Search warrants come fast and unannounced and, in today’s world of voluminous ESI, increasingly capture privileged materials.  It is common practice for prosecutors to establish a team of attorneys and law-enforcement agents uninvolved with the prosecution to filter the privilege materials and provide the investigating prosecutors with non-privileged documents.  But what protocols does this filter team use to render privilege decisions, and what can the privilege holder do about it?

A search-warrant situation in Mississippi provides an example of a federal judge’s displeasure with the government’s handling of seized materials that contained privileged information.  Federal prosecutors established a filter team to review seized documents for privileged information, but did not obtain pre-approval from the court, did not seek the privilege holder’s input on the protocol, or permit the privilege holder an objection period.  And when finished reviewing, the team sent the non-privileged materials—as unilaterally decided by the filter team—to the investigating prosecutors.

The court found that this process failed to protect the attorney–client privilege and entered an injunction stopping and modifying the filter-team procedures.  United States v. Ritchey, 2022 WL 1914329 (S.D. Miss. June 3, 2022).  You may read the decision here.  Let’s discuss it.

A Search Warrant but no Privilege-Review Protocols

A Magistrate Judge in the Southern District of Mississippi granted the local USAO’s application for a warrant to search the premises of Gulf Coast Pharmaceuticals Plus, LLC, the sole owner of which is Kenneth Bryan Ritchey.  The warrant did not provide anyone with notice of the USAO’s intent to use a privilege filter team or of the protocols the team would use in its privilege review.

In April 2020, federal agents executed the warrant, seized several electronic devices, and imaged them for review.  The agents obtained a list of GCPP’s current and former attorneys and then unilaterally created a filter team to review the seized materials—without obtaining the court’s pre-approval.  Almost a year later, March 2021, and following Ritchey’s January 2021 indictment, the USAO sent copies of the seized materials to Ritchey’s criminal defense lawyer.

Then, without notice to Ritchey, the filter team began reviewing the documents.  And less than two months later, the filter team released to the investigating prosecutors portions of the seized materials that it unilaterally determined were not privileged.

A Second Search Warrant with General Protocols

During the dog days of Mississippi’s Summer of 2021, a Magistrate Judge approved the USAO’s application for a second search warrant.  This warrant contained a set of general privilege-review guidelines, which simply stated that someone would review the documents, make a privilege call, and turn over the non-privileged documents to the investigating prosecutors.  The guidelines provided Ritchey with no opportunity to review and object to the filter team’s privilege decisions.

Ritchey’s lawyer, in this letter, demanded that the filter team disclose its privilege protocols.   One of the filter team members responded via this letter giving this synopsis of its review—

The filter team “used attorney-specific search terms and generic terms to identify material potentially subject to a claim of attorney client privilege, attorney work product, or other protection.”

Does this description give you comfort?  The description certainly did not ease the concerns of Ritchey’s lawyer, who promptly filed an application to enjoin the USAO’s ongoing document review.

Fox in the Henhouse

The court quickly dispensed with Ritchey’s argument that the USAO’s use of filter teams violated the Constitution’s Separation of Powers Clause.  If the Executive Branch’s U.S. Attorneys’ Offices could not use filter teams, the privilege review of seized materials would fall to the Judicial Branch.  And for the courts, this presents an “intolerable burden.”

The more relevant question was whether the filter team’s privilege-review protocols adequately protected Ritchey’s attorney–client privilege.  Or, stated in injunction terms, “is it substantially likely that the Government’s filter team protocol provides inadequate protection for Ritchey’s attorney–client privilege.”

While recognizing that filter teams are a necessary, common procedure, they “always present inevitable, and reasonably foreseeable, risks to privilege.”  It’s the old fox-in-the-henhouse conundrum—

A filter team is the government’s fox left in charge of the privilege-holder’s henhouse, and may err by neglect or malice, as well as by honest differences of opinion.

Ruling

Courts therefore “necessarily view filter teams with a certain level of suspicion.”  As such, government attorneys typically seek (1) the court’s preapproval of the filter team protocol, or (2) an agreement with the defendant.  Here, the USAO did neither.  It unilaterally created a protocol and never fully apprised Ritchey’s counsel about it. And these acts caused the Court to “question the adequacy of the filter team protocol.”

The Court’s questioning of the protocol’s adequacy increased because the USAO did not provide Ritchey with a period of time to review the documents designated non-privileged for purpose of disagreeing and asserting objections. While the filter team’s privilege decisions represent preliminary findings, the production of documents to the investigating prosecutors effectively “vested the final privilege determination in the filter team.”

