In re Grand Jury

• Decision Date: 17 March 1978
• Docket Number: Misc. No. 979.
• Citation: In re Grand Jury, 446 F.Supp. 1132 (N.D. Tex. 1978)
• Parties: In re GRAND JURY.
• Court: U.S. District Court — Northern District of Texas

446 F. Supp. 1132

In re GRAND JURY.

Misc. No. 979.

United States District Court, N. D. Texas, Dallas Division.

March 17, 1978.

Names of the attorneys have been masked to protect ongoing grand jury proceedings.

ROBERT W. PORTER, District Judge.

A Federal Grand Jury has been investigating certain allegations of fraud in the United States Department of Health, Education and Welfare Student Financial Aid Programs (HEW-SFAP). Parent and Subsidiary Corporations are targets of the investigation, and there are also pending two civil lawsuits involving the participation of the Parent and Subsidiary Corporations in HEW-SFAP.¹ Two individuals, Assistant Treasurer of Subsidiary Corporation formerly in the personnel department of Subsidiary Corporation (hereinafter "Assistant") and an Auditor in the internal auditing department of Parent Corporation, (herein "Auditor") were summoned to appear and testify before the Grand Jury. Each is a potential target of the Grand Jury investigation.

Law firm has represented Parent and Subsidiary Corporation in connection with the investigation by the Federal Grand Jury of HEW-SFAP. Lawyers W and X of Law Firm have been actively involved in that representation. Lawyer Y of Law Firm represents Assistant and Auditor in connection with the investigation. Lawyer Y and Law Firm have also been involved in the defense of Doe v. Parent Corp. Plaintiff Doe has asserted a class action and has been attempting to discover Grand Jury documents for discovery in his civil case. The Government has been ordered to produce the requested documents. Lawyer Z is corporate counsel for Parent Subsidiary Corporation, but does not represent Assistant or Auditor.

In March, 1977, Assistant appeared for an interview with the U. S. Attorney. Lawyers Z and W were present. Assistant testified that at the time she understood these lawyers were representing Parent Corporation and not her individually.

Assistant received a subpoena to appear before the Grand Jury in January, 1978. Assistant was advised by Lawyer Z that Assistant could select Law Firm and Lawyer Y as her lawyer. Lawyer Y advised Assistant that she had the right to choose her own lawyer, and Assistant testified that she received no pressure to select Lawyer Y as her lawyer. She selected Lawyer Y, who had also assisted Assistant with some earlier civil litigation involving Subsidiary Company. Assistant testified before the Grand Jury on January 13, 1978. She never refused to answer questions, and never took the Fifth Amendment in answer to any questions. She never stepped out of the Grand Jury room at any time to consult with Lawyer Y. On February 7, 1978 Assistant again appeared before the Grand Jury. She did not take the Fifth Amendment, answered all questions and did not step out to consult with her lawyer.

Assistant also testified that she was not paying for Lawyer Y's services, and "presumed" they were paid by Parent Corporation. On direct examination Assistant testified that if Lawyer Y was disqualified from representing her she would be without an attorney. She testified on cross examination that she had not discussed with Lawyer Y how to secure other counsel if Lawyer Y was disqualified, or whether Parent Corporation would pay for that counsel.

After her February 7, 1978 appearance, the U. S. Attorney served Assistant with a motion to disqualify Lawyer Y. Lawyer Y then returned to Law Firm with Assistant, and discussed the motion with her in privacy. Lawyer Y explained to Assistant that Assistant had to decide whether to continue employing Lawyer Y as her counsel. She decided to retain Lawyer Y because: (1) Lawyer Y had advised Assistant on other legal matters; (2) Assistant believed Lawyer Y was competent and there was a good rapport and; (3) Lawyer Y had knowledge of the student loan program.

Auditor received a summons to appear before the Grand Jury in January, 1978. Lawyer Z advised Auditor that he could retain Lawyer Y as counsel for his grand jury appearance. In a conversation with Lawyer Z the day after Auditor received the subpoena to appear before the Grand Jury, Lawyer Z advised Auditor that there was a potential conflict of interest if Parent Corporation's legal department represented him. Lawyer Z asked Auditor if he wanted outside counsel and Auditor requested outside counsel. Lawyer Z suggested Law Firm; no other lawyer or law firm was suggested.

At the initial meeting between Lawyer Y and Auditor, Lawyer Y advised Auditor that Lawyer Y perceived no actual conflict in the representation of Auditor and the companies but that a conflict might arise at a future date. Lawyer Y told Auditor that he had the right to counsel of his own choice and that he did not want to influence Auditor in his choice of counsel. Auditor then selected Lawyer Y as his counsel.

On February 7, 1978 Auditor appeared and testified before the Grand Jury. Auditor never took the Fifth Amendment, never refused to answer a question, and never stepped out to consult with Lawyer Y on any matters.

