civil matter has been set for
August 28, 2017.
3
Unless otherwise stated, all statutory citations herein are to the Penal Code.
2
On December 2, 2015, defendant filed the motion at the heart of these writ
proceedings, seeking an evidentiary hearing to determine whether Valla was part of the
prosecution team and, as such, subject to the Brady disclosure requirement of producing
any material and exculpatory evidence in its possession notwithstanding the attorney-
client privilege. The previously-filed motion for protective order was thus taken off
calendar and a new hearing was scheduled on February 8, 2016, to permit the People to
file a written opposition. At this hearing, the court summarily scheduled an evidentiary
hearing with respect to the Brady issue for April 18, 2016.
On March 21, 2016, petitioners filed a petition in this court requesting that we set
aside and vacate the February 8, 2016 order for an evidentiary hearing, arguing that this
hearing would violate the constitutional right of a victim (to wit, IAR) to reasonably
confer with the prosecutor regarding the charged offenses, as well as IAR‘s right to the
protection of the attorney-client and work-product privileges. In addition, petitioners
argued that, as a matter of law, the attorney for a crime victim cannot be deemed part of
the prosecution team. We denied this writ petition without prejudice, advising petitioners
of their right to renew it if appropriate after the scheduled evidentiary hearing.
The evidentiary hearing was thus held on May 4 and June 13, 2016. Among other
things, Antonio Valla, the founder of Valla, testified that the firm did not conduct legal
research or investigate the charged offenses solely at the request of the police or district
attorney or take any action with respect to defendant other than in its role as attorneys for
IAR. To the contrary, Valla merely turned over information to law enforcement that it
had independently obtained in discovery in the civil action brought against defendant.
Further, Michael Purcell, a legal associate at Valla, testified that the firm did not ask the
police or district attorney for assistance in the civil discovery process or in its legal
research in the civil matter, nor did the firm have any sort of agreement with these
agencies. Rather, the firm arranged and scheduled meetings between the police and
district attorney and its client, IAR, and provided these agencies with information that
was already in its or its client‘s possession.
3
Both Elizabeth Nardi and Kimberly Perrotti, San Mateo County deputy district
attorneys, confirmed this testimony. While it was standard procedure for the district
attorney‘s office to communicate with a crime victim (here, IAR) through its attorneys,
they did not ask Valla in this case to gather evidence, interview witnesses or find specific
witnesses on its behalf. Similarly, Detective William Beck of the Foster City Police
Department testified that the police conducted its own investigation without guidance
from Valla, and did not ask Valla to gather specific evidence, make specific discovery
requests or talk to specific witnesses. Valla did, however, forward a copy of defendant‘s
deposition transcript to the police.
With respect to IAR‘s selection and hiring of a forensic accountant, deputy district
attorney Nardi wrote an email to Valla on June 20, 2013, noting the financial complexity
of the case against defendant and describing the impediments her office faced in
determining whether to bring charges against him:
―Obviously, an embezzlement case of this magnitude which spans nearly a decade
involves a lot of paperwork and financial analysis. Our office does not have the
resources to interpret the voluminous financial documents nor is that our role. Our role is
[sic] take what documents and/or other evidence a police agency presents to our office (in
any criminal matter – murder, embezzlement, DUI, etc.) and determine if there is enough
evidence to prove to a jury of twelve beyond a reasonable doubt that a crime has been
committed.
―As such, a case of this complexity is impossible to prove without an independent
financial audit. I cannot compel you to hire an auditor nor can I direct Foster City PD to
hire an independent financial auditor. While our office works with police agencies, we
are not their boss and cannot direct them on how to conduct a criminal investigation. The
District Attorney‘s role is to take the information that is presented to us and make a
determination if we can pursue criminal charges. That being said, if IAR does go
forward with an independent financial audit, the company needs to hire someone who
will be available to testify in San Mateo County. While IAR is a global company the
4
forensic auditor would be our ‗star witness‘ at the Preliminary Hearing stage as well as a
jury trial (should the case come to that) and needs to be available to testify.‖
At the hearing, Mr. Valla testified his understanding of deputy Nardi‘s email was
that the district attorney was requesting that IAR provide information and expertise from
an independent financial auditor retained by IAR. Detective Beck, in turn, testified that
the responsibility for obtaining and paying a forensic accountant was ―delegated to IAR
via Valla . . . .‖ IAR asked Steven Smith, who had provided basic accounting and tax
services to IAR since 2012, to provide the needed information and expertise to
understand defendant‘s crimes. Subsequently, IAR, not Valla, retained Smith to serve as
expert witness in the civil action against defendant.4 Smith testified at the preliminary
hearing in this matter, after being prepared to do so by the district attorney. IAR paid
Smith for his services in both the criminal and civil matter, which mainly consisted of
reporting on defendant‘s credit card expenses and identifying which were likely personal
in nature as opposed to business in nature.
The evidentiary hearing revealed several instances of cooperation between the
police or district attorney and Valla. For example, on July 18, 2013, Purcell, a legal
associate at Valla, emailed Detective Beck, asking for Penal Code citations for the
offenses that would likely be charged to defendant, explaining that the firm might try to
work the elements of the charged offenses into its upcoming deposition of defendant.
