Exhibit D 

Case 2:18-cr-00422-DJH Document 195-4 Filed 06/14/18 Page 1 of 73
UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF ARIZONA

 _________________

 ) 

In Re Grand Jury 16-4, ) Phoenix, Arizona

 )

 ) February 22, 2017

_____________________________________)

BEFORE: THE HONORABLE DAVID G. CAMPBELL, JUDGE

REPORTER'S TRANSCRIPT OF PROCEEDINGS

Motion to Compel and Cross-Motion to Quash Grand Jury Subpoena

SEALED

Official Court Reporter:

Patricia Lyons, RMR, CRR

Sandra Day O'Connor U.S. Courthouse, Ste. 312

401 West Washington Street, SPC 41

Phoenix, Arizona 85003-2150

(602) 322-7257

Proceedings Reported by Stenographic Court Reporter

Transcript Prepared with Computer-Aided Transcription

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Case 2:18-cr-00422-DJH Document 195-4 Filed 06/14/18 Page 2 of 73
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A P P E A R A N C E S

For the Government: 

US Attorney's Office

By: DOMINIC LANZA, ESQ.

40 N. Central Ave., Ste. 1200 

Phoenix, AZ 85004

Department of Justice

By: REGINALD JONES, ESQ.

Washington DC 

For Backpage.com and Mr. Ferrer: 

Henze Cook Murphy 

By: TOM HENZE, ESQ.

By: JANEY HENZE COOK, ESQ.

4645 N. 32nd St., Ste. 150

Phoenix, AZ 85018

Davis Wright Tremaine

By: JAMES C. GRANT, ESQ.

1201 Third Ave., Ste. 2200

Seattle, WA 98101

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Case 2:18-cr-00422-DJH Document 195-4 Filed 06/14/18 Page 3 of 73
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P R O C E E D I N G S

THE COURTROOM DEPUTY: Grand Jury Number 16-4, on

motion for hearing, motion to compel. Will the parties please

announce.

MR. LANZA: Afternoon, Your Honor. Dominic Lanza and

Reggie Jones on behalf of the United States. 

MR. HENZE: Good afternoon, Judge Campbell. Tom

Henze and Janey Henze Cook from Henze Cook Murphy appearing. 

Let me introduce Your Honor, the Court, to Jim Grant

from Davis Wright Tremaine. He is appearing pro hoc vice and

he will be addressing the Court today.

I also have one housekeeping matter. I think I

covered it. Also present in the courtroom --

THE COURT: Mr. Henze, could you pull the mic over

just so we can hear you a little more clearly.

MR. HENZE: Excuse me. Also present in the courtroom

is Backpage LLC's general counsel, Liz McDougall. She's not

appearing, but we would like the Court's permission for her to

remain.

THE COURT: Any objection?

MR. LANZA: No objection.

THE COURT: All right. Good afternoon everybody.

Counsel, we're here on the government's motion to

1 4 : 1 0 : 2 1 compel. We've sealed the courtroom since this proceeding is a

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Case 2:18-cr-00422-DJH Document 195-4 Filed 06/14/18 Page 4 of 73
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grand jury proceeding and the materials have been filed under

seal.

This was originally in front of Judge Rayes but was

reassigned to me a couple of weeks ago. I have read the

briefs. I have read many of the cases that you all have

cited. So I think I understand the arguments being made on

both sides, but I want to give you an opportunity to address

anything that you think is important so that I'm fully

informed when I make the decision. 

And since this is the government's motion, let's have

government counsel go first.

MR. LANZA: Thank you, Your Honor. May I approach

the podium?

THE COURT: Yes.

MR. LANZA: Thank you. I'd like to focus -- the

Court said it's read the pleadings. I know they're

voluminous. We thank the Court for getting to this on an

expedited basis. 

I want to focus on five topics this afternoon. First

is the interplay between the First Amendment and what the

standard of review is here.

The second is Backpage's argument that this

investigation isn't being conducted in bad faith and that's a

ground for quashing the subpoena. 

1 4 : 1 1 : 3 7 The third is Backpage's argument that there's no

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connection between the materials being sought and the

underlying scope of the investigation.

Fourth is whether the subpoena is unreasonable or

oppressive under Rule 17(c). 

And the fifth is the extent to which this Court

permissibly can consider the contents of a PSI report when

addressing the issues that are before it.

So, first, the interplay between the First Amendment

and the standard of review.

The pleadings contain a great deal of discussion

concerning a very interesting and complicated issue, which is

whether a grand jury subpoena is subject to heightened level

of review when the recipient claims complying with it would

chill or implicate its First Amendment rights in the future.

I think ultimately the Court doesn't need to address

that issue with certainty because we should prevail even under

Backpage's expansive view of what Bursey means. It's in our

briefs, but I want to talk briefly why we think we have the

better side of this argument, that in fact the standard the

Court should apply is very similar to the traditional standard

under Rule 17(c), which is that the subpoena is presumptively

enforceable unless there's a showing that the investigation is

being conducted in bad faith or there's no connection between

the requested materials and the investigation.

1 4 : 1 2 : 5 6 In my view, the four key cases here are Bursey,

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Branzburg, the 1993 In Re Grand Jury Subpoena case, which is

referred to as Scarce sometimes, and the 1971 Ninth Circuit

decision in Weinberg.

Our position, it is true that at first blush this

Bursey decision from 1972 seems to articulate the test that

Backpage claims it articulates, which is the burden's on the

government, when the First Amendment is implicated there's

these three factors, et cetera. But I find it significant

that Bursey was decided almost simultaneously with Branzburg,

which had a very different approach that was more favorable to

the enforcement of subpoenas in the First Amendment context. 

And Bursey itself doesn't even mention Branzburg, and

the only mention of Branzburg came when government then filed

a petition for rehearing, and that's addressed on the very

last page or two of the Bursey decision. They say on the one

hand, the Ninth Circuit, that Branzburg doesn't overrule the

result they reached here, but the way I read it and the way I

think this 1993 Scarce opinion construes it is it says that

the Bursey approach is consistent with Branzburg so long as

the focus is simply on whether the materials being sought by

the grand jury are actually relevant to the underlying

investigation. Which really isn't any different from a

traditional Rule 17(c) standard that the Court would apply

irrespective of whether the First Amendment was implicated.

1 4 : 1 4 : 2 5 So we've shown in our brief several decades afterward

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the Ninth Circuit has considered First Amendment challenges to

subpoenas. It's never struck one down under Bursey, It's

never interpreted or applied Bursey the way Backpage argues.

Now, in their surreply Backpage argues all these

cases we've cited, the Lewis cases, Scarce, 2006 case, they're

distinguishable because they dealt with reporter's privilege

claims, not the same sort of full-throated First Amendment

claim that was present at Bursey. I don't think that's the

right way to interpret those cases. The reason for that is in

that 1993 decision in Scarce, the researcher in that case also

claimed that Bursey supported his position that he shouldn't

have to comply with the subpoena.

If it were true, as Backpage asserts, that the reason

his reliance on Bursey was misplaced is because he had a much

lesser First Amendment basis than was present in Bursey, they

would have dismissed it on that ground. But they didn't do

that.

Instead, in 1993 the Ninth Circuit said this

researcher didn't prevail under Bursey because it sort of

dismissed and narrowly construed Bursey as a pre-Lewis case

that in any event simply dealt with no connection between the

materials sought and the scope of the investigation.

So all of that, I think, is then punctuated by this

1971 case that we cited in our reply, Weinberg, which says in

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questions -- any chilling effect grand jury questions may have

on the future exercise of First Amendment rights isn't

generally a recognized ground for refusing to comply with a

subpoena.

So for all those reasons, we're not denying that

Backpage, their conduct, might implicate the First Amendment.

It's difficult to articulate precisely how the First Amendment

applies here. But the test nevertheless, we believe the

burden should be on Backpage to show that subpoena is not

enforceable either by showing a lack of good faith or no

connection. And as I'll address in a second, they haven't

made that showing either way.

As on the bad faith issue, they've primarily cited

two grounds for saying this isn't a good faith investigation,

we're just trying to harass them. The first is this order

from the Western District of Washington and the other is the

Communications Decency Act.

With respect to the Washington order, I can't

emphasize strongly enough how different this investigation is

and the facts and circumstances are here than they were in

Washington.

In brief, in Washington there was litigation over a

subpoena and the U.S. Attorneys Office up there, for whatever

reason, refused to explain to the court in the course of those

1 4 : 1 7 : 1 0 proceedings why it thought the materials it was seeking were

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relevant to its investigation. During the first round, the

court ordered them to narrow the scope of their subpoenas.

They didn't do that; they reissued in the same scope. They

then added categories seeking information that had no

relevance to their investigation. It was simply meant to

embarrass Backpage's employees by seeing if they had used some

of the prostitution and escort services.

And, finally, there was investigation in that case

that the U.S. Attorneys Office knew, because they were the

first party who had ever subpoenaed this stuff from Backpage,

they were causing Backpage to incur tens of thousands of

dollars of costs to comply.

Given that set of facts, it's perhaps not surprising

the judge in Washington found it just didn't seem right, it

had a bad smell about what the office was doing there.

Without reaching the First Amendment -- without endorsing the

First Amendment arguments that Backpage is making there, or

here, he said I'm not going to enforce it because it just

looks like U.S. Attorneys Office is trying to harass Backpage.

