Klein, Matter of

• Decision Date: 16 August 1985
• Docket Number: 85-1997 and 85-2230,85-1996,Nos. 85-1894,s. 85-1894
• Court: U.S. Court of Appeals — Seventh Circuit
• Parties: -6164, 85-2 USTC P 9701 In the Matter of Lee J. KLEIN, a witness before the Special September 1983 Grand Jury, Appellant. Appeal of John H. WESTON, David M. Brown, Robert E. Smith, Carl L. Rubin, Stephen M. Taylor, and Michael Y. Sandborn, witnesses before the Special September 1983 Grand Jury, Appellants. Appeal of Harry Virgil MOHNEY, Lee J. Klein, and Burton H. Gorelick, Intervenors-Appellants.

Page 628

776 F.2d 628

56 A.F.T.R.2d 85-6164, 85-2 USTC P 9701

In the Matter of Lee J. KLEIN, a witness before the Special

September 1983 Grand Jury, Appellant.

Appeal of John H. WESTON, David M. Brown, Robert E. Smith,

Carl L. Rubin, Stephen M. Taylor, and Michael Y.

Sandborn, witnesses before the Special

September 1983 Grand Jury, Appellants.

Appeal of Harry Virgil MOHNEY, Lee J. Klein, and Burton H.

Gorelick, Intervenors-Appellants.

Nos. 85-1894, 85-1996, 85-1997 and 85-2230.

United States Court of Appeals, Seventh Circuit.

Argued Aug. 13, 1985.

Decided Aug. 16, 1985.

John H. Weston, Brown, Weston & Sarno, Beverly Hills, Cal., for appellants.

Veta M. Carney, Asst. U.S. Atty., Indianapolis, Ind., for appellees.

Before BAUER, FLAUM and EASTERBROOK, Circuit Judges.

EASTERBROOK, Circuit Judge.

A grand jury in Indianapolis is investigating potential income tax, arson, and other offenses. The "targets" of this investigation include Harry Virgil Mohney, Burton H. Gorelick, Lee J. Klein, and Michael Y. Sandborn. The "subjects" of the investigation include Robert E. Smith. Klein, Sandborn, and Smith are attorneys. Each represents other targets, subjects, and witnesses.

In January and February 1985 the grand jury served subpoenas on seven attorneys--Klein, Sandborn, Smith, and four others who the Government regards simply as witnesses. Each subpoena called for the attorney to produce documents arising out of his representation of a target. One subpoena served on John H. Weston, for example, called for accounting ledgers concerning Klein and Mohney, for Weston's time records, bills, and memoranda showing when and where he met Mohney, for retainer contracts and similar documents, and "[a]ny and all business and/or financial books, records, and documents relating to Lee J. Klein, Harry Virgil Mohney, whether or not the ownership, control or involvement is reflected in the said documents." The subpoena served on David M. Brown called for "all documents relating to business and/or financial transactions involving, in any manner whatsoever, directly or indirectly, Harry V. Mohney, Lee J. Klein, and/or Burton C. Gorelick" from 1968 through the date of production. The subpoena served on Klein asked for "all documents relating to business and/or financial transactions involving, in any manner whatsoever, Harry V. Mohney and/or Burton H. Gorelick."

The attorneys moved to quash the subpoenas, arguing (among other things) that they impinged on the attorney-client relation and called for potentially incriminating documents. The prosecutor eliminated any problem of self-incrimination by obtaining orders granting use immunity for the act of production. See United States v. Doe, 465 U.S. 605, 104 S.Ct. 1237, 79 L.Ed.2d 552 (1984). The district court rejected the other arguments on the merits in two opinions. The first, filed on May 9, 1985, deals with Klein's subpoena alone. 608 F.Supp. 538 (S.D.Ind.1985). The second, on May 23, addressed the other six lawyers' claims in similar language. In each opinion the district court concluded that the attorneys must appear before the grand jury. If they believe that any document is covered by the attorney-client privilege, they must assert the privilege one document at a time. The judge declined to follow cases in other courts holding that the Government must establish the need for and relevance of any document it seeks out of the hands an attorney, whether or not the document is privileged. The district court also declined to stay its order enforcing the subpoenas, but the prosecutor voluntarily withheld enforcement of the subpoenas pending our decision. This court expedited consideration of the case.

I

None of the attorneys has appeared before the grand jury. None has claimed that particular documents are privileged. No one has been held in contempt. There is therefore no "final decision," as that term usually is understood. A final decision in a subpoena case means an order holding a witness in contempt, see United States v. Ryan, 402 U.S. 530, 91 S.Ct. 1580, 29 L.Ed.2d 85 (1971).

