United States v. Gorski, 1st Cir. (2015)

7/26/2019 United States v. Gorski, 1st Cir. (2015)

1/22

United States Court of AppealsFor the First Circuit

Nos. 14- 196314- 196414- 2074

UNI TED STATES OF AMERI CA,

Appel l ee, Cr oss- Appel l ant ,

v.

DAVI D E. GORSKI ,

Def endant , Appel l ant , Cr oss- Appel l ee,

LEGI ON CONSTUCTI ON, I NC. ,

I nt er est ed Par t y, Appel l ant , Cr oss- Appel l ee.

APPEALS FROM THE UNI TED STATES DI STRI CT COURTFOR THE DI STRI CT OF MASSACHUSETTS

[ Hon. F. Denni s Sayl or , I V, U. S. Di st r i ct J udge]

Bef ore

Lynch, Sel ya, and Kayat t a,Ci r cui t J udges.

Tr acy A. Mi ner , wi t h whom Megan A. Si ddal l and Demeo LLP wer eon br i ef , f or Gor ski .

Mar t i n G. Wei nberg, wi t h whom Ki mber l y Homan was on br i ef ,f or Legi on Const r uct i on, I nc.

J enni f er Hay Zacks, Assi st ant Uni t ed Stat es At t or ney, wi t hwhom Car men M. Or t i z, Uni t ed St at es At t or ney, was on br i ef , f ort he Uni t ed St at es.


2/22

December 9, 2015


3/22

- 3 -

LYNCH, Circuit Judge. These i nt er l ocut or y appeal s

ar e f r om a di st r i ct cour t or der t hat , among ot her t hi ngs, compel s

t he l aw f i r m of Mi nt z, Levi n, Cohn, Fer r i s, Gl ovsky & Popeo, P. C.

( Mi nt z Levi n) t o pr oduce cer t ai n document s per t ai ni ng t o a f r aud

al l egedl y commi t t ed by Davi d Gor ski i n hi s oper at i on of Legi on

Const r uct i on, I nc. ( Legi on) . Gor ski and Legi on appeal t he di st r i ct

cour t ' s or der t hat at t or ney- cl i ent pr i vi l eged document s be

pr oduced under t he cr i me- f r aud except i on. The pr osecut i on cr oss-

appeal s t he di st r i ct cour t ' s deci si on t o excl ude communi cat i ons

bet ween Gor ski and hi s per sonal at t or ney, El i zabet h Schwar t z, f r om

t he pr oduct i on or der . We concl ude t hat we have j ur i sdi ct i on over

Legi on' s appeal and t he pr osecut i on' s cr oss- appeal , but not over

Gor ski ' s appeal . We di smi ss Gor ski ' s appeal f or want of appel l at e

j ur i sdi ct i on. We af f i r m t he product i on or der as t o Mi nt z Levi n.

We vacat e t he di st r i ct cour t ' s deci si on t o excl ude Gor ski ' s

communi cat i ons wi t h Schwart z f r om t he pr oduct i on order and r emand

t hat por t i on of i t s or der .

I .

The prosecut i on al l eges t hat f r om about l at e 2005 t o

about November 2010, Gor ski f r audul ent l y r epr esent ed t o f eder al

government agenci es t hat Legi on was a Servi ce- Di sabl ed Veteran

Owned Smal l Busi ness Ent i t y ( SDVOSB) i n or der t o qual i f y f or and

obt ai n gover nment cont r act s.


4/22

- 4 -

By st at ut e, at l east t hr ee per cent of al l gover nment

cont r act s must go t o SDVOSBs. 15 U. S. C. 644( g) ( 1) ( A) ( i i ) . To

qual i f y as an SDVOSB, an ent i t y must be at l east f i f t y- one per cent

owned by one or mor e servi ce- di sabl ed vet er ans. 13 C. F. R. 125. 9;

38 C. F. R. 74. 3. The ent i t y must al so be cont r ol l ed by one or

mor e ser vi ce- di sabl ed vet er ans, meani ng t hat bot h l ong- t er m

deci si on- maki ng and day- t o- day management are conduct ed by

ser vi ce- di sabl ed vet er ans. 13 C. F. R. 125. 10( a) ; 38 C. F. R.

74. 4( a) , ( c) ( 1) . Bef or e Febr uar y 8, 2010, t he ser vi ce- di sabl ed

vet eran owners were not r equi r ed t o work f ul l t i me but had t o "show

sust ai ned and si gni f i cant t i me i nvest ed i n t he busi ness. " 38

C. F. R. 74. 4( c) ( 1) ( 2008) . Ef f ect i ve Febr uar y 8, 2010, t he

r egul at i ons wer e amended t o r equi r e t hat a ser vi ce- di sabl ed

vet er an owner "wor k f ul l - t i me i n t he busi ness. " 38 C. F. R.

74. 4( c) ( 1) ( 2010) . The Febr uary 8, 2010, amendment al so

el i mi nat ed t he sel f - cer t i f i cat i on pr ocedur e t hat had been i n

ef f ect f or SDVOSBs, r epl aci ng i t wi t h a f or mal ver i f i cat i on

pr ocess. 38 C. F. R. 74. 2. The essence of t he cr i mi nal case

agai nst Gor ski i s t hat Gor ski , a non- vet er an, made f al se st at ement s

about t he owner shi p, oper at i on, and cont r ol of Legi on t o appear t o

be i n compl i ance wi t h t he SDVOSB el i gi bi l i t y r equi r ement s whi l e

r et ai ni ng ef f ect i ve owner shi p and cont r ol of t he company f or

hi msel f .