Here, on every one of those key grounds, the exact

opposite is true. We've gone out of our way in our pleadings,

at length, to try to explain why we have a good faith basis

for believing that the evidence, if it turns out the way we

think it might, could support criminal liability against

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We have identified other cases where website

operators have been recently criminally prosecuted

successfully. I acknowledge the cases aren't on all fours,

but the broader point is that the First Amendment doesn't give

a blanket shield to website operators that they can never be

held liable.

I can also represent to this Court that my office has

four AUSA's assigned to this matter. Mr. Jones is here from a

DOJ component working on this matter. We have three different

federal agencies with agents working very hard on this

investigation. This is not some sham investigation simply

meant to harass Backpage.

Second, our subpoenas here don't seek any

embarrassing information simply meant to harass. In fact, the

third one, we put in italics we specifically don't want any

personally identifying information because we don't even want

to go down that road of having that be an issue.

And, finally, the cost issue. I think it's

tremendously relevant and helpful for our position that our

subpoena's mirrored on the PSI subpoena. And the reason for

that, we chose to do it that way in large part so that

Backpage couldn't raise any complaints about the costs of

compliance or need to start from scratch and get attorneys and

private firms to start billing and reviewing documents and all

1 4 : 1 9 : 5 1 those things, because the work has already been done.

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That is very different from Washington where there

was evidence that the U.S. Attorneys Office was trying to run

up costs.

If we're trying to harass Backpage here, we're doing

a really poor job of it. We picked the quickest and easiest

way possible for them to comply by defining what we're

seeking.

Other argument about good faith or bad faith is the

CDA. I think Backpage's reliance on the CDA here is the

weakest part of their argument. They asked this Court to

conjure up, based on its views of the spirit and purpose of

the statute, that it should apply in the federal criminal

context, too. And with all respect, statutes don't have

spirits and don't have purposes, they have text.

The analysis of the statute should start and end with

the plain language of the statute, and here the plain language

of the CDA could not be clearer: Nothing in this section

shall be construed to impair the enforcement of any criminal

statute. No effect on criminal law. It would turn the rules

of statutory construction on their head to conclude that

notwithstanding that language Congress secretly wanted the

courts to not enforce grand jury subpoenas in the criminal

context. 

If Congress had wanted the CDA to provide protection

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They pointedly didn't. 

Finally, we also cited the roommates.com case in our

reply. Again, even putting aside federal criminal context

where we feel like we're on very good footing on the CDA, even

in civil damages lawsuit in state and criminal prosecutions,

the rule in the Ninth Circuit, which a lot of website

operators don't like, is that if an operator edits its users

content in a way that contributes to the illegality of the

content, the CDA no longer provides a defense. That is --

again, that's the exact thing we want to investigate here.

I'll talk about it in a moment. We have good faith reasons

for believing that Backpage has engaged in moderation

practices to scrub out illegal -- scrub out terms from illegal

prostitution ads in a way to make them less obvious to law

enforcement. That's right what roommates.com gets at and says

CDA doesn't apply.

Third issue, connection. Their position is that we

can't show a connection between what we're seeking and any

legitimate chance of ever having a criminal prosecution

because under the First Amendment they could never be liable

for just running -- being a conduit for other people's

content.

As an initial matter, I think it is important to note

there's a tension between the positions Backpage is taking.

1 4 : 2 2 : 2 8 On the one hand they say we're just a conduit for other

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people's content, we don't have anything to do with their

content. On the other hand, they're saying that the First

Amendment gives us this broad protection because we're making

active editorial decisions about what not to print and what to

print. And I think that that smacks of having it both ways,

to say I'm both a mere conduit and a First Amendment actor who

is making editorial decisions.

But putting that aside, these arguments about them

being liable criminally for merely re-posting others' ads are

a straw man. We tried to be as clear about this as we could

in our briefs. Our theory here is not that Backpage could be

held liable for merely re-posting other people's ads or being

negligent, or strict liability negligence type of theory.

The theories here are, one, Backpage acquired actual

knowledge of the illegality of ads and continued to post them

despite that knowledge, or, second, and even worse, they

affirmatively edited and wordsmithed their clients' ads in an

effort to, as one of the Backpage moderators told the PSI,

sanitize them. That is not merely acting as a conduit.

And it's telling that just a few months ago the

district court for the District of Columbia, Backpage had

brought a constitutional challenge to a newly amended statute

that makes knowingly running advertising involving child sex

trafficking victims a crime. The court there rejected

1 4 : 2 3 : 5 4 Backpage's arguments and endorsed the very theory we're

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propounding here, which is if a website operator knowingly

runs ads that are soliciting illegal services, the First

Amendment doesn't apply in that context.

So all that gets to the connection here. Because

we're trying to investigate what Backpage knew about the

legality of its users' ads and whether it was editing them, it

follows that the three categories of things we're trying to

get are subpoenaed. There couldn't be a tighter fit. They go

to the heart of what we're trying to investigate, the

knowledge and editing practices.

The fourth issue I wanted to address is, putting

aside the First Amendment issues under Rule 17(c), should the

subpoena be deemed oppressive or unreasonable? Backpage has

used colorful language in its briefs. It likens this

investigation to the Star Chamber and talks about it being a

dragnet search, makes an analogy to law enforcement doing a

search of an entire bookstore in hope of finding maybe one

illegal book.

Those analogies don't work because the facts matter.

There's ample evidence here that virtually all of

Backpage's ads are illegal prostitution ads and not lawful

escort ads. We cited in our briefs law enforcement officers

in Chicago and Seattle have both put in evidence in other

lawsuits that they've done hundreds of investigations arising

1 4 : 2 5 : 2 2 from ads on Backpage and 100 percent of the time, hundreds and

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hundreds of times, it's always a prostitution ad, not on

escort ad.

Backpage received a letter from the National

Association of Attorneys General in 2011 making the common

sense point that of course these are prostitution ads. We

don't check our common sense at the door.

The PSI report contains an e-mail from Backpage's

CEO, Mr. Ferrer, in 2011 where he acknowledges they were

stripping out banned terms from quote, unquote, almost every

adult ad on the website. Which, again, gives the lie to the

notion that nearly all of these are lawful escort ads.

And, finally, the moderators who testified in the PSI

proceeding also talked about everybody knew these were all

prostitution ads. It was no secret.

One other consideration under Rule 17(c) is cost. We

acknowledge that in some circumstances if a federal grand jury

subpoena were issued to a company and it would cost millions

of dollars and a ton of attorney time to compile the

materials, there might be an argument about oppressiveness or

unreasonableness. But here, those costs were already incurred

before we got involved. The test under Rule 17(c) is whether

complying with this subpoena would be unreasonable or

oppressive, and it wouldn't. It would cost virtually nothing

and take virtually no time.

1 4 : 2 6 : 4 9 Final issue I wanted to address is the consideration

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of the PSI report. They've asked this Court to essentially

blind itself to the report and not consider it when evaluating

this motion, and we would submit there are four reasons why

that's not an approach the court should take.

First, tellingly, they have cited zero cases to

support their position. And that's telling because, of

course, the Court should consider all of the relevant evidence

before it. Courts should always try to make the best

decisions they can based on all the available evidence. And

the available evidence here includes the PSI report and its

appendix.

The Court can see from the appendix exactly what's in

some of these e-mails and how they fit into our theory of

investigation and it would be anomalous for the Court to not

look at evidence when deciding whether to evaluate a motion.

A related point is that I was trying to search for

the right analogy to think about this. Sometimes in criminal

cases the government ultimately comes into possession of

evidence that was ultimately obtained by some third party

through some improper means. The government didn't have

anything to do with how it was improperly obtained, but it

later comes into the government's hands. In that

circumstance, a defendant can't suppress that evidence by

pointing to how the evidence was initially obtained because

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that process. It's not a perfect analogy, but I think it's a

rough analogy for what happened here.

The Department of Justice has nothing to do with

these PSI proceedings. The e-mails, for better or worse, are

out there and they powerfully show why things we're seeking

have a tight connection with the grand jury's investigation.

And, again, it would be anomalous for the Court to ignore this

evidence when deciding this motion.

A third point is that although it's true that the PSI

report was based in part on the e-mails that the senate

obtained through the subpoena, which are the same thing we're

trying to obtain here, it wasn't only based on the e-mails and

the documents, it was also based on testimony. Testimony both

from former employees of Backpage and from victims of

Backpage. And that also formed part of the report.

So even if Backpage later somehow prevailed in the DC

circuit, I'm not sure exactly what remedy they're trying to

get there, but if the court rules that the district court in

that matter shouldn't have enforced the subpoena in the first

place, nevertheless the PSI report is out there with all this

moderator testimony talking about how widespread the knowledge

was within Backpage that virtually all these ads are illegal,

how moderators viewed the marching orders from management as

trying to sanitize prostitution ads, the victims testifying

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call the company begging to get the ads taken down and

Backpage would refuse to do it, which, again, is knowingly

running ads once they've subjectively acquired knowledge of

its illegality.

Finally, separate from everything that's in the PSI

report, there's loads of predication here showing this isn't

some fishing expedition. We've got these investigations from

local law enforcement agencies, we've got the NAAG letter,

we've got the First Circuit's finding last year in the civil

case that even though it found the CDA barred the victims in

that case from seeking civil damages, there was compelling

evidence that Backpage had created its moderation practices so

as to enhance the ability of sex traffickers to ply their

trade.

