Impounded, In re

• Decision Date: 13 May 1999
• Docket Number: No. 98-6498,98-6498
• Citation: 178 F.3d 150
• Parties: 999-1 Trade Cases P 72,525 In re IMPOUNDED.
• Court: U.S. Court of Appeals — Third Circuit

178 F.3d 150

999-1 Trade Cases P 72,525

In re IMPOUNDED.

No. 98-6498.

United States Court of Appeals Third Circuit.

Argued March 3, 1999.

Filed May 13, 1999.

Jeremy D. Margolis, Edward E. McNally (Argued), Robert M. Andalman (Argued), Altheimer & Gray, Chicago, IL, for John Doe 1 and John Doe 2.

James R. Streicker, Terence H.

Page 301743

Campbell, Cotsirilos, Stephenson, Tighe & Streicker, Ltd., Chicago, IL, for John Doe 3.

Joel I. Klein, Assistant Attorney General, A. Douglas Melamed, Deputy Assistant Attorney General, John J. Powers, III, John P. Fonte (Argued), Anthony V. Nanni, Reginald K. Tom, Matthew D. Segal, Antitrust Division, U.S. Department of Justice, Washington, DC, for Appellee.

Before: RENDELL, ALDISERT Circuit Judges, WILLIAMS, District Judge ^*

OPINION OF THE COURT

RENDELL, Circuit Judge.

This case involves the question of when a fear of foreign prosecution implicates the Fifth Amendment privilege after the Supreme Court's decision in United States v. Balsys, 524 U.S. 666, 118 S.Ct. 2218, 141 L.Ed.2d 575 (1998). Appellants are immunized witnesses who have refused to testify before a grand jury, claiming that their case falls within a test articulated in Balsys requiring Fifth Amendment protection.

On October 29, 1997, a special grand jury was impaneled in the District of New Jersey for the purpose of investigating possible price-fixing or other anticompetitive agreements among manufacturers and distributors in the artificial sausage casings industry that may violate Section 1 of the Sherman Act, 15 U.S.C. § 1. The appellants in this case are employees of a corporation targeted in this investigation; each of the appellants appeared before the grand jury pursuant to a subpoena and an immunity order of the District Court compelling his testimony. Appellants indicated their willingness to answer questions relating to certain business dealings within the United States, but they refused to answer questions about activities that occurred in the United States and related to foreign markets or occurred outside the United States, claiming that the court's compulsion order and grant of immunity provided insufficient protection against foreign prosecution. When the government moved to hold appellants in contempt, the appellants requested the court to order a hearing at which they could question the government regarding contacts with foreign governments relating to this investigation.

Appellants argued before the District Court, as they do here, that language in the Supreme Court's opinion in United States v. Balsys created a test for when a foreign prosecution implicates a defendant's Fifth Amendment rights, and that this prosecution falls within the "test" of Balsys, because it is an instance of cooperative international antitrust enforcement. ¹ They offered evidence of a "standing policy" that included selections from speeches by Antitrust Division officials that discussed increasing "internationalization" of antitrust enforcement, "positive comity" initiatives with other countries that result in information and evidence sharing, and two prior criminal antitrust investigations with the Canadian government. They also pointed to substantive criminal penalties in other countries for antitrust violations, namely, Argentina, Canada, Chile, Ireland, France, Japan, Korea, Norway, Spain, Taiwan, Thailand, and the Philippines, as further evidence of increasing internationalization of antitrust law. They also argue that the policy of internationalization also included the use of Mutual Legal Assistance Treaties ("MLATs") in obtaining information, and also the use of the grand jury in aiding foreign prosecutions, through the International Antitrust Enforcement Assistance Act.

In addition, appellants argued to the District Court that a joint international prosecution had occurred in their cases. They pointed to the following as evidence of that joint prosecution: 1) questioning of grand jury witnesses about Canadian and German contacts; 2) efforts by the Antitrust Division in Canada, Spain, the United Kingdom, Germany, Mexico, France, and other nations, to obtain documents for the grand jury investigation; and 3) efforts by the Antitrust Division to question Mexican and German nationals. Appellants also argued that Canadian authorities had contacted one of their counsel, and that this event also constituted evidence of a joint prosecution. As a result, appellants argued they were facing a "whipsaw" in which they could be compelled to produce information in this country, but be prosecuted in foreign nations, and that the Antitrust Division desired to use the witnesses' testimony about foreign effects of their behavior to instigate a foreign prosecution based on the grand jury's investigation.

