In Re: Grand Jury Proceedings v. , 802 F.3d 57 ( 2015 )

United States Court of Appeals
For the First Circuit
No. 15-1555
IN RE: GRAND JURY PROCEEDINGS
APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MAINE
[Hon. Jon D. Levy, U.S. District Judge]
Before
Kayatta, Selya, and Dyk,*
Circuit Judges.
Timothy E. Zerillo, with whom Hallet, Zerillo & Whipple, P.A.,
was on brief, for intervenor-appellant.
Renée M. Bunker, Assistant United States Attorney, with whom
Thomas E. Delahanty, II, United States Attorney, was on brief, for
appellee.
September 4, 2015
*
Of the Federal Circuit, sitting by designation.
DYK, Circuit Judge. Appellant is the target of an
ongoing grand jury investigation into an alleged scheme to defraud
investors regarding the salvaging of a sunken vessel. The district
court granted the government’s motion to compel the production of
documents from appellant’s attorneys in connection with the grand
jury investigation and granted the government’s motion for a
judicial determination that the crime-fraud exception applied to
materials seized from appellant’s home. The district court
rejected appellant’s claim of attorney-client privilege, holding
that the crime-fraud exception applied. Although appellant
requested in camera review of the documents that were the subject
of the motion to compel, neither appellant nor appellant’s
attorneys ever produced the privilege log required under the
Federal Rules. We affirm.
I.
The P.N.1 is a British cargo ship that was sunk by a
German U-boat off the coast of Massachusetts on June 16, 1942.2
1
To preserve the confidentiality of grand jury
proceedings, see Fed. R. Crim. P. 6(e), we use initials, as agreed
by the parties, to refer to the relevant individuals and vessels.
2
Much of the factual background for this case derives from
an affidavit from Federal Bureau of Investigation Special Agent
Mark Miller (the “Miller affidavit”) that was attached to the
government’s February 19, 2015, motion to compel evidence from
appellant’s attorneys. Appellant’s response to the motion to
compel attached a November 25, 2014, affidavit that had previously
been filed in an associated admiralty action, but did not attach a
counter affidavit to the Miller affidavit. Both parties
incorporated the facts and arguments from the motion to compel into
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The government contends that appellant and appellant’s company,
S.H., raised $8 million from investors to salvage the P.N. by
falsifying documents to make it appear as though the ship contained
valuable cargo. Appellant currently contends that S.H. discovered
the P.N. “[i]n approximately 2007.”3 E.M., who is now a witness
for the government, is a shipwreck researcher hired by appellant to
research the P.N. The government contends that appellant conspired
with E.M. to falsify documents related to the P.N.’s cargo to
defraud investors, whereas appellant contends that E.M. falsified
the documents without appellant’s knowledge. According to
appellant, appellant first learned during a November 23, 2014,
telephone conversation with E.M. that the documents had been
altered.
The government asserts that the fraudulent activity dates
back to August 29, 2006, the date that E.M. purchased Volume III of
Lloyd’s War Losses, a compendium of information about merchant
ships owned by British, allied, and neutral countries that were
their briefing on the motion for a judicial determination.
3
Appellant has previously reported various dates for the
discovery of the P.N. In a May 2008 confidential offering summary,
appellant claimed that the P.N. was discovered on May 5, 2007.
This May 5, 2007, date was repeated in a December 5, 2012,
confidential offering summary. In a September 10, 2012, amended
complaint in an admiralty action relating to the P.N., appellant
claimed that S.H. “first located the wrecksite of the [P.N.]” in
April of 2008. And at a January 7, 2014, deposition, appellant
testified that S.H. discovered the wreck at “the end of 2007,” and
that appellant “think[s] it was in September.”
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sunk or destroyed during World War II. According to E.M.,
appellant paid E.M. to purchase a copy of Lloyd’s War Losses. The
original entry for the P.N. from Lloyd’s War Losses indicated that
the ship sank on June 16, 1942, and listed her cargo as “1600 tons
automobile parts & 4000 tons military stores.” According to E.M.,
E.M. showed the entry to appellant who said that E.M. “needed to
show more to get investors on board.” E.M. “altered an image of
the [P.N.] entry in Lloyd’s War Losses to indicate that the ship
was carrying 1,707,000 troy ounces of platinum.” E.M. also
admitted to heavily redacting the remainder of the document and
adding a forged “declassification” stamp to conceal its origin. As
discussed below, the altered document was later used to secure
money from investors and was filed in the associated admiralty
proceeding.
