Court Opinion

ID: 9297958
Source: CourtListenerOpinion
Date Created: 2022-12-01 18:05:59.811839+00
Date Added: 2024-06-11T17:13:31.240227
License: Public Domain

138 Nev., Advance Opinion 7.5
                          IN THE SUPREME COURT OF THE STATE OF NEVADA

                   ROWEN A. SEIBEL; MOTI PARTNERS,                          No. 83723
                   LLC; MOTI PARTNERS 16, LLC; LLTQ
                   ENTERPRISES, LLC; LLTQ
                   ENTERPRISES 16, LLC; TPOV
                   ENTERPRISES, LLC; TPOV 16                                     HLE
                   ENTERPRISES, LLC; FERG, LLC;
                   FERG 16, LLC; R SQUARED GLOBAL                                NOV 23 2022
                   SOLUTIONS, LLC; DNT                                                    A. BROWN
                                                                                        Ury E
                   ACQUISITION, LLC; GR BURGR, LLC;                         AY
                                                                                 C HEE DEPUTY CLERK
                   AND CRAIG GREEN,
                   Petitioners,
                   vs.
                   THE EIGHTH JUDICIAL DISTRICT
                   COURT OF THE STATE OF NEVADA,
                   IN AND FOR THE COUNTY OF
                   CLARK; AND THE HONORABLE
                   TIMOTHY C. WILLIAMS, DISTRICT
                   JUDGE,
                   Respondents,
                     and
                   DESERT PALACE, INC.; PARIS LAS
                   VEGAS OPERATING COMPANY, LLC;
                   PHWLV, LLC; AND BOARDWALK
                   REGENCY CORPORATION,
                   Real Parties in Interest.

                               Petition for extraordinary writ relief challenging a district court
                   order compelling the disclosure of privileged documents under the crime-
                   fraud exception to the attorney-client privilege.
                               Petition denied.

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                Bailey Kennedy and Joshua P. Gilmore, John R. Bailey, Dennis L. Kennedy,
                and Paul C. Williams, Las Vegas,
                for Petitioners.

                Pisanelli Bice PLLC and Jordan T. Smith, James J. Pisanelli, Debra L.
                Spinelli, and M. Magali Mercera, Las Vegas,
                for Real Parties in Interest.

                BEFORE THE SUPREME               COURT,     HARDESTY,       STIGLICH, and
                HERNDON, JJ.

                                                 OPINION

                By the Court, HARDESTY, J.:
                            We elect to hear this petition to address a inatter of first
                impression before this court regarding the procedures and burden of proof
                required to establish the crime-fraud exception to the attorney-client
                privilege. Because the district court did not err in ordering an in camera
                review of the privileged communications at issue here, and because it did
                not abuse its discretion in ultimately ordering the disclosure of those
                communications, we deny this petition for extraordinary relief.
                                 FACTS AND PROCEDURAL HISTORY
                            Petitioner   Rowen    Seibel,   through   his   limited   liability
                companies, entered into development agreements with Caesars to operate
                restaurants for various Caesars properties." When Caesars discovered that

                       'Petitioners Seibel, his affiliated entities, and Craig Green are
                collectively referred to as "Seibel" in this opinion. Real parties in interest
                are four properties operated by Caesars Entertainment, Inc., and are
                collectively referred to as "Caesars" in this opinion.
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                      Seibel had been convicted of tax fraud, it terminated the agreements, citing
                      a term that appeared in all the parties' contracts that allowed Caesars to
                      terminate if its relationship with Seibel could jeopardize Caesars' gaming
                      licenses. Seibel sued one of the Caesars properties, Planet Hollywood in
                      Las Vegas, for breach of contract and related claims. Seibel claimed that he
                      had cured any potential risk by creating an irrevocable family trust and
                      assigning his contractual rights and interests under the development
                      agreements to newly formed business entities owned and managed by
                      independent trustees. He asserted that he was neither a trustee nor a
                      beneficiary of the trust and was no longer affiliated with the business
                      entities that were assigned the development agreements. Planet Hollywood
                      counterclaimed that Seibel had fraudulently attempted to hide his
                      unsuitability to conduct business with a gaming licensee, causing it
                      damages. Other Caesars properties later sued Seibel, seeking declaratory
                      relief and damages, and these actions were consolidated.
                                  During litigation, Caesars obtained through discovery a copy of
                      a prenuptial agreement between Seibel and his wife, which had been
                      executed contemporaneously to Seibel's trust and allowed Seibel to benefit
                      from the trust. Caesars concluded that Seibel had used legal counsel to
                      create both the trust and the prenuptial agreement so that he could secretly
                      retain the benefits of the development agreements while tricking Caesars
                      into thinking that he had dissociated from them. On this suspicion, Caesars
                      moved to compel discovery of over 100 documents from Seibel's attorney-
                      client privilege log under Nevada's crime-fraud exception. The district court
                      granted this motion in two orders. The first granted in camera review of
                      the documents after determining that Caesars had met its burden of
                      showing that Seibel was engaged in an attempt to deceive Caesars when he

