Klitzman, Klitzman and Gallagher v. Krut

• Decision Date: 17 September 1984
• Docket Number: No. 84-5443,84-5443
• Citation: 744 F.2d 955
• Parties: 17 Fed. R. Evid. Serv. 880 KLITZMAN, KLITZMAN and GALLAGHER v. Robert J. KRUT, Vernon Holmes, W. Hunt Dumont, Michael Milner, Appellants.
• Court: U.S. Court of Appeals — Third Circuit

Page 955

744 F.2d 955

17 Fed. R. Evid. Serv. 880

KLITZMAN, KLITZMAN and GALLAGHER v. Robert J. KRUT, Vernon Holmes, W. Hunt Dumont, Michael Milner, Appellants.

No. 84-5443.

United States Court of Appeals Third Circuit.

Argued Aug. 13, 1984.

Decided Sept. 17, 1984.

W. Hunt Dumont, U.S. Atty., Ralph A. Jacobs (Argued), Chief, Appeals Div., Paul Alfred C. DeCotiis (Argued), Richard T. Philips, DeCotiis & Philips, West Orange, N.J., for appellee.

J. Dillon, Asst. U.S. Atty., Newark, N.J., for appellants.

Before ALDISERT, Chief Judge, WEIS, Circuit Judge, and RE, Judge. ^*

OPINION OF THE COURT

ALDISERT, Chief Judge.

The government has appealed from the grant of a preliminary injunction commanding the return of documents and records seized at a law office pursuant to a search warrant. The district court held that the search and seizure violated the fourth amendment because the search was overbroad, and granted the injunction. After the government announced its intention to appeal immediately, the district court placed the seized materials under seal. The government then petitioned this court for relief from the injunction and requested a stay of the order and an expedited briefing schedule. We granted the stay, preserved the status of the materials under seal, and expedited the appeal. Because we agree that the search was overbroad, we now affirm the judgment of the district court granting the preliminary injunction, lift the stay, and order the return of the seized materials to the law office.

I.

Charles Klitzman, an attorney, was the target of a grand jury investigation of an alleged conspiracy to use the U.S. Mail to defraud insurance companies by submitting fraudulent medical reports and inflated medical bills in personal injury cases. As part of the investigation, U.S. Postal Inspectors searched Klitzman's law office, Klitzman, Klitzman and Gallagher, in Asbury Park, New Jersey.

There is no dispute as to the facts. The postal inspectors accomplished the search pursuant to three search warrants. The first warrant authorized the seizure of all closed or non-active files of personal injury claimants, business bank account records of the firm, ledger books concerning trust accounts, retainer and compensation agreements and financial records pertaining to personal injury clients, records reflecting payments to attorneys, investigators, and other third parties, case registers, legal diaries, telephone message books and pads, visitors logs, telephone toll records, and any other evidence of a conspiracy to defraud insurance companies. The magistrate issued the warrant based on the affidavit of Postal Inspector Robert Krut detailing particular examples of false or inflated medical bills submitted on behalf of Klitzman's clients.

The second warrant authorized the seizure of certain open files of personal injury claimants. The third warrant extended the scope of the search to include the storage room of the law firm. The affidavits of Postal Inspector Vernon Holmes formed the basis for these latter two warrants.

Government agents occupied Klitzman's office for a full day while performing the search, resulting in the closing of the office to clients. The postal inspectors required two trucks to haul away 2,000 files and numerous financial documents seized at the law firm.

II.

In seeking a preliminary injunction to compel the government to return the seized materials, plaintiff, the Klitzman firm, argued that: (1) there was no probable cause for the issuance of the warrants; (2) the warrants lacked sufficient particularity; (3) a search of a law office is per se unreasonable; and (4) the search was overbroad. The district court rejected plaintiff's first three contentions, implicitly resting its finding that plaintiff was likely to succeed on the merits on the conclusion that the search was overbroad.

The government contended that the search warrant properly was limited "to closed personal injury files which contained reports and bills for professional services by medical practitioners, and other records associated with the preparation and presentation of closed personal injury claims." Klitzman, Klitzman & Gallagher v. Kurt, 591 F.Supp. 258, 268 (D.N.J.1984). The district court, however, concluded that the warrant permitted a far broader search, encompassing materials and documents from the entire range of Charles Klitzman's individual law practice and also from much of the rest of the firm's practice. The court found that the inspectors examined and seized materials irrespective of their relationship to the alleged conspiracy, and regardless of whether the files searched were open or closed. The court also determined that the warrant allowed the seizure of files that contained potentially privileged information, and many financial records that, even if not privileged, could not be regarded as necessary or relevant to proving the alleged scheme to defraud insurance companies.

