Case o' The Week: Justice is Blind, But DJs Should Take a Peek - In re Grand Jury Investigation -- Attorney-Client Privilege and the Crime Fraud Exception

 Should a district court actually look at attorney-client docs, before deciding they are not privileged and compelling their disclosure?

“Yep,” holds the Ninth, in a very welcome case of first impression.

 In re Grand Jury Investigation, No. 15-50450 (9th Cir. Jan. 14, 2016) (Ord.), order and opinion available here.

NB: The opinion filed Jan. 14, 2016 was withdrawn so it could be redacted. See also 2016 WL 158595. The opinion on the Ninth’s web site appears redacted (compare it to the WL opinion), but this case should not be cited until clearly re-issued. 

Players: Decision by Judge Gould, joined by Judge Berzon and Sr. DJ Steeh III.

Facts: Appellant Corporation was a call center that marketed surgical devices. Id. at 4. The FDA began an investigation regarding the Corp.’s advertising. Id. 

Over time, three attorneys associated with the Corporation or medical centers corresponded with the FDA about the FDA’s warning letters. Id. The government alleged that these letters contained false statements designed to obstruct the FDA investigation. Id. 

The Feds caused grand jury subpoenas to be served on the three attorneys, under the crime-fraud exception to the attorney-client privilege. Id. at 4-5. The attorneys did not fully comply, the government moved to compel, and the district court granted the motion. 

The district court found that there was independent, non-privileged evidence that the lawyers’ services were obtained in furtherance of and sufficiently related to ongoing crimes. Id. The court did not, however, hold an in camera hearing, and did not review the disputed documents. Id.

Issue(s): Must “district courts . . .  review documents in camera before deciding whether they should be produced under the crime-fraud exception[?]” Id. at 7.

Held: “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.’” Id. at 8 (internal citations and quotations omitted).

Of Note: This decision (once it is published) will be the first written opinion in the Ninth requiring in camera review of documents, potentially subject to the attorney-client privilege, before compelled disclosure. Id. at 7. Given the order of the court regarding redaction (with the redacted opinion that accompanies the order, and the odd Westlaw reference), use care in how you refer to In re Grand Jury Investigation in the short term. Hopefully, however, this welcome new Ninth rule will stick in the final version of the decision.

How to Use: This case involves civil attorneys entangled in a corporation’s alleged missteps. The holding, however, is of broader interest for indigent defense.  

This brief opinion lays out the two-step approach to evaluate whether counsel’s documents are subject to compelled disclosure over attorney-client privilege objections. Id. at 6 (discussing the first step: prima facie showing of crime-fraud, done without in camera review, and the second step: in-camera review of docs to see if they are sufficiently related to, and made in furtherance of, the illegality).

It is a thus a very good read for crim defense counsel. (It is considerably more fun to serve subpoenas, than to be served with one). In re Grand Jury is an important decision that explains how to evaluate attorney-client privilege, and adds a welcome layer of protection before Feds can snag our files. 

 Also mull the decision when defending a white collar case, when the Feds have built their case on the backs of corporate counsel. If this in camera procedure didn’t happen, those documents were improperly obtained and should remain privileged and out-of-bounds (we’ll argue).

                                               

For Further Reading: For a thoughtful discussion of this corner of law, see Bethany Lipman, Invoking the Crime Fraud Exception: Why Courts Should Heighten the Standard in Criminal Cases, available here. 

Image of “Confidential Document Attorney-Client Privilege” stamp from http://www.jgllaw.com/blog/does-attorney-client-privilege-apply-after-your-death

Steven Kalar, Federal Public Defender N.D. Cal. Website at www.ndcalfpd.org

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Case o' The Week: Interpreting Clarity - James and the Rule of Acerbity

Hon. Judge Alex Kozinski

“This rule of acerbity, i.e., the rule of lenity stood on its head, is not how the criminal law is supposed to work.”

  United States v. James, 2016 WL 158559, *8 (9th Cir. Jan. 14, 2016), decision available here. (Kozinski, J., dissenting).

