Paramount Pictures Corp. v. Miskinis

• Decision Date: 19 March 1984
• Docket Number: Docket No. 67943,No. 4,4
• Citation: 418 Mich. 708,344 N.W.2d 788
• Parties: PARAMOUNT PICTURES CORPORATION, et al., Plaintiffs, and Appellees, v. Joseph MISKINIS, et al., Defendants, and Appellants. Calendar
• Court: Michigan Supreme Court

Page 788

344 N.W.2d 788

418 Mich. 708

PARAMOUNT PICTURES CORPORATION, et al., Plaintiffs, and Appellees, v. Joseph MISKINIS, et al., Defendants, and Appellants.

Docket No. 67943.

Calendar No. 4.

Supreme Court of Michigan.

Argued May 3, 1983.

Decided March 19, 1984.

Butzel, Long, Gust, Klein & Van Zile, P.C. by Dennis B. Schultz, Detroit, for plaintiffs and appellees.

Arthur J. Hass, Detroit, for defendants and appellants.

BOYLE, Justice.

The issue raised by this appeal is whether Joseph Miskinis, Jr., as custodian of corporate and partnership books and records, can withhold production of those documents in a civil action on the ground that there is a possibility that the documents will be personally incriminating to him, thus raising the privilege against self-incrimination protected by the Michigan and United States Constitutions, Const.1963, art. 1, Sec. 17 and U.S. Const., Am. V.

I. Facts

Plaintiffs-appellees are foreign corporations which have been or are engaged in the business of licensing theater owners and operators to exhibit motion picture films distributed by them. Defendants-appellants owned and operated two motion picture theaters in Detroit and Royal Oak, one a partnership, and the other a Michigan corporation.

Defendant movie theater entities entered into licensing agreements with plaintiff distributors which required the defendants to pay the distributors a percentage of the theaters' gross receipts of the admission prices collected at the box office in exchange for the right to exhibit plaintiffs' films. The agreements further provided that the distributors' share of the proceeds was to be held in trust by the exhibitors for the distributors in a separate and distinct fund. Defendants were contractually obligated to prepare and submit to plaintiffs daily statements of the gross receipts derived from the exhibition of the films and to keep and preserve for at least four years full and accurate books and records. Plaintiffs contractually reserved the right to audit the defendants' books and records at any time.

Plaintiffs used a spot-checking system to verify the accuracy of defendants' reports. This checking system revealed discrepancies between the amount of gross receipts shown on the written statements prepared and submitted by defendants and the amount shown by the checking system. As a result, plaintiffs made a written request to examine defendants' business records. Defendants refused to honor the request, and plaintiffs commenced this action.

The original complaint was filed against "Joseph Miskinis d/b/a Oak Drive-In Theatre and Civic Theatre". Counts I and III set out causes of action for breach of contract by failing to produce for examination the relevant business records, by submitting false and incorrect statements of gross receipts, and by submitting statements of gross receipts which did not fully and completely disclose the gross receipts. Count II of the original complaint was a claim for intentional misrepresentation.

In his answer to the original complaint defendant Joseph Miskinis, Jr. denied being the sole owner of the theaters in question and answered that the Oak Drive-In was owned by a Michigan corporation, that the Civic Theatre was owned by a Michigan partnership, and that the defendant had a minority interest in each entity. Plaintiffs subsequently moved to add parties defendant. The motion was granted, and plaintiffs filed an amended complaint naming as defendants the Oak Drive-In Theatre and the Civic Theatre in addition to Joseph Miskinis.

During the course of discovery plaintiffs moved the trial court for an order requiring defendants to produce their business books and records for examination. Defendants raised the privilege against self-incrimination in opposition to this motion. ¹ The trial court granted plaintiffs' motion, but limited the scope of discoverable documents to those pertaining to the defendants' theater operations from January 1, 1976, to December 31, 1978. The court further ordered "that neither the plaintiffs nor their agents, employees, or independent contractors who perform the copying and examination of the aforesaid books, documents, and records shall disclose the information obtained from those books, documents, and records during such copying and examination to anyone except plaintiffs' legal counsel or this court."