5/22

- 5 -

The prosecut i on al l eges t he f ol l owi ng f act s. Ar ound

l at e 2005, Gor ski appr oached Vet er an A, a ser vi ce- di sabl ed

vet er an, t o st ar t a const r uct i on busi ness t ar get i ng SDVOSB

cont r act s. Gor ski t ol d Veter an A t hat he want ed Vet eran A' s

i nvol vement f or hi s "vet er an st at us. " Gor ski f i l ed a cer t i f i cat e

of i ncor por at i on f or Legi on i n J anuar y 2006, wi t h Vet er an A l i st ed

as pr esi dent and hi msel f as vi ce pr esi dent .

Fr omJ anuary 2006 t o August 2007, Veteran A was nomi nal l y

t he f i f t y- f i ve per cent owner of Legi on. I n August 2007, Gor ski

caused Legi on t o under go a cor por at e r est r uct ur i ng i n whi ch Gorski

became a nomi nal f or t y- ni ne per cent owner , Vet eran A became a

nomi nal el even per cent owner , and Vet er an B - - al so a ser vi ce-

di sabl ed vet eran - - became nomi nal owner of t he r emai ni ng f ort y

percent . However , Veteran A r ecei ved no compensat i on f or t he st ock

t hat he r el i nqui shed. Meanwhi l e, Gor ski r et ai ned ef f ect i ve

cont r ol of Legi on by havi ng the vet erans execut e demand notes

payabl e t o Gor ski and secur ed by t hei r shar es of Legi on st ock, as

wel l as by havi ng them si gn empl oyment agr eement s t hat al l owed

Gor ski t o t er mi nat e t hei r empl oyment wi t h Legi on f or cause. Gor ski

al so pl aced hi s wi f e on Legi on' s payrol l even t hough she had f ul l -

t i me empl oyment el sewhere, as a di sgui sed method t o pay hi msel f

more money t han he was payi ng t he vet erans. Thr oughout t hi s t i me,

Legi on was awarded government cont r act s based on r epr esent at i ons

t hat i t qual i f i ed as an SDVOSB.


6/22

- 6 -

I n l at e 2009, Legi on r et ai ned Mi nt z Levi n i n

ant i ci pat i on of t he Febr uar y 8, 2010, amendment i n r egul at or y

cr i t er i a f or SDVOSBs. Mi nt z Levi n ef f ect ed a cor por at e

r est r uct ur i ng under whi ch Vet eran B pur chased Vet er an A' s

r emai ni ng st ock, r esul t i ng i n Vet er an B nomi nal l y owni ng f i f t y-

one per cent of Legi on' s shar es and Gor ski nomi nal l y owni ng f or t y-

ni ne per cent . Al t hough t he pur chase di d not occur unt i l Mar ch 23,

2010, t he document s were dated "as of " Febr uary 1, 2010 - - bef ore

t he date of t he regul atory amendment s.

At some poi nt , Gor ski al so engaged El i zabet h Schwar t z,

an at t or ney unaf f i l i at ed wi t h Mi nt z Levi n, f or l egal advi ce r el at ed

t o t he 2010 r est r uct ur i ng.

On Mar ch 8, 2010, one of Legi on' s compet i t or s f i l ed a

bi d pr ot est wi t h t he U. S. Smal l Busi ness Admi ni st r at i on ( SBA)

chal l engi ng Legi on' s SDVOSB st at us. The pr ot est r el at ed t o a bi d

submi t t ed by Legi on on J anuar y 11, 2010. On Apr i l 5, 2010, Legi on,

wi t h t he assi st ance of Mi nt z Levi n, f i l ed a r esponse t o t he SBA.

The r esponse i ncl uded new cor por at e documents prepar ed by Mi nt z

Levi n pur port i ng t o show t hat Legi on r est r uct ur ed on Febr uar y 1,

2010. The r ecor d suppor t s the di st r i ct cour t ' s f i ndi ng t hat t he

new cor porate document s were cr af t ed so as t o make i t appear t hat

t hey were si gned bef ore t he date of t he SBA r egul atory amendment s,

when t hey wer e not , and t hat an af f i davi t t hat f l at l y swor e under

penal t y of per j ur y t hat Vet er an B pur chased t he st ock on Febr uar y


7/22

- 7 -

1, 2010, was f al se. Fur t her , i t i s pl ai n t hat Gor ski l i kel y knew

t hat hi s l awyer s' handi wor k coul d l ead SBA t o bel i eve t hat whi ch

was f al se.

Bet ween J ul y 29, 2010, and November 19, 2010, Gorski had

di scussi ons wi t h Legi on' s account ant about ci r cumvent i ng the

SDVOSB r egul at i ons t hat r equi r e t he servi ce- di sabl ed vet er an owner

t o be t he company' s hi ghest pai d of f i cer . Gor ski and Legi on' s

account ant di scussed a pl an under whi ch Gorski woul d r ecei ve

addi t i onal , hi dden compensat i on i n a speci al bank account .

