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

RULINGS BY SUMMARY ORDER DO NOT HAVE PRECEDENTIAL EFFECT.  CITATION TO A

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

FEDERAL RULE OF APPELLATE PROCEDURE 32.1 AND THIS COURTʹS LOCAL RULE 32.1.1.  

WHEN CITING A SUMMARY ORDER IN A DOCUMENT FILED WITH THIS COURT, A PARTY MUST

CITE EITHER THE FEDERAL APPENDIX OR AN ELECTRONIC DATABASE (WITH THE NOTATION

ʺSUMMARY ORDERʺ).  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 6th day of October, two thousand fifteen.

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

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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 Attorneys, for Preet

Bharara, United States Attorney for the

Southern District of New York, New York,

New York.  
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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 ʺCompanyʺ) whose

president and owner (the ʺOwnerʺ) 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 Companyʹs attorneys to produce certain

attorney‐client communications between the attorneys and the Owner.  The district

court held that the crime‐fraud exception to the attorney‐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 partiesʹ 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‐partyʹs 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 ʺpowerless to
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avert the mischief of the orderʺ).  In Mohawk, the Supreme Court held that ʺcollateral

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

attorney‐client privilegeʺ because ʺpostjudgment 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 ʺthe Supreme Court has

barred the assumption of ʹhypothetical jurisdictionʹ only where the potential lack of

jurisdiction is a constitutional question.ʺ  Fama v. Commʹr of Corr. Servs., 235 F.3d 804,

816 n.11 (2d Cir. 2000) (quoting Steel Co. v. Citizens for a Better Envʹt, 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.   
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Second, as to the merits, we review the district courtʹs 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 attorney‐client

privilege from ʺclient 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) ʺthat the client

communication or attorney work product in question was itself in furtherance of the

crime or fraudʺ and (2) ʺprobable cause to believe that the particular communication

with counsel or attorney 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 omitted).  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, ʺthe party seeking disclosure . . . must show probable cause that the litigation or

an aspect thereof had little 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 find no error.  

Based on the facts before it, the district court did not clearly err in finding that there was
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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

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

We have reviewed the Companyʹs 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 OʹHagan Wolfe, Clerk