Attorney-client Privilege, the Crime-Fraud Exception and Gmail

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This post examines a recent decision from the U.S. District Court for the Southern District of New York:  U.S. v. Nunez, 2013 WL 4407069 (2013).  The opinion notes that Jose Nunez “is charged with conspiracy to distribute, and possessing with intent to distribute, controlled substances” in violation of federal law.  U.S. v. Nunez, supra. From  the opinion, it appears the prosecution involved synthetic drugs.

In the opinion, the federal district court judge who has the case is ruling on Nunez’s motion “to preclude disclosure of communications purportedly protected by the attorney-client privilege.”  U.S. v. Nunez, supra.  This, according to the opinion, is how the issue arose:

On September 10, 2012, Nunez and a co-defendant were arrested and subsequently charged with conspiracy to distribute, and possession with intent to distribute, controlled substances. On September 11, 2012, Nunez retained [Dwane] Smith, who had previously represented him in a number of civil matters. Nunez regarded Smith as his personal attorney.

On November 29, 2012, the Government provided Nunez with . . . a search warrant application for Nunez's Google email account (the `Gmail Account’). After receiving the contents of the Gmail Account from Google, the Government provided the contents of the account to Nunez on January 2, 2013. Several weeks later, on January 31, 2013, the Government emailed Smith to alert him that the Gmail Account contained approximately 460 emails between Smith and Nunez, which the Government had not read and which it would maintain separately from the other emails in the account.

Smith asked to be relieved as counsel for Nunez on April 3, 2013, due to potential conflicts of interest presented by the emails between himself and Nunez. New counsel was appointed for Nunez on April 18, 2013 . . . and, on May 1, 2013, Nunez asserted for the first time that the emails between Smith and Nunez that were contained in the Gmail Account were subject to the attorney-client privilege, which he was not waiving.

At the Court's direction, a Government `Wall Assistant’ reviewed all of the emails between Smith and Nunez, identifying 78 communications regarding which there was a colorable claim of privilege (the `Potentially Privileged Emails’), and eight of which the Government contends are beyond the scope of that privilege, regardless of the waiver issue (the `Specified Emails’). 

U.S. v. Nunez, supra. 

(The term “Wall Assistant” refers to someone who is assigned to review documents, emails and/or other types of hard-copy or digital evidence to determine which are protected by the attorney-client privilege – or other law – and which are not.  The term comes from the custom of referring to such a review as placing the evidence behind a Chinese wall, as Wikipedia notes. See, e.g., In re Search Warrant for Law Offices, 153 F.R.D. 55 (U.S. District Court for the Southern District of New York 1994) (referring to the “Chinese Wall Assistant” who reviewed evidence for attorney-client privilege).)

In this opinion, the federal judge is deciding which, if any, of the emails are protected by the attorney-client privilege.  He begins by explaining that the attorney-client privilege is

`the oldest of the privileges for confidential communications known to the common law. Its purpose 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. U.S., 449 U.S. 383 (1981). `In order to balance this protection of confidentiality with the competing value of public disclosure, however, courts “apply the privilege only where necessary to achieve its purpose” and “construe the privilege narrowly because it renders relevant information undiscoverable.”‘ U.S. v. Meija, 655 F.3d 126 (U.S. Court of Appeals for the 2d Circuit 2011) (quoting In re County of Erie, 473 F.3d 413 (U.S. Court of Appeals for the 2d Circuit 2007)).

The party asserting the privilege bears the burden of establishing that the communications in question are `(1) between a client and his attorney, (2) . . . intended to be, and in fact were, kept confidential, [and] (3) for the purpose of obtaining or providing legal advice.’ U.S. v. Meija, supra.

U.S. v. Nunez, supra.

Since there is apparently no evidence that Nunez intentionally waived the attorney-client privilege, the judge analyzes the case in terms of case law dealing with “inadvertently” waiving the privilege.  U.S. v. Nunez, supra.  He noted that while the U.S. Court of Appeals for the 2d Circuit (whose decisions are binding on this court) has rejected the

notion that `all inadvertent disclosures mandate a finding of waiver,’ In re Grand Jury Proceedings, 219 F.3d 175 (U.S. Court of Appeals for the 2d Circuit 2000), [it] has not addressed what factors control whether a party has waived the attorney-client privilege via inadvertent disclosure of privileged communications. As a result, the parties disagree as to the applicable law. Nunez relies on the principle that `[a]n attorney may not waive the privilege without his client's consent’ because `the privilege belongs solely to the client and may only be waived by him.’ In re Von Bulow, 828 F.2d 94 (U.S. Court of Appeals for the 2d Circuit 1987).

