REPLY by Martin Kao as to Martin Kao re 95 Response, 92 Order - Written Order Following Oral… — USA v. Kao (Dkt. 98)

Summary

Defendant Martin Kao's Reply to PacMar Technologies LLC's Response to Objections to and Appeal from Dispositive Order [Document 92] of Magistrate Judge [Document 95], Document 98 in No. 1:21-cr-00061-LEK, in the U.S. District Court for the District of Hawaii, filed April 6, 2023. The caption lists a hearing on APRIL 13, 2023 at 11:00 AM before HON. LESLIE KOBAYASHI. The reply argues that the standard of review should be de novo and that the Magistrate Judge could not have summarily determined that Mr. Kao had no privacy interest in the phone data. It requests that the Order be vacated and/or rejected or, alternatively, modified to protect personal data. It is signed /s/ Chuck C. Choi.

Summary drafted by a model from the document's text below and checked by script against that text before publication. It is a navigation aid, not a reading of what the document proves. Where AI is used

Record facts

Full text

86314 
1 
 
KEITH M. KIUCHI #2735 
1001 Bishop Street, Suite 985 
Honolulu, Hawaii 96813 
Telephone: (808) 533-2230 
Facsimile: (808) 533-4391 
E-Mail: kkiuchi106@cs.com  
 
 
 
 
 
 
Civil Attorneys for Defendants 
MARTIN KAO appearing to for the 
limited purposes of Objecting to the 
Order granted in favor of Movant 
Pacmar Technologies, Inc. 
 
CHOI & ITO, Attorneys at Law 
Chuck C. Choi  
     #6435 
Allison A. Ito 
 
     #8152 
Michel A. Okazaki            #6524  
(independent lawyer appearing 
through Choi & Ito) 
700 Bishop Street, Suite 1107 
Honolulu, Hawaii 96813 
Telephone: (808) 533-1877 
Facsimile: (808) 566-6900 
Email: cchoi@hibklaw.com  
aito@hibklaw.com 
 
 
UNITED STATES DISTRICT COURT  
FOR THE DISTRICT OF HAWAII 
 
UNITED STATES OF AMERICA 
                 Plaintiff 
            v. 
MARTIN KAO 
                 Defendant 
CR. NO. 21-00061 LEK 
 
DEFENDANT MARTIN KAO’S 
REPLY TO “PACMAR 
TECHNOLOGIES LLC'S RESPONSE 
TO OBJECTIONS TO AND APPEAL 
FROM DISPOSITIVE ORDER 
[DOCUMENT 92] OF MAGISTRATE 
JUDGE” [DOCUMENT 95] 
PACMAR TECHNOLOGIES LLC 
                 Movant            v. 
MARTIN KAO 
                 Respondent/Objecting Party 
 
HEARING: 
DATE:   APRIL 13, 2023 
TIME:    11:00 AM 
JUDGE: HON. LESLIE KOBAYASHI 
Case 1:21-cr-00061-LEK     Document 98     Filed 04/06/23     Page 1 of 13  PageID.840

86314 
1 
 
DEFENDANT MARTIN KAO’S REPLY TO “PACMAR TECHNOLOGIES 
LLC'S RESPONSE TO OBJECTIONS TO AND APPEAL FROM 
DISPOSITIVE ORDER [DOCUMENT 92] OF MAGISTRATE JUDGE” 
[DOCUMENT 95] 
 
 
Defendant Martin Kao, through civil counsel appearing for the limited 
purposes of objecting to the order granted in favor of Movant Pacmar 
Technologies Inc., hereby submits his REPLY to PACMAR TECHNOLOGIES 
LLC'S RESPONSE TO OBJECTIONS TO AND APPEAL FROM DISPOSITIVE 
ORDER [DOCUMENT 92] OF MAGISTRATE JUDGE [DOCUMENT 95]. 
I.  
REBUTTAL 
 
A. 
STANDARD OF REVIEW 
 
As a preliminary matter, Defendant Kao reiterates that the standard of 
review should be de novo. The proceeding initiated by Pacmar's Fed. R. Crim. P. 
Rule 41(g) motion is unusual in that it is both criminal and civil in nature.  It was 
brought by Pacmar, a civil litigant who is not a party to the criminal case. Indeed, it 
is the hybrid nature of the proceeding that allowed Pacmar to appear and bring the 
motion in the first instance. 
 
