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Media Alerts - In re Grand Jury Investigation, United States of America v. Doe Corporations and Corporations
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March 16, 2016
  In re Grand Jury Investigation, United States of America v. Doe Corporations and Corporations
Area of Law: Civil Procedure and Evidence, Exception to Attorney-Client Privilege

Headline: A district court must review in camera individual subpoenaed documents before deciding whether they should be produced under the crime-fraud exception to the attorney-client privilege.

Issue Presented: Whether a district court must examine individually subpoenaed documents 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" under the crime-fraud exception to the attorney-client privilege.

Brief Summary: Suspecting that the appellant Corporation's advertisements were "inadequately inform[ing] consumers of potential risks" of a surgical device allegedly in violation of the Food, Drug, and Cosmetic Act ("FDCA"), the Food and Drug Administration ("FDA") opened an investigation and sent warning letters to the Corporation and a few medical centers in California. In response to the FDA's warning letters, attorneys for the Corporation and several medical centers sent letters to the FDA. The government alleged that these responses contained false statements designed to obstruct the FDA investigation. Grand jury subpoenas were issued to the attorneys to produce all communications and retainer agreements in relation to the FDA investigation. All three attorneys failed to fully comply with this order and the government filed a motion to compel. The district court granted the motion, without conducting an in camera review of the individual documents, on the basis that the government had established a prima facie case of crime-fraud.

The Ninth Circuit panel agreed with the district court that "in camera review is not necessary during step one [of the crime-fraud inquiry] 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'." However, the panel did not agree with the district court's order to produce all the subpoenaed documents without previously conducting an in camera review of the individual documents themselves to determine that the specific attorney-client communications that were sought is "'sufficiently related to' that were made 'in furtherance of the intended, or present, continuing illegality.'" In re Napster, Inc. Copyright Litig., 479 F.3d 1078, 1090 (9th Cir. 2007).

Significance: This decision establishes a precedent in the Ninth Circuit to require in camera review of subpoenaed documents to determine which individual documents contain communications that are "sufficiently related to" and were made "in furtherance of the intended, or present, continuing illegality," which will allow the party to invoke the crime-fraud exception to the attorney-client privilege.

Extended Summary: The director and health officer for the Los Angeles County Public Health reported the Corporation to the Food and Drug Administration ("FDA") for inadequate marketing information with respect to a surgical devise for medical facilities. The Corporation contacted the FDA - through an attorney - with the intention to dissuade the FDA from further investigating the matter. Nevertheless, the FDA opened an investigation and sent letters to the Corporation informing it that the FDA believed its advertising violated the Food, Drug, and Cosmetic Act (FDCA). Another attorney for the Corporation and a third attorney on behalf of a few medical centers sent letters to the FDA in response to these warning letters. The government alleged that these letters provided "false statements designed to obstruct the FDA investigation."

Under the crime-fraud exception to attorney-client privilege, grand jury subpoenas were issued to the three lawyers to produce all communications and retainer contracts relating to the FDA investigation. The attorneys did not fully comply with the subpoenas. Finding that the Government had established a prima facie case of crime-fraud based on independent, non-privileged evidence, the district court rejected the Corporation's request for in camera review of the individual attorney-client communications and granted the government's motion to compel production of all the subpoenaed documents.

On appeal, the panel recognized that, while "the attorney-client privilege is 'arguably most fundamental of the common law privileges recognized under Federal Rule of Evidence 501,' it is 'not absolute.'" See In re Napster, 479 F.3d at 1090, abrogated in part on other grounds by Mohawk Indus., Inc. v. Carpenter, 558 U.S. 100 (2009).

The panel applied a two-part test to invoke the crime-fraud exception to attorney-client privilege: "First, the party must show that the client was engaged in or planning a criminal or fraudulent scheme when it sought the advice of counsel to further the scheme. Second, it must demonstrate that the attorney-client communications for which production is sought are sufficiently related to and were made in furtherance of [the] intended, or present, continuing illegality." Citing In re Grand Jury Proceedings, 87 F.3d 377, 381-83 (9th Cir. 1996).
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The panel ruled that the existence of a prima facie case satisfies only the first step of the crime-fraud inquiry. On the second step, the Government will have to also provide information to determine "whether the attorney-client communications for which production is sough are 'sufficiently related to' and were made 'in furtherance of the intended, or present, continuing illegality.'" In re Napster, 479 F.3d at 1090.

As to the first step, the panel agreed with the district court that district courts may find a prima facie case of crime-fraud either by examining privileged material in camera or by examining independent, nonprivileged evidence. As to the second step, the panel, noting an absence of Ninth Circuit published opinions on point, adopted the Sixth Circuit's approach: "While in camera review 'could . . . assist[ ] the court in determining whether a prima facie violation had been made' (step one), in camera review 'is mandated to determine the scope of the order,' i.e. 'to determine whether [the documents] reflect communications or work product made in furtherance of a contemplated or ongoing' crime-fraud (step two)." Citing In re Antitrust Grand Jury, 805 F.2d 155, 168 - 69 (6th Cir. 1986).

Accordingly, the panel concluded that an in camera review was not necessary to establish the prima facie case; however, on remand,"[the] district court must examine the individual documents themselves to determine that the specific attorney-client communications and documents for which production is sought are "'sufficiently related to' and were made 'in furtherance of the intended, or present, continuing illegality,'" by doing so, making the scope of production of documents more specific and possibly narrower. See In re Napster, 479 F.3d at 1090.

To read full opinion, please visit:

https://cdn.ca9.uscourts.gov/datastore/opinions/2016/01/14/15-50450.pdf

Panel: Ronald M. Gould and Marsha S. Berzon, Circuit Judges, and George Caram Steeh III, Senior District Judge.

Argument Date: December 7, 2015

Date of Issued Opinion: January 14, 2016

Docket Number: 15-50450

Decided: Vacated and Remanded

Case Alert Author: David Erghelegiu

Counsel: Robert A. Kashfian, Ryan D. Kashfian (argued), Kashfian & Kashfian LLP, Century City, California, for Respondents Appellant. Robert J. Rice, Los Angeles, California, for Respondent Appellant.

Kristen A. Williams, Evan J. Davis, Assistant United States Attorneys, Major Frauds Section; Consuelo S. Woodhead (argued), Assistant United States Attorney, Criminal Appeals Section, Los Angeles, California, for Plaintiff-Appellee.

Author of Opinion: Judge Ronald M. Gould

Circuit: Ninth

Case Alert Supervisor: Professor Glenn Koppel

    Posted By: Glenn Koppel @ 03/16/2016 06:12 PM     9th Circuit  

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