The police thereafter responded with two Penal Code citations, but did not suggest or
request any particular deposition questions relating to these provisions. Later, Valla
provided the district attorney with a copy of defendant‘s deposition transcript with
4
There was also evidence that, earlier, in December 2012, the Foster City Police
Department asked Valla whether there was a forensic accountant from Deloitte who
could explain data taken from defendant‘s computer so that the police could prepare a
search warrant. As the record reflects, a Swedish affiliate of Deloitte had served as
auditor for IAR‘s parent company, and had been responsible for recovering certain files
from defendant‘s computer. Mr. Valla responded that Deloitte should be able to assist in
this task, while cautioning police that ―Deloitte is expensive as I told you, so if you need
to speak with them, I suggest video or voice conference.‖
5
portions underlined; however, there was no evidence that the district attorney requested
this evidence, or that Valla underlined portions of the transcript for, or at the request of,
anyone in law enforcement.
In addition, on February 6, 2014, the district attorney emailed the firm to request
that, at an upcoming meeting, IAR employees be available to discuss, among other
things, ―how [the Civil Code sections relating to ratification] may or may not affect [sic]
the ‗ratification‘ defense. My office has concerns about this possible defense since
Shehayed was able to get away with misappropriating funds without anyone noticing.
Hopefully, the IAR employees will be able to shed more light on this area.‖ This request
from the district attorney followed her receipt of a communication from defense counsel
in which counsel argued that defendant‘s alleged acts of embezzlement had been
authorized or ratified by IAR.
The record reflects that the ratification defense was later discussed in a phone call
between the district attorney and Valla associate, Michael Purcell. Following this call,
the district attorney, who lacked a background in civil law, asked for citations ―to the
cases and statutes [that Purcell] mentioned were on point with the Shehayed criminal
case,‖ and Valla complied by emailing the district attorney copies of statutes from the
Civil Code that included case citations. At the hearing, Valla explained that it had spent
only five or ten minutes crafting this response, as the firm had already researched these
statutes in connection with the civil case against defendant.
Following the evidentiary hearing, the trial court granted defendant‘s motion.
Specifically, on August 16, 2016, the court issued an order finding Valla to be a part of
the prosecution team, noting, in particular, the email correspondence between Valla and
law enforcement relating to the hiring of a forensic accountant, and to the identification
and exchange of legal authority. The court thus ruled that ―Valla & Associates are
required to comply with Brady requirements. Informal discovery requests can be sent to
them, and they will be expected to respond accordingly.‖
In August 19, 2016, Valla and IAR filed this petition for writ of mandate asking
this court to direct the trial court to vacate its determination that Valla is part of the
6
prosecution team, and to enter a new order denying defendant‘s motion. The People
subsequently joined in their request for relief arguing, like petitioners, that the court‘s
finding that Valla was part of the prosecution team for purposes of Brady is erroneous as
a matter of law.
DISCUSSION
Petitioners seek writ relief on the ground that the trial court erred as a matter of
law in concluding that Valla, attorneys for IAR, the victim of defendant‘s financial
crimes, is part of the prosecution team for purposes of the duty under Brady to disclose
any material, exculpatory evidence in its possession. Specifically, they challenge the trial
court‘s finding that Valla is part of the prosecution team because, ―in their zeal to
represent their client, IAR US, Valla and Associates interjected themselves into and made
themselves part of the prosecution team. . . . and in some cases it would appear that their
interjection was welcomed by the District Attorney‘s office.‖ For reasons set forth
below, we agree the trial court erred.5
In making the determination that Valla is part of the prosecution team and
requiring Valla to comply with Brady, the trial court relied primarily upon three factors.
First, the court relied upon email correspondence between the district attorney‘s office
and Valla beginning on February 6, 2014 (described above), in which the deputy district
attorney asked Valla to provide case citations for the so-called ratification defense, which
defense counsel had indicated that it would assert. Second, the court relied upon the July
2013 correspondence between Valla associate, Michael Purcell, and Detective Beck,
wherein Purcell asked for a list of the crimes that would likely be charged to defendant so
that Valla could explore the elements of them in defendant‘s upcoming deposition in the
5
Petitioners also contend the trial court erred as a threshold matter by ordering an
evidentiary hearing to determine whether Valla was in fact acting as part of the
prosecution team because, as a matter of law, a crime victim‘s attorney cannot be deemed
part of the prosecution team. However, because we agree with their broader argument
that, on this record, Valla cannot be deemed part of the prosecution team, we need not
address whether the mere holding of an evidentiary hearing on this issue was improper
(an issue that, in any event, appears moot at this point).
7
civil action. And lastly, the court relied upon ongoing communications between Valla,
the police and the district attorney relating to the government‘s need — and inability to
pay — for a forensic accountant to analyze the complicated financial data that would
establish defendant‘s guilt. At the same time, the court declined to rule on the related
issue of whether the attorney-client privilege or work-product doctrine would ultimately
override any obligation to disclose evidence under Brady.
We address the trial court‘s order, first, to the extent it requires Valla to make
disclosures in accordance with Brady and, second, to the extent it relies on these
particular three factors, after first setting forth the applicable legal framework.