On Oct ober 23, 2012, Gorski was i ndi ct ed f or one count

of conspi r acy to def r aud t he Uni t ed St at es and f our count s of wi r e

f r aud, i n vi ol at i on of 18 U. S. C. 371 and 1343.

On J ul y 21, 2014, t he pr osecut i on i ssued subpoenas t o

Legi on and Mi nt z Levi n under Feder al Rul e of Cr i mi nal Procedur e

17( c) . The subpoenas r equi r ed t he pr oduct i on of document s f r om

November 2009 t o December 2010 concer ni ng Legi on' s owner shi p and

SDVOSB el i gi bi l i t y; negot i at i ons and t r ansf er s of Legi on st ock

i nvol vi ng Gorski , Veteran A, and Veteran B; and t he March 2010 bi d

pr ot est f i l ed agai nst Legi on. Mi nt z Levi n and Legi on wi t hhel d

pr oduct i on of cer t ai n document s on t he basi s of at t or ney- cl i ent

pr i vi l ege.

On August 7, 2014, t he di st r i ct cour t gr ant ed t he

pr osecut i on' s mot i on t hat t he cour t conduct an i n camer a

exami nat i on t o determi ne whether t he cr i me- f r aud except i on t o t he


8/22

- 8 -

at t or ney- cl i ent pr i vi l ege appl i ed. Mi nt z Levi n and Legi on

submi t t ed t housands of pages of document s f or t he di st r i ct cour t ' s

r evi ew. On Sept ember 4, 2014, t he di st r i ct cour t hel d an ex par t e

hear i ng wi t h def ense counsel and, upon concl udi ng t hat t he cr i me-

f r aud except i on t o t he at t or ney- cl i ent pr i vi l ege appl i ed, or der ed

t hat al l of t he cont est ed document s be pr oduced.

On Sept ember 8, 2014, Gorski f i l ed an ex part e mot i on

f or r econsi der at i on of t he Sept ember 4 or der as over br oad wi t h

r espect t o seven categor i es of document s. Al so on Sept ember 8,

2014, Legi on, whi ch i s not a par t y t o t he cr i mi nal case, f i l ed a

mot i on t o i nt ervene and t o st ay t he Sept ember 4 order , al ong wi t h

a mot i on t o conduct a de novo hear i ng on t he cr i me- f r aud except i on.

The di st r i ct cour t grant ed Legi on' s mot i on and, on September 11,

2014, hel d an ex par t e hear i ng wi t h counsel f or Legi on and Gor ski .

On Sept ember 12, 2014, t he di st r i ct cour t i ssued an or der

gr ant i ng i n par t and denyi ng i n par t t he mot i on f or

r econsi der at i on. As an i ni t i al mat t er , t he di st r i ct cour t f ound

t hat al l of t he document s at i ssue wer e r el evant and f aci al l y

pr i vi l eged. The onl y i ssue was whet her t he cr i me- f r aud except i on

appl i ed. The di st r i ct cour t began i t s anal ysi s by st at i ng t hat i t

consi der ed t he gr and j ur y i ndi ct ment of Gor ski t o be "concl usi ve

evi dence" of pr obabl e cause t o bel i eve t hat Gor ski commi t t ed a

cr i me or f r aud. The di st r i ct cour t t hen r easoned t hat " t her e i s

a reasonabl e basi s t o bel i eve that Gor ski i nt ended t o, and di d,


9/22

- 9 -

use the ser vi ces of t he l awyer s" i n f ur t her ance of t hat cr i me or

f r aud. The di st r i ct cour t f ound t hat i t was r easonabl e t o bel i eve

t hat Gor ski i nt ended t o use Mi nt z Levi n' s servi ces t o "per pet uat e

[ an] ongoi ng scheme" i n whi ch he "mai nt ai n[ ed] ef f ect i ve owner shi p

and cont r ol of Legi on, whi l e mai nt ai ni ng i t s appar ent st at us as

a[ n] SDVOSB. "

However , t he di st r i ct cour t gr ant ed t he mot i on t o

r econsi der as t o cat egor y t hr ee of t he document s, whi ch consi st ed

of communi cat i ons bet ween Gorski and hi s per sonal at t orney,

Schwar t z, i n r el at i on t o t he 2010 r est r uct ur i ng. The di st r i ct

cour t f ound t hat al t hough " [ t ] he basi c i nt ent of t hose

communi cat i ons i s ar guabl y t he same as hi s communi cat i ons wi t h

Mi nt z Levi n, . . . Ms. Schwar t z appar ent l y had no r ol e i n t he

submi ssi on t o t he SBA. " The di st r i ct cour t concl uded t hat under

t he ci r cumst ances, i t woul d "not make t he necessar y f i ndi ng" as t o

t he appl i cabi l i t y of t he cri me- f r aud except i on. The di st r i ct cour t

al so det er mi ned, wi t hout expl ai ni ng i t s r easoni ng on t he recor d,

t hat t he cr i me- f r aud except i on di d not appl y t o document s i n

cat egor i es one, t wo, f i ve, and si x of t he mot i on f or

r econsi der at i on. The di st r i ct cour t or der ed Legi on and Mi nt z Levi n

t o pr oduce al l of t he cont est ed document s not encompassed by t hose

cat egor i es.

