The Laptop, Attorney-Client Privilege and Intervening in a Criminal Case

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After he was indicted on one count of conspiracy to commit securities fraud in violation of 15 U.S. Code §§ 78j(b) and 78ff and 18 U.S. Code § 371 and one count of securities fraud in violation of 15 U.S. Code §§ 78j(b) and 78ff, Mathew Martoma filed a motion to compel the government to produce certain evidence to him.  U.S. v. Martoma, 962 F. Supp.2d 602 (U.S. District Court for the Southern District of New York 2013).

To understand the motion, it is necessary to understand something about the factual allegations in the indictment and what has happened so far in the case.  Indictment, U.S. v. Martoma, 2012 WL 7829267. As the opinion explains, the

Indictment alleges that Martoma traded securities on the basis of inside information received from a cooperating witness -- Dr. Gilman. Indictment, U.S. v. Martoma, supra. At the time of the alleged conspiracy, Dr. Gilman was employed by the University of Michigan. . . . The University had provided Dr. Gilman with certain electronic equipment, including a laptop computer, desktop computer, iPhone, iPad, and five external flash drives. . . .

In August 2012, in advance of a proffer session with the Government, Dr. Gilman permitted the FBI to make a forensic image of the hard drive of the laptop computer provided by the University. . . . Before the hard drive was copied, Dr. Gilman's counsel and the Government acknowledged that it contained potential `confidential information.’ . . .  

At some point after [Martoma] was indicted and requested that the Government produce a copy of the imaged hard drive, Dr. Gilman's counsel informed the Government that some of the documents on the hard drive appeared to be privileged. . . .

U.S. v. Martoma, supra.

The opinion also explains that

[i]n November 2012, after Dr. Gilman resigned from the University of Michigan, the University requested that Dr. Gilman return all of the electronic devices that it had issued to him. . . . When he returned the devices to the University, Dr. Gilman asserted that in doing so, `neither [he] nor any other privilege holder waives any applicable privilege(s).’  . .

U.S. v. Martoma, supra.

The next development in the case was that the prosecution

later provided the imaged hard drive to the University for purposes of decryption . . . so that the Government could satisfy its discovery and disclosure obligations to the Defendant. See Federal Rule of Criminal Procedure Rule 16; Brady v. Maryland, 373 U.S. 83 (1963); Giglio v.United States, 405 U.S. 150 (1972).

The University also agreed to search and produce documents from certain other electronic devices that Dr. Gilman had returned to the University. . . . Although the University takes no position regarding Dr. Gilman's assertion of privilege, it has agreed not to produce any potentially privileged documents until the Court resolves the privilege issue. . . . .

U.S. v. Martoma, supra.

That brings us to the issue the judge is dealing with in this opinion:

On June 21, 2013, [Martoma] moved to compel the Government and/or the University to produce the documents withheld on the basis of Dr. Gilman's assertion of attorney-client privilege. . . .  On July 12, 2013, the Government filed an opposition to [his] motion. . . . On July 17, 2013, Dr. Gilman moved to intervene to oppose [Martoma’s] motion, and for a protective order barring the production of the allegedly privileged communications. 

U.S. v. Martoma, supra.

Gilman’s motion to intervene in the criminal prosecution was an unusual move.  As the judge explains in the opinion, the

`Federal Rules of Criminal Procedure make no reference to a motion to intervene in a criminal case.” U.S. v. Aref, 533 F.3d 72 (U.S. Court of Appeals for the 2d Circuit 2008) see also In re New York Times Co., 708 F.Supp. 603 (U.S. District Court for the Southern District of New York 1989) (Federal Rule of Civil Procedure 24, which allows for intervention in civil cases, `has no applicability to criminal cases’).

Nevertheless, `it is settled law that persons affected by the disclosure of allegedly privileged materials may intervene in pending criminal proceedings and seek protective orders. . . .’ U.S. v. RMI Co., 599 F.2d 1183 (U.S. Court of Appeals for the 3d Circuit 1979).

U.S. v. Martoma, supra.

Having found that it was possible for Dr. Gilman to intervene in the criminal prosecution, the judge then addressed whether his request to intervene should be granted.  U.S. v. Martoma, supra.  He noted, first, that the “attorney-client privilege `can be asserted only by the client (or one authorized to do so on the client's behalf).’”  U.S. v. Martoma, supra (quoting In re Sarrio, S.A., 119 F.3d 143 (U.S. Court of Appeals for the 2d Circuit 1997)).

In opposing Dr. Gilman’s motion to intervene, the prosecution argued that

it has standing because it has `a legitimate and compelling interest in acting ethically and consistently with the rules of professional conduct in not releasing to the defendant (or reviewing itself) documents over which a witness has made a non-frivolous claim of privilege.’ (Gov't Brief. 8)

While the Government may have an ethical obligation to bring the privilege issue to the Court's attention, that obligation does not confer standing on the Government to assert privilege on Dr. Gilman's behalf under the circumstances of this case. See U.S. v. Smith, 454 F.3d 707 (U.S. Court of Appeals for the 7th Circuit 2006) (`Although the government did not act inappropriately in bringing the privilege issue to the court's attention, this was not a proper basis for a government objection to the defense questioning of [the witness].’) (emphasis omitted). . . .

U.S. v. Martoma, supra.

The judge then found that the

Government is not authorized to assert Dr. Gilman's privilege merely because he has expressed a desire to preserve the confidentiality of the communications at issue.

Indeed, Dr. Gilman has filed a motion to intervene, stating that `because [he] is the privilege holder, his interests are not adequately represented by the other parties in this matter.’ (Gilman Brief 6)

The Government acknowledges that Dr. Gilman's motion is necessary `to avoid any issue with respect to standing[,] and because Dr. Gilman is in a better position to address the particular arguments advanced by [Martoma].’ (Gov't Brief 8)

Given that Dr. Gilman has moved to intervene to assert his rights, and has not authorized the Government to assert those rights on his behalf, the Government does not have standing to assert Dr. Gilman's privilege here. . . .

U.S. v. Martoma, supra.  In a footnote, the judge notes that the prosecution’s motions and briefs did not cite any cases supporting a contrary result.  U.S. v. Martoma, supra.

He therefore held that a

third-party's reasonable assertion of privilege with respect to documents to be produced in a criminal action is sufficient grounds on which to grant the third-party's motion to intervene and to consider the merits of that party's application. Accordingly, Dr. Gilman's motion to intervene will be granted.

U.S. v. Martoma, supra.  

For the eventual outcome of the Martoma prosecution, check out this news story.