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ELIZABETH A. STRANGE

First Assistant United States Attorney District of Arizona

KEVIN M. RAPP (Ariz. Bar No. 14249, kevin.rapp@usdoj.gov)

MARGARET PERLMETER (Ariz. Bar No. 024805, margaret.perlmeter@usdoj.gov)

PETER S. KOZINETS (Ariz. Bar No. 019856, peter.kozinets@usdoj.gov) 

ANDREW C. STONE (Ariz. Bar No. 026543, andrew.stone@usdoj.gov)

JOHN J. KUCERA (Cal. Bar No. 274184, john.kucera@usdoj.gov) 

Assistant U.S. Attorneys

40 N. Central Avenue, Suite 1800

Phoenix, Arizona 85004-4408

Telephone (602) 514-7500

BRIAN BENCZKOWSKI

Assistant Attorney General

Criminal Division, U.S. Department of Justice

REGINALD E. JONES (Miss. Bar No. 102806, reginald.jones4@usdoj.gov)

Senior Trial Attorney, U.S. Department of Justice Child Exploitation and Obscenity Section 

950 Pennsylvania Ave N.W., Room 2116

Washington, D.C. 20530

Telephone (202) 616-2807 

Attorneys for Plaintiff

IN THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF ARIZONA

United States of America,

Plaintiff, 

v. 

Michael Lacey, et al.,

Defendants.

CR-18-422-PHX-SPL (BSB) 

UNITED STATES’ REPLY IN 

SUPPORT OF MOTION TO 

RESOLVE ATTORNEY-CLIENT 

PRIVILEGE ISSUES AND 

RESPONSE TO CROSS-MOTION TO 

OBTAIN DISCOVERY AND 

ADDRESS PRIVILEGE ISSUES

INTRODUCTION AND SUMMARY OF ARGUMENT

Defendants Lacey and Larkin advance two primary arguments in an attempt to 

convince the Court that Carl Ferrer—as Backpage’s CEO and 100% owner—does not have 

authority to waive the company’s attorney-client privilege. The first argument is facially 

wrong and the second strains credulity. 

First, for communications that occurred before April 2015, Defendants argue that 

Ferrer lacked authority to waive the company’s attorney-client privilege because he was 

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only an employee before the sale and his purchase of the company “did not vest him with 

authority he did not have before.” CR 226 at 22. That argument is wrong. It is hornbook 

law that “when control of a corporation passes to new management, the authority to assert 

and waive the corporation’s attorney-client privilege passes as well.” Commodity Futures 

Trading Comm’n v. Weintruab, 471 U.S. 343, 349 (1985). Moreover, the very cases cited 

in Defendants’ brief (Polycast and Glidden) recognize that this authority extends to 

communications that occurred before the sale. Put simply, Ferrer possesses the authority 

to waive the attorney-client privilege and he’s exercised it. CR 195-3. All communications 

between Backpage and its attorneys that occurred before April 2015 are, therefore, not 

subject to a privilege and the prosecution team should be permitted to review those 

documents immediately. 

Defendants’ second argument relates to communications that occurred after 

Backpage’s sale. Here, Defendants make an opaque argument about the relationship 

between Backpage and several of the individual Defendants and various oral and written 

agreements that were purportedly entered into by those parties. Their argument boils down 

to this: from the moment Backpage was sold by Lacey and Larkin to Ferrer, the parties 

“recognized the importance of having joint representation” and entered into an oral 

agreement to be represented jointly in all issues that involved Backpage. CR 226 at 13. 

This purported oral agreement, they continue, was then memorialized some 20 months later 

“so that all dealings and communications from April 22, 2015 and afterward were 

encompassed and protected by the parties’ joint privilege undertakings.” Id. Defendants 

do not limit the scope of this supposed joint representation agreement to any specific 

attorneys or subject matter, but rather argue that it applies broadly to any communications

between Backpage and any attorneys from April 22, 2015 through April 2018. Id. at 14. 

The government believes this argument is not only convenient but also unlikely to 

withstand scrutiny, especially considering that the burden to prove a privilege rests with 

Lacey and Larkin. The government, however, is unable to fully respond because the actual 

written agreements were filed in camera.

