Little Rock School Dist. v. Borden, Inc., 79-1994

• Decision Date: 27 October 1980
• Docket Number: No. 79-1994,79-1994
• Parties: 1980-2 Trade Cases 63,522 LITTLE ROCK SCHOOL DISTRICT, North Little Rock School District, Mountain Home School District, and State of Arkansas, Appellees, v. BORDEN, INC.; Coleman Dairy, Inc.; Dean Foods Company; Foremost-McKesson, Inc.; and Hiland Dairy, Inc., Eugene F. Proctor, Simeon Walter Lynn, Appellants.
• Court: U.S. Court of Appeals — Eighth Circuit

Page 700

632 F.2d 700

1980-2 Trade Cases 63,522

LITTLE ROCK SCHOOL DISTRICT, North Little Rock School

District, Mountain Home School District, and State

of Arkansas, Appellees, v. BORDEN, INC.; Coleman Dairy, Inc.; Dean Foods Company;

Foremost-McKesson, Inc.; and Hiland Dairy, Inc.,

Eugene F. Proctor, Simeon Walter Lynn, Appellants.

No. 79-1994.

United States Court of Appeals,

Eighth Circuit.

Submitted June 10, 1980.

Decided Sept. 9, 1980.

Rehearing and Rehearing En Banc Denied Oct. 27, 1980.

William R. Wilson, Jr., Richard N. Moore, Dodds, Kidd & Ryan, Little Rock, Ark., for appellants.

Gary V. McGowan, Mandell & Wright, Houston, Tex., for appellees; Steve Clark, Atty. Gen., Carl A. Crow, Jr., Asst. Atty. Gen., Little Rock, Ark. and Stephen D. Susman, and Randall Wilson, Houston, Tex., on brief.

Before GIBSON, Senior Circuit Judge, and HEANEY and STEPHENSON, Circuit Judges.

HEANEY, Circuit Judge.

This interlocutory appeal arises from an order compelling testimony from two witnesses in a civil antitrust case. The issue was certified by the district court ¹ and we granted leave to appeal pursuant to 28 U.S.C. § 1292(b). We affirm on grounds other than those relied on by the district court.

I. BACKGROUND

On May 10, 1977, the State of Arkansas filed this class action on behalf of all persons in Arkansas who purchased dairy products from the defendant milk producers, alleging that the defendants had violated federal antitrust laws. ² The action followed closely on the heels of an indictment, returned by a federal grand jury on April 22, 1977, that charged Borden, Inc., Coleman Dairy, Inc., Dean Foods Products Company, Inc., Simeon W. Lynn and Eugene F. Proctor with conspiring to fix the prices of dairy products in twenty-eight counties in central Arkansas during the period from February, 1971, to June, 1976. Lynn and Proctor, along with the corporate defendants, pled nolo contendere to this charge and were convicted on December 27, 1977.

In early 1978, federal prosecutors convened a second grand jury to investigate into further allegations of dairy industry price fixing. Both Lynn and Proctor were summoned before this grand jury in June of 1978 and were granted use immunity pursuant to 18 U.S.C. § 6003 for their testimony. No indictments were returned and the grand jury was discharged. None of the testimony presented to the grand jury has been disclosed to the parties to this action. Transcripts of the grand jury testimony of After the June, 1978, grand jury had been dissolved, the State of Arkansas attempted to take the depositions of Lynn and Proctor for use in this civil action. At both depositions, each witness invoked his Fifth Amendment privilege against self-incrimination and refused to answer any question that went beyond his identity and current address. Arkansas them moved to compel Lynn and Proctor to testify on the ground that further prosecution of either man was unlikely. On December 29, 1978, the district court denied the state's motion, reasoning that since the witnesses' nolo contendere pleas covered conduct more limited in time and geographic scope than that encompassed in the civil action, the possibility of the witnesses' testimony prompting further federal prosecution was sufficient to sustain the invocation of the Fifth Amendment privilege. It also acknowledged but did not discuss the possible danger of future state prosecutions.

Lynn and Proctor are, however, lodged in the district court.

Further, the court noted that requests made to the Department of Justice for federal immunity had already been denied. Instead it had on file a letter from an Assistant United States Attorney expressing the following prosecutorial intentions:

The United States as a litigant in (this) action hereby represents to the Court that it does not contemplate any further criminal action against S. W. Lynn, Eugene Proctor and Carlos Starkey for any conduct involving the pricing of milk in Arkansas, if said conduct occurred prior to April 22, 1977.

The court rejected this "as a substitute for the appropriate Congressionally-mandated procedure under 18 U.S.C. § 6003(b)," Little Rock School Dist. v. Borden, Inc., Nos. LR-76-C-41, LR-C-77-126, LR-C-77-108, slip op. at 4 (E.D.Ark., Dec. 29, 1978) (hereafter Order of December 29, 1978), and denied the motion to compel testimony.