In May 2008, S.H. produced a confidential offering
summary for potential investors. The summary claimed to have
discovered the P.N. on May 5, 2007, and stated that “[i]ncluded in
the bounty are seventy-one tons of platinum and a very real
possibility of ten tons of gold bullion.” It added that the ship’s
“manifest records” revealed that 1.5 tons of industrial diamonds
were also aboard the ship with an “[u]nknown value at this time.”4
4
Appellant later testified that the information about
diamonds aboard the ship “was just speculation.”
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On August 19, 2008, S.H. filed an admiralty claim in
federal district court seeking a warrant for the arrest of the P.N.
and salvage or ownership rights to it. A claim for salvage
requires three elements: “1. A marine peril. 2. Service
voluntarily rendered when not required as an existing duty or from
a special contract. 3. Success in whole or in part, or that the
service rendered contributed to such success.” The “Sabine”, 101
U.S. 384, 384 (1879); see also Clifford v. M/V Islander, 751 F.2d
1, 5 (1st Cir. 1984). “To obtain possession over the res, district
courts sitting in admiralty may issue a warrant of arrest for a
physical part of a shipwreck (an ‘artifact’) and, based on this
arrest, exercise constructive jurisdiction over the entire
shipwreck.” Great Lakes Exploration Grp., LLC v. Unidentified
Wrecked & (For Salvage-Right Purposes), Abandoned Sailing Vessel,
522 F.3d 682, 694 (6th Cir. 2008).
In its complaint in the admiralty action, S.H. claimed to
be the salvor-in-possession of the P.N. and that it had effected
the arrest by recovering six “metal pieces” from the vessel. The
United Kingdom appeared in the action, claiming ownership of the
P.N. On August 26, 2008, the court issued the requested warrant
naming S.H. salvor-in-possession of the ship based on the purported
recovery of the six metal pieces on April 21, 2008.
Although the arrest warrant established the admiralty
court’s in rem jurisdiction over the P.N., it did not settle the
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parties’ ultimate rights, and the admiralty action continued with
respect to that question. See Fla. Dep’t of State v. Treasure
Salvors, Inc., 458 U.S. 670, 697 (1982) (“Of course, the warrant
itself merely secures possession of the property; its execution
does not finally adjudicate the State’s right to the artifacts.”).
The nature and value of the P.N.’s cargo was pertinent to
the admiralty proceeding because “[t]he value of the property
saved” is a factor in determining the amount of the salvage award.
The Blackwall, 77 U.S. 1, 14 (1869); see also R.M.S. Titanic, Inc.
v. Wrecked & Abandoned Vessel, 286 F.3d 194, 204 (4th Cir. 2002)
(“Courts have held that [a salvage] award cannot exceed the value
of the property itself.”); Allseas Maritime, S.A. v. M/V Mimosa,
812 F.2d 243, 246 (5th Cir. 1987) (“The salvage award
is . . . limited by the value of the property saved . . . .”);
Lambros Seaplane Base v. The Batory, 215 F.2d 228, 234 (2d Cir.
1954) (“[A]mongst the factors which affect a salvage claim are the
values . . . of the vessel or property saved . . . .”).
On or about February 14, 2011, S.H. issued a second
confidential offering summary for potential investors, repeating
the prior claims about the P.N.’s cargo and adding that S.H. had a
claim to the shipwreck because it had “filed an arrest warrant in
the U.S. Federal Court.” In response to the question of to whom
“the material (cargo) belong[ed],” the same offering summary
explained that “[i]f the original owner or owners are known or the
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salvor desires not to dispute a third party’s title claim to the
wreck, then the salvor will seek a recovery award under the law of
salvage, a well-established doctrine with significant international
legal precedent, that has been in [the] past around 90% of the
recovery.”
In 2011, E.M.’s company, in a further effort to
substantiate the claim that the P.N. contained valuable cargo when
it sank, contracted with R.L., a private archival researcher, to
review National Archives and Records Administration (“NARA”)
records regarding the P.N. and other vessels. On February 15,
2012, E.M. forwarded R.L.’s February 14, 2012, email to appellant,
which indicated that R.L. had copied “cargo reports” “for earlier
trips only.”
