Federal Judge Denies Government Bid to Disqualify First Amendment Attorneys from Backpage Defense Team

Color photo of Michael Lacey and Jim Larkin, standing in a restaurant, smiling and displaying a legal document.
Michael Lacey (left) and Jim Larkin, in August 2017, after a Sacramento judge dismissed pimping charges against them (photo by Stephen Lemons)
A federal judge in the Backpage case has rejected the prosecution's attempt to disqualify a cohort of high-caliber First Amendment attorneys from the defense team

A federal judge in Phoenix, Arizona, handed defendants in the Backpage case a victory on Friday, October 12, when he denied a government motion to disqualify a prestigious contingent of First Amendment attorneys from the defense team.

In a ten-page decision, U.S. District Judge Steven P. Logan rejected prosecutors’ arguments that lawyers from the firms of Davis Wright Tremaine and Henze Cook Murphy should be barred from participating in the case, owing to an “incurable conflict of interest” under Arizona’s ethics rules for lawyers.

Logan’s ruling allowed the defense to parry a significant aspect of what one member of the team recently characterized as a “multi-prong” attack by the government that also included freezing the defendants’ assets.

Veteran newspaperman Michael Lacey, one of the defendants, hailed the judge’s decision.

“There are many shady aspects of the government’s alleged case,” Lacey said. “And they know it. Nothing is more underhanded than their attempt to deny us our historic legal representation, cancel our Sixth Amendment rights, and force us to endure complex litigation with new attorneys who know nothing of the fourteen-year history of this case.”

That attempt began on April 6, when the FBI seized and shut down online listings giant Backpage.com and arrested seven current and former company executives on a 93-count indictment involving allegations of money laundering, conspiracy, and facilitating prostitution.

Read Judge Steven P. Logan’s October 12 Ruling in the Backpage Case:
2-18-cr-00422-SPL 338 101218 ORDER denying Government Motion to Disqualify Counsel [118]

The U.S. Department of Justice singled out Lacey and his longtime business partner, Jim Larkin, for special treatment that day. The men’s homes were raided, their assets and valuables seized. Each was jailed for a week before being granted a hearing. They finally were freed on $1 million bonds pending a trial, which is not scheduled to start until early 2020.

Lacey and Larkin were highly successful publishers long before Backpage first flickered onto computer monitors. Beginning with the founding of Phoenix New Times in 1970, the pair assembled a coast-to-coast chain of alternative weeklies, which came to be known as Village Voice Media (VVM). In 2004, the partners co-founded Backpage to compete with Craigslist, whose pioneering online classifieds had been steadily whittling away revenue at print publications across the spectrum.  Larkin and Lacey sold VVM in 2012. In 2015, they sold their interests in Backpage to  Carl Ferrer, the website’s CEO.

A day before the FBI raids, Ferrer secretly pleaded guilty to state and federal charges of conspiracy and money laundering, agreeing to cooperate with the government’s prosecution of his former colleagues. (Note: One of the initial seven defendants, Dan Hyer, Backpage’s onetime sales manager, pleaded guilty in August to one count of conspiracy.)

Davis Wright Tremaine and Henze Cook promptly withdrew from representing Ferrer and Backpage, which the former CEO had turned over to the government. But the two law firms continued as part of the defense team: Davis Wright Tremaine handled First Amendment issues; Henze Cook represented Lacey, a longtime client, on matters pertaining to conditions of his pretrial release and his financial interests.

The government wanted both firms off the case entirely.

On April 25, prosecutors filed a motion to disqualify them, arguing that the State Bar of Arizona’s Rules of Professional Conduct for attorneys prevents the firms from representing clients whose interests are “materially adverse” to a former client (Ferrer, in this case).

If successful, the motion would have dealt the defendants a devastating blow.

Henze Cook’s father-daughter team of Tom and Janey Henze had long represented Lacey on a variety of legal issues and have intimate knowledge of his finances.

And Davis Wright Tremaine attorneys Jim Grant and Robert Corn-Revere have successfully defended Backpage (and Lacey, Larkin, and Ferrer) for years in state and federal courts throughout the nation. The firm has successfully and repeatedly fended off charges that Backpage facilitates prostitution and/or sex trafficking.

Using the First Amendment and Section 230 of the Communications Decency Act of 1996, which grants website operators immunity for content that others post on their sites (such as classified ads), Grant and Corn-Revere crushed adverse rulings on appeal, overturned laws in three states designed to go after Backpage, and twice forced the dismissal of criminal charges filed in California against Lacey, Larkin, and Ferrer.