After the district court issued this order on December 29, 1978, two events occurred which prompted Arkansas to move for reconsideration: the issuance of an order compelling testimony in In re Folding Carton Antitrust Litigation, 465 F.Supp. 618 (N.D.Ill.1979) (later vacated at 609 F.2d 867 (7th Cir. 1979)), ³ and the court's receipt of a more detailed letter of prosecutorial intent from a Justice Department official. On May 18, 1979, Judge Eisele reconsidered his December order and concluded that the testimony of Lynn and Proctor should be compelled. Although he rejected reliance on Folding Carton, he was persuaded that the letter of Barry F. McNeil, Chief of the Dallas office, Antitrust Division, Department of Justice, had critical implications for the witnesses' Fifth Amendment claims. The letter read as follows:

The Court has requested the Antitrust Division of the Department of Justice to state its position regarding applications for immunity, pursuant to 18 U.S.C. § 6001, et seq., in State of Arkansas v. Borden, Inc., et al., LR-C-77-126.

The Department of Justice is vested with the authority to seek immunity for witnesses under the Organized Crime Control Act of 1970, 18 U.S.C. § 6001, et seq. By statute, the Department is required to seek immunity only in circumstances where it has made a determination, under § 6003(b), that the testimony of the individual may be necessary to the public interest. In making its determination of the public interest necessity of the testimony, the Department has declined to seek immunity in private litigation where the grant of immunity would further private, rather than governmental, interests.

Although the injunctive case, United States v. Borden, Inc., et al., LR-C-77-108, is presently before this Court, and was consolidated with the damage actions of the State of Arkansas and the private plaintiffs, the Antitrust Division is in the process of concluding negotiations with Since the Antitrust Division cannot make the representations to the Court that the testimony is necessary and will further the interests which the Government here represents, we will not apply for immunity for any witnesses in State of Arkansas v. Borden. This decision should not be taken to reflect any enforcement intentions with respect to Messrs. Proctor and Lynn. We do not intend to bring an enforcement action against either of those gentlemen based upon activities in the dairy industry in Arkansas for which they were prosecuted in United States v. Borden, Inc., et al. (LR-CR-77-60) or concerning which they testified before the June 1978 grand jury in the Eastern District of Arkansas.

the defendants in this case which will result in a consent decree. In view of the status of these settlement negotiations, the Division did not seek to participate in discovery pending the outcome of the negotiations. Accordingly, any attempts to seek immunity for witnesses in this case would be inappropriate at this time and inconsistent with the congressionally mandated intent that the immunized testimony be necessary to the public interest.

The district court concluded that this letter constituted "an effective, de facto grant of transactional immunity from any antitrust criminal prosecution for any activities in the milk industry in Arkansas within a certain time frame, a grant of immunity that is enforceable in this Court as a matter of constitutional law." Little Rock School Dist. v. Borden, Inc., Nos. LR-76-C-41, LR-C-77-126, LR-C-77-108, slip op. at 15 (E.D.Ark., May 18, 1979) (hereafter Order of May 18, 1979) (emphasis in original). It therefore ordered that Lynn and Proctor be "compelled to testify at deposition about all matters pertaining to 'activities in the dairy industry in Arkansas for which they were prosecuted * * * or concerning which they testified before the June 1978 grand jury * * *.' " Id. ⁴

On October 29, 1979, the district court denied motions to reconsider the May 18th order but certified the issues raised by these motions for appeal to our Court. ⁵ We have accepted jurisdiction.

II. ANALYSIS

A critical issue before us is whether Lynn and Proctor face any danger of further criminal prosecution as a result of testifying in this case. ⁶ Clearly, their prior conviction for price fixing in twenty-eight Arkansas counties during the period prior to June 30, 1976, protects them from further federal prosecution for that particular activity. Further, the immunization of their testimony before the June, 1978, grand jury protects them from any subsequent prosecution, state or federal, in which direct or indirect use of this testimony is made. Kastigar v. United States, 406 U.S. 441, 92 S.Ct. 1653, 32 L.Ed.2d 212 (1972); United States v. McDaniel, 482 F.2d 305 (8th Cir. 1973).

Nevertheless, the district court concluded that there was sufficient danger of subsequent federal prosecution to sustain the invocation of the Fifth Amendment privilege. Noting that the civil action was broader in both geographic scope and time than were the prior criminal convictions, the court decided that this case fell "outside the more normal situation in which a conviction involving a criminal transaction terminates one's Fifth Amendment privilege with regard to testimony about that transaction." Order of December 29, 1978 slip op. at 3 (citation deleted). Similarly, the witnesses were not protected by the immunity granted to their grand jury testimony, since the deposition questions were not derived from that testimony. See United States v. Kuehn, 562 F.2d 427 (7th Cir. 1977).

Although the December 29th order was reconsidered in...