Players: Decision by Judge Tallman, joined by Sr. DJ Piersol. Dissent by Judge Kozinski.  Hard-fought appeal by D. Az. AFPD Keith Hilzendeger.

Facts: Twenty-eight year old T.C. was severely disabled by cerebral palsy. Id. at *1. She was largely nonverbal, and communicated displeasure with grunts or nodding her head. Id. T.C.’s legal uncle, James, was discovered having sex with her (while inside the boundaries of a reservation). Id. at *2. 

James was charged with aggravated forcible sexual assault under 18 U.S.C. § 2242(2)(B) – which prohibits sex with a victim who has the mental capacity to consent, but is “physically incapable of declining participation in, or communicating unwillingness to engage in, that sexual act.” Id. at *1. 

The jury returned a guilty verdict, and the district court then granted James’s Rule 29 motion. Id. at *2. The government appealed.

Issue(s): “This case turns on the breadth of the ‘physically incapable’ standard in § 2242(2)(B) for punishing a sexual act with an individual with the physical incapacity to decline participation in or communicate unwillingness to engage in the act.” Id. at *3.

Held: “We hold that the district court erred in granting that acquittal, although we acknowledge that determining what constitutes physical incapacity under § 2242(2)(B) is a difficult issue of first impression in our circuit. Applying the familiar standard under Jackson v. Virginia, 443 U.S. 307, 320, 99 S.Ct. 2781, 61 L.Ed.2d 560 (1979), we hold, contrary to the district court's decision, that there was sufficient evidence to support the jury's determination by proof beyond a reasonable doubt that James violated the statute under which he was found guilty.” Id. at *1. 

“After surveying the dearth of case law, we find the cases more persuasive which punish conduct under the broader ‘physically incapable’ standard rather than the narrower ‘physically helpless’ standard because it will allow more cases to be submitted to the good judgment of a jury.” Id. at *5.

Of Note: Judge Kozinksi pens a doozy of a dissent. “I am puzzled and confused by Part III of the opinion . . .  The whole enterprise seems misguided because the statute is clear and thus not reasonably susceptible to conflicting interpretations.” Id. at *7 (Kozinski, J., dissenting). “I . . . disagree with the methodology employed by the majority in seeking to pump up the statute beyond its ordinary meaning . . . . This rule of acerbity, i.e., the rule of lenity stood on its head, is not how the criminal law is supposed to work.” Id. at *8.

Judge Kozinski reviews the district court’s compelling recitation of facts showing that T.C. actually had the ability to communicate unwillingness – the gravamen of the statute charged. Id. at *8-*11. (District Judge Neil Wake, by the way, was the jurist who granted the Rule 29 motion). 

The dissent is well worth the read, with a dispassionate analysis of the statute’s language, and frank concern for the autonomy of the physically disabled.

How to Use: The majority chides the district court for considering state decisions while interpreting a federal statute. Id. at *4. Keep those James passages handy when the government tries to incorporate (bad) state law to interpret the meaning of federal criminal statutes.

                                               

For Further Reading: Whither thou goest, beloved Rule of Lenity? Judge Kozinski argues the majority flips the rule upside down – taking a clear statute, exploring interpretations, and then expanding the definition in the statute against the defense. 

For an equally candid assessment of the decline of the Rule of Lenity (with a frank contrast to the rise of qualified immunity), see Matt Kaiser, Another Reason It’s Better to be A Cop Than Accused of a Crime, available here.

Image of Honorable Judge Alex Kozinski from http://law.nd.edu/news/43561-chief-judge-alex-kozinski-comes-to-ndls/

Steven Kalar, Federal Public Defender N.D. Cal. Website at www.ndcalfpd.org

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Case o' The Week: No 702 => 192: Spangler, Defense Experts, and FRE 702 Relevance

Appellant Mark Spangler

Former IRS employee. 

Former Criminal Investigator. 

Forensic Accountant.

Defense Expert.

Excluded.

   United States v. Spangler, 2016 WL 191997 (9th Cir. Jan.15, 2016), decision available here.

