U.S. v. NICHOLAS Case No. SACR 08-00139 CJC.
594 F.Supp.2d 1116 (2008)
UNITED STATES of America, Plaintiff, v. Henry T. NICHOLAS, III and William J. Ruehle et al., Defendants.
United States District Court, C.D. California, Southern Division.
December 29, 2008.
Jack P. DiCanio, Lavanya Mahendran, Richard Marmaro, Matthew Eric Sloan, Matthew Donald Umhofer, Skadden Arps Slate Meagher and Flom LLP, Los Angeles, CA, Kevin M. Downey, Malachi B. Jones, Tobin J. Romero, Barry S. Simon, Brendan V. Sullivan, Jr., Negar Tekeei, Lance A. Wade, Marcie R. Ziegler, Williams and Connolly LLP, Washington, DC, James D. Riddet, Stokke and Riddet, Santa Ana, CA, for Defendants.
CORMAC J. CARNEY, District Judge.
Defendant Henry T. Nicholas, III ("Dr. Nicholas") and the government have filed competing motions regarding an email entitled Brett's Home Run ("Email") that Dr. Nicholas sent to his estranged wife, Stacey, from his Broadcom email account. In the Email, Dr. Nicholas admits to engaging in certain misconduct and making various misrepresentations in his capacity as CEO of Broadcom. Five years after Dr. Nicholas sent the Email, the government became aware of the Email during its 2007 criminal investigation of Dr. Nicholas and the stock option granting practices at Broadcom. In the course of the government's investigation, Broadcom representatives provided the Email to the government. Soon after learning that the government had a copy of the Email, Dr. Nicholas asserted that the Email was a privileged marital communication and demanded that the government return the Email to him. The government refused and maintained that the Email was not a privileged communication. Ultimately, the parties requested that the Court resolve this dispute, and the Court found that the Email was not a privileged communication. However, the Ninth Circuit reversed, holding that the Email was a privileged marital communication, but did not require that the government return the Email to Dr. Nicholas.
Dr. Nicholas now moves to preclude the government from disclosing the Email to Dr. Nicholas' co-defendant William J. Ruehle ("Mr. Ruehle") and from using the privileged Email for cross-examination or impeachment of Dr. Nicholas should he testify at trial. The government opposes Dr. Nicholas' motion and moves for permission to disclose the Email to Mr. Ruehle so he can prepare his defense to the charges against him. The government also believes the Court's ultimate decision regarding the parties' competing motions should be made public.
After carefully considering the evidence presented by the parties and the arguments of their counsel, the Court believes that the Email must be disclosed to Mr. Ruehle. As the Ninth Circuit recognized, the Email may be admissible at trial notwithstanding the privilege. The government may be able to use the Email to impeach Dr. Nicholas should he give exculpatory testimony at trial that contradicts the incriminating statements in the Email. The Court may allow the government to use the Email for impeachment purposes as the jury's interest in finding the truth may outweigh Dr. Nicholas' confidentiality in a troubled marriage. The incriminating statements in Dr. Nicholas' Email may also be admissible against Mr. Ruehle as a
The Court also believes that this order regarding the Email should be made public. Transparency is the hallmark of a fair and equitable system of justice, and as the Ninth Circuit has held, "[t]he presumption of openness ... is at the foundation of our judicial system." CBS, Inc. v. District Court,
A. The Email
In April 2002, Dr. Nicholas composed and sent the Email to his then-wife, Stacey, from his Broadcom email account, using his company laptop. (Decl. of Robb Adkins, Nov. 10, 2008 ("Adkins Decl.") Ex. A.) The eighteen-paragraph email discusses the Nicholas' children, the breakup of the Nicholas' marriage, Dr. Nicholas' drug use, and various issues related to Broadcom. (Id.) Dr. Nicholas details business decisions made in his capacity as CEO of Broadcom. In one paragraph, Dr. Nicholas admits:
(Id.) Dr. Nicholas also details his drug use and the effects thereof. (Id.) After ending his drug use "cold turkey," Dr. Nicholas writes that he experienced "`panic attacks'" and "`electric shock' like flashes" before and during a "wall-street conference call." (Id.) The Email concludes with a postscript in which Dr. Nicholas states that he will "not need [his then-wife's] help," but admonishes that "the things that effect [sic] my emotional fragility [around the time of the board and shareholder
Dr. Nicholas sent the Email from his Broadcom email account through the company server, using his company laptop. (Decl. of Robb Adkins and Andrew Stolper, Sept. 10, 2007 ("Adkins/Stolper Decl.") ¶ 6.) Dr. Nicholas chose not to apply password protection to his Broadcom laptop or otherwise limit unauthorized access, and approximately ten Information Technology ("IT") staff members had the capacity to access Dr. Nicholas' laptop. (Id. ¶ 9.) Dr. Nicholas also engaged in a regular practice of handing a cloned, unprotected copy of his laptop to his traveling staff, including his limousine driver, airplane pilot, and secretary. (Id. ¶¶ 11, 15.) Dr. Nicholas authorized several Broadcom employees to create back-up copies of his emails, which required the employee to open and compare emails with the back-up copy. (Id. ¶¶ 8-11; Def.'s Mot. Ex. 2 at 14.) Although emails sent from Dr. Nicholas' company laptop were not stored on the Broadcom server, Dr. Nicholas' sent items were backed up at regular intervals by Broadcom's IT staff. (Adkins/Stolper Decl. ¶¶ 8-10.)