Legi on and Gor ski f i l ed separ at e not i ces of appeal .

Legi on l i mi t ed i t s appeal t o t he por t i on of t he di st r i ct cour t


10/22

- 10 -

or der r equi r i ng pr oduct i on of document s by Mi nt z Levi n. The

di st r i ct cour t has st ayed i t s pr oduct i on or der as t o Mi nt z Levi n

pendi ng appeal . The di st r i ct cour t has st ayed and hel d i n abeyance

i t s i ndependent pr oduct i on or der as t o Legi on, pendi ng r esol ut i on

of t hi s appeal as t o t he Mi nt z Levi n or der .

I I .

"Or di nar i l y, l i t i gant s may not seek i mmedi at e appeal of

di scover y or der s because they ar e not f i nal deci si ons and or der s

of t he di str i ct cour t . " Gi l l v. Gul f str eam Par k Raci ng Ass' n,

I nc. , 399 F. 3d 391, 397 ( 1st Ci r . 2005) ; see al so FDI C v. Ogden

Cor p. , 202 F. 3d 454, 458 ( 1st Ci r . 2000) . A t ar get of a di scover y

order can gai n an i mmedi ate r i ght of appeal by ref usi ng t o compl y

wi t h a di scover y or der , bei ng hel d i n cont empt by t he di st r i ct

cour t , and t hen appeal i ng t he cont empt or der . Gi l l , 399 F. 3d at

397. However , none of t he part i es t o t hi s appeal have been hel d

i n cont empt . Exami ni ng t he al t ernat i ve bases upon whi ch t he

par t i es cl ai m appel l at e j ur i sdi ct i on t o chal l enge t he di scover y

or der , we concl ude t hat we do not have j ur i sdi ct i on over Gor ski ' s

appeal but t hat we do have j ur i sdi ct i on over Legi on' s appeal and

t he pr osecut i on' s cr oss- appeal .

Gor ski r el i es sol el y on t he col l at er al or der doct r i ne as

t he basi s f or appel l at e j ur i sdi cti on. 1 The col l at er al or der

1 The pr osecut i on poi nt s out an ant ecedent i ssueexpl i ci t l y l ef t open by t he di st r i ct cour t : whet her Gor ski can


11/22

- 11 -

doct r i ne al l ows i mmedi at e appeal of a "smal l cl ass" of deci si ons

t hat do not end t he l i t i gat i on but ar e nonet hel ess consi der ed

" f i nal " and t hus i mmedi at el y r evi ewabl e. Cohen v. Benef i ci al

I ndus. Loan Cor p. , 337 U. S. 541, 546 ( 1949) . "That smal l cat egor y

i ncl udes onl y deci si ons t hat ar e concl usi ve, t hat r esol ve

i mpor t ant quest i ons separ at e f r om t he mer i t s, and t hat ar e

ef f ect i vel y unr evi ewabl e on appeal f r om t he f i nal j udgment i n t he

under l yi ng act i on. " Swi nt v. Chambers Ct y. Comm' n, 514 U. S. 35,

42 (1995) ; see al so Uni t ed St at es v. Qui nt anaAguayo, 235 F. 3d

682, 684 ( 1st Ci r . 2000) ( per cur i am) . Gor ski ar gues that t he

col l at er al or der doct r i ne gi ves us j ur i sdi ct i on over hi s appeal

because t he di st r i ct cour t ' s di scover y or der wi l l be ef f ect i vel y

unr evi ewabl e i n an end- of - case appeal .

Gorski ' s ar gument i s squarel y at odds wi t h t he Supr eme

Cour t ' s deci si on i n Mohawk I ndust r i es, I nc. v. Car pent er , 558 U. S.

100 ( 2009) . I n Mohawk, t he Cour t hel d t hat " col l at er al or der

appeal s are not necessary t o ensur e ef f ect i ve r evi ew of or der s

adver se t o t he at t or ney- cl i ent pr i vi l ege, " i d. at 108, because

"post j udgment appeal s gener al l y suf f i ce t o pr ot ect t he r i ght s of

l i t i gant s and ensur e t he vi t al i t y of t he at t or ney- cl i ent

even asser t at t or ney- cl i ent pr i vi l ege over t he document s t hepr osecut i on seeks f r om Mi nt z Levi n, or whet her t he pr i vi l ege i shel d by Legi on al one. We do not r esol ve t hi s i ssue because wel ack j ur i sdi ct i on over Gor ski ' s appeal even i f he i s a pr i vi l ege-hol der .


12/22

- 12 -

pr i vi l ege, " i d. at 109. The Cour t r easoned t hat when di scl osur e

orders ar e hel d t o be er r oneous on post j udgment appeal ,

" [ a] ppel l at e cour t s can r emedy t he i mpr oper di scl osur e of

pr i vi l eged mater i al i n t he same way t hey r emedy a host of other

er r oneous evi dent i ar y r ul i ngs: by vacat i ng an adver se j udgment and

r emandi ng f or a new t r i al i n whi ch t he pr ot ect ed mat er i al and i t s

f r ui t s ar e excl uded f r om evi dence. " I d. Mor eover , t he Cour t

not ed, i mmedi at e r evi ew of ser i ous er r or s i s avai l abl e t hr ough a

wr i t of mandamus or by a cont empt uous r ef usal t o compl y wi t h t he

di scover y or der and an appeal of t he subsequent cont empt order .