I. Standard of Review.
Generally speaking, a trial court‘s ruling on discovery matters is reviewed for
abuse of discretion. (People v. Ayala (2000) 23 Cal.4th 225, 299.) ―[D]iscretion is
abused whenever the court exceeds the bounds of reason, all of the circumstances being
considered. [Citations.]‖ (People v. Giminez (1975) 14 Cal.3d 68, 72.) However, the
duty to disclose under Brady is not a discovery rule, but a due process requirement: ―The
Brady rule is based on the requirement of due process. Its purpose is not to displace the
adversary system as the primary means by which truth is uncovered, but to ensure that a
miscarriage of justice does not occur.‖ (United States v. Bagley (1985) 473 U.S. 667,
675); see also Weatherford v. Bursey (1977) 429 U.S. 545, 559-560 [―There is no general
constitutional right to discovery in a criminal case, and Brady did not create one . . . ‗the
Due Process Clause has little to say regarding the amount of discovery which the parties
must be afforded‘ ‖].) As such, the abuse of discretion standard for discovery rulings
does not apply. Rather, whether Brady applies is a legal matter, reviewed de novo.
(People v. Uribe (2008) 162 Cal.App.4th 1457, 1473.) At the same time, the trial court‘s
factual findings are, as usual, reviewed for substantial evidence. (People v. Superior
Court (Hartway) (1977) 19 Cal.3d 338, 350 fn. 6.)
II. Brady v. Maryland (1963) 373 U.S. 83 (Brady).
― ‗ ―The prosecution has a duty under the Fourteenth Amendment‘s due process
clause to disclose evidence to a criminal defendant‖ when the evidence is ―both favorable
8
to the defendant and material on either guilt or punishment.‖ [Citations.] Evidence is
―favorable‖ if it hurts the prosecution or helps the defense. [Citation.] ―Evidence is
‗material‘ ‗only if there is a reasonable probability that, had [it] been disclosed to the
defense, the result . . . would have been different.‘ ‖ [Citations.]‘ (People v. Earp (1999)
20 Cal.4th 826, 866 [85 Cal.Rptr.2d 857, 978 P.2d 15]; see, e.g., United States v. Bagley
(1985) 473 U.S. 667, 674-678 [87 L.Ed.2d 481, 105 S.Ct. 3375 (Bagley); Brady, supra,373 U.S. at p. 87; In re Sassounian (1995) 9 Cal.4th 535, 543-545 [37 Cal.Rptr.2d 446,
887 P.2d 527].)‘ ‖ (People v. Superior Court (Meraz) (2008) 163 Cal.App.4th 28, 47.)
―A prosecutor‘s duty under Brady to disclose material exculpatory evidence
extends to evidence the prosecutor — or the prosecution team — knowingly possesses or
has the right to possess. The prosecution team includes both investigative and
prosecutorial agencies and personnel. [Citation.] In Kyles v. Whitley (1995) 514 U.S.
419, 437-438 [115 S. Ct. 1555, 1567, 131 L. Ed. 2d 490], the Supreme Court held that a
prosecutor has a duty to learn of favorable evidence known to other prosecutorial and
investigative agencies acting on the prosecution‘s behalf, including police agencies. The
scope of the prosecutorial duty to disclose encompasses exculpatory evidence possessed
by investigative agencies to which the prosecutor has reasonable access. [Citation.]‖
(People v. Superior Court (Barrett) (2000) 80 Cal.App.4th 1305, 1314-1315 [Barrett].)
―A prosecutor has a duty to search for and disclose exculpatory evidence if the
evidence is possessed by a person or agency that has been used by the prosecutor or the
investigating agency to assist the prosecution or the investigating agency in its work. The
important determinant is whether the person or agency has been ‗acting on the
government‘s behalf‘ (Kyles v. Whitley, supra, 514 U.S. at p. 437 [115 S. Ct. at p. 1567])
or ‗assisting the government‘s case.‘ [Citation.] [¶] Conversely, a prosecutor does not
have a duty to disclose exculpatory evidence or information to a defendant unless the
prosecution team actually or constructively possesses that evidence or information. Thus,
information possessed by an agency that has no connection to the investigation or
prosecution of the criminal charge against the defendant is not possessed by the
9
prosecution team, and the prosecutor does not have the duty to search for or to disclose
such material.‖ (Barrett, supra, 80 Cal.App.4th at p. 1315.)
― ‗[T]he duty to disclose exists regardless of whether there has been a request by
the accused, and the suppression of evidence that is materially favorable to the accused
violates due process regardless of whether it was intentional, negligent, or inadvertent.
[Citations.]‘ [Citation.]‖ (People v. Superior Court (Meraz), supra, 163 Cal.App.4th at
pp. 47-48.)
Applying these legal principles to the record before us, we first find error in the
trial court‘s order to the extent it purports to require Valla – as opposed to the prosecution
– to comply with Brady requirements by responding to informal discovery requests sent
directly to them. ―[T]he Supreme Court has unambiguously assigned the duty to disclose
[under Brady] solely and exclusively to the prosecution; those assisting the government‘s
case are no more than its agents. (Kyles, supra, 514 U.S. at p. 438 [115 S.Ct. at p. 1568];
[citations].) By necessary implication, the duty is nondelegable at least to the extent the
prosecution remains responsible for any lapse in compliance. Since the prosecution must
bear the consequences of its own failure to disclose [citations], a fortiori, it must be
charged with any negligence on the part of other agencies acting in its behalf [citations].