The proceeding is deemed dispositive because it completely disposed of the 
ancillary proceeding regarding the phone and will result in loss of Mr. Kao's 
property and privacy rights in favor of a third-party if it is enforced.  The order can 
be accurately characterized as an order that completely resolves a matter collateral 
to the main (criminal) case.  The fact that the criminal proceeding is still pending is 
Case 1:21-cr-00061-LEK     Document 98     Filed 04/06/23     Page 2 of 13  PageID.841

86314 
2 
 
irrelevant given the nature of the proceeding, the relief provided to a non-party to 
the criminal case, and the permanent effect of the order.   
 
Second, under FRCP Rule 72, a matter is subject to clearly-erroneous review 
if “a pretrial matter not dispositive of a party’s claim or defense is referred to a 
magistrate judge to hear and decide[.]” See FRCP 72(a).  Otherwise, dispositive 
motions are subject to de novo review.  See FRCP 72(b)(3).  The magistrate’s 
order was dispositive in that it completely resolved Pacmar’s claim made by its 
Rule 41(g) motion.   
 
Finally, the Magistrate judge did not have jurisdiction to issue a dispositive 
order depriving Mr. Kao of his property and privacy rights.  Therefore, the 
Magistrate's order (if it is to have any legal status) can only be viewed as a 
recommendation subject to the District Judge's de novo review.     
B. 
THE MAGISTRATE JUDGE COULD NOT HAVE 
SUMMARILY DETERMINED THAT MR. KAO DID NOT 
HAVE A PRIVACY INTEREST IN THE IPHONE DATA 
 
 
PACMAR argues that “What the DOJ knows or does not know about the 
history of Defendant Kao’s use of the Company Cellphone is irrelevant.”  Dkt 95 
at 13.  PACMAR argues that “Defendant Kao has no privacy interest in the 
Company Cellphone, as it was at all times subject to PacMar’s Information System 
Security Policies and Procedures Manual and Employee Mobile Device Policy.”  
Id. 
Case 1:21-cr-00061-LEK     Document 98     Filed 04/06/23     Page 3 of 13  PageID.842

86314 
3 
 
 
These arguments are incorrect.  
 
First, there is no reason why PACMAR needs or should be given Mr. Kao’s 
personal data.  Although nobody other than the United States knows exactly what 
is on the phone, Mr. Kao believes the personal information may include his 
personal medical data, medical data of his wife, and medical data concerning his 
son’s disabilities.  The data regarding his wife and kids are not limited to medical 
records, but also personal photographs, including private photographs of Mr. Kao’s 
minor children, and even childbirth photographs.  That PACMAR is opposed to 
segregating out personal information from business information is very troubling.  
 
Second, the scope of Mr. Kao’s reasonable expectation of privacy is not 
defined by some patchwork of handbook policies of questionable authenticity and 
ambiguous meaning. Without hearing from Mr. Kao, the Magistrate Judge could 
not have summarily determined that Mr. Kao did not have a privacy interest in the 
phone and its contents.   
 
Because Mr. Kao is facing sentencing, he elected to remain silent and did 
not offer a declaration or testimony regarding his state of mind during relevant 
timeframes.  PACMAR effectively obtained the equivalent of summary judgment 
because Mr. Kao, as the opposing party, could not submit his own testimony and 
evidence.    
Case 1:21-cr-00061-LEK     Document 98     Filed 04/06/23     Page 4 of 13  PageID.843

86314 
4 
 
 
The Magistrate should have denied the motion (without prejudice to refiling 
at a more appropriate time) or continued it until after sentencing.  Even if the 
phone contains information that PACMAR is entitled to keep confidential, the 
Phone and its contents are under the safekeeping of the United States Attorney’s 
office.  PACMAR waited about 2.5 years to bring the motion.  There was no 
demonstrable need to rush the proceedings to the detriment of Mr. Kao.  
 C. 
THE NATURE OF PACMAR’S OWNERSHIP AND THE 
APPLICABILITY AND EFFECT OF THE HANDBOOK 
MATERIALS IS A MATTER OF DISPUTE 
 
 
PACMAR claims it is undisputed that it is the owner of the cellphone.  
However, the "evidence" of ownership was from Verizon's consolidated invoice to 
MDG, where a "Device Payment Agreement" is listed under Martin Kao's charges.  
See Document 82-8 at 3.  
 
