Grand Jury Subpoenas, April, 1978, at Baltimore, In re

• Decision Date: 17 August 1978
• Docket Number: Nos. 78-1335,78-1336,s. 78-1335
• Citation: 581 F.2d 1103
• Parties: In re GRAND JURY SUBPOENAS, APRIL, 1978, AT BALTIMORE.
• Court: U.S. Court of Appeals — Fourth Circuit

Page 1103

581 F.2d 1103

In re GRAND JURY SUBPOENAS, APRIL, 1978, AT BALTIMORE.

Nos. 78-1335, 78-1336.

United States Court of Appeals, Fourth Circuit.

Argued July 21, 1978.

Decided Aug. 3, 1978.

As Amended Aug. 17, 1978.

Samuel Dash, Georgetown University Law Center, Washington, D. C. (Richard R. Molleur, Washington, D. C., and Lawrence M. Brauer, Marvin J. Garbis, Allen L. Schwait, Stephen C. Struntz, Garbis & Schwait, P. A., Baltimore, Md., on brief), for appellant.

James A. Bruton, Atty., Tax. Div., Dept. of Justice, Washington, D. C. (M. Carr Ferguson, Asst. Atty. Gen., Washington, D. C., Russell T. Baker, Jr., U. S. Atty., Baltimore, Md., Gilbert E. Andrews, Robert E. Lindsay, Charles E. Brookhart, Attys., Tax Div., Dept. of Justice, Washington, D. C., on brief), for appellee.

Before WINTER, Circuit Judge, FIELD, Senior Circuit Judge, and HALL, Circuit Judge.

WINTER, Circuit Judge:

A corporation, currently under investigation by a federal grand jury for possible federal income tax violations, appeals from an order of the district court denying its motion to quash eight grand jury subpoenas and to terminate the grand jury proceedings. Alternatively, the corporation seeks a writ of mandamus directing the district court to hold an evidentiary hearing into allegations that the grand jury process has been abused by the Internal Revenue Service (IRS) and the Justice Department. ¹

Because we are of the opinion that the district court's order is not a final decision within the meaning of 28 U.S.C. § 1291, we dismiss petitioner's appeal (No. 78-1336) for want of jurisdiction. As to the mandamus petition (No. 78-1335), we dismiss on the merits. We are not persuaded that petitioner has alleged a case of sufficient substance to warrant an evidentiary hearing or to entitle it to the writ.

I.

After actively auditing petitioner's tax returns for more than seven years, ² the Intelligence Division of the IRS, in May, 1977, initiated a criminal investigation of petitioner's tax returns for the years 1971-1975. ³ At some point prior to April, 1978 the decision was made to discontinue the administrative investigation into petitioner's possible criminal liability and to rely instead on the investigatory powers of the federal grand jury. ⁴ The decision to resort to a grand jury was made at or about the time that petitioner was successful in resisting judicial enforcement of several administrative summonses, but the record does not establish whether before or after. The grand jury investigation is currently proceeding, with five IRS agents who were previously involved in the administrative investigation (including one that has also been involved in the civil audits) now assisting the government attorney responsible for the grand jury investigation.

On April 11, 1978, the clerk of the district court, upon application of the government, issued eight subpoenas to secure certain documents believed to be in the possession of petitioner. Shortly thereafter petitioner moved to have the subpoenas quashed and the grand jury proceedings terminated. Alternatively, petitioner sought a protective order prohibiting disclosure of grand jury materials to the IRS. Petitioner charged that the government was improperly using the broad powers of the grand jury to obtain documents and records, otherwise unobtainable through the administrative process, desired by the IRS for civil purposes and its administrative criminal investigation.

After hearing the parties' arguments In camera and receiving a sworn affidavit attesting to the government's good faith in conducting the grand jury investigation, ⁵ as well as assurances that the IRS agents participating in the investigation realized that disclosure without a court order was prohibited by F.R.Crim.P. 6(e)(2)(B), ⁶ the district court denied relief. Proceedings in this court followed. ⁷

II.

We consider first the basis on which the case is before us.

For an appeal properly to lie, the order of the district court must constitute a final decision under 28 U.S.C. § 1291, or come within the several exceptions as to interlocutory decisions enumerated in 28 U.S.C. § 1292. Petitioner concedes that the instant action is not made appealable by § 1292, but instead contends that the district court's order constitutes a final decision within the meaning of Cohen v. Beneficial Industrial Loan Corp., 337 U.S. 541, 69 S.Ct. 1221, 93 L.Ed. 1528 (1949). We disagree. ⁸

