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United States v. Chan

United States District Court, S.D. California

February 9, 2015

UNITED STATES OF AMERICA, Plaintiff,
v.
KAM WING CHAN, Defendant.

ORDER DENYING THE APPEAL OF THE MAGISTRATE JUDGE'S DECISION TO APPOINT CJA COUNSEL FOR MR. CHAN (Doc. No. 26) AND ORDER DENYING "APPEAL" OF THE MAGISTRATE JUDGE'S ORDER APPOINTING CJA COUNSEL FOR DEFENDANT KAVEN COMPANY, INC. (Doc. No. 28)

ANTHONY J. BATTAGLIA, District Judge.

I INTRODUCTION

At a motion hearing and trial setting conference on February 6, 2014, counsel for Kaven Company, Inc., asked the Court to "revisit" the Order of Appointment by Judge Bartick (Doc. No. 28) suggesting that the Court could indeed appoint CJA counsel under its supervisory power or, in the alternative, require interim billing rather than a billing and payment at the conclusion of the case. While this issue was presented without notice or briefing, the Court considered it as a de facto appeal in the interest of judicial econ-omy.

Next, Counsel for the Government asked the Court to review the recently filed appeal of the magistrate judge's decision to appoint CJA counsel for defendant Kam Wing Chan (Doc. No. 26). This matter was not set for hearing on this date, but in the interest of judicial economy, the court also agreed to consider the issue. A further discussion ensued, and the court and counsel reviewed the evidence on the record, and the court further considered the additional supplemental documentation submitted by counsel for Mr. Chan.

The Court ultimately took the matter under submission in order to consider, fully, the documents on file, the United States v. Unimex (991 F.2d 546 (9th Cir. 1993)) decision, and the issues presented.

For the reasons indicated below, the Court affirms Magistrate Judge Bartick's Order appointing counsel for Mr. Chan, and denies defendant Kaven Company's "appeal" for the appointment of CJA counsel for its defense, while the Court does grant the request to allow interim billing for services rendered by Mr. Scott during the case, thereupon modifying Judge Bartick's order in this regard..

II. APPEAL OF THE ORDER APPOINTING COUNSEL FOR DEFENDANT KAM WING CHAN

There is a long and involved history with regard to the status of appointed counsel for Mr. Chan in this case. This is well documented and will not be repeated here.

Magistrate Judge Bartick last addressed the issue of appointment of counsel for Mr. Chan in the Order filed January 27, 2015 (Doc. No. 29). The Government has appealed indicating that real property holdings by Mr. Chan, his business interests and ownership of Kaven Company, Inc. all suggests an ability to pay counsel for representation in this case. The parties all agree that the burden of proof financially ultimately rests with the defense. The defense has demonstrated to the Court on multiple occasions the inability to pay for counsel.

With regard to the holdings in the corporation, the records demonstrate that Mr. Chan holds an equity interest in Kaven Company, as the sole shareholder of the corporealtion. Kaven Company is a separate legal entity and there is no legal authority for the premise that a corporation has an obligation to pay the legal expenses of its predominate or sole shareholder in a criminal matter. While the Government makes arguments and points to evidence to suggest a pattern and practice of self dealing with corporate assets by Mr Chan, these are not sufficient for the court to disregard the separate entity status of the corporation at this juncture. Nor does the information compel the court to undertake a process to adjudicate the alter ego issue. Alter ego is not an issue in the substantive counts charged in the Indictment, and while the Corporation has significant assets and inventory, it is essentially net cash poor, with reported income of less than $19, 000 per year.

Regarding the home, there is certainly equity beyond the market value and the equity loan, however, the ability of Mr. Chan drawing on the equity of his half interest, with his low salary, is suspect. Mr Chan's only contribution to the property is the monthly payments made for a pool service and gardener. He pays nothing else and his salary shows little ability to pay any more. Some of his expenses may be covered on the company credit card, but those fall short of the kind of "income" required to retain counsel. This Court agrees with Magistrate Judge Bartick that the property is not a liquid asset that can be immediately liquidated or utilized to secure a loan to provide resources to retain counsel.

This Court, following a de novo review, finds Magistrate Judge Bartick's assessment of the financial circumstances sound and, affirms those findings. Federal Defenders will continue its appointment as counsel for Mr. Chan under 18 U.S.C. 3006(A), and the Court will consider the need for Mr. Chan to reimburse the United States for the cost of appointed counsel as the case proceeds.

III. Appointment of Counsel for Defendant Kaven Company, Inc.

As reflected above, defendant Kaven Company, Inc. sought to "revisit" Judge Bartick's Order with regard to counsel for Kaven Company, Inc. Considering this an "appeal", and upon review, the Court sees no reason to disturb Magistrate Judge Bartick's decision that corporation can not be appointed counsel under the Criminal Justice Act. Judge Bartick's decision is consistent with the law, and reasonably based.

Counsel for Kaven Company asked for consideration under the court's supervisory power, and suggested that Kaven Company and other corporations may have an individual's right to counsel under an extension of the United States Supreme Courts Hobby Lobby case. See, Burwell v. Hobby Lobby, 573 U.S. _ (2014) (As applied to closely held corporations, the regulations promulgated by the Department of Health and Human Services requiring employers to provide their female employees with no-cost access to contraception violates the Religious Freedom Restoration Act.).

The government has asserted that the Unimex case precludes any consideration of using CJA funds to represent a corporation. That authority remains undisturbed in the Ninth Circuit. The issue with regard to inherent authority or other basis to avoid preclusion by Unimex have been recently discussed in the case of the United States v. Burke, 2014 W.L. 2800759. While Burke is from the District Court in the Western District of Texas, and not precedent this court must follow, the detailed analysis by Judge Guaderrama is very instructive and this Court adopts that analysis and reasoning in regards to this issue in this case.

This Court does not find the holding in Hobby Lobby applicable nor it's reasoning supportive of a Sixth Amendment right of corporations to appointed CJA counsel.

Based on the foregoing, the Court will not appoint counsel for Kaven Company, Inc. under the CJA on any basis. The Court will, however, modify Judge Bartick's Order as requested by Mr. Scott allowing monthly billing to Kaven Company, Inc. Kaven Company, Inc. Should pay counsel within 30 days of the invoices unless otherwise arranged between attorney and client.

Mr. Scott has confirmed that he would, indeed, represent the corporation at a rate consistent with CJA guidelines (i.e., a reduced rate). This ability to pay by Kaven Company, has been previously confirmed in the case by Mr. Chan, and no evidence to the contrary was brought forward at the hearing on February 6.

CONCLUSION

The Court affirms the Order of Judge Bartick with regard to the appointment of Federal Defenders as counsel for Mr. Chan and therein denies the Government's appeal; and, grants in part and denies in part defendant Kaven Company's request for "appeal" as stated above.

IT IS SO ORDERED.


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