15

‐ 1976

In re: Grand Jury Subpoenas Dated March 2, 2015

15

‐ 1976

In re: Grand Jury Subpoenas Dated March 2, 2015

UNITED STATES COURT OF APPEALS

FOR THE SECOND CIRCUIT

SUMMARY ORDER

R ULINGS BY SUMMARY ORDER DO NOT HAVE PRECEDENTIAL EFFECT

. C ITATION TO A

SUMMARY ORDER FILED ON OR AFTER J ANUARY 1, 2007 IS PERMITTED AND IS GOVERNED BY

F EDERAL R ULE OF A PPELLATE P ROCEDURE 32.1 AND THIS COURT ʹ S L OCAL R ULE 32.1.1.

W HEN CITING A SUMMARY ORDER IN A DOCUMENT FILED WITH THIS COURT

, A PARTY MUST

CITE EITHER THE F EDERAL A PPENDIX OR AN ELECTRONIC DATABASE ( WITH THE NOTATION

ʺ SUMMARY ORDER ʺ ). A PARTY CITING A SUMMARY ORDER MUST SERVE A COPY OF IT ON

ANY PARTY NOT REPRESENTED BY COUNSEL

.

At a stated term of the United States Court of Appeals for the Second

Circuit, held at the Thurgood Marshall United States Courthouse, 40 Foley Square, in

the City of New York, on the 6 th day of October, two thousand fi fteen.

PRESENT: ROBERT D. SACK,

DENNY CHIN,

CHRISTOPHER F. DRONEY,

Circuit Judges

.

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IN RE: GRAND JURY SUBPOENAS DATED

MARCH 2, 2015 15

‐ 1976

‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ x

FOR INTERVENOR

‐ APPELLANT: BRIAN D. LINDER, Clayman & Rosenberg

LLP, New York, New York.

FOR APPELLEE: STANLEY J. OKULA, JR., Michael A. Levy,

Assistant United States A tt orneys, for Preet

Bharara, United States A tt orney for the

Southern District of New York, New York,

New York.‐ 2

‐ Appeal from the United States District Court for the Southern District of

New York (Caproni, J. ).

UPON DUE CONSIDERATION, IT IS HEREBY ORDERED,

ADJUDGED, AND DECREED that the order of the district court is AFFIRMED

.

Intervenor

‐ appellant is an investment company (the ʺ Company ʺ ) whose

president and owner (the ʺ Owner ʺ ) is the subject of an ongoing grand jury investigation

into tax fraud. On June 5, 2015, the United States District Court for the Southern District

of New York issued an order compelling the Company ʹ s a tt orneys to produce certain

a tt orney

‐ client communications between the a tt orneys and the Owner. The district

court held that the crime

‐ fraud exception to the a tt orney

‐ client privilege applied to their

communications relating to a tax protest because there was probable cause to believe

that the Owner was using the lawyers to further his fraudulent scheme. The Company

appeals. We assume the parties ʹ familiarity with the facts, procedural history, and

issues on appeal.

First, we consider the issue of subject matter jurisdiction. Our Circuit has

not yet determined how Mohawk Industries, Inc. v. Carpenter

, 558 U.S. 100 (2009), affects

our jurisdiction under the Perlman doctrine to hear a non

‐ party ʹ s appeal of a non

‐ final

order compelling disclosure of communications protected by the attorney

‐ client

privilege in the context of an ongoing grand jury proceeding. See Perlman v. United

States

, 247 U.S. 7, 13 (1918) (permitting jurisdiction where appellant is ʺ powerless to‐ 3

‐ avert the mischief of the order ʺ ). In Mohawk

, the Supreme Court held that ʺ collateral

order appeals are not necessary to ensure effective review of orders adverse to the

attorney

‐ client privilege ʺ because ʺ postjudgment appeals generally suffice to protect the

vitality of the attorney

‐ client privilege. ʺ 558 U.S. at 108

‐ 09. Several courts have noted

tension between Perlman and Mohawk

. See, e.g.