Accordingly, the risk and consequences of nonreceipt must fall to the prosecution.‖ (In
re Brown (1998) 17 Cal.4th 873, 881-882.) ―Although rigorous, we do not perceive the
duty imposed by Brady as too onerous. [Citations.] ‗Obviously some burden is placed
on the shoulders of the prosecutor when he is required to be responsible for those persons
who are directly assisting him in bringing an accused to justice. But this burden is the
essence of due process of law. It is the State that tries a man, and it is the State that must
insure that the trial is fair.‘ [Citations.] This obligation serves ‗to justify trust in the
prosecutor as ‗the representative . . . of a sovereignty . . . whose interest . . . in a criminal
prosecution is not that it shall win a case, but that justice shall be done.‖ ‘ (Kyles, supra,514 U.S. at p. 439 [115 S.Ct. at p. 1568] . . . .) It also tends ‗to preserve the criminal trial,
as distinct from the prosecutor‘s private deliberations [or some other agency‘s
independent assessment of materiality], as the chosen forum for ascertaining the truth
10
about criminal accusations. [Citations.]‘ (Kyles, supra, 514 U.S. at p. 440 [115 S.Ct. at
p. 1568]; [U.S. v.] Alvarez [9th Cir. 1996], supra, 86 F.3d [901] at p. 905.)‖ (In re
Brown, supra, 17 Cal.4th at p. 883.) As such, we conclude the trial court committed legal
error by imposing any duty under Brady to disclose material, exculpatory evidence
directly on Valla, as opposed to on the prosecution. As explained above, Brady is not a
discovery rule, but a requirement of due process. (United States v. Bagley, supra, 473
U.S. at p. 675.)
At the same time, however, there remains at play the separate issue of whether
Valla may be deemed part of the prosecution team for purposes of Brady, such that the
prosecution can be required to search for and disclose Brady materials under Valla‘s
possession or control. The trial court, in finding Valla to be part of the prosecution team
for purposes of Brady, and, as such, under a duty to disclose exculpatory evidence,
employed the ―totality of the circumstances‖ test set forth by the federal district court for
the Southern District of New York in United States v. Meregildo (S.D.N.Y. 2013) 920
F.Supp.2d 434 (Meregildo). There, the defendant called upon the district court to find
that a cooperating witness was part of the prosecution team. In declining to do so, the
court first made the point that the disclosure requirements under Brady stem from the
unique role the government plays in criminal prosecutions. (Id. at p. 439 [―[Brady]
obligations prevent the Government from exploiting its position to obtain an unfair
advantage at trial‖]; see also Strickler v. Greene (1999) 527 U.S. 263, 281 [―[w]ithin the
federal system, for example, we have said that the United States Attorney is ‗the
representative not of an ordinary party to a controversy, but of a sovereignty whose
obligation to govern impartially is as compelling as its obligation to govern at all; and
whose interest, therefore, in a criminal prosecution is not that it shall win a case, but that
justice shall be done‘ ‖].) Then, following a lengthy discussion of the relevant case law,
the district court ultimately identified the following legal framework:
―There is no clear test to determine when an individual is a member of the prosecution
team. See United States v. Zagari, 111 F.3d 307, 320 fn. 13 (2d Cir. 1997) (‗The extent
to which knowledge may be imputed from one federal investigative agency to another for
11
Brady purposes is as yet unclear.‘); [citations]). [¶] A prosecution team may have many
members with different responsibilities. At its core, members of the team perform
investigative duties and make strategic decisions about the prosecution of the case. See,
e.g., Kyles, 514 U.S. at 438 (police investigator); Giglio [v. U.S. (1972)], 405 U.S. [150]
at [p.] 154 (fellow prosecutor). The prosecution team may also include individuals who
are not strategic decision-makers. See, e.g., United States v. Bin Laden 397 F.Supp.2d
465, 481 (S.D.N.Y. 2005) (finding that agents of the United States Marshals Service‘s
Witness Security Program were members of the prosecution team because, at the
prosecutors‘ request, the agents installed and continuously operated video-teleconference
equipment ‗in order to further the Government‘s investigation‘). Those may include
testifying police officers and federal agents who submit to the direction of the prosecutor
and aid in the Government‘s investigation. Pina [v. Henderson (2d Cir. 1985)], 752 F.2d
[47] at [p.] 47; Bin Laden, 397 F.Supp.2d at 481. But the prosecution team does not
include federal agents, prosecutors, or parole officers who are not involved in the
investigation. [U.S. v. Locascio (2d Cir. 1993)], 6 F.3d [924] at [p.] 949; [U.S. v. Quinn
(2d Cir. 1971)], 445 F.2d [940] at [p.] 944; Pina, 752 F.2d at 47. And, even when agents
are involved in the investigation, they are not always so integral to the prosecution team
that imputation is proper. See United States v. Stewart, 323 F.Supp.2d 606, 616-18
(S.D.N.Y. 2004) (declining to impute knowledge of a forensic expert from the Secret
Service lab who provided trial support for the prosecution and testified as an expert); see
also, e.g., United States v. Persico, No. 84 Cr. 809 (JFK) 1993 U.S. Dist.LEXIS 13640,
1993 WL 385799, at *6 (S.D.N.Y. Sept. 29, 1993) (declining to impute a case agent‘s
knowledge of a Government witness‘s illegal actions).‖ (Meregildo, supra, 920
F.Supp.2d at pp. 441-442. Accord Barnett v. Superior Court (2010) 50 Cal.4th 890, 904
[borrowing the following three-part Brady inquiry from federal case law when deciding
the analogous issue of whether a defendant sentenced to death was entitled to
postconviction discovery under section 1054.9: ― ‗(1) whether the party with knowledge
of the information is acting on the government's ―behalf‖ or is under its ―control‖; (2) the
extent to which state and federal governments are part of a ―team,‖ are participating in a
12
―joint investigation‖ or are sharing resources; and (3) whether the entity charged with
constructive possession has ―ready access‖ to the evidence.‘ [Citations.]‖].)
