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.
The P.N.
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 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.
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."
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, 25 L.Ed. 982 (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 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, 102 S.Ct. 3304, 73 L.Ed.2d 1057 (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, 10 Wall. 1, 19 L.Ed. 870 (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
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 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 U.S. Treasury Ledger-Listing Platinum as cargo" (the "Treasury Ledger"); (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.
In a January 25, 2013, objection to the admiralty court's scheduling order, counsel
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 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 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:
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.
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.
On February 20, 2015, appellant filed a motion to intervene asserting the attorney-client privilege, which was granted.
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 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,
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.
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, 38 S.Ct. 417, 62 L.Ed. 950 (1918). As this court has noted:
Grand Jury, 123 F.3d at 696-97 (citing Perlman, 247 U.S. at 12-13, 38 S.Ct. 417). 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 F.2d 1, 3 (1st Cir.1983) (declaratory judgment order which "was in reality a full final judgment" was appealable).
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." Upjohn Co. v. United States, 449 U.S. 383, 389, 101 S.Ct. 677, 66 L.Ed.2d 584 (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 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
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.
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 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.
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
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).
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.
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, 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
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 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 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
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.
Costs to the United States.