Grand Jury Subpoena (85-W-71-5), In re

• Decision Date: 21 February 1986
• Docket Number: W-71-5,No. 85-2171,85-2171
• Citation: 784 F.2d 857
• Parties: 21 Fed. R. Evid. Serv. 159 In re GRAND JURY SUBPOENA (85-).
• Court: U.S. Court of Appeals — Eighth Circuit

Page 857

784 F.2d 857

21 Fed. R. Evid. Serv. 159

In re GRAND JURY SUBPOENA (85-W-71-5).

No. 85-2171.

United States Court of Appeals Eighth Circuit.

Submitted Jan. 17, 1986.

Decided Feb. 21, 1986.

James Wyrsch, Kansas City, Mo., for appellant.

Robert B. Schneider, Asst. U.S. Atty., Kansas City, Mo., for appellee.

Before McMILLIAN, Circuit Judge, BRIGHT, Senior Circuit Judge, and JOHN R. GIBSON, Circuit Judge.

McMILLIAN, Circuit Judge.

This is an expedited appeal from an order entered in the District Court ¹ for the Western District of Missouri denying a motion to quash a subpoena duces tecum. In re Grand Jury Subpoena, No. 85-W-71-5 (W.D.Mo. Sept. 17, 1985) (order). For reversal appellant argues that the motion to quash should have been granted because production of the corporate records listed in the subpoena would compel incriminating testimonial communication by her client in violation of the fifth amendment "act of production" doctrine. ² Appellant also argues that production would violate the attorney-client privilege and the work product privilege. For the reasons discussed below, we affirm the order of the district court.

Appellant is an attorney who has physical possession of certain Westech Corp. records. Westech Corp. is now defunct. Appellant was given the corporate records by her client, intervenor-appellant Alan R. Cunningham, a former officer of Westech Corp., at the time he sought legal advice in connection with certain civil actions pending in state and federal court involving Westech Corp.

During the early 1980s Westech Corp. was the prime contractor for a multi-million dollar Department of Defense construction project at the White Sands Missile Range in New Mexico. A performance bond for the construction project had been issued by Fireman's Fund Insurance Co. The government paid the contract price of over $6.6 million directly to Westech Corp. because Westech Corp. had certified that all its subcontractors and vendors had been paid. Then in 1983 numerous subcontractors began to file claims with Fireman's Fund Insurance Co. under the performance bond. The Defense Contract Audit Agency conducted an audit of the construction project and discovered "major discrepancies" between Westech Corp.'s general ledger and its financial statements. The government auditors suspected that Westech Corp. had submitted false claims to the Department of Defense in connection with the construction project.

A federal grand jury began investigating the alleged submission of false claims and false statements by Westech Corp., Cunningham and others in connection with the White Sands construction project. Thus, Cunningham is a target of the grand jury investigation. The subpoena in question in the present case was issued by the District Court for the Western District of Missouri in March 1985. The subpoena was addressed to appellant and called for testimony and production of certain Westech Corp. records ³ in connection with the White Sands construction project. Appellant filed a motion to quash. The parties agreed that appellant would not have to appear before the grand jury until the district court ruled upon the motion to quash. The district court also granted Cunningham's application to intervene. The records that appellant claims are protected by her client's fifth amendment privilege have not been examined by government auditors.

After a hearing in September 1985, the district court denied the motion to quash. The district court held that because the "act of production" doctrine did not apply to corporate records, Cunningham had no fifth amendment privilege which would be violated by the production of the Westech Corp. records. Infra at 860-61. The district court also held that neither the attorney-client privilege nor work product privilege barred production of the Westech Corp. records by appellant. Slip op. at 6. This appeal followed.

As a preliminary matter, we note that the order denying appellant's motion to quash the subpoena, although interlocutory, is immediately appealable. E.g., In re Berkley & Co., 629 F.2d 548, 551 (8th Cir.1980); see In re Two Grand Jury Subpoenae Duces Tecum, 769 F.2d 52, 54-56 (2d Cir.1985).

The general rule is that a person to whom a grand jury subpoena is directed cannot appeal from the denial of a motion to quash the subpoena, but must first refuse to comply with the subpoena and litigate his [or her] claims in contempt proceedings.

A well-established exception to this rule, however, permits an individual claiming a privilege or other interest in subpoenaed documents to appeal from an order to produce directed to a third party custodian of the documents. The theory for allowing immediate appeal is that the appellant himself [or herself] cannot resist compliance in order to obtain review in contempt proceedings, and the third party custodian cannot be expected to risk contempt to secure review on his [or her] behalf.

