The Catch 22 of Defending Parallel Civil and Criminal Proceedings

The Court of International Trade recently denied a motion to add a defendant’s criminal attorney to a protective order in a parallel civil regulatory case, teeing up key Fifth and Sixth Amendment concerns. 

Background  

In parallel civil and criminal cases filed against defendants Zhe “John” Liu and GL Paper Distribution, LLC (U.S. v. Zhe “John” Liu, CIT # 22-00215; U.S. v. Liu et al., case no. 1:23-cv-00116), the government alleges that Liu and GL Paper avoided paying duties on steel wire hangers imported into the United States by falsely declaring their country of origin.  While Liu denied involvement with many of the companies alleged to have been involved in the scheme, according to the government, evidence produced in civil discovery “showed that, in fact, Liu operated and controlled the companies,” including GL Paper.[i]  In April 2023, the Court granted Liu’s motion for a protective order.  In June 2023, a search warrant was executed at Liu’s residence, where Liu allegedly directed the transshipment scheme.  That same day, Liu’s criminal counsel notified the government that he represented Liu in the criminal case.

In July 2023, Liu filed an unopposed consent motion to stay the civil case, arguing that it was necessary to protect his Fifth Amendment right against self-incrimination and because “the Government’s discovery obligations in a civil proceeding [could] impair or undermine its criminal investigation.”[ii]  The Court granted the stay request. 

In September 2023, Liu’s civil counsel emailed the government requesting that Liu’s criminal counsel be provided “access” to certain information under the protective order in the civil case.  Liu’s civil counsel further indicated that Liu’s criminal counsel would not be filing a notice of appearance in the civil case but would be acting as a “consultant.”  The DOJ objected to this request, and expressed concerns that this would effectively permit Liu’s criminal counsel to conduct an “end run” around criminal discovery procedures. 

The government takes numerous interesting positions, including its opposition to Liu’s motion to add an attorney to the protective order, after already having produced written discovery to Liu’s civil counsel without seeking a protective order.  It was Liu who sought (1) the protective order one month after receiving civil discovery and (2) an unopposed motion to stay the civil case.  The reason for the latter appears focused on both Liu’s Fifth Amendment rights and the possibility that future discovery (i.e. depositions and interrogatories) could undermine the criminal investigation.  Any discovery already provided, would, if it has evidentiary value, presumably have to be disclosed if the criminal investigation results in an indictment; if not, that discovery hardly seems to pose a threat to the criminal investigation.  Accordingly, it is notable that the government would oppose Liu’s motion to grant his criminal attorney access to materials that Liu and his civil counsel can already access.[iii]

In September 2023, following motion papers on both sides, the Court denied Liu’s motion to add criminal counsel to the protective order.[iv]  While the Court provided no rationale for its decision, it allows the defense to file a new motion to amend the protective order if the stay is extended in December. 

Constitutional Concerns

The Court’s denial of Liu’s request to add his criminal counsel of choice to assist in his parallel civil case raises two important questions regarding defendants’ constitutional rights:

1. Does a defendant in a civil regulatory case parallel to a criminal case have the right under the Sixth Amendment to choose his or her own counsel, experts, and consultants? While the available case law is unclear on whether the court can deny a defendant the right to a consultant who aids in the defense of a civil matter, the law is clear that defendants in the United States have a presumed right to be represented by the person(s) of their choice in a criminal proceeding.[v] The question in Liu’s case appears to be whether denying his criminal defense attorney access to information in a civil regulatory enforcement action premised on similar, if not the same, fact pattern and allowing for significant regulatory penalties, is infringing on that right—or impacting the criminal attorney’s ability to provide effective assistance of counsel.  This is not a situation where Liu is facing a civil case pursued by private plaintiffs—the same federal government has charged him in both matters for alleged legal violations which, if true, could result in serious sanctions against him.  Given that premise, Liu’s ability to develop a consistent and adequate defense strategy applicable to both cases might well be entirely dependent on access to information the government is producing in one matter but apparently not in the other.  And in Liu’s case, the government’s position begs the question: would DOJ take a different position if the same firm or attorney represented Liu in both matters?
   
   
2. Does bringing a civil regulatory case in tandem with criminal proceedings interfere with a defendant’s Fifth Amendment right against self-incrimination? Defendants facing parallel civil regulatory cases and criminal proceedings pursued by the same government may find themselves in a Catch 22, having to choose between the lesser of two evils—taking the “Fifth” and triggering an adverse inference, or waiving that privilege and being forced to testify against oneself in a criminal proceeding.[vi] In a civil regulatory case, a defendant has a right to assert their Fifth Amendment privilege against self-incrimination, but may suffer the consequence of an adverse inference. [vii]  An adverse inference may not be drawn against a criminal defendant for invoking his Fifth Amendment privilege.  Thus, the Catch-22: submitting to a civil deposition can effectively waive one’s Fifth Amendment privilege against self-incrimination; asserting the Fifth can result in an adverse inference.  Again, the Liu/GL Paper matter, like so many parallel enforcement cases, involves the same government bringing two different cases based on similar facts and similar alleged statutory violations.

Defendants facing parallel civil regulatory and criminal proceedings brought by the same government premised on the same alleged fact patterns and statutory violations should not have to risk their constitutional right to invoke their Fifth Amendment privilege against self-incrimination, much less have their Sixth Amendment right to the counsel of their choice, or that counsel’s ability to provide effective assistance, infringed by the government’s strategic decisions about what actions to pursue and what discovery to provide.

We would like to thank Anna Kufta, Senior Law Clerk, for her contribution to this alert.