The bottom line is that grand jury subpoenas carry

with them a heavy presumption of validity. Now we're not

coming before the Court disputing that subpoenas are subject

to judicial review. There are circumstances where the

government overreaches, and courts have the ability to strike

down subpoenas when they overreach. But this one doesn't.

This subpoena, which would cost Backpage virtually nothing to

comply with, goes to the heart of legitimate criminal

theories.

Backpage at times seems like they're arguing a

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is ultimately going to be sufficient to sustain a criminal

conviction. That's the wrong way to look at this. We're at

the grand jury stage. The grand jury is simply trying to get

information so it can make an informed choice about how to

proceed. So we ask the Court to enforce the subpoena.

THE COURT: All right. Thank you, Mr. Lanza.

Counsel, I wasn't paying close enough attention when

Mr. Henze introduced you. Are you Mr. Grant?

MR. GRANT: Mr. Grant.

THE COURT: Okay. Go ahead, Mr. Grant.

MR. GRANT: Thank you, Your Honor.

I'd like to focus on three points and respond to any

questions the Court has, and also respond to the government's

position.

THE COURT REPORTER: Excuse me, Counsel, could you

pull the mic over.

THE COURT: Actually, you can kind of pull them both

in and everybody will be able to hear you.

MR. GRANT: I have a low voice. Can you hear me

okay?

I think there are three central issues here and at

least three central problems with the government subpoena.

The first is that this unquestionably challenges and

implicates First Amendment rights. When the government sets

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editorial decisions and what those decisions are, that's the

heart of the First Amendment. That's why the law Bursey in

this circuit applies.

Second, there's a very real concern here, Your Honor,

about the process how we got here. Listening to the

government's argument that this is merely copying the PSI

subpoena, that makes it all more permissible, they think. I

think it raises a serious constitutional question about

investigating under PSI initially and then using that as the

hook for a grand jury subpoena. That's the second point.

And the third is that the subpoena here, I think it's

unreasonable, overbroad, and burdensome under any standard.

There I'd like to talk again about the Western District of

Washington's ruling, but also in connection with the

constitutional standards which should be applicable here.

Let me start with the First Amendment issues.

The argument that we hear from the government today

is the same argument that Backpage has heard and courts have

heard in countless cases now dating back over eight years.

It's an argument that's been rejected over and over again.

This notion that all the ads on Backpage are for illegal

conduct and they're all just prostitution ads. Your Honor,

nine different courts have now held that the content of escort

ads on Backpage are, in fact, protected speech.

1 4 : 3 3 : 5 0 And there's a very real difference between -- an

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escort ad, it is permissible and has been permissible, whether

in the yellow pages or in newspapers, for scores of years.

Escort services are regulated within the state of Arizona and

many, many other states and cities. So escort ads are

permissible.

The courts have held, as I say, that that's also

protected speech. The Seventh Circuit in the Dart case, the

district courts of Washington, Tennessee, and New Jersey, each

in instances where states tried to pass laws to target

Backpage. So it's established now that not only is there a

presumption in favor of speech being protected, but in this

case there's actually established law that the speech on

Backpage is protected. And that's the premise for the

applicable standard to determine the appropriateness of the

grand jury subpoenas here.

The government criticizes the Bursey case, suggests

it's no longer good law. I submit, Your Honor, it is in fact

very much good law, and there are several cases. We didn't

have an opportunity in our surreply to cite the balance of

other cases that have upheld Bursey and have applied Bursey

within the Ninth Circuit, and outside the Ninth Circuit, since

it's been decided, but the government's position is all based

on a series of cases that arose from Branzburg that have held

there is no constitutional reporter's privilege.

1 4 : 3 5 : 3 1 When the government suggests that the Ninth Circuit

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in Bursey did not take into account the analysis of Branzburg,

they really overlooked the rehearing statement from the Ninth

Circuit saying they expressly considered Branzburg and they

expressly say this does not change our analysis.

And there's a very real difference between the

reporter's privilege cases and the circumstances of Bursey

itself.

Reporter's privilege cases had to do with the

question of whether or not there's an absolute constitutional

privilege not to reveal confidential sources which have to do

with witnessing or evidence of a crime. Directly going to a

criminal investigation and evidence of that crime.

The situation in Bursey is very different, and the

cases that have applied the Bursey standard are different.

They're situations where the government is going after an

organization, the press, or a publisher, and they're going

after them for those kinds of activities. That directly

implicates the First Amendment and it does so in such a way

that the Bursey test applies. Substantial relationship,

compelling interest to the government, substantial connection

in order to show that the information the government seeks is

directly relevant to its investigation. And that this is the

least intrusive means the government can pursue for its

investigation.

1 4 : 3 6 : 5 6 So I respectfully disagree with the government that

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Bursey is not the governing standard here. I believe it is.

And in this circumstance, what we're talking about

really is very plainly an investigation of the public.

If you look at the three requests that the government

has made, and the breadth of those requests, they cover

effectively all editorial decisions throughout the country for

any ads on Backpage over the course of the last seven years,

plus any determinations about rules, about monitoring content,

about barring users, about screening content, about words that

are to be permitted or not permitted on the website. All of

those things are exactly what websites do and exactly what

publishers do. So it's the heart of what the First Amendment

should protect and Bursey should protect.

THE COURT: Let me ask you a question because I know

I'll forget it if I wait until the end of your comments.

You distinguished Bursey a moment ago from Lewis and

other Ninth Circuit cases by saying -- I think you said that

Bursey was an instance of the government going after an

organization. Bursey specifically was the government trying

to compel two women to testify about what they knew regarding

the publishing activities of the Black Panther newspaper.

Now, there's no doubt the ultimate target was the Black

Panther party and their activities, but the subpoenas were to

individuals about what they knew or observed in their role in

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Branzburg was quite similar in that it was the

government going after individuals to find out what they knew

about various criminal activities that were ultimately the

target of the government there. And Lewis and Scarce and Wolf

were all sort of the same. So I'm not understanding,

Mr. Grant, the distinction you're drawing between Bursey and

those other cases. Could you explain that?

MR. GRANT: Glad to, Your Honor. The difference

between the two being -- and there is a piece of Bursey, in

fact, remember, where the Ninth Circuit did permit

questioning. There were four different categories of

questions. It wasn't solely, though, that the two individuals

who were testifying were reporters and they weren't solely

being asked about information they had witnesses or obtained

from confidential sources.

So remember that the one thing that the government

said was permissible to ask, and they allowed the questions,

had to do with -- I think the statement was "We are going to

kill the president." It was a statement within an editorial.

And they asked questions about who the "we" were that was

referred to in that editorial. As I recall, the government

said -- the Ninth Circuit has said those kinds of questions

are permissible.

But what the government did in Bursey went well

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who makes the editorial decisions within the Black Panther

newspaper, what kind of decisions are there, who are these

people who are involved with the newspaper, and, much broader,

having to do with all of the publication of the newspaper and

the association of people within the Black Panther party as

well. That's what the Ninth Circuit said could not be the

subject of investigation. That was going too far. That's the

component of Bursey that's all about the publishing conduct.

So, yes, there is an element of if the reporter has

witnessed a crime and a grand jury asks the reporter about

that, the reporter is not privileged to not disclose the

information. Likewise, if the reporter's gotten the

information from a confidential source, there is no absolute

constitutional privilege. There are various other privileges

as well. 

Does that answer the Court's question?

THE COURT: I think I understand.

MR. GRANT: It really is a publishing function that

happened in Bursey.

THE COURT: I understand the point you've made, I

think.

MR. GRANT: If I may, let me turn to the second very

real concern here.

As I say, the government's view is that the grand

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because it's patterned on -- it's actually verbatim duplicate

of the PSI subpoena. And that raises the very serious

concern.

Remember that the PSI subpoena was issued by the

senate from its subcommittee on investigations subject to its

investigative powers. Now, while I can't necessarily -- I

won't necessarily concede the government's position in that

case because that's pending appeal before the DC circuit, the

government's position is that the breadth of its subpoena

powers for legislative purposes is as broad as the United

States Code. It's any subject that Congress could legislate

on. The DC district court accepted that argument. And based

on that threat, enforced the subpoena against Backpage and the

respondents there.

The government's purpose here is anything but

legislation. The government's purpose here is punitive. It's

to investigate targeting backpage.com. They've said that.

So the requirements that the government has to

satisfy here are those that are applicable to a grand jury.

Here's the problem though. If the PSI gets all of its

information under this ostensibly broader purpose and merely

says -- and the government merely comes in and says we want

the exact same information because they got it, that

completely messes the purpose -- the differences of the

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override the constitutional protections that should be

applicable in the grand jury context.

In fact, really works out to be a recipe for how the

government can evade the constitutional protections that

should apply in the context of grand jury. Congressional

committee goes out, does its broad investigation, then the

government turns around and says, the DOJ, we want the same

information because it's already been disclosed. 

This is actually a very real concern in connection

with the investigation that the PSI did. And I note it's one

of the issues that's pending before the DC circuit, is whether

in fact the purpose of that was legislative at all or,

instead, was a purpose of gathering information for possible

prosecutions.

