UNITED STATES DISTRICT COURT 

 FOR THE DISTRICT OF ARIZONA 

 _________________ 

United States of America, ) 

 ) 

 Plaintiff, ) CR-18-0422-PHX-SPL 

 ) 

 vs. ) Phoenix, Arizona 

 ) October 5, 2018 

Michael Lacey, ) 10:50 a.m. 

James Larkin, ) 

Scott Spear, ) 

John Brunst, ) 

Andrew Padilla, ) 

Joye Vaught, ) 

 ) 

 Defendants. ) 

 ) 

______________________________) 

 

BEFORE: THE HONORABLE STEVEN P. LOGAN, JUDGE 

REPORTER'S TRANSCRIPT OF PROCEEDINGS

HEARING ON PENDING MOTIONS - VOLUME I

(Pages 1 through 60, inclusive.) 

Official Court Reporter: 

Linda Schroeder, RDR, CRR 

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

401 West Washington Street, Spc. 32 

Phoenix, Arizona 85003-2151 

(602) 322-7249 

Proceedings Reported by Stenographic Court Reporter

Transcript Prepared by Computer-Aided Transcription

Case 2:18-cr-00422-DJH Document 347 Filed 10/19/18 Page 1 of 60
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A P P E A R A N C E S 

For the Government: 

 U.S. Attorney's Office 

 By: PETER SHAWN KOZINETS, ESQ. 

 ANDREW C. STONE, ESQ. 

 MARGARET WU PERLMETER, ESQ. 

 KEVIN M. RAPP, ESQ. (Telephonic) 

 40 North Central Avenue, Suite 1200 

 Phoenix, AZ 85004 

 U.S. Attorney's Office 

 By: JOHN JACOB KUCERA, ESQ. (Telephonic) 

 312 North Spring Street, Suite 1200 

 Los Angeles, CA 90012 

 U.S. Department of Justice 

 By: REGINALD E. JONES, ESQ. (Telephonic) 

 1400 New York Avenue NW, Suite 600 

 Washington, DC 20530 

For the Defendant Lacey: 

 Liptsitz Green Scime Cambria 

 By: PAUL JOHN CAMBRIA, JR., ESQ. 

 42 Delaware Avenue, Suite 120 

 Buffalo, NY 14202 

For the Defendants Lacey and Larkin: 

 Davis Wright Tremaine 

 By: ROBERT CORN-REVERE, ESQ. 

 1919 Pennsylvania Avenue NW, Suite 800 

 Washington, DC 20006 

 Davis Wright Tremaine 

 By: JAMES C. GRANT, ESQ. 

 1201 3rd Avenue, Suite 2200 

 Seattle, WA 98101 

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Case 2:18-cr-00422-DJH Document 347 Filed 10/19/18 Page 2 of 60
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For the Defendant Larkin: 

 Bienert Miller & Katzman 

 By: THOMAS HENRY BIENERT, JR., ESQ. 

 WHITNEY Z. BERNSTEIN, ESQ. 

 903 Calle Amanecer, Suite 350 

 San Clemente, CA 92673 

 Schulte Roth & Zabel 

 By: SEETHA RAMACHANDRAN, ESQ. 

 919 Third Avenue, Suite 2013 

 New York, NY 10022 

For the Defendant Spear: 

 Feder Law Office 

 By: BRUCE S. FEDER, ESQ. 

 2930 East Camelback Road, Suite 160 

 Phoenix, AZ 85016 

For the Defendant Brunst: 

 Kimerer & Derrick 

 By: MICHAEL D. KIMERER, ESQ. 

 1313 East Osborn Road, Suite 100 

 Phoenix, AZ 85014 

 Bird Marella Boxer Wolpert Nessim 

 Drooks Lincenberg & Rhow 

 By: ARIEL A. NEUMAN, ESQ. 

 1875 Century Park E, Suite 2300 

 Los Angeles, CA 90067 

For the Defendant Padilla: 

 Piccarreta Davis Keenan Fidel 

 By: MICHAEL L. PICCARRETA, ESQ. 

 2 East Congress Street, Suite 1000 

 Tucson, AZ 85701 

For the Defendant Vaught: 

 Karp & Weiss 

 By: STEPHEN M. WEISS, ESQ. 

 3060 North Swan Road 

 Tucson, AZ 85712 

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For Henze Cook Murphy, PLLC: 

 Mitchell Stein Carey Chapman 

 By: LEE DAVID STEIN, ESQ. 

 ANNE MICHELLE CHAPMAN, ESQ. 

 2 North Central Avenue, Suite 1450 

 Phoenix, AZ 85004 

 

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Case 2:18-cr-00422-DJH Document 347 Filed 10/19/18 Page 4 of 60
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THE CLERK: Criminal case 18-422, United States of

America versus Michael Lacey and others. 

This is the time set for hearing on pending motions. 

Please announce your presence for the record.

MR. KOZINETS: Thank you. Peter Kozinets from the

U.S. Attorney's Office for the government. With me here is

Andrew Stone and Margaret Perlmeter. In addition we have on

the phone Kevin Rapp from our office, John Kucera from the U.S.

Attorney's Office in the Central District of California, and

Reginald Jones from the Criminal Division at main justice.

THE COURT: Good morning to all of you.

MR. KOZINETS: Good morning.

MR. CAMBRIA: Good morning, Your Honor. Paul Cambria

on behalf of Michael Lacey.

THE COURT: Good morning.

MR. CORN-REVERE: Good morning, Your Honor. Robert

Corn-Revere on behalf --

THE COURT: I'm sorry, sir. I need you to speak into

a microphone, if you would, please.

MR. CORN-REVERE: Okay. Good morning, Your Honor.

Robert Corn-Revere on behalf of defendants James Larkin and

Michael Lacey. 

THE WITNESS: Good morning to you as well.

MR. GRANT: Good morning, Your Honor. Jim Grant on

behalf of defendants Michael Lacey and James Larkin.

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THE COURT: Good morning.

MR. BIENERT: Good morning, Your Honor. Thomas

Bienert and Whitney Bernstein on behalf of defendant Jim

Larkin, who is present in court on bond. 

And I will point out, we also have a paralegal, but

I'd have Ms. Ramachandran, who is sitting here on the asset

forfeiture issues, if we get to them in a substantive way

today. So she may be joining us.

THE COURT: Good morning to all of you.

MR. FEDER: Bruce Feder for Scott Spear, who is in the

audience. 

MR. WEISS: Morning, Your Honor, Steve Weiss on behalf

of Joye Vaught, and I waive her presence.

THE COURT: Good morning to you. 

MR. PICCARRETA: Good morning, Judge Logan. Mike

Piccarreta on behalf of Andrew Padilla, and I have waived his

presence in our pleading.

THE COURT: Good morning to you all as well.

MR. KIMERER: Good morning, Your Honor. Michael

Kimerer and Ariel Neuman on behalf of Jed Brunst, who is

present in the courtroom at this time.

THE COURT: Good morning to you all as well. 

As you all know, at this -- I'm sorry. 

MR. STEIN: Good morning, Your Honor. Lee Stein and

Anne Chapman on behalf of the law firm of Henze Cook and

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Case 2:18-cr-00422-DJH Document 347 Filed 10/19/18 Page 6 of 60
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Murphy. And Tom Henze and Janey Henze are here as well.

THE COURT: Good morning to all of you. Thank you.

As you are all aware, we are here this morning because

I have several questions about the pending issues.

I plan to cover the following today: The Government's

Motion to Disqualify Counsel, which is Document Number 118. I

have the Government's Motion to Resolve Attorney-client

Privilege Issues, which is Document Number 195. I have

Defendant's Lacey's Motion for Disclosure of Documents Related

to Carl Ferrer's Waiver of Privilege. I have Defendants Lacey

and Larkin cross-motion to obtain discovery and address

privilege issues. 

I also have defendant Padilla's Motion for Itemization

of Brady Giglio Material, which is Document 273. And last I

have the Government's application for an order regarding

criminal forfeiture of property in government custody.

Again, I am going to ask you all if -- there's a

number of questions that I have, and when I call for an

attorney to respond to some questions, I think it would be

easier if you would approach the lectern and speak directly

from the lectern. That would be very, very helpful.