Defendants sought leave to appeal to the Court of Appeals, which was granted. The Court affirmed the judgment of the lower court in an unpublished per curiam opinion. The Court of Appeals rejected defendants' claim that the production of documents was protected by the privilege against self-incrimination, Const.1963, art. 1, Sec. 17; U.S. Const., Am. V. Reasoning that the privilege against self-incrimination applies only to natural persons and that a corporation, a creature of the state, could not assert the privilege to avoid the production of its records, the Court of Appeals held that production was justified because the records were those of a particular corporation as opposed to the personal records of any individual. The officer of the corporation in possession of corporate books could not assert his own privilege against self-incrimination to prevent their disclosure inasmuch as he only held the records pursuant to his duty to the corporation, unless the materials were his own personal records. This reasoning was also found to be applicable to a partnership. The Court of Appeals modified the trial court's order to the extent that it could be read as requiring production of Joseph Miskinis' personal tax returns if they should be found by the trial court to be personally incriminating to the individual defendant.

This Court granted defendants' application for leave to appeal. 414 Mich. 868, 323 N.W.2d 910 (1982). We affirm the decision of the Court of Appeals.

II. Federal Constitutional Provision: Amendment V

We begin our analysis with an examination of the Fifth Amendment of the United States Constitution ² to determine whether federal constitutional law prohibits the compelled production of the documents at issue in this case. The Fifth Amendment privilege against self-incrimination is a personal privilege and cannot be asserted on behalf of another. The privilege applies only to natural persons and thus cannot be utilized by or on behalf of any organization, such as a corporation. United States v. White, 322 U.S. 694, 64 S.Ct. 1248, 88 L.Ed. 1542 (1944); Hale v. Henkel, 201 U.S. 43, 26 S.Ct. 370, 50 L.Ed. 652 (1906).

The United States Supreme Court has repeatedly held that the custodian of an organization's books and records cannot refuse to produce the documents even if they might be personally incriminating to the custodian. In Wilson v. United States, 221 U.S. 361, 31 S.Ct. 538, 55 L.Ed. 771 (1911), the Court upheld the contempt conviction of Wilson, president of the United Wireless Telegraph Company, for his refusal to obey a grand jury subpoena duces tecum requiring the production of the corporation's letter-press copy books. The Court focused on the nature of the documents as the books of the corporation and on the capacity in which they were held, despite the fact that Wilson himself had written many of the business entries in his capacity as executive officer of the corporation. The Wilson Court reasoned that because of the corporate form of business activity, with its chartered privileges, the corporation could not refuse the government's demand to examine books when that demand is expressed in lawful process and is reasonable under the circumstances. "This is involved in the reservation of the visitatorial power of the state, and in the authority of the national government where the corporate activities are in the domain subject to the powers of Congress." Wilson, 221 U.S. p. 382, 31 S.Ct. p. 545. See also Hale v. Henkel, supra, 201 U.S. pp. 74-75, 26 S.Ct. p. 378-79. The reserved power of visitation would be defeated if "guilty officers could refuse inspection of the records and papers of the corporation," and it was held that the visitational power which existed with respect to the corporation necessarily reached the corporate books regardless of the conduct of the custodian.

While the Court's reasoning in Wilson could fairly be read as applying only to the production of corporate documents, subsequent decisions of the Court make clear that production of documents of other types of organizations may be compelled against Fifth Amendment objections. In United States v. White, 322 U.S. 694, 64 S.Ct. 1248, 88 L.Ed. 1542 (1944), it was held that an "assistant supervisor" of an unincorporated labor union who had possession ³ of books subpoenaed by a federal grand jury could not refuse to produce the documents even though they might have tended to incriminate the union and himself personally. The Court held that individuals, when acting as representatives of a collective group, are not exercising their personal rights, duties, and privileges, but rather assume the rights, duties, and privileges of the entity of which they are agents or officers and are bound by its obligations. The Court explained:

"The reason underlying the restriction of this constitutional privilege to natural individuals acting in their own private capacity is clear. The scope and nature of the economic activities of incorporated and unincorporated organizations and their representatives demand that the constitutional power of the federal and state governments to regulate those activities be correspondingly effective. The greater portion of evidence of wrongdoing by an organization or its representatives is usually to be found in the official records and documents of that organization. Were the cloak of the privilege to be thrown around these impersonal records and documents, effective enforcement of many federal and state laws would be impossible. See Hale v. Henkel, supra, [201 U.S.] 70, 74, 8 Wigmore on...