Daily Journal Corp. v. Superior Court

• Decision Date: 22 July 1999
• Docket Number: No. S072133,S072133
• Court: California Supreme Court
• Parties: , 979 P.2d 982, 99 Cal. Daily Op. Serv. 5817, 1999 Daily Journal D.A.R. 7431 DAILY JOURNAL CORPORATION, Plaintiff and Respondent, v. The SUPERIOR COURT of Orange County, Defendant and Respondent; Merrill Lynch & Co., Inc., et al., Real Parties in Interest and Appellants; Robert L. Citron Et al., Real Parties in Interest and Respondents

Page 623

86 Cal.Rptr.2d 623

20 Cal.4th 1117, 979 P.2d 982, 99 Cal. Daily Op. Serv. 5817,

1999 Daily Journal D.A.R. 7431

DAILY JOURNAL CORPORATION, Plaintiff and Respondent, v. The SUPERIOR COURT of Orange County, Defendant and Respondent Merrill Lynch & Co., Inc., et al., Real Parties in Interest and Appellants Robert L. Citron Et al., Real Parties in Interest and Respondents.

No. S072133.

Supreme Court of California

July 22, 1999.

Law Offices of Paul S. Meyer, Paul S. Meyer, Costa Mesa; Morvillo, Abramowitz, Grand, Iason & Silberberg, Robert G. Morvillo, John T. Tigue, Jr., Richard D. Weinberg, Diana D. Parker, New York, NY; Morrison & Foerster and Dan Marmalefsky, Los Angeles, for Real Party in Interest and Appellant Merrill Lynch & Co., Inc.

Fried, Frank, Harris, Shriver & Jacobson, Audrey Strauss, New York, NY, and Stephen D. Alexander, for Real Parties in Interest and Appellants Grand Jury Witnesses John Does 1-28.

McCambridge, Deixler & Marmaro, Richard Marmaro, Michael A. Firestein and Jonathan E. Rich, Los Angeles, for Real Party in Interest and Appellant Grand Jury Witness John Doe II.

John T. Philipsborn, San Francisco, for California Attorneys for Criminal Justice as Amicus Curiae on behalf of Real Parties in Interest and Appellants Grand Jury Witnesses John Does 1-28.

Davis Wright Tremaine, Kelli L. Sager, Karen N. Fredericksen, Steven J. Westman, Los Angeles, and Rochelle L. Wilcox, for Plaintiff and Respondent.

David W. Wiechert, Costa Mesa, for Real Party in Interest and Respondent Robert L. Citron.

Hennigan, Mercer & Bennett, J. Michael Hennigan, Robert L. Palmer, Los Angeles, and Lawrence C. Jones, for Real Party in Interest and Respondent Thomas W. Hayes.

No appearance for Respondent Superior Court.

Michael R. Capizzi, District Attorney (Orange) and Gregory J. Robischon, Deputy District Attorney, as Amici Curiae.

MOSK, J.

As part of its investigation into the circumstances leading to Orange County's filing for bankruptcy in December 1994, the Orange County Grand Jury conducted a criminal investigation of Merrill Lynch & Co., Inc. (hereafter Merrill Lynch), in connection with its role in underwriting several debt offerings in Orange County during the summer of 1994. The criminal investigation ended without indictments after a civil settlement between Merrill Lynch and the Orange County District Attorney. After the settlement, the Daily Journal Corporation and other media entities (hereafter, collectively, media entities) sought, and the superior court ordered, release to the public of all testimony and all documents presented to the grand jury in the course of the criminal investigation.

We granted review to determine whether the superior court, in the absence of a statutory provision for disclosure under these circumstances, properly released the grand jury materials to the public. As will appear, we conclude that it did not. Accordingly we reverse the judgment of the Court of Appeal.

I

In December 1994, the County of Orange (hereafter the County) filed for bankruptcy protection after its pooled investment fund lost approximately $1.7 billion. Merrill Lynch was one of the investment banking firms from which the County purchased high-risk securities.

The Orange County District Attorney initiated grand jury criminal investigations into the events leading to the bankruptcy. "Phase one" and "phase two" targeted county officials involved in the transactions leading to the bankruptcy. The investigations resulted in criminal indictments or accusations against former county officials.