On February 19, 2012, E.M. sent appellant a document that
was purportedly “the last cargo of the [P.N.]” and was “on file at
the National Archives.” The document was titled ”Cargo, Mail, and
Passenger Report” (the “Cargo Report”) and was date-stamped “FEB 6
1941” [not 1942, the date of the sinking]. Adjacent to a box
labeled “GENERAL CARGO,” the document contained a reference to
“BULLION.”
In a June 19, 2012, status report filing in the admiralty
case, S.H. attached three altered documents: (1) the altered
document derived from Lloyd’s War Losses labeled as a “Copy of US
Treasury Ledger–Listing Platinum as cargo” (the “Treasury Ledger”);
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(2) a version of the Cargo Report purportedly from the P.N.’s final
voyage that removed or completely obscured the “FEB 6 1941" date-
stamp; and (3) a third document, a purported copy of a “US Treasury
Department, Procurement Division” cargo listing (the “Treasury
Procurement”) altered to show that the P.N. contained 741 platinum
bars and 4,889 gold bullion bars. A September 10, 2012, amended
complaint in the admiralty case referred to the “[o]fficial
documents of the United States Customs Service and the United
States Treasury Department,” which “contain a list of (at least
part) of the commercial cargo being transported” and were “attached
to the [June 19, 2012, status report].” According to E.M.,
appellant “pressured [E.M.] to alter the documents based on demands
that [S.H.] was facing from potential investors who were interested
in the [P.N.].”
S.H. issued a third confidential offering summary on
December 5, 2012, attaching the same three documents (the Treasury
Ledger, Cargo Report, and Treasury Procurement) that had been filed
with the admiralty court, referring to them in the table of
contents as “SMOKING GUN DOCUMENTS” and as evidence of valuable
cargo aboard the P.N. This summary claimed that a remote-operated
vehicle had entered the ship and the “bullion boxes [we]re then
located.” It also noted that “a federal admiralty claim has been
issued” regarding the P.N.
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In a January 25, 2013, objection to the admiralty court’s
scheduling order, counsel for the United Kingdom questioned the
authenticity of the documents. According to E.M., on or about June
24, 2013, E.M. traveled to NARA in Maryland at appellant’s request
to have copies of E.M.’s altered Treasury Procurement stamped with
a NARA seal. Around the same time, NARA investigators reviewed the
Treasury Procurement and Cargo Report from E.M. and concluded that
they were fraudulent. NARA investigators located an original copy
of the Cargo Report which, unlike the copy filed with the admiralty
court, made no mention of bullion. An August 29, 2013, status
report filed by S.H. in the admiralty action noted that E.M.
attempted “to secure a certified copy of the [Treasury Procurement]
document from the National Archives” but was “unsuccessful,” such
that “the validity of the document must remain in question.”
On October 15, 2013, one of appellant’s attorneys in the
admiralty matter, Attorney D.H., moved to withdraw, citing a
“fundamental disagreement” with “the client regarding how this
action should be conducted,” and that motion was granted. Attorney
D.H. also sent an October 16, 2013, email to appellant and
appellant’s two remaining attorneys (Attorney G.B. and Attorney
M.T.) entitled “False Smoking Gun Documents” and attached altered
and unaltered versions of the Treasury Procurement document that
had been filed in the admiralty matter. Attorney D.H. noted that
“[t]hese issues were found by [Attorney D.H.’s associate] and
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required [Attorney D.H.’s] withdrawal” because Attorney D.H. “d[id]
not believe that the primary documents came from the archives.” On
the same day as Attorney D.H.’s email, Attorney G.B. moved to
withdraw as counsel in the admiralty matter, and that motion was
granted.
On October 22, 2013, appellant forwarded the February 19,
2012, email from E.M. that attached the Cargo Report to K.L., a
former S.H. vessel crew member. Appellant asked K.L. to review the
documents from E.M. to assess their legitimacy. At a meeting in or
around November 2013, K.L. informed appellant and an investor that
K.L. believed the documents were falsified, and, according to K.L.,
appellant “appeared upset but not surprised by [K.L.’s] findings.”
