In re Grand Jury Subpoena

• Decision Date: 19 July 2000
• Docket Number: No. 00-1622,00-1622
• Parties: (3rd Cir. 2000) IN RE: GRAND JURY SUBPOENA Argued:
• Court: U.S. Court of Appeals — Third Circuit

Page 213

223 F.3d 213 (3rd Cir. 2000)

IN RE: GRAND JURY SUBPOENA

No. 00-1622

UNITED STATES COURT OF APPEALS FOR THE THIRD CIRCUIT

Argued: July 19, 2000

Filed August 4, 2000

On Appeal from the United States District Court for the Eastern District of Pennsylvania, District Judge: Hon. James McGirr Kelly (D.C. No. 96-gj-00774-4)

Attorneys for Appellant: William J. Winning (Argued) Scott Magargee Cozen & O'Connor Philadelphia, PA 19103, Arthur T. Donato, Jr. Media, PA 19063, Carmen P. Belefonte Ferrara, Belefonte, McFadden & Ferrara Media, PA 19063

Attorneys for Appellee: Michael R. Stiles United States Attorney Walter S. Batty, Jr. Assistant United States Attorney Chief of Appeals Catherine L. Votaw Gregory A. Paw (Argued) Michael A. Schwartz Assistant United States Attorneys Office of United States Attorney Philadelphia, PA 19106

Before: SLOVITER, NYGAARD and FUENTES, Circuit Judges

OPINION OF THE COURT

SLOVITER, Circuit Judge.

In this appeal, we are faced with an issue of first impression for this court, whether the target of a grand jury investigation whose attorney has been subpoenaed to give testimony and provide documents to the grand jury that would ordinarily be protected by attorney-client privilege is entitled to review the government's ex parte affidavit upon which the District Court relied in deciding that the crime-fraud exception was applicable.

In order to preserve the confidentiality of the proceedings, we will refer to the dramatis personae as the client or the target (the target of the investigation) and the attorney (who is the witness under subpoena). We will also not identify the documents that were subpoenaed, as the legal issue before us is not dependent on the particular documents. We will assume arguendo that those documents ordinarily would be privileged.

I.

There is an ongoing extensive federal grand jury investigation into the client's activities in connection with potential violations of the Internal Revenue Code and 18 U.S.C. SS 371, 1341 and 1951. We were advised at the oral argument that the grand jury investigation has been underway for two years and that numerous witnesses have testified and numerous documents have been produced.

The attorney who was subpoenaed has represented the target for more than a year in connection with the criminal investigation. The government subpoenaed the attorney "as a witness in the investigation" of his client. The attorney moved to quash the grand jury subpoena, asserting that testimony and production of documents concerning the subject matter specified in the subpoena would result in disclosure of privileged attorney-client communications and work product material and would violate his client's Sixth Amendment right to counsel because the attorney's testimony would disqualify him from representing the client-target. The client was given permission to intervene and asserted the same arguments. In response, the government, which had earlier provided the attorney with a Schofield affidavit minimally disclosing the purpose of the grand jury investigation, submitted a second Schofield affidavit, this one ex parte, to establish the applicability here of the crime-fraud exception to the attorney-client privilege. The affidavit details the grand jury investigation, and includes excerpts of testimony and documents obtained during the course of the investigation.

On May 4, 2000, the District Court held a closed hearing on the motion to quash. Counsel for the subpoenaed attorney and his client argued that without recourse to the ex parte affidavit, they could not effectively rebut the government's assertion of the crime-fraud exception, consequently depriving the client of his due process right to be heard. On May 17, 2000, the District Court issued a Memorandum and Order denying the motion to quash and directing the attorney to testify. The court found that "the government's Schofield affidavit adequately sets forth the purpose of the grand jury's investigation and that [the attorney's] testimony would be relevant to the investigation." The court further stated "there is no indication that [the attorney's] testimony is sought for an improper purpose. The Court is also convinced that disclosure of the Schofield affidavit at this time would compromise the secrecy of the grand jury." Finally, and most pertinent here, the court held that "the Schofield affidavit adequately sets forth the basis for invocation of the crime-fraud exception . . . ."