"Phase three" of the grand jury proceedings, at issue here, involved a criminal investigation into the conduct of Merrill Lynch as the underwriter of four debt offerings of the County in the summer of 1994. Testimony was taken and documents received from Merrill Lynch from July 1996 until June 1997. No civil grand jury investigation was conducted. ¹

In June 1997, before the grand jury began deliberations, the district attorney, with the agreement of the Attorney General, entered into a civil settlement with Merrill Lynch with regard to the County's "factual inquiry into Merrill Lynch's role in underwriting four debt offerings in 1994." Under the settlement, Merrill Lynch agreed to pay $30 million to the County's general fund, $3 million of which was allocated as reimbursement for the costs of the investigation by the district attorney and the Attorney General. Merrill Lynch also agreed to implement procedural changes and training modifications for its personnel involved in the debt offerings. The agreement did not affect any currently pending litigation against Merrill Lynch by any other party, including the County. The County also agreed, in a separate letter agreement, that it would not prosecute Merrill Lynch or bring any criminal action against it in connection with the County's bankruptcy. The agreement was based, in part, on Merrill Lynch's representation that it was "not aware of any evidence that establishes that Merrill Lynch has committed a crime in connection with any transaction involving Orange County." ²

Shortly thereafter, media entities submitted informal letter requests to the superior court seeking public release of all grand jury material. The superior court ordered a hearing, which was held in late July 1997.

In August 1997, the superior court ordered the district attorney to release all transcripts and documents from the grand jury's investigation of Merrill Lynch, based on the "public's right to information under the First Amendment and the California Constitution" and the court's "inherent equity, supervisory and administrative powers." Observing that the receipt of $3 million by the district attorney's office "seems self-serving" and "may create a conflict of interest," it ruled that disclosure was warranted by "the magnitude of the public's loss of funds and loss of confidence in government and financial markets" and "[e]ach and every citizen['s] ... inalienable right to the disclosure of this information."

Merrill Lynch and grand jury witnesses -- current and former employees of the company -- appealed, arguing that there was no legal authority for the disclosure because the investigation ended without indictment, and that releasing the transcripts to the public would result in damage to reputation and business interests. Media entities and real party in interest Robert L. Citron, former Orange County Treasurer, urged that the superior court properly ordered release of the transcripts.

The Court of Appeal affirmed. It determined that, in the absence of any statutory provision limiting its authority, a superior court has inherent power to order the release of otherwise secret grand jury materials whenever the advantages gained by secrecy are outweighed by a public interest in disclosure. Applying that balancing test, it ruled that the considerations justifying secrecy were de minimis in this instance, because no one was exonerated and the grand jury was discharged. It also determined that there was a "very strong public policy in favor of preserving the public integrity of the grand jury system which can only be served by disclosure." Release of the grand jury materials at issue was stayed pending further appellate review.

We granted review and now reverse.

II

Although the grand jury was originally derived from the common law, the California Legislature has codified extensive rules defining it and governing its formation and proceedings, including provisions for implementing the long-established tradition of grand jury secrecy. (See Pen.Code, pt. II, tit. 4, chs. 1-3, §§ 888-939.91; see also Pen.Code, §§ 940-945.) The provisions include rules for excluding unauthorized persons from sessions and excluding all nonjurors from deliberations, and rules concerning disclosure.

The relevant statutes are as follows.

Penal Code section 939.1 provides that, at the written request of the grand jury and the attorney general or the district attorney, a superior court may order public sessions of the grand jury when it involves matters affecting the public welfare. Otherwise, grand jury proceedings are conducted in secrecy. (Pen.Code, § 915 [grand jury "shall retire to a private room" to conduct inquiry into offenses].) Unless requested by the grand jury, "the judge of the court ... shall not be present during the sessions of the grand jury." (Id., § 934.) Apart from necessary and authorized appearances, as specified by statute, no person is permitted to be present during criminal sessions of the grand jury except the members and witnesses actually under examination. (Id., § 939.) Deliberations of the grand jury are completely private; no person other than the grand jurors themselves may be present during "the expression of the opinions of the grand jurors, or the giving of their votes" on any criminal matter before them. (Ibid.)

Grand jurors must take an oath that they will "not disclose any evidence brought before the grand jury, nor anything which [they] or any other grand juror may say, nor the manner in which [they] or any other grand juror may have voted on any matter before the grand jury." (Pen.Code, § 911.) A grand juror who willfully discloses the fact of an information or indictment before the defendant has been arrested is guilty of a misdemeanor. (Id., § 924.) Unless required by the court, grand jurors are not permitted to disclose any evidence adduced before the grand jury or anything said by a member of the grand jury. (Id., § 924.1, subd. (a).) Moreover, each grand juror "shall keep secret" the deliberations and voting of the grand jury. (Id., § 924.2.) A grand juror may not be questioned about any deliberations or vote relative to a matter pending before the grand jury, "except for a perjury of which he may have been guilty in making an accusation or giving testimony to his fellow jurors." (Id., § 924.3.)

If an indictment is returned, Penal Code section...