Appellants also asserted that they required a hearing to question government witnesses, because they had no way of further developing their proof regarding foreign contacts. In response to appellants' arguments, the government disclosed a set of Schofield affidavits and submitted separate in camera Schofield affidavits. The disclosed affidavits stated that the compelled testimony was sought by the United States "to advance the grand jury's inquiry, and not for another purpose" and that testimony was not sought for the purpose of delivering that testimony to a foreign nation.

The appellants claimed that this government proffer was insufficient, because it could be inferred from their evidence that the Antitrust Division had already been sharing information with foreign authorities for the purpose of foreign prosecutions. Based on all of these facts, they argued, due process required that the nature and extent of the relationships between the United States and the foreign countries in this case be explained, and that the evidence they had already produced mandated an evidentiary hearing.

The District Court convened a number of hearings that focused on the nature and extent of appellants' asserted Fifth Amendment rights. At the first hearing, the District Court addressed several of the substantive legal issues raised by appellants and engaged in a waiver colloquy with one of them, who would not be able to attend the later hearing. In the interim, when another appellant refused to testify, the court heard argument on the applicability of United States v. Balsys and entered an initial contempt order; appellants filed a motion for reconsideration, and the court heard further argument, withheld signature on its contempt order, and combined the claims and arguments of the witnesses for briefing and argument. The court then held a final hearing on the import of Balsys to determine whether the appellants should be held in contempt, and whether the appellants' motion to compel witnesses should be granted. In addition to these hearings, the court reviewed the disclosed and in camera Schofield affidavits and questioned prosecutors and the grand jury foreman in camera as to the nature of the dispute.

In its final rulings on the motions, the court credited the efforts of appellants, but noted that it had to focus upon the "well-defined nature of the proceedings that are before the Court at this time .... what is the likelihood of disclosure of the evidence to one or more foreign governments at least to the point of requiring a factual inquiry into that subject." In so stating, the court accepted the government's pronouncements, including the assurances made in its Schofield affidavits to the effect that the information to be obtained was only to be used for a prosecution within the United States, found that the appellants had not raised a genuine issue of material fact requiring an evidentiary hearing, and denied appellants' motion to compel. Later in the argument, appellants made a renewed application for an evidentiary hearing and for disclosure of the in camera proceedings and affidavits, claiming that disputed issues had presented themselves in the course of the government's presentation, and that their course of dealings with the government indicated that a hearing was necessary. The court denied the hearing motion once again, finding that the evidence presented by appellants, even if accepted, was "immaterial and inadequate." The court also found that the evidence and argument of appellants did not undermine the government's representations, even those contained in the Schofield affidavits released to counsel, that grand jury evidence was being collected in furtherance of a legitimate inquiry, and that the material was not going to be released to foreign prosecutors. The court also found that the circumstances presented "virtually no likelihood of the generation of a record which would overcome those positions asserted by the government with regard to this testimony from these witnesses." The District Court then moved on to set forth its reading of the Balsys opinion, and it found that Balsys did not provide a basis for appellants' claims of Fifth Amendment privilege. The District Court held the appellants in contempt, and they now appeal to this court.

Appellants now assert: 1) the District Court erred in not accepting their assertions of privilege, and 2) the District Court erred by determining that an evidentiary hearing was not required to determine the merit of their Fifth Amendment claims, and in so doing, denied them their due process rights. We have jurisdiction pursuant to 28 U.S.C. § 1291. Our review of the District Court's legal analysis is plenary. See In re Grand Jury, 103 F.3d 1140, 1143 (3d Cir.1997). The District Court's decision to deny additional review, beyond that of a Schofield affidavit, is subject to abuse of discretion review. See In re Grand Jury, 171 F.3d 826, 834 (3d Cir.1999).

I. Balsys

Appellants recognize that the basis for and scope of their Fifth Amendment privilege was the subject of extensive discussion in United States v. Balsys, 524 U.S. 666, 118 S.Ct. 2218, 141 L.Ed.2d 575 (199...