But before we get to that, Mr. Stone, I have Document

Number 331, which was filed yesterday. It is a supplement of

Defendant Lacey and Larkin's opposition to the United States'

Motion to Disqualify Counsel. Have you had a chance to read

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Case 2:18-cr-00422-DJH Document 347 Filed 10/19/18 Page 7 of 60
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through this 15-page document?

MR. STONE: We did, Your Honor.

THE COURT: Was it the government's intent to file a

motion to strike the filing as an improper sur-reply?

MR. STONE: Obviously we haven't done so yet, but it

crossed our mind when it was filed at noon yesterday.

THE COURT: Well, who is the author of this? If you

would please stand.

MR. GRANT: I am, Your Honor, Mr. Grant.

THE COURT: Sir, is there any reason why you filed

this so late?

MR. GRANT: Yes. The reason is -- two different

rationales for filing the paper. One, is because the

government raised a number of new issues in connection with

their reply, which we -- fact issues that we had no opportunity

to respond to.

They filed a supplement without leave. We did not

object to their supplement. But we also wanted to make sure

that the Court was up to speed in terms of what's happened,

because the motions have been pending as long as they have

been, circumstances of various cases. 

One, in particular, the government mentioned the

Washington State case, the J.S. case, that case has now

progressed much further. The order that the Court -- or that

the government talks about has actually been stayed pending

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Case 2:18-cr-00422-DJH Document 347 Filed 10/19/18 Page 8 of 60
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appeal, and the appeal is pending. So we wanted the Court to

have a full picture of where matters stand today.

THE COURT: Okay. I just want to let all the parties

know, please make sure that you read the Court's order, in

terms of your filings, so you don't have something very, very

important that gets stricken from the record.

If you do need some additional time, you need to reach

out to the Court and let me know. This is a case that has a

lot of different pleadings, and I certainly appreciate and

respect the work of all parties, but it makes it very difficult

for the Court to respond to anything if I only have a number of

hours to deal with it right before a hearing.

The first thing I want to take up is the Government's

Motion to Disqualify Counsel. Do I have any argument from the

government?

MR. KOZINETS: Yes, Your Honor. Good morning.

THE COURT: Since we have so many lawyers that are

present, what would be very, very helpful to me is when you

come to the lectern, if you can tell me who you are again that

would be great.

MR. KOZINETS: Sure. I am Peter Kozinets from the

U.S. Attorney's Office. The Davis Wright and Henze Cook law

firms have a very stark conflict of interest, and there are

these forming points that warrant disqualification here. 

The first point is that Seattle state court order that

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Case 2:18-cr-00422-DJH Document 347 Filed 10/19/18 Page 9 of 60
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was just discussed. In a case brought by two minor victims who

had been trafficked by Backpage, the state court judge sua

sponte ordered the Davis Wright firm disqualified under the

ethical rules, pointing that they had jointly represented

Mr. Ferrer, Mr. Lacey, Mr. Larkin, Backpage, and a number of

entities, in several cases throughout the country, that those

cases were substantially related to the trafficking and tort

claim issues in the Washington court, and also to the issues in

this court, and that because of all of that, there's a, quote,

high possibility that the Davis Wright firm, quote, will

encounter an impermissible conflict of interest jeopardizing

the effective administration of justice if they continue to

represent Mr. Lacey and Larkin.

We recognize that order has -- is now under appeal,

but because it was entered sua sponte, that really emphasizes

how strongly the Court felt about these issues.

Secondly, in criminal cases, the law is clear that in

precisely this kind of situation, disqualification is required

where you have a former client who is now expected to be a key

prosecution witness and counsel for that former client now

seeks to represent a current defendant in the case.

This sort of factual scenario is addressed in multiple

cases cited in our brief. The Moscony case is just a great

example. 

Very briefly, Your Honor, a real estate firm's

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Case 2:18-cr-00422-DJH Document 347 Filed 10/19/18 Page 10 of 60
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employees were under federal investigation. One law firm

represented all those employees. When two employees were

indicted, one of those defendants sought to hire that law firm

to represent him in the criminal case, but because two of the

other employees who had also been jointly represented were

going to be key prosecution witnesses, the government moved to

disqualify, the District Court granted the motion, the Court of

Appeals affirmed finding there was an actual obvious conflict

of interest.

THE COURT: Counsel, I will allow you to finish with

your argument, and I'm very, very familiar with all of the

pleadings that have been filed in the case. We have gone over

those numerous times.

I need to focus on a few questions that I need

answered. First, does Ferrer's waiver of attorney-client

privilege in the proffer agreement constitute a waiver of the

confidential privileged information sought to be protected by

this motion to disqualify?

MR. KOZINETS: No, Your Honor. And the reasons for

that are many, but the key reason why that kind of waiver is

really immaterial, is that the ethical rule of confidentiality

sweeps far broader than the evidentiary attorney-client

privilege.

This proffer agreement relates to evidentiary

privilege, it doesn't relate to counsel's ethical duty to

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Case 2:18-cr-00422-DJH Document 347 Filed 10/19/18 Page 11 of 60
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maintain in confidence all information it learned about

Mr. Ferrer in the course of its multi-year,

multi-jurisdictional representation of him, personally and in

connection with other Backpage defendants.

And that -- kind of the broad scope of the

disqualification rule has been expanded by more recent Arizona

cases, including the Foulk case, Arizona Ethics Opinion 91-05,

which addresses precisely the scenario we have here. A witness

formerly -- the same scenario addressed in that Moscony case.

We also have an independent duty of loyalty that these

lawyers continue to owe to their former client. That's been

independently recognized in the law, and that is separate and

unrelated to this privilege waiver notion.

So the conflict though really is so extreme and stark

in this case because this isn't a situation where you just have

one relevant former representation of Mr. Ferrer. Instead what

you have is a multi-year litigation campaign waged by these two

law firms over five to six years throughout the country in

which they frequently communicated with Mr. Ferrer, met with

him, drafted written testimony for him and/or prepared him for

oral testimony in different proceedings.

The whole point of that legal strategy was to

consistently deny any knowledge of any wrongdoing regarding

rampant prostitution advertising on the Backpage website. And

that strategy has now essentially collapsed. Because you have

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Mr. Ferrer and Mr. Hyer, the sales manager, pleading guilty and

essentially admitting that Backpage was principally in the

prostitution advertising related business. 

And as a consequence of that, you have litigants in

these other cases who are starting to file motions for

sanctions involving these issues.

So in that Washington state court, for instance, the

state court judge who disqualified Davis Wright also imposed a

$200,000 sanction on Davis Wright's clients.

In the hearing involving that sanctions issue, Davis

Wright lawyers pointed the finger back to Mr. Ferrer and said

that he may be subject to cross-examination or discovery about

his prior inconsistent statements. Prior inconsistent

statements including many declarations that the Davis Wright

firm drafted for Mr. Ferrer and filed in these other

proceedings.

Similarly -- just real briefly, Your Honor.

Similarly, in Chicago Federal Court, there's another case

called Backpage versus Dart, where there's currently pending a

motion for sanctions directly against the Davis Wright firm.

And in their response to that motion, Davis Wright

asserted that Ferrer, quote, will have to answer for

differences between his plea agreement and his prior testimony,

including the declarations that Davis Wright prepared. 

So you have a conflict that is -- it's difficult to

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imagine a starker conflict with lawyers expressly reserving the

right to impeach their former client with testimony that they

drafted for him.

Mr. Ferrer hasn't consented to that conflict. He

hasn't waived that conflict, and disqualification is necessary

for those reasons as well.

THE COURT: Sir, can you provide the Court with the

government's understanding of the joint defense agreement and

your position on how that agreement impacts this motion to

disqualify?

MR. KOZINETS: Yes. Yes, Your Honor. So from our

reading of the pleadings, it looks like the defendants have

pointed to three different types of agreements.

One is a December 12th, 2016 engagement letter, or

what might be called a joint representation agreement, where

Davis Wright agreed to jointly represent Backpage, the company,

plus Mr. Ferrer, Mr. Lacey, and Mr. Larkin.

