U.S. v. Aero Mayflower Transit Co., Inc., 86-5674

• Decision Date: 30 October 1987
• Docket Number: No. 86-5674,86-5674
• Citation: 831 F.2d 1142
• Parties: , 56 USLW 2259, 1987-2 Trade Cases 67,740 UNITED STATES of America v. AERO MAYFLOWER TRANSIT CO., INC., et al., Appellants, Global Van Lines, Inc.
• Court: U.S. Court of Appeals — District of Columbia Circuit

Page 1142

831 F.2d 1142

265 U.S.App.D.C. 383, 56 USLW 2259,

1987-2 Trade Cases 67,740

UNITED STATES of America v. AERO MAYFLOWER TRANSIT CO., INC., et al., Appellants, Global

Van Lines, Inc.

No. 86-5674.

United States Court of Appeals, District of Columbia Circuit.

Argued Sept. 17, 1987.

Decided Oct. 30, 1987.

Joseph Brooks, with whom William L. Gardner, Washington, D.C., was on brief for appellants Allied Freight Forwarding, Inc., et al.

James A. Calderwood, with whom Edward J. Kiley, Washington, D.C., was on brief for appellants Aero Mayflower Transit Co., Inc., et al.

Thomas M. Auchincloss, Jr., and Leo C. Franey, Washington, D.C., were on brief for appellant Bekins Van Lines Co.

Joan E. Hartman, Atty. Dept. of Justice, with whom Richard K. Willard, Asst. Atty. Gen., Joseph E. diGenova, U.S. Atty., and Michael F. Hertz, Atty. Dept. of Justice, Washington, D.C., were on brief for the appellee. John Bates, Asst. U.S. Atty., Washington, D.C., also entered an appearance for the appellee.

Before MIKVA and SILBERMAN, Circuit Judges, and KOZINSKI, ^* Circuit Judge, United States Court of Appeals for the Ninth Circuit.

Opinion for the Court filed by Circuit Judge SILBERMAN.

SILBERMAN, Circuit Judge:

Appellants, a number of interstate van lines, challenged subpoenas duces tecum issued by the Inspector General of the Department of Defense in support of an investigation into allegations of collusion and price fixing with respect to Department of Defense moving and storage contracts. Refusing to comply with the subpoenas, appellants asserted that they were themselves the victims of collusion; in the enforcement proceeding below, they sought limited discovery and an evidentiary hearing to establish that the Inspector General was not conducting an independent investigation but was serving as a mere conduit for an investigation by the Justice Department's Antitrust Division by lending out the Inspector General's subpoena power.

The district court declined to permit discovery and granted the United States' motion for summary enforcement of the administrative subpoenas. United States v. Aero-Mayflower Transit Co., 646 F.Supp. 1467 (D.D.C.1986). The van lines appeal that ruling, contending that the district court applied an incorrect legal standard in examining only whether the Inspector General had statutory authority to issue the subpoenas rather than also inquiring into the propriety of the purpose for which they were issued, an inquiry that might justify discovery. We agree with the district court that appellants are not entitled to discovery, and we reject appellant Bekins Van Lines' ("Bekins") contention that the involvement of the military in the administration of the subpoenas transgresses a constitutional proscription of the use of the Armed Forces in domestic law enforcement. Consequently, we affirm the enforcement order.

I.

Because this case involves summary enforcement proceedings, the factual record is not fully developed. The contours of the dispute are, nevertheless, clear. For at least three years prior to the issuance of the district court's enforcement order, the Antitrust Division of the Justice Department had been investigating alleged anti-competitive practices in the moving and storage industry. This examination led to the return of five indictments and one prosecution by information of local moving and storage companies for price fixing. The Inspector General instituted his own investigation in September of 1985 into possible "anticompetitive activity in certain industries" that contract with the Defense Department. Sometime thereafter, the Inspector General targeted the moving and storage industry for further investigation.

In that same fall--although it is unclear whether before or after the Inspector General focused on the moving and storage industry--the Antitrust Division and the Federal Bureau of Investigation suggested to the Inspector General a cooperative investigation into the price-fixing allegations. Having agreed to that investigation, the Inspector General signed, on April 10, 1986, 377 subpoenas directed to interstate van lines and their local agents.