The USAO’s execution of its protocols created “the appearance of non-neutrality,” which, by extension, further affects the adequacy of those protocols.  The government’s failure to include a protocol in the first search warrant, failure to seek the Court’s pre-approval, failure to disclose the protocol to Ritchey’s lawyer, and failure to warn Ritchey’s lawyer about its disclosure of documents to the investigating team “created an appearance that it favored the Government.”

Results

Having determined that Ritchey showed a substantial likelihood of succeeding on the merits of the inadequacy of the protocols, the Court easily found that the remaining injunction factors weighed in Ritchey’s favor.  So, the Court issued the injunction and—

  • Vacated the existing filter team protocol.
  • Required the prosecution team to return all originals of the disclosed documents to the filter team and destroy any copies.
  • Enjoined the filter team from taking further action until the Court approves a new filter team protocol.

Unring the Bell?

While the government’s prosecution team must return the seized documents to the filter team, the fact remains that they reviewed some or all of those documents, some of which may contain privileged communications.  The Court noted that this conduct “may carry significance for suppression purposes.”  So, due to the USAO’s handling of the seized materials, perhaps a suppression hearing awaits it in the future.

Appeal

The government intends to appeal this decision to the District Judge under Federal Rule of Criminal Procedure 59(a).  So, we’ll see if the fox gets to return to the privilege henhouse.

The subject matter waiver doctrine generally provides that a privilege-holder’s voluntary disclosure of a privileged document waives the privilege to the disclosed document and undisclosed documents that relate to the same subject matter of the disclosed document.  In cases where federal law governs, FRE 502 supplies the subject matter waiver rule, which applies when a trial judge determines that disclosed and undisclosed privileged documents “ought in fairness to be considered together.”

Many states, however, do not have a Rule 502 counterpart and their common-law decisions have not addressed whether the subject matter waiver rule applies and, if so, defined its scope and contours.  A Connecticut appellate court has now filled some of that void by adopting this waiver rule.  And while the rule applies, trial courts must review the undisclosed and disclosed privileged documents in camera to determine, like the federal standard, whether they “ought in fairness to be considered together.” Ghio v. Liberty Ins. Underwriters, Inc., 212 Conn. App. 754 (May 31, 2022). You may read the opinion here.

Agreed Judgment, Assignment, and a Bad-Faith Lawsuit

William and Janet Ghio invested in Back9 Network, Inc. and, apparently unhappy with their investment, sued Back9’s officers and directors about it, as you can see in this Complaint.  Liberty Insurance insured the officers and directors and retained an attorney, Berman, to represent them.  Shortly before trial, Liberty’s coverage counsel, Lane, sent a letter denying coverage for any judgment.  The Ghios and insureds then entered a Stipulation for Judgment for $1.9M and, as part of the deal, the insureds assigned their bad-faith claim against Liberty to the Ghios.

As part of the Stipulated Judgment the insureds agreed to provide the Ghios with communications with Liberty regarding insurance coverage but with a caveat to protect privileged communications:

The [insureds] hereby direct their counsel to turn over promptly to [Ghios’] attorney … a copy of all correspondence with [Liberty] that are in the possession of any of the individual [insureds] or their counsel relating to the existence of insurance coverage, including bills, redacted to the extent permitted to any applicable privilege ….

The Ghios sued Liberty for failing to pay the judgment and sought production of all communications between Liberty and Berman, but the insureds objected to Liberty producing any privileged documents to the Ghios. Later, the Ghios filed a summary-judgment motion to enforce the Stipulated Judgment and supported their motion, in part, with two Berman–Lane communications regarding the underlying lawsuit.

Busy Trial Judge

At an omnibus hearing on a couple of issues, the trial judge, who “wanted to move quickly” because he was “running short of time,” entertained Liberty’s position that it could use the insureds’ privileged documents because the insureds had disclosed arguably privileged documents as part of the Stipulated Judgment.  The judge did not review any of the disclosed or undisclosed privileged documents but nonetheless ruled from the bench and decided that Liberty could use the insureds’ privileged documents to defend the Ghios’ lawsuit.

The trial court decided that the insureds “opened the door” by disclosing Berman’s communications with Liberty’s counsel from the underlying lawsuit.  You may read the full transcript and the trial judge’s ruling here.  Displeased with the court’s from-the-bench ruling, its lack of time to fully consider the issue, and its failure to review any of the documents, the insureds took the matter to the court of appeals.

Subject Matter Waiver

The trial court’s “opened the door” phrase was effectively an implementation of the subject matter waiver doctrine.  As the appellate court noted, this doctrine provides that the voluntary disclosure of the content of a privileged document waives the privilege as to that content—even if found in undisclosed privileged documents.  The rule’s purpose is one of fairness to discourage the use of a privileged document as a “litigation weapon.”