And what we know from that agreement, to the extent it

is quoted in Mr. Ferrer's letter to Davis Wright terminating

their representation of him, it requires Davis Wright to

withdraw if a conflict arises between those three individuals.

Broader, says that in the event of that kind of

conflict, Davis Wright could continue to represent Backpage

itself, but Backpage itself has also pleaded guilty in this

proceeding, and Davis Wright no longer represents Backpage

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itself. So that's that first agreement.

The second agreement they call a Common Interest in

Litigation Management Agreement, dated December 30th, 2016.

Common interest sounds like a joint defense agreement.

Joint defense agreements are agreements that are

entered to allow separately represented parties to share

information with each other's attorneys without losing the

attorney-client privilege. And those provisions typically must

be clear and explicit in order to provide notice to the clients

of what rights they're waiving. 

That's recognized in the Stepney case. United States

versus Stepney, from the Northern District of California, 2003.

The JDA should identify the signatory attorneys who the client

is seeking not to seek disqualification of. And they must be

clearly drafted to ensure that the client can get informed

consent.

Our understanding is that Davis Wright Tremaine, nor

any other outside counsel, signed this common interest

agreement. In fact, in the pleading filed yesterday, shortly

before noon, page 8, footnote 6, Davis Wright says it did not

draft that agreement and it had no role whatsoever in its

negotiation or execution.

So the fact that Davis Wright wasn't a party is

important. It is important because it means that under the

Stepeny case, the chances of any sort of informed consent were

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greatly, greatly compromised. 

There's a third JDA -- a third agreement, which is

actually called the Joint Defense Agreement, which Your Honor

perhaps may be referring to, dated, I think, June, 2017.

And again, a JDA is a limited kind of agreement which

just allows sharing of confidential information among

separately represented counsel.

The fact that Mr. Ferrer might have been involved in

one or two JDAs is really irrelevant. The key issue is whether

he was represented by Davis Wright Tremaine directly, as

established in that December -- that first agreement, that

December 12th, 2016 agreement.

And that agreement clearly sets forth that Davis

Wright is required to withdraw in the event of a conflict such

as the one we have here.

I'm happy to address further why there was no informed

consent to any waiver that might appear in any of these

agreements.

THE COURT: Well, counsel, what objection would the

United States Government have to allowing Davis Wright Tremaine

and Henze Cook Murphy law firms to continue with the

representation in their limited roles that were outlined in the

pleadings, since the defendants have already conceded that they

will not participate as it relates to the trial preparation?

MR. KOZINETS: The government objects, Your Honor,

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because the law is clear that this kind of proposed limited

representation is just not permitted under the ethical rules.

The federal cases cited by briefs on both sides, from

the defense and from the government, contain cases where courts

have explicitly rejected the use of co-counsel to kind of avoid

these types of conflict issues. Those are the Chesire cases,

the Williams case, and also the United States versus Locascio

case.

THE COURT: And what's your understanding, counsel, of

their limited role?

MR. KOZINETS: Well, that's another really good

question, Your Honor, because it's really not clear.

THE COURT: Have you talked to them about it?

MR. KOZINETS: Yes, we have. So the Henze Cook firm

has expressed an interest in limiting representation to

forfeiture issues and supervised release issues.

And we understand just from the pleadings, that the

Davis Wright firm would not serve as trial counsel, but this is

just simply not permitted under the case law, and under Arizona

cases as well. 

The Roosevelt Irrigation District case from this

Federal Court in 2011 expressed grave concerns about screening

attorneys and emphasized that the screened attorney must have

no role in a new case posing a conflict.

Arizona Ethnics Opinions 91.05 prohibits precisely

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this kind of concept as well, finding there is a complete

prohibition. An attorney may not represent the defendant in

the current criminal proceeding where this kind of conflict is

involved.

The Court's rules also do not allow limited

representation in a criminal case. The local rules provide

that when an attorney or a law firm enters a Notice of

Appearance, it shall be deemed responsible as attorney of

record in all matters in the case.

These proposals would also create monitoring problems,

practical monitoring problems. We really have no way of

enforcing any sort of limited representation agreement.

So the case law recognizes really that in these

conflict situations, the law really doesn't -- the law is

extremely concerned about whether an attorney who has worked on

a case in the past can really screen themselves from using that

knowledge in their subsequent representation.

And in this Arizona Ethics Opinion, the State Bar

Ethics Committee expressly stated, the use of co-counsel won't

solve the conflict because these kinds of scenarios, quote,

necessarily -- because lawyers, quote, necessarily will engage

in many communications about the criminal defense of the

defendant. They will have to coordinate their facts,

coordinate their theories, and coordinate their arguments. And

that is absolutely the case here and further underscores the

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government's objection to that limited representation.

THE COURT: Well, counsel, would the government expect

an order from this Court to prevent HCM and DWT from acting as

an adviser in this role as well?

MR. KOZINETS: Yes, Your Honor.

THE COURT: So you see adviser and limited role

representation as the same thing?

MR. KOZINETS: Yes, because it is really impossible to

monitor that kind of scenario, and it's really impossible to

know whether these law firms will be using, either consciously

or even unconsciously, information, knowledge, that they have

from their prior representations.

I think that's particularly the case here where we

have Davis Wright, for instance, which communicated over

several years with Mr. Ferrer, drafted declarations for him.

For all we know, that firm still has within its files, the

record of its communications, knowledge about those

communications. 

And the law recognizes that it's really impossible to

disregard that kind of knowledge. You can't really unring the

bell, so to speak, once you've had that kind of very close,

continuing and extensive relationship with a former client.

THE COURT: Well, counsel, give me some feedback as it

relates to how I can enforce what you are asking me to do as it

relates to these firms from being somewhat involved in this

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case. 

Because I see an adviser role, I also see a limited

role, and obviously, I can order the parties that you cannot,

you know, talk to these clients that you've assisted in the

past, but what do you -- what do you see as the textbook answer

for this?

MR. KOZINETS: The textbook answer, Your Honor, is

that a limited role or advisory role representation is just

strictly and absolutely prohibited.

Again, I would direct the Court to the Arizona Ethics

Opinion 91.05, which recognized that Ethical Rule 1.9(a) takes

a broad prophylactic approach that flatly prohibits the lawyer

from even entering a relationship where misuse of former client

confidence is possible.

THE COURT: Before you indicted these individuals, did

they have any kind of pre-indictment roles? Or was this

something where -- refresh my memory, did you have an

indictment that was sealed and the parties didn't know about

it? Sometimes the government will work with parties before

indicting criminal defendants.

MR. KOZINETS: Yes, Your Honor. The government did

have pre-indictment communications, but not with -- to my

knowledge, those communications were with criminal defense

counsel.

THE COURT: Okay. Mr. Stone, do you have any

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additional information on that? You can just speak into the

microphone.

MR. STONE: From back here, Your Honor? 

THE COURT: Just go to the lectern with your partner

there.

MR. STONE: Your Honor, I just wanted to supplement

the record on that particular issue, is that there was some

intensive pre-indictment litigation in this case that involved

the government and compliance with a subpoena that went before

Judge Campbell, and in that case, both, I believe, Henze Cook

and certainly Davis Wright Tremaine were involved in that

litigation.

THE COURT: I appreciate that.

Counsel, is there anything else that you wanted to

place on the record as it relates to the government's motion,

which is Document Number 118?

MR. KOZINETS: We would just like to reserve the right

to respond to any argument offered by the defense.

THE COURT: This is your last chance, as it relates to

118.

MR. KOZINETS: The only thing that I would add, Your

Honor, is that in 1988, the U.S. Supreme Court recognized the

importance of taking up disqualification issues. 

In the Wheat versus United States case, the government

objected to a conflict presented in that case and moved to

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disqualify, the government's motion was granted. And the Court

recognized that the Sixth Amendment right to choose one's own

counsel is circumscribed in several important respects. 

And in discussing different scenarios, the Supreme

Court said, quote, nor may a defendant insist on the counsel of

an attorney who has a previous or ongoing relationship with an

opposing party. 