, In re Naranjo

, 768 F.3d 332, 343 n.14 (4th

Cir. 2014); United States v. Punn

, 737 F.3d 1, 11 n.8 (2d Cir. 2013); United States v. Copar

Pumice Co.

, 714 F.3d 1197, 1207

‐ 08 (10th Cir. 2013). Several of our sister Circuits,

meanwhile, conclude that Perlman may continue to permit non

‐ party privilege holders

to appeal in particular circumstances. See, e.g.

, Doe No. 1 v. United States

, 749 F.3d 999,

1005

‐ 07 (11th Cir. 2014); In re Grand Jury

, 705 F.3d 133, 145

‐ 46 (3d Cir. 2012); Holt

‐ Orsted

v. City of Dickson

, 641 F.3d 230, 239 (6th Cir. 2011); United States v. Krane

, 625 F.3d 568,

573 (9th Cir. 2010). We need not decide whether Perlman would apply in the

circumstances of this case, however, because the only restriction on jurisdiction here is a

statutory and not a constitutional one, see 28 U.S.C. § 1291, and ʺ the Supreme Court has

barred the assumption of ʹ hypothetical jurisdiction ʹ only where the potential lack of

jurisdiction is a constitutional question. ʺ Fama v. Comm ʹ r of Corr. Servs.

, 235 F.3d 804,

816 n.11 (2d Cir. 2000) (quoting Steel Co. v. Citizens for a Better Env ʹ t

, 523 U.S. 83, 94

(1998)). As both sides urge us to reach the merits and it would be more efficient for us

to do so, we assume we have jurisdiction to hear this appeal.‐ 4

‐ Second, as to the merits, we review the district court ʹ s determination that

the crime

‐ fraud exception applies for clear error. United States v. Jacobs

, 117 F.3d 82, 87

(2d Cir. 1997), abrogated on other grounds by Loughrin v. United States

, 134 S. Ct. 2384

(2014). The crime

‐ fraud exception removes the protection of the a tt orney

‐ client

privilege from ʺ client communications in furtherance of contemplated or ongoing

criminal or fraudulent conduct. ʺ In re John Doe, Inc.

, 13 F.3d 633, 636 (2d Cir. 1994)

(quoting In re Grand Jury Subpoena Duces Tecum Dated Sept. 15, 1983

, 731 F.2d 1032, 1038

(2d Cir. 1984)). A party wishing to invoke the exception must prove (1) ʺ that the client

communication or a tt orney work product in question was itself in furtherance of the

crime or fraud ʺ and (2) ʺ probable cause to believe that the particular communication

with counsel or a tt orney work product was intended in some way to facilitate or to

conceal the criminal activity. ʺ In re Richard Roe, Inc.

, 168 F.3d 69, 71 (2d Cir. 1999)

(internal quotation marks omi tt ed). But ʺ [w]here the very act of litigating is alleged as

being in furtherance of a fraud, ʺ we adopt a more stringent probable cause standard,

that is, ʺ the party seeking disclosure

. . . must show probable cause that the litigation or

an aspect thereof had li tt le or no legal or factual basis and was carried on substantially

for the purpose of furthering the crime or fraud. ʺ Id.

Even assuming, as the district court did, that the heightened probable

cause standard applies to communications made in tax protests, we fi nd no error.

Based on the facts before it, the district court did not clearly err in fi nding that there was‐ 5

‐ probable cause to conclude that the tax protest was based on a false, undocumented

transaction and that the Owner engaged in the tax protest as part of a strategy to further

conceal that tax fraud and shirk his tax liabilities. The district court conducted an in

camera review of the privileged communications at issue and concluded that those

communications supported its determination that the crime

‐ fraud exception applied.

We have examined those privileged communications, the facts in the record, and the

parties ʹ ex parte submissions, and hold that the district court did not clearly err.

We have reviewed the Company ʹ s remaining arguments and conclude

that they are without merit. Accordingly, we AFFIRM the order of the district court.

Because the grand jury investigation is still ongoing, the mandate shall issue forthwith.

FOR THE COURT:

Catherine O ʹ Hagan Wolfe, Clerk