United States v. Acquest Dev., LLC

• Decision Date: 26 March 2013
• Docket Number: No. 11–CR–000347–WMS–JJM.,11–CR–000347–WMS–JJM.
• Parties: UNITED STATES of America, Plaintiff, v. ACQUEST DEVELOPMENT, LLC, Acquest Transit, LLC, and William L. Huntress, Defendants.
• Court: U.S. District Court — Western District of New York

932 F.Supp.2d 453

UNITED STATES of America, Plaintiff,

v.ACQUEST DEVELOPMENT, LLC, Acquest Transit, LLC, and William L. Huntress, Defendants.

No. 11–CR–000347–WMS–JJM.

United States District Court,

W.D. New York.

March 26, 2013.

David Ross Pfalzgraf, Jr., Rupp, Baase, Pfalzgraf, Cunningham & Coppola LLC, Buffalo, NY, Paul J. Cambria, Jr., Lipsitz Green Scime Cambria LLP, Buffalo, NY, for Plaintiff and Defendants.

ORDER

WILLIAM M. SKRETNY, Chief Judge.

Having thoroughly reviewed Judge McCarthy's Report and Recommendation, the parties' objections thereto, and the applicable law, this Court agrees with the Judge's recommendation and finds in it no legal or factual error. As expressed in more detail at the status on March 25, 2013,

IT HEREBY IS ORDERED, that this Court accepts Judge McCarthy's November 8, 2012 Report and Recommendation [35] in its entirety.

FURTHER, that the Government's objections [43] are DENIED.

FURTHER, that Defendants' objections [41, 42] are DENIED.

FURTHER, that Defendants' motion to dismiss [14] is GRANTED, without prejudice, in accordance with the Report and Recommendation.

FURTHER, Defendants' omnibus motion [19] is DENIED as moot, in accordance with the Report and Recommendation.

FURTHER, that the Clerk of the Court shall close this case.

SO ORDERED.

REPORT AND RECOMMENDATION

JEREMIAH J. McCARTHY, United States Magistrate Judge.

INTRODUCTION

Before me are defendants' motions seeking various forms of relief, including dismissalof the indictment [14, 19].¹ The motions have been referred to me by Hon. William M. Skretny for preparation of a Report and Recommendation [2]. At the conclusion of oral argument on October 24, 2012, I announced from the bench, and confirmed in a Text Order, that I would recommend dismissal of the indictment in a Report and Recommendation to follow [30, 31].

Although defendants' original motion did not specify whether they sought dismissal of the indictment with or without prejudice, at oral argument defense counsel suggested that dismissal should be with prejudice. Having now reviewed defendants' supplemental argument as to why the dismissal should be with prejudice [34], I conclude that there is no need for the government to respond. For the following reasons I recommend that the indictment be dismissed without prejudice, but that the motions otherwise be denied.

BACKGROUND

The essential facts underlying this motion are undisputed ( see Cambria Declaration [14], government's Consolidated Response [23] ). Defendants are charged in a seven-count indictment [1] with various crimes in connection with an alleged wetlands site in the Town of Amherst, New York, including conspiracy, obstruction of justice, concealment of material facts, and violations of the Clean Water Act (“CWA”), 33 U.S.C. §§ 1251 et seq.

On December 2, 2010, the Acquest defendants' in-house counsel, Louis Fessard, was served with a grand jury subpoena directing him to appear for testimony before the grand jury on December 8, 2010, and to produce various documents relating to the preparation and submission of two letters to the U.S. Environmental Protection Agency dated November 28, 2007 and February 8, 2008 (the “EPA letters”). On December 8, 2010, Mr. Fessard appeared before the grand jury and asserted the attorney-client privilege concerning the preparation of the EPA letters. On December 15, 2010 the government moved to compel Mr. Fessard to testify before the grand jury and to produce the documents which he had withheld as privileged. On February 23, 2011, Judge Arcara granted that motion. On October 19, 2011, Mr. Fessard returned to the grand jury, where he engaged in the following exchange with counsel for the government:

“Q. Mr. Fessard, you are back here to testify. You recall you have previously been here to testify; is that fair to say?

A. Yes, that's correct.

Q. And in your previous testimony, if you can recall, there was [ sic ] certain questions that I asked you that you elected to invoke the attorney/client privilege and chose not to answer certain questions. You understand that?

A. Yes.

Q. And, in response, are you aware that started sort of a separate process? Are you aware that the government then filed a motion with the Federal District Court to compel your testimony and the production of certain documents, essentially before this Grand Jury?

A. Yes.

Q. And the motion was based on the fact that the government believed that there was what is legally known as a crime fraud exception to the attorney/client privilege and that crime fraud exception, in essence,defeated the privilege and, in essence, would allow you to not violate that privilege and testify here today? That was the government's position?