And in that regard, just recently, this is from

February 14, the minority chairperson, Senator McCaskill,

issued a statement that after the PSI had finished their final

report, which said nothing about legislation, said nothing

about any sort of possible remedies or proposals about sex

traffic but merely focused on attacks on Backpage, then most

recently Senator McCaskill said "I'm hopeful the results of

our investigation will give future cases against Backpage the

legal ammunition to more effectively pursue justice against

the company and we didn't need to pass a new law to achieve

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The concern is this mechanism can be used, if you use

the broader powers, or arguably broader powers, of a PSI and

then use that for punitive purposes. That's the concern in

connection with the PSI subpoena. 

The government also argues it should be fair game for

the Court to consider all of that information. I suggest,

Your Honor, it should not. In part because the decision by

the DC district court is currently pending before the DC

circuit court of appeals. There are very significant problems

in that case about First Amendment, about the DC district

courts shifting the burden backwards. Remember, under the

First Amendment it should be that the government has the

burden to show the compelling interest for its investigations.

That's true for the legislative context as it is in the grand

jury context. The DC district court flipped it and put the

burdens on the respondents instead. And, as I say, there are

serious questions that are still pending.

THE COURT: Before you leave that point, let me make

sure I understand it.

It seems to me what you're saying, Mr. Grant, is that

if a legislative committee is permitted to obtain information

under its very broad subpoena powers, that fact should never

be used to justify a grand jury subpoena that simply tracks

the legislative subpoena because they have very different

1 4 : 4 5 : 5 9 purposes and powers. Is that your argument?

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MR. GRANT: It's my argument that that should not per

se justify the grand jury subpoena.

THE COURT: Right.

MR. GRANT: I don't believe you can do that. What

I'm suggesting is this court has an independent obligation to

look at the grand jury subpoena anew. You can't take the PSI

subpoena as justification whether this is proper or improper.

THE COURT: Well, that gets to my next question,

which I think you just answered, but I assume it's also your

position that if a legislative body undertakes a broad

subpoena and obtains information, that fact does not preclude

a grand jury from obtaining the same information if the grand

jury meets the appropriate test for grand jury subpoenas.

MR. GRANT: I think I was answering that question as

well, Your Honor. What I was suggesting was the grand jury

needs to satisfy the grand jury standards, can't bootstrap in

from the governmental standards.

But the other thing to keep in mind here is it's also

inappropriate, though, to say because the government obtained

that information -- and it's still subject to question whether

the government obtained it properly in the PSI context, that

is not a final decision, that's currently pending appeal -- to

use that information and to use the PSI's report in particular

here as justification for why this grand jury subpoena should

1 4 : 4 7 : 1 9 be permitted, I think it's entirely backwards and a serious

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challenge to due process. Because that's sort of taking if

you got the information improperly in the first instance and

then you choose to use it for some other purpose, then that's

permissible.

I listened to the government's suggestion that that's

like some third party has inappropriately obtained evidence

and the government could still use that. Well, this is not a

third party. This is one government body and another

government body which, at least from Senator McCaskill, was

one that was intending to help prosecutions by the other. So

this is not a situation where it was inadvertently disclosed

information.

And the difficulty with the PSI report itself, I

don't have a fraction of the time I would need to go through

all of the inaccuracies and how much of a, really, just an

argumentative document that is. But let me just sort of

summarize, because effectively what it's talking about --

THE COURT: Let me interrupt you for a minute and

tell you this -- I don't know if this will help your

argument -- I have not read it. I have deliberately chosen

not to read it because what I did before I decided whether or

not to read it is I read your surreply where you suggested I

shouldn't be looking at it. And I thought until I'd heard the

argument here, I ought not read it.

1 4 : 4 8 : 4 3 So you can talk about what's wrong with it if you

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want, but you don't need to do that to persuade me to

disregard what's in it because I haven't read it yet. I'll

obviously decide after the hearing whether I should. But I

just wanted you to be aware of that fact as you proceed.

MR. GRANT: I appreciate that. And there is still

pieces of the report and statements from the report that are

included within the government's briefs, and I just listened

to the government's arguments again focusing on pieces of

that. So let me respond very briefly about that.

THE COURT: That's fine.

MR. GRANT: The real concern is this is all an attack

on Backpage's efforts to moderate, to review, to screen ads,

to block ads, make sure the content that's going on the

website is not offensive, not unlawful, and going through lots

of different mechanisms to do that. It's an enormous job.

They use automated filters, they use multiple levels of manual

review.

But the gist of what the government is arguing about

this is, well, let's talk about this term that they banned or

that term they banned, and that must mean the underlying ads

are illegal and they must have been trying to intentionally

scrub illegality. 

Your Honor, I can get into the particulars why that

makes no sense at all, that in fact what they were trying to

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offensive, not improper, and going through means to do that.

That's -- this is where my point about the CDA comes in. That

is exactly what Congress intended.

Congress set out to say to websites, knowing that

there's such an enormous volume of information that comes

through them, they wanted to encourage websites to come up

with means to screen content, to do so voluntarily, and

whether that is automated or whether it's by manual review,

that is what Congress set out to do.

They also said -- and admittedly this is in the civil

context. I'll take the government's point that there is an

exemption for federal criminal charges within the CDA. I

accept that. But the idea was that if we were to impose

liability on websites if they were imperfect in their

screening practices or if someone thought the screening

practices were inadequate, that would be exactly backwards

from what we intend to do to encourage websites to police

their content. That's the problem.

What the government really is attacking is coming up

with characterizations and castigations of ways that were

being used to screen to try to suggest that those things were

nefarious when, in fact, they were intended for every good

purpose to try to make sure the content on the website was not

offensive and not improper.

1 4 : 5 1 : 3 7 Your Honor, if I may, let me turn to my last point.

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The subpoena, I suggest, here is unreasonable and

burdensome under any standard, whether we're talking about a

First Amendment standard or Rule 17 standard.

If you look at the three categories of information --

the government seems to think because we only have three

requests, that's not very extensive. In fact, that's -- if

you look at the breadth of those three requests, they're

enormously extensive, and if you look at all eight requests of

the subpoena, they effectively ask for everything about

editorial practices, ads, whatever's been posted nationwide

for seven years and all the decisions of the website about how

to do that, how to edit, how to publish, as well as revenue

information and a variety of other things in the other five

requests.

If you were to draw a comparison of those requests to

ones that the Western District of Washington considered, in

fact Western District of Washington requests were narrower.

There, the request had to do with specific ads for the most

part, although one piece was broader. But they were ads

within specific markets: State of Washington, Western

Washington, and later the government expanded it to say 16

other cities in the country. Here, the request is for the

entire nation. So all communications about editorial

decisions, monitoring and screening across the country. So

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narrower rather than broader here. 

The Court's decision in that case was that whether

you applied a First Amendment standard or not, the requests

that the government made were oppressive and burdensome, and I

suggest, Your Honor, the Western District of Washington, in

all fairness, did not find the government in bad faith. The

issue that the Court raised was a real concern about whether

the government had shown any basis to prosecute, whether there

was any theory here to prosecute.

And what the court said was if the government's

theory is that all ads on Backpage are unlawful, they don't

need to undertake this investigation to pursue that theory.

They already know that argument, they already know the ads on

Backpage, they could already pursue that theory if they

thought they had a basis to do it. 

But the problem is, this is a fundamental problem

under the First Amendment. This notion is that you can argue

that simply because an improper ad appears that that somehow

infers knowledge. And the Western District recognized that

the idea was sort of backwards. What the government was

trying to do was investigate every ad posted on the website to

try to find something that was illegal about those ads.

That's the same problems we have here. In effect

what the government is doing is boil the ocean approach. We

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made concerning ads over the last about seven years, and from

that we'd like to find something to infer there was something

improper or some knowledge of illegality.

That's backwards.

And that's the case law we've suggested that dates

back to Smith versus California. It is the same case law that

the government can't go seize all the books of a bookstore and

try to find something that's obscene or unlawful in it.

But the problem here is even greater than that. If

the government could adopt this kind of theory, then virtually

any website, any website, that screens content would be

vulnerable. Google screens content. They block web pages all

the time. Hundreds of millions of them. And, in fact,

they've been investigated by government authorities

challenging whether their blocking techniques and screening

techniques are good enough or not.

Amazon does the same.

EBay has all sorts of rules about what can and cannot

be posted on their website.

So this theory that the government pursues here, we

can go investigate about anyone's rule if there's something on

the website that we don't like, it's a dangerous theory, a

chilling theory for free speech interest. That's the

fundamental problem.

1 4 : 5 6 : 0 9 Your Honor, I would suggest the approach taken by the

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Western District of Washington is instructive and I recommend;

the Court's attention to that --

THE COURT: I've read both of Judge Jones' orders.

MR. GRANT: Thank you.

But -- and I say that because what he did was he

looked very closely at the actual request the government was

making. He said I'm not going to redraft your subpoenas for

you, but you can't do this; this is too broad. There may be

some permissible request, there may not be, but come back to

me with something else. That was the first of the subpoenas

he eliminated.

Then afterward, when the government did come back

with further subpoenas and had no better connection for their

cause of their investigation, he said, in effect, enough's

enough.

So I think his sort of measured approach as to how to

address the subpoenas and to recognize the real flaw was this

vast overbreadth of the subpoena in the first place, that it

recommends itself and Rule 17 suggests that is exactly the way

the analysis should go.

Are there other questions?

THE COURT: Yeah. Hold on just a minute.

MR. GRANT: Sure. 