In 2002, Timothy Duchene, a member of Broadcom's IT department, found the Email on Dr. Nicholas' laptop while he was engaged in the authorized maintenance and back-up of Dr. Nicholas' email account. (Id. ¶ 15.) Around the same time, Scott Smith, another member of Broadcom's IT department who worked closely with Dr. Nicholas, became concerned about Dr. Nicholas' erratic conduct and possible drug abuse. (Id. ¶ 5.) Mr. Smith brought these issues to the attention of Henry Samueli, Broadcom's Co-Chairman of the Board of Directors, who asked Mr. Smith to obtain more proof of Dr. Nicholas' conduct. (Id.) According to Mr. Smith, Dr. Samueli authorized Mr. Smith to obtain this information by "any means necessary"—including searching emails sent on the Broadcom server. (Id.) Mr. Smith, who knew of the existence of the Email, asked Mr. Duchene to retrieve a copy of it from a back-up of Dr. Nicholas' laptop. (Id.) Per Mr. Smith's request, Mr. Duchene retrieved the Email and gave a copy of it to Mr. Smith. (Id.) (Mr. Duchene also shared the Email with Bryan Maine, another member of Broadcom's IT staff. (Id. ¶ 15))
Mr. Smith returned the copy of the Email to Mr. Duchene, but notified Broadcom's General Counsel, David Dull, of the existence of the Email. Mr. Dull then asked Dave Shaw, another member of the IT department, to retrieve a copy of the Email for him. (Id. ¶ 5.) Mr. Shaw provided Mr. Dull with a copy of the Email as well. (Id. ¶ 6.) Mr. Dull then gave Mr. Smith a copy of the Email, and Mr. Smith provided the Email to Dr. Samueli, a person identified as Aranoff, and another unidentified individual. (Id.) Mr. Smith also retained an electronic copy of the Email for his own personal records. (Id.) Upon reading the Email, Dr. Samueli became very concerned and asked Mr. Smith to make additional copies of the Email. (Id.)
During the summer of 2002, Broadcom's Director of Human Resources, Nancy Tullos, also learned of the Email's existence and directed Mr. Smith to retrieve the Email for her records. (Def.'s Mot. Ex. 2 at 17, Ex. 1 at 5.) Per Ms. Tullos' request, Mr. Smith sent a copy of the Email to Mr. Dull and Ms. Tullos. (Id.) Ms. Tullos then saved a copy of the Email to her hard drive. (Id. Ex. 2 at 17.) Several Broadcom executives and employees subsequently learned of and saw the Email, including Alan "Lanny" Ross, Werner Wolfen, Timothy Langan. (Adkins/Stolper Decl. ¶¶ 20, 22, 25.) The Email remains in the possession of Broadcom. (Adkins Decl. Ex. B
On June 1, 2007, in the course of the government's investigation of Dr. Nicholas and Broadcom's stock option granting practices, Ms. Tullos' attorneys met with the government and provided the government with a copy of the Email. (Adkins Decl. ¶ 4.) The government had never seen the Email, did not know of its existence, and did not request it. (Id.) However, Ms. Tullos had previously provided the Email to the Securities and Exchange Commission ("SEC") pursuant to an administrative subpoena. (Id.)
Dr. Nicholas was aware that Broadcom possessed the Email and that many employees had access to it, but took no efforts to maintain its privacy until he first raised the claim of privilege in July of 2007. Dr. Nicholas' attorneys contacted the Office of the United States Attorney ("USAO") and demanded the return of the Email, claiming that the Email was a privileged marital communication. (Def.'s Mot. Ex. 2 at 16-19.) The USAO responded that the assertion of privilege was not well taken. (Id. at 23-24.) However, the USAO proposed that it would preserve the issue of privilege for presentation to the criminal duty judge within 60 days and agreed not to use the Email in its continuing investigation. (Id. at 30-31.) Subsequently, Dr. Nicholas filed a motion for a protective order with this Court.