On February 11, 2014, S.H. filed another status report in
the admiralty action, which referred the court to the three
documents filed on June 19, 2012, and explained that S.H. had been
unable to verify the source of (or find an unredacted copy of) the
Treasury Ledger or Treasury Procurement documents. In this status
report, appellant also indicated that because the Cargo Report was
dated in 1941, it did not relate to the P.N.’s final voyage in June
1942. Appellant filed a supplemental affidavit on June 12, 2014,
claiming that appellant did not know in June 2012 that an unaltered
version of the Cargo Report document existed.
On November 14, 2014, NARA agents interviewed E.M. On
November 23, 2014, the government recorded a conversation between
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appellant and E.M. During that conversation, appellant indicated
that appellant was aware of the existence of a criminal
investigation, an awareness which apparently colored the ensuing
exchange. E.M. informed appellant that his earlier statements that
a former federal agent (named J.M.) had led E.M. to the documents
at issue was inaccurate. Later in the same conversation, the
following exchange occurred:
E.M.: Mm-hmm. Yeah, but I mean, you knew—you knew those
documents were fake a long time ago, you know?
APPELLANT: Not 100 percent, I didn’t.
. . .
APPELLANT: No, we didn’t [E.M.]. I’m telling you, we
didn’t. I’ve stuck up for them because I do not—that’s
why I stuck up for them because I had an idea, but I have
no proof. The only proof I have is what you said this
morning, right now.
E.M.: Well, we discussed it.
APPELLANT: What? Forging documents?
E.M.: No, we didn’t say it in those words.
APPELLANT: Exactly. We didn’t. You’re right.
On December 4, 2014, the government executed a search
warrant at appellant’s home, seizing six metal pieces in addition
to numerous computers and electronic media storage devices. And on
December 22, 2014, a NARA agent interviewed the captain of the S.W.
vessel (which was supposedly used by S.H. to recover the six metal
pieces), who stated that no material was recovered from the P.N.
while he was captain. Another crew member aboard the S.W. vessel
at the time of discovery and for two subsequent trips stated that
no material was recovered from the P.N. during those trips.
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In February 2015, the government served grand jury
subpoenas on three of appellant’s admiralty lawyers (Attorney M.T.,
Attorney D.H., and Attorney G.B.) and their law firms for materials
“from 2006 until the present,” including all documents provided by
S.H. and communications with S.H. regarding the P.N.5 Appellant’s
lawyers asserted the attorney-client privilege and work-product
protection6 in response, and on February 19, 2015, the government
filed a motion to compel and a separate motion requesting a
5
The subpoena requested, inter alia, the following
materials:
1. All documents, video, artifacts or other tangible material
provided to you by [S.H.] relating to the [P.N.], the salvage
thereof, or the solicitation of investments in [S.H.] relating
to the salvage of the [P.N.], including historical documents,
photographs, charts, maps, illustrations, ship artifacts, and
any log books for the [S.W. vessel], [S.H. vessel], or any
other vessel/ROV utilized by [S.H.].
2. All records of communications between [S.H.] and you, or
between you and other attorneys representing [S.H.], regarding
the [P.N.], the contents of the [P.N.]’s cargo, the salvage of
the [P.N.], [the admiralty suit], or the solicitation of
investments relating to the salvage of the [P.N.], including
but not limited to e-mail, letters, voicemails, and notes or
memoranda relating to conversations.
3. All law firm records, including but not limited to
memoranda, notes, e-mails, voicemails, billing records, and
calendar entries relating to your firm’s representation of
[S.H.] with respect to the formation of or investments in any
[S.H.] entity, the salvage of the [P.N.] or [the admiralty
suit].
4. Drafts of pleadings and supporting exhibits, including
affidavits, filed on behalf of [S.H.] in [the admiralty suit].
6
Appellant has similarly asserted that the work-product
protection applies here. For convenience, we have omitted
discussion of the work-product protection, which the district court
did not specifically address.
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determination that the materials seized from appellant’s home fell
under the crime-fraud exception.7 The government attached the
Miller affidavit, which summarizes the investigation of appellant
and E.M.
On February 20, 2015, appellant filed a motion to
intervene asserting the attorney-client privilege, which was
granted.8 On March 4, 2015, appellant filed an opposition to the
government’s motion to compel, joined by Attorney M.T. In that
opposition, appellant argued for the first time that although the
government had not requested in camera review, if the court was
“inclined to grant the Motion [to compel], it is hard to imagine
the Court doing so before an in camera review has occurred.”