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The government currently has 10,733 documents segregated for filter review from 

compliance of the two search warrants discussed in its motion. Out of those documents, 

only 1,328 are communications that occurred after Ferrer purchased Backpage in April 

2015. Accordingly, the Court can, and should, issue an order finding that Backpage—

through Ferrer—has waived the attorney-client privilege for all communications that 

occurred before April 2015, which would permit the government to review 9,405 of the 

segregated documents. Further, based on Judge Campbell’s waiver ruling, the Court can 

conclude that the subject matters of ad moderation and acknowledgment of the prevalence 

of prostitution ads on the Backpage website have both been waived. Any communications 

about either one of those two subjects are not privileged and should also be disclosed to 

the government. For the remaining 1,328 documents, Lacey and Larkin must specifically 

demonstrate what privileges apply and why they have not been waived. Even if Defendants 

are able to demonstrate that certain documents are privileged, case law suggests that when 

a joint privilege is shared between individuals and a corporation the corporation can 

unilaterally waive the privilege over the individual’s objection. If, however, the Court 

finds there are privileged documents that the corporation cannot unilaterally waive, the 

filter team would produce those specific documents to both Defendants and the Court to 

permit further litigation.

ARGUMENT

A. Ferrer Had Authority To Waive Backpage’s Corporate Attorney-Client Privilege

Since 2015, Carl Ferrer has been the CEO and 100% owner of Backpage.com, 

LLC. In April 2018, Ferrer executed a written waiver of Backpage’s corporate attorneyclient privilege. CR 195-3. The issue before the Court is whether Ferrer had authority to 

execute such a waiver over the objection of Backpage’s former owners and managers (i.e.,

Defendants Lacey and Larkin).

The answer to this question is a resounding yes. As the United States showed in its 

motion (see CR 195 at 10-11), the Supreme Court (Weintraub) and Ninth Circuit (Graf) 

have long recognized the authority of a corporation’s current owners and managers to 

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execute privilege waivers in these circumstances. Put simply, “[d]isplaced managers may 

not assert the privilege over the wishes of current managers, even as to statements that the 

former might have made to counsel concerning matters within the scope of their corporate 

duties.” Weintraub, 471 U.S. at 349.

Notwithstanding the clarity of the law in this area, Lacey and Larkin ask the Court 

to disregard Ferrer’s waiver. See CR 226 at 15-18. As explained below, their arguments 

with respect to all communications pre-sale are unavailing and much more is required for 

Defendants to support their contention that privileges still exist for all post-sale 

communications.

1. Ferrer Did Not Need To Obtain The Consent of Backpage’s Former 

Parent Company Before Waiving Backpage’s Corporate Attorney- Client Privilege For All Pre-Sale Communications

Lacey and Larkin’s first argument is that, because Backpage was a wholly-owned 

subsidiary of various parent companies (referred to collectively, for sake of simplicity, as 

Village Voice Media Holdings (“VVMH”)) until 2015, and because the privilege waiver 

would encompass communications predating the 2015 sale, Ferrer cannot waive 

Backpage’s privilege without the joint consent of its former parent, VVMH. See CR 226 

at 16-17 (“For the period before the 2015 sale, it is clear that Backpage.com (as a 

subsidiary) . . . had no separate authority to control or waive privileges. . . . Thus, . . . his 

purchase of Backpage.com in April of that year did not vest him with authority he did not 

have before.”); see also id. at 18 (“[Ferrer] has no authority otherwise to waive privileges 

as to VVHM . . . .”).

This argument is easily rejected. In fact, it is directly contradicted by the two cases 

(Polycast and Glidden) cited in the opposition brief. In Polycast Tech. Corp. v. Uniroyal, 

Inc., 125 F.R.D. 47 (S.D.N.Y. 1989), a parent company (Uniroyal) once owned a subsidiary 

(Uniroyal Plastics) but later sold the subsidiary to a new owner (Polycast). Id. at 48. After 

a post-sale dispute arose, the buyer propounded a discovery request seeking certain 

documents describing pre-sale communications between the parent’s general counsel and 

the subsidiary’s vice president. Id. at 49-50. When the parent refused to produce this 

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material on attorney-client privilege grounds, the district court intervened to address “[t]he 

issue . . . of control over a corporate subsidiary’s attorney-client privilege after the 

subsidiary is sold.” Id. at 49. The court concluded that, although the parent still retained 

an interest in the privileged communications, the new buyer possessed the unilateral right 

to waive the privilege: “Because . . . the privilege is jointly held by Polycast and Uniroyal, 

and because Polycast acquired control over Plastics’ privilege rights when it purchased 

the company, Polycast and Plastics’ new management may now waive the privilege at their 

discretion.” Id. at 51 (emphasis added).