Contrary to its assertion, PACMAR’s ownership of the phone is not 
established by this evidence.  Assuming that Mr. Kao went to Verizon and 
purchased the iphone, is that a benefit for Mr. Kao or is it MDG’s phone?  
PACMAR does not describe how this phone was obtained.  PACMAR does not 
discuss the SIM card.  PACMAR did not attach any receipt, user agreement, or 
even the Device Payment Agreement.  PACMAR did not identify any separate 
agreement between Mr. Kao and MDG at the time Mr. Kao first obtained the 
phone.   
Case 1:21-cr-00061-LEK     Document 98     Filed 04/06/23     Page 5 of 13  PageID.844

86314 
5 
 
 
Even if PACMAR established legal title, that is insufficient. As PACMAR 
should know, ownership may be based on legal title or beneficial interest.  
Possession can be more important than legal title in establishing actual ownership. 
As an extreme example, the seller under an agreement of sale retains legal title but 
the law treats the purchaser as the true owner.  Ownership issues could not be fully 
explored because Mr. Kao elected to remain silent.  However, it was undisputed 
that Mr. Kao had possession of the phone.  It was error for the Magistrate Judge to 
have made a ruling without having explored the nature and scope of Mr. Kao’s 
possessory interest.   This exploration should have occurred after Mr. Kao's 
sentencing. 
 
The patchwork of policies that PACMAR stitched together would not 
support summary judgment, let alone the deprivation of a criminal defendant's 
property and privacy rights during a time when his privilege against self-
incrimination must be protected and respected. The policies that PACMAR cherry-
picks to establish its alleged ownership rights actually undermine its arguments 
when viewed in proper context.   
 
The policies by their terms are policies for employees and it is misleading to 
characterize Mr. Kao as an employee in 2019 and 2020.  As PACMAR knows 
from its arbitration with Mr. Kao, Mr. Kao was paid by distributions (not by W-2 
Case 1:21-cr-00061-LEK     Document 98     Filed 04/06/23     Page 6 of 13  PageID.845

86314 
6 
 
employee compensation) and had a capital account (based on 99% ownership) in 
2019 and 2020.1   
 
The “Cellular Phones” policy (Document 82-4 at 45) states the following as 
its purpose: “The purpose of this policy is to promote a safe and productive work 
environment and increase public safety.  This policy applies to both incoming and 
outgoing cellular calls.”  See Id at 45.  By its plain terms, this policy applies to 
personal and company cell phones, and it is intended to govern safe and efficient 
usage.  It does not purport to give PACMAR/MDG any ownership interest in a 
phone’s contents. 
 
The “Electronic Mail and Internet Usage” policy focuses on the company’s 
email system.  See Document 82-4 at 46.  It does not purport to govern cell phones 
or the contents of cell phones.  PACMAR isolates and then underscores a provision 
that states: “Computers, computer files, electronic communication systems, 
internet access, and software furnished to employees are Company property 
intended to be used solely for business purposes . . . . All work done with 
Company resources will be owned by the Company or will be deemed 
assigned to the Company.”  See Dkt 95 at 6 (emphasis supplied).  PACMAR is 
 
1 See Navatek Capital Inc. et al v. Martin Kao, 1CCV-20-0001511, Circuit Court of 
the First Circuit, State of Hawaii, at Dkt 452, Final Judgment Confirming 
Arbitration Award, at Exhibit A (Redacted Award) at 24, 63, 72 (judicial notice 
requested). 
Case 1:21-cr-00061-LEK     Document 98     Filed 04/06/23     Page 7 of 13  PageID.846

86314 
7 
 
reaching for straws.  First, none of the equipment listed is a cellular phone, which 
is the subject of the Policy on the prior page.  Second, the purpose of this provision 
is obviously to ensure that MDG owns the intellectual property produced from the 
company's IT and software system.2   The argument that it gives MDG ownership 
of personal information on an iPhone is unavailing. 
 
