U.S. v. Bauer, 97-10046

• Decision Date: 22 December 1997
• Docket Number: No. 97-10046,97-10046
• Parties: Bankr. L. Rep. P 77,588, 48 Fed. R. Evid. Serv. 524, 97 Cal. Daily Op. Serv. 9549, 97 Daily Journal D.A.R. 15,303 UNITED STATES of America, Plaintiff-Appellee, v. Leonhard BAUER, Defendant-Appellant.
• Court: U.S. Court of Appeals — Ninth Circuit

Page 504

132 F.3d 504

Bankr. L. Rep. P 77,588, 48 Fed. R. Evid. Serv. 524,

97 Cal. Daily Op. Serv. 9549,

97 Daily Journal D.A.R. 15,303

UNITED STATES of America, Plaintiff-Appellee, v. Leonhard BAUER, Defendant-Appellant.

No. 97-10046.

United States Court of Appeals Ninth Circuit.

Argued and Submitted Nov. 6, 1997.

Decided Dec. 22, 1997.

Amitai Schwartz and Dennis M. Farias, San Francisco, CA, for Defendant-Appellant.

Andrew M. Scoble, Assistant United States Attorney, San Francisco, CA, for Plaintiff-Appellee.

Appeal from the United States District Court for the Northern District of California; D. Lowell Jensen, District Judge, Presiding. D.C. No. CR-95-40179-DLJ.

Before: CHOY, GOODWIN, and T.G. NELSON, Circuit Judges.

T.G. NELSON, Circuit Judge:

Leonhard Bauer ("Bauer") appeals his conviction for making false statements on his bankruptcy petition in violation of 18 U.S.C. § 152(3) and omitting certain assets from his bankruptcy petition in violation of 18 U.S.C. § 152(7). Because we conclude that Bauer's attorney-client privilege was violated when the district court allowed Bauer's bankruptcy attorney to testify against him at his criminal trial, and this error was not harmless, we reverse Bauer's conviction.

FACTS

On October 11, 1990, Bauer filed for Chapter 11 bankruptcy, listing assets of $532,000.00 and liabilities of $960,588.00. At the time, Bauer was represented by an attorney, Kenneth N. Rivera ("Rivera"), whom he consulted approximately twelve times. In April 1991, a trustee was appointed and the case was converted to Chapter 7 bankruptcy in October 1991. On November 2, 1994, all of Bauer's dischargeable debts were discharged and the case was closed on January 17, 1995.

In 1992, following the trustee's discovery that several of Bauer's assets had not been reported and that other assets had been transferred within one year of Bauer's filing of his bankruptcy petition, the case was referred to the FBI for criminal investigation. The investigation revealed that Bauer had transferred several assets belonging to the estate within one year of the bankruptcy petition, forming the basis for the concealment charge. On September 24, 1990, Bauer transferred ownership of his 1977 Dodge van to his daughter Suzanne. On October 9, 1990, Bauer transferred his lease interest in a 1978 Cadillac to his other daughter Angelique. On September 26, 1990, Bauer transferred ownership of a life insurance policy to his wife Sieglinde, after having requested the maximum available loan on the policy on September 22, 1990, and having deposited the proceeds in a bank account in the name of Bauer's grandson. There was evidence that loan proceeds from other life insurance policies were handled in the same manner.

The investigation also revealed the existence of several assets that Bauer did not include in his bankruptcy petition. In 1992, Bauer filed a theft-loss claim with State Farm, his insurance company, listing personal property valued at approximately $22,000.00 that was allegedly stolen during separate thefts in 1992. Items contained on the inventory forms submitted by Bauer for which he listed a pre-bankruptcy petition acquisition date, but which had not been reported in the bankruptcy petition, included a handgun and several items of gold jewelry. The value of these assets, as alleged by Bauer in the inventory forms, totaled $21,249.00. There was also evidence that Bauer possessed a substantial collection of firearms which was not reported in the bankruptcy petition. Finally, Bauer owned a Rolex watch, valued at $11,050.00, which he admitted failing to disclose in his bankruptcy petition, explaining that he did so because he was still making payments.

On October 5, 1995, a grand jury returned an indictment against Bauer, charging him with concealing assets in violation of 18 U.S.C. § 152(7) and making false statements in his bankruptcy petition in violation of 18 U.S.C. § 152(3). On June 24, 1996, Bauer's jury trial began.

The case boiled down to a dispute over Bauer's intent. As its final witness, the Government called Rivera, Bauer's bankruptcy attorney, to testify. Over both Bauer's pretrial and at-trial objections, Rivera testified on direct examination by the Government as follows:

Q. Now, again, without asking about the contents of any privileged communications that you may have had with Mr. Bauer, did you advise him prior to filing his petition-prior to his filing the petition that generally there is a duty to disclose all property, something to that effect?