The appellants maintain that we have jurisdiction under Perlman v. United States, 247 U.S. 7, 38 S.Ct. 417, 62 L.Ed. 950 (1918), which permitted the holder of a privilege to intervene in order to assert the privilege and to appeal from the rejection of the assertion. (The clients have intervened in this case.) The rejection of the claim is the final decision with respect to the intervenor, the Court reasoned; because the person summoned before the grand jury may testify rather than go to jail to support someone else's privilege, the rejection of the claim is final as a practical matter too. Like several other courts, this one has treated Perlman as a holding that clients always are entitled to appeal as soon as their attorneys are required to produce documents. In re November 1979 Grand Jury, 616 F.2d 1021, 1024-25 (7th Cir.1980), relying on Velsicol Chemical Corp. v. Parsons, 561 F.2d 671, 674 (7th Cir.1977), cert. denied, 435 U.S. 942, 98 S.Ct. 1521, 55 L.Ed.2d 538 (1978). See also, e.g., In re Doe, 759 F.2d 968, 971 n. 1 (2d Cir.1985); In re Fine, 641 F.2d 199 (5th Cir.1981); In re FMC Corp., 604 F.2d 798 (3d Cir.1979).

The Government nevertheless asks us to dismiss this appeal for want of jurisdiction. It points out that the attorneys have not been before the grand jury at all, so that claims of privilege remain unresolved. Moreover, the language used in November 1979 Grand Jury was much broader than the case required; the documents were already in the hands of the prosecutor, so that review on appeal from an order permitting use of the documents was the only possible avenue of review. No private person could have been held in contempt--which was true in Perlman as well. Perlman relied in part on a conclusion that the rejection of an intervenor's claim is "final" with respect to the intervenor, a position the Supreme Court rejected in DiBella v. United States, 369 U.S. 121, 82 S.Ct. 654, 7 L.Ed.2d 614 (1962), when the intervenor is also a putative defendant. Although the Supreme Court has cited Perlman since DiBella, it has not reconsidered how much of Perlman's rationale survives.

Three circuits have rejected our opinion in Velsicol and held that Perlman permits an appeal in advance of a citation for contempt only when contempt is unlikely as a practical matter. In re Sealed Case, 655 F.2d 1298 (D.C.Cir.1981); In re Oberkoetter, 612 F.2d 15 (1st Cir.1980); National Super Spuds, Inc. v. New York Mercantile Exchange, 591 F.2d 174 (2d Cir.1979) (Friendly, J.). See also Comment, The Perlman Exception: Limitations Required by the Final Decision Rule, 49 U.Chi.L.Rev. 798 (1982). The Government asks us to follow these cases and limit Velsicol if not overrule it.

In this case four of the lawyers are suspects themselves, and they have every reason to resist disclosure. The non-suspect lawyers may not have personal interests but they have an ethical duty to respect their clients' wishes concerning the privilege. If it is necessary that these attorneys suffer contempt in order to ensure that the clients have an opportunity for a decision on appeal, then the lawyers must follow this path. ¹ It is therefore very likely that the lawyer-appellants will stand in contempt if claims of privilege should be made and rejected.

Cases such as Flanagan v. United States, 465 U.S. 259, 104 S.Ct. 1051, 79 L.Ed.2d 288 (1984), emphasize the importance of expedition in the criminal process. The final decision rule plays an essential role in moving things along. A requirement that the subject of a subpoena stand in contempt in order to obtain review serves two purposes. First, it sharpens the issues so that a single appellate review will be sufficient; we discuss this further in Part II. Second, it ensures that people raise only those claims that are sufficiently serious that they are willing to make a sacrifice to obtain appellate review. Self-interest cuts down dramatically on the number of appeals taken to obtain delay.

When people may appeal any order enforcing a subpoena, it is easy to oppose every subpoena and make broad claims, which the appellants in this case have done with gusto. The claims are very hard to resolve, because they lack the focus on particular documents and defenses that an adjudication in contempt would produce. Win or lose, the appellants obtain delay, which they may value highly. If they lose here, they can always make more particular claims of privilege and try again. In the meantime the targets are free, memories of other witnesses are fading, evidence is disappearing, the grand jury may have difficulty proceeding against other targets, and events may escape scrutiny as the statute of limitations takes its toll. Calandra v. United States, 414 U.S. 338, 94 S.Ct. 613, 38 L.Ed.2d 561 (1974), and Cobbledick v. United States, 309 U.S. 323, 60 S.Ct. 540, 84 L.Ed. 783 (1940), say in no uncertain terms that such delay should not be tolerated.

Nothing this court can do, however, could eliminate the conflict among the circuits on the question before us. The Supreme Court may consider the question before much longer. In the meantime, litigants' legitimate interest in the stable application of this court's precedents make us hesitate to disturb Velsicol. The rule of Velsicol also has its advantages, at least until the Supreme Court resolves the conflict. A jurisdictional rule that turns on whether the holder of the privilege can count on the holder of the documents to stand in contempt would require substantial factual inquiries in each case. Jurisdictional inquiries turning on the nuances of particular situations may be worse than rules allowing all appeals in a category; at least a rule allowing appeals permits this court quickly to reach the merits so that the grand jury may get about its business. Cf. United States v. MacDonald, 435 U.S. 850, 857-58 n. 6, 98 S.Ct. 1547, 1551 n. 6, 56 L.Ed.2d...