Meanwhile, in Glidden Co. v. Jandernoa, 173 F.R.D. 459 (W.D. Mich. 1997), a 

parent company (Grow) once owned a wholly-owned subsidiary (Perrigo), but the 

subsidiary was spun off into a new company (also called Perrigo) via a management 

buyout. Id. at 464. Afterward, the parent sued the new company for fraud. Id. During 

discovery, the parent sought various pre-buyout communications between the subsidiary 

and its lawyers, but the new company opposed this request under the theory that “the 

attorney-client privilege belonging to [the subsidiary] passed to the present Perrigo . . . by 

operation of merger, and that the attorney-client privilege now belongs to . . . Perrigo.” Id.

at 470. The district court disagreed and ordered the new company to produce the requested 

documents. Notably, the court recognized that, under Weintraub, “[a]s the surviving entity 

after a merger . . . , Perrigo does indeed have the authority to assert or waive the attorneyclient privilege.” Id. at 472 (emphasis added). Nevertheless, the court held that, because 

“[t]he universal rule of law . . . is that the parent and subsidiary share a community of 

interest, such that the parent (as well as the subsidiary) is the ‘client’ for purposes of the 

attorney-client privilege,” the new company couldn’t invoke the privilege as a shield

against the former parent. Id. at 472-73. Thus, the court concluded: “Perrigo Company 

had no reasonable expectation that it could keep anything secret from its parent 

corporation. As long as Perrigo was a wholly owned subsidiary of Grow, Perrigo’s officers 

had no legal ability to resist disclosure to Grow of any of Perrigo’s records, including its 

attorney-client communications.” Id. at 473.

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Notably, the Polycast and Glidden courts each cited an earlier decision—Medcom 

Holding Co. v. Baxter Travenol Laboratories, Inc., 689 F. Supp. 841 (N.D Ill. 1988)—in 

support of their privilege analyses. In that case, a parent company (Baxter) once owned a 

subsidiary (Medcom, Inc.) but later sold the subsidiary to a new owner (Medcom 

Holding). Id. at 842. The issue presented was whether the new owner could, over the 

objection of the parent, waive the attorney-client privilege as to pre-sale communications 

involving the subsidiary. Id. at 842-44. The court held the new owner could effectuate 

such a unilateral waiver: “Medcom Holding controls Medcom Inc.’s privilege with respect 

to attorney-client communications occurring prior to or relating to the sale of Medcom, 

Inc. Therefore, Baxter’s objections . . . are without merit.” Id. at 844. The court further 

noted that this outcome was consistent with Weintraub, which “expressly included 

takeovers and mergers in its finding that new corporate managers may waive the attorneyclient privilege as to communications of prior management.” Id.; see also. id. at 842-43 

(“[P]arties who negotiate a corporate acquisition should expect that the privileges of the 

acquired corporation would be incidents of the sale. . . . Because Medcom, Inc. was a party 

to the communications in issue, it was reasonable to assume that successor management of 

Medcom, Inc. would control the attorney-client privilege.”).

The bottom line is that Polycast, Glidden, and Medcom all recognize that, once a 

subsidiary has been sold or spun off from a parent company, the new owners of the 

subsidiary may waive the corporate attorney-client privilege without the consent of (and 

even over the objection of) the parent. Lacey and Larkin thus cannot prevent Ferrer from 

waiving the attorney-client privilege as to all communications that occurred before April 

2015. 

2. Defendants’ “Joint Representation” And “Joint Defense” Arguments, 

Which Could Apply Only To Post-April 2015 Documents, Are Opaque 

And Imprecise

Defendants assert that, the moment they sold Backpage to Ferrer in April 2015, all 

parties orally entered into a “joint representation” agreement that prevents Ferrer from

executing a privilege waiver without their consent. See CR 226 at 7-8, 17-18. This 

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supposed oral agreement, they contend, was then purportedly memorialized in subsequent 

written agreements. 

The government cannot speak directly to what the written agreements say, because 

Defendants have filed all such agreements in camera. CR 180 at 12. In previous filings, 

however, Defendants have referenced the following:

(1) an engagement agreement between Davis Wright Tremaine LLP (“DWT”) 

and Ferrer, Larkin, and Lacey (dated December 12, 2016);

(2) a Common Interest and Litigation Management Agreement (the “Common 

Interest Agreement”) (dated December 31, 2016), executed by the three 

individuals on behalf of themselves and the companies they control; and

(3) a joint defense agreement (“JDA”) entered into June 2017 that Ferrer, Larkin, 

and Lacey and others signed (but which DWT apparently did not sign). 

