The Fifth Circuit recently reversed a district court’s dismissal of a motion to return property after the government’s seizure of protected attorney-client information in Harbor Healthcare Sys., L.P. v. United States, 5 F.4th 593 (July 15, 2021). Harbor Healthcare System, L.P. (“Harbor”) was the subject of two qui tam lawsuits—filed in 2014 and 2016—alleging violations of the False Claims Act (“FCA”). The Civil Division of the Department of Justice shared the allegations in the qui tam actions with its prosecutors to investigate possible criminal activity. Prosecutors obtained warrants authorizing it to search Harbor locations and offices and seize twenty-two broad categories of documents as well as smart phones, iPads, and other mobile electronic devices. Harbor asserted that the materials seized by the government contained a wealth of information protected by the attorney-client privilege, and that the government did not inform the magistrate judges who authorized the search warrants that the government had seized privileged material from Harbor.
After failed attempts to meet with the government to discuss the return of privileged documents, Harbor filed a pre-indictment motion under Federal Rule of Criminal Procedure 41(g), which allows a person “aggrieved by an unlawful search and seizure of property or by the deprivation of property” to move for the property’s return. The district court encouraged the parties to test a proposed privilege-screening plan whereby the government would give Harbor information about documents seized from its Director of Compliance, Harbor would produce a privilege log, and the government would file any objections to assertions of privilege. After completion of the screening process, the district court would review the privilege log and objections and determine how to proceed. The government then moved to dismiss Harbor’s case for lack of equitable jurisdiction, arguing that Harbor failed to demonstrate irreparable harm to its legitimate property interests and that the Rule 41(g) motion was mooted by the privilege-screening plan. Assured that processes were in place to protect Harbor’s privileged information, the district court granted the government’s motion to dismiss. Harbor filed an emergency motion for reconsideration, which the district court denied. Harbor then appealed to the Fifth Circuit.
The Fifth Circuit found that the district court abused its discretion in dismissing Harbor’s Rule 41(g) motion. Citing Richey v. Smith, 515 F.2d 1239 (5th Cir. 1975), the court outlined the four factors a district court must consider when deciding whether to grant a pre-indictment motion for return of property: (1) whether the motion accurately alleges that the government displayed a “callous disregard” for the plaintiff’s rights; (2) whether the plaintiff has an individual interest in and need for the material; (3) whether plaintiff would be irreparably injured by the denial of the return of the property; and (4) whether plaintiff has an adequate remedy at law.
First, the appellate court found 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.” The government’s failure to seek express authorization for the seizure of attorney-client privileged materials and the government’s knowledge that the seized documents contained attorney-client privileged information demonstrated that “the government made no attempt to respect Harbor’s right to attorney-client privilege.” Furthermore, the appellate court viewed the government’s continued retention of privileged documents as further evidence of its “callous disregard” for Harbor’s rights. Second, the Fifth Circuit noted that the “district court erred by failing to account for Harbor’s privacy need, which weighs heavily in favor of granting Rule 41(g) relief.” Third, the appellate court found that the government’s “ongoing intrusion on Harbor’s privacy” constituted irreparably injury that could be cured only by Rule 41(g) relief. Finally, the court found that Harbor had no adequate remedy at law, and that a motion to suppress in a possible criminal proceeding would not redress Harbor’s injury.
The Fifth Circuit’s decision to reverse the district court in Harbor Healthcare despite a privilege screening process put in place strengthens parties’ privilege protections in the government search-and-seizure context, and requires the government to take express actions both before and after seizure of information to protect a party’s privacy rights.