Fifth Circuit Rebukes U.S. Attorney’s Office in Fed. R. Crim. P. 41(g) Action for Breaching Grand Jury Secrecy and Holding onto Documents Identified as Privileged

In Harbor Healthcare System, L.P. v. United States, No. 19-20624 (5th Cir. July 26, 2021), a per curiam panel of the Fifth Circuit takes aim at the government’s “callous disregard” of the plaintiff’s attorney-client privilege, reversing the district court’s dismissal of the plaintiff’s action for pre-indictment return of its privileged documents.

Harbor was the subject of two qui tam actions. In the course of these cases, the Civil Division of the Department of Justice issued a Civil Investigative Demand to Harbor. Thereafter, investigating possible criminal violations, “[p]rosecutors from the United States Attorney’s Office for the Eastern District of Texas sought warrants to search Harbor locations and offices.”

“The government executed those search warrants on May 18, 2017. The government seized twenty-nine smartphones, twenty computers and computer hard drives, and the e-mail accounts of seventeen employees. In total, the government seized 3.59 terabytes of data and hundreds of boxes of paper records. As part of the search, the government seized [Harbor Director of Compliance] Sprott’s computer, e-mail account, iPhone, and all of the paper documents in his office. Harbor asserts that these materials contained a wealth of information protected by the attorney–client privilege, including recent communications with [outside counsel] Mendez regarding the government’s Civil Investigative Demand.”

The government used a “filter,” or “taint,” team to prevent the prosecutors from viewing privileged material. Harbor petitioned the team for return of the privileged documents, which it refused to answer. “On September 7, 2018, Harbor filed a motion under Federal Rule of Criminal Procedure 41(g) in the United States District Court for the Southern District of Texas. Because there was not yet any criminal proceeding against Harbor, the motion was filed as its own civil case.” Harbor “identified 3,843 e-mails from Sprott’s account as privileged,” and there was evidence that “a significant number of privileged documents” passed out of the filter team to the criminal investigation.

The district court denied the relief. “The district court explained that it would no longer exercise its equitable jurisdiction over Harbor’s Rule 41(g) motion because it was assured that processes were in place to protect Harbor’s privileged information.” Moreover, there was no irreparable injury because “Harbor may make its arguments in a post-indictment motion to suppress, if an indictment is ultimately returned” against Harbor.

The Fifth Circuit reverses. Initially, concerning the appellate court’s jurisdiction, the panel finds that there remained federal judicial power to decide the case despite that a grand jury proceeding potentially involved the same documents. Indeed, the opinion criticizes the government’s very mention of the grand jury. “The government asserts several times in its brief that ‘Harbor is a subject of a grand jury proceeding.’ Under Rule 6 of the Federal Rules of Criminal Procedure, the government’s attorneys ‘must not disclose a matter occurring before the grand jury.’ Fed. R. Crim. P. 6(e)(2)(B)(vi) . . . . An exception exists for ‘[t]he court [to] authorize disclosure—at a time, in a manner, and subject to any other conditions that it directs—of a grand-jury matter preliminarily to or in connection with a judicial proceeding.’ Fed. R. Crim. P. 6(e)(3)(E)(i). The government has not pointed to such authorization by this or another court.”

On the merits, the panel finds that the district court abused its discretion, holding that Harbor satisfied the relevant factors for return of its documents. “The district court incorrectly concluded that the government did not show a ‘callous disregard’ for Harbor’s rights simply because it obtained search warrants prior to seizing Harbor’s privileged materials. But it is a stipulated fact in this case that ‘the government did not seek express prior authorization from the issuing Magistrate Judge for the seizure of attorney-client privileged materials’ . . . . The stipulated facts show that the government made no attempt to respect Harbor’s right to attorney–client privilege in the initial search.”

“When asked at oral argument why the government had not already destroyed or returned copies of documents that it agreed were privileged, the government said: ‘The only reason they haven’t been destroyed is for the potential for a future filter team, if the criminal team looks at the privilege logs and disagrees for some reason.’ A taint team serves no practical effect if the government refuses to destroy or return the copies of documents that the taint team has identified as privileged.”

The panel also finds irreparable injury and lack of an adequate remedy of law enough to support the court’s equitable power. It rejects the government’s suggestion that Harbor could file a suppression motion if it were indicted. “First, it is not certain that there ever will be criminal charges brought against Harbor. If no charges are brought but a suppression motion is Harbor’s only means of redress, Harbor would never have an opportunity to challenge the government’s seizure of its privileged materials. Second, suppression motions vindicate an interest entirely different from Rule 41(g) motions. Suppression merely prevents the government from using certain materials as evidence in a judicial proceeding—suppression does not force the government to return those materials to the criminal defendant.”

Finally, “[t]he district court expressed concern about the practicality of it parsing through reems [sic] of Harbor documents to rule of claims of privilege. The district court’s concern can be assuaged by the array of document-review options. For starters, the government could simply be ordered to return the documents for which it does not dispute the asserted basis for the privilege. For the balance, the court could engage a magistrate judge or special master to review the potentially privileged documents. Even this will not entail reviewing each and every document; Harbor’s privilege logs should allow for recommendations or rulings based on categories of documents.”

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