Attorney D.H. and Attorney G.B. did not file a response
in opposition to the government’s motion to compel. At a March 26,
2015, hearing before the district court on the motion to compel,
the government represented that Attorney D.H. and Attorney G.B.
“are asserting the attorney-client privilege with respect to the
7
Because the parties agreed that the motion for a judicial
determination raised identical issues to the motion to compel, both
parties adopted the facts and argument set forth in the briefing on
the motion to compel in the motion for a judicial determination.
8
Appellant asserts that appellant was the privilege-holder
here, as opposed to S.H., a limited partnership “organized for the
specific purpose of salvaging the cargo of the [P.N.].” The
subpoena defined S.H. to include, inter alia, appellant and E.M.
For privilege purposes, neither appellant nor the district court
has distinguished appellant and S.H., the company owned by
appellant.
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requested materials but are prepared to produce them upon a
requisite court order, and they do not feel the need to be heard in
opposition to the motion. They simply wanted the order in order to
comply with their professional responsibility obligations.”
Neither appellant nor appellant’s attorneys have filed a privilege
log or otherwise identified any specific documents subject to the
subpoena that they contended were not subject to the crime-fraud
exception.
On March 11, 2015, S.H.’s remaining attorney in the
admiralty action, Attorney M.T., moved to withdraw (like the other
two attorneys who withdrew in 2013), and the motion was granted.
On April 17, 2015, the district court granted the
government’s motion to compel and the government’s motion for a
judicial finding that the crime-fraud exception applied to evidence
seized from appellant’s home,9 finding that the government had
proffered prima facie proof that (1) appellant “participated in a
fraud,” and (2) “that the admiralty action was connected to the
fraud.” The court relied on the Miller affidavit in finding
sufficient evidence that appellant participated in a fraud by
submitting falsified documents to the admiralty court showing that
the P.N. was carrying valuable cargo and claiming that “war
9
The district court limited the second subpoena category
to omit the first reference to the P.N., because this category
otherwise “may ensnare material unrelated to [appellant’s] planning
and engagement in the salvage of the [P.N.], including the
investment scheme and admiralty lawsuit associated with it.”
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records” showed that the P.N. was carrying valuable cargo. The
district court also found evidence that the fraud began as early as
2006, based on the 2006 purchase of Lloyd’s War Losses, which was
the source of the fraudulent Treasury Ledger prepared in 2008. In
addition, the court found that appellant had provided varying
accounts of when the P.N. was discovered (see supra note 4), and
that appellant’s claim that S.H. recovered six pieces of metal from
the P.N. was belied by statements by the S.W. vessel’s captain that
no objects were recovered during that time period.
Based on this evidence, the district court rejected
appellant’s claim that appellant had been duped by E.M.,
“conclud[ing] that [the] government’s evidence supports its belief
that [appellant] was [E.M.]’s co-conspirator, and not [appellant’s]
victim.” Finally, the district court found sufficient evidence
that the admiralty claim was part of the fraud because “[t]here
could be no salvage operation for investors to invest in without a
judicial determination that [appellant] had a lawful claim to the
ship’s cargo.” The district court did not address appellant’s
request for in camera review. On May 15, 2015, the admiralty case
was dismissed with prejudice.
Appellant appeals the grant of both the government’s
motions. We review the district court’s rulings on questions of
law de novo, findings of fact for clear error, and evidentiary
determinations for an abuse of discretion. In re Grand Jury
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Subpoena (Mr. S.), 662 F.3d 65, 69 (1st Cir. 2011).
II.
Ordinarily, we would not have appellate jurisdiction over
the district court’s order granting the government’s motion to
compel prior to a citation for contempt. See In re Grand Jury
Subpoenas, 123 F.3d 695, 696 (1st Cir. 1997). We have jurisdiction
in the circumstances of this case, however, pursuant to Perlman v.
United States, 247 U.S. 7 (1918). As this court has noted:
An exception to the rule requiring a contempt citation
prior to appeal exists when subpoenaed documents are in
the hands of a third party [the “Perlman doctrine”]. In
that case, the owner of the documents may seek immediate
appeal of a district court’s order requiring production
of those documents.
Grand Jury, 123 F.3d at 696–97 (citing Perlman, 247 U.S. at 12–13).