After his appearance Auditor was served by the U. S. Attorney with a motion to disqualify Lawyer Y from representing Auditor. Auditor and Lawyer Y then went to Law Firm and conferred privately. Lawyer Y and Auditor discussed the motion, and Auditor affirmatively chose Lawyer Y to continue representing Auditor because: (1) Auditor had previous contact with Lawyer Y, and (2) Auditor felt Lawyer Y had familiarity with the student loan program and the subsidiary company's involvement in the program.

In these pre-indictment appearances of individuals before the Grand Jury, the Court must decide: (1) Does Lawyer Y and Law Firm's representation of Auditor and Assistant individually and their representation of Subsidiary and Parent Corporations present an actual or potential conflict of interest; and (2) if a conflict exists, may that conflict be waived by the individuals involved?

The Sixth Amendment of the United States Constitution guarantees individuals the right to effective assistance of counsel, including a right to select the counsel of one's choice. The right to select counsel of one's choice is not absolute in grand jury proceedings and the Court may regulate the professional conduct of attorneys. In re Gopman, 531 F.2d 262 (5th Cir. 1976); Matter of Grand Jury Empanelled January 21, 1975, 536 F.2d 1009 (3rd Cir. 1976); In re Investigation Before April, 1975 Grand Jury, 174 U.S.App.D.C. 268, 531 F.2d 600 (1976); In re Investigation Before the February 1977 Lynchburg Grand Jury, 563 F.2d 652 (4th Cir. 1977).

In a matter before the Court, an attorney has a duty to immediately bring to the Court's attention any actual or potential ethical violation involving any of the parties, witnesses or attorneys in the case. In re Gopman, 531 F.2d 262 (5th Cir. 1976); Supreme Beef Processors v. American Consumer Industries, Inc., 441 F.Supp. 1064 (N.D.Tex.1977).

ACTUAL CONFLICT

A witness may not interfere with the course of a Grand Jury's inquiry or set limits on its investigation. United States v. Calandra, 414 U.S. 338, 345, 94 S.Ct. 613, 38 L.Ed.2d 561 (1973). The Grand Jury must have the freedom to pursue its investigation within certain constitutional and legal guidelines unhindered by external influence or supervision. United States v. Dionisio, 410 U.S. 1, 16-18, 93 S.Ct. 764, 35 L.Ed.2d 67 (1972).

An actual conflict of interest may arise when a lawyer or law firm represents two or more witnesses summoned as witnesses by a Grand Jury. The court may disqualify the lawyer or law firm from multiple representation in appropriate circumstances when witnesses invoke the Fifth Amendment before the Grand Jury or refuse to answer Grand Jury questions. In re Investigation Before the February 1977 Lynchburg Grand Jury, 563 F.2d 652 (4th Cir. 1977) (The Court found actual conflict when witnesses invoked the Fifth Amendment and one of the attorneys was himself target of Grand Jury); but see: Matter of Grand Jury Empanelled January 21, 1975, 536 F.2d 1009 (3rd Cir. 1976) (invocation of Fifth Amendment by Grand Jury witnesses represented by same counsel does not by itself justify disqualification); accord, In re Investigation Before April, 1975 Grand Jury, 174 U.S.App.D.C. 268, 531 F.2d 600 (1976). An actual conflict also arises when one witness is offered statutory use immunity and could give testimony detrimental to other witnesses represented by the same counsel, In re Grand Jury Investigation, 436 F.Supp. 818, 821 (W.D.Pa.1977), or has a fee arrangement that affects counsel's representation. Pirillo v. Takiff, 462 Pa. 511, 341 A.2d 896 (1975). The retention of a lawyer or law firm by a union to represent the union before a Grand Jury and the retention of that lawyer or law firm by individual union members before the Grand Jury standing alone does not create an actual conflict of interest even when the union pays the attorney's fees for all of the representation. In re Investigation Before April 1975 Grand Jury, 174 U.S.App.D.C. 268, 531 F.2d 600 (1976).² When an attorney represents 12 police-witnesses before a Grand Jury and the attorney's fees are paid by a police association which publically vowed to oppose any form of cooperation by individual policemen with the Grand Jury, an actual conflict of interest exists. Pirillo v. Takiff, 462 Pa. 511, 341 A.2d 896 (1975).

I find that the payment by a "target" corporation of the attorney's fees of a law firm representing both the corporation and witnesses before a Grand Jury does not, by itself, constitute an actual conflict of interest sufficient to warrant disqualification of the law firm. I also find that there is insufficient evidence in this case to establish who paid the attorney's fees of Assistant and Auditor.³

There is no actual conflict of interest present in the record of this case. Both witnesses have answered all questions when they appeared before the Grand Jury. Neither witness took the Fifth Amendment in...