B. Procedural History
In his motion for a protective order, Dr. Nicholas claimed that the Email was a privileged marital communication. Dr. Nicholas requested a court order prohibiting the use of the Email in the government's investigation and requiring the government to return the Email to him. The Court held that the Email was not a privileged marital communication "because (1) the Nicholas' marriage had failed at the time of the communication; (2) Dr. Nicholas had no reasonable expectation of privacy in the email; and (3) Dr. Nicholas waived any privilege he may have asserted over the email by failing to take reasonable steps to secure its confidentiality." In re Grand Jury Investigation, Order at 2 (C.D.Cal. Sept. 25, 2007).
Dr. Nicholas then appealed the Court's ruling to the Ninth Circuit. The Ninth Circuit stayed the Court's order and ordered briefing by the parties. On November 27, 2007, the Ninth Circuit vacated the Court's order, holding that the Email was a privileged communication, and ordered the Court to enter a protective order "precluding the introduction of the privileged communication in judicial or grand jury proceedings." In re Grand Jury Investigation, Slip Op. at 15 (9th Cir. Nov. 27, 2007). However, the Ninth Circuit declined to preclude the government from "using or retaining the email for any purpose." Id.
Per the Ninth Circuit's instructions, the Court entered a protective order. Believing that the Court's protective order was deficient, Dr. Nicholas filed a motion for clarification with the Ninth Circuit. In his motion, Dr. Nicholas requested that the Ninth Circuit clarify that the Email could not be used for "impeachment, rebuttal, and other purposes." In re Grand Jury Investigation, Slip Op. at 3 (9th Cir. Apr. 30, 2008). The Ninth Circuit declined to afford Dr. Nicholas the relief he sought. Id. at 4. Rather, the Ninth Circuit reiterated that "the only holding of our [prior] disposition" was that the "electronic communication is privileged as a marital communication." Id. The Ninth Circuit went on to hold:
Id. (internal citations omitted). The Court entered a revised protective order on May 20, 2008. Consistent with the Ninth Circuit's ruling, the Court's revised protective order provides that the Email may not be disclosed "in judicial or grand jury proceedings to the full extent of the marital communications privilege." In re Grand Jury Investigation, Order at 2 (C.D.Cal. May 20, 2008). On June 4, 2008, the grand jury returned an indictment against Dr. Nicholas and Mr. Ruehle for an alleged conspiracy related to stock options granting practices at Broadcom.
On October 20, 2008, after notification from the government that it intended to use the Email in preparation for trial and to disclose the Email to Mr. Ruehle, Dr. Nicholas brought the instant motion to suppress, again requesting that the Court preclude the use of the Email for trial preparation, cross-examination, or impeachment and prohibit its disclosure to Mr. Ruehle. On October 28, 2008, the government filed its ex parte application to unseal the documents filed in connection with the pre-indictment litigation regarding the issue of privilege or, in the alternative, provide these documents to Mr. Ruehle.
C. Publication of the Email in the Orange County Register
On November 15, 2008, the Orange County Register ran a story that disclosed the existence of the Email, detailed its contents, and included excerpts from the Email. John Gittelsohn, Ex-Broadcom CEO: Drugs Meant He Was `Not Fully Functioning,' ORANGE COUNTY REG., Nov. 15, 2008. In addition to providing a context for and overview of the Email, the story included the following direct quotations from the Email:
The Register obtained the Email from Mr. Smith. Id. Mr. Smith previously had provided the Email to several Broadcom executives and also retained an electronic copy of the Email for his personal records. Id. (He subsequently gave a copy of the Email to the SEC and was asked about the Email by the FBI. Id.) Mr. Smith told the Register that he disclosed the Email in an effort to "stand[ ] strong for truth ... and also to protect the interests of Broadcom and its shareholders."
As the Ninth Circuit recognized, the Email may be admissible at trial notwithstanding the privilege. The Court will have to make the ultimate determination of the Email's admissibility at trial after considering all of the facts and circumstances at that time. Because the Email may be admissible at trial, in fairness, the Email must now be disclosed to Mr. Ruehle. Finally, in light of the disclosure of the contents of the Email by the Orange County Register, the Court finds no compelling interest in keeping this order under seal.