I d. at 111.

Gor ski at t empt s t o di st i ngui sh Mohawk by poi nt i ng out

t hat i f we do not hear hi s appeal , our deci si on on Legi on' s appeal

wi l l become the l aw of t he case and pr event Gor ski f r om

r el i t i gat i ng t he i ssue on appeal f r omf i nal j udgment . Thi s, Gor ski

cl ai ms, makes t he di scover y or der ef f ect i vel y unr evi ewabl e on

f i nal j udgment i n a way t hat di st i ngui shes Mohawk. But even i f

Gor ski i s cor r ect about t he appl i cabi l i t y of t he l aw of t he case

doct r i ne - - an i ssue we do not deci de - - t he Cour t made i t cl ear

i n Mohawk t hat t he avai l abi l i t y of col l at er al or der r evi ew i s

det er mi ned by exami ni ng " t he cl ass of cl ai ms, t aken as a whol e. "

I d. at 107. As such, Mohawk hel d t hat par t i es ar e cat egor i cal l y

bar r ed f r om appeal i ng pr i vi l ege- r el at ed di scl osur e or der s under

t he col l at er al or der doct r i ne, not wi t hst andi ng t he f act "[ t ] hat a


13/22

- 13 -

f r act i on of or der s adver se t o t he at t or ney- cl i ent pr i vi l ege may

never t hel ess har m i ndi vi dual l i t i gant s i n ways t hat ar e ' onl y

i mper f ect l y r epar abl e. ' " I d. at 112 ( quot i ng Di g. Equi p. Cor p. v.

Deskt op Di r ect , I nc. , 511 U. S. 863, 872 ( 1994) ) . We do not have

j ur i sdi ct i on over Gor ski ' s appeal .

Legi on, a non- par t y t o the i ndi ct ment , cl ai ms appel l at e

j ur i sdi ct i on under an except i on t o t he f i nal or der doct r i ne

der i vi ng f r om Per l man v. Uni t ed St at es, 247 U. S. 7 ( 1918) . Under

Per l man, "a di scovery or der addr essed t o a non- par t y somet i mes may

be t r eat ed as an i mmedi at el y appeal abl e f i nal or der vi s- - vi s a

par t y who cl ai ms t o hol d an appl i cabl e pr i vi l ege. " Ogden Cor p. ,

202 F. 3d at 459. The r at i onal e f or Per l man i s t hat when t he t ar get

of a di scover y or der i s a non- par t y, a par t y cl ai mi ng t he pr i vi l ege

cannot gai n t he r i ght of appeal by i t sel f r ef usi ng t o pr oduce

di scover y and bei ng hel d i n cont empt . See i d. Nor wi l l t he t ar get

of t he di scover y or der al l ow i t sel f t o be hel d i n cont empt t o

obt ai n appel l at e revi ew on behal f of t he pr i vi l ege- hol der because

t he non- par t y "pr esumabl y l acks a suf f i ci ent st ake i n t he

pr oceedi ng t o r i sk cont empt by r ef usi ng compl i ance. " I d. ( quot i ng

Chur ch of Sci ent ol ogy v. Uni t ed St at es, 506 U. S. 9, 18 n. 11

( 1992) ) . As such, " [ c] our t s f r equent l y have i nvoked Per l man when

a cl i ent . . . seeks t o appeal an or der compel l i ng her

at t or ney . . . t o pr oduce al l egedl y pr i vi l eged mat er i al s. " I d.


14/22

- 14 -

Legi on' s appeal pr esent s a cl assi c Per l man si t uat i on.

The di st r i ct cour t has or der ed Mi nt z Levi n, a non- par t y, t o produce

document s. Legi on assert s at t or ney- cl i ent pr i vi l ege over t hose

document s, but i t cannot br i ng an i mmedi at e chal l enge t o t hat or der

by al l owi ng i t sel f t o be hel d i n cont empt because i t i s not t he

t ar get of t he subpoena at i ssue. 2 Nor does i t seem t hat Mi nt z

Levi n has any i nt ent i on of r ef usi ng t o compl y and t her ef or e r i ski ng

cont empt . See i d. Because Legi on i s a non- par t y, i t cannot ensure

t hat t her e woul d be any t r adi t i onal f i nal j udgment f r om whi ch t o

appeal , ei t her . Legi on i s t hus "power l ess t o aver t t he mi schi ef

of t he or der , " Per l man, 247 U. S. at 13, unl ess we appl y t he Per l man

except i on and t ake appel l at e j ur i sdi ct i on.

We have j ur i sdi ct i on over t he pr osecut i on' s cr oss- appeal

under 18 U. S. C. 3731, whi ch pr ovi des t hat " [ a] n appeal by t he

Uni t ed St at es shal l l i e t o a cour t of appeal s f r om a deci si on or

or der of a di st r i ct cour t suppr essi ng or excl udi ng evi dence. "

I I I .