THE COURT: If a website operator republishes an

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that the advertisement is for underage prostitution, meeting

the scienter requirement that was addressed in the briefing,

is it Backpage's position that that -- either that that is not

a crime or, if it could be characterized as a crime, it can't

be prosecuted because it's committed in a First Amendment

context? 

MR. GRANT: To take the Court's question, I'm

assuming they have knowledge not simply because somebody

submitted an ad, but they know something?

THE COURT: Yeah, they know something more --

MR. GRANT: Actual mens rea, actual knowledge?

THE COURT: Right. That's my hypothetical.

MR. GRANT: So the situation of the hypothetical is

if there is actual knowledge, say through participation in a

venture, you're conspiring with somebody, you know they posted

an ad, you know the person involved is underaged, that's a

prosecutable crime, Your Honor.

THE COURT: Let's assume, then, hypothetically, that

the government has reason to believe that a website operator

is doing that. Is knowingly engaging in illegal activity by

publishing these advertisements, and let's say that the

government serves a grand jury subpoena on the website

operator to obtain information from the operator as to how the

ads are received and processed and revised and what

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whether or not the website operator does in fact know this is

illegal conduct. Is it Backpage's position that that subpoena

is improper?

MR. GRANT: The subpoena that the government issued

had to do with an incident of sex trafficking and they had a

basis -- I'm not sure --

THE COURT: Let's say not even an incident. Let's

say they have reason to believe, from various sources of

information, that this particular operator is knowingly

publishing advertisements for underaged prostitution. So they

serve a subpoena saying we want documents showing how these

things get on your website, what editing you do, what

communications you have with the advertisers, because we want

to find out if you know, as we think you do, that this is

prostitution.

Is that subpoena an improper subpoena in some way?

MR. GRANT: That's --

THE COURT: I know it's a general question, but I'm

trying to get at the heart of what your argument is.

MR. GRANT: I understand, but I think that's where

there's the distinction between what I was suggesting. If

it's a specific incident and the government has information

that there was conspiracy, somebody was participating with the

website to traffic somebody underaged, that's an investigation

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The hypothetical Your Honor just gave me, though,

suggests this more -- this broader sense of the government

thinks that there's some basis to think that the website has

knowledge that underaged people might be trafficked through

ads. And that's where the problem comes in, because given

that Backpage, for example, cooperates routinely with law

enforcement about investigations, and, in fact, Backpage

itself reports suspect ads, if the inference of knowledge is

because something has happened that there have been incidents

and that Backpage knows of those incidents despite its best

efforts to prevent them, then that becomes an improper basis,

I think, to issue a subpoena to investigate a website.

THE COURT: Why?

MR. GRANT: Because the same theory would apply to

every website and every publisher. Because improper content

does go out over the web and it goes out over almost every

website. And the fact that you would be taking the

cooperation, the efforts by a website publisher to prevent

that from happening and turning that around to say that's the

basis for an inference of knowledge would be completely

backwards.

And, this is where I think the First Amendment

concern comes into play, that's a very, very dangerous

precedent for the First Amendment. That's why what I'm

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scienter and mens rea, the way that First Amendment

investigations have been done, the way that First Amendment

laws, regulations, prosecutions have been done, needs to be

done on the basis of a specific incident. It needs to be done

on something that's a much more significant and better

connection or basis for the government to pursue it.

The idea that if you set out to try to prevent it,

that shows your knowledge -- and by the "it" I mean some form

of sex trafficking -- that shows your knowledge that sex

trafficking can occur and therefore I can investigate you?

Every website's at risk now. And that, I suggest, is exactly

the First Amendment backwards.

THE COURT: How would you articulate what the

government needs to know before it can launch that kind of

investigation of a website operator?

MR. GRANT: I've thought about that question and it's

a little difficult for me to articulate because I'm not the

one to suggest to the government how it should pursue its

investigations --

THE COURT: Maybe I can ask it differently. I don't

want to have you create the government standard.

Branzburg, which I do think is a relevant case, has a

fairly relevant discussion, in my view, on page 701 of 408

U.S. where it talks about what kinds of thing a grand jury may

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I'm now reading from page 701: "The role of the grand jury as

an important instrument of effective law enforcement

necessarily includes an investigatory function with respect to

determining whether a crime has been committed and who

committed it. To this end, it must call witnesses in the

manner best suited to perform its task.

"When the grand jury is performing its investigatory

function into a general problem area, society's interest is

best served by a thorough and extensive investigation. A

grand jury investigation is not fully carried out until every

available clue has been run down, et cetera."

But then he says, "Such an investigation may be

triggered by tips, rumors, evidence proffered by the

prosecutor, or the personal knowledge of the grand jurors."

He seems to be saying you don't have some sort of

probable cause threshold that the jury has to conclude before

it launches an investigation. And this is in the context of

talking about when the grand jury function collides with the

First Amendment.

So what I'm wrestling with is the argument I think

you're making, that there is some threshold that has to be

cleared before a grand jury can investigate a website

operator's posting of information. If you could address that.

MR. GRANT: So let me address it in two respects.

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Branzburg said in the decision, this is not -- we're not

deciding a First Amendment issue here. They're deciding a

separate issue having to do with the reporter's privilege.

And, secondly, concurrence --

THE COURT: Well, what they're deciding is whether

the First Amendment creates a reporter's privilege.

MR. GRANT: And the decision is that it does not.

THE COURT: Right.

MR. GRANT: So there is not a First Amendment issue

for the privilege, claim privilege that they're addressing

there.

And recall that the occurrences say, and Branzburg

itself says, we have no doubt that grand juries are

constrained by the First Amendment and by the Fourth

Amendment, and Fifth, and that if there are circumstances

where the government goes beyond this kind of situation, that

courts are not without power to step in and monitor their

activities.

And that's where I think we come back to Bursey. I

appreciate the Court's point Branzburg is at least on the

periphery of the First Amendment, it does relate to reporters,

that is true. But it is a different circumstance. When we

come back to Bursey, which still controls in this circuit,

your question about is there a need for a threshold of some

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Court was just reading, that's very certainly a good and

accurate description of the broad powers of the grand jury.

I suspect I could find you 20 or 30 more because,

obviously, grand juries do have broad powers and do have a

right to investigate for the sake of investigating to

determine whether a crime -- sorry. That's a misstatement.

They have a right to investigate for purposes of determining

whether or not a crime was committed.

But, but, when they intrude on areas of First

Amendment speech, publisher's association rights, and the

press, then they have to show an immediate, substantial,

subordinating need, they have to show substantial relationship

of that information, and they have to show there isn't another

means to obtain the information. And I suggest on the third

category in particular, Your Honor, this is where the

government can investigate in many, many other ways. But

issuing a subpoena says give me -- in effect. I realize this

isn't exactly what the subpoena says, but in effect, give me

everybody you've ever published and everything you've ever

decided about your publication and let me go through that.

I'll rummage through all that information and I'll see if I

can find something to suggest that you actually knowingly are

promoting some sort of illegality.

That's backwards. That's the problem. 

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I structure what the government should do. I don't know the

answer to that, but I do know it's considerably narrower than

the tact we've taken here.

THE COURT: Let me ask you another question about

Bursey.

As you know, Judge Hufstedler and her panel issued

the Bursey decision, I think it was the day after Branzburg

came down. No Westlaw to post it that day for them, so they

didn't know about it for a week.

MR. GRANT: In fact, Shepardized it.

THE COURT: Right. Branzburg comes down, there's a

petition for rehearing, and she says in her opinion

accompanying the denial of the petition for hearing Branzburg

doesn't change the result.

Two years later we get the Lewis decision, Lewis I.

A member of the panel in the Lewis case is Judge Koelsch,

K-O-E-L-S-C-H, who was also on the panel in the Bursey case.

So he's well aware of Bursey.

MR. GRANT: He's from my neck of the woods, Seattle.

THE COURT: And he -- it's a procuring opinion so we

don't know if he wrote it, but Lewis addresses the clash

between the grand jury subpoena and First Amendment rights.

This was, as you well know, a radio station manager who

wouldn't turn over certain information it had obtained.

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controlling test.

Next year Lewis II comes down with three other

judges, including one from your neck of the woods, Judge

O'Scannlain, which doesn't even mention Bursey; relies

entirely on Branzburg.

We then get to 1993, the opinion that's sometimes

called the Scarce decision where yet another panel addresses

the colliding of grand jury powers and First Amendment, and

doesn't rely on Bursey. It relies upon Branzburg. And, in

fact, it says Bursey can be explained as falling within the

narrow exception that Justice Powell described in his

concurrence in Branzburg.

And then there's a 2006 decision, which I don't know

that we can even cite because it's unpublished and it's before

2007, which is sort of the trigger date for citing, but it is

a case that relies on Branzburg again.

Given that history, why isn't it a fair reading of

Ninth Circuit law to conclude that Branzburg is an example of

Justice Powell's, and also Justice White's, sort of exception

to the general rule that people can't refuse to turn over

information to a grand jury on the basis of the First

Amendment?

MR. GRANT: That Bursey is an exception to --

THE COURT: No, that Bursey falls within Powell's

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MR. GRANT: I think there's a concern about reading

too much into the series of cases, reporter's privilege cases

from Lewis all the way through Scarce and the 2006 decision.

They all fall squarely within Branzburg. As a matter of fact,

I think it was Scarce itself that says that. This is

controlled by that.

