Gregory A. Brower is a Shareholder with Brownstein Hyatt Farber Schreck, LLP in Las Vegas, NV and Washington, DC. Mr. Brower also serves on WLF Legal Policy Advisory Board and is the WLF Legal Pulse’s Featured Expert Contributor, White Collar Crime and Corporate Compliance.

In a much-anticipated decision, the U.S. Court of Appeals for the  Fourth Circuit recently reversed a district court’s refusal to enjoin a U.S. Department of Justice filter team’s review of materials seized from a law firm during a criminal investigation.  A unanimous three-judge panel ruled that the use of a magistrate judge-approved filter team was improper for several reasons, including that the creation of the filter team “inappropriately assigned judicial functions to the executive branch.”  This ruling has the potential to upend longstanding and well-established processes routinely utilized, with judicial approval, by DOJ to allow for the expeditious review of seized records that are likely to include attorney-client communications and attorney work-product.

This dispute arose out of an IRS criminal investigation in which the target’s law firm came under suspicion of assisting the target in breaking the law.  This led to an investigation of the law firm, which eventually led to a government application for a warrant to search the law firm’s office.  The presiding magistrate judge found requisite probable cause for the search and, at the same time the warrant was issued, the judge also authorized a filter team protocol proposed by DOJ.  As always, the filter-team process would enable a review of the seized documents for potentially privileged or work product documents performed by a team that did not include anyone involved in the underlying investigation.  

The specific filter protocol approved by the magistrate judge in this case provided that the filter team should review the seized records, identify and set aside any privileged and potentially privileged materials, and forward all other records to the investigative/prosecutive team. The team was to then evaluate the records identified as privileged or potentially privileged for responsiveness, and then discuss with the law firm whether those documents could be forwarded to the investigative/prosecutive team or be submitted to the court for decision.  The protocol also authorized the filter team to contact other clients of the law firm whose records were seized in order to request privilege waivers. As noted above, DOJ proposed this protocol, which the magistrate judge adopted contemporaneous with the issuance of the warrant on an ex parte basis.

The subject search resulted in the seizure of all of the law firm’s email correspondence, including emails relating to the target of the investigation, and emails relating to numerous other clients, some of whom DOJ was also investigating or prosecuting for unrelated crimes.  Following the seizure of the records, the law firm sought an injunction from a district court to secure the return of the records so as to allow them to do their own privilege review before the government could review the records.  The district court denied this request, explaining that the protocol provided that the filter team would be operating under the court’s direction, and could be neutral.  The district court further observed that “absent a finding that there has been some breach of [their] ethical responsibilities and duties in this case, which rarely occurs,” the filter protocol was not inappropriate. The court also noted that there was no “per se rule that law firms are to be treated so differently that neutral examiners must be appointed in every case.”  The law firm appealed, and the Fourth Circuit reversed.

The Fourth Circuit’s opinion quickly cut to what the judges considered to be the core issue, deciding that the filter team’s unilateral discretion to decide what records were privileged and what records were not meant that the protocol was not fair.  The court explained that the magistrate judge erred by failing to consider that fewer than 1% of the seized records were actually responsive to the warrant and that, as a result, the filter team would be receiving emails concerning other ongoing federal investigations of other related clients.  Thus, while the filter team did not include any personnel who were involved in the underlying investigation, because that was not necessarily true for the other investigations of which the other clients might be targets, the protocol was flawed.  The court further decided that the magistrate judge should have conducted an adversarial, i.e. not an ex parte, hearing on the filter team protocol issue.

While this case arguably presented some unique factors that particularly troubled this panel, the decision is nevertheless likely to have broader implications.  One likely result is that magistrate judges may agree to specific filter team protocols only after a search has been conducted and before any government review, and only after conducting a hearing that includes counsel for the target of the search. While such an approach will slow down the government’s review process, it would not create any significant additional burdens for the court. 

However, others predict that the impact of this decision could go so far as to cause the elimination of filter teams altogether, giving way to a judicial review process for every search that potentially includes privileged materials. This approach would mark a significant change in the way filter teams have always worked, and would impose a burden on the judiciary that would not only significantly slow the review process, but also increase the costs of the process with no clear concomitant increase in the protection of the search target’s rights. 

Finally, some have even suggested that this decision could make judges, prosecutors, and agents so uneasy about the potential complications associated with searches of attorneys’ offices that such warrants will only be rarely sought or issued, even when based on clear probable cause. All of this could have the effect of significantly chilling DOJ’s enthusiasm for pursuing some types of white-collar investigations.