Nevertheless, the Second Circuit went on to explain that a client may

` by his actions impliedly waive the privilege or consent to disclosure. And an attorney may, in appropriate circumstances, possess an implied authority to waive the privilege on behalf of his client. Moreover, it is the client's responsibility to insure continued confidentiality of his communications.’

In re Von Bulow, supra. (quotations omitted).

U.S. v. Nunez, supra.

The Department of Justice relied “on a test set out by the” U.S. Court of Appeals for the 10th Circuit, which had not been adopted by courts in the Southern District of New York.  U.S. v. Nunez, supra (citing U.S. v. Ary, 518 F .3d 775 (U.S. Court of Appeals for the 10th Circuit 2008)).  Since none of those courts had adopted this test, and since the U.S. Court of Appeals’ decisions are binding on this court, the judge went with a test another federal judge adopted in Lois Sportswear, U.S.A., Inc. v. Levi Strauss & Co., 104 F.R.D. 103 (U.S. District Court for the Southern District of New York).  U.S. v. Nunez, supra.

The Lois court held that when a court is required to determine whether the “attorney-client privilege has been waived through inadvertent disclosure”, the court should consider

`(1) the reasonableness of the precautions to prevent inadvertent disclosure, (2) the time taken to rectify the error, (3) the scope of the discovery and the extent of the disclosure,’ and `(4) an over[arching] issue of fairness and the protection of an appropriate privilege which . . . must be judged against the care or negligence with which the privilege is guarded.’ Lois Sportswear, supra.  

U.S. v. Nunez, supra.

As to the first factor, the judge found that Nunez took

reasonable precautions to prevent disclosure of his communications with Smith. The communications were located in his Gmail Account, which was protected by a password that was not disclosed to any third-parties. . . . No suggestion is made as to additional precautions Nunez might have taken with respect to his personal email. Indeed, neither Nunez nor Smith disclosed any communications; instead the Government obtained them through the service of a search and seizure warrant on a third-party that hosted Nunez's email account. This factor militates in favor of finding that privilege has not been waived.

U.S. v. Nunez, supra.

As to the second, he found that courts “generally” allow a “reasonable” amount of time to

claw back inadvertently disclosed documents, measured in days from the time that the disclosure is discovered, if not less. . . . Here, approximately 90 days passed between the time when the Government alerted Smith that the Gmail Account contained emails between himself and Nunez, and when Nunez's new counsel first asserted that the attorney-client privilege had not been waived. On the other hand, we are not dealing with `inadvertent disclosure,’ but rather with the seizure of documents. Perhaps Smith may have been dilatory, but he was distracted by . . . his recusal. In these circumstances, the Court concludes that the second factor is neutral with respect to waiver.

U.S. v. Nunez, supra.

He found the third factor – “the scope of the discovery and the extent of disclosure” – was “inapposite” in this case.  U.S. v. Nunez, supra.  The judge noted this comes into play when a “`relatively small number of privileged documents’” were inadvertently disclosed because they were part of a large number of documents produced for review, which was not the case here.  U.S. v. Nunez, supra (quoting U.S. v. Rigas, 281 F. Supp.2d 733 (U.S. District Court for the Southern District of New York 2003)).

Finally, he found that “fairness militates in favor of finding that the privilege has not been waived” because the prosecution “has not argued that it `ha[s] already relied on the documents at issue’”.  U.S. v. Nunez, supra (quoting Bank Brussels Lambert v. Credit Lyonnais S.A., 160 F.R.D. 437 (U.S. District Court for the Southern District of New York 1995)).  He noted “it is unclear how the Government's investigation or prosecution of Nunez would be prejudiced by the suppression of the Potentially Privileged Emails, beyond the deprivation of information to which it was not originally entitled.” U.S. v. Nunez, supra.  