So the fact that they don't address the Bursey

circumstance is pretty obvious. Because there's no need to.

There's no absolute reporter's privilege. Scarce extends it

to the scholar's privilege. It's effectively the same thing.

Radio station, largely the same thing.

So you've got very clearcut law, Branzburg is the

law. There isn't a need to consider the Bursey analysis

because we're not outside the realm of someone simply claiming

the reporter's privilege.

So I don't think it's appropriate, given the holdings

of this cases don't affect a situation where there is

investigation of a publisher for publishing. They don't

affect the kind of associational rights issues that were

involved in Bursey. Given their holdings have nothing to do

with that, it's not surprising that they don't mention Bursey.

And saying Bursey is sort of a unique carve-out,

whether you do it in terms of Justice Powell's concurrence or

you say simply Bursey stands and it stands and as Judge

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And it doesn't arise very often. But it does arise here, and

it would arise in every situation where the government decides

it's going to investigate editorial practices of a website

because it doesn't like the content on the website.

THE COURT: Are you aware of any Ninth Circuit case

or district court case within the Ninth Circuit that has

recognized what you just said, namely that Bursey is not a

reporter's privilege case, it's really a different kind of

case and it has continuing vitality in that area?

MR. GRANT: Trying to recall whether it's Ninth

Circuit or not. I know cases that have followed Bursey and

its analysis since Bursey was decided. I don't recall, Your

Honor, whether they're in the Ninth Circuit or not. I can

tell you they're in, for instance, circumstances of

investigating information about what books someone read, going

to a book seller and asking for that information, Bursey

applies and the analysis applies there. So, yes. And there

have been other circumstances as well. 

So there's situations where we're not talking about

the straight reporter's privilege, but we're talking about

press, speech, book sellers, rights to decide what to read.

I'd be happy to give you a list of those cases. I have it

from prior briefing I don't have it in front of me now.

THE COURT: That's okay. They're easy to find if

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Last question for you when I looked over the eight or

nine cases you cited, the Seventh Circuit and all of the

district court cases, it appeared to me that the only one of

them that's a grand jury case is Judge Jones from the Western

District of Washington. Am I right about that?

MR. GRANT: That is correct, Your Honor. The others

arise in different contexts. I think the point we were trying

to make from all the cases is they're all consistent for the

notion that the government can't presume the speech is

illegal, that in fact escort ads are protected speech and that

efforts by the government to try to establish otherwise, the

burden always falls to the government in order to establish

its subordinating need and the connection for that, and that

there's no less-intrusive means to get the information.

That's -- let me just say this sort of in closing.

Bursey is entirely consistent with all First Amendment law.

It is the notion that it is always the government's burden in

a circumstance that directly infringes speech or implicates

speech rights. The government has the burden to establish

something along the lines of what the Bursey test proposes.

THE COURT: Okay. Thanks, Mr. Grant.

MR. GRANT: Thank you.

THE COURT: Mr. Lanza.

MR. LANZA: Couple points in responding to

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they'd previously won where they challenged states that were

trying to bring criminal actions, and articulated that as a

broad judicial recognition that the First Amendment shields

what they do here. I disagree. Those were CDA cases not

First Amendment cases, and they beg the question what happens

here when the CDA doesn't apply.

There's discussion on how the fact that the senate

had a different legislative purpose in using its subpoena

power to get the documents than we have. That may be true,

but our position here is not that because the senate got these

documents, we get them automatically without making any

showing whatsoever. That's not our position.

Our position is we also have a compelling reason for

getting these. We're conducting a federal criminal

investigation, which the Ninth Circuit has found time again is

a compelling interest of the government, and these documents

are relevant to what we're investigating.

We're not just trying to coast on the fact that the

PSI obtained them to show they're fair game for anybody. But

here, they meet even the heightened Bursey test you just

talked to. We do have a compelling need and they do go to the

heart and have substantial fit in connection with what we're

investigating.

I think that the most salient points I want to

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the end when the Court asked the two hypotheticals. I think

those hypotheticals get exactly to the heart of the issues

here.

One, can a website operator be held criminally liable

for knowingly publishing advertisements with the knowledge

that they're for criminal activities? Yes. He admitted that.

That's what the Lynch case from DC came out with last year,

and that's exactly what we're trying to investigate here.

We're trying to figure out what they knew.

Then the Court's question was if the government

reasonably believes this is happening, can they subpoena it?

I think it was telling his answer was no, but I didn't really

see much of a principled reason for that other than "it would

be bad for my client here."

Of course. 

Under Branzburg the court hit the nail on the head.

Grand juries have wide latitude when they think something is

afoot to investigate. There is no requirement of a

preliminary showing of probable cause or anything like that.

But I'd further note that even though Branzburg sets

the bar very low, we would meet even a higher bar here.

There's all sorts of predication and evidence here on the

record justifying why the grand jury is conducting this

investigation. There's statements from Backpage moderators

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findings from law enforcement folks back in 2011 and 2012.

There's the First Circuit's findings. So this isn't some

blind fishing expedition.

Branzburg sets a very low bar. Wherever the bar is,

even if it's true -- I don't agree, but even if it's true that

somehow different sort of First Amendment claims raise the bar

a little bit in the First Amendment context, we've still

greatly exceeded wherever that bar is.

Unless the Court has any questions --

THE COURT: I do have a couple of questions.

What statute, in your view, is violated if a website

operator knowingly publishes an advisement that is for illegal

activity?

MR. LANZA: There's at least two of them that we're

focusing on here. First is 1952 the Travel Act, which makes

it a crime to use interstate --

THE COURT: Is that 18 USC?

MR. LANZA: 18 USC 1952.

THE COURT: I thought that was part of racketeering.

MR. LANZA: The Travel Act -- I'll give the Court a

chance to look it up. I don't have the statute book in front

of me, but I'm pretty sure that's it.

THE COURT: Well, 18 USC 1951 is in chapter 95 on

racketeering. And 1952, maybe that's what you're focusing on

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travel or transportation in aid of racketeering?

MR. LANZA: And then I think subdivision -- I'm

going -- I don't have it in front of me. There's a

subdivision that says it's a crime to knowingly facilitate

prostitution committed in violation of state law.

THE COURT: Unfortunately, like all other

racketeering sections, this has got about a thousand words in

it.

Mr. Lanza -- Traci, would you hand this to him --

point out to me, if you would, what you're talking about, but

do it in the mic so the other counsel can hear you.

MR. LANZA: So 1952(a)(3) makes it a crime whoever

uses any facility in interstate commerce, which would be the

internet, to otherwise promote, manage, establish, carry on,

or facilitate the promotion, management, establishment, or

carrying on of any specif- -- excuse me, of any unlawful

activity. And the term "unlawful activity" is defined further

on in the statute.

So in our view we'd be focusing on using a facility

in interstate commerce to facilitate the promotion,

management, establishment, or carrying on of an unlawful

activity. 

Then in 1952 subdivision (b)(1), "As used in this

section, 'unlawful activity' means," and then it goes on to

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state in which they're committed or of the United States."

THE COURT: And what was the second statute that you

mentioned?

MR. LANZA: Then 15 -- 18 USC 1591, which I believe

formed the basis for the hypothetical that the Court asked

earlier. That's --

THE COURT: I wish I had a statute in mind when I

asked it, but I didn't.

MR. LANZA: That is the statute -- one of the cases

we cited in our brief is the District Court for the District

of Columbia Backpage v Lynch, which was decided last year.

Backpage brought a constitutional challenge to this statute

and the statute makes it a crime whoever knowingly in or

affecting interstate or foreign commerce recruits, entices

harbors, transports, provides, obtains, advertises, or

maintains by any means a person that the person has not

obtained the age of 18 be caused to engage in a commercial sex

act. So that statute expressly makes it a crime for a person

to knowingly advertise an underaged sex trafficking victim.

THE COURT: Okay. Would you comment on the

distinction that Mr. Grant drew between Bursey and the

reporter privilege cases.

MR. LANZA: Yeah. I think the key case here is that

1993 case In Re Grand Jury, or Scarce, where the court

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excuse me, the researcher's claim in that case that Bursey

supported his position. And if the distinction they're

drawing were the correct distinction, the Ninth Circuit would

have said, you know, Mr. Researcher, you're out of luck here

because Bursey was a full-blooded First Amendment claim,

you're a researcher trying to rely on the reporter's privilege

and that is some lesser species of First Amendment claim, so

that's why you don't win under Bursey. And that's not what

they said.

Instead they distinguish Bursey along the grounds

that we've laid out in our brief and that the court was

discussing. They dismissed it as that was a case that was

decided before Lewis, and in any event it's consistent with

Justice Powell's concurrence in Branzburg.

THE COURT: What is your response to Backpage's

argument that the three categories in the subpoena that you

want me to enforce are broader than the categories that Judge

Jones found overly broad in the Washington case because these

are nationwide, they go back four years, they uncover all

documents within these three categories during that entire

period?

MR. LANZA: I disagree. I think in part I disagree

because in Backpage they weren't simply -- excuse me, in

Washington they weren't simply seeking information about the

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about a host of other issues, including information about

whether Backpage employees had personally used the services,

which really seemed to be one of the things that caught the

judge's attention up there as improper and isn't present here.