I n pr i vi l ege cases, we r evi ew quest i ons of l aw de novo,

f act ual f i ndi ngs f or cl ear er r or , and di scret i onar y j udgment s f or

2 Al t hough t here i s al so a subpoena agai nst Legi on, t hedi st r i ct cour t ' s pr oduct i on or der as t o Legi on has been st ayed andhel d i n abeyance pendi ng our r esol ut i on of t he appeal s of t he or deras t o Mi nt z Levi n. Ther ef or e, we have bef or e us onl y t he par t oft he di st r i ct cour t ' s or der compel l i ng pr oduct i on f r omMi nt z Levi n.


15/22

- 15 -

abuse of di scr et i on. Caval l ar o v. Uni t ed St at es, 284 F. 3d 236,

245 ( 1st Ci r . 2002) .

The at t or ney- cl i ent pr i vi l ege i s "a pr i vi l ege of a

cl i ent t o r ef use t o t est i f y or t o have hi s counsel t est i f y as t o

conf i dent i al communi cat i ons bet ween t he t wo made i n connect i on

wi t h t he r ender i ng of l egal r epr esent at i on. " I n r e Gr and J ur y

Pr oceedi ngs, 417 F. 3d 18, 21 ( 1st Ci r . 2005) . The cr i me- f r aud

except i on "wi t hdr aws prot ect i on wher e the cl i ent sought or

empl oyed l egal r epr esent at i on i n or der t o commi t or f aci l i t at e a

cr i me or f r aud. " I d. at 22. The par t y i nvoki ng t he cr i me- f r aud

except i on "must make a pr i ma f aci e showi ng: ( 1) t hat t he cl i ent

was engaged i n ( or was pl anni ng) cr i mi nal or f r audul ent act i vi t y

when t he at t or ney- cl i ent communi cat i ons t ook pl ace; and ( 2) t hat

t he communi cat i ons wer e i nt ended by t he cl i ent t o f aci l i t at e or

conceal t he cr i mi nal or f r audul ent act i vi t y. " I n r e Gr and J ur y

Pr oceedi ngs ( Gr egor y P. Vi ol et t e) , 183 F. 3d 71, 75 ( 1st Ci r . 1999) ;

see al so Uni t ed St at es v. Al ber t el l i , 687 F. 3d 439, 450 ( 1st Ci r .

2012) . By pr i ma f aci e showi ng, we mean "a r easonabl e basi s t o

bel i eve that t he l awyer ' s servi ces wer e used by the cl i ent t o

f ost er a cr i me or f r aud. " I n r e Gr and J ur y Pr oceedi ngs, 417 F. 3d

at 23 & n. 4. Thi s st andard may be met by "somethi ng l ess t han a

mat hemat i cal ( mor e l i kel y t han not ) pr obabi l i t y t hat t he cl i ent

i nt ended t o use t he at t or ney i n f ur t her ance of a cr i me or f r aud. "


16/22

- 16 -

I d. at 23. However , i t r equi r es mor e t han "specul at i on [ or ]

evi dence t hat shows onl y a di st ant l i kel i hood of cor r upt i on. " I d.

Her e, we ar e sat i sf i ed t hat t he reasonabl e basi s

st andar d i s met as t o bot h par t s of t he cr i me- f r aud except i on

test. 3 As t o t he f i r st par t , t he di st r i ct cour t cor r ectl y not ed

3 Two ant ecedent i ssues ar e r ai sed by Gor ski ' s br i ef butnot by Legi on' s br i ef . Though we do not have j ur i sdi ct i on overGorski ' s appeal and Legi on does not expr essl y adopt t he ar gument si n Gor ski ' s br i ef , we under st and Gor ski t o make t hese ar gument s i nopposi t i on t o t he government ' s appeal , and so we addr ess t hem.

The f i r st i ssue i s whet her t he di st r i ct cour t er r ed i nconduct i ng an i n camer a r evi ew of t he pr i vi l eged document s at al l .The Supreme Cour t has hel d t hat di st r i ct cour t s may conduct an i ncamer a r evi ew of pr i vi l eged mat er i al s upon a "good f ai t h bel i ef bya reasonabl e per son, " Uni t ed St at es v. Zol i n, 491 U. S. 554, 572( 1989) ( quot i ng Cal dwel l v. Di st . Cour t , 644 P. 2d 26, 33 ( Col o.1982) ) , t hat " i n camer a revi ew of t he mat er i al s may reveal evi dencet o est abl i sh t he cl ai m t hat t he cri me- f r aud except i on appl i es, "i d. The st andar d f or i n camer a r evi ew i s a "ver y r el axed t est "t hat r equi r es a l esser evi dent i ar y showi ng t han what i s ul t i mat el yneeded t o pi er ce t he pr i vi l ege. I n r e Gr and J ur y Pr oceedi ngs, 417

F. 3d at 22. That st andar d was met by t he pr osecut i on' s al l egat i ont hat Mi nt z Levi n' s r est r uct ur i ng of Legi on was par t of a f i ve- yearongoi ng scheme whose essence was t hat t he out ward st r uct ur e of t hecompany di d not mat ch i t s act ual owner shi p and cont r ol . Gor ski ' sargument t hat t he use of an ef f ect i ve date on corporate document swas not i l l egal and so coul d not have f or med t he basi s f or t he i ncamer a r evi ew i s t oo nar r owl y f ocused, because i t i s t he ent i r ef i ve- year scheme al l eged i n t he i ndi ct ment t hat j ust i f i es i n camer ar evi ew. A j ur y coul d vi ew t he chr onol ogy as an at t empt t o convi ncet he SBA t hat t r ansact i ons t ook pl ace bef or e t hey di d, and t o di spelany reason f or f ur t her SBA i nqui r y.