CR 180 at 12-13. 

As far as the government can discern, these are all the agreements that form the 

basis for Defendants’ argument that, post-April 2015, Backpage held joint privileges with 

Lacey and Larkin for all communications with any attorneys. In an effort to address this 

argument, the government breaks down Defendants’ claims with respect to (a) joint 

representation and (b) the JDA and the Common Interest Agreement, and discusses each 

in turn.

a. The Purported Joint Representation Agreements

Defendants argue that Backpage, under Ferrer’s ownership, has always had 

agreements with Lacey and Larkin for joint representation. To support this argument,

Defendants suggest that DWT entered into “joint representation agreements” with the 

parties, but fail to point to any other agreements between and among Lacey, Larkin, and 

Backpage. Defendants bear the burden of “establishing the relationship and the privileged 

nature of the communication.” United States v. Ruehle, 583 F.3d 600, 607 (9th Cir. 2009) 

(citations omitted) (emphasis in original). Mere conclusory statements about privileges are 

not sufficient. Thus, even assuming Defendants’ contention about DWT’s joint 

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representation is correct, then all communications between Backpage and any attorneys 

other than DWT that occurred after the April 2015 sale would not be subject to any 

attorney-client privilege.1

 Accordingly, the 1,328 documents that represent post-April 

2015 potentially privileged material would further be reduced by eliminating all 

communications from any attorneys other than DWT.

Moreover, even if Backpage had entered into oral agreements for joint 

representation with every attorney it engaged after April 2015, Defendants are incorrect in 

their assertion that the company would have needed to secure their consent before waiving 

the attorney-client privilege. The First Circuit has held that, when an individual corporate 

officer and a corporation are jointly represented by the same attorney, the corporation can 

unilaterally waive the privilege over the individual officer’s objection: “[W]e hold that a 

corporation may unilaterally waive the attorney-client privilege with respect to any 

communications made by a corporate officer in his corporate capacity, notwithstanding the 

existence of an individual attorney-client relationship between him and the corporation's 

counsel.” In re Grand Jury Subpoena, 274 F.3d 563, 573 (1st Cir. 2001). Admittedly, the 

Ninth Circuit, in Ruehle, acknowledged the First Circuit’s approach on this issue but 

declined to say whether it was adopting it. 583 F.3d at 608 n.7 (“[W]e need not reach and 

decide in this case whether our circuit should adopt the rule of [the First Circuit]: that the 

corporation, without consent of an executive asserting privilege, can waive the attorneyclient privilege in a dual-representation context where the subject matter of the waiver 

concerns matters of interest to the corporation.”). Nevertheless, the existing case law 

significantly undermines Defendants’ theory as to the significance of the supposed oral 

joint representation that was executed following the April 2015 sale.

 

1 The government recognizes some communications with attorneys other than DWT 

may theoretically be subject to a privilege under the JDA or the Common Interest 

Agreement, which the government addresses below.

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b. The JDA and the Common Interest Agreement

The privileges arising from a joint-defense agreement differ from those arising from 

attorney-client communications. As one court has explained, “the joint defense privilege 

differs sufficiently from the attorney-client privilege in both purpose and scope that the 

two should be viewed as entirely separate doctrines.” United States v. Stepney, 246 F. 

Supp. 1069, 1073 (N.D. Cal. 2003). In broad terms, the joint-defense privilege is an 

extension of the attorney-client privilege that permits parties who are represented by 

separate counsel to share certain types of privileged information with each other 

confidentially. Id. at 1086 (“Each defendant entering into a joint defense agreement 

already has a representative, fully and confidentially informed of the client’s situation. The 

joint defense privilege allows defendants to share information . . . .”); see also In re Pacific 

Pictures Corp., 679 F.3d 1121, 1129 (9th Cir. 2012) (“Rather than a separate privilege, the 

‘common interest’ or ‘joint defense’ rule is an exception to ordinary waiver that allows 

attorneys for different clients pursuing a common legal strategy to communicate with each 

other.”); Waller v. Fin. Corp. of Am., 828 F.2d 579, 583 n.7 (9th Cir. 1987) (“The joint 

defense privilege . . . is an extension of the attorney client privilege . . . [under which] 

‘communications by a client to his own lawyer remain privileged when the lawyer 

subsequently shares them with co-defendants for purposes of a common defense.’”) 

