U.S. v. Segal, 02 CR 0112.

• Decision Date: 07 August 2003
• Docket Number: No. 02 CR 0112.,02 CR 0112.
• Parties: UNITED STATES of America, v. Michael SEGAL, et al.
• Court: U.S. District Court — Northern District of Illinois

276 F.Supp.2d 896

UNITED STATES of America, v. Michael SEGAL, et al.

No. 02 CR 0112.

United States District Court, N.D. Illinois, Eastern Division.

August 7, 2003.

Harvey M. Silets, Gil M. Soffer, Jonathan S. Feld, Katten Muchin Zavis Rosenman, Chicago, IL, Daniel E. Reidy, Thomas P. McNulty, Jones Day, Chicago, IL, for Michael Segal.

Daniel T. Brier, Donna A. Walsh, Myers, Brier & Kelly, LLP, Scranton, PA, Sal Cognetti, Jr., Foley, Cognetti, Comerford & Cimini, Scranton, PA, for Near North Ins. Brokerage, Inc.

Virginia M. Kendall, U.S. Attorney's Office, Chicago, IL, for U.S.

MEMORANDUM OPINION AND ORDER

CASTILLO, District Judge.

The Government presently moves to quash Michael Segal's ("Segal") subpoena served on Perkins Coie, LLC ("Perkins Coie"), the law firm that represents several potential government witnesses. In addition, Segal moves for an evidentiary hearing to discern whether potential government witness were acting as government agents and in violation of the Fourth Amendment when they received information hacked from the computer network of Near North Insurance Brokerage, Inc., ("NNIB"). For the reasons set out herein, the Court quashes the subpoena on Perkins Coie and instead orders the firm to produce the documents specified in the subpoena for in camera inspection for a final decision on whether they will be produced to Segal. (R. 108-1; 113-1.) The Court also denies Segal's motion for an evidentiary hearing without prejudice as premature and unsupported at this time. (R. 97-1.)

RELEVANT FACTS

In the spring of 2002, NNIB discovered that a former employee from its information technology department, David Cheley ("Cheley"), had been hacking into the company's computer network between approximately the fall of 2001 and April 2002. Defense exhibits show that in October 2001, anonymous person(s), whom the defense asserts to be Cheley, transmitted hacked material, including allegedly privileged or confidential information, to two former NNIB executives, Matt Walsh ("Walsh") and Dana Berry ("Berry"). Both Walsh and Berry, along with another former executive, Tim Gallagher ("Gallagher") have been cooperating with the Government's investigation and may testify for the Government at trial.

The record reveals that Cheley initiated contact with Walsh via email in late September 2001. In a September 21, 2001 email, Cheley introduced himself to Walsh as a former NNIB employee and wrote that he might have some information of interest to Walsh. (R. 98, Def.'s App., Ex. 5, Sept. 21, 2001 email.) That same day, Walsh answered Cheley's message by confirming his email address and sending Cheley his phone number. (Id., Ex. 8, Sept. 21, 2001 email.) Cheley's email reply assured Walsh that he did not "want to do anything that might cause problems for either you or myself" and that "taking the high road is the best way to do things." (Id., Ex. 15, Sept. 21, 2001 email.)

On October 1, 2001, Walsh received a zip file from a "Lisa Chen" that allegedly contained several dozen privileged and confidential communications involving Segal and NNIB.¹ The day after receiving the first zip file, Walsh emailed Chen the following message: "I recognize that these were sent in error and contain information that upon first glance I did not wish to receive and you did not intend to send. Hence it has been deleted without any review." (Id., Ex. 17, Oct. 2, 2001 email.) Chen sent Walsh two other zip files of NNIB information during October 2001.

Segal points to the following four interactions between the government witnesses and the FBI as particularly telling of the Government's knowledge and role in obtaining the hacked material. First, on October 31, 2001, an FBI agent filled out a 302 report describing information received from a source who provided an attached copy of an email from Segal to NNIB employees regarding the company's internal audit. (Id., Ex. 26, Oct. 31, 2001 302 Report.) Second, on February 8, 2002, Walsh sent an FBI agent an email with an attached "Lisa Rasmussen" email that contained a phone log of calls from NNIB employees to Walsh, Berry and Gallagher. Walsh indicated in his email to the agent that "[a]s noted in the past, from time to time I receive these anonymously. Again, I do not know if they are trying to intimidate us, set us up, or otherwise. If I receive any others I will advise." (Id., Ex 21, Feb. 8, 2002 email.) Segal notes that the Government has neither produced a copy of this email, nor a corresponding 302 report memorializing the forwarding of the hacked information. Third, on September 19, 2002, an FBI agent prepared a 302 report memorializing a March 2002 conversation with Berry, wherein Berry stated that he had received an unsolicited email from "Lisa Fisher." Again, Segal stresses the fact that the FBI agent did not contemporaneously memorialize its knowledge of the hacked information. Finally, three of the government witnesses brought these anonymous emails to the attention of an FBI agent in a January 14, 2002 conversation. The agent's notes of the conversation contain the name Dave "Chiele" or "Shiele" along with the statement: "sending anonym [sic] e-mails to these 3(?)." (R. 112, Gov't's Mot. to Correct, Ex. A.) The agent recalls that one or more of the three witnesses expressed suspicion that Cheley might be sending them anonymous emails.²