But separately the question of whether or not it's

okay to seek nationwide evidence, of course it is. Backpage

is a nationwide company. A charge here would presumably

involve an allegation of a conspiracy between two or more

people to commit these statutes that I've mentioned earlier,

and perhaps some money laundering statutes that the violations

of 1591 and 1952 could be underlying SUA for.

A criminal prosecution in that case would include

everything Backpage did across the country. Although the

conspiracy would have to take place, in part, in Arizona for

venue to be here, the crimes have nationwide applicability.

So we're -- it would be improper, and we're certainly

aren't limited in only investigating acts of advertising or

sex crimes that happened to occur within Arizona when the

grand jury has a legitimate basis under Branzburg and for

other reasons to think this was a conspiracy that stretched

outside of Arizona's borders.

THE COURT: Okay.

Counsel, what I want to do is take a 15-minute break

to go back and review my thoughts and my notes and see if I

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in and tell you that, but I want to think through that before

I just dismiss you. So we'll break until 3:45.

(Recess taken from 3:28 to 3:52.)

THE COURT: Thank you. Please be seated.

Thank you for your patience, everybody.

I am going to give you my decision now. In an ideal

world, I would write a more thorough written basis for the

decision, but, frankly, the press of business right now in my

other cases just doesn't afford me the time to do it, and I

don't want to wait a month or two to get you a decision. So

I'm going to give you the most complete description I can now

on the record so that there's at least, hopefully, a

reasonably clear basis for my decision.

And to avoid undue suspense, I'm going to rule in

favor of the government and grant the motion to compel. And I

will try to explain my reasons as carefully as I can.

The key issue, in my judgment, is what test applies,

whether it is the test under the Bursey case from the Ninth

Circuit that the respondent has argued or it is the test under

the Branzburg, B-R-A-N-Z-B-U-R-G, case and subsequent Ninth

Circuit cases that the government has discussed.

The Branzburg case, which is a 1972 decision from the

Supreme Court, as we all know, held that the First Amendment

does not create a privilege for news gatherers, newspaper

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grand jury. And the Supreme Court specifically declined to

recognize a First Amendment right to refuse to turn over

information.

Near the end of the decision, Justice White put a

caveat into the majority opinion where he said that if a grand

jury proceeding is being instituted or conducted other than in

good faith, or if it constitutes official harassment of the

press, undertaken not for purposes of law enforcement but to

disrupt a reporter's relationship, then the First Amendment

would prevail. At least that is what he implied. He said it

would be a different outcome. And that's at pages 707 and 708

of the Branzburg decision, which is at 408 U.S.

Justice Powell, who concurred and who was the fifth

vote in the majority, and therefore arguably his concurrence

would have some influence on the scope of the ruling, was a

bit more specific on this caveat.

Justice Powell said that if a grand jury proceeding

is not be being conducted in good faith, or if it seeks

information bearing only remotely and tenuously on the subject

of the investigation, or if it implicates confidential source

relationships without a legitimate need of law enforcement,

then a court could step in with a motion to quash.

The Bursey case, decided by the Ninth Circuit the day

after Branzburg, adopted quite a different test, which has

1 5 : 5 5 : 4 9 been outlined by the parties in this case. And as you well

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know, and I won't take time to repeat it, it requires a

showing of a compelling government interest, and there's other

adjectives used to describe the strength of that interest that

has to be established. In addition, the government showed --

the government must show that there is a substantial

connection between the information it seeks and the overriding

government interest. And, third, the government must use a

means that is not more drastic than necessary to achieve the

government's purposes.

Bursey didn't mention Branzburg for obvious reasons,

but did say, as we've already indicated in this discussion, in

a petition or in denying a petition for re-hearing that the

different analysis in Branzburg would not have changed the

outcome in Bursey.

Bursey was decided in 1972. It's at 466 F.2d 1059.

Two years later, the Ninth Circuit decided Lewis versus United

States, 501 F.2d 418. As I've already mentioned, Judge

Koelsch was on the panel in the Lewis case. He had also been

on the panel in the Bursey case. The question was whether a

radio manager could refuse to turn over an audiotape and

document he had received for inspection by a grand jury, or

whether the First Amendment protected him from having to do

so.

The Ninth Circuit ruled that he could not assert the

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his contempt citation for failing to do so. Significantly,

the panel in Lewis did not cite Bursey. They relied instead

on the good faith test that's set forth in Branzburg. And at

501 F.2d, page 423, the Ninth Circuit said, "There was no

evidence that the request of the grand jury -- that the

requests of the grand jury were in the course of official

harassment of the press and not for legitimate purposes of law

enforcement." And therefore ruled against the First Amendment

argument made by Mr. Lewis.

The next year Mr. Lewis was back in front of the

Ninth Circuit again in another contempt citation for having

failed to turn over another document that he obtained from a

confidential source. A different panel of the Ninth Circuit

reviewed his contempt citation and affirmed it, and looked to

Branzburg as the controlling test.

It noted, and I'm now reading from page 238 at 517

F.2d, "The opinion of the court in Branzburg stated that a

reporter will be protected where a grand jury investigation is

instituted or conducted other than in good faith. The court

continued, official harassment of the press undertaken not for

purposes of law enforcement but to disrupt a reporter's

relationship with his news sources would have no

justification. A similar area of protection was suggested in

Justice Powell's concurring opinion."

1 5 : 5 9 : 4 2 So the Ninth Circuit was recognizing the caveat that

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Justice White had recognized in Branzburg in saying it did not

compel protection of the First Amendment interests of

Mr. Lewis in this case, which was a 1975 decision.

After writing what I just read, the Ninth Circuit

said, "Appellate has shown no basis for relief under these

standards." So that was clearly the standard it was looking

to.

In 1993 the Ninth Circuit decided In Re Grand Jury

Proceedings, 5 F.3d 397, also sometimes cited as Scarce,

S-C-A-R-C-E, versus United States. We've talked about this

case today. It was a Ph.D student who asserted a scholar's

privilege against turning over -- against describing

information he had learned from individuals who may have

conducted vandalism at the University of Washington. He was

held in contempt for refusing to do so. He made a First

Amendment argument that he was collecting information for his

Ph.D work and his studies that was protected by the First

Amendment. And the Ninth Circuit rejected that argument and

affirmed the contempt citation.

Again, the Ninth Circuit looked to Branzburg to

decide whether or not the First Amendment could be asserted as

a defense against the grand jury subpoena and held that it

could not. The Ninth Circuit again looked to the caveat that

Justice White had identified in the majority opinion. And

1 6 : 0 1 : 1 8 then the Ninth Circuit said, on page 401, "Justice Powell

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underscored this point in a separate concurrence in which he

noted that news gatherers may be entitled to First Amendment

protection where the information sought bears only a remote

and tenuous relationship to the subject of the investigation,

or where there is some other reason to believe that the

testimony implicates confidential source relationships without

a legitimate need of law enforcement."

The Ninth Circuit said that was the controlling test.

It wasn't satisfied by Mr. Scarce. The Ninth Circuit then

said this test is consistent with Lewis I and Lewis II, that

I've already discussed. And the individual in the Scarce case

who had been held in contempt argued that Bursey controlled

with its higher standard. The Ninth Circuit disagreed and

said Bursey, "Is consistent with the limited area for

balancing of interests described by Justice Powell and

consistent with our discussion thereafter in the Lewis cases."

That's page 402 at 5 F.3d.

The Ninth Circuit in that decision seemed clearly to

me to say that Bursey is limited to the caveat that Justice

White identified in Branzburg and that Justice Powell

articulated more fully in his concurrence in Branzburg. The

Ninth Circuit did not say in the Scarce case that Bursey was

inapplicable because it applies to a different kind of First

Amendment right. Namely, publisher's rights or associational

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the Branzburg caveat.

Finally, as already mentioned in In Re Grand Jury

Subpoena, sometimes referred as the Wolf case, at 201 Fed

Appendix 430, the Ninth Circuit 2006 memorandum decision, the

Ninth Circuit followed Scarce. It didn't mention Bursey.

That's not a precedential decision so I can't rely on it, but

to me it at least shows the Ninth Circuit was consistent with

what apparently had been established in Scarce and in the two

Lewis cases.

So my conclusion is -- and, incidentally, I did,

while I was out, look at cases that have cited the Bursey

test, the compelling standards test. There were six of them

cited. None of them entered a holding consistent with Bursey.

Most were not even quite on point, they were citing it for

other First Amendment purposes.

So my conclusion is that the test that applies in

this case is the Branzburg test, and that Backpage's First

Amendment refusal to comply with the subpoena is valid only

if, as described by Justice Powell, I can conclude that the

grand jury investigation is not being conducted in good faith,

or that the information sought from Backpage bears only a

remote and tenuous relationship to the subject of the

investigation, or if I conclude that the grand jury is looking

into sensitive First Amendment information without a

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When I apply that test, I conclude that the subpoena

is appropriate. My conclusion is that this grand jury

investigation, on the basis of the information that I have in

front of me, is a good faith investigation and not being

undertaken for bad faith purposes.

I still have not read what's been referred to as the

PSI report that was attached to the government's reply in this

case, so I'm not relying upon that.

Rather, I'm relying upon the fact that the government

has cited other sources of information to suggest that there

is reason to believe that Backpage has been knowingly involved

with the posting of illegal advertisements. I say "reason to

believe." I should -- that's probably too strong. There's

reason to at least have a suspicion about that. I don't want

to characterize this as somehow being substantial proof, but

it is certainly enough, in my view, to warrant a grand jury

investigation.