The “MDG Employee Mobile Device Policy” is similarly unhelpful to 
PACMAR.  It is focused on the productive use of mobile devices, not the 
ownership of content. Indeed, it states in part:   
The Company owns any and all phone numbers for accounts that are paid 
for by the Company. 
 
Employees are eligible to upgrade beyond the standard-issue device or 
provide their own nonstandard device at their own expense, provided the 
device conforms to the Company's IT/Security policy requirements. 
 
The Company provides a mobile device as both a necessity for the regular 
and complete execution of the employee's professional responsibilities and a 
benefit for the employee. 
 
Document 82-7 at 2 (emphases added). This policy can hardly be construed as a 
waiver of all rights to privacy in a phone.  Significantly, the Policy describes 
company-issued mobile devices as also an employee benefit.  It would hardly be a 
benefit if "Defendant Kao had no right to privacy in the device" or if "personal uses 
was at his own risk" and the company owned his personal data.  The Policy only 
 
2 I.e., a type of work-for-hire IP-protection clause. 
Case 1:21-cr-00061-LEK     Document 98     Filed 04/06/23     Page 8 of 13  PageID.847

86314 
8 
 
identifies as disciplinary consequences for “excessive or inappropriate use” the 
banning of use during business hours or repossession.  Id. at 3.   
 
Furthermore, the Policy allows the employee to keep the phone by paying 
for it: “Upon termination or departure from the Company, the employee's mobile 
device may be purchased at fair value (as determined by the Company), and if so 
desired by the employee, the phone line may be released to the employee.”  This 
right to purchase and take the phone line weakens any claim PACMAR may claim 
to the personal and other data on the phone. Mr. Kao would purchase the phone at 
fair value, which appears to be under $400.3 
 
PACMAR also cherry-picks and quotes from a provision regarding 
inspection. The alleged right of inspection contained in the mobile device policy 
states: "At any time upon request by Company management, the employee shall 
produce the mobile device for return or inspection."   See Document 82-7 at 2.  
Even if the phone is subject to this policy, PACMAR greatly exaggerates the effect 
of the provision.    
 
First, who was the “Company management” at the time Mr. Kao had the 
iPhone?  PACMAR alleges that “[f]rom and after 2018, as President and CEO of 
 
3 https://swappa.com/guide/apple-iphone-11-
pro/prices#:~:text=What's%20the%20best%20price%20for,to%20the%20MSRP%
20of%20%24999. 
 
Case 1:21-cr-00061-LEK     Document 98     Filed 04/06/23     Page 9 of 13  PageID.848

86314 
9 
 
PacMar, Defendant Kao was responsible for oversight of all of PacMar’s business 
operations[.]”  Dkt 95 at 7.4  If Mr. Kao is considered management during the time 
he had the phone, then it is Mr. Kao that had the right to inspect his own phone.  
Mr. Kao’s reasonable expectation of privacy should include an assessment of 
expectations given the facts and circumstances.   
 
Second, the provision does not state that PACMAR owns any personal data 
on the phone.  The provision does not state that an employee cannot remove 
personal data before returning the phone. Indeed, the Policy states that employees 
“shall make reasonable efforts to… [p]rotect their own personal data, as the 
Company will not responsible for personal data loss[.]” This provision clearly 
indicates that personal data will not be property of the Company.  
 
Third, the inspection provision must be read in conjunction with the Policy’s 
“Disciplinary Consequences” provision, which states: “The Company retains the 
right to monitor employees for excessive or inappropriate use of their mobile 
devices. If an employee's usage causes a prolonged decline in productivity or 
interferes with our operations, the Company may ban that employee from using 
mobile devices during business hours and/or repossess a Company-provided 
 
4 In its opposition, PACMAR dismisses the following rhetorical question raised in 
the objection: “Who at the company at the time Mr. Kao was CEO and owner 
would have asked Mr. Kao for personal information on his phone?” See Dkt 95 at 
15.  However, it is a relevant and significant issue, especially in the context of the 
asserted right to inspect.   
Case 1:21-cr-00061-LEK     Document 98     Filed 04/06/23     Page 10 of 13  PageID.849