The Court also said that district courts must be

allowed substantial latitude to address these issues, and even

to refuse conflict waivers where there's an actual conflict or

a serious potential for conflict. Because the district courts

have an independent interest in ensuring that criminal trials

are conducted within the ethical standards of the profession

and that legal proceedings appear fair to all who observe them.

So in this context, Your Honor, we would respectfully

submit that the Government's Motion to Disqualify should be

granted. 

And just one other further point. There was some

argument about whether these defendants are adequately

represented, even without these two additional law firms. 

And I would just like to point out that the defendants

are represented by at least six, maybe more than six, law firms

that have very experienced, very knowledgeable criminal defense

attorneys from Arizona to California, all the way to New York.

So this isn't a case where they will experience severe hardship

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from granting a motion such as this.

THE COURT: But that's in your opinion?

MR. KOZINETS: It's the -- it is the government's

position that that hardship will not materialize here for those

reasons, and also because really, the issues, the legal issues

that these firms have worked on, are really kind of now in the

past. The landscape of the litigation has now shifted from

kind of legal, more theoretical issues, to much more factual

issues about specific knowledge, trial issues that call for

representation by experienced criminal defense lawyers.

A lot of the First Amendment and Internet law issues

have already been resolved and resolved really against these

defendants through substantial litigation in the District of

Columbia, in the Senate Permanent Subcommittee on

Investigations case against Backpage, through extensive

litigation, grand jury investigation in the District of Arizona

before Judge Campbell, where he recognized that there's really

no First Amendment protection for the knowing publication of

prostitution advertisements, from the internal discovery that

has now been obtained, pulling back the curtain on Backpage's

internal practices, from the indictments that have been issued

in this case and from the -- the guilty pleas as well, of

Mr. Ferrer and Mr. Hyer and Backpage, which essentially admit

that this was a prostitution related advertising business.

THE COURT: Thank you very much.

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MR. KOZINETS: Thank you, Your Honor.

THE COURT: Next, I want to take up Defendant Lacey's

response in defense of HCM, which is Document Number 174,

whoever that lawyer is that will argue. I also want the lawyer

for 176 to come forward. That's HCM's response, and defendant

Lacey and Larkin's response in defense of DWT, which is

Document Number 180. And of course Defendant Padilla's

response in defense of W -- I'm sorry, DWT Document Number 177.

MR. BIENERT: Your Honor, Thomas Bienert for

Mr. Larkin. If I may approach? 

May I just comment on Your Honor's --

THE COURT: Can you come up to the microphone so we

have a recording? 

MR. BIENERT: Yes, Your Honor. In terms of the

documents that you referenced, if it's okay with Your Honor, I

am individual counsel for Mr. Larkin, and I am going to address

Document 180.

But Mr. Grant of Davis Wright Tremaine will address

some of the substantive allegations and the waivers and that

sort of stuff, in terms of the documents at issue. And then we

have individual counsel in the other documents you reference

that would come next, if that's okay?

THE COURT: Well, the reason why I wanted all the

counsel up -- and we'll do it one by one if that's the easiest

way to go about it, is I have some questions that I pose to all

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of you, and I am just curious what your positions may be. 

But if you feel you want to place the positions on the

record individually, I would appreciate that as well. 

So go ahead.

MR. BIENERT: Thank you, Your Honor. And I think I am

going to kind of start where counsel left off, namely, the

reason there are multiple law firms representing my client, and

the harm to my client if they get the order that they are

seeking.

Number one, he points out that we have lawyers, and I

assume he is alluding somewhat to my firm, from California, to

here, to New York.

Well, we have California counsel. Ms. Bernstein and

I, we are criminal counsel. We will be trial counsel. We will

try this case. But we are not First Amendment lawyers. This

is a First Amendment case.

The primary issue that is just kicking along with the

indictment is -- it's a First Amendment case, the defense is --

largely rides on First Amendment issues. 

Government counsel is, unfortunately just inaccurate

when he says the First Amendment issues have been decided.

Your Honor will be seeing a lot of motions coming relating to

the First Amendment aspect. 

But plain and simple, this is our position. Our

clients are not guilty, because what is alleged here against

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our clients is not a crime as it relates to them. Why?

Because of the First Amendment.

The First Amendment issues make clear that publishers

are not responsible for any criminal acts of people who take

out ads in their published materials.

Now, the government disputes that, I get it, but that

is the main principle of our defense -- before we even get to

all of the factual issues. So first and foremost, the First

Amendment issues infect this case from cradle to grave.

Number two, my client absolutely wants his First

Amendment counsel who frankly are among, if not the best in the

country, in this case. It is very nuancey. It is very

substantive. And this particular firm has successfully

represented Backpage on at least nine different matters, and I

think seven or eight different districts, where -- against

allegations just like these. Courts have held and dismissed

cases because, as a matter of law, publishers are not

responsible, civilly or criminally, for the acts of people who

place ads in their publication. That's our defense.

So we need First Amendment counsel. I am a pretty

quick study, I'd like to think, but I am nowhere near the

counsel that Mr. Grant is and Mr. Corn-Revere, when it comes to

First Amendment issues.

So my client needs them. He wants them. To the

degree that the Arizona ethical rule kind of goes in two

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directions, Your Honor. 1.9 looks to the old client, in this

case, Mr. Ferrer. 1.7 points to the current client, my client.

He waives any conflict that there could be under 1.7 in having

assistance from a counsel for several of us who is a First

Amendment specialist.

So he would like that. I would like to reiterate that

my client definitely is going forward with his right, as noted

in the case law, to have counsel of his choice. And

unfortunately, I don't agree with the government that somehow

First Amendment issues aren't significant.

Finally, just from a case management, from a time and

expense, as the government points out, Davis Wright Tremaine

has a history of several years on the very issues in this case,

for Backpage, and it makes absolutely no sense. 

It's a definite detriment to my client to lose that

institutionalized -- about that company, to lose the expertise

about the company's issues, and frankly, just from a financial

standpoint, to have to somehow start from scratch on the First

Amendment issues. 

So on that point, I would submit that he's entitled to

his Sixth Amendment right, and it would certainly trump any

concern the government has. 

Only one other point on that and then I'm going to sit

and turn it to over to Mr. Grant. And that is this, I think

the single most significant feature of this issue -- well,

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there are two. They're the fact that Mr. Ferrer waived all of

these issues, and Mr. Grant will talk about that. But that

sets it apart from any and every case cited by the government.

And number two, it is Exhibit B to Mr. Piccarreta's

motion, where he attaches the letter from the government

responding to issues about this conflict of interest. And the

government acknowledges that Mr. Ferrer refused to join in this

Motion to Disqualify.

So the person who they claim should have the concern

under 1.9 and certain case law, has affirmatively said he's not

joining in this motion. I think Mr. Grant can give a good

explanation to the Court of maybe why he's saying that, because

frankly he's waived that right several times. 

But the simple reality is, under the case law where

Your Honor has to acknowledge on the one hand a criminal

defendant's right to counsel of his choice, and on the other

hand factor in, well, what happens if I keep this counsel here,

the only purported victim of this, if we can even use that

terminology, would be Mr. Ferrer, who has affirmatively decided

not to be a part of a motion to recuse counsel.

So on that, Your Honor, I would submit that that's

sort of the particularized position of Mr. Larkin. And then

Mr. Grant will be speaking for Mr. Larkin and others on the

other issues.

THE COURT: I appreciate that. Thank you very much. 

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MR. BIENERT: Thank you, Your Honor.

MR. GRANT: Morning, Your Honor. 

THE COURT: Good morning to you.

MR. GRANT: Your Honor, on behalf of Defendants Larkin

and Lacey, let me sort of outline the things that I wanted to

discuss. 

The Court --

THE COURT: Sir, what defense motion are you related

to?

MR. GRANT: At this point, I am addressing, I think

it's 180 is our opposition. This is the Motion for

Disqualification from the government as it relates to Davis

Wright Tremaine.

THE COURT: Go ahead.

MR. GRANT: And I was going to say this, there are

three different things that I wanted to touch on, but given

that the Court has sort of questions in mind, let me lay out

the topic, and then if there are specific questions in those

topics that you would like to address, or anything else, of

course --

THE COURT: Well, what I want is -- I just want the

defenses' position, since there are so many different

defendants that are here, I want all the positions, and then I

have some questions to pose to all of you, is what I would like

to do.