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                 sought the advice of legal counsel for the creation of his trust and prenuptial
                 agreement. The second order granted the motion to compel disclosure of all
                 the documents after finding, through in camera review, that the documents
                 were sufficiently related to and made in furtherance of Seibel's attempted
                 fraudulent scheme.
                               Seibel petitions this court for a writ of prohibition or mandamus
                 preventing the district court from compelling disclosure of the documents
                 and ordering the district court to find the documents undiscoverable. Seibel
                 argues primarily that the district court erred in finding that Caesars had
                 rnet its initial burden of demonstrating that Seibel was engaged in a
                 fraudulent scheme when he sought legal advice regarding his trust and
                 prenuptial agreement, and that the district court erred in further
                 concluding that all of Seibel's privileged communications regarding the
                 trust and prenuptial agreement were sufficiently related to and made in
                 furtherance of that fraud.
                                                 DISCUSSION
                 Writ relief
                               Extraordinary writ relief is available only where there is no
                 "plain, speedy and adequate remedy in the ordinary course of law." NRS
                 34.330. Although writ relief is generally not available to review discovery
                 orders, this court will consider writ petitions challenging orders that compel
                 the disclosure of privileged information because in such cases "a later
                 appeal would not remedy any improper disclosure of the information."
                 Wynn Resorts, Ltd. v. Eighth Judicial Dist. Court, 133 Nev. 369, 374, 399
                 P.3d 334, 341 (2017).
                               Writ relief is also appropriate to clarify an important issue of
                 law, such as the parameters of a privilege. See Canarelli v. Eighth Judicial
                 Dist. Court, 136 Nev. 247, 250-51, 464 P.3d 114, 119 (2020) (entertaining a
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                petition for writ of prohibition to clarify whether Nevada recognizes the
                petitioner's asserted exception to the attorney-client privilege). We elect to
                entertain this petition, treating it as one for prohibition, because Seibel
                challenges   a   discovery    order   compelling   disclosure   of   privileged
                information, and prohibition, not mandamus, is the "appropriate rernedy to
                correct an order that compels disclosure of privileged information." Las
                Vegas Dev. Assocs., LLC v. Eighth Judicial Dist. Court, 130 Nev. 334, 338,
                325 P.3d 1259, 1262 (2014).
                Standard of review
                             We review the district court's legal determinations regarding
                the crime-fraud exception de novo.         See Hwnboldt Gen. Hosp. v. Sixth
                Judicial Dist. Court, 132 Nev. 544, 547, 376 P.3d 167, 170 (2016) (reviewing
                legal questions de novo on petition for writ of mandamus). "Discovery
                matters are within the district court's sound discretion," and factual
                findings "are given deference and will not be set aside unless they are
                clearly erroneous or not supported by substantial evidence." Canarelli, 136
                Nev. at 251, 464 P.3d at 119 (internal quotation marks omitted).
                Application of Nevada's crime-fraud exception to the attorney-client privilege
                             Nevada's attorney-client privilege and crime-fraud exception
                are statutory.   Under NRS 49.095, the attorney-client privilege grants
                clients "a privilege to refuse to disclose, and to prevent any other person
                from disclosing, confidential communications" between the client (or
                representative) and his or her lawyer (or representative), and between the
                client's lawyer and the lawyer's representative. But per NRS 49.115(1),
                Nevada's crime-fraud exception allows documents otherwise privileged
                under NRS 49.095 to be disclosed when "the services of the lawyer were
                sought or obtained to enable or aid anyone to commit or plan to commit

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                what the client knew or reasonably should have known to be a crime or
                fraud."
                             Neither NRS 49.095 nor NRS 49.115(1) establishes the
                procedure or burden of proof that courts are to use when determining
                whether the crime-fraud exception should apply, however, and this court
                has not clarified those issues before. Both statutes "are taken without
                substantive change from" Rule 5-03 of the Preliminary Draft of Proposed
                Rules of Evidence for the United States District Courts and Magistrates,
                submitted by the Advisory Committee on Rules of Evidence, reprinted in 46
                F.R.D. 161, 249-51 (1969), which is widely considered federal common law.2
                Therefore, this court finds federal caselaw interpreting the federal common-
                law attorney-client privilege and crime-fraud exception persuasive in
                interpreting NRS 49.095 and NRS 49.115(1). See, e.g., In re 2015-2016
                Jefferson Cty. Grand Jury, 410 P.3d 53, 59 (Colo. 2018) (following United