This court has applied the Perlman doctrine to circumstances where,
as here, “a client seeks immediate appeal of an order compelling
production of a client’s records from his attorney.” Id. at 699;
see also In re Grand Jury Subpoena (Custodian of Records,
Newparent, Inc.), 274 F.3d 563, 570 (1st Cir. 2001).
With respect to the district court’s declaratory order
granting the government’s motion for a judicial finding, we have
jurisdiction because the declaratory order is a final judgment.
See 28 U.S.C. § 2201 (“Any such declaration shall have the force
and effect of a final judgment or decree and shall be reviewable as
such.”); see also Langley v. Colonial Leasing Co. of New Eng., 707
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F.2d 1, 3 (1st Cir. 1983) (declaratory judgment order which “was in
reality a full final judgment” was appealable).
III.
Appellant argues that the district court did not have a
sufficient basis to find that appellant was engaged in a scheme to
commit a crime or fraud.
The purpose of the attorney-client privilege is “to
encourage full and frank communication between attorneys and their
clients and thereby promote broader public interests in the
observance of law and administration of justice.” Upjon Co. v.
United States, 449 U.S. 383, 389 (1981). In general, the burden is
on appellant (as the party asserting the privilege here) to
“establish the existence and applicability of the
privilege . . . [using] sufficient information to allow the court
to rule intelligently on the privilege claim.” Marx v. Kelly, Hart
& Hallman, P.C., 929 F.2d 8, 12 (1st Cir. 1991); see also Grand
Jury, 662 F.3d at 69 (“The burden of showing that documents are
privileged rests with the party asserting the privilege.”).
“The crime-fraud exception—one of several qualifications
to the attorney-client privilege—withdraws protection where the
client sought or employed legal representation in order to commit
or facilitate a crime or fraud.” In re Grand Jury Proceedings, 417
F.3d 18, 22 (1st Cir. 2005). The government has the burden of
establishing the application of the crime-fraud exception by
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establishing “a reasonable basis to believe that the lawyer’s
services were used by the client to foster a crime or fraud.”
Grand Jury, 417 F.3d at 23; see also In re Grand Jury Proceedings
(Gregory P. Violette), 183 F.3d 71, 75 (1st Cir. 1999). “To bring
the crime-fraud exception to bear, the party invoking it must make
a prima facie showing: (1) that the client was engaged in (or was
planning) criminal or fraudulent activity when the attorney-client
communications took place; and (2) that the communications were
intended by the client to facilitate or conceal the criminal or
fraudulent activity.” Violette, 183 F.3d at 75. If the party
asserting the crime-fraud exception makes this reasonable cause
showing (also referred to as a prima facie case), the privilege is
forfeited. See Grand Jury, 417 F.3d at 22–24.
Here, there was ample evidence for the district court to
conclude under the applicable evidence standard that appellant was
involved in a scheme to defraud investors as to the value of the
cargo of the P.N. This included evidence that E.M. stated that the
documents were falsified at appellant’s direction, that the
falsified documents were transmitted to potential investors and the
admiralty court, that appellant’s claim that the six metal pieces
came from the P.N. was contradicted by the captain of the S.W.
vessel that supposedly recovered them, and various other evidence
from the Miller affidavit.
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Appellant contends that the subpoena is temporally
overbroad because it reaches back to documents beginning in 2006,
but 2006 is the year that appellant identified as the year during
which appellant supposedly learned “something remarkable about” the
P.N. after “scouring through” various records, and the year in
which appellant caused E.M. to purchase the copy of Lloyd’s War
Losses eventually employed to perpetuate the fraud. In light of
what happened later, particularly appellant’s direction to E.M. to
utilize the Lloyd’s War Losses book purchased in 2006 to perpetuate
the fraud by altering its contents, it is reasonable to conclude
that the fraud began in 2006.
And there was also sufficient evidence for the district
court to conclude that at least some of the communications between
appellant and appellant’s attorneys with respect to the admiralty
proceeding were intended by appellant to facilitate that fraudulent
scheme. This included the fact that the fraudulently altered
documents were filed with the court by counsel and that the
admiralty action was referenced in various offering summaries. The
admiralty proceeding itself would have been the source of any
potential monetary recovery from the P.N., as S.H. represented to
potential investors that it expected a salvage award amounting to
approximately ninety percent of the value of the P.N.’s cargo.
Appellant argues that the district court failed
adequately to consider contrary evidence that supported appellant’s
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contention that appellant was not involved in the crime or fraud.