(citation omitted).

Here, the United States is not suggesting that Ferrer can unilaterally waive any jointdefense privileges that may exist between him, Lacey, and Larkin. To the contrary, the 

United States previously sent a letter to defense counsel drawing a distinction between the 

joint-defense and attorney-client privileges and making clear that it was not seeking access

to any materials that might be covered by a joint-defense privilege. See Exhibit A (May 3 

letter to defense counsel).

Nevertheless, it is highly unlikely that any of the documents currently segregated in 

the government’s filter review contain material covered by the joint-defense privilege. 

Indeed, the filter team has confirmed that none of the segregated documents involves

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communications from December 2016 or later. This is relevant because Ferrer, Lacey, and 

Larkin didn’t enter into a joint-defense agreement until late December 2016.2

 

In In re Grand Jury Subpoena, 415 F.3d 333 (4th Cir. 2005), the Fourth Circuit 

encountered a similar issue. There, AOL Time Warner (“AOL”) began conducting an 

internal investigation in March 2001 and had its outside counsel, as part of the 

investigation, interview several AOL employees, including Wakeford. Id. at 335-36. In 

November 2001, the SEC opened an investigation into AOL. Id. at 336. Soon afterward, 

AOL and Wakeford entered into an “oral ‘common interest agreement,’” which they later 

memorialized in writing. Id. Several years later, the grand jury issued a subpoena to AOL 

for the memorandum summarizing its outside counsel’s interview with Wakeford. Id. at 

337. AOL agreed to waive its corporate attorney-client privilege and produce the 

memorandum but Wakeford intervened to oppose the request, arguing that the 

memorandum was covered by the joint-defense privilege and that AOL couldn’t waive that 

privilege unilaterally. Id. The district court rejected this argument, holding that 

“Wakeford’s interviews were not privileged because . . . Wakeford’s common interest with 

AOL postdated the March-June 2001 interviews” (id.), and the Fourth Circuit affirmed, 

concluding that “[b]ecause there is no evidence that Wakeford and AOL shared a common 

interest before December 2001, we find no error in the district court’s conclusion that 

Wakeford had no joint defense privilege before that time.” Id. at 341. So, too, here—all 

of the segregated documents involve communications that predate the execution of 

 

2 In their opposition brief, Lacey and Larkin seem to suggest they entered into an 

“oral” joint-defense agreement with Ferrer and Backpage at some unspecified date and 

simply “memorialized” this agreement in writing in December 2016. See CR 226 at 17 

n.19. The Court should reject this claim. The United States doesn’t dispute that it’s 

possible to enter into an oral joint-defense agreement, see United States v. Gonzalez, 669 

F.3d 974 (9th Cir. 2012), but the party claiming the existence of such agreement bears the 

burden of proving it. Here, Lacey and Larkin have failed to meet that burden. And, in any 

event, the criminal lawsuit in California against Lacey, Larkin, and Ferrer wasn’t initiated 

until October 2016, and there is no evidence suggesting that any sort of joint-defense 

agreement, oral or otherwise, existed before then.

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Defendants’ joint defense agreement with Ferrer.

B. Judge Campbell’s Ruling Was Broad, Based On Backpage’s Privilege Log

Between 2010 and 2016, Backpage repeatedly divulged privileged information to 

third parties, including three different public relations firms and an investment bank. In a 

thorough ruling issued in April 2018, Judge Campbell ruled that Backpage had waived its 

privilege by failing to maintain the confidentiality of these communications. CR 195-8. 

Accordingly, Judge Campbell ordered Backpage to produce a particular set of 

documents—which were responsive to a grand jury subpoena and which Backpage had 

previously attempted to withhold on privilege grounds—to the prosecution.

In its motion, the United States showed that Judge Campbell’s ruling has important 

ramifications with respect to the issues now before the Court (i.e., the extent to which 

Backpage has waived its attorney-client privilege and how to complete the review of 

approximately 10,000 other documents that were obtained via search 

warrant). Specifically, the United States showed that (1) under Ninth Circuit law, 

Backpage should be deemed to have waived the privilege as to any “subject matter” 

addressed in the privileged documents that were previously disseminated to the PR firms 

and the investment bank, (2) two of the “subject matters” that were addressed in those 

documents were ad moderation and whether/how to acknowledge the prevalence of 

prostitution ads on the Backpage website, and (3) the 10,000 segregated documents may 

therefore be disclosed to the prosecution team if they touch upon the same “subject 

matters.” See CR 195 at 11-12; see also Hernandez v. Tanninen, 604 F.3d 1095, 1100 (9th 

Cir. 2010) (“Disclosing a privileged communication or raising a claim that requires 

disclosure of a protected communication results in waiver as to all other communications 

on the same subject.”); United States v. Plache, 913 F.2d, 1375, 1380 (9th Cir. 1990) 

(“[T]he district court properly found that Plache voluntarily disclosed his privileged 

attorney communication, thereby waiving the privilege on all other communications on the 

same subject.”).

