Grand Jury Proceedings, Thursday Special Grand Jury Sept. Term, 1991, In re
| Decision Date | 01 September 1991 |
| Citation | 33 F.3d 342 |
| Parties | In re GRAND JURY PROCEEDINGS, THURSDAY SPECIAL GRAND JURY |
| Court | U.S. Court of Appeals — Fourth Circuit |
ARGUED: Robert Charles Bonsib, Marcus & Bonsib, Greenbelt, MD, Joshua R. Treem, Schulman, Treem, Kaminkow & Gilden, P.A., Baltimore, MD, for appellants. Ira Lee Oring, Asst. U.S. Atty., Baltimore, MD, for appellee. ON BRIEF: Sheryl G. Holtz, Schulman, Treem, Kaminkow & Gilden, P.A., Baltimore, MD, for appellants. Lynne A. Battaglia, U.S. Atty., Jane F. Barrett, Asst. U.S. Atty., Baltimore, MD, for appellee.
Before HALL, MURNAGHAN, and LUTTIG, Circuit Judges.
Affirmed in part and remanded in part by published opinion. Judge MURNAGHAN wrote the opinion, in which Judge K.K. HALL and Judge LUTTIG joined.
On June 21, 1993, the United States District Court for the District of Maryland granted the government's motion to compel the production of various documents to the grand jury investigating the billing practices of one of the appellants, which we will refer to as Subsidiary B of the Company. 1 The appellants asserted both attorney-client and work product privileges with respect to the responsive documents they withheld when served with the subpoena. The government submitted that the claimed privileges were not applicable to certain of the requested documents and that the privilege was vitiated with respect to others due to the crime-fraud exception. The appellants have appealed the district court's order requiring them to produce the documents on several grounds. Finding that the crime-fraud exception does vitiate the asserted privileges in some instances and that other asserted privileges do not apply, we agree with the government that the appellants must produce the subpoenaed documents. We do find merit, however, in the Attorney's assertion of the opinion work product privilege and, accordingly, require the district court to redact that material from the subpoenaed documents.
A federal grand jury began investigating Subsidiaries A and B in September 1991. In October, Subsidiary A was served with a subpoena issued by the grand jury for the District of Maryland. 2 Subsidiary A produced some responsive documents but withheld a number of documents asserting attorney-client and work product privileges. Subsidiary A described those documents to the government in letters in late 1992 and early 1993.
In December 1992, the custodian of records for the Law Firm, and one member of that firm, the Attorney, were served with grand jury subpoenas. Asserting attorney-client and work product privileges, Subsidiary A instructed both the Firm and the Attorney not to produce documents in response to the subpoenas. While the Law Firm asserted those privileges, the Attorney also asserted a Fifth Amendment privilege with regard to his calendars and appointment books. 3 Appellants allege that the requested documents were from confidential client files revealing confidential client communications and the attorneys' mental impressions and opinions.
On April 23, 1993, the government filed a motion to compel compliance with the subpoenas insofar as documents were withheld because of privilege claims. The government claimed that many of the records were not covered by the asserted privileges and that all claims of privilege were abrogated because the services of counsel had been utilized to further a course of fraudulent and/or criminal conduct. In support of its motion to compel, the United States provided the court with an in camera submission which consisted primarily of grand jury testimony and documents supporting the applicability of the crime-fraud exception. 4 The appellants have not been given access to the submission. 5
Subsidiaries A and B filed a motion to intervene with regard to the subpoenas directed at the law firm. After the court granted that motion, the appellants filed an opposition to the government's motion to compel, attaching ex parte exhibits providing detailed summaries of the requested documents for the court's review. The appellants also requested an opportunity to rebut the government's in camera submission. The government filed a reply.
The district court considered the submissions by both parties, but did not, according to the appellants, afford them the opportunity to make the requested rebuttal. On June 21, 1993 the court granted the government's motion, ruling that some of the documents were not covered by either asserted privilege and that, as to the other documents, the privileges could not be asserted "in light of the very strong case made by the government that the attorneys in question were used to perpetrate fraudulent conduct by individuals within the corporate hierarchy." The district court did not, at any time, review the actual documents at issue. The court made the determination that the privileges did not apply or, alternatively, were vitiated, on the basis of an in camera review of ex parte submissions by both parties. The court ordered the documents to be turned over within fifteen days but stayed the order pending appeal. 6 The appellants appealed to this Court. 7
The September Session Grand Jury 1991 handed down two indictments in late August 1993. In the first indictment, Subsidiary B, its president, vice-president, and various other employees were charged with mail fraud relating to a scheme to defraud Subsidiary B's customers through millions of dollars of fraudulent billing in violation of 18 U.S.C. Sec. 1341. The second indictment charged that Subsidiary B, as well as various of its employees, defrauded Montgomery County, Maryland by setting up sham minority contractors to appear to comply with the county's minority set-aside program. Trial is pending on both indictments. 8
On September 2, 1993 the grand jury expired, and the jurors were discharged. That week, the appellants filed a motion to dismiss the appeal as moot alleging that the Court of Appeals no longer had jurisdiction to hear the appeal. The government opposed the motion. A three-judge panel denied the motion without prejudice and the appellant was, therefore, free to brief and argue the mootness issue at oral argument.
The government has submitted a sealed supplemental appendix detailing its continuing investigation based primarily on the testimony before the grand jury. The government has requested that the appendix be considered in camera. The government's continuing investigation concerns efforts by the senior management of the Company and Subsidiary A to mislead company auditors and others regarding the scope of the billing fraud by Subsidiary B. Targets of the continuing investigation differ from those previously indicted.
Subsidiary A has withheld documents that are allegedly responsive to the subpoena and that relate to securities filings, correspondence with underwriters, memoranda and notes. The Law Firm has withheld documents allegedly relating to responses to audit letters by outside, independent auditors. The government informed the district court that the management of the Company and Subsidiary A engaged in a concerted effort to prevent disclosure of Subsidiary B's fraudulent billing practices. The submission purports to show that the attorneys were participants in the corporations' fraudulent activities that were designed to avoid public disclosure of the fraud. Although the appellants continually suggest that the attorneys were not active members of the cover-up but were merely used by the officers of the corporation, the government seems to have reason to believe that the attorneys did participate in the fraud.
Appellants argue that aside from the government's ex parte allegations, the government did not identify in its motion to compel, or in its letter to the appellants, the SEC statutes or regulations allegedly violated; the disclosures made to the SEC; or what was defective about those disclosures. The government's in camera submission seems to cover some of those topics, but the appellants do not have access to the submission.
Appellants have contended that the Fourth Circuit does not have jurisdiction to hear the case because the appeal has been rendered moot by the recent indictments and the expiration of the September Term Grand Jury 1991. The appellants also have argued that the district court used improper procedures in the proceedings below, preventing the appellants from fully and fairly litigating the issues raised in this appeal. Specifically, the district court did not provide the appellants an opportunity to review and refute the government's ex parte in camera submission. Additionally, the district court did not articulate the basis for the crime or fraud that allegedly vitiates the privileges the appellants have asserted. They also make much of the fact that the district court failed to specify which privileges applied to which documents. Finally, the appellants have suggested that the district court issued a blanket vitiation rule without taking into account the discrete standards governing the various privileges; without reviewing the allegedly privileged documents in camera; and without stating the basis of the crime or the fraud on the record. The appellants have requested the Fourth Circuit to reverse and remand with instructions to apply proper procedures and standards and to make particularized findings regarding the privileges.
The grand jury returned two indictments in August 1993. After the grand jury expired...
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