In explaining the rule, the court stated that it implements the sword-and-shield approach, which it summarized by quoting from the Illinois Supreme Court’s decision in Center Partners, Ltd. v. Growth Head GP, LLC, 981 N.E.2d 345, 357 (Ill. 2012):

Courts have characterized this reasoning as the sword and the shield approach, in that a litigant should not be able to disclose portions of privileged communications with his attorney to gain a tactical advantage in litigation (the sword), and then claim the privilege when the opposing party attempts to discover the undisclosed portion of the communication or communications relating to the same subject matter.

You may read more about the doctrine in my discussion of the Center Partners case via this link.

First Impression Ruling

No Connecticut court had decided whether to adopt the subject matter waiver doctrine, forcing the appellate court to make a first-impression ruling.  The court decided to adopt the doctrine because of two related privilege rules existing under Connecticut law.

First, Connecticut recognizes the implied-waiver doctrine, which “is founded on the same fairness considerations justifying the subject matter waiver rule.”  The rule applies, for instance, when a party relies on an advice-of-counsel defense or specifically places the attorney–client relationship at issue. In those instances, the disclosing party waives “the right to confidentiality by placing the content of attorney’s advice directly at issue because the issue cannot be determined without an examination of that advice.”

Second, Connecticut has rejected the selective-waiver doctrine. The selective-waiver doctrine permits a party to selectively disclose privileged documents to certain third parties without waiving the privilege as to others.  In rejecting this doctrine, the Connecticut Supreme Court previously decided that the law could not permit a party to “pick and choose among its opponents, waiving the privilege for some and resurrecting the claim of confidentiality to obstruct others.” This same reasoning, the appellate court determined, supports application of the subject matter waiver doctrine.

So, based on these two reasons, the court adopted the subject matter waiver doctrine “as the law in this state.” The court described the doctrine this way—

The voluntary disclosure of a privileged attorney-client communication constitutes a waiver of the privilege as to all other communications concerning the same subject matter when the trial court determines that the waiver was intentional and that fairness dictates that the disclosed and undisclosed communications be considered together.

In Camera Review

The last piece of this holding—the trial court’s fairness determination—was absent from the trial court’s ruling.  So, the appellate court further held that, if a trial court rules that the subject matter waiver doctrine applies, then it must next “determine the scope of that waiver.”  And this determination “necessarily involves a fact intensive inquiry into the nature of the disclosed communications, as well as those communications withheld as privileged.”

The fact-intensive inquiry means that Connecticut trial courts must review the relevant disclosed and undisclosed documents to decide whether to apply the subject matter wavier doctrine and to define the scope of that waiver.  And the appellate court adopted the federal, FRE 502(a)(3) standard for this process, holding that the “central question” is whether the disclosed and undisclosed documents “out in fairness be considered together.”

So, Connecticut trial courts and appointed Special Masters will now have a bit more work to do. And it starts with the trial judge in the Ghios case, for the appellate court reversed the production order and remanded the matter for a full document review.

You’ve heard of inadvertently disclosed privileged documents, and we know what can happen when receiving lawyers use them without notice or producing lawyers allow adversaries to use them. But what happens when a lawyer obtains privileged documents purloined by a third-party hacker and then uses them—repeatedly—against the privilege holder?

International soccer superstar Cristiano Ronaldo knows.  He successfully persuaded a court to issue case-terminating sanctions when the opposing counsel intentionally obtained Ronaldo’s privileged documents from a leaks website and used them to support a lawsuit.  The court found that opposing counsel acted in bad faith and that disqualifying him would “not cure the prejudice to Ronaldo.”  Mayorga v. Ronaldo, 2022 WL 2093723 (D. Nev. June 10, 2022).  You may read the District Judge’s decision here, which adopted the Magistrate Judge’s Report and Recommendations, available here.

Sexual-Assault Allegations and a Settlement

In 2009, Kathryn Mayorga claimed that Ronaldo sexually assaulted her in a Las Vegas hotel. Ronaldo denied the allegations but, in 2010, Mayorga and Ronaldo entered a settlement agreement under which Ronaldo allegedly paid Mayorga $375,000 to forgo criminal charges and keep the incident and monetary settlement confidential.

Football Leaks and Der Spiegel Article

Over a decade later, Football Leaks, a website self-described as exposing financial corruption within European soccer teams, somehow hacked into servers containing privileged emails and work-product materials created by Ronaldo’s lawyers.  You may read more about Football Leaks, in this New Yorker article.