The federal district court also identified several limitations on whether an
individual or entity could be deemed part of the prosecution team under the totality-of-
the-circumstances test: ―Interacting with the prosecution team, without more, does not
make someone a team member. Stewart, 323 F.Supp.2d at 616-18. Instead, under the
totality of the circumstances, the more involved individuals are with the prosecutor, the
more likely they are team members. Stewart, 323 F.Supp.2d at 616-18. Among many
others, these circumstances include whether the individual actively investigates the case,
acts under the direction of the prosecutor, or aids the prosecution in crafting trial strategy.
See, e.g., United States v. Diaz, 176 F.3d 52 106-07 (2d Cir. 1999). In some cases, when
an individual is significantly involved with the prosecution, the presence of a single
factor may warrant imputation. Cf. United States v. Stein, 488 F.Supp.2d 350, 364
(S.D.N.Y. 2007) (holding that materials in corporation‘s files are within government‘s
‗control‘ for Rule 16 purposes because of cooperation agreement). In other cases, when
an individual‘s involvement is minor, even the presence of many factors will not warrant
imputation. See, e.g., Stewart, 323 F.Supp.2d at 616-18. Ultimately, no single factor is
the touchstone for imputation. Bin Laden, 397 F.Supp.2d at 481.‖ (Meregildo, supra,
920 F.Supp.2d at pp. 441-442.) We find the federal court‘s analytic framework
persuasive.
To begin with, we accept petitioners‘ point that there is no published decision in
California or elsewhere holding that a private party that is also a crime victim qualifies as
a member of the prosecution team for purposes of Brady. Indeed, defendant has directed
us to no such case; nor have we found one. This likely reflects two factors. First, as
noted above, the Brady rule arises from the unique role prosecutors and their agents play
in our criminal justice system, which courts have recognized justifies Brady‘s heightened
disclosure requirements. (E.g., Strickler v. Greene, supra, 527 U.S. at p. 281.) However,
crime victims and their attorneys, like IAR and Valla, are also uniquely positioned in our
criminal justice system. As petitioners point out, the California Constitution affords
13
crime victims certain unique rights, including the right to refuse to cooperate with the
prosecution and, of particular significance here, the right ―to reasonably confer with the
prosecuting agency, upon request, regarding, the arrest of the defendant . . . [and] the
charges filed . . . .‖ (Cal. Const., art. I, § 28, subd. (b)(6).) Given these circumstances,
petitioners contend that, as a matter of law, crime victims and their legal representatives
cannot be deemed part of the prosecution team for purposes of Brady. As the People
argue, to ―impose on the victim‘s law firm the moniker of ‗prosecution team‘ is to impose
on the victim-principal a status limiting the victim‘s constitutional rights . . . and limits
the agent lawyer‘s ability to take actions on the principal‘s own behalf to secure recovery
that may well conflict with the prosecution‘s interests.‖
However, whatever the wisdom of petitioners‘ proposed rule that a victim‘s
attorney cannot, as a matter of law, be deemed part of the prosecution team, we conclude
that the particular facts of this case demonstrate that Valla cannot be deemed part of the
prosecution team. As the Meregildo court aptly explained when distinguishing between
government agents and non-governmental cooperating witnesses for the purpose of
determining whether an actor may be deemed part of the prosecution team:
―At bottom, imputation involves a question of agency law: should a prosecutor be held
responsible for someone else‘s actions? ([Citation; citing] Restatement (Second) of
Agency § 272.) An agency relationship is limited in scope and defined by control.
Restatement (Second) of Agency § 14. ‗A principal has the right to control the conduct
of the agent with respect to matters entrusted to him.‘). And an agent‘s duties are limited
by the scope of the agency relationship. Restatement (Second) of Agency § 14.
