In Harbor Healthcare Systems LP v. United States, No. 19-20624 (July 15, 2021), the Fifth Circuit reversed a decision by the District Court for the Southern District of Texas denying a Rule 41(g) motion for return of property. The Court held that the “district court erred in its assessment of the pre-indictment harm resulting from an allegedly unlawful seizure of privileged materials.”
Harbor was involved in two qui tam lawsuits under the False Claims Act. In those cases, Harbor produced documents in April 2017. The Department of Justice opened a parallel criminal investigation and search warrants were issued. The government executed those search warrants in May 2017. Because attorney-client privileged materials were possibly seized, at the government’s request Harbor provided a list of lawyers and law firms. The documents were reviewed by the filter team. In September 2018, Harbor filed a motion to return property under Federal Rule of Criminal Procedure 41(g). After the district court’s denial of Harbor’s motions regarding the privilege screening plan and the district court’s allowing the government’s filter team to continue reviewing material designated as privileged, Harbor appealed to the Fifth Circuit.
The Court’s reversal of the district court’s decision was based upon its application of the facts to the factors in Richey v. Smith, 515 F.2d 1239, 1243–44 (5th Cir. 1975).
(1) “[W]hether the motion for return of property accurately alleges that the government agents . . . displayed ‘a callous disregard for the rights of [the plaintiff]’”;
(2) “[W]hether the plaintiff has an individual interest in and need for the material whose return he seeks;”
(3) “[W]hether the plaintiff would be irreparably injured by the denial of the return of the property; and”
(4) “[W]hether the plaintiff has an adequate remedy at law for the redress of his grievance.
The Fifth Circuit held that the district court incorrectly concluded that the government did not show a “callous disregard” for Harbor’s rights simply because it obtained search warrants prior to seizing Harbor’s privileged materials. It instead emphasized that “the government did not seek express prior authorization from the issuing Magistrate Judge for the seizure of attorney-client privileged materials.” The Court further stated that the government’s failure to return Harbor’s privileged materials after the search further disregarded Harbor’s rights.
The Court further found that the district court also erred in its assessment of Harbor’s need for the documents and information the government seized. Notably the Court’s finding was not based on whether Harbor had access to the materials, but rather “Harbor’s need … lies in protecting the privacy of the privileged material in the documents.”
The court further found that the government’s ongoing intrusion on Harbor’s privacy constitutes an irreparable injury that can be cured only by Rule 41(g) relief. Finally, the Court found that Harbor does not have an adequate remedy at law because it is not certain that there will ever be criminal charges brought against Harbor. Thus, Harbor may not have an opportunity to challenge the seizure of privileged materials. It also noted that suppression motions vindicate an interest different from Rule 41(g) motions. Suppression prevents the government from using certain materials as evidence—it does not force the government to return those materials to the defendant. Thus, the Court concluded that “the district court erred by misunderstanding the harm alleged by Harbor and by equating return of property with suppression of evidence. It therefore abused its discretion by refusing jurisdiction over Harbor’s Rule 41(g) motion.”
This is a significant opinion in the white-collar criminal area and practice changes could be far reaching. The government may begin adding language in warrant affidavits that the search may include privileged materials. It may also force the government’s taint teams to more expeditiously review and destroy or return, as opposed to merely segregate, potentially privileged materials. The opinion may even result in the issuance of grand jury subpoenas for documents in lieu of executing search warrants when the government has assurance from defense counsel that materials have been adequately preserved.
Defense attorneys may want to institute some practice changes as well. They should be proactive in preserving materials when they are aware of an investigation to avoid a potential search. Defense attorneys should also seriously consider whether a Rule 41(g) motion is appropriate if attorney-client privileged materials are seized. Prior to Harbor Healthcare Systems, the Rule 41(g) standard was difficult to satisfy in this scenario. However, this case and the government’s increasing use of search warrants resulting in seizure of privileged materials in the age of electronic media make a Rule 41(g) motion a more viable option.