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MR. GRANT: Fair enough. Your Honor, the three things

that I wanted to touch on are to make sure the Court first

understands the relationship of the parties, many different

parties, and the nature of the agreements they entered into

about joint representation.

Second is the application of the appropriate rules of

professional conduct which expressly allow the kind of

representation that Davis Wright did jointly on behalf of all

of the defendants.

And the third point, I just want to come back to

something that Mr. Kozinets was saying about the JS case and

the sua sponte order that had been entered in that case. This

is the Washington State trial court, the decision that's

pending on appeal and has already been stayed.

So first of all, Your Honor, I think it's very

important to understand what the parties are, what their

relationships were.

It's not just that there is a Backpage.com and then

there are three other individuals, Mr. Ferrer, Mr. Larkin, and

Mr. Lacey. And, in fact, I heard Mr. Kozinets refer to that,

and the government sort of lumped things together repeatedly.

Backpage is not a single entity. It never has been.

From its founding in 2004 until 2015, April 2015,

Backpage.com was a subsidiary of a company owned by other

entities of Mr. Larkin and Mr. Lacey. The company is Village

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Voice Media Holdings. That was the parent company. That

company still exists today. There has been a name change, but

the company that was still exists and the parent company is

there.

Throughout that period of time from 2004 -- let's say

2008 to 2015, Mr. Ferrer held roles as essentially an employee

of the company. He was first vice president, and then later he

was a CEO of Backpage.com. But at all times, the company was

controlled, owned by those Voice Media Holdings.

From 2010 to 2015, there was, I think the government

alluded to, there were a number of different lawsuits filed

against Backpage.com and Village Voice Media Holdings, and

other cases that were brought and prosecuted by the companies.

My firm began representing Backpage and Village Voice

Media in 2012. But at all times, the litigation, the retention

of counsel, the management of counsel, was the responsibility

of Village Voice Media Holdings. They held the privilege.

They had the responsibility.

Mr. Ferrer's role throughout that time was as a

corporate representative. As would be true in any corporation,

we have to deal with the employees, the officers, the

directors, in order to be able to defend the corporation, and

that's what we did.

And throughout that time, there were no instances ever

where there had been personal charges or claims brought against

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Mr. Ferrer or against any other individual. It was all in the

corporate capacity. And at no time throughout that period, or

at any time, did Mr. Ferrer ever request of Davis Wright that

it represent him in a personal capacity.

THE COURT: Well, Mr. Grant, let me ask you this. And

my apologies for interrupting you. I will allow you to finish. 

But what is your specific position on the current

state or the plain text of the ethical rules and the ethical

opinions that actually require or may require disqualification

under these circumstances?

MR. GRANT: The plain text of the rule, and we're

talking about obviously 1.7 and 1.9.

THE COURT: Correct.

MR. GRANT: The plain text of the two rules is that

when there's a situation that there has not been informed

consent provided by a party, that in certain circumstances the

Court may rule that there can be disqualification. 

We have a situation here where Mr. Ferrer expressly

provided his informed consent. He did it both in his capacity

originally as a representative of Backpage, and in that role he

was not being personally represented. But secondly, he did it

expressly in the joint representation agreements. And let me

touch on that.

There are three different agreements. Two of them are

joint representation agreements. The third is a joint defense

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agreement. There's a difference between those things. 

The joint representation agreements were -- have to do

with a single counsel, in this case, Davis Wright Tremaine,

although the agreements are broader than just Davis Wright,

representing a number of different parties.

The ethical rules specifically contemplate that

happening. They recognize that that's actually a beneficial

arrangement in a lot of circumstances. It's more efficient, it

provides for a common defense. 

But at the same time, they recognize that in order to

do that, it's incumbent on counsel, and the parties, to spell

out the nature of the relationship and understand that there

could be conflicts. And, in fact, that's exactly what happened

in this case.

THE COURT: Well, tell me about the limited role that

Mr. Kozinets had talked about on the record? Tell me about

this -- the definition of the limited role, if you can.

MR. GRANT: Well, first of all, Your Honor, it's not

necessary under these circumstances that there be a limited

role. I have to say that at the outset. Because under the

circumstances, the agreement that Mr. Ferrer entered into, and

not just him, but all of his companies, was that if in fact he

were to withdraw from the joint representation, this is, by the

way, Exhibit B in the in camera declaration, if he were to

withdraw from the joint representation, then Davis Wright or

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any other counsel could continue to represent Larkin, Lacey, or

other Medalist parties -- that's the name of their companies. 

And he could not and would not seek to disqualify

them, and he waived all conflicts related to that

representation, either in the past, in the present, or in the

future.

It's very broad and very specific waiver of conflict

issues, and recognition for the continuing joint

representation.

And I commend the Court, look at the express language

of Exhibit A and Exhibit B to the declaration. They very

clearly spell this out.

But let me answer your question, I apologize it took

me a lead-up to get there.

In terms of limitations, what we have said throughout

is that we have been counsel on First Amendment issues, we've

been counsel on Internet issues, and related issues that have

to do with Internet publishers. That's part of our expertise,

Your Honor. But -- and we have said that we're not going to be

lead counsel for this case.

Each one of the defendants, at all times, since there

has been any threat or actual charges brought against them

individually, each one of the defendants has always had his own

personal counsel. That was true in the California --

previously. It is true still here today. And those are the

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lead trial counsel for purposes of defendants throughout this

case.

So the role that we would anticipate having --

certainly is to participate in connection with those counsel,

but, again, not to cross-examine Mr. Ferrer. There are other

very capable counsel who can and will do that, and not to act

as the lead trial counsel, because each defendant should have

his own lead trial counsel for purposes of this case.

So that's the limited role that I think is appropriate

under these circumstances. And Mr. Kozinets' comments that you

can't have any sort of lesser alternative than outright

disqualification, I'd say, Your Honor, that's not what the law

of Arizona says.

The Alexander case in Arizona suggests that there are

five different factors you look at to determine whether the

extreme remedy of disqualification is appropriate or not.

And can the Court suggest that there are other means

or other ways to manage the issue? And here I would suggest

the Court may want to consider the question of

cross-examination of Mr. Ferrer. I understand that. But

beyond that, any greater limitations as to the role of Davis

Wright, and again, I am focusing on my firm, Your Honor, I

think are inappropriate. 

And I would offer a parallel to that. And this will

take me to the Washington State case. First of all, I have

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to -- the government points to the JS case and the sua sponte

disqualification order there as though that should be

indicative of what this court should do. There are a couple of

major problems with that.

First of all, as I said, it was a sua sponte order.

The Court heard no motion. The Court did not read the joint

defense agreements in connection with the proceedings. The

Court permitted no argument. And under Washington State law, a

sua sponte dismissal like that is more or less per

se reversible. The Court of Appeals of Washington State will

have to address that issue.

But at the same time, another court in Massachusetts

considered the same issue. This is Judge Sorokin's order,

which we provided to you, and actually did read the joint

representation agreements, did consider them, and held that in

fact disqualification was not appropriate.

The Court said in that circumstance that he wanted

confirmation from the clients, Mr. Larkin and Mr. Lacey, that

they wanted to continue with representation of Davis Wright

Tremaine. They said, yes, we do. And the Court further said,

well, I will consider it down the road if there's any issue

here having to do with cross-examination of Mr. Ferrer. But it

is not appropriate under the ethics rules to disqualify Davis

Wright outright.

I have to point out one other thing about this use of

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the state court cases. It is apparent that what's happened

here is the government has been using and coordinating with

plaintiff's counsel in the various state civil cases in order

to pursue this idea of disqualification.

Keep in mind, Your Honor, Mr. Ferrer has not moved for

disqualification in any case, not in any of the civil cases,

not in this case, not in the Grand Jury proceedings, the

situation was a bit different there, but the government knew of

Davis Wright's involvement.

And throughout all -- and in fact has said,

specifically in the Washington State case, that Backpage and

Mr. Ferrer cannot support and will not support a motion for

disqualification.