Appellant van lines informed the Inspector General that they would not comply with the subpoenas, and the government petitioned for summary enforcement on August 14, 1986. Appellants adduced several affidavits to show that the Inspector General had simply "rubber stamped" the subpoenas and thus improperly delegated his authority to the Justice Department. The affidavits recite that on numerous occasions recipients of the subpoenas who sought extensions of time or clarifications from Defense Department personnel were told that the latter had no independent authority so to act and were referred to the Justice Department. The affidavits further state that Justice Department personnel routinely exercised authority to modify the Inspector General's subpoenas and that the documents produced in response to the subpoenas were to be directly available to the Justice Department, without prior review by the Inspector General. Finally, it is claimed that the Inspector General's investigation was of unprecedented magnitude--suggesting that the Inspector General did not conceive the investigation alone. On the strength of this record, appellants argued below that the subpoenas should be quashed as having been issued for an improper purpose, and requested in the alternative that they be allowed limited discovery and an evidentiary hearing in order to prove that improper purpose by demonstrating that the Inspector General was acting as nothing more than a return agent or document repository for the Justice Department.

The district court declined to pass on the degree of independence exhibited by the Inspector General, ruling that "[a]n agency need show only that the investigation is within the scope of its authority and that the requested documents are minimally relevant to that inquiry." 646 F.Supp. at 1472. It also noted that the coordination of the agencies' efforts "is precisely the kind of cooperation that an efficient government should encourage." Id. at 1471. It is from that ruling that the van lines appeal.

II.

In 1978, Congress, out of concern over governmental inefficiency, created offices of Inspector General in a number of departments and agencies. ¹ The Report of the Senate Committee on Governmental Affairs on the legislation referred to "evidence [that] makes it clear that fraud, abuse and waste in the operations of Federal departments and agencies and in federally funded programs are reaching epidemic proportions." S.REP. NO. 1071, 95th Cong., 2d Sess. 4, reprinted in 1978 U.S. CODE CONG. & ADMIN.NEWS 2676, 2679. The Committee blamed these failures in large part on deficiencies in the organization and incentives of executive branch auditors and investigators. The Inspectors General were, therefore, to provide intra-agency cohesion and a sense of mission in the struggle against waste and mismanagement as well as to further important communication between agencies: "[T]his type of coordination and leadership strengthens cooperation between the agency and the Department of Justice in investigating and prosecuting fraud cases." Id. at 6-7, U.S.Code Cong. & Admin.News 978, pp. 2681-2682. In service of this end, the Act gives the Inspectors General both civil ² and criminal ³ investigative authority and subpoena powers coextensive with that authority. ⁴

As a general proposition, an investigative subpoena of a federal agency will be enforced if the "evidence sought ... [is] not plainly incompetent or irrelevant to any lawful purpose" of the agency. Endicott Johnson Corp. v. Perkins, 317 U.S. 501, 509, 63 S.Ct. 339, 343, 87 L.Ed. 424 (1943); see also FTC v. Texaco, 555 F.2d 862, 871-73 (D.C.Cir.) (en banc ) (tracing development of this doctrine), cert. denied, 431 U.S. 974, 97 S.Ct. 2940, 53 L.Ed.2d 1072 (1977). However, a court may inquire into the agency's reasons for issuing the subpoena upon an adequate showing that the agency is acting in bad faith or for an improper purpose, such as harassment. United States v. Powell, 379 U.S. 48, 58, 85 S.Ct. 248, 255, 13 L.Ed.2d 112 (1964). Appellants contend that the Inspector General is acting in bad faith or for an improper purpose in this case because the information is actually sought for the Justice Department's Antitrust Division. Appellants rely on United States v. LaSalle National Bank, 437 U.S. 298, 98 S.Ct. 2357, 57 L.Ed.2d 221 (1978), in which a closely divided Supreme Court held that the IRS could not use its summons authority solely for a criminal investigation: "[T]he good faith standard will not permit the IRS to become an information-gathering agency for other departments, including the Department of Justice...." Id. at 317, 98 S.Ct. at 2368. But the Court's opinion in LaSalle turns entirely on its examination of the IRS's statutory summons authority. The Court was unable to find there congressional authorization to use IRS summonses solely for criminal investigations. Id. n. 18. ⁵ By contrast, Congress in the statute before us has explicitly directed the Inspector General to engage in criminal investigations. LaSalle thus appears to us to be totally inapposite. Cf. In re EEOC, 709 F.2d 392, 399 (5th Cir.1983) (refusing to import rule of LaSalle into EEOC subpoena enforcement proceeding).

Appellants also rely on United States v. Westinghouse Electric Corp., 788 F.2d 164 (3d Cir.1986). That case, however, is simply a variant of LaSalle. Westinghouse, a defense contractor, challenged an Inspector General subpoena because it was allegedly issued solely for the benefit of another component of the Defense Department, the Defense Contract Audit Agency. Although the Third Circuit did say that an inquiry into the Inspector General's "motive or intent" was appropriate, that statement is contained in the court's discussion of a Defense Department internal policy memorandum...