The second i ssue i s whet her t he di st r i ct cour t er r ed i nnot consi der i ng a J anuar y 2, 2014, deci si on by a magi st r at e j udgenot t o conduct an i n camer a r evi ew under Zol i n. I t i s uncont est edt hat t he pr osecut i on di d not f i l e a t i mel y appeal of t he magi st r at ej udge' s or der and t her eby wai ved i t s r i ght t o r evi ew under Feder alRul e of Cr i mi nal Procedur e 59( a) . However , t he advi sory commi t t eenot es on Rul e 59( a) speci f i cal l y pr ovi des t hat "[ d] espi t e t hewai ver pr ovi si ons, t he di st r i ct j udge r et ai ns t he aut hor i t y t or evi ew any magi st r ate j udge' s deci si on or r ecommendat i on whether


17/22

- 17 -

t hat t he i ndi ct ment pr ovi des a r easonabl e basi s t o bel i eve t hat

Gor ski and/ or Legi on was engaged i n cr i mi nal or f r audul ent

act i vi ty.

As t o the second par t , we t oo have revi ewed t he numerous

and var i ed document s and agr ee wi t h t he di st r i ct cour t ' s

charact er i zat i ons. There are many communi cat i ons between Gorski

and hi s at t or neys on t he "per cei ved need t o r evi se [ Legi on' s]

cor por at e st r uct ur e. " The f act s concer ni ng t he chr onol ogy of t he

event s and t he r el evance of t he dat es t o t he r egul at or y st r uct ur e

ar e document ed. Ther e i s consi der abl e i nf or mat i on about t he bi d

pr ot est , choi ces as t o how t o respond, and t he pr epar at i on of

af f i davi t s f or submi ssi on t o t he gover nment .

The di st r i ct cour t cor r ect l y concl uded t hat t her e was a

r easonabl e basi s t o bel i eve t hat t he at t or ney- cl i ent

communi cat i ons " wer e i nt ended by t he cl i ent t o f aci l i t at e or

conceal t he cr i mi nal or f r audul ent act i vi t y. " I n r e Gr and J ur y

Pr oceedi ngs, 183 F. 3d at 75. Gor ski al l egedl y or chest r at ed an

ongoi ng scheme i n whi ch, f or f i ve years, he mai nt ai ned t he out ward

appear ance that Legi on was compl i ant wi t h SDVOSB r egul at i ons whi l e

r et ai ni ng act ual cont r ol f or hi msel f . Mi nt z Levi n was ret ai ned t o

or not obj ect i ons ar e t i mel y f i l ed. " See Fed. R. Cr i m. P. 59( a)advi sor y commi t t ee' s not e to 2005 adopt i on; see al so Thomas v.Ar n, 474 U. S. 140, 154 ( 1985) . I t was wel l wi t hi n t he di st r i ctcour t ' s di scr et i on t o deci de t he i ssue on i t s own, even af t er t het i me had passed f or t he pr osecut i on t o appeal t he magi st r at ej udge' s or der .


18/22


19/22

- 19 -

t hat Mi nt z Levi n was r et ai ned wi t h t he i nt ent of cr eat i ng out war d

compl i ance wi t h t he amended r egul at i ons so t hat Gorski coul d

cont i nue hi s ongoi ng scheme to ret ai n hi dden owner shi p and cont r ol .

That r easonabl e i nf er ence suf f i ces t o meet t he "somet hi ng l ess

t han a mat hemat i cal ( mor e l i kel y t han not ) pr obabi l i t y" st andar d,

I n r e Gr and J ur y Pr oceedi ngs, 417 F. 3d at 23, t hat t he pr osecut i on

had t o meet t o def eat t he at t or ney- cl i ent pr i vi l ege.

Legi on ar gues t hat even i f t he above were t r ue, t he

pr oduct i on or der was over br oad because t he di st r i ct cour t di d not

conduct a document - by- document r evi ew t o determi ne speci f i cal l y

whi ch communi cat i ons and document s were i n f urt herance of t he

cr i mi nal or f r audul ent conduct . However , t he di st r i ct cour t made

i t cl ear i n a st at us conf er ence f ol l owi ng t he or der t hat i t s

deci si on was t he r esul t of "a document - by- document r evi ew. " We

t oo have r evi ewed t he document s. The di st r i ct cour t coul d have

done a document - by- document anal ysi s and st i l l r eadi l y concl uded

t hat al l of t he document s f r om Mi nt z Levi n f el l wi t hi n t he cr i me-

f r aud except i on based on a r easonabl e i nf er ence t hat t he ent i r e

scope of t he repr esent at i on was i nt ended by Gor ski t o f ur t her t he

cr i me or f r aud. Gor ski ' s ongoi ng scheme r equi r ed Legi on t o be

st r uct ur ed t o mai ntai n t he appear ance of compl i ance wi t h SDVOSB

r egul at i ons, and t he ent i r e scope of Mi nt z Levi n' s r epr esent at i on

was r el at ed t o t he 2010 r est r uct ur i ng. As such, t her e was a

r easonabl e basi s t o concl ude t hat t here was a compl ete congr uence


20/22

- 20 -

between everyt hi ng Mi nt z Levi n di d and t he f r audul ent pur pose by

Gor ski t hat t r i gger s t he cr i me- f r aud except i on.

