'Coworking' With a Search Warrant Target
Sharing desks, computers, coffee makers and work space, or "coworking," is an increasingly common feature of startup life. The office might be leased traditionally or split up and managed by another company à la NextSpace. The coworking model can, however, bring considerable—and often unanticipated—risks, including losing computers and mission-critical property if a coworking company or individual is the target of a search warrant executed on a client's shared office space.
Counsel can help navigate this thorny issue with a mix of preventative measures and post-seizure litigation. Advising clients on how to preempt this potential problem can save them trouble down the road, and can help ensure clients are not in long-term limbo while the post-search property issues are negotiated or litigated.
Federal Rule of Criminal Procedure 41(g) governs the procedure when property is improperly seized in a search directed at a different, separate target. While an investigation may be targeted at one specified company or individual, shared workspace can make it virtually impossible to distinguish between employees and startups coworking in the space. The actual seizure and subsequent sorting occurs pre-indictment; clients sharing space with the target of an investigation are not criminal defendants so their recourse exists outside of an indicted case. A phone call to prosecutors detailing the overbroad seizure is unlikely to resolve the issue. Initially, agents likely will not know whether two coworking companies or employees are acting in concert, and regardless will be planning to analyze for evidence all property seized from the shared space. Because of this likely "seize first, question later" dynamic, having a command of the applicable law is essential to getting client property back.
It is virtually impossible to keep property untouched after a seizure, even an improper one. If a negotiation or motion for property return is successful, agents likely will still be allowed to retain and review evidence seized from a non-target, coworking client. In the Rule 41(g) context, the courts often split the difference and grant a 41(g) motion for property return while also allowing the government to keep copies of seized computers. See, e.g. Ramsden v. United States, 2 F.3d 322, 325 (9th Cir. 1993); Labor Force Partners, Ltd. v. United States, 2006 WL 1328262, at *3-4 (E.D. Cal. May 16, 2006) (denying motion where movants had access to computers while government retained copies). In Ramsden, the agents had an arrest warrant, but also took documents from closed suitcases. Even in a Ramsden-type warrantless search context, the court allowed the government to retain copies.
When filing for a coworking client's property return, it is critical not to style the motion as one to suppress evidence, because courts are unlikely to grant a motion in equity when the issue could later be litigated in criminal proceedings. Instead, focus on the separate nature of the client's property and equitable factors. Rule 41(g) provides that, "[a] person aggrieved by an unlawful search and seizure of property or by the deprivation of property may move for the property's return" in the district where the property was seized. The courts construe it as a civil motion because the motion asks the court to exercise its equitable jurisdiction in determining whether the property must be returned and/or retained. Unsurprisingly, this makes the procedure quite fact-specific, and what is persuasive varies. Some assertions—specifically the impropriety of the search—can be analogous to a suppression motion, but a Rule 41(g) motion cannot properly seek suppression given that there is no live prosecution from which to exclude the property found at the shared office. See In re Grand Jury, 635 F.3d 101, 103 (3d Cir. 2011).
The federal courts have set a high bar for prevailing on a 41(g) motion for property return, using a two-step approach: a threshold test and a merits test. Across circuits, a district court first decides whether to exercise its equitable jurisdiction by balancing four factors: 1) whether the seizure involved a callous disregard for constitutional rights; 2) the movant's individual need for the property; 3) the irreparability of injury caused by denying return; and 4) whether there is an adequate remedy at law to redress the improper seizure. See Ramsden at 325. Only if the balance of these factors tips in the movant's favor will the court reach the merits. The cumulative effect of the balancing test factors means moving past the threshold stage is difficult. Requiring a "callous disregard for constitutional rights" means that particularly egregious conduct is required—a very high standard. Non-target clients whose property has been seized under a search warrant directed at someone working in the same space must show the improper seizure was more than a mistake or the result of an agent's confusion. Clients are thus much better off being counseled to avoid misdirected seizures in the first place.
The coworking movement is new enough that courts have not yet waded into 41(g) issues specifically in the shared workspace context. Attorneys can, however, help coworking clients avoid seizure problems by maintaining the clearest possible separation between different startups' devices, computers, desks, and documents. A visitor, or investigating agent, should have no confusion over who works where, and whose computers live on which desks. The following is a non-exhaustive, hopefully helpful, list of measures and advice for coworking clients:
1. Do not share everything. It is critically important to delineate who uses what and when. Making sure employees use individual company computers—even when sharing desks—can combat messy issues later. Sharing computers but maintaining private log-ins is insufficient; if a search warrant target or target's employee logged in to the device once, it can be on the evidence log later.
2. Write clear sharing agreements. Workspace sharers should have leases or other contracts specifying exactly how they are splitting the space. Does each employee have their own desk? Does one startup use the space on Tuesdays? Advise clients to commit their sharing plan to paper—and to keep that paper on hand. The same goes for shared bills. If multiple companies are using an internet or phone service, make sure the account information accurately reflects all companies or individuals using the service. Committing this to paper mitigates issues later if one company is a warrant subject.
3. Signal with signage. Building a logo and brand name happens early in a startup's evolution. Consider advising clients to print their logo and name signage, and make sure the signage visibly identifies the start-up's work space. If your client is a more itinerant desk sharer, consider printing a mobile name plate or simple sign and placing that near wherever work is happening.
4. Ask for a map, and a lawyer. If agents arrive at a client's coworking space, calling a defense attorney with experience in this area is the best immediate step to take. If it looks like all property in a coworking space are going to be seized before counsel arrives, consider advising clients to map or otherwise document where each device was located when seized.
In this area of law, prevention is particularly important because even property wrongfully seized (and rightfully returned) may be subject to review. These measures can avoid unintended consequences of coworking when agents with a warrant come knocking.
Reprinted with permission from the October 26, 2015 issue of The Recorder. ©2015 ALM Media Properties, LLC. Further duplication without permission is prohibited. All rights reserved