A. The Email May Be Admissible at Trial
The marital communications privilege, like all evidentiary privileges, is not
1. The Email May Be Admissible to Impeach Dr. Nicholas
The Ninth's Circuit's ruling on the issue of privilege recognizes that the Email may be admissible to impeach Dr. Nicholas if he gives exculpatory testimony that contradicts his incriminating statements in the Email. The Ninth Circuit held that the privilege afforded the Email is not absolute and recognized the possibility that the Email may be used at trial. In its first ruling, the Ninth Circuit refused to preclude the government from "using or retaining the email for any purpose," as Dr. Nicholas requested. In re Grand Jury Investigation, Slip Op. at 15 (9th Cir. Nov. 27, 2007). And in response to Dr. Nicholas' request for clarification that the Email could not be used for impeachment, the Ninth Circuit declined to restrict the use of the Email in this way. Instead, it held simply: "[i]n order to ensure that Nicholas gets the benefit of the marital communications privilege to which he is entitled, the district court may be required to undertake an individualized assessment of the specific facts and circumstances and exercise its discretion within the context of a trial, if there is one." In re Grand Jury Investigation, Slip Op. at 4 (9th Cir. Apr. 30, 2008). Thus, for a second time, the Ninth Circuit specifically declined to hold that the Email could not be used for any purpose, including impeachment or rebuttal. Id. Rather, the Ninth Circuit held that the "appropriate scope of protection for Nicholas' privileged communication" must be determined pursuant to the relevant "case law." Id. at 3.
Relevant precedent confirms that precluding the use of the Email for any purpose would exceed the "appropriate scope of protection" to which the Email is entitled. Evidentiary privileges are not absolute, and the jury's obligation to consider relevant, probative evidence may outweigh any interest in keeping privileged information from it. In Harris v. New York, the United States Supreme Court held that statements obtained in violation of a defendant's Miranda rights, while inadmissible in the government's case-in-chief, can be used to impeach a defendant, if he testifies. The Supreme Court held:
Harris v. New York,
The marital communications privilege does not preclude the introduction of privileged communications for impeachment insofar as the defendant's testimony constitutes waiver of the privilege. The Tenth Circuit noted that Harris "supports the trial court's ruling that otherwise inadmissible testimony involving the martial communications privilege can be used to impeach a defendant who testifies on his own behalf." United States v. Neal,
Dr. Nicholas particularly relies on United States v. Hall in support of his argument that the Email may not be used for purposes of impeachment or cross-examination, but this authority is inapposite.
The Court will not speculate at this time as to whether the Email will be admissible at trial. As the Ninth Circuit recognized, the Court may only make an assessment regarding the admissibility of the Email in "the context of a trial, if there is one." In re Grand Jury Investigation, Slip Op. at 4 (9th Cir. Apr. 30, 2008). The Court must wait to see if there is a trial, if Dr. Nicholas testifies, if Dr. Nicholas gives exculpatory testimony that contradicts his incriminating statements in the Email, and if the government seeks to impeach Dr. Nicholas with the Email.
2. The Email May Be Admissible Against Mr. Ruehle as a CoConspirator Admission
The Email may be admissible against Mr. Ruehle as an admission of a coconspirator. Under the Federal Rules of Evidence, "a statement by a coconspirator of a party during the course and in furtherance of the conspiracy" is admissible against the party. FED. R. EVID. 801(d)(2)(E). As a threshold issue, Mr. Ruehle does not have standing to assert the marital privilege because Dr. Nicholas and his wife alone are the holders of the privilege. United States v. Montgomery,
Dr. Nicholas' statements in the Email arguably qualify as admissions of a coconspirator because Mr. Ruehle and Dr. Nicholas have been indicted as co-conspirators, (Indictment ¶¶ 2, 3), Dr. Nicholas wrote and sent the Email in April 2002, which was during the course of the alleged conspiracy, (Indictment ¶ 15), and Dr. Nicholas may have made the statements in the Email in furtherance of the alleged conspiracy.
"[T]o be `in furtherance' the statements must further the common objectives of the conspiracy or set in motion transactions that are an integral part of the conspiracy." United States v. Kearns,
The Court has insufficient evidence at this time to determine conclusively if the Email falls within the scope of Rule 801(d)(2)(E). Such a determination, however, is unnecessary at this time. What is necessary at this time is a determination of whether the Email could be admissible at trial against Mr. Ruehle as a co-conspirator admission. The Court can make this determination and finds that the Email definitively may be admitted at trial against him as such an admission.