                States v. Zolin, 491 U.S. 554, 562-63 (1989), and Upjohn Co. v. United

                States, 449 U.S. 383, 389 (1981), when interpreting Colorado's attorney-

                client privilege and crime-fraud exception); People v. Radojcic, 998 N.E.2d
                1212, 1221-23 (Ill. 2013) (same).

                      2NRS     49.095 (subcomm.'s cmt.); NRS 49.115 (subcomin.'s cmt.).
                Specifically, Rule 503 of the Draft Federal Rules of Evidence or "Supreme
                Court Standard 503" is widely regarded as the common law crime-fraud
                exception's enumeration. 3 Mark S. Brodin et al., Weinstein's Federal
                Evidence §§ 503-1, 503.01-10 (2d ed. 2022); accord United States v. Spector,
                793 F.2d 932, 938 (8th Cir. 1986) ("Although Congress did not adopt
                [Supreme Court Standard 503], courts have relied upon it as an accurate
                definition of the federal common law of attorney-client privilege . . . ."). And
                federal common law, such as Supreme Court Standard 503, is binding over
                claims of privilege in the federal context under the Federal Rules of
                Evidence. Fed. R. Evid. 501 (stating that "Mlle common law . . . governs a
                claim of privilege," unless federal law provides otherwise).
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                            Federal courts "have recognized the attorney-client privilege
                under federal law as the oldest of the privileges for confidential
                communications known to the common law."           Zolin, 491 U.S. at 562
                (quoting Upjohn, 449 U.S. at 389). The privilege exists to ensure that
                clients can freely and confidentially communicate with their legal counsel,
                which is central "to the proper functioning of our adversary system of
                justice." Id. However, "[s]ince the privilege has the effect of withholding
                relevant information from the factfinder, it applies only where necessary to
                achieve its purpose" and is therefore subject to limited exceptions such as
                the crime-fraud exception.     Id. at 562-63 (internal quotation marks
                omitted); see also NRS 49.115(1).
                            In determining whether the crime-fraud exception should
                apply, the United States Court of Appeals for the Ninth Circuit utilizes a
                two-part test, which reflects the prevailing approach among federal circuits.
                E.g., United States v. Boender, 649 F.3d 650, 655-56 (7th Cir. 2011); In re
                Richard Roe, Inc., 168 F.3d 69, 71 (2d Cir. 1999). Under this approach, a
                party seeking to invoke "the crime-fraud exception must satisfy a two-part
                test":
                            First, the party must show that "the client was
                            engaged in or planning a criminal or fraudulent
                            scheme when it sought the advice of counsel to
                            further the scheme." Second, it must demonstrate
                            that the attorney-client communications for which
                            production is sought are "sufficiently related to"
                            and were made "in furtherance of [the] intended, or
                            present, continuing illegality."
                In re Napster, Inc. Copyright Litig., 479 F.3d 1078, 1090 (9th Cir. 2007)
                (alteration in original) (citation omitted) (quoting In re Grand Jury
                Proceedings, 87 F.3d 377, 381, 382-83 (9th Cir. 1996) (internal quotation

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                marks omitted)), abrogated in part on other grounds by Mohawk Indus., Inc.
                v. Carpenter, 558 U.S. 100 (2009).
                            We find these authorities persuasive, and we thus adopt the
                two-part test utilized by the Ninth Circuit for determining whether the
                crime-fraud exception should apply. As the Napster court concluded, in civil
                matters, the moving party bears the burden of proving both prongs of the
                test by a preponderance of the evidence for the crime-fraud exception to
                apply. Id. at 1094-95.
                            In some circumstances, the district court may determine that
                in camera review of the privileged documents is necessary before deciding
                whether the crime-fraud exception applies. In such instances, the district
                court must first require the moving party to show 'a factual basis adequate
                to support a good faith belief by a reasonable person,' that in camera review
                of the materials may reveal evidence to establish the claim that the crime-
                fraud exception applies." Zolin, 491 U.S. at 572 (citation omitted) (quoting
                Caldwell v. Dist. Court, 644 P.2d 26, 33 (Colo. 1982)). Generally, "[o]nce
                that showing is made, the decision whether to engage in in camera review
                rests in the sound discretion of the district court." Id.     But when the
                privileged communications are documents, the district court must do an in
                camera review. In re Grand Jury Investigation, 810 F.3d 1110, 1114 (9th
                Cir. 2016). During its in camera review, the district court must determine
                to which documents specifically the second step applies. Id. Particularly,
                            [w]hile in camera review is not necessary during
                            step one ..., a district court must examine the
                            individual documents themselves to determine that
                            the specific attorney-client communications for
                            which production is sought are sufficiently related
                            to and were made in furtherance of the intended, or
                            present, continuing illegality.

