Anbang Group Holdings Co. Limited v. Zhou

Background

The plaintiffs moved to compel production of documents and testimony from nonparty Steven Nielsen under the crime-fraud exception to the attorney-client privilege and attorney work-product doctrine. The exception permits disclosure when the client was engaged in or planning a criminal or fraudulent scheme while seeking legal advice to advance it, and the communications sought were sufficiently related to and made in furtherance of the ongoing or intended illegality.

The court stated that, in civil cases in the Ninth Circuit, the party seeking outright disclosure must prove the exception by a preponderance of the evidence, meaning that the facts are more likely true than not. The exception can apply to work product as well as attorney-client communications. The attorney need not have known about the client’s improper purpose, participated in the criminal activity, or ultimately helped the activity succeed.

The complaint described an alleged yearslong effort by defendant Haibin Zhou and associates to assert false ownership claims over at least a dozen luxury hotels belonging to the plaintiffs or their affiliates. According to the complaint, Nielsen, a patent attorney and member of the California Bar who operated Nielsen Patents, was retained in 2019 in connection with purported arbitration awards that allegedly awarded Zhou and related entities tens of billions of dollars and ownership interests in the hotels. The complaint also alleged that Nielsen helped coordinate the preparation and signing of six purportedly false arbitration awards, drafted and filed a false arbitration petition and default judgment, and coordinated sham lawsuits seeking to enforce the awards.

The plaintiffs argued that Nielsen’s emails and other records supported their allegations. They also acknowledged that the available information appeared likely to show that Nielsen unknowingly relied on false statements from Zhou, whom Nielsen knew as “Andy Bang,” and on a counterfeit document that purported to be a secret Chinese arbitration agreement. The plaintiffs argued that they did not need to prove Nielsen intended to advance the alleged fraud or knew about Zhou’s alleged fraudulent intent.

Nielsen’s Position

Nielsen responded that he was required to assert the attorney-client privilege on Zhou’s behalf and to refuse production or testimony about privileged matters without a waiver or court order. He stated that he had not knowingly submitted documents containing false or misleading information to a court and had not intentionally participated in activities intended to further a crime or fraud. He otherwise declined to respond to the specific allegations, citing privilege.

Ruling

The court found that Nielsen could deny or confirm what he did without disclosing privileged communications. It concluded that the plaintiffs’ detailed accusations, combined with Nielsen’s failure to directly deny the alleged involvement, satisfied the preponderance-of-the-evidence standard. The court therefore granted the plaintiffs’ motion to compel.

Judge Thomas S. Hixson ordered Nielsen to disclose the documents in his possession that were identified in the privilege log and to provide deposition testimony about communications or activities that furthered Zhou’s alleged fraudulent scheme during 2019–2020. The order did not state that Nielsen himself knowingly participated in the alleged fraud.