B. The Email and the Court's Order Must Be Disclosed to Mr. Ruehle
Since the Email may be admissible at trial—either to impeach Dr. Nicholas if he waives the privilege or as a co-conspirator admission against Mr. Ruehle—the Email must be disclosed to Mr. Ruehle. If he did not learn about the Email while he was at Broadcom, Mr. Ruehle presumably now knows about the Email in light of its publication in the Orange County Register. In any event, he is entitled to access the Email in its entirety in order to understand Dr. Nicholas' statements in context. More importantly, he must be apprised of the Court's order and the fact that the Email may be admissible at trial. The Email and the fact that it may be admissible at trial are critical pieces of information to consider as Mr. Ruehle prepares for trial and crafts his defense strategy. Mr. Ruehle cannot learn of the possible admissibility of this significant piece of evidence in the midst of trial. That is simply not fair.
Contrary to Dr. Nicholas' assertion, disclosure of the Email and the Court's order to Mr. Ruehle is not inconsistent with the Ninth Circuit's ruling on the issue of privilege. The Court's protective order, which tracks the language of the Ninth Circuit's ruling, prevents the disclosure of the Email "in judicial or grand jury proceedings to the full extent of the marital communications privilege." In re Grand Jury Investigation, Order at 2 (C.D.Cal. May 20, 2008). The Ninth Circuit's ruling does not prohibit the use of the Email for impeachment or trial preparation.
Moreover, under the Federal Rules of Criminal Procedure, Mr. Ruehle has a right to discover the Email. Rule 16 provides that the government must disclose documents that are "material to preparing the defense" or that "the government intends to use ... in its case-in-chief at trial." FED.R.CRIM.P. 16(a)(1)(E)(i)-(ii). The Email is certainly material to the preparation of Mr. Ruehle's defense and Dr. Nicholas' statements in the Email may be used against Mr. Ruehle as admissions of a co-conspirator. Even more to the point, however, Mr. Ruehle has a right to a fair trial. Denying Mr. Ruehle access to the Email and keeping him in the dark regarding its potential admissibility— against either him or Dr. Nicholas—would be patently unfair to Mr. Ruehle. Dr. Nicholas' statements in the Email are incriminating. Mr. Ruehle must be given the opportunity to devise a strategy that minimizes the statements or distance himself from them. Both the Federal Rules of Criminal Procedure and the constitutional requirements relating to a defendant's pretrial rights recognize the importance of providing a criminal defendant with sufficient notice of the evidence against him so he may fairly defend against the government's charges. Mr. Ruehle needs to see the Email and be told of its potential admissibility at trial, and he needs to see it and be told of that potential admissibility now.
Dr. Nicholas suggests that because the Email is privileged it may not be disclosed to Mr. Ruehle. Dr. Nicholas argues that privileged documents may not be disclosed to third parties.
C. The Court's Order Cannot Be Maintained Under Seal
The United States Supreme Court has held that the right to attend criminal proceedings "is implicit in the guarantees of the First Amendment." Richmond Newspapers, Inc. v. Virginia,
Understanding the importance of the public's right to access criminal proceedings, the Ninth Circuit has held that the First Amendment's qualified right of access extends to certain pre-trial hearings, including hearings on motions to suppress. United States v. Brooklier,
Neither the assertion of the privilege nor the fact that information is confidential alone is sufficiently compelling to justify sealing a court proceeding or record. A defendant's stated interest in "`[c]onfidentiality' is not some talismanic utterance that can justify a refusal to disclose the contents" of a court document. Schlette, 842 F.2d at 1583.
In this case, the public has a presumptive right of access to the Court's order, and the public's strong interest in the openness of this judicial record can only be overcome by a compelling interest in closure. Dr. Nicholas asserts that his interest in preventing the further publication of the contents of his privileged Email is sufficiently compelling to warrant keeping the Court's order under seal.
Because the contents of the Email are now a matter of public record, no compelling justification exists for keeping the Court's order under seal. Dr. Nicholas' interest in preventing further dissemination of the already public information contained in the Email is not sufficient to override the public's constitutional right to understand the analysis of the legal issues presented to the Court regarding the Email. The public has a right to understand and scrutinize the Court's legal analysis and conclusions. The Court understands that Dr. Nicholas has not waived the privilege, and the Court will afford Dr. Nicholas the full protection of the marital communications privilege to which he is entitled at trial. However, insofar as the confidential information Dr. Nicholas seeks to keep under seal has been made public, the privilege does not justify shielding the Court's order from meaningful review and comment by the public.
For the foregoing reasons, Dr. Nicholas' motion to suppress and for an evidentiary hearing is DENIED, and the government's application is GRANTED in part. The Court will unseal this order and make it a matter of public record in ten days unless otherwise directed by the United States Court of Appeals for the Ninth Circuit.
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