In their opposition brief, Defendants urge the Court to disregard Judge Campbell’s 

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ruling and find that has no bearing on the current issues. See CR 226 at 18-19. Although 

Defendants do not appear to dispute the legal principle underlying the United States’ 

position (i.e., intentionally disclosing a privileged communication results in waiver as to 

all other communications touching upon the same subject matter), they fault the United 

States for taking an “absurdly broad” view of the subject matters that were actually 

discussed in the set of documents that Judge Campbell required Backpage to produce. Id.

at 19. Defendants do not, however, attempt to provide their own definition of the subject 

matters at issue. Instead, they conclude by accusing the United States of attempting to 

“morph Judge Campbell’s ruling into a blanket privilege waiver.” Id.

These arguments lack merit. As an initial matter, the United States has never argued 

that Judge Campbell’s ruling should result in a “blanket privilege waiver” as to all 

issues. To the contrary, the United States made clear in its motion that Judge Campbell’s 

ruling should only result in a finding of a subject matter waiver as to the particular topics 

addressed in the PR firm and investment bank documents.

On the merits, it is obvious that one of the “subject matters” addressed in the PR 

firm documents was the subject of ad moderation. Indeed, Backpage’s own privilege 

logs—which Backpage used to justify its initial refusal to produce the PR-firm documents, 

and which were provided to Judge Campbell as part of the subpoena litigation—concede 

this point. For example, Backpage initially sought to withhold the document enclosed as 

Exhibit B on the ground that it “contain[ed] legal advice from outside counsel Hemanshu 

Nigam, Esq. regarding ad moderation.” See Exhibit C (JMS privilege log, with relevant 

entry highlighted at top of page six) (emphasis added). As the Court can see, the document 

itself is a detailed memo from Backpage’s outside counsel containing legal advice about 

ad moderation, including advice about how to review the content of ads (Section 1), how 

to review the images appearing within ads (Section 2), how to enable users to report illegal 

ads (Section 3), how to “create and enforce guidelines for adult forums prohibiting 

prostitution” and other topics (Section 4), and legal advice concerning “age related 

restrictions and safety” (Section 5). Similarly, Backpage initially sought to withhold the 

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document enclosed as Exhibit D on the ground that it “contain[ed] legal advice from 

outside counsel Edward E. McNally, Esq. regarding ad moderation.” See Exhibit E

(Culloton privilege log, with relevant entry highlighted in the middle of page two) 

(emphasis added). The document itself is an email chain addressing how to deal with the 

fact that Backpage advertisements were appearing on a prostitution-related blog that 

“pimps use . . . as a resource to identify trends, hotspots and stay current on laws and law 

enforcement authority.” See Exhibit D at 4. After Backpage’s public relations consultants 

warned that such advertisements were “a BIG problem,” because “law enforcement may 

perceive BP [Backpage] to be playing to the pimp audience,” Backpage’s principals and 

outside counsel discussed strategies for removing the ads. Id. at 1-4.

These documents are just of the tip of the iceberg in terms of the ad moderationrelated documents that were disclosed by Backpage pursuant to Judge Campbell’s 

ruling. For example, Backpage initially sought to withhold the document enclosed as 

Exhibit F on the ground that it “contain[ed] legal advice from outside counsel Hemanshu 

Nigam, Esq. regarding safety and security policies.” See Exhibit C (JMS privilege log, 

with relevant entry highlighted in middle of page one). In fact, the document is a detailed 

three-page spreadsheet from Backpage’s outside counsel containing legal advice about 

certain “action items” to pursue. One such item, listed in the category of “Finding Illegal 

Ads,” warned that “‘New In Town’ terminology is often used by pimps who shuttle 

children to different locations where they do not know anyone and cannot get 

help.” Another item, also listed in the category of “Finding Illegal Ads,” recommended 

that Backpage should “[d]etermine if there is a way to figure out if a [credit] card being 

used is prepaid; this could be one indicator (of many) . . . as a potential trafficking ad.” And 

yet another recommendation, under the category of “Finding Illegal Ads,” was to “[c]reate 

a way to figure out if one phone number is being used on numerous different ads . . . 