“Punishing Nunez for disclosures that . . . were not made by either him or his attorney, but rather by a third-party `outside of [his or Smith's] control’ would be inequitable.”  U.S. v. Nunez, supra (quoting Apionishev v. Columbia University, 2012 WL 208998 (U.S. District Court for the Southern District of New York 2012)).

Based on all this, the judge found “Nunez has not waived the attorney-client privilege with respect to the Potentially Privileged Emails listed in Exhibit B.”  U.S. v. Nunez, supra.  He then took up the government’s argument that two of the emails were encompassed by the crime-fraud exception to the privilege, and so were not protected.  U.S. v. Nunez, supra. 

On December 1, 2011, LCM Herbal, which apparently sold synthetic marijuana, terminated Nunez's employment via an email that attributed the termination to the company's decision to discontinue sales activity due to . . . `legal restraints.’ Within a matter of hours, Nunez forwarded the email to Smith, asking whether he could `do something about this.’ On January 12, 2012, Nunez again forwarded the email in which he was terminated to Smith, this time omitting any additional questions or commentary.

U.S. v. Nunez, supra. 

The judge found, and the prosecution conceded, that Nunez was seeking his lawyer’s advice “`to further his interests in a commercial dispute’”, not to further or conceal evidence of a crime or fraud.  U.S. v. Nunez, supra.  He also noted that even if the “vague reference to `legal restraints’” was “an acknowledgment by Nunez that he “had engaged in illegal activity”, the crime-fraud exception is not “automatically triggered” by a client’s providing evidence that might be used to prosecute him/her as long as the evidence does not show the communication “`was itself in furtherance of the crime.’”  .  U.S. v. Nunez, supra.  So the crime-fraud exception did not apply. U.S. v. Nunez, supra. 

Finally, the prosecution claimed the privilege did not apply to “five emails and one online chat”.  U.S. v. Nunez, supra.  The chat occurred on March 21, 2012, when Smith was

representing Nunez in connection with his termination from LCM Herbal. Although the conversation primarily discusses Smith's request that Nunez visit a potential client of Smith's to pick up a retainer fee and agreement on his behalf, for which Smith offered to pay Nunez, it also discusses the legality of Nunez's work for LCM Herbal and Smith's representation of Nunez on matters related to the sale of synthetic drugs. Accordingly, the relevant portion of the online chat is privileged.

Second, on March 29, 2012, Nunez sent Smith three separate emails regarding a local news story discussing New York's efforts to ban synthetic marijuana. In two emails on May 7, 2012, and July 11, 2012, Smith responded by sending Nunez a picture of a controlled substances schedule and subsequently sent an article from the New York Daily News discussing attempts by the Attorney General of New York to crack down on sellers of synthetic drugs.

U.S. v. Nunez, supra.   

The government relied on cases that have held that a lawyer’s informing the client of a court date is not protected by the privilege because it simply “`a conduit for transmission of a message.’”  U.S. v. Nunez, supra (quoting U.S. v. Hall, 346 F.2d 875 (U.S. Court of Appeals for the 2d Circuit 1965)). The judge did not agree, pointing out that unlike the

communications in Hall, the March 29, 2012 emails were sent by the client to his attorney, seeking legal advice based on a news story that related directly to his former field of employment. . . . Smith's emails, consisting of a schedule of controlled substances from which synthetic marijuana is absent and a news article discussing the state's efforts to force `storeowners to stop selling the products because they violate consumer protection laws for labeling’, Kenneth Lovett, Clever A–Salt on New Drugs, N.Y. Daily News, July 11, 2012, are best understood as an indirect form of legal advice to Nunez. 

They are definitively not a `transmission of a message from any third-party source for which Smith `merely served as a conduit,’ U.S. v. Hall, supra, nor has the Government cited any cases applying Hall to a communication relaying the result of an attorney's research to a client.

The Court takes no position on the quality of Smith's legal representation of Nunez, but notes there is no requirement that legal advice be concise, well-targeted or correct to be protected by the attorney-client privilege

U.S. v. Nunez, supra (emphasis in the original).

The judge therefore granted Nunez’s motion to preclude disclosure of the communications at issue.  U.S. v. Nunez, supra.