But this is clearly not so: the district court considered all
evidence presented, and simply did not find appellant’s evidence to
be so compelling as to preclude a finding that there was a
reasonable basis to conclude that appellant used appellant’s
lawyers to foster a fraud. As we have explained, ample evidence
supported this finding.
IV.
Although we affirm the district court’s conclusion that
sufficient evidence exists to invoke the crime-fraud exception,
that is not the end of the matter. Appellant alleges that the
subpoena seeks documents that did not further the crime or fraud.
In appellant’s opposition to the government’s motion to compel,
appellant requested for the first time that the district court
conduct an in camera review as an alternative to denying the
motion. The district court did not address this request.
In camera review can perform two separate functions in
the crime-fraud exception context. First, in camera review may be
used to determine whether there is sufficient evidence to apply the
crime-fraud exception to a claim of attorney-client privilege. In
United States v. Zolin, 491 U.S. 554 (1989), the Supreme Court
approved of the use of “in camera review to determine the
applicability of the crime-fraud exception,” upon “a showing of a
factual basis adequate to support a good faith belief by a
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reasonable person that in camera review of the materials may reveal
evidence to establish the claim that the crime-fraud exception
applies.” Id. at 572 (internal quotation, citation omitted). As
discussed above, there was ample evidence here for the district
court to conclude that the crime-fraud exception applied without
the need to resort to in camera review, nor did appellant seek in
camera review for this purpose. See Linder v. Nat’l Sec. Agency,
94 F.3d 693, 696–97 (D.C. Cir. 1996) (“A court may rely on
affidavits in lieu of an in camera review when they are
sufficiently detailed . . . .”). Importantly, this is not a case
in which in camera review of the subject documents would have
helped the district court decide the issue that the parties put
before it: whether the crime-fraud exception generally applied.
Second, in camera review may be sought for a different
purpose—to determine whether specific documents evidence
communications with attorneys in furtherance of the crime or fraud.
This is because the crime-fraud exception requires “that the
communications were intended by the client to facilitate or conceal
the criminal or fraudulent activity.” Grand Jury, 417 F.3d at 22
(quoting Violette, 183 F.3d at 75); see id. at 25 (suggesting the
use of in camera review on remand to determine whether certain
attorney-client communications were intended to perpetuate a crime
or fraud).
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Appellant apparently seeks in camera review here to
identify documents that remain privileged notwithstanding the
existence of the crime-fraud exception because they were not in
furtherance of the crime or fraud.10
The question is whether appellant has preserved
appellant’s claim for in camera review. Under Rule 45 of the
Federal Rules of Civil Procedure, applicable to grand jury
subpoenas, “[a] person withholding subpoenaed information under a
claim that it is privileged or subject to protection as trial-
preparation material must: . . . describe the nature of the
withheld documents, communications, or tangible things in a manner
that, without revealing information itself privileged or protected,
will enable the parties to assess the claim.” Fed. R. Civ. P.
45(e)(2)(A). “The operative language is mandatory and, although
the rule does not spell out the sufficiency requirement in detail,
10
Appellant asserts that this includes certain documents
(or portions of documents) relating to vessels other than the P.N.
Documents relating solely to shipwrecks other than the P.N. are not
within the scope of the subpoena, which is limited to materials
“relating to” or “regarding the” P.N. and the associated admiralty
suit. Appellant points to one aspect of the subpoena that might go
beyond the P.N. and the associated admiralty suit: “[a]ll law firm
records . . . relating to your firm’s representation of [S.H.] with
respect to the formation of or investments in any [S.H.]
entity . . . .” As the government explains, however, appellant’s
affidavit represented that S.H. “was organized for the specific
purpose of salvaging the cargo of the . . . [P.N.],” and “[a]ll of
[S.H.’s] activities, and all documents generated or obtained by
S.H., have related directly or indirectly to that [P.N.] salvage
project.” As such, this aspect of the subpoena is also limited to
the P.N.
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courts consistently have held that the rule requires a party
resisting disclosure to produce a document index or privilege log.”
Grand Jury, 274 F.3d at 575.
Rule 45 does not specify when this description (normally
in the form of a privilege log) must be provided. See 9A Charles
Alan Wright & Arthur R. Miller, Federal Practice and Procedure
§ 2464 (3d ed. 2008) (“One problem presented by Rule 45[] is that
it fails to provide any guidance as to when the claim of privilege
or work product must be asserted by the person subpoenaed.”).