[because] this could indicate a prostitution situation or a human trafficking situation.” It is 

accurate—and not “absurdly broad”—to characterize this document as containing legal 

advice on the subject matters of ad moderation and whether/how to acknowledge the 

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prevalence of prostitution ads on the Backpage website. Similarly, Backpage initially 

sought to withhold the document enclosed as Exhibit G on the ground that it “contain[ed] 

legal advice from outside counsel regarding proposed policy changes.” See Exhibit C

(JMS privilege log, with relevant entry highlighted on bottom of page six). In fact, the 

document is a detailed five-page spreadsheet from Backpage’s outside counsel addressing 

such topics as “Finalize policy on acceptable conduct” (which was accompanied by the 

note “List of prostitution-related terms banned from site; additional content rules 

pending”), “Finalize policy on whether unacceptable content is removed from ads or if the 

entire ad is deleted,” and “Remove return of results when certain keywords are used (on 

the front end) that indicate illegal activity (i.e., rape, incest, Lolita, etc.).”

For these reasons, the Court should find that, separate and apart from the broader 

privilege waiver discussed in Section A of this reply, Backpage has waived the privilege 

as to the subject matters of ad moderation and whether/how to acknowledge the prevalence 

of prostitution ads on the Backpage website.

C. The J.S. Waiver Ruling

The government believes that its arguments in Section A and B are sufficient to 

establish that Backpage’s attorney-client privilege has been waived for the vast majority of 

the 10,733 documents currently segregated in its filter review. The issue raised by the J.S. 

waiver ruling provides a closer call. The government has been unable to find any case that 

stands for the proposition that a settlement is the same as “abandon[ing] the claim that 

gives rise to the waiver condition.” Bittaker v. Woodford, 331 F.3d 715, 721 (9th Cir. 

2003). But, likewise, the government hasn’t found cases that hold a settlement is 

insufficient to cure an implied-waiver finding.3

 

3

 Backpage’s decision to use its general counsel—Elizabeth McDougall—as a 

corporate spokesperson in a civil lawsuit demonstrates that her position with the company went beyond simply providing legal advice. In any event, Defendants do not claim there 

are any joint representation agreements that involve Elizabeth McDougall, therefore her 

communications are no longer privileged.

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D. Government’s Use Of A Filter Team Is Proper

Lacey and Larkin criticize the government’s use of a filter team in this matter. Their 

complaints fit into four categories: (1) courts have expressed doubts about the use of filter 

teams; (2) the government should not “take matters into its own hands” by implementing 

filter teams without judicial approval; (3) the government used an incomplete list of 

attorneys’ names when segregating documents for review; and (4) the government’s filter 

review must have been inadequate because the California Attorney General’s Office

(“AGO”) segregated over 64,000 documents while the government’s review only set aside 

10,733. Each of these complaints is unfounded. 

First, while Lacey and Larkin identify a handful of district court decisions that have 

expressed doubts about filter teams, there are many additional cases upholding and 

approving the validity of filter teams. See, e.g., United States v. Loughner, 782 F. Supp. 

2d 829, 833 (D. Ariz. 2011) (“The Court approves the Government’s use of a filter team to 

screen BOP’s records for possible privilege issues.”); Hicks v. Bush, 452 F. Supp. 2d 88, 

103 (D.D.C. 2006) (granting government’s motion to authorize filter-team review and 

explaining that there was “[n]o practical and effective alternative to the Filter Team. . . . 

Neither review by special masters nor pre-screening by counsel for the detainees could be 

accomplished in a reasonable amount of time.”); In re Search of 5444 Westheimer Road, 

Suite 1570, Houston, Texas, on May 4, 2006, 2006 WL 1881370, *2 (S.D. Tex. July 6, 

2006) (noting that “[o]ther courts have upheld the use of taint team procedures” and 

authorizing “the Government to commence reviewing the materials through use of the 

proposed taint team procedure”); United States v. Grant, 2004 WL 1171258, *3 (S.D.N.Y. 

May 25, 2004) (same). As one court has put it: “The use of a taint team is a proper, fair 

and acceptable method of protecting privileged communications when a search involves 

property of an attorney.” United States v. Triumph Capital Group, Inc., 211 F.R.D. 31, 43 

(D. Conn. 2002).

