836 F.2d 1468 (4th Cir. 1988), 87-5565, In re Grand Jury Subpoena

Docket Nº:87-5565.
Citation:836 F.2d 1468
Party Name:IN RE GRAND JURY SUBPOENA. UNITED STATES of America, Plaintiff-Appellee, v. (UNDER SEAL), Defendants-Appellants.
Case Date:January 12, 1988
Court:United States Courts of Appeals, Court of Appeals for the Fourth Circuit
 
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836 F.2d 1468 (4th Cir. 1988)

IN RE GRAND JURY SUBPOENA.

UNITED STATES of America, Plaintiff-Appellee,

v.

(UNDER SEAL), Defendants-Appellants.

No. 87-5565.

United States Court of Appeals, Fourth Circuit

January 12, 1988

Argued July 31, 1987.

Rehearing and Rehearing En Banc Denied March 18, 1988.

Eugene Propper (Lane & Edson, P.C. on brief); Anne Davies Smith (White & Case; John R. Fornaiciari; Mark H. Tuohey, III; Kenneth A. Grigg; Pierson, Ball & Dowd, Washington, D.C., on brief), for defendants-appellants.

Barbara Slaymaker Sale, Asst. U.S. Atty. (Breckinridge L. Willcox, U.S. Atty.; Baltimore, Md., Joyce K. McKee, Asst. U.S. Atty., on brief), for plaintiff-appellee.

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Before WINTER, Chief Judge, and MURNAGHAN and SPROUSE, Circuit judges.

HARRISON L. WINTER, Chief Judge:

Four third-party deponents in a civil action in the Eastern District of Virginia appeal from a judgment of the district court of Maryland denying their motion to quash two grand jury subpoenas issued by a special grand jury in Maryland to an attorney in Virginia requiring production of their sealed depositions taken during the civil litigation in Virginia. The appellants-deponents moved to quash the subpoenas in the district court of Maryland on the ground that the depositions were sealed by a protective order issued by the district court in Virginia. The district court of Maryland denied the motion to quash, concluding that a civil protective order cannot be used to shield discovery materials from a subpoena issued by a grand jury. We affirm.

I.

A special grand jury in the district of Maryland is investigating the events surrounding the collapse in September, 1985, of Community Savings & Loan (Community), which was part of a group of affiliated organizations whose parent corporation is Equity Programs Investment Corporation (EPIC). The appellants-deponents in this case are former officers and directors of EPIC and its subsidiaries. In 1985, the state of Maryland placed Community into conservatorship and EPIC filed for bankruptcy. Subsequently, several private mortgage insurance companies which had insured mortgages held by EPIC brought suit in the Eastern District of Virginia against EPIC Mortgage, Inc. (a subsidiary of EPIC), numerous banks, and the Maryland Deposit Insurance Corporation, the conservator for Community. The appellants-deponents are not parties to the litigation in the Eastern District of Virginia.

In 1986, plaintiffs in the civil action in Virginia noticed the depositions of the appellants. Some of these deponents became concerned about complying with this order because of the ongoing grand jury investigation in Maryland. The deponents moved for a stay of discovery pending completion of the grand jury investigation in order to avoid being forced to choose between the possibility of self-incrimination and asserting their fifth amendment rights. After a hearing, the Virginia district court denied the motion for a stay. With the consent of all parties and the deponents, the court instead orally issued a protective order sealing the deposition transcripts and limiting access to the transcripts to the parties in the civil action. The district court requested that the parties prepare a written protective order for the district court to consider. The parties submitted the written order to the district judge on October 8, and it was signed the next day. 1

The written protective order sealed deposition transcripts that were filed with the court and limited access to these transcripts to necessary court personnel, the deponents, and the parties to the civil action and their counsel. The protective order specifically stated:

IT IS FURTHER ORDERED that the transcript or record of the sealed depositions and the information contained therein shall not be made available to any state or federal investigating agency or authority, and shall not be used in

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connection with any proceedings other than these actions, except by further order of this Court.

The protective order also provided for possible modification:

IT IS FURTHER ORDERED that this Order may be modified only by further order of this Court or any other court having jurisdiction over the trial of any of these cases upon notice to the deponents and the parties to this case with reasonable opportunity to respond.