Our deci si on t hat a pr i ma f aci e case f or t he cr i me- f r aud

except i on has been made does not r ef l ect a f i ndi ng on the ul t i mat e

quest i on of whet her Gor ski act ed wr ongf ul l y. See Uni t ed St at es v.

Schussel , 291 F. App' x 336, 346 ( 1st Ci r . 2008) . Nor does i t bear

on t he conduct or i nt ent of t he l awyer s i nvol ved, because the

cr i me- f r aud except i on i s t r i gger ed by t he i nt ent of t he cl i ent .

I n r e Gr and J ur y Pr oceedi ngs, 183 F. 3d at 79.

I V.

I n i t s cr oss- appeal , t he pr osecut i on chal l enges t he

di st r i ct cour t ' s quashi ng of t he pr osecut i on' s subpoena as t o t he

"category t hr ee" document s, whi ch consi st ed of communi cat i ons

bet ween Gor ski and hi s per sonal at t or ney, Schwar t z, i n r el at i on t o

t he 2010 r est r uct ur i ng. The di st r i ct cour t r easoned t hat even

t hough " [ t ] he basi c i nt ent of t hose communi cat i ons i s arguabl y t he

same as hi s communi cat i ons wi t h Mi nt z Levi n, " t he cr i me- f r aud

except i on does not appl y t o t hose document s because "Ms. Schwart z

appar ent l y had no rol e i n t he submi ssi on t o the SBA. "

The prosecut i on ar gues t hat t he di st r i ct cour t er r ed

because whether or not Schwart z was i nvol ved i n the submi ss i ons t o

t he SBA r el at i ng t o t he bi d pr ot est was l egal l y i r r el evant . We

agr ee. As descr i bed above, t he cr i me- f r aud except i on appl i es upon

t wo pr i ma f aci e showi ngs: f i r st , t hat t he cl i ent was engaged i n


21/22

- 21 -

cr i mi nal or f r audul ent act i vi t y; and second, t hat t he at t or ney-

cl i ent communi cat i ons wer e i nt ended by the cl i ent t o f aci l i t at e or

conceal t he cr i mi nal or f r audul ent act i vi t y. See i d. at 75. The

di st r i ct cour t f ound t hat t he i ndi ct ment pr ovi ded a reasonabl e

basi s t o bel i eve t hat Gor ski was engaged i n cr i mi nal act i vi t y,

meet i ng t he f i r st r equi r ement . As f or t he second r equi r ement , t he

di st r i ct cour t r ecogni zed t hat Gor ski ' s i nt ent wi t h r egar d t o

Schwart z was ar guabl y t he same as hi s i nt ent wi t h r egard t o Mi nt z

Levi n: t o perpetuate an ongoi ng scheme to conceal t he t r ue

owner shi p and cont r ol of Legi on over a f i ve- year t i me per i od. The

f act t hat Schwar t z was not act ual l y i nvol ved i n t he submi ssi on of

document s i n t he bi d pr otest or otherwi se has no necessary bear i ng

on ei t her of t hose t wo poi nt s. Fur t her , Schwar t z pr edat ed Mi nt z

Levi n as counsel advi si ng Gor ski on Legi on. The gover nment al l eges

t her e was an ear l i er par t of an ongoi ng f r aud. Gor ski di d i ndeed

ask her f or i deas on how t o "f i nanci al l y benef i t f r om [ hi s]

ef f or t s" despi t e t he nomi nal r est r uct ur i ng and hi s concer ns about

no l onger bei ng t he "pr i mar y shar ehol der " despi t e shoul der i ng t he

"bal ance of r esponsi bi l i t i es" af t er t he r est r uctur i ng.

Because t he di st r i ct cour t appear s t o have empl oyed

i ncor r ect l egal r easoni ng wi t h r egar d t o t he "cat egor y t hr ee"

document s, we vacat e and r emand t hat por t i on of t he di st r i ct cour t

or der f or appl i cat i on of t he cor r ect l egal st andar d.


22/22

V.

We di smi ss Gor ski ' s appeal f or want of appel l at e

j ur i sdi ct i on. We vacat e t he por t i on of t he di st r i ct cour t or der

quashi ng t he pr osecut i on' s subpoena as t o the "cat egor y t hr ee"

document s, and r emand f or f ur t her pr oceedi ngs consi st ent wi t h t hi s

opi ni on. Ot her wi se, we af f i r m t he di st r i ct cour t ' s or der of

pr oduct i on as t o Mi nt z Levi n. Cost s ar e t axed agai nst Davi d E.

Gor ski and Legi on Const r uct i on, I nc.

Documents

United States v. Gorski, 1st Cir. (2015)