It is settled in this circuit that the appropriate way to challenge alleged "errors or abuses of discretion on the part of district judges in dealing with grand jury investigations" is through a petition for a writ of mandamus. United States v. United States District Court, 238 F.2d 713, 719 (4 Cir. 1956), Cert. denied, Valley Bell Dairy Co. v. United States,352 U.S. 981, 77 S.Ct. 382, 1 L.Ed.2d 365 (1957). Accord, In re April 1977 Grand Jury Subpoenas, 573 F.2d 936, 940-41 (6 Cir. 1978), Rehearing en banc granted (June 8, 1978); Application of Johnson, 484 F.2d 791, 795 (7 Cir. 1973). The grand jury process, like the discovery process in civil litigation, on occasion gives rise to questions of exceptional importance despite the early stage at which they occur. Even though the decisions of district courts to intervene or to decline to intervene in these pre-trial processes are not routinely appealable, the power of mandamus is available where the question presented is of such exceptional importance or extraordinary nature that justice requires immediate review. Cf. Schlangenhauf v. Holder,379 U.S. 104, 85 S.Ct. 234, 13 L.Ed.2d 152 (1964); United States Board of Parole v. Merhige, 487 F.2d 25 (4 Cir. 1973), Cert. denied, 417 U.S. 918, 94 S.Ct. 2625, 41 L.Ed.2d 224 (1974). Therefore, while we lack jurisdiction to entertain this appeal, we do not doubt our authority, under the All Writs Act, to direct the district court to take whatever action is necessary and proper to protect petitioner's legitimate interests in an appropriate case.

For us to exercise this power, however, the circumstances must be particularly compelling. "The remedy of mandamus is a drastic one, to be invoked only in extraordinary situations." Kerr v. United States District Court, 426 U.S. 394, 402, 96 S.Ct. 2119, 2123, 48 L.Ed.2d 725 (1976). Petitioner necessarily carries a heavy burden in convincing us to issue the writ. Not only must we be persuaded that petitioner has a clear and indisputable right which the district court by its action has abridged, but we must also be persuaded that unless we act promptly to rectify the district court's error, petitioner's right will be irretrievably lost. See Kerr v. United States District Court, supra, at 403, 96 S.Ct. 2119; Will v. United States, 389 U.S. 90, 95-96, 88 S.Ct. 269, 19 L.Ed.2d 305 (1967); Bankers Life & Casualty Co. v. Holland, 346 U.S. 379, 382-85, 74 S.Ct. 145, 98 L.Ed. 106 (1953); Roche v. Evaporated Milk Association, 319 U.S. 21, 26, 63 S.Ct. 938, 87 L.Ed. 1185 (1943). With these considerations in mind, we turn to the merits of petitioner's case.

III.

Petitioner contends that the powers of the grand jury have been purposely abused by the government and that, because of the government's improper motives, petitioner should not be subjected to the grand jury's process and the grand jury's investigation should be terminated. Briefly stated, petitioner alleges that IRS has had a history of using grand jury powers to further administrative investigations that have otherwise become stymied. ⁹

Coupled with its allegation of historical abuse, petitioner points out that, in the instant case, IRS was conducting a joint civil and criminal investigation during which petitioner was served with a number of administrative summons with which it refused to comply, and this refusal was subsequently vindicated in an enforcement action in the district court. Shortly after IRS lost its court battle to enforce the summons, the grand jury investigation began, with several agents previously involved in the administrative investigation being deputized for the grand jury probe. The subpoenas then served by the grand jury sought the same materials which the IRS had unsuccessfully attempted to obtain administratively. Petitioner's inference, which it wants the district court to investigate, is that the grand jury is being used as a subterfuge for gaining access to documents IRS needs in its pending civil and criminal investigation of petitioner. ¹⁰

The district court refused to conduct the investigation into the government's motives and purposes which petitioner sought. Instead it relied on an affidavit by a Department of Justice attorney attesting to the government's good faith in utilizing the grand jury. We agree with the district court that no further inquiry is required at this juncture and that petitioner is subjected to no risk of substantial injury by allowing the grand jury to run its course.

A grand jury is convened to determine "if there is probable cause to believe that a crime has been committed . . . ." Branzburg v. Hayes, 408 U.S. 665, 686, 92 S.Ct. 2646, 2659, 33 L.Ed.2d 626 (1972). If the powers of the grand jury, including the power to subpoena documents, are used, not for the purpose of criminal investigation but rather to gather evidence for civil enforcement, there exists an abuse of the grand jury process. United States v. Proctor & Gamble, 356 U.S. 677, 683, 78 S.Ct. 983, 2 L.Ed.2d 1077 (1958); Robert Hawthorne, Inc. v. Director of Internal Revenue, 406 F.Supp. 1098, 1118 (E.D.Pa.1976). This is the abuse alleged by petitioner. ¹¹ The precise question for decision is whether a district court is obliged to conduct a full evidentiary hearing at the time such abuse is alleged or whether it is sufficient, during the course of the grand jury's proceedings, to rely on the government's own affirmations of good faith.

We begin with the well-recognized principle that courts should not intervene in the grand jury...