Court Opinion

ID: 1025933
Source: CourtListenerOpinion
Date Created: 2013-07-05 06:58:01.737201+00
Date Added: 2024-06-11T15:36:20.530690
License: Public Domain

UNPUBLISHED

                    UNITED STATES COURT OF APPEALS
                        FOR THE FOURTH CIRCUIT

                              No. 07-5069

UNITED STATES OF AMERICA,

                  Plaintiff - Appellee,

INVESTMENT PROPERTIES OF AMERICA, LLC,

                  Intervenor - Appellee,

           v.

EDWARD H. OKUN,

                  Intervenor - Appellant.

Appeal from the United States District Court for the Eastern
District of Virginia, at Richmond.   Robert E. Payne, Senior
District Judge. (3:07MS167-1)

Argued:   May 13, 2008                      Decided:   June 11, 2008

Before WILKINSON, NIEMEYER, and MOTZ, Circuit Judges.

Affirmed by unpublished opinion. Judge Niemeyer wrote the opinion,
in which Judge Wilkinson and Judge Motz joined.

ARGUED: Guy Richard Strafer, Miami, Florida, for Appellant. Brian
Lee Whisler, OFFICE OF THE UNITED STATES ATTORNEY, Richmond,
Virginia; Patrick Hugh O’Donnell, KAUFMAN & CANOLES, PC, Norfolk,
Virginia, for Appellees.    ON BRIEF: Michael J. Rosen, Miami,
Florida, for Appellant. Chuck Rosenberg, United States Attorney,
Alexandria, Virginia, for Appellee United States of America.
Unpublished opinions are not binding precedent in this circuit.

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NIEMEYER, Circuit Judge:

     On August 27, 2007, a federal grand jury sitting in the

Eastern District of Virginia issued a subpoena to Eric Perkins,

formerly the Chief Legal Officer of Investment Properties of

America, LLC (“IPA”), a company engaged in the acquisition and

management of commercial real estate.       The grand jury sought

Perkins’ testimony as it related to transactions involving the

misuse of funds by IPA and its CEO and sole shareholder, Edward H.

Okun.   Okun filed a motion in the district court to quash the grand

jury subpoena, asserting personal attorney-client privilege and

“common interest” privilege. The district court denied the motion,

finding that Okun did not have standing to challenge the subpoena

served on Perkins because Okun had not established that he had a

personal attorney-client relationship with Perkins giving rise to

any privilege.   We affirm.

                                  I

     Edward H. Okun was, at the relevant time, the sole shareholder

and CEO of IPA, as well as the sole shareholder of the 1031 Tax

Group, LLC, a business facilitating the exchange of properties

under Section 1031 of the Internal Revenue Code.    Section 1031 of

the Internal Revenue Code allows owners of investment property to

defer capital gains taxes that would be due upon sale of a property

if the sale proceeds are deposited in a “Qualified Intermediary”

until the seller is ready to close on a like-kind replacement

                                  3
property.    The grand jury’s investigation deals with the alleged

misuse of funds held by Qualified Intermediaries that were the

subsidiaries of the 1031 Tax Group, through improper loans to both

IPA and Okun individually.

       IPA’s legal staff began looking into the allegedly improper

loan transactions in October 2006, first obtaining a memorandum

from   outside   counsel    that   discussed    investment   restrictions

applicable to funds held by Qualified Intermediaries.               After

receiving this memorandum from outside counsel, IPA’s in-house

counsel Eric Perkins began investigating the loan transactions

himself,    requesting     information   from   various   IPA   employees.

Thereafter, Perkins prepared two memoranda for IPA, one dated

November 7, 2006 (the “November 7 Memo”) and the other dated

November 21, 2006 (the “November 21 Memo”).         The November 7 Memo

outlined Perkins’ understanding of the fund transfers made through

loans from the 1031 Tax Group subsidiaries to both IPA and Okun

personally. In the November 7 Memo, Perkins repeatedly referred to

himself as “in-house counsel” and recommended actions that IPA

should take going forward.         In the follow-up November 21 Memo,

Perkins stated that he was “obligated to advise the company that

continuing this course of conduct will likely result in both civil

and criminal liability (in multiple jurisdictions) to the entities

and individuals involved with such conduct.” (Emphasis added). He

also clarified his role as Chief Legal Officer of the company,

                                     4
stating that he “represent[ed] the company [IPA] as opposed to its

sole owner, officers, managers, or individual employees.”                          He

stated that such individuals “should understand that their personal

interests may be in conflict (currently or in the future) with

those of the company and/or other involved individuals” and advised

that    they   therefore     “may     wish   to    obtain      independent      legal

representation to protect their individual interests.”

       On August 27, 2007, the grand jury issued a subpoena to

Perkins, commanding him to testify before it in connection with its

investigation into misuse of the funds held by the 1031 Tax Group

and the Qualified Intermediaries.             Both IPA and Okun moved for

leave to intervene in the proceedings and to quash the subpoena

served    upon    Perkins,     asserting     attorney-client           and    “common

interest” privileges.        Okun asserted that Perkins had represented

him personally, not merely IPA as corporate in-house counsel, and

alternatively that he and IPA shared a “common interest” privilege.

On November 2, 2007, IPA, then represented by different counsel,

withdrew its motion to quash the subpoena and waived any claims of

privilege it had as to communications with Perkins.                     Thereafter,

the district court denied Okun’s motion.

       In denying Okun’s motion, the district court found that Okun

did not have standing to challenge the subpoena served on Perkins

because   he     had   not   established     the    existence     of    a    personal

attorney-client        relationship    giving      rise   to    privilege.        The

                                         5
district court held that “[a]ny claims of privilege belong to

Perkins’ client, IPA,” which had by then withdrawn all such claims.