So we have this circumstance where Ferrer and Backpage

are saying, we are not seeking disqualification, and there's a

reason for it. They can't. Because Backpage and Ferrer both

agreed in the Common Interest Litigation Management Agreement

that they would not do so.

But we have the government, through Mr. Ferrer's

counsel, sending letters to 15 different courts. It's not a

motion, not a Request to Disqualify, it's just a letter, sort

of unsolicited, saying, hey, there's an issue here. Mr. Ferrer

doesn't consent to continued representation by Davis Wright

Tremaine.

So they have sort of planted this seed of this

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disqualification order in various courts. That's part of the

reasons -- we will come to the disclosure motions that we've

brought. That's part of the reason we want to know exactly

what coordination has taken place and how that came about. 

Because in part, federal law actually expressly

prohibits the government from pursuing this sort of use of the

civil cases as a ruse to try to set up a Motion for

Disqualification or other purposes in this case.

18 U.S.C. 3509(k) which incidentally was cited by

Backpage in a pleading we believe brought by or with

coordination of the government, says that the government

cannot -- not only in its civil actions where the parallel

criminal proceedings such as this must be stayed, but that the

government cannot even mention the civil action in the context

of the criminal case, and yet that's exactly what the

government is doing here. They sort of set up these stalking

horses of these other cases in order to pursue their

disqualification motion here.

Fundamental point though, Your Honor, is that under

Rules 1.7 and 1.9, well taken in pieces, 1.9 has to do with the

consent of the existing clients. Here we have Mr. Larkin and

Mr. Lacey, both of whom agreed that they want to continue with

the representation of Davis Wright. 

1.7 says, if there is informed consent, and it can

be -- prior informed consent, as is the case here, under the

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December agreement with Davis Wright and then further under the

joint interest agreement, the common interest agreement in

December of 2016, then joint representation is permissible, and

disqualification is inappropriate.

Other questions?

THE COURT: I don't. Thank you very much.

Just to make sure I am clear with all of you, if --

the pleadings are very, very detailed. If you don't feel the

need to make an argument on the record, you don't -- I am not

requiring you to do that, but if you would like to -- we are

going to have to try to limit the time for you to place your

information on the record, or we will be here through Sunday.

So, sir, if you will step forward and tell me who you

are, and I will give you 10 minutes.

MR. CAMBRIA: Thank you, Your Honor. My name is Paul

Cambria, and I represent Mr. Lacey.

I did file the opposition in 180. And Your Honor has

put your finger precisely on the Achilles heel in the

government's disqualification motion when you asked the

question about waiver in the proffer agreement.

Here is why. They are relying on 1.9, and they refer

you to ethics opinions with regard to 1.9. And specifically, I

would like to read this language to you from the ethics opinion

that dealt precisely with that issue.

It is as follows: It says, one must remember that

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ER1.9(a) is designed to protect W -- the witness. It is

intended to give the witness the assurance that her lawyer

client confidences will not be used against her. 1.9

specifically requires the existence of confidences that have

not been waived.

And in addition to that, there has been mention here

of the Alexander case. Well, Alexander is the Supreme Court of

Arizona interpreting 1.9. And we know that 1.9 requires two

things.

It requires not only the lawyer's situation, but it

requires that the matter be in a same or substantially related

matter.

And the Alexander case, the Court said there that

where there are no confidences, the substantially related

aspect is taken out of the mix.

Here's what the Court said: The present case does not

involve any disclosures of confidential information from --

they name a law firm -- thus the substantial relationship test

is not applicable.

So here, the very rule that the government is relying

on, 1.9, in the ethics opinion that they are also relying on,

it is clear there must be the existence of a confidence. The

Supreme Court of Arizona has said that in order for it to be

substantially related, there must be a confidence.

And so then we move to the actual meat of the

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argument, if you will. It is the proffer agreement. Now, this

proffer agreement is drafted by the government. Their words,

they are trying to back away and say, oh, well, it wasn't

supposed to be a waiver of personal privileges. It clearly

says that it was. It is clearly drafted by them.

Mr. Ferrer had two personal attorneys not in any way

connected with any of us, or any of the history of us, advise

him and sign as witnesses to this waiver. He used the waiver

obviously to his advantage in the proffer. Because as we all

know in proffers, the government wants to make sure, number

one, that they ask about all of the information; and number

two, they want to be in a position where they can use that

information.

So that's why they put in that proffer agreement a

waiver, so that somewhere down the line, somebody couldn't say,

oh, well, he told you something that's privileged, you can't

use it, you used it, et cetera. That's their design. That's

why they are there.

So Mr. Ferrer uses the waiver to his advantage in the

proffer agreement, but -- and the government uses the waiver to

their advantage, and then here today they come in here and say,

oh, no, that's not a waiver, that's not what it says it is,

because now we want you disqualified.

Well, 1.9 requires a confidence. Alexander

interpreted it. It requires a confidence. They are all

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waived. They are waived. If they are waived, this can't

happen, a disqualification can't happen.

And here's the other thing. They cite a number of

cases. He cited the irrigation case and so on. Your Honor,

those are civil cases. They do not have a right of counsel

under this Sixth Amendment in a criminal case context. Those

are civil cases.

And it's interesting because when you look at those

cases, because they are civil, there is actually parties, one

against the other. Here, Mr. Ferrer is going to be a witness.

Whatever happens in this case, whether it be an acquittal or a

conviction, has no impact, or shouldn't have any impact, on

Mr. Ferrer, unless the government is prepared to say, we are

going to give him this sentence if we get a conviction, and he

is going to get that sentence if we get an acquittal. I doubt

they're going to take that position here for us. So that means

that really there's no impact on him.

So now he has clearly waived all of his confidences

with all prior lawyers under the plain language of that proffer

agreement. He used it to his advantage. They drafted it. And

so now we have the benefit of it.

THE COURT: Just to let you know, you have about two

minutes left.

MR. CAMBRIA: Thank you, Your Honor.

So in the end, in the end, the question now is, I have

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the Henze Cook law firm that I have asked that they can play a

limited role here.

And the limited role is as follows: We have

conditions on bail that require reporting on financial

transactions and so on. That's what I've asked that they be

allowed to do.

And the other part is, in connection with forfeitures,

they've seized all of my client's liquid assets and strangled

us, as far as trying to defend ourselves. We are working our

way through that.

We have a case under decision now in Los Angeles where

they originally got their seizure orders, and all I have asked

is that the Henze Cook firm, who have been personal business

lawyers and so on for my client, be able to supply me with

financial information and things like that, banking records,

tracing, et cetera. Nothing whatsoever to do with the defense

of this case. In any event, everything has been waived.

Thank you, Your Honor.

THE COURT: Sir, thank you very much. Is there anyone

else? Mr. Stein, come on up.

He got up first, sir. I'm sorry. 

MR. PICCARRETA: He was quicker than I am.

THE COURT: He is very fast.

MR. STEIN: I would have to take that. 

Good morning, Your Honor. Lee Stein on behalf of

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Henze Cook Murphy. I would just first like to urge the Court

to consider the positions of Davis Wright Tremaine and Henze

Cook Murphy separately. Their facts and circumstances are

different, and I think the analysis is different.

Let me also say, Your Honor, that I think the

government has the legal standard exactly backwards.

Disqualification is not required. There's no automatic rule.

That's within the Court's discretion. 

And here we have fashioned a limited role carefully

for the Henze Cook Murphy firm so we avoid the issues of 1.9.

THE COURT: Well, Mr. Stein, let me go back to about

57 minutes ago.

MR. STEIN: Okay.

THE COURT: What is a limited role? 

MR. STEIN: Yes.

THE COURT: Because the government has no idea what it

means.

MR. STEIN: I will tell you, Your Honor. It is to

work with pretrial services and the Court, if necessary, on

issues of release. And you might wonder, why do you need to be

counsel of record to do that? And it's because pretrial

services won't talk to them if they are not counsel of record.