Addressing this gap, the District of Columbia and Second Circuits
have imposed a requirement that “the information required under the
Rule is provided to the requesting party within a reasonable time,
such that the claiming party has adequate opportunity to evaluate
fully the subpoenaed documents and the requesting party has ample
opportunity to contest that claim.” Tuite v. Henry, 98 F.3d 1411,
1416 (D.C. Cir. 1996); see also In re DG Acquisition Corp., 151
F.3d 75, 81 (2d Cir. 1998) (citing and applying Tuite’s “reasonable
time” requirement). We agree that this is the appropriate
standard.
Here, in opposing the government’s motion for a judicial
determination that the crime-fraud exception applied to materials
seized from appellant’s home, Rule 45 was inapplicable and
appellant was not required to provide a privilege log to argue
against the government’s crime-fraud theory. And even with respect
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to the government’s motion to compel (governed by Rule 45), neither
party thought that a privilege log was necessary at that stage to
address the applicability of the crime-fraud exception to the
documents generally. For purposes of the crime-fraud exception,
the government simply assumed that the subpoena sought documents
that would otherwise have been privileged. Under those
circumstances, there was no need for a privilege log to address
that general question, and appellant’s failure to provide a
privilege log in opposition to the motion to compel did not deprive
appellant of the right to contest the government’s overall crime-
fraud theory.
However, when appellant asserted the need for an in
camera inspection in assessing the motion to compel, appellant
essentially requested that the court make a document-by-document
ruling as to whether any particular document might not be
discoverable notwithstanding general application of the crime-fraud
exception. The failure to produce a privilege log (or otherwise
identify particular documents subject to the privilege) to support
the need for in camera inspection waived appellant’s right to seek
in camera inspection.
Neither appellant nor appellant’s attorneys ever produced
a privilege log in response to the motion to compel nor otherwise
complied with the requirements of Rule 45. Under this court’s
cases, that constitutes a waiver of the request for in camera
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review. See Grand Jury, 274 F.3d at 576 (“A party that fails to
submit a privilege log is deemed to waive the underlying privilege
claim.”); Grand Jury, 662 F.3d at 72; see also Corvello v. New Eng.
Gas Co., 243 F.R.D. 28, 34 (D. R.I. 2007) (“[I]n camera inspection
is unnecessary where the party claiming privilege has failed to
make a prima facie showing that the documents in question are
privileged by submitting a privilege log that adequately described
the documents and the basis for the claimed privilege.”).
The requirement to comply with Rule 45 applies even
where, as here, the allegedly privileged documents are in the
possession of the client’s attorneys, rather than the client, and
the client has either knowledge of or access to them. As the
attorneys’ client (or former client), appellant had access to the
attorneys’ files. See Me. Bar Rules § 1.16(d); ABA Model Rules of
Prof. Conduct 1.16(d); see also Maine Professional Ethics Opinion
120; Maine Professional Ethics Opinion 51. In Grand Jury, the
allegedly privileged documents were in the possession of corporate
counsel for the intervenor clients’ parent company, but “the
intervenors made no effort to prepare a privilege log” despite
their “knowledge of the communications to which the subpoena
pertained.” 274 F.3d at 576. We held that because “[p]rivilege
logs do not need to be precise to the point of pedantry[,] . . . a
party who possesses some knowledge of the nature of the materials
to which a claim of privilege is addressed cannot shirk his
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obligation to file a privilege log merely because he lacks
infinitely detailed information. To the contrary, we read Rule
45[] as requiring a party who asserts a claim of privilege to do
the best that he reasonably can to describe the materials to which
his claim adheres.” Id. (emphasis added).
Here, appellant clearly “possesses some knowledge of the
nature of the materials” sought by the subpoenas, id., because at
least two of the subpoenaed categories were necessarily in
appellant’s possession at one point: communications between
appellant’s company and appellant’s attorneys, and materials
provided by appellant’s company to appellant’s attorneys. Because
appellant failed to produce a privilege log or any other
“descri[ption] of the nature of the withheld documents,” Fed. R.
Civ. P. 45(e)(2), appellant’s request for in camera review was not
preserved.
AFFIRMED
Costs to the United States.
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