Read More About Jim Larkin, Michael Lacey, and the First Amendment:
Front Page Confidential Founders Michael Lacey and Jim Larkin Speak Out in Reason.com Profile”

During a three hour hearing on October 5, the defendants’ criminal attorneys argued that there was no way they could replicate Davis Wright Tremaine’s expertise on the First Amendment or Section 230, both of which lie at the heart of the defense. Also at stake, they argued: their clients’ right to counsel under the Fifth and Sixth amendments.

Addressing  Judge Logan, Larkin’s attorney Thomas Bienert drove home the importance of First Amendment jurisprudence in the case.

“The First Amendment issues make clear that publishers are not responsible for any criminal acts of people who take out ads in their published materials,” Bienert argued. “Now, the government disputes that, I get it, but that is the main principle of our defense — before we even get to all of the factual issues. So first and foremost, the First Amendment issues infect this case from cradle to grave.”

Arguing on behalf of defendant David Padilla, attorney Michael Piccarreta, reminded the judge that the government had tied up Lacey’s and Larkin’s assets in a California court, which has yet to rule on motions to release the funds. In a case involving a cache of more than 10 million documents in digital form — the mere examination of which could cost an estimated $800,000 — those assets, and Davis Wright Tremaine’s expertise, are crucial.

“I think it was definitely a tactical thing to [use] a multi-prong attack to seize assets of the defendants, to render them impecunious, to disqualify the most qualified counsel, to give us disclosure…that would cost hundreds and hundreds of thousands of dollars [to decipher],” said Piccarreta, a past president of the State Bar of Arizona.

In the end, Judge Logan bypassed the constitutional issues, instead relying on the wording of the state’s ethical rules. These explain that potential conflicts can be resolved if a client gives “informed consent, confirmed in writing” to waive attorney-client privileges.

As the defense had pointed out, Ferrer had done precisely that in at least two so-called joint defense agreements (JDAs) with the other parties.

In his ruling, Logan wrote that the terms of the confidential agreements, which he had reviewed in chambers, “are fatal to the government’s argument for disqualification,” and that both documents “anticipated circumstances” in which  a party might withdraw from the joint defense. As a result, Ferrer “waived his right to seek to disqualify [Henze Cook] and [Davis Wright Tremaine] or assert any future conflicts of interest.”

The judge noted that each firm will play a “limited role” in the defense and won’t cross-examine Ferrer. Thus, he wrote, each firm may continue its participation as defense counsel.

Still pending before the court: the government’s request that Judge Logan affirm that prosecutors may hold on to an estimated $100 million in assets belonging to Lacey and Larkin until after the trial.

At the October 5 hearing, defense attorneys pointed out that dueling motions over the assets are already on the desk of another federal judge in California, who has indicated that he intends to rule on them. The defense team suggested that Logan allow the matter to play out in Los Angeles.

In advancing that argument, Bienert called the government’s machinations with respect to the assets “an illegal seizure marred by misconduct.” He again invoked Constitutional precedent, noting, “You are not allowed to seize pretrial proceeds or materials from First Amendment matters without a full evidentiary hearing.”

Logan asked Assistant U.S. Attorney John Kucera, appearing via telephone from California, if he agreed with the defense’s contention that he should hold off pending the California court ruling.

Kucera demurred. Noting that “the government already possesses these assets,” he said he was simply seeking a “housekeeping order” to clarify that the funds “are also being sought and deserve protection in the Arizona court.”

Bienert was ready with a rebuttal. He told the judge that the defense had been seeking a hearing on the asset seizures for six months, during which time the government had repeatedly endeavored to delay.

He likened the government’s strategy to legalized plunder.

“From my client [Larkin]’s standpoint, it doesn’t matter whether some guy kicked his door in at night and took his assets or whether somebody used a fraud scheme or whether somebody purportedly with government paper allowing an ex parte seizure did it,” he said.

Added Bienert: “We’re entitled to a hearing to see if under the First Amendment and under the laws that seizure weathers the crucible of an adversary hearing.”

See Also:
“Backpage Defense Team Wages First Amendment Battle on Two Fronts”

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About Stephen Lemons

Stephen Lemons is an award-winning investigative journalist with more than 20 years of experience covering everything from government corruption to white-supremacist gangs. In addition to Front Page Confidential, his work has appeared in Phoenix New Times, the Los Angeles Times, Salon.com, and the Southern Poverty Law Center’s Intelligence Report magazine.

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