Ms. Henze has been dealing with Justin Lauby, the

pretrial services officer, on paying bills and providing

information, that sort of thing, to ensure compliance. And

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Mr. Lacey is -- he is 70 years old. He's got a complicated

life, and he's in a fight for his life, and he wants people

standing next to him who he trusts. And so having him in this

limited role, they are not trial counsel, they won't be

preparing cross-examination, they won't be sitting at counsel

table. They are here in the criminal case to ensure his

compliance with pretrial release conditions and to make sure

that he is complying at all times. And that would be the

limited role. Nothing else. And that doesn't put Mr. Lacey's

interest materially adverse to Mr. Ferrer's interest. And so

1.9 is not implicated in that capacity.

With respect to forfeiture, the role -- and I think

Mr. Cambria explained it well, it's -- they've got a long

history with Mr. Lacey. They can help with tracing assets,

figuring out the financial information, sorting through that

stuff, not litigating the forfeiture issues with respect to

whether Mr. Ferrer is right or is not right or anything like

that. It's to help Mr. Cambria sort through the forfeiture

issues, that would be the limited role there.

And when the government says that's not permitted,

they are just wrong. That is within your discretion to control

your courtroom how you see fit, and there are many, many

circumstances.

I am in one right now in another district where the

Court has approved a limited role for counsel, and what's

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important there is that the client, who is the defendant,

agrees -- consents to that limited role after consulting with

counsel.

That's happened here, and Mr. Lacey would come into

court and Your Honor could question him on that and he would

indicate his consent on the record, and that's to prevent an

appellate case later down the road, I was not provided

effective counsel because my counsel was somehow limited by a

conflict of interest.

So there are cases in which the limited role of

counsel is approved by the court, honored by the court, and

carried out.

And I guess I would also add, Your Honor, that the

cases that the government cites are really all distinguishable,

and that's because those are cases involving trial counsel.

Lawyers who want to be at the table, asking questions. And

they say, well, you can't really be at the table and not help

your co-counsel with cross-examination and that kind of stuff.

That's not the case here.

THE COURT: I'm sorry for interrupting you, Mr. Stein. 

Mr. Kozinets, do you agree with that last position

that Mr. Stein just placed on the record?

MR. KOZINETS: With respect to --

THE COURT: Trial counsel versus limited role counsel.

MR. KOZINETS: No, Your Honor. The government

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believes that the case law and the ethical rules absolutely

prohibit representation in a case like this where the conflict

is so extreme, based on many years of prior representation in

many, many different cases. So under any conceivable kind of

balancing test --

THE COURT: So your answer is, no, I disagree?

MR. KOZINETS: Correct, Your Honor.

THE COURT: Okay. Go ahead.

MR. STEIN: I would ask that the government produce

one single case that didn't involve trial counsel. Every one

of their cases is a trial counsel case. This is not trial

counsel. I mean, that distinction is important.

And I guess -- let me address just one last issue, and

then I will sit down, Your Honor. You asked some questions

about monitoring and how do we make sure that this is followed.

Well, we're talking about Tom and Janey Henze, who are well

known in this community, who are members of the bar and if they

give their word about what they will do and what role they will

play in the case, the Court can believe that. There's no

reason why they can't. They are members of the bar, and

they've got great integrity and great respect in this

community, and I think you can take their word for it.

THE COURT: Thank you very much, counsel.

Anyone else? 

MR. PICCARRETA: Yes, Your Honor. 

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THE COURT: Sir, come on up. Tell me who you are,

again.

MR. PICCARRETA: Yes, I am Mike Piccarreta from

Tucson, representing Mr. Padilla. 

THE COURT: Nice to see you again.

MR. PICCARRETA: Judge, we filed a separate motion,

due to the importance of this issue. And I would suggest that

this issue may be the most important ruling that will be made

in the case, and the reason I say this, is the Ninth Circuit

has said that if there's an erroneous denial of right to

counsel, it's an automatic reversal without showing of

prejudice. That's how serious the issue is taken.

When you look at the state cases, the words they use

on this is, they bear a heavy burden to do this, to sever a

defendant from the people most able to represent their

interests. It could create fundamental injustice. 

In some cases they say, the prosecutor has no standing

to even argue it. They can present it to the court, not argue

it. That it's unseemly on the state to do so, should only

happen in extreme circumstances, and they shouldn't even be

participating in this issue. And I've been doing this for a

couple of years, and I haven't seen the vigor of a prosecution

to disqualify criminal defense counsel.

Now, I am not making any aspersions as to motives, but

if this motion is granted, they will gain a huge, huge tactical

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advantage over the defense. The reason is, for all of the

defendants, and I have been told they join in my remarks to

avoid having to say, me, too, this counsel Davis Wright

Tremaine has been the leading counsel on First Amendment

issues, the leading counsel on Section 230 issues, issues that

are going to be presented to the Court, and we need them to

present them.

It would take us -- well, first of all, never would we

be able to have that expertise, no matter how much time. But

hundreds of hours to gain that level of knowledge that they

have off the top of their heads.

There's a joint defense agreement here signed by

Mr. Ferrer. And joint defense agreements in this district, I

can speak to, are normally -- and there are two main areas that

everyone is aware of what might happen. One, you want to keep

the privilege. 

But, two, if a defendant negotiates a plea and

cooperates, they won't disqualify all of the other lawyers that

they have shared confidences with. And they agree to do that,

and that is what was agreed to do here, and that was relied

upon by my client in the joint defense agreement and -- both

orally and in writing, and we relied upon it for the case. We

are similarly situated to Mr. Lacey and Mr. Larkin, as to Davis

Wright Tremaine, because if they were the people who were going

to be presenting these motions, we would be joining into their

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work.

And, you know, I have had a lot of cases with joint

defense agreements, and I have had a lot of cases where people

cooperated, but I have never seen the government, until today,

come in trying to disqualify counsel, and especially counsel

that will not have a role in cross-examining the witnesses at

trial.

Now, sir, we have those cases --

THE COURT: I'm sorry. I just need to go back. Tell

me what your position is as it relates to the plain text of

this ethical rule that we've been discussing this morning.

MR. PICCARRETA: Yes, I will. Judge, when I was bar

president, one of the things we had to do was to review

complaints about lawyers in the middle of litigation trying to

disqualify the other one, virtually always in a civil context.

And what we did then, and I can't speak for the bar

now, is that they would say, we're not going to let the bar get

used as a matter of trial tactics.

When the case is over, if there's an ethical

violation, we deal with it. If there's not an ethical

violation, we deal with it. But during the trial thing here we

have, one, a situation where there are no confidences. There's

been waivers on multiple documents.

And three, Mr. Ferrer, pursuant to the joint defense

agreement, has provided all sorts of information to it.

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So, one, I don't think that having the Court enforce

the ethical rule to gain tactical advantage in a criminal case

should happen.

Two, we have the Fifth and Sixth Amendment issues that

are always raised whenever they try and disqualify counsel.

The bar just deals with the language of the ethical rule. And

I would suggest if they think there's a violation, the bar can

deal with it when the case is done.

Two, Mr. Ferrer is a witness. Davis Wright Tremaine

will not be involved in the cross-examination of him. He does

not have a substantial interest in the outcome of the case,

apart from the fact he has waived all confidences in not just

one document, not just two documents, I think they are now up

to three and four.

And we relied upon those documents. When lawyers sign

those documents, as Mr. Ferrer's counsel did, and then later

come in before your court and try and disqualify other lawyers,

I agree with the Arizona courts that said, that's unseemly.

So, Judge, I don't think Rule 1.7 applies. B, we all

have independent criminal trial counsel who are going to be

handling the actual courtroom, so the activities will not

impact the trial itself. Three, he's waived every confidence

that we can think of, both in documents and through

consultation. And four, the prejudice level, the prejudice

level is indescribable.

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The role of these people for all of these defendants

and the role to present to the Court the best possible

knowledge on First Amendment. And they try and sprinkle a

little fairy dust on the case and go, it's no First Amendment.

Really? 

They've indicted a publisher who is posting things on

the web and holding them responsible for actions of third

parties in cases that have been either dismissed or modified in

nine separate cases, many of them federal courts. That they

have a novel theory, as one federal judge has called it, of

prosecution. That they have to show specific knowledge, and

that's just on the facts.

There will be motions before you to dismiss this

entire prosecution on First Amendment grounds, and those will

be the motions that are the responsibility of Davis Wright

Tremaine and will not require any cross-examination of

Mr. Ferrer.