Generally, a principal is responsible for the knowledge of an agent when that agent has a
‗duty to give the principal information‘ or when the agent acts on his knowledge
regarding a matter that is ‗within his power to bind the principal.‘ Restatement (Second)
of Agency § 272. An agent's duty to disclose is thus linked to his power to bind the
principal. [¶] Because a prosecutor exercises greater control over federal agents than
cooperating witnesses, the agency relationship between a federal agent and a prosecutor
is strong. By contrast, the scope of the agency relationship between a cooperating
14
witness and a prosecutor is narrower and warrants imputation in fewer circumstances.
This comports with sound policy and common sense. It does not require an analysis of
agency law to determine that a police officer or federal agent is in a better position than
a cooperating witness to bind the federal government.‖ (Meregildo, supra, 920
F.Supp.2d at pp. 443-444 [italics added].)
As this discussion by our federal colleague in Meregildo reflects, the issue, in
essence, is whether the prosecution has exercised such a degree of control over the
nongovernmental actor or witness that the actor or witness‘s actions should be deemed to
be those of the prosecution for purposes of Brady compliance. Further, this framing of
the issue fits well within the broader standard, set forth in the California case law,
requiring a prosecutor to search for and disclose exculpatory evidence ―if the evidence is
possessed by a person or agency that has been used by the prosecutor or the investigating
agency to assist the prosecution or the investigating agency in its work,‖ such that the
person or agency may be deemed an agent of the prosecution for purposes of the matter at
hand. (E.g., Barrett, supra, 80 Cal.App.4th at p. 1315; see also Kyles v. Whitley, supra,514 U.S. at p. 437 [―[t]he important determina[tion] is whether the person or agency has
been ‗acting on the government‘s behalf‘ ‖]; accord Restatement (Second) of Agency
§ 14 [―A principal has the right to control the conduct of the agent with respect to matters
entrusted to him‖.) Given the record at hand, we conclude the answer in this case is, no.
Quite simply, Valla‘s involvement with the prosecution as a cooperating witness in this
matter has not been significant enough to warrant the trial court‘s finding that Valla‘s
files should be deemed under the district attorney‘s ―control‖ for purposes of Brady.
In so concluding, we again note that, below, the trial court relied primarily upon
the sharing of legal citation and ―analysis‖ between Valla and the police or district
attorney, and the delegating by the district attorney to Valla of the task of hiring and
paying for a forensic accountant to prepare a report and testify regarding the factual basis
for the charges against defendant. However, based on our own review of the record, we
conclude the evidence is in fact much more benign than the trial court‘s ruling would
suggest. For example, with respect to the sharing of legal authority, it appears Valla did
15
no more than share a handful of legal citations relating to the ratification defense based
on the research the firm had already undertaken in the civil action it was pursuing against
defendant on its client‘s behalf – a task that took only about five or 10 minutes. Contrary
to the trial court‘s finding, however, the firm did not undertake on behalf of, or provide
to, the district attorney any legal analysis, the sort of cooperation that, under the case law,
might place a private party under the prosecution-team umbrella.
Next, the trial court accurately found that the district attorney suggested to Valla,
as legal representative to IAR, that it select and hire a forensic accountant to examine and
then testify regarding the financial evidence of defendant‘s crimes. However, this
circumstance, if anything, reflects the complex nature of these crimes rather than any
submission of Valla to the direction of the prosecutor. As deputy district attorney Nardi
readily acknowledged to Valla, her office had insufficient experience and resources to
adequately investigate ―an embezzlement case of this magnitude,‖ particularly in light of
the complex global corporate structure of IAR and the extent of defendant‘s alleged
wrongdoing (spanning ―nearly a decade‖). Further, the accountant ultimately retained by
IAR , Steven Smith, had provided routine accounting and tax services to IAR since 2012
(to wit, before law enforcement began investigating the underlying crimes in this case),
and had been designated by IAR as an expert witness in the civil action against
defendant.6 According to Smith‘s testimony, he, at Valla‘s request, ―independently took
the data, the credit card receipts and created our own report [for IAR].‖ Then, once
Smith completed his report, he sent it to Valla and IAR‘s finance manager before the
report ultimately ―found its way to the District Attorney.‖ While Smith later testified at
the preliminary hearing for the prosecution, he did not consider his work to be for or at
the direction of the prosecution; rather, he worked independently for IAR. Nor did
deputy district attorney Nardi understand Smith to be part of the prosecution‘s team,
much less exert the degree of control, direction or assistance over his work as would be
6
Contrary to the trial court‘s suggestion, it was IAR, not Valla, that retained and
paid for Steven Smith, the accounting expert.
16
necessary to trigger the prosecution‘s disclosure obligations under Brady. Given this
record, we conclude the fact that law enforcement may have obtained more specialized
information and expertise from the crime victim, IAR, in this case than it would have in a
more ordinary criminal case does not, without more, prove Valla and the prosecution
were ―team members‖ for purposes of Brady. (See Meregildo, supra, 920 F.Supp.2d at
p. 441 [―At its core, members of the team perform investigative duties and make strategic
decisions about the prosecution of the case‖].)