The examples are the statement in Backpage.com versus

Dart, 127 F.Supp. 3rd 919, and specifically page 922. This is

a 2015 decision from the Northern District of Illinois noting

that in over 800 sting operations responding to Backpage ads

since 2009, law enforcement officers have made arrests for

prostitution, child trafficking, or related crimes 100 percent

of the time.

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both parties, 881 F.Supp. 2d, pages 1267 and '68, that

decision notes that many child prostitutes are advertised

through online escort advertisements displayed on Backpage.com

and that a Seattle vice detective has never contacted any

person, juvenile or otherwise, posting advertisements on the

escorts section of backpage.com who was advertising for

legitimate escort services.

Third, there is the letter from the National

Association of Attorneys General to Backpage in August of 2011

noting that "Nearly naked persons in provocative positions are

pictured in nearly every adult services advertisement on

backpage.com, and the site requires advertisement for escorts

and other similar services to include hourly rates. It does

not require forensic training to understand that these

advertisements are for prostitution."

Again, I'm not reaching any conclusions as to whether

or not these suggestions of improper conduct by Backpage are

valid or warranted, but my judgment is, given that

information, the grand jury or a grand jury clearly has the

power to conduct an investigation.

I won't take time to read it again, but I read

earlier in the discussion the quotation from Branzburg. I

will read one sentence. This, again, is at 408 U.S., page

701. "Such an investigation may be triggered by tips, rumors,

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knowledge of grand jurors." And that is citing another

Supreme Court case of Costello versus United States. 

My conclusion based on this information is that

there's a good faith basis for the government to conduct an

investigation and I cannot conclude the investigation is being

conducted in bad faith, which would bring it within the first

criteria of Justice Powell's concurrence in Branzburg.

The second circumstance identified by Justice

Powell -- actually it's the third, but I'm going to take them

out of order. The third circumstance is the First Amendment

prevents grand jury activity if the information sought is not

legitimately linked to a legitimate government purpose.

I cannot conclude that that circumstance exists in

this case. It does appear to me that if an online website

operator knows that information that it is posting as

advertisements is for illegal activity, then a crime is being

committed. And I don't think Backpage contests that based on

the exchange I had with Mr. Grant. But specifically, it does

appear to me that 18 USC Section 1952(a)(3) and (b)(1), and

Section 1591, would criminalize the knowing publication of an

advertisement for illegal prostitution or other illegal

activity.

So it does appear to me that there is a legitimate

basis for the investigation into criminal activity.

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substantiated it, they're not doing this investigation on some

theory of strict liability, that a website operator can be

held criminally liable merely because somebody else gives it

an ad that's promoting criminal activity. The government

seems clearly to agree there has to be a scienter requirement,

knowledge on the part of the website operator. If there is,

it appears to me there is the possibility of criminal conduct,

and, therefore, that the objective for which the investigation

is being undertaken is a legitimate objective and does not

fall within the caveat Justice Powell identified where

information intrudes in the First Amendment without a

legitimate need for law enforcement.

The final category that Justice Powell identified is

when a grand jury seeks information that bears only a remote

and tenuous relationship to the subject of the investigation.

I've read the three subpoena categories the government seeks

to enforce several times. It does appear to me that this

information is designed to determine whether or not Backpage

and its personnel knew that advertisements posted on the

website were for illegal activity. It appears to me each

category is designed to get at information that will go to

that specific question, which is a key question in whether or

not crimes have been committed.

I cannot conclude that this information bears only a

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is a legitimate inquiry. And, therefore, I don't find that

the scope of the three categories of information the

government seeks fall within one of Justice Powell's

exceptions to the general rule that the First Amendment is not

a bar to grand jury information.

I do want to add that I did read carefully the

decisions by Judge Jones from the Western District of

Washington, which are attached as Exhibits A and B to

Backpage's opposition to the government's motion to compel.

Judge Jones quashed the subpoenas in that case, not

on First Amendment grounds, as was pointed out, but because

they were unduly burdensome and overly broad. And in fact, in

his first decision, which is Exhibit A, he specifically said

"In this case, however," I'm reading now at the bottom of page

22 of his opinion at Exhibit A. "In this case, however,

Backpage would succeed in quashing the subpoenas regardless of

the Court's approach to the First Amendment issues. For that

reason, the Court will not answer unsettled First Amendment

questions today."

And Judge Jones found the subpoenas overly broad in

part, I think, out of his exasperation with the fact that the

government wouldn't tailor them as he had instructed them to

do and came back with broader subpoenas than he had found

appropriate.

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the First Amendment a bar to appropriately tailored inquiries

because he enforced the second subpoena and Backpage produced

7,000 pages of documents in response to it.

So I view the situation in front of Judge Jones as

different from the situation here, and his decision is not

directly relevant to what I'm having to decide.

A final couple of points.

The authorities relied upon by Backpage, the nine or

so cases that are cited, as mentioned during our exchange, are

not grand jury cases with the exception of Judge Jones'

decision. I think that's a significant consideration.

I agree with Backpage's point that they do recognize

there are First Amendment rights implicated by the things

Backpage does. I think that's clearly correct. But there

were First Amendment rights implicated by all of the people

who were before the courts in Branzburg, in Lewis, in Scarce,

in Wolf, and the question was what happens when First

Amendment rights and grand jury investigative powers collide?

And none of those cases address that issue, with the exception

of Judge Jones, and I've already explained why I think that is

distinguishable.

So although I agree those cases stand for the

proposition that Backpage has First Amendment rights with

respect to what it does, they don't control, in my judgment,

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subpoena. That is decided, in my judgment, under the

Branzburg test, and, for the reasons I've described, I don't

believe that test calls for the subpoenas to be quashed here.

I've said it a couple of times but I'll say it again,

I have not read the PSI report. I haven't relied on anything

in it. I don't know whether it would be appropriate for me to

do so or not, but it's not necessary for me to do so, so I've

set that aside and I have not considered it.

The last point -- I keep saying that. I think this

is the last point. I am not concluding that the subpoena in

this case is appropriate because the legislative subpoena was

appropriate. That, to me, is an apples and oranges issue. It

would be inappropriate for me to say the subpoena from the

grand jury in this case is proper because another judge found

the legislative subpoena proper. I agree with what Mr. Grant

said, they're different inquiries, they're different tests,

and I've tried to apply what I believe to be the grand jury

test under Branzburg.

The legislative subpoena is factually relevant in the

sense that Backpage has already gone through the process of

finding and collecting these documents and so there hasn't

been an argument made in this case that it would be unduly

burdensome in the sense of time and expense to respond. But

that is merely a fact. That's not in any way a controlling

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So that's my best description of the reasons for the

decision. Obviously you can get a copy of the transcript if

you decide to appeal this, and hopefully the Court of Appeals

will be able to tell how I got to the conclusion that I did.

Are there any questions?

MR. LANZA: Could I have just a moment?

THE COURT: Yeah.

MR. LANZA: Your Honor, only thing we'd ask is now

that the order's been entered, technically they need to comply

because the compliance date has already past. We don't expect

them to comply right now, they need to evaluate it and figure

out what their next step is going to be, but it might make

sense for the Court to set a reasonable date, I don't know,

maybe a week or two out where compliance would be expected --

THE COURT: That's a fair point. I was thinking we

should say in the minute entry that comes out that compliance

is required within X period of time to give some limit to my

order. But I'm interested in your thoughts about what that

ought to be.

MR. GRANT: Yes, Your Honor. To give us reasonable

period of time to determine how we want to respond to the

Court's ruling. I'm sort of shooting blind. I would say I

would ask for a month if that's possible.

THE COURT: Well, today is the 22nd. I'm going to

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That's a little over three weeks. Seems to me that's enough

time to sort through the legal issue and decide what strategy

you want to follow. And if production is required, it seems

to me it could happen within that amount of time as well.

Unless, Mr. Grant, you see any particular problem with three

and a half weeks.

MR. GRANT: No. The only thing that comes to mind,

Your Honor, is if we do pursue appellate rights, we may be

back to suggest compliance be stayed.

THE COURT: Sure. I recognize if you decide you're

going to appeal my decision that we'll need to address stay

issues, and you would certainly have the right to do it.

I'll tell you what I would suggest if we get there,

though, is if you decide you're going to appeal and you want a

stay, confer with the government. If you can't reach

agreement, call me and let's talk about how best to tee up

that issue, rather than just have everybody launch into

briefing. If I need briefing on it, then we can do some

focused briefing. But that would be more efficient, to me,

than just having a motion to stay filed.

MR. GRANT: Thank you, Your Honor.

THE COURT: Okay. Thank you all for your patience.

MR. LANZA: Thank you, Your Honor.

(End of transcript.)

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C E R T I F I C A T E

I, PATRICIA LYONS, do hereby certify that I am duly

appointed and qualified to act as Official Court Reporter for

the United States District Court for the District of Arizona.

I FURTHER CERTIFY that the foregoing pages constitute

a full, true, and accurate transcript of all of that portion

of the proceedings contained herein, had in the above-entitled

cause on the date specified therein, and that said transcript

was prepared under my direction and control, and to the best

of my ability.

DATED at Phoenix, Arizona, this 27th day of February,

2017.

 s/ Patricia Lyons, RMR, CRR

Official Court Reporter 

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