In re Berkley & Co., 629 F.2d at 551 (citations omitted).

Here, if the government had subpoenaed either Westech Corp. or Cunningham directly, instead of appellant, Westech Corp. or Cunningham could have protected any claims of privilege by refusing to comply and by then appealing any subsequent contempt order. However, because the subpoena was addressed to appellant, a third party, an immediate appeal is allowed. Moreover, under Fisher v. United States, 425 U.S. 391, 96 S.Ct. 1569, 48 L.Ed.2d 39 (1976), appellant, as Cunningham's attorney, is in effect asserting her client's fifth amendment privilege. As explained in United States v. Authement, 607 F.2d 1129, 1131 n. 1 (5th Cir.1979),

Fisher v. United States ... held that compelled production of documents by way of subpoena from a client's attorney does not implicate the client's fifth amendment privilege because it does not compel the client to do anything. 425 U.S. at 396-01 . Fisher makes clear, however, that as long as the material to be produced would be privileged in the hands of the client, it is also privileged in the hands of the attorney by means of the attorney-client privilege where the transfer was made for the purpose of obtaining legal advice. 425 U.S. at 402-05 . The proper inquiry when material has been transferred to an attorney for the purpose of legal advice and the subpoena is directed to the attorney, then, is whether the subpoena, if directed to the client himself [or herself], would require (1) compulsion of a (2) testimonial communication that is (3) incriminating.

Appellant does not contend that the corporate records are themselves privileged. Appellant argues, however, that the very act of producing these records in response to the subpoena would be a compelled, incriminating, testimonial communication by her client Cunningham. Appellant argues that the act of production, plus other circumstantial evidence, could support an inference that Cunningham had guilty knowledge of the potentially incriminating contents of the records and that he removed them from Westech Corp. files to prevent their disclosure. See In re Grand Jury Subpoenas Duces Tecum, 722 F.2d 981 (2d Cir.1983); In re Katz, 623 F.2d 122 (2d Cir.1980). Appellant contends that the recent decision of the Supreme Court in United States v. Doe, 465 U.S. 605, 104 S.Ct. 1237, 79 L.Ed.2d 552 (1984), applies to corporate records and supports her argument. Appellant thus argues that the district court should have quashed the subpoena unless the government, by stipulation or by obtaining a grant of immunity pursuant to 18 U.S.C. Secs. 6002-6003, agreed to immunize the act of production, or the district court should have modified the subpoena to permit another individual to produce the records.

At oral argument counsel for the government emphasized that the subpoena requires production of only corporate records and stated that, despite the wording of the subpoena form, the subpoena does not require any testimony by appellant. Counsel for the government further stated that the government will not seek authentication of the records by appellant or Cunningham.

The government argues that United States v. Doe applies only to the records of sole proprietorships and does not modify the "collective entity" rule, which provides that "an individual cannot rely upon the privilege [against self-incrimination] to avoid producing the records of a collective entity which are in his [or her] possession in a representative capacity, even if these records might incriminate him [or her] personally." Bellis v. United States, 417 U.S. 85, 88, 94 S.Ct. 2179, 2183, 40 L.Ed.2d 678 (1974) (emphasis added); see Hale v. Henkel, 201 U.S. 43, 74, 26 S.Ct. 370, 378, 50 L.Ed. 652 (1906). The government argues that Cunningham has no fifth amendment privilege to prevent the production of corporate records; as a result, the records are not protected by the attorney-client privilege in appellant's hands as Cunningham's attorney; and, thus, the district court did not err in denying the motion to quash. We agree.

The Collective Entity Rule

Normally a corporate representative or agent cannot claim a fifth amendment privilege against producing corporate documents, regardless of whether they contain information incriminating him [or her] or were written by him [or her], and regardless of whether the corporation is large or small. The reason for this is that the corporation itself has no fifth amendment privilege, and the only way to prevent the corporation from shielding its records from a subpoena is to prevent individual corporate representatives from exercising such a privilege with respect to corporate records.

In re Two Grand Jury Subpoenae Duces Tecum, 769 F.2d at 56 (citations omitted) ("collective entity" rule); see also Bellis v. United States, 417 U.S. at 88-89, 94 S.Ct. at 2182, 2183 (individual partner who held subpoenaed partnership records in a representative capacity for the dissolved partnership could not assert personal fifth...