175 F.3d 332 (4th Cir. 1999), 98-4841, In re Grand Jury Subpoena

Docket Nº:98-4841.
Citation:175 F.3d 332
Party Name:In re GRAND JURY SUBPOENA Under Seal; Under Seal 2, Petitioners-Appellees, v. United States of America, Respondent-Appellant.
Case Date:April 29, 1999
Court:United States Courts of Appeals, Court of Appeals for the Fourth Circuit

Page 332

175 F.3d 332 (4th Cir. 1999)

In re GRAND JURY SUBPOENA

Under Seal; Under Seal 2, Petitioners-Appellees,

v.

United States of America, Respondent-Appellant.

No. 98-4841.

United States Court of Appeals, Fourth Circuit

April 29, 1999

Argued March 3, 1999.

Page 333

ARGUED: David S. Kris, United States Department of Justice, Washington, D.C., for Appellant. Thomas Louis Patten, LATHAM & WATKINS, Washington, D.C.; E. Fitzgerald Parnell, III, Poyner & Spruill, L.L.P., Charlotte, North Carolina, for Appellees. ON BRIEF: Faith S. Hochberg, United States Attorney, Mark R. Winston, Assistant United States Attorney, Mark T. Calloway, United States Attorney, Frank D. Whitney, Assistant United States Attorney, Brian L. Whisler, Assistant United States Attorney, United States Department of Justice, Washington, D.C., for Appellant. Jennifer C. Archie, Latham & Watkins, Washington, D.C., for Appellees.

Page 334

Before ERVIN, HAMILTON, and LUTTIG, Circuit Judges.

Affirmed by published opinion. Judge LITTIG wrote the opinion, in which Judge ERVIN and Judge HAMILTON joined.

LUTTIG, Circuit Judge:

The United States appeals a decision by the federal district court to quash a subpoena in an ongoing criminal investigation on the ground that the sole purpose of the subpoena was to obtain discovery for a parallel civil qui tam proceeding. Because the district court's findings as to the purpose of the subpoena were not clearly erroneous, we affirm.

I.

This case involves allegations of potentially fraudulent pricing practices by Baker & Taylor, Incorporated (B & T), the nation's largest wholesale bookseller. On June 1, 1995, two private parties--Ronald Thornburg, a former employee of B & T, and Robert Costa, a public librarian in Richmond, Virginia 1--filed a sealed qui tam civil complaint in the United States District Court for the Northern District of California against B & T and its former corporate parent, W.R. Grace & Company--Connecticut ("Grace"), alleging that B & T fraudulently overcharged institutional customers, including federally funded libraries, in violation of the civil provisions of the False Claims Act. See United States ex rel. Costa v. Baker & Taylor, Inc., 955 F.Supp. 1188, 1189 (N.D.Cal.1997). From the date of filing until January 1997, the government conducted an investigation under seal to determine whether or not to intervene in the action, during which the government amassed thousands of documents and interviewed numerous witnesses. The investigation was spearheaded by Dee Lord, a lawyer in the Commercial Litigation Branch of the Civil Division of the Department of Justice, and Marty McGuire, a special agent in the Defense Criminal Investigative Service (DCIS), a branch of the Office of the Inspector General at the Department of Defense. In January 1997, after the district court decided to lift the seal on the complaint, the government formally intervened in the case.

On February 8, 1996, the Department of Justice asked DCIS to commence a criminal investigation against B & T to determine whether B & T's allegedly fraudulent pricing practices violated any federal criminal statutes. Between May 1996 and August 1998, officials working on the civil case intermittently met with their counterparts on the criminal case. Notably, McGuire participated in the criminal investigation, as well as the civil investigation. During this period, however, little progress was made on the criminal case, and indeed the statute of limitations appears to have run on a number of potential criminal charges. In early 1998, Mark Winston, Assistant United States Attorney for the District of New Jersey, took over as the prosecutor responsible for the criminal case. He was assisted by Frank Whitney, Assistant United States Attorney for the Western District of North Carolina. 2

In July 1998, the government issued a subpoena in the civil case against Gerald Garbacz, president of B & T. Attached to the subpoena was a request for a list of records relating to B & T's billing practices, designated as "Attachment A." On July 31, 1998, B & T and Grace objected to this subpoena and requested that discovery be stayed. The district court scheduled a telephone hearing for August 6, 1998, in order to rule on the objection.