A German newspaper, Der Spiegel, obtained the privileged documents from Football Leaks and, in this article, exposed the Mayorga–Ronaldo settlement. The article detailed the alleged sexual-assault incident, the investigation by Ronaldo’s lawyers, and his lawyers’ communications about resolving the matter. The article’s author clearly quoted or paraphrased many documents that contained privileged communications or attorney work product.

A Call and Privilege-Emblazoned Emails

Following the article’s publication, in April 2018 Mayorga’s attorney contacted Football Leaks’ creator, Rui Pinto, and requested copies of the Ronaldo documents underlying Der Spiegel’s article, including communications involving, and reports drafted by, Ronaldo’s attorneys.  Pinto complied and provided Mayorga’s lawyer several privileged documents such as internal emails between Ronaldo’s lawyers discussing settlement strategies.  These emails were “emblazoned with notices that their contents contain attorney-client communications and attorney work product.”

Las Vegas Police and Civil Lawsuits

Mayorga’s lawyer initially disclosed the privileged documents to the Las Vegas Police Department.  A warrant was issued for Ronaldo’s arrest, but the Clark County DA’s office declined to pursue criminal charges, as you can see in this press release.

Mayorga and her counsel then turned to the civil courts, first filing a verified complaint in state court, available here, seeking to void the 2010 settlement agreement.  The complaint described the contents of the privileged documents, including the written questions that the legal team asked Ronaldo regarding the night of the alleged incident—and Ronaldo’s purported answers.

Mayorga withdrew the state-court complaint and filed a virtually identical complaint, available here, in federal court.

Privilege Waiver?

In the federal-court action, Ronaldo filed a motion to compel arbitration based on an arbitration provision in the settlement agreement. Mayorga responded and attached some, but not all, of the privileged documents obtained from Football Leaks.  And when Ronaldo moved to strike the privileged documents, Mayorga’s lawyer claimed Ronaldo waived the privilege by, among other things, failing to safeguard the privileged documents from hackers.

The Magistrate Judge issued a Report and Recommendation, available here, granting the motion to strike, finding that, “under the circumstances presented here,” Ronaldo did not waive the privilege by failing to prevent the hacking incident.  The District Judge, in an opinion available here, adopted the R&R, agreeing that Mayorga’s lawyer presented “only conjecture—not reasoned argument or evidence—to support her position.”

Unfortunately for us, the court sealed the parties’ arguments on the waiver issue and the two judges did not elaborate on their legal analyses supporting a no-waiver finding.  But whatever the judges’ bases, the ruling was clear that Mayorga could not use the purloined privileged documents.

And yet, Mayorga’s lawyer continued to do so.

Who Would “Stoop to this Level”?

Discovery progressed, including some depositions, and Ronaldo’s counsel repeatedly pressed Mayorga’s lawyer to agree not to use any of the privileged documents exposed by Football Leaks.  The lawyer refused.  And, though difficult to discern due to the extensive sealing of the pleadings, it appears Mayorga and her lawyer continued to “pepper their filings with quotes from those documents despite them having been struck.”

Cristiano Ronaldo Celebrates. ©canno73/123RF.COM

Ronaldo moved for case-terminating sanctions or, alternatively, to disqualify Mayorga’s lawyer due to this conduct.  Mayorga and her lawyer argued that that the privilege did not cover the documents in the first instance and the perhaps the crime–fraud exception applied.  And, remarkably, Mayorga’s lawyer argued that Ronaldo waived the privilege by not doing enough to stop her from disclosing the Football Leaks documents.

The lawyer’s continued use of the purloined privileged documents after the court granted the motion to strike was perplexing because “an order striking documents on the basis of privilege can be fairly interpreted to preclude a party from repeatedly filing and relying on those same documents.”  The court found little precedent showing lawyers who would “stoop to this level” but easily determined that a case-terminating sanction was the only remedy.

Purging the Taint

In the end, the court found that the lawyer’s intentional and active procurement of Ronaldo’s privileged documents and repeated use of them to prosecute the case “has every indicia of bad faith.” And the court found that no arbiter could distinguish between what Mayorga actually remembered about the 2009 incident or the 2010 settlement and what she learned through reading the confidential, privileged materials.  As a result, disqualification of the attorney due to his bad-faith conduct in obtaining and then repeatedly using the privileged documents was insufficient.

So, in short, “nothing less than a with-prejudice dismissal will purge the taint that has permeated this case from its very inception and preserve the integrity of the litigation process.”

Thanks to my friend and excellent lawyer John Day for alerting me to this decision.