The district court rested its holding on its finding that Okun had

not established a “subjective belief that a[] [personal] attorney-

client      relationship   existed    [that]      was   reasonable   under    the

circumstances,” as required by In re Grand Jury Subpoena:                Under

Seal, 415 F.3d 333, 339 (4th Cir. 2005), cert. denied, 546 U.S.

1131 (2006).      The court explained that “Okun’s testimony [that he

had such a reasonable, subjective belief] makes no logical sense,”

because (1) the “November 7 and the November 21 Memos, by their

terms, are not addressed to him        as an individual, notwithstanding

that   he    is   mentioned   in   them”;   (2)    “Okun   testified   that    he

continued to entrust confidential information to Perkins after

Perkins had allegedly breached both Okun’s previous confidences and

his specific instructions” -- which “simply defies logic and common

sense”; and (3) “Okun’s demeanor as a witness further undercuts his

credibility.”

       From the district court’s ruling, Okun filed this appeal and

an emergency motion to stay compliance with the subpoena.                      We

earlier denied Okun’s stay request.

                                      II

       As noted, Under Seal (2005), 415 F.3d at 339, established that

to assert attorney-client privilege, an individual must have a

                                       6
“subjective belief” that is “reasonable under the circumstances”

that an attorney-client relationship existed.

     Here, the district court found that Okun did not have such a

“subjective belief” that Perkins was his personal attorney, despite

Okun’s    testimony    that     he    so   believed.         The   district   court

discredited       Okun’s   testimony       based   on   legitimate    credibility

determinations, finding that Okun’s claim that he believed Perkins

was his personal attorney was belied by the context in which Okun

claimed that Perkins was his personal attorney, by Okun’s demeanor,

and by inconsistencies within his testimony.                   We agree with the

district court’s findings. Moreover, we conclude that even if Okun

could establish that he held a subjective belief that Perkins was

acting as his personal attorney, such a belief would not have been

reasonable in the circumstances of this case.

     As a preliminary matter, in choosing between two versions of

relevant events, the district court credited Perkins’ testimony

rather     than     Okun’s,     and    we      defer    to     such   credibility

determinations, especially where, as here, the testimony of Okun

was directly contradictory to that of Perkins.                 When a factfinder

is confronted with “two permissible views of the evidence, the fact

finder’s choice between them cannot be clearly erroneous.”                    Sheet

Metal Worker’s Int’l Ass’n v. Sweeney, 29 F.3d 120, 126 (4th Cir.

1994)    (quoting    Anderson    v.    Bessemer     City,    470   U.S.   564,   574

(1985)).    Thus, we accept the district court’s findings that (1)

                                           7
Okun did not speak with Perkins prior to the distribution of the

November 7 Memo; (2) Okun in fact never spoke to Perkins regarding

his personal conduct; and (3) Okun never told Perkins that he was

upset because he believed Perkins breached his confidentiality by

distributing the Memos to people other than Okun.

     With   these    determinations       of   fact,   there    could   be   no

objectively   reasonable     basis    for      Okun    --   a   sophisticated

businessman who, as the record reveals, had an understanding of the

nature of personal attorney-client relationships -- to have had a

belief that Perkins was acting as his personal attorney.                     In

addition, in the November 21 Memo, Perkins affirmatively stated

that he was not acting as Okun’s personal attorney.

     Okun argues that Perkins’ circulation of the November 7 and

November 21 Memos to R. David Field, who was neither an officer nor

employee of IPA or 1031 Tax Group at the time but the prospective

Chief Financial Officer of Okun Holdings, a holding company yet to

be formed for all of Okun’s legally separate companies, would have

been improper if Perkins represented only IPA because Perkins would

have had authority to circulate the Memos to only IPA’s officers

and directors.      But this argument fails first because IPA had an

interest in circulating the relevant Memos to Field, who was set to

become the Chief Financial Officer of IPA’s prospective parent

company and would likely be involved in dealing with this issue.

Morever, Okun’s assertion that Perkins’ circulation of the two

                                      8
Memos to Field somehow supports Okun’s belief that Perkins was his

personal attorney makes no sense.          If Perkins was Okun’s personal

attorney, he still would have lacked authority to distribute the

Memos to Field, and circulation to Field provides no evidence of a

personal attorney-client relationship between Okun and Perkins.

        In sum, we conclude that the district court properly denied

Okun’s motion to quash the subpoena issued to Perkins on the basis

that Okun lacked standing because he failed to establish a personal

attorney-client privilege.

        Okun contends alternatively that, even if we affirm the

district court’s finding that he did not have a personal attorney-

client relationship with Perkins, we must nonetheless grant his

motion to quash on the basis that there is a “common interest”

privilege between him and IPA.         In In re Teleglobe Communications

Corporation, 493 F.3d 345, 364 (3d Cir. 2007), the court explained

that the common interest privilege “allows attorneys representing

different clients with similar legal interests to share information

without having to disclose it to others.”          But in this case, Okun

failed to establish that he and IPA were represented by separate

legal    counsel   engaged   in   a   joint   strategy.   Moreover,   “[a]n

employee’s cooperation in an internal investigation alone is not

sufficient to establish a common interest; rather some form of

joint strategy is necessary.”         Under Seal (2005), 415 F.3d at 341

(internal quotation marks and citation omitted).

                                       9
     Here, not only does the record indicate that Okun likely

refused to cooperate with Perkins’ internal investigation, but he

also has not demonstrated any common interest between the parties

as part of an ongoing legal enterprise or strategy.   Thus, Okun’s

motion to quash also fails to be supported by the common interest

privilege.

     Accordingly, the district court’s denial of Okun’s motion to

quash the grand jury subpoena issued to Perkins is

                                                         AFFIRMED.

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