A. Well, I gave him a document which we reviewed, and in the review of the document-

....

In the review of the document, we went through a disclosure of the--of his estates, which included all property that he told me he had.

Q. Okay. And as part of that process prior to filing his bankruptcy, did you advise him in one form or another-I'm not asking for exact words-of the fact that a bankruptcy petition and its attachments is filed under penalty of perjury, that it's sworn?

A. I think we covered that they were signed under penalty of perjury.

On July 2, 1996, the jury found Bauer guilty on both counts. On January 15, 1997, after making a three-level downward departure based upon Bauer's extraordinary physical impairments, the district court sentenced Bauer to one year in prison, three years of post-prison supervised release, and ordered restitution in the amount of $84,967.51, plus additional restitution (for the Rolex watch) in the amount of $3,418.13. This timely appeal followed. ¹

DISCUSSION

We must first determine whether Rivera's statements to Bauer concerning Bauer's duty to disclose all property in his bankruptcy petition and the perjury implications of falsifying a bankruptcy petition are in fact covered by the attorney-client privilege. A party asserting the attorney-client privilege has the burden of establishing the relationship and the privileged nature of the communication. Ralls v. United States, 52 F.3d 223, 225 (9th Cir.1995). Whether the party has met these requirements is reviewed de novo. Id. We also review the district court's rulings on the scope of the attorney-client privilege de novo. United States v. Blackman, 72 F.3d 1418, 1423 (9th Cir.1995), cert. denied, --- U.S. ----, 117 S.Ct. 275, 136 L.Ed.2d 198 (1996). We view the district court's conclusion that Rivera's communication to Bauer is not protected by the attorney-client privilege as "a mixed question of law and fact which this court reviews independently and without deference to the district court." United States v. Gray, 876 F.2d 1411, 1415 (9th Cir.1989).

Although the Government offers several alternative grounds to support its argument that Rivera's statements are not covered by the attorney-client privilege, it is appropriate to begin with the ground on which the district court relied. In ruling that the statements were admissible, the district court stated that "it's not within the attorney-client privilege when the attorney gives advice to that effect in that the attorney's acting as an officer of the court and not as attorney-client." ² After some discussion with Bauer's trial counsel, the district court concluded: "I believe that-notwithstanding the grounds that are stated, Mr. Martinez, I think that this does fall within the notion that it's the attorney simply advising the client of the rules of court that apply to the proceeding that's involved, and so I think it's admissible." This ruling was incorrect.

At the outset, it is important to recognize that the attorney-client privilege is a two-way street: "The attorney-client privilege protects confidential disclosures made by a client to an attorney in order to obtain legal advice, ... as well as an attorney's advice in response to such disclosures." United States v. Chen, 99 F.3d 1495, 1501 (9th Cir.1996) (emphasis added) (quotation omitted) (addressing a claim concerning the crime-fraud exception to the attorney-client privilege), cert. denied, --- U.S. ----, 117 S.Ct. 1429, 137 L.Ed.2d 538 (1997). There is no dispute in this case that Rivera's testimony disclosed statements of the law that he made to Bauer in the course of representing him in the preparation and filing of his bankruptcy petition.

In support of the district court's ruling, the Government relies on three Ninth Circuit cases, all of which are distinguishable from the circumstances present in this case. We discuss each case in turn.

In United States v. Freeman, 519 F.2d 67 (9th Cir.1975), we held that the attorney-client privilege does not cover an attorney's statement to a client regarding the date on which the district court ordered the client to appear for sentencing, where the client was charged with bail jumping (18 U.S.C. § 3150) and alleged that she did not know the date of her sentencing hearing. Quoting the Second Circuit, we explained:

The relaying of this message is not in the nature of a confidential communication. Defense counsel served merely as a conduit for transmission of a message. ... Defendant's counsel had a duty to relay the instructions to his client in his capacity as an officer of the court, and this in no way was inconsistent with his obligation to his client.

Id. at 68 (emphasis added) (quoting United States v. Hall, 346 F.2d 875, 882 (2d Cir.1965)). We therefore held that "[t]he evidence sought to be elicited from [the attorney] was not of a confidential nature and hence was not protected by the attorney-client privilege. It simply related to whether he had advised his client of the court's order to appear." Id.

In United States v. Gray, 876 F.2d 1411 (9th Cir.1989), we were faced with virtually an identical situation, where the defendant argued that the district court should not have allowed his attorney to testify that he informed the defendant of his sentencing date. After noting that "information concerning a defendant's obligation to appear for sentencing" does not qualify as confidential...