United States District Court, D. Oregon, Medford Division
FEDERAL TRADE COMMISSION, Plaintiff.
ADEPT MANAGEMENT INC., et al, Defendants.
OPINION AND ORDER
D. CLARKE UNITED STATES MAGISTRATE JUDGE.
case comes before the Court on a motion (#291) by Defendants
Dennis Simpson and Reality Kats, LLC ("Simpson
Defendants"), to compel the resumption of the
depositions of third-pany witness David Lennon and Defendant
Jeffrey Hoyal, and for an order compelling them 10 answer
questions for which they previously invoked privileges. For
the reasons discussed below, the motion to compel is denied.
attorney client privilege protects confidential
communications between attorneys and clients that are made
for the primary purpose of giving or receiving legal advice,
unless the protection is waived. United States v.
Rickey, 632 F.3d 559, 566 (9th Cir. 2011). The part)
"asserting the attorney-client privilege has the burden
of establishing the relationship and the privileged nature of
the communication." U.S. v. Bauer, 132 F.3d
504, 507 (9th Cir. 1997) (citation omitted). It is beyond
dispute that the attorney-client privilege may apply when the
client is a corporation, organization, or entity rather than
a natural person. See Upjohn Co. v. United States,
449 U.S. 383. 389-90 (1981). Once the attorney-client
privilege has been invoked, a party challenging the privilege
must show by that it has been abused. Clark v. U.S..
289 U.S. 1, 15(1933).
moving defendants are attempting to invoke the crime-fraud
exception to the attorney client privilege. In the Ninth
Circuit, "[a] party seeking to vitiate the
attorney-cliem privilege under the crime-fraud exception must
satisfy a two-part test." In re Napster, Inc.
Copyright Litig., 479 F.3d 1078, 1090 (9th Cir. 2007),
abrogated on other grounds by Mohawk Indus.. Inc. v.
Carpenter. 558 U.S. 100 (2009). "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.'" Id.
(quoting In re Grand Jury Proceedings, 87 F.3d 377,
381 (9th Cir. 1996). "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.' Id.
(alterations in original) (quoting In re Grand Jury
Proceedings. 87 F.3d at 381). The burden of proof is
preponderance of the evidence. Id. at 1095-96.
Fifth Amendment provides that "[n]o person shall be . .
. compelled in any criminal case to be a witness against
himself." That privilege protects a person from being
compelled to testify in any proceeding-including civil
proceedings-when the answers may incriminate the person in a
future criminal prosecution. See, e.g., Maness v.
Meyers, 419 U.S. 449, 464 (1975) (reaffirming the
principle, in the context of a civil case, that "the
privilege against self-incrimination can be asserted in any
proceeding, civil or criminal, administrative or judicial.
investigatory or adjudicatory" (internal quotation marks
omitted)). The privilege pertains not only to inquiries that
would be directly incriminating, but also "embraces
those which would furnish a link in the chain of
evidence" needed to prosecute a crime. Hoffman v.
United Stales. 341 U.S. 479. 486(1951).
Court first notes that there are a number of procedural
problems with this motion that would support denying the
motion without consideration of its merits, including
violating LR 26-3(b), which provides a 10-page limit for
discovery motions. See Third-Party Witness
Leimon's Opp n Mot. Compel ('"Lennon Resp.')
(#295), 2-6. Although the court allowed this motion to be
filed, the timing of it is also suspect given the Hoyal
deposition was taken on October 31, 2017, and the Lennon
deposition was taken on April 24, 2018, at which time the
court agreed to be available by telephone to resolve expected
claims of privilege. Notwithstanding the procedural problems,
and timing concerns, the Simpson Defendants nevertheless fail
to meet their burden to establish that Mr. Lennon abused the
attorney-client privilege by invoking it during his
deposition. Simpson Defendants also fail to show why Mr.
Hoyal's invocation of his Fifth Amendment privilege
against self-incrimination in response to certain deposition
questions was improper.
Defendants challenge Mr. Lennon's invocation of
attorney-client privilege during his deposition. Given that
it appears that Mr. Lennon had a number of different roles in
defendants operations, it is certainly appropriate to view
any claim of attorney-client privilege b> Mr. Lennon with
a critical eye. Mr. Lennon however is also a member of the
bar and is entitled. if not required, to invoke the attorney
client privilege where in his professional judgement it
should be invoked. It is not entirely clear to the Court
under what grounds Simpson Defendants challenge the
privilege. Simpson Defendants include several questions and
answers from Lennon's deposition transcript, but they
fail to articulate why they believe the attorney-client
privilege is improperly invoked in those instances.
See Mot. Compel at 21-22. It is clear however, that
Simpson Defendants believe that the crime-fraud exception
should apply to some extent. It is still unclear though which
questions, documents, or communications Simpson Defendants
believe fall under this exception to attorney-client
privilege. See Mot. Compel.
Court is not, in any event, persuaded that the Simpson
Defendants have established a prima facie showing that the
crime-fraud exception should apply in this case. Simpson
Defendants provide two arguments for application of the
crime-fraud exception. They first argue broadly that Mr.
Hoyal and Mr. Lennon have conspired to "scapegoat"
Mr. Simpson in this case. Mot. Compel at 8, 16, 27. Simpson
Defendants however, provide at this time, no more than
conclusory allegations on this point, and fail to meet their
burden in establishing that the crime-fraud exception should
apply. Second, they argue that Mr. Hoyal and Mr. Lennon
worked together to forge a Unit Purchase Agreement for the
Scenic Trust and falsified the Novato Development Operating
Agreement. Mot. Compel at 10-11, 15-16, 18, 28. Simpson
Defendants though, fail to establish how these transactions
are relevant to this action. Furthermore, Mr. Lennon provides
evidence in his response to this motion that refutes these
allegations. See Lennon Resp. Exs. D, E. Ultimately,
Simpson Defendants simply fail to carry their burden to show
an abuse of the attorney client privilege. It is far from
clear to this court if these "border skirmishes"
between Simpson. Hoyal, and Lennon, which have been raised in
other litigation. will even be a part of the trial of this
case. The Simpson defendants previously attempted to inject
them into the deposition of the Hoyal, which the court
Simpson Defendants also fail to show why Mr. Hoya's
invocation of his right against self-incrimination during his
deposition was improper. Simpson Defendants argue that
"Mr. Hoyal refused to answer a multitude of questions,
and ambiguously and vaguely assert[ed] a right not to
incriminate himself, making it unclear exactly what the scope
of the privilege was." Mot. Compel at 16. Simpson
Defendants provide their own answer however, mentioning that
it was likely because of the pending grand jury proceeding on
tax issues, Mot. Compel at 11, in which some "defendants
had received subpoenas that described Mr. Hoyal (as well as
Mr. Simpson and other defendants) as a potential subject
matter on which the Assistant U.S. Attorney would ask
questions.'' Hoyal Defs.' Resp. (#294) at 7. This
of course is potentially a very serious matter that could
possibly expose Mr. Hoyal to criminal liability.
Additionally, the Court previously stated "each
individual defendant is entitled to exercise the [Fifth
Amendment] privilege whenever a response "might lead to
incriminating evidence[.]"" including in response
to deposition questions. Order (#124), 6 (citation omitted).
Accordingly, the Simpson Defendant have failed to persuade
the Court they are entitled to an order forcing Mr. Hoyal to
waive his Fifth Amendment privilege.
court believes all parties and the court are best served by
focusing on resolving the merits of this case by summary
judgment or trial.
reasons above, the motion to compel Jeffrey Hoyal and David
Lennon to answer ...