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                Id. (internal quotation marks omitted) (following In re Antitrust Grand
                Jury, 805 F.2d 155, 168-69 (6th Cir. 1986)).
                The district court did not err in granting in camera review of Seibel's
                privileged documents
                            As to step one in the analysis, the district court found that
                Caesars had established by a preponderance of the evidence that Seibel was
                engaged in or planning a criminal or fraudulent scheme when he sought the
                advice of legal counsel in the drafting of the prenuptial agreement. The
                district court based its findings on the prenuptial agreement, the trust, and
                other evidence before it. While Seibel takes issue with the district court's
                factual findings, we defer to those findings, as they are supported by
                substantial evidence in the record and are not clearly erroneous.        See
                Canarelli, 136 Nev. at 251, 464 P.3d at 119 (noting that factual findings
                "are given deference and will not be set aside unless they are clearly
                erroneous or not supported by substantial evidence").      Accordingly, the
                district court properly proceeded to step two, conducting an in camera
                review to determine if the documents were "sufficiently related to and were
                made in furtherance of the intended, or present, continuing illegality." In
                re Grand Jury Investigation, 810 F.3d at 1114 (internal quotation marks
                omitted).
                The district court did not abuse its discretion in ordering the disclosure of
                Seibel's privileged communications after conducting an in camera review
                            After conducting an in camera review, the district court found
                that the crime-fraud exception applied to all of Seibel's privileged
                documents. Seibel argues that the district court's order was overbroad in
                disclosing every document. We disagree. While Seibel argues that the
                district court erred in only quoting from three documents in its order
                granting Caesars' motion to compel, he does not specifically argue which of

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                the privileged documents were improperly disclosed or why.         Walker v.
                Second Judicial Dist. Court, 136 Nev. 678, 680, 476 P.3d 1194, 1196-97
                (2020) (explaining that the burden is on the party seeking extraordinary
                writ relief to establish that such relief is warranted). Further, we are aware
                of no legal authority that requires district courts to make specifically
                enumerated factual findings regarding each document or communication
                reviewed in camera.
                            Rather, after reviewing the privileged documents in camera
                ourselves, we conclude that the district court did not act outside of its
                jurisdiction in finding that the documents were sufficiently related to and
                rnade in furtherance of Seibel's ongoing scheme. We therefore conclude that
                the district court properly granted disclosure of the privileged documents
                after conducting an in camera review under Nevada's crime-fraud exception
                to the attorney-client privilege. Canarelli, 136 Nev. at 251, 464 P.3d at 119
                ("Discovery matters are within the district court's sound discretion .. . ."
                (internal quotation marks omitted)). As the district court acted within its
                jurisdiction, we deny writ relief.3
                                               CONCLUSION
                            Having determined that the district court properly granted an
                in camera review of Seibel's privileged communications, and that it did not
                err in conducting that in camera review, we conclude that Seibel has failed
                to demonstrate that extraordinary relief is warranted in the form of a

                      3We also deny Seibel's petition to the extent that it asks this court to
                order the sequestration of the district court's minute order that contains
                quotations from three of the privileged documents, as Caesars' motion to
                compel was properly granted with respect to every document.
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                petition for a writ of prohibition. We further deny Seibel's petition to the
                extent that it asks for judicial reassignment.4

                                                                                   J.
                                                      Hardesty

                We concur:

                    A•aisC:4-0               ,   J.
                Stiglich

                                                 J.
                Herndon

                      4 Whilethis court may order reassignment of a judge under certain
                circumstances, we determine that such circumstances are not present here.
                See FCH1, LLC v. Rodriguez, 130 Nev. 425, 435, 335 P.3d 183, 190 (2014)
                (reassigning judge who formed conclusion on the merits based on
                improperly admitted evidence); Leven v. Wheatherstone Condo. Corp., 106
                Nev. 307, 310, 791 P.2d 450, 451 (1990) (reassigning a judge who made
                numerous errors suggesting favoritism). Further, this court lifts the stay of
                the proceedings in the district court that was granted in part on November
                10, 2021.
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