The client appeals. He argues that the District Court's procedure of relying on an ex parte affidavit to determine that the crime-fraud exception applied was inconsistent with this court's decision in Haines v. Liggett Group Inc., 975 F.2d 81 (3d Cir. 1992), and that it violates his due process rights and Sixth Amendment right to counsel. We have jurisdiction under 28 U.S.C. S 1291. The client "appeals as the nonsubpoenaed holder of the attorney- client privilege . . . ." In re Grand Jury Proceedings (Appeal of FMC Corp.), 604 F.2d 798, 801 (3d Cir. 1979). We have stated that "[i]t is clear that the attorney client privilege is one that is owned by the client . . . and that he has standing to appeal an order directed to his attorney that affects the privilege." Id. We review for abuse of discretion, but we have plenary review over the argument that Haines imposes a rule of law.

II.

A.

Central to our review of the District Court's decision is an understanding of the role of the grand jury in the administration of our criminal justice system. The Supreme Court has commented:

The institution of the grand jury is deeply rooted in Anglo-American history. In England, the grand jury served for centuries both as a body of accusers sworn to discover and present for trial persons suspected of criminal wrongdoing and as a protector of citizens against arbitrary and oppressive governmental action. In this country the Founders thought the grand jury so essential to basic liberties that they provided in the Fifth Amendment that federal prosecution for serious crimes can only be instituted by a presentment or indictment of a Grand Jury. The grand jury's historic functions survive to this day. Its responsibilities continue to include both the determination whether there is probable cause to believe a crime has been committed and the protection of citizens against unfounded criminal prosecutions.

United States v. Calandra, 414 U.S. 338, 342-43 (1974) (citations, quotation, and footnote omitted).

A grand jury proceeding is not an adversary hearing where guilt or innocence is adjudicated but an ex parte investigation to determine if there is probable cause to believe a crime has been committed. The grand jury deliberates in secret and acts "independently of either prosecuting attorney or judge . . . ." United States v. Dionisio, 410 U.S. 1, 16 (1973) (quotation omitted). Because it is essential to the federal criminal justice system, this investigative body has great powers of investigation and inquisition. The grand jury may generally "compel the production of evidence or testimony of witnesses . .. unrestrained by the technical procedural and evidentiary rules governing the conduct of criminal trials." Calandra, 414 U.S. at 343.

To prevent abuse of this process, this court has required the government to justify a grand jury subpoena by making "some preliminary showing by affidavit that each item [being subpoenaed] is at least relevant to an investigation being conducted by the grand jury and properly within its jurisdiction, and is not sought primarily for another purpose." In re Grand Jury Proceedings (Schofield), 486 F.2d 85, 93 (3d Cir. 1973). District courts enjoy considerable discretion in determining whether the Schofield affidavit submitted by the government is sufficient to enforce a subpoena. See In re Grand Jury, 103 F.3d 1140, 1145 (3d Cir. 1997). If the district court decides that the government should present information beyond the minimal Schofield requirements, it may use in camera proceedings or ex parte affidavits to preserve grand jury secrecy, a procedure we have consistently endorsed. See id.; see also United States v. R. Enters., Inc., 498 U.S. 292, 302 (1991).

The issue came before us recently in In re the Grand Jury Empaneling of the Special Grand Jury, 171 F.3d 826 (3d Cir. 1999), where witnesses subpoenaed by the grand jury had refused to testify against their rabbi father on religious grounds. They filed a motion to quash the subpoena. The government opposed the motion and submitted a Schofield affidavit, ex parte and in camera, containing details from the grand jury proceedings. The district court reviewed the affidavit in camera to protect grand jury secrecy and then denied the motion to quash, ordering the witnesses to testify. On appeal from that order, we held that the district court did not abuse its discretion by refusing to disclose the ex parte affidavit. See id. at 836.

The proceedings in this case followed a similar pattern. The government provided the subpoenaed attorney with a Schofield affidavit containing the limited disclosure required. The attorney filed an affidavit invoking the attorney-client privilege and a motion to quash the subpoena. The client intervened. The government then filed a supplemental ex parte affidavit, i.e., a second Schofield affidavit in which it asserted the crime-fraud exception to that privilege. Based on that ex parte affidavit, the District Court ruled the crime-fraud exception was applicable.

The Appellant recognizes and does not challenge the general use of ex parte Schofield affidavits. Instead, he argues that this case differs from our earlier decisions because the information being subpoenaed is protected by attorney-client privilege. He contends that it is unfair and inequitable for the District Court to have relied solely on an ex parte affidavit to decide that the crime-fraud exception applied when he was unable to rebut the...