The warrant undeniably allowed the seizure of all file lists and appointment books without regard to whether the materials had any connection to particular alleged crimes or to personal injury cases in general. Moreover, as the district court determined, the warrant required the impoundment of all closed personal injury files, without requiring the postal inspectors to make any effort to segregate the files according to physicians involved, types of personal injury claims at issue, or other indicia that would protect the privacy interests of uninvolved lawyers and clients. Id. The district court, therefore, held that the search violated both the attorney-client privilege and the Privacy Protection Act, 42 U.S.C. Sec. 2000aa-11, ¹ because the search included in its scope materials emanating from confidential relationships between lawyers not suspected of criminal activity and their clients.

III.

Although other issues are suggested in this appeal, ² we will consider only the appeal from the injunctive order. We will invoke the familiar standards for review of the grant or denial of a preliminary injunction. The law has entrusted the power to grant or deny an injunction to the discretion of the trial court in the first instance, and not to the appellate court. Unless that court abuses its discretion, commits an obvious error in applying the law, or makes a serious mistake in considering the proof, the appellate court must take the judgment of the trial court as presumptively correct. National Land & Investment Co. v. Specter, 428 F.2d 91, 95 (3d Cir.1970); Stokes v. Williams, 226 F. 148, 156 (3d Cir.1915), cert. denied, 241 U.S. 681, 36 S.Ct. 728, 60 L.Ed. 1234 (1916). This limited review is appropriate because a court nearly always bases the grant or denial of an injunction on an abbreviated set of facts, requiring a delicate balancing of the probabilities of ultimate success at final hearing with the consequences of immediate irreparable injury that possibly could flow from the denial of preliminary relief. United States Steel Corp. v. Fraternal Association of Steelhaulers, 431 F.2d 1046, 1048 (3d Cir.1970).

In exercising its limited review of the grant or denial of preliminary injunctive relief, the appellate court asks: (a) did the movant make a strong showing that it is likely to prevail on the merits? (b) did the movant show that, without such relief, it would be irreparably injured? (c) would the grant or denial of a preliminary injunction substantially have harmed other parties interested in, or affected by, the proceedings? (d) where lies the public interest? A.O. Smith Corp. v. FTC, 530 F.2d 515, 525 (3d Cir.1976); see also Eli Lilly & Co. v. Premo Pharmaceutical Laboratories, Inc., 630 F.2d 120, 136 (3d Cir.), cert. denied, 449 U.S. 1014, 101 S.Ct. 573, 66 L.Ed.2d 473 (1980); Constructors Association of Western Pennsylvania v. Kreps, 573 F.2d 811, 814-15 (3d Cir.1978). With these criteria in mind, we turn to the arguments presented to us.

IV.

In granting the preliminary injunction, the district court made two essential determinations. The court found that the law firm had made a strong argument that it would prevail on the merits of the litigation, based on its claim that the search was overbroad. Second, the court held that the plaintiff met its burden of proving irreparable injury, amply demonstrating both that the law firm could not function without many of the seized materials, and, more important, that the seizure represented a gross imposition on the attorney-client privilege. We first consider whether plaintiff carried its burden by making a strong showing that it was likely to prevail on the merits.

A.

The district court correctly rejected plaintiff's other objections to the search, finding that only the overbreadth claim was substantial. There is little doubt that probable cause existed for a search of plaintiff's offices. Postal Inspector Krut's affidavit, upon which the magistrate based the issuance of the primary warrant, stated that postal inspectors had interviewed approximately thirty clients of the Klitzman firm who testified as to the fraudulent activities. Probable cause, therefore, existed to believe that a federal crime had been committed and that plaintiff's office may have been "the place of concealment of evidence of the crime." Zurcher v. Stanford Daily, 436 U.S. 547, 558, 98 S.Ct. 1970, 1978, 56 L.Ed.2d 525 (1978). Moreover, the magistrate's determination that probable cause existed is entitled to great deference by a reviewing court. Illinois v. Gates, 462 U.S. 213, 103 S.Ct. 2317, 2330, 76 L.Ed.2d 527 (1983).

Little doubt also exists that the warrants issued were sufficiently particular. They described in detail the premises to be searched and the items to be seized, leaving nothing to the discretion of the officers executing the warrants. Andresen v. Maryland, 427 U.S. 463, 480, 96 S.Ct. 2737, 2748, 49 L.Ed.2d 627 (1976). In fact, when confusion arose as to whether the first warrant...