86314 
10 
 
mobile device.”  Dkt 82-7 at 3.  Logically, given the Policy as a whole, the right to 
inspect is to confirm whether excessive or inappropriate use occurred.  There is no 
expectation from the Policy that personal data belongs to the company.  
D. 
THE MAGISTRATE JUDGE COMMITTED ERROR BY 
GIVING PACMAR GOVERNMENT WORKPRODUCT OF A 
CRIMINAL SEARCH AND SEIZURE 
 
 
The government asserts that it seized the phone pursuant to a warrant: 
Pursuant to warrant, the government seized the cell phone at issue on or 
about September 30, 2020, from Defendant Kao at the offices of the Navatek 
companies that are now PacMar in connection with the arrest of Defendant 
Kao. 
 
Dkt 96 at 2. PACMAR’s argument that the phone should not be afforded the same 
scrutiny as property taken by criminal warrant is without merit.  As stated by the 
United States: 
5. After seizing the cell phone, the government used forensic tools to 
extract data from the cell phone. 
6. The extracted data set contains both business data and personal data. 
 
Dkt 96 at 2 (emphasis added).  The government states it can provide a Cellebrite 
report and/or raw data.  
 
It is believed that extracting raw data still requires special tools.  PACMAR 
should be required to wait until the phone can be released to make its request.  By 
then, perhaps, Mr. Kao will be able to testify without fear of incrimination.    
 
 
Case 1:21-cr-00061-LEK     Document 98     Filed 04/06/23     Page 11 of 13  PageID.850

86314 
11 
 
E. 
THE MAGISTRATE JUDGE FAILED TO PROTECT MR. 
KAO’S PRIVACY INTERESTS IN SEIZED PROPERTY 
 
Having PACMAR pay for a special master to segregate company data from 
personal data is an option.  The United States is amenable to the use of a special 
master as long as the United States does not pay for it: 
To the extent that the Court orders the segregation of business data from 
personal data before data is produced to PacMar, the government requests 
that a third-party, such as a special master, be appointed by the Court 
because such task would be unduly burdensome if placed upon the 
government. Furthermore, PacMar and/or Defendant Kao, and not the 
government, should bear the costs incurred for such a process because the 
government’s obligation is merely to return property to its owner at the 
conclusion of proceedings and the instant dispute between PacMar and 
Defendant Kao is a part of a long-running business and legal dispute 
between the two. 
 
Dkt 96 at 4.   PACMAR should bear the cost of a special master because it is the 
one claiming an urgent need to review the data.  
II. 
CONCLUSION 
 
Based on the submissions, the record,5 and argument that may be raised at 
hearing, Mr. Kao requests the following: 
1. The Order should be vacated and/or rejected.   
2. Alternatively, the Order should be modified in order to protect Mr. Kao’s 
personal data.  PACMAR should not be entitled to the data unless it pays to 
 
5 According to the court reporter, the original transcript of the hearing on the 
motion will be or has been filed with the Court. 
Case 1:21-cr-00061-LEK     Document 98     Filed 04/06/23     Page 12 of 13  PageID.851

86314 
12 
 
have a special master review the data and segregate the personal data from 
business data.   
DATED: HONOLULU, HAWAII, APRIL 6, 2023. 
 
 
 
 
 
/s/ Chuck C. Choi  
 
 
 
 
 
 
 
 
 
KEITH M. KIUCHI 
  
 
 
 
 
CHUCK C. CHOI  
 
 
 
 
 
ALLISON A. ITO 
 
 
 
 
 
MICHEL A. OKAZAKI 
 
 
 
Case 1:21-cr-00061-LEK     Document 98     Filed 04/06/23     Page 13 of 13  PageID.852

File and source

File

gov.uscourts.hid.154418.98.0.pdf

Size

229,894 bytes

SHA-256

0c87ccc7fd9984365d29669607b20feea1aeb26241613bfd43c3c32ebaa35374

Our copy

gov.uscourts.hid.154418.98.0.pdf

Original

PACER (login required)