A. Yes.

Q. Are you aware of that?

A. Yes, I'm aware of that.

Q. That motion was litigated. Are you aware that the court issued an order, in fact, compelling you to come and testify and provide certain documents and the Court found that a crime fraud exception to the attorney/client privilege, in fact, was present?

A. Yes. I'm aware of that.

Q. Okay. I'm going to show you Grand Jury Exhibit 236. I ask you if you've seen this document.

A. Yes, I have seen it and reviewed it.

Q. I'll put it on the screen. What is this document? Why don't you tell the Grand Jurors.

A. That was the end result of the motion that the government brought and that was contested by Paul Cambria to compel me to testify relative to those questions with regard to the two letters, the two EPA inquiry letters and my response letters thereto, which I had taken the attorney/client privilege on in December and Judge Arcara ruled that the crime fraud exception to the attorney/client privilege applied and it compelled me to testify and answer those questions and I believe it also said with regard to the withheld documents, there were five of them, that Mr. Personius had withheld that we had to produce those documents as well.

Q. And you mentioned Paul Cambria. He is an attorney who represents Bill Huntress and/or Acquest; is that fair to say?

A. That's correct.

Q. And Mr. Personius' your attorney?

A. Yes.

Q. And I'm going to actually flip to the last portion of this document, Grand Jury Exhibit 236. I just want to read it into the record. On page seven and going on to eight we'll read:

Having provided this Court with probable cause to believe; one, that certain environmental crimes may have been committed; two, that Acquest may have engaged in sham farming activity as a pretext to conduct its otherwise impermissible development of the site; and three, that Fessard's letters were sent to the EPA in furtherance of the ongoing environmental violations and to thwart or hinder the EPA's investigation thereafter, the government has met its burden of demonstrating that the crime fraud exception to the attorney/client privilege applies ... with respect to the Fessard letters. Accordingly, the Court finds that the crime fraud exception applies. Fessard is hereby compelled to comply with the Grand Jury subpoena seeking testimony and documents relating to the Preparation, drafting, review and submission of his November 28th, '07 and February 8th, '08 letters to the EPA ordered by the district court.

Correct?

A. Yes.” (Cambria Declaration [14], pp. 5–7) (emphasis added).

On November 9, 2011, the grand jury returned the seven-count indictment [1], including charges which are extremely similar to Judge Arcara's earlier probable cause findings. For example:

— Judge Arcara found “probable cause to believe ... that Acquest may have engaged in sham farming activity as a pretext to conduct its otherwise impermissible development of the site” (Cambria Declaration [14], p. 6), and the indictment charges that “[i]n order to conceal [their] conduct ... defendants ... hired various farmers to conduct agricultural activity on the Site in an attempt to exempt the earthmoving and discharge activities occurring on the Site from the provisions of the CWA” ( [1], Count 1, ¶ 8);

— Judge Arcara found “probable cause to believe ... that Fessard's letters were sent to the EPA in furtherance of the ongoing environmental violations and to thwart or hinder the EPA's investigation” (Cambria Declaration [14], p. 6), and the indictment charges that these letters were sent to the EPA in furtherance of defendants' conspiracy to conceal their activities and obstruct the EPA's investigation ( [1], Count 1, ¶¶ 43, 47);

— Judge Arcara found “probable cause to believe ... that certain environmental crimes may have been committed” (Cambria Declaration [14], p. 6), and the indictment charges violations of the CWA ( [1], Counts 6 and 7).

In moving to dismiss the indictment, defendants argue that the government impermissibly interfered with the grand jury's independence by calling its attention to Judge Arcara's Order compelling Mr. Fessard to testify, including his finding of probable cause to believe that crimes had been committed (Cambria Declaration [14], Point I). In response, the government argues that because Fessard had initially refused to testify, “the grand jury was entitled to hear that Fessard had been compelled, and the circumstances leading up to that compulsion, so that they could appropriately weigh his testimony and understand why he was now electing to provide testimony. The compulsion order was not introduced by the government to usurp the grand jury's function, but simply, to provide the grand jury with a better understanding of the events that lead Fessard back into the grand jury”. Consolidated Response [23], p. 31.

The government further notes that “Fessard's testimony was not the only evidence presented to the grand jury .... 20 witnesses other than Fessard testified, which amounted to 1,120 pages of testimony (as opposed to 165 pages for Fessard) and the introduction of hundreds of grand jury exhibits”. Id., pp. 31–32.

ANALYSIS

A. Does This Court Have Subject Matter Jurisdiction?

Before considering any other aspect of their motion,...