In late 1986, following the taking of these depositions, the Assistant United States Attorney guiding the special grand jury investigation in Maryland requested copies of the deposition transcripts in the Virginia litigation from an attorney for a defendant in that action. The attorney provided the grand jury with the requested materials, except for those depositions sealed by the protective order. On December 16, 1986, the grand jury issued a subpoena duces tecum requiring an attorney for the plaintiffs in the Virginia action to produce the deposition transcripts of two of the appellants in this action. On January 21, 1987, the grand jury issued a second subpoena requiring an attorney to produce the deposition transcripts of the remaining appellants. Appellants subsequently filed their motion to quash.

Following a hearing on the motion to quash, the deponents, at the request of the Maryland district judge, scheduled an appearance before the Virginia district court in order to clarify the protective order. During that hearing, the district judge in Virginia explained that the protective order was intended to bar access to the transcripts by the Maryland grand jury and that the deponents were entitled to rely on the order to protect their fifth amendment rights. The government subsequently stipulated that the protective order was intended to apply to the Maryland grand jury. On April 21, 1987, the district court of Maryland denied the motion to quash.

II.

The appellants seek to employ a civil protective order as a defense against compliance with a grand jury subpoena demanding production of deposition transcripts obtained during discovery in a civil action to which they were not parties. The issue of the need to comply with the grand jury subpoena is properly before this court. The government had two options in seeking to obtain the deposition transcripts: it could seek permissive intervention in the civil action in Virginia pursuant to Fed.R.Civ.P. 24(b) to request that the protective order be modified or vacated, or it could subpoena the transcripts as part of the ongoing grand jury investigation. Martindell v. International Telephone and Telegraph Corp., 594 F.2d 291, 294 (2 Cir.1979). The government validly chose the latter course in this action. 2

The issue presented in this case is an important one of first impression in the circuit courts concerning the legal authority of the grand jury. The Maryland district court denied the motion to quash the subpoena on the ground that it lacked the authority to quash the grand jury's subpoena duces tecum notwithstanding that the deposition transcripts sought to be obtained were sealed under the terms of a valid civil protective order issued by another federal district court. In reaching this decision, the Maryland district court assumed that the deponents relied on the protective order during the taking of depositions and that the protective order was validly issued. The district court appropriately framed the legal issue for consideration, and we agree with its conclusion. 3

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The question of the grand jury's authority presented in this case involves the intersection of three interests: the authority of a grand jury to gather evidence in a criminal investigation; the deponents' right against self-incrimination; and the goals of liberal discovery and efficient dispute resolution in civil proceedings. We begin by discussing these respective interests.

A.

The sweeping power of the grand jury to compel the production of evidence has been recognized since the nation's founding. Blair v. United States, 250 U.S. 273, 280, 39 S.Ct. 468, 470, 63 L.Ed. 979 (1919). Federal grand juries derive the authority to investigate criminal wrongdoing by requiring testimony and the production of documents from the United States Constitution, the Federal Rules of Criminal Procedure, and federal statutes. U.S. Const., Amend. V; Fed.R.Crim.P. 6; 18 U.S.C. Secs. 3321 et seq.

The grand jury has the authority to require the production of evidence and testimony of witnesses because "the public ... has a right to every man's evidence." Branzburg v. Hayes, 408 U.S. 665, 688, 92 S.Ct. 2646, 2660, 33 L.Ed.2d 626 (1972). While grand jury investigations are subject to constitutional limits, the grand jury has wide latitude in gathering evidence because this power is essential to the task of criminal investigations. Thus, the grand jury's power to investigate criminal offenses is "unrestrained by the technical procedural and evidentiary rules governing the conduct of criminal trials." United States v. Calandra, 414 U.S. 338, 343, 94 S.Ct. 613, 617, 38 L.Ed.2d 561 (1974). The grand jury has the right to obtain and consider all evidence relevant to its deliberations because the nature of the crime and the identity of the accused must be ascertained based upon this evidence at the conclusion of the grand jury's inquiry. Blair, 250 U.S. at 282, 39 S.Ct. at 471. Because the grand jury enjoys important constitutional status, the grand jury is not subject to the direction of the court with respect to these essential functions. United States v. United States District Court, 238 F.2d 713 (4 Cir.1956), cert. denied sub nom., Valley Bell Dairy Co. v. United States, 352 U.S. 981, 77 S.Ct. 382, 1 L.Ed.2d 365 (1957). As a result, a court may not intervene in the grand jury process absent compelling reason. United States v. Dionisio...

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