Second, this is not a case where the government unilaterally chose to use a filter 

team. To the contrary, the government sought and obtained permission from two different 

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magistrate judges before doing so. See CR 195-1, 195-2. The case cited by Defendants—

United States v. Neill, 952 F. Supp. 834 (D.D.C. 1997)—dealt with a situation where no 

court had issued an order approving the filter team review.

Third, Lacey and Larkin state the government has woefully under-segregated the 

documents for filter team review. That, again, is false. The government used the attached 

list (Exhibit H) with over 265 search terms to determine what documents may need further 

review, which include search terms that would identify communications from all attorneys 

listed in Defendants’ response. Compare Exhibit H with CR 226 at 12 n.14. This list led 

to 10,733 potentially privileged documents. 

Fourth, and finally, it is incorrect to conclude—as Defendants do—that the federal 

filter team’s efforts must have been inadequate because it didn’t segregate as many 

documents as the AGO’s filter team. In fact, federal authorities didn’t take possession of 

the 64,000 documents that the AGO had previously culled. The 10,733 documents at issue 

here are additional documents that the federal filter team segregated for further review.

4

 

CONCLUSION

The record is clear that the privilege has been waived for all of Backpage’s attorneyclient communications before April 2015. The authority to waive the privilege transferred 

to Carl Ferrer when he purchased the company and he has exercised that right. 

Additionally, Backpage waived its privilege as to the subject matter of many of those 

documents by sharing privileged materials with third-party public relations firms and an 

investment bank. The practical impact of an order on this issue would be to permit 9,405 

out of the 10,733 documents that have been segregated for filter review—all of the 

communications that occurred before April 2015—to be immediately turned over to the 

 

4

 Defendants use their response brief to raise, again, the issue of disclosure of the government’s communications with Ferrer. CR 226 at 23-24. The government responded to this argument previously (CR 216). Further disclosure from the government is neither necessary nor relevant for the Court to determine whether Backpage’s attorney-client 

privilege has been waived. As discussed above, however, the Court may require further 

disclosure from Defendants before it can rule on Defendants’ claim of joint privilege with respect to Backpage’s post-sale communications. 

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prosecution team. 

Defendants’ assertion that privilege attaches to all communications between 

Backpage and all of the company’s attorneys after April 2015 is dubious. As an initial 

matter, between April 2015 and December 2016, any communications between Backpage 

and any attorneys that had not been engaged in joint representation with the individual 

Defendants (i.e., all lawyers and law firms other than DWT) should also be provided to the 

prosecution team. For all remaining documents, Defendants must specifically demonstrate 

the privileges that apply and why they have not been waived. Even if Defendants are able 

to demonstrate that certain documents are privileged, case law suggests that when a joint 

privilege is shared between individuals and a corporation the corporation can unilaterally 

waive the privilege over the individual’s objection. In the end, if the Court finds that 

privileged documents remain, the government would propose that the filter team produce 

those specific documents to both Defendants and the Court to permit further litigation.

Respectfully submitted this 17th day of August, 2018.

ELIZABETH A. STRANGE

First Assistant United States Attorney

District of Arizona

/s Andrew C. Stone

KEVIN M. RAPP

MARGARET PERLMETER

PETER S. KOZINETS

ANDREW C. STONE

JOHN J. KUCERA

Assistant U.S. Attorneys

BRIAN BENCZKOWSKI

Assistant Attorney General

Criminal Division, U.S. Department of Justice

REGINALD E. JONES

Senior Trial Attorney

U.S. Department of Justice, Criminal Division

Child Exploitation and Obscenity Section

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Certificate of Service

I hereby certify that on this date, I electronically transmitted the attached document to the 

Clerk’s Office using the CM/ECF system for filing and transmittal of a Notice of Electronic 

Filing to the following CM/ECF registrants: Anne Chapman, Erin McCampbell, Gregory 

Zamora, James Grant, Larry Debus, Lawrence Kazan, Lee Stein, Paul Cambria, Robert 

Corn-Revere, Ronald London, Janey Henze Cook, John Littrell, Kenneth Miller, Thomas 

Bienart, Jr., Bruce Feder, Michael Kimerer, Rhonda Neff, KC Maxwell, David Wakukawa, 

Michael Piccarreta, Stephen Weiss. 

s/Rose Marie Trandicosta

U.S. Attorney’s Office

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