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Events in the civil and criminal cases came to a head on August 6. On the morning of August 6, members of the civil and criminal teams, including Lord, McGuire, and Winston, met in Washington to exchange information and discuss how to proceed in the criminal case. 3 That afternoon, during the scheduled telephone conference in the civil case--in which Lord participated--the district court granted B & T and Grace's request to stay discovery in that case, pending the resolution of various motions by states to intervene as plaintiffs. 4

With discovery in the civil case stayed, members of the criminal team, including Whitney and McGuire, met on August 26 and decided to begin using a grand jury to assist in the criminal investigation. On September 11, Whitney directed McGuire to prepare a criminal subpoena for Thomas Neblett, a B & T salesman with responsibility for sales to schools and libraries. In preparing the subpoena, McGuire attached a photocopy of Attachment A, the same list of documents that he had attached to the Garbacz subpoena in the civil case. The subpoena was issued on September 16 and duly served. No other criminal subpoenas were served.

Upon learning about the Neblett subpoena, counsel for Grace contacted Lord on October 7 and informed her of Grace's intention to seek sanctions against the government for its allegedly improper use of a criminal subpoena to obtain discovery for a civil case. On October 8, the day after she learned that Grace knew about the subpoena, Lord wrote to McGuire recommending that he be "walled off" from any further involvement in the civil proceedings. On October 19, B & T and Grace filed motions in the United States District Court for the Western District of North Carolina to intervene in the criminal grand jury proceedings and to quash the Neblett subpoena. The district court granted both motions, but permitted the government to reapply for the subpoena once the stay in the civil proceeding was lifted.

The government then moved to unseal the pleadings in the criminal case in order to allow officials from the civil team to review the allegations of misconduct against them. After the district court granted the motion, the government then moved for reconsideration of the district court's order quashing the subpoena, attaching affidavits from Lord, McGuire, Winston, and Whitney, in which they testified that members of the civil team did not know about, and were not involved in, the decision to issue the subpoena. The district court denied the motion. From the district court's original order quashing the subpoena and its subsequent order denying the motion for reconsideration, the government now appeals.

II.

As a preliminary matter, we must dispose of appellee's motion to dismiss for lack of subject matter jurisdiction. Although we have frequently reviewed district court orders quashing subpoenas, see, e.g., In re Grand Jury Proceedings No. 92-4, 42 F.3d 876, 877 (4th Cir.1994); United States v. Under Seal, 757 F.2d 600, 602 (4th Cir.1985); United States v. Under Seal, 745 F.2d 834, 835 (4th Cir.1984), vacated on other grounds sub nom. United States v. Doe, 471 U.S. 1001, 105 S.Ct. 1861, 85 L.Ed.2d 155 (1985); United States v. Under Seal, 714 F.2d 347, 348 (4th Cir.1983), we have never discussed the source of our jurisdiction to do so, except in the 1984 Under Seal case, and then only in a one-sentence footnote. There, we stated simply that "[o]ur jurisdiction is based on 18 U.S.C. § 3731," without further elaboration. Under Seal, 745 F.2d at 835 n. 1.

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Appellant contends that jurisdiction lies on two independent grounds: 18 U.S.C. § 3731, which provides jurisdiction for appeals by the United States from district court orders suppressing or excluding evidence in criminal proceedings, and 28 U.S.C. § 1291, which provides jurisdiction generally for appeals from final district court decisions.

We begin with 18 U.S.C. § 3731. In relevant part, the statute reads:

An appeal by the United States shall lie to a court of appeals from a decision or order of a district court suppressing or excluding evidence or requiring the return of seized property in a criminal proceeding, not made after the defendant has been put in jeopardy and before the verdict or finding on an indictment or information, if the United States attorney certifies to the district court that the appeal is not taken for the purpose of delay and that the evidence is a substantial proof of a fact material in the proceeding.

18 U.S.C. § 3731. 5 In candor, given the text of section 3731, we are less than convinced that this provision was actually intended to afford appellate jurisdiction to review an order quashing a grand jury subpoena. First, the phrase "a decision or order of a district court suppressing or excluding evidence," is most naturally (even if not exclusively) understood as an order in either a post-indictment, pretrial proceeding or the trial itself; that is, we do not often refer to the "suppression" or "exclusion" of evidence from a grand jury--indeed, we do not even often have the occasion to do so. Second, the provision seems to presuppose (even if not necessarily so) a post-indictment decision, through its limitation to orders entered prior to the time that "the defendant" has been put in jeopardy, because, of course, only as to post-indictment orders is there a "defendant." Finally, that the United States Attorney must certify both "that the appeal is not taken for the purpose of delay" and "that the evidence is a substantial proof of a fact material in the proceeding" further tends to confirm that the statute was intended to...

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