Finally, with respect to Valla‘s request for information from the district attorney‘s
office about the crimes with which they intended to charge to defendant, the record
reflects that Valla made this request in order to prepare questions regarding the elements
of these crimes for defendant‘s already-scheduled deposition in the civil matter. It does
not, to the contrary, reflect Valla‘s investigation of defendant at the direction of or on
behalf of the prosecution in this criminal matter. Further, according to the record, in
response to Valla‘s request, the police merely provided the firm with two citations to
Penal Code provisions. While it is true that Valla later gave law enforcement a copy of
defendant‘s deposition transcript with certain portions underlined, there is no evidence
that Valla asked any question during defendant‘s deposition at the direction of the police,
or shared or highlighted deposition testimony for any reason other than its own
preparation in the civil matter. As such, the record establishes no more than that Valla,
attorney of record for IAR in a civil lawsuit against defendant, was discharging its
fiduciary duty to thoroughly investigate the facts and seek appropriate legal redress on
behalf of its client rather than working on behalf, and as an agent, of the government to
prosecute defendant in the criminal realm.
Lastly, two additional factors persuade us that the trial court‘s decision cannot
stand on this record. First, we note that Valla‘s conduct in each of the identified
instances was wholly consistent with the general right of crime victims under the
California Constitution to ―reasonably confer with the prosecuting agency‖ regarding
―the charges filed‖ against the defendant. (Cal. Const., art. 1, § 28, subd. (b)(6).) As
deputy district attorney Nardi testified, it was common practice for her office to
17
communicate with crime victims through their attorneys. While it is undoubtedly true
that Valla and IAR, as crime victim, and the district attorney, as prosecutor, share an
interest(s) in the outcome of this case, the nature of their interests surely differs.
Specifically, while crime victims and their attorneys inevitably have privately-motivated
interests in bringing a defendant to justice and, if appropriate, gaining redress, the district
attorney, as an arm of the government, is duty-bound to serve the public interest in
uncovering the truth behind the underlying charges. (See United States v. Josleyn (1st
Cir. 2000) 206 F.3d 144, 154 [―While prosecutors may be held accountable for
information known to police investigators, [citation] we are loath to extend the analogy
from police investigators to cooperating private parties who have their own set of
interests. Those private interests, as in this case, are often far from identical to — or even
congruent with — the government‘s interests‖].)
Indeed, and in any event, in deciding the issue at hand, our focus is not on any
commonality of interest between a third party and the prosecution; rather, our focus is on
whether the third party has been acting under the government‘s direction and control by,
for example, ―actively investigat[ing] the case, act[ing] under the direction of the
prosecutor, or aid[ing] the prosecution in crafting trial strategy.‖ (Meregildo, supra, at
p. 442; see also Barrett, supra, 80 Cal.App.4th at p. 1315.)
Second, as the United States Supreme Court has aptly recognized, ―naturally, . . . a
prosecutor anxious about tacking too close to the wind will disclose a favorable piece of
evidence. [Citation.] (‗The prudent prosecutor will resolve doubtful questions in favor of
disclosure‘). This is as it should be. Such disclosure will serve to justify trust in the
prosecutor as ‗the representative . . . of a sovereignty . . . whose interest . . . in a criminal
prosecution is not that it shall win a case, but that justice shall be done.‘ [Citation.] And
it will tend to preserve the criminal trial, as distinct from the prosecutor‘s private
deliberations, as the chosen forum for ascertaining the truth about criminal accusations.
[Citations]; United States v. Leon, 468 U.S. 897, 900-901, 82 L. Ed. 2d 677, 104 S. Ct.
3405 (1984) (recognizing general goal of establishing ‗procedures under which criminal
defendants are ―acquitted or convicted on the basis of all the evidence which exposes the
18
truth‖ ‘ (quoting Alderman v. United States, 394 U.S. 165, 175, 22 L. Ed. 2d 176, 89 S.
Ct. 961 (1969)). The prudence of the careful prosecutor should not therefore be
discouraged.‖ (Kyles v. Whitley, supra, 514 U.S. at pp. 439-440. See also Barrett, supra,
80 Cal.App.4th at p. 1315 [―[t]he important determinant is whether the person or agency
has been ‗acting on the government‘s behalf‘ [citation] or ‗assisting the government‘s
case.‘ [Citation.]‖].) Thus, putting aside our conclusion that Valla cannot be deemed part
of the prosecution team for purposes of this case, the scope of the prosecution‘s duty of
disclosure under Brady remains sufficiently broad to protect defendant‘s fundamental
right to a fair trial designed to uncover, rather than conceal, the truth.7 At the same time,
by declining to unnecessarily extend the scope of this duty to include Valla in this case,
we avoid undue intrusion into the equally sacrosanct duty of a private attorney or law
firm to zealously represent the interests of its client with undivided loyalty. As the
California Supreme Court has explained: ―Attorneys have a duty to maintain undivided
loyalty to their clients to avoid undermining public confidence in the legal profession and
the judicial process. [Citations.] The effective functioning of the fiduciary relationship
between attorney and client depends on the client‘s trust and confidence in counsel.
