Court filing
REPLY by Martin Kao as to Martin Kao re 95 Response, 92 Order -… — PPP Attempt Conspiracy Legal Filings (Dkt. 98)
No. 1:21-cr-00061-LEK · Doc. 98 · Docket on CourtListener
Summary
Defendant Martin Kao's reply to Pacmar Technologies LLC's response (Document 95) to his objections to a magistrate judge's order (Document 92), filed April 6, 2023 as Document 98 in United States v. Martin Kao, No. 1:21-cr-00061-LEK, in the U.S. District Court for the District of Hawaii, with a hearing set for April 13, 2023. The reply argues that the order on Pacmar's Rule 41(g) motion for data from Kao's seized iPhone was dispositive and subject to de novo review. It argues that the magistrate judge could not rule without hearing from Kao, who remained silent pending sentencing, that Pacmar's ownership of the phone is disputed, and that the company policies do not make personal data company property. It asks that the order be vacated or modified to protect his personal data, with Pacmar paying for a special master to separate personal from business data.
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Case 1:21-cr-00061-LEK Document 98 Filed 04/06/23 Page 1 of 13 PageID.840
KEITH M. KIUCHI #2735 CHOI & ITO, Attorneys at Law
1001 Bishop Street, Suite 985 Chuck C. Choi #6435
Honolulu, Hawaii 96813 Allison A. Ito #8152
Telephone: (808) 533-2230 Michel A. Okazaki #6524
Facsimile: (808) 533-4391 (independent lawyer appearing
E-Mail: kkiuchi106@cs.com 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
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.
UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF HAWAII
UNITED STATES OF AMERICA CR. NO. 21-00061 LEK
Plaintiff DEFENDANT MARTIN KAO’S
v. REPLY TO “PACMAR
TECHNOLOGIES LLC'S RESPONSE
MARTIN KAO TO OBJECTIONS TO AND APPEAL
FROM DISPOSITIVE ORDER
Defendant [DOCUMENT 92] OF MAGISTRATE
JUDGE” [DOCUMENT 95]
PACMAR TECHNOLOGIES LLC
HEARING:
Movant v. DATE: APRIL 13, 2023
MARTIN KAO TIME: 11:00 AM
JUDGE: HON. LESLIE KOBAYASHI
Respondent/Objecting Party
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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
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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.
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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.
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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.
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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
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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).
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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.
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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.
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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.
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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.
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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.
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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
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