Overby v. United States Fidelity and Guaranty Co., 15419.

• Decision Date: 28 June 1955
• Docket Number: No. 15419.,15419.
• Citation: 224 F.2d 158
• Parties: A. N. OVERBY, Acting Secretary of the Treasury, Appellant, v. UNITED STATES FIDELITY AND GUARANTY COMPANY and The First National Bank of Auburn, Appellees.
• Court: U.S. Court of Appeals — Fifth Circuit

224 F.2d 158 (1955)

A. N. OVERBY, Acting Secretary of the Treasury, Appellant, v. UNITED STATES FIDELITY AND GUARANTY COMPANY and The First National Bank of Auburn, Appellees.

No. 15419.

United States Court of Appeals Fifth Circuit.

June 28, 1955.

Donald B. MacGuineas, Samuel D. Slade, Attys., Dept. of Justice, Washington, D. C., Warren E. Burger, Asst. Atty. Gen., Hartwell Davis, U. S. Atty., Montgomery, Ala., for appellant.

Ralph B. Tate, Joseph G. Gamble, Jr., Frank M. Young, Birmingham, Ala., for appellees.

Before HOLMES and RIVES, Circuit Judges, and WRIGHT, District Judge.

RIVES, Circuit Judge.

This appeal by the Acting Secretary of the Treasury is from an order denying a claim of privilege asserted by him, and ordering the President of the appellee bank to produce for discovery certain reports of examination of said bank made by National Bank Examiners to the Comptroller of the Currency and correspondence with the Comptroller.¹

The order was issued in a suit brought by appellee bank against appellee surety company seeking recovery in the sum of $100,000.00 for the alleged breach of a bond indemnifying the bank against losses through any dishonest, fraudulent, or criminal act of an employee of the bank. The district court's order explains why the surety wants the documents:

"The defendant has not as yet made answer to plaintiff\'s complaint, asserting that if the documents sought in the motion to produce are made available, such documents will show that plaintiff through its officers and directors had knowledge of the alleged fraudulent and dishonest acts of its employee and failed to comply with the duty they were legally bound to perform as contained in the following items of the bond:

"`At the earliest practicable moment after discovery of any loss hereunder the Insured shall give the Underwriter (the defendant) written notice thereof and shall also within six months after such discovery furnish to the Underwriter affirmative proof of loss with full particulars.\'

"`This bond shall be deemed terminated or cancelled as to any Employee — (a) as soon as the Insured shall learn of any dishonest or fraudulent act on the part of such employee * * *.\'"

The bank's president, Mr. Duran, appeared for the taking of his deposition but declined to produce the Comptroller of the Currency correspondence and the bank examiner's reports on the ground that he had been instructed by letter from the Acting Comptroller of the Currency not to produce them because the documents were privileged. The surety then filed a motion to require Duran to produce these documents. At this point appellant, the Acting Secretary of the Treasury, filed an Assertion of Interest and Claim of Privilege opposing the surety's motion to produce on the ground that the material requested is privileged against compulsory disclosure. This claim of privilege was supported by an affidavit of the Acting Secretary of the Treasury in which he stated that "after having given actual personal consideration to the matter", he was asserting a formal claim of privilege and found that the introduction in evidence of the documents "would be inimical to the public interest."²

COPYRIGHT MATERIAL OMITTED

The district court, upon giving consideration to the Assertion of Interest and Claim of Privilege stated:

"This court is unable to find as a fact that the information sought in these documents is of such a confidential nature that its disclosure would be inimical to the public interest. To the contrary, the court finds as a fact that such documents contain no such information of a highly confidential nature as require them to be privileged. The proper administration of justice requires their production. * * *"

Accordingly, the district court denied the Assertion of Interest and Claim of Privilege, granted the surety's motion to produce, and ordered that the bank's suit would be dismissed unless the president of the bank complied with the court's order within thirty days.