[Citation.] The courts will protect clients‘ legitimate expectations of loyalty to preserve
this essential basis for trust and security in the attorney-client relationship.‖ (People ex
7
In addition to the binding authority of Brady and its progeny, California recently
enacted section 141, which makes it a felony, punishable by imprisonment, for a
prosecutor to intentionally and in bad faith conceal or destroy certain exculpatory
information: ―A prosecuting attorney who intentionally and in bad faith alters, modifies,
or withholds any physical matter, digital image, video recording, or relevant exculpatory
material or information, knowing that it is relevant and material to the outcome of the
case, with the specific intent that the physical matter, digital image, video recording, or
relevant exculpatory material or information will be concealed or destroyed, or
fraudulently represented as the original evidence upon a trial, proceeding, or inquiry, is
guilty of a felony punishable by imprisonment pursuant to subdivision (h) of Section 1170
for 16 months, or two or three years.‖ (§ 141, subd. (c).)
19
rel. Dept. of Corporations v. SpeeDee Oil Change Systems, Inc. (1999) 20 Cal.4th 1135,
1146-1147.)8
Thus, having carefully considered the undisputed record in this case in accordance
with these legal principles, we conclude for all the reasons identified above that Valla
engaged in few, if any, of the sort of activities that would render it part of the prosecution
team. While it is no doubt true that Valla was engaged in investigating the facts of
defendant‘s misconduct and crafting a trial strategy, it undertook these tasks on behalf of
its corporate client, IAR, in its role as plaintiff‘s attorney in the civil lawsuit brought by
IAR against its former employee. The fact that these tasks sometimes overlapped with
the district attorney‘s efforts to prosecute defendant, and that Valla cooperated with the
district attorney in its efforts to uncover the truth about defendant‘s wrongdoing, does
not, without more, make them ―team members‖ for purposes of Brady.9 (Cf. People v.
Uribe, supra, 162 Cal.App.4th at pp. 1479-1481 [holding that a SART examiner was part
of the prosecution team where ―[the exam] was clearly spearheaded by the police,‖ a
8
We find inapposite defendant‘s authority, People v. Eubanks (1996) 14 Cal.4th
580, a case involving the prosecution of two men for trade secret theft from a company.
There, the California Supreme Court held in relevant part that the company‘s $ 9,450
contribution to the cost of the criminal investigation, which was made at the district
attorney’s request to cover a debt already incurred by the district attorney, first, was
properly found by the trial court to have created a conflict of interest and, second,
supported the trial court‘s discretionary decision to recuse the district attorney from the
case because the conflict was so grave as to render fair treatment of the defendants in all
stages of the criminal proceedings unlikely (§ 1424). (People v. Eubanks, supra, at
pp. 600-601.) In our case, there is no such after-the-fact request by the prosecution that
the third party assume its investigative costs, to wit, the circumstance that, according to
the court, jeopardized the likelihood of the criminal defendants receiving fair treatment in
People v. Eubanks.
9
Defendant provides other examples of cooperation between Valla and law
enforcement. For example, the record reflects that the Foster City Police Department
asked Valla for assistance in having the forensic accountant from Deloitte who had
retrieved files from defendant‘s computer explain the retrieved data, and also for
assistance in obtaining or explaining certain financial data from IAR relating to
defendant‘s misdoings. None of these instances, however, suffices alone or collectively
to make the requisite prosecution-team showing.
20
―major purpose of the examination was to determine whether the allegation could be
corroborated with physical findings [that the victim had been sexually abused],‖ the
examiner ―collected and preserved physical evidence, consistent with statutory protocol,‖
and ―according to her practice — after completion of the SART examination and after
she and Dr. Kerns reach concurrence as to their findings as contained in the written report
— [the examiner] provided a copy of the forensic report to the police‖].)
Accordingly, we conclude the trial court‘s order was rendered in error and must be
reversed.10
DISPOSITION
A peremptory writ of mandate is entered directing the trial court to set aside and
vacate its order of February 8, 2016, with the instruction to enter a new order finding that
petitioner Valla & Associates is not part of the prosecution team in this case for purposes
of Brady v. Maryland (1963) 373 U.S. 83, 87.
_________________________
Jenkins, J.
We concur:
_________________________
Pollak, Acting P. J.
_________________________
Siggins, J.
10
Nothing in our analysis should be understood to suggest that a private law firm is
subject to disclosure obligations under the Due Process clause as expressed in Brady.
21
Trial Court: Superior Court, County of San Mateo
Trial Judge: Hon. Joseph Scott
Counsel for Petitioners Antonio Valla, Michael Purcell
IAR Systems Software, Inc.: VALLA & ASSOCIATES, INC.
Counsel for Petitioners William D. Rauch
Valla & Associates, Inc.: LAW OFFICES OF WILLIAM RAUCH
Counsel for Real Parties in Interest Thomas J. Nolan, Serenity Wang
Nadim Shehayed: NOLAN BARTON BRADFORD & OLMOS LLP
Counsel for Real Parties in Interest Kamala D. Harris, Attorney General
State of California: Gerald A. Engler, Chief Assistant Attorney General
Jeffrey M. Laurence, Senior Assistant Attorney
General
Laurence K. Sullivan, Supervising Deputy
Attorney General
Bridget Billeter, Deputy Attorney General
IAR Systems Software, Inc. et al. v. Superior Court of San Mateo County (Nadim Shehayed et al.), A149087
22