Players: Decision by Sr. DJ Lefkow, joined by Judges McKeown and Tallman.

Facts: Spangler (pictured above) was an investment advisor who created two “normal” investment funds. Id. at *1. Investors were told that these funds would hold stock from publically-traded companies, and investment decisions would be made by an outside investment manager. Id.

 Spangler also created a high-risk investment fund dedicated to start-up companies. Id. Spangler himself diverted money from the “normal” investment funds to support the (unsuccessful) high-risk fund, without clearly explaining to the “normal fund” investors what was happening. Id. at *2.

The scheme fell apart, and Spangler was charged with wire fraud, money laundering, and investor fraud. Id. at *1. Id.

Before trial, Spangler noticed expert witness John Keller, a forensic accountant and former IRS criminal investigator. Id. at *3. The court excluded this expert as not relevant. Spangler was convicted and sentenced to 192 months. Id.

Issue(s): “Spangler . . . argues that the district court erred in precluding his expert witness, John Keller, from testifying.” Id. at *3. “Spangler argues that Keller’s testimony would have been relevant to his intent to defraud his clients.” Id. at *4.

Held: “Spangler’s ability to challenge the ruling excluding expert testimony is governed by Federal Rule of Evidence 702.” Id. at *3.  

“Given the government’s theory, any testimony that the client’s financial statement accurately reflected the amount of money invested in each . . . fund would have been irrelevant. Rather, the government’s point was that, while the financial statements were technically accurate, they failed to disclose the reality behind Spangler’s investment decisions. . . . 

Nor was Keller’s proposed testimony about the prudence of Spangler’s investment decisions relevant to fraudulent intent . . . That in hindsight Spangler’s investments in startup companies were arguably prudent does not negate his fraudulent intent.” Id. at *4.

Of Note: Spangler is a case to distinguish. One important fact is that Spangler had three other experts that the district court deemed admissible – yet the defense didn’t call them at trial. In both the harmless error analysis, id. at *4, and the Sixth Amendment analysis, id. at *5, the Ninth emphasized that Spangler did not call these (permitted) experts to testify. An unusual fact to seize upon when fighting a harmless error analysis. 

(And note a small bright spot – the Ninth rejects the government’s argument that the entire expert-appeal was precluded because Spangler presented no defense at trial. See id. at *3 (distinguishing Luce, , 469 U.S. 38 (1984)).   

How to Use: You’ve dissected the indictment and have found a flaw. Eureka! Now, do you move to dismiss pretrial (allowing the AUSA to trot back to the grand jury to get a superseding), or do you wait and bring the motion after the petit jury is sworn in?  

Spangler discusses this conundrum. (Spangler brought a challenge to the indictment ten days into trial). “Although the failure of an indictment to state an offense cannot be waived, a tardy challenge – that is, one made during trial or after the verdict – suggests a purely tactical motivation and is needlessly wasteful because pleading defense can usually be readily cured through a superseding indictment before trial.” Id. at *7. 

The defense family wrestled with this timing question during the early Apprendi era – Spangler’s discussion is a depressing refresher on how a “tardy challenge” is likely to be viewed on appeal.

                                               

For Further Reading: FRE 702 needs a re-write. So argues Defending Daubert: It’s Time to Amend Federal Rule of Evidence 702, 57 Wm. & Mary L. Rev. 1 (2015), available here.

Here’s a teaser: “Many commentators have bemoaned the “lackadaisical” approach that some courts have taken in screening out unreliable forensic evidence in criminal prosecutions. Public defenders offices have argued that more vigilant ‘gatekeeping’ is especially important in criminal cases, where innocent defendants can lose their liberty based on faulty forensic evidence, and adversarial testing is less likely to curb the impact of ‘bad science.”’

Image of Mark Spangler from http://www.investmentnews.com/article/20140314/FREE/140319938/former-napfa-chairman-spangler-gets-16-years-for-fraud-must-pay-19

Steven Kalar, Federal Public Defender ND Cal. Website at www.ndcalfpd.org

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