Whereas the potential government witnesses suspected that the anonymous emails were simply attempts to destroy their credibility, Segal contends that the information contained in the emails was solicited by the witnesses and passed onto the Government. (R. 97, Def.'s Mem. in Support of Mot. for Hr'g at 16.) Segal currently seeks an evidentiary hearing to ascertain how much hacked information was passed onto the Government, if the Government had any knowledge that it was hacked and if the witnesses were acting as government agents.

At the same time, Segal argues that the hacked information might have been used by the witnesses for improper business-related purposes. (R. 111, Def.'s Resp. to Mot. to Quash at 11.) To support this argument and rebut the Government's allegation that Segal's pending civil litigation against the witnesses is not simply retaliatory litigation, Segal seeks from Perkins Coie:

All documents, including but not limited to any correspondence, memoranda, facsimile transmissions, and e-mails, regarding Near North National Group, Inc., Near North Insurance Brokerage, Inc., Michael Segal, Dana Berry, Matthew Walsh, Tim Gallagher, Lori Shaw, or AON Corporation and any related entity, that were given, transmitted, or shown to the federal government, including any employees or agents of the United States Department of Justice, the United States Attorney's Office for the Northern District of Illinois, or the Federal Bureau of Investigation or any other law enforcement agency, from January 1, 2001 to the present. (R. 108-1, Mot. to Quash, Ex. 1.)

The Government opposes both the enforcement of this subpoena and the granting of an evidentiary hearing. The subpoena, argues the Government, is simply a fishing expedition that seeks discovery already requested in the civil case and to harass and undermine the credibility of government witnesses. The Government primarily contends that a hearing is not warranted at this time because it would be premature given that Segal has not identified any evidence that he seeks to suppress.

ANALYSIS

I. Motion to Quash

Segal's subpoena seeks the production of documents pursuant to Federal Rule of Criminal Procedure 17(c). As delineated in the seminal Supreme Court case, Bowman Dairy Co., et al. v. United States et al., Rule 17 was not intended to supplement Rule 16 as an additional means of discovery, but primarily was intended "to expedite the trial by providing a time and place before trial for the inspection of the subpoenaed materials." Bowman Dairy, 341 U.S. 214, 220, 71 S.Ct. 675, 95 L.Ed. 879 (1951). In order to require pre-trial production, the movant must show: "(1) that the documents are evidentiary and relevent [sic]; (2) that they are not otherwise procurable reasonably in advance of trial by exercise of due diligence; (3) that the party cannot properly prepare for trial without such production and inspection in advance of trial and that the failure to obtain such inspection may tend unreasonably to delay the trial; and (4) that the application is made in good faith and is not intended as a general fishing expedition." United States v. Nixon, 418 U.S. 683, 699, 94 S.Ct. 3090, 41 L.Ed.2d 1039 (1974). Nixon summarized the test by holding that the movant must clear the three hurdles of relevancy, admissibility and specificity. Id. A subpoena may also be quashed on the grounds of unreasonableness or oppressiveness. Fed.R.Crim.P. 17(c)(2).

As a threshold issue, Segal argues that the Government has no standing to quash the subpoena served on Perkins Coie. A third party, however, in this case the Government, has standing to quash a subpoena if it infringes on their legitimate interests. United States v. Raineri, 670 F.2d 702, 712 (7th Cir.1982). In Raineri, the Seventh Circuit affirmed the quashing of a defense subpoena that sought to call a witness who had already been called by the prosecution and had already testified and been cross-examined. Id. The Court held that the prosecution's legitimate interests in quashing included "preventing undue lengthening of the trial, undue harassment of its witness, and prejudicial over-emphasis on [the witness's] credibility." Id.

In the instant case, although Segal issued a pre-trial subpoena for documents rather than a subpoena to testify, the Government shares some of the same interests that were at issue in Raineri. The Government claims that the subpoena on the firm that represents several potential government witnesses is part of an overall strategy "designed to harass government witnesses and seek general discovery aimed at creating and...