He has no -- apart from not even being here, he has no

prejudice. We have insurmountable levels of prejudice, and we

have Fifth and Sixth Amendment rights to be represented by

counsel of our choosing. And I would submit, Judge, if they

have an ethical problem, there's other places to deal with it.

Trial management problems in this courtroom are here,

and I think that this is a big case. It's going to -- it's 

the leading First Amendment case in the country in many, many

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years, and it is in this court.

And I understand their desire to get the people that

know it the best off the case and the tactical advantage that

will ensue. But, Judge, I urge you not to punish these

defendants and severely prejudice them on this issue.

My view is, I thought the motion -- I won't say

frivolous, but not well taken. And you can ask yourself, as a

U.S. Attorney and as a Judge, how many of these motions do I

see? 

Normally, it's when we represent someone, and then

they become the key witness against you when they're

cross-examined. You've seen it, when they represent them on

various matters with Joint Representation Agreements? Have you

seen it with people with JDAs, which are frequently, where one

pleads, tries to disqualify the others? You haven't.

So why are we here for this motion? Why are they

willing to risk an automatic reversal if they are wrong to get

these folks out of the case?

And it's troubling, and I have dealt with these

issues, mostly civil lawyers are the ones who always accuse

each other of a variety of things and try, you have a conflict,

you have this. The criminal lawyers traditionally don't do

that. 

And ask yourself, how many of these have you seen, and

say, on this case, this is the one? Why is that? Why Davis

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Wright Tremaine?

And I am not saying that their intent is to gain a

tactical advantage. I am not accusing them of improper

motives. I am saying, the result of their behavior gives them

huge tactical advantage. And as a result, that's why you have

got pleadings this big from them. 

If they were in state court, the judge would go, you

have no say over who these folks' lawyer is. They have a right

to counsel of their choice. They have constitutional rights.

You brought it to my attention, I appreciate your hard work, I

will deal with it, and I guess dealt with later.

Here, you've got pleadings a foot high trying to get

rid of the lawyers of choice, and it impacts every defendant

sitting here today, every defendant. Because we all

understood, we all agreed orally, in writing, that everyone

knew that these guys were going to do it. 

And if Mr. Padilla had been the one to plead, I

wouldn't get up and say, these guys have to go. Because I

agreed in writing to the contrary, and that's maybe why

Mr. Ferrer is not here, because he signed it.

So here's the aggrieved party, Mr. Ferrer, who is not

even a party anymore, over lawyers who won't be questioning him

at trial.

I have been the public criminal counsel, Judge, and I

would urge you to not accept this cunning invitation to, at

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this point, issue a court order that interferes with all of our

Fifth and Sixth Amendment rights and would impact the whole

litigation, which is going to go on, for a while, at least

until January 2020, if they are acquitted, and if they are not,

for years afterwards on a very, very important First Amendment

case involving a publisher. And to remove the lawyers who are

most acquainted with it and the most qualified, in the whole

United States, from the case, is obvious, obvious, obvious

prejudice.

THE COURT: I appreciate that, sir. Thank you. 

Is there anyone else? Sir, come on up. Tell me your

name again, and what you would like to tell me.

MR. WEISS: Yes. Thank you, Your Honor. My name is

Steve Weiss, and I represent Defendant Joye Vaught, and I'll be

very brief.

I've joined in the Document 180 the objection to

disqualification. I certainly adopt Mr. Piccarreta's remarks.

My client was a low-level employee of Backpage.com. I have not

been in this case for a long period of time, just as of around

April.

But one of the things that I did realize is that the

case involves significant critical First Amendment issues, and

that Davis Wright Tremaine lawyers are the preeminent First

Amendment lawyers in the country.

For me to try and even get anywhere near that, I'd

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have to try and reinvent the wheel, and I just couldn't do it.

My client wants them to continue in their role, and if

they were disqualified, her Sixth Amendment and Fifth Amendment

rights, as Mr. Piccarreta eloquently explained to the Court,

would be violated. And so we would ask the Court to deny the

motion to disqualify.

THE COURT: I appreciate that, sir. Thank you very

much. 

I don't think we have any additional defense counsel

that wish to place -- sir, come on up. Tell me who you are. 

MR. NEUMAN: Thank you, Your Honor. Ariel Nueman on

behalf of Mr. Brunst, defendant number 4. I don't know if this

is necessary, but I just want to officially, on the record,

adopt the arguments of Mr. Weiss and Mr. Piccarreta on behalf

of Mr. Brunst as well.

THE COURT: I appreciate you doing that. Thank you

very much. 

Is there anyone else?

MR. FEDER: I want to do the same thing, Judge -- or

can I just say it from here?

THE COURT: You can stand from there, as long as you

speak up, Mr. Feder.

MR. FEDER: We join in all of the --

(Courtroom phone begins to ring.)

THE COURT: Just one moment, please. The folks

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calling in, I guess we lost them, and they're trying to get

back to us.

THE CLERK: They should be there.

THE COURT: Okay. Thank you.

Go ahead, Mr. Feder.

MR. FEDER: Let me just add something to what

Mr. Piccarreta said. I was on the state bar's professional

rules committee for about 20 years, and this is the very reason

why we would never, generally speaking, consider objections by

one counsel against the other counsel, to oppose them during

litigation is to gain strategic advantages. 

It was pretty much, if you have a problem with your

behavior, then you can ask us a question, but not to try to get

leverage over somebody else on the other side. This is a

perfect example of why the committees of the bar at least don't

engage in this kind of activity.

THE COURT: I appreciate you all.

Mr. Kozinets, I will give you two minutes.

MR. KOZINETS: Thank you, Your Honor. I just want to

emphasize a couple of things. First, the Wheat, Ross, Stepney,

and many other criminal cases that we've cited from the U.S.

Supreme Court on down, recognize that this kind of

disqualification motion is eminently proper when you have an

actual conflict of interest, particularly the one as stark as

we have here.

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Case 2:18-cr-00422-DJH Document 347 Filed 10/19/18 Page 57 of 60
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UNITED STATES DISTRICT COURT

With respect to the litigation in Washington State,

it's actually the R.O. case, not the J.S. case. There was a

sua sponte order, but my understanding is that there was a

motion to reconsider that was filed before that state court

judge and that was denied.

And the Massachusetts District Court order that

Mr. Grant referred to actually explicitly recognizes a very

severe potential for conflict arising from Davis Wright's

continued representation of Mr. Lacey and Mr. Larkin there.

With respect to any notion of coordination between the

government and civil cases, that is just preposterous.

THE COURT: I just have one question for you. 

MR. KOZINETS: Yes.

THE COURT: One question. Did you file the motion to

gain an unfair advantage over the defense?

MR. KOZINETS: No, absolutely not, Your Honor. In the

Wheat case, and then in United States versus Iorizzo case, from

the Second Circuit, says that where a conflict like this

arises, the government actually has an affirmative obligation

and should file a motion like this before trial, rather than

not addressing the issue, letting a conflict-riddled trial to

then occur, only to see it reversed later on appeal. So we

were duty bound to raise these issues for Your Honor's

consideration.

THE COURT: Thank you very much. We are going to take

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Case 2:18-cr-00422-DJH Document 347 Filed 10/19/18 Page 58 of 60
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UNITED STATES DISTRICT COURT

our morning recess of about 15 minutes, and what I need you all

to do is, as I stated before, the pleadings that I have already

received and I am very familiar with, I don't need you to step

up here and tell me what you've already given to me in writing.

I need you to make your best arguments, and if you

would like to speak in one voice, you can certainly do that. I

know all of your time is incredibly valuable, so I want to make

sure we pare this all down.

So the Court is in recess until 10:45 so you can pare

down your arguments.

(Recess is taken at 10:31 a.m.)

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Case 2:18-cr-00422-DJH Document 347 Filed 10/19/18 Page 59 of 60
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UNITED STATES DISTRICT COURT

C E R T I F I C A T E

I, ELVA CRUZ-LAUER, 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.

DATED at Phoenix, Arizona, this 6th day of October,

2018.

 s/Elva Cruz-Lauer 

 Elva Cruz-Lauer, RMR, CRR 

 

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