At the threshold, appellee surety company moves to dismiss the appeal on the ground that the order denying the claim of privilege is not appealable. Counsel for the bank had informed the district court that, apart from the prohibition of the Comptroller of the Currency, the bank had no objection to producing the documents. Under threat of a dismissal of the bank's suit, it is to be anticipated that the documents would have been produced in the absence of some appeal or stay order. After such production, there would be no further point to the claim of privilege, it would be irretrievably breached and beyond the protection of an appellate court. We think, therefore, that the order is in effect a final decision appealable under 28 U.S.C.A. § 1291, even though the main suit between the bank and the surety has not been concluded.³ The cases relied on by appellee surety are readily distinguishable because in each of those cases denial of the privilege could be reviewed on appeal either from the final judgment or from a contempt order.⁴

The appellant, asserting a continuing right of control of, and property right in, the documents, has standing to maintain this appeal whether or not he was formally recognized as a party to the suit in the district court.⁵ Accordingly, the motion of appellee surety company to dismiss the appeal is denied.

The question to be decided is whether there was a valid claim of privilege. The manner of assertion of the claim followed the course outlined in United States v. Reynolds, 345 U.S. 1, 7-8, 73 S.Ct. 528, 532, 97 L.Ed. 727: "There must be a formal claim of privilege, lodged by the head of the department which has control over the matter, after actual personal consideration by that officer."

That case establishes the doctrine, we think, that, while every reasonable effort should be made by the parties, by the court, and by the head of the executive department to avoid a conflict of interests, in the final analysis, the court and not the executive officer is to determine the validity of the claim of privilege.

"The court itself must determine whether the circumstances are appropriate for the claim of privilege, and yet do so without forcing a disclosure of the very thing the privilege is designed to protect. * * * Judicial control over the evidence in a case cannot be abdicated to the caprice of executive officers." United States v. Reynolds, supra, 345 U.S. at pages 8, 9-10, 73 S.Ct. at page 532.

See also 8 Wigmore on Evidence, 3rd ed., Para. 2379, pp. 798-799.

We do not think that any privilege has been waived by putting copies of the documents in the hands of the directors of the bank.⁶ Only in that way could the documents be effectively used for their whole purpose was the adequate supervision and regulation of national banks. If the bank directors violated their trust and, without authority, showed copies of the examiner's reports to the bank's attorneys and auditors for the purposes of this litigation, it nevertheless remains true that, "The privilege belongs to the Government and must be asserted by it; it can neither be claimed nor waived by a private party." United States v. Reynolds, supra, 345 U.S. at page 7, 73 S.Ct. at page 532. Hence, any wrongful disclosure of these reports by the bank directors cannot constitute a waiver of the Government's privilege.

To discuss at length the difficult and important subject of Governmental privilege against disclosure of official information⁷ would unduly extend this opinion, and is not now necessary, for we are of the clear opinion that the order to produce is in such broad terms (footnote 1, supra) as to require reversal. Much of the matter claimed to be privileged and which would have to be produced under such an order bears no possible relevance to the defense of the bank's suit, and there is no necessity for requiring its production; such for example as the disclosure of the identity of informants, information about customers of the bank, their financial affairs, and the status of their loans from the bank, and various other matters not pertinent to the defense of the bank's suit. We have held that a subpoena too broadly drawn may be modified accordingly.⁸

The brief of appellee surety discloses that its counsel have fairly definite information about the evidence they desire.⁹ It should not be too difficult for them to prepare detailed written interrogatories or requests¹⁰ to the witness calling on him to produce or attach duly authenticated copies¹¹ of such parts only of the documents as may be pertinent to the defense of the suit, describing the same as accurately as they can. Appellee surety company states in brief:

"Defendant seeks information from the documents relating only to the very items made the basis of the suit and about which such items there will be testimony in open court for the Bank has seen fit to bring this suit. * * * Defendant does not desire to know the identity of any so-called `informers\'."

Any matter disclosing or indicating the identity of informers could therefore be deleted.

Upon the submission to the Secretary of the Treasury of a copy of such written interrogatories or requests and an offer by the surety company to pay for the cost of preparing authenticated copies of such parts of the documents requested as the Secretary might be willing to furnish without claiming privilege, it may be that there will be no claim of privilege. If, however, the appellee surety demands more than the Secretary is willing to furnish without claiming privilege, it will then become necessary for the Court to rule upon the validity of any such claim.

Through such procedure, or some similar procedure, the competing public interests of the administration of justice and of governmental privilege may be reconciled. Every reasonable effort will have been made to avoid a conflict. If, nevertheless, a claim of privilege has to be decided by the Court, at least it will be in as narrow compass...