Special March 1981 Grand Jury, Matter of

• Decision Date: 23 January 1985
• Docket Number: No. 84-1187,84-1187
• Citation: 753 F.2d 575
• Parties: Medicare&Medicaid Gu 34,492 In the Matter of SPECIAL MARCH 1981 GRAND JURY. Appeal of ALMOND PHARMACY, INC., et al.
• Court: U.S. Court of Appeals — Seventh Circuit

Page 575

753 F.2d 575

Medicare&Medicaid Gu 34,492

In the Matter of SPECIAL MARCH 1981 GRAND JURY Appeal of ALMOND PHARMACY, INC., et al.

No. 84-1187.

United States Court of Appeals Seventh Circuit.

Argued Sept. 11, 1984.

Decided Jan. 23, 1985.

Daniel A. DuPre, Asst. U.S. Atty., Dan K. Webb, U.S. Atty., Chicago, Ill., for plaintiff.

Edgar A. Blumenfeld, Edgar A. Blumenfeld, Ltd., Chicago, Ill., for defendant.

Before POSNER, Circuit Judge, SWYGERT, Senior Circuit Judge, and DUPREE, Senior District Judge. ^*

POSNER, Circuit Judge.

This appeal questions the propriety of the action of the Chief Judge of the Northern District of Illinois in handing over to the Illinois Department of Public Aid voluminous business records of the appellants (several pharmacies) that a federal grand jury had subpoenaed in 1983. The appellants had turned over the records to the grand jury without making copies of them; and when shortly afterward the Department of Public Aid tried to audit the appellants as part of its responsibility for administering Medicaid, the appellants told the Department that the records it needed were in the hands of the grand jury. The state thereupon (in August 1983) wrote one of the assistant United States attorneys in charge of the grand jury's investigation, listing the categories of documents it needed and requesting access to them. Satisfied (without going much behind the letter) with the state's representation that the records it was seeking were indeed ones that federal and state law required the appellants to maintain, the assistant U.S. attorney filed in September and October ex parte motions with the chief judge of the district court, which were promptly granted, to allow the United States Attorney's office to hand over the requested documents to the state. In January 1984 the appellants, discovering that their records were in the hands of the state (where they remain today), which was using them in administrative proceedings that might result in terminating their eligibility to participate in the Medicaid program, petitioned the chief judge to prohibit the state from using the records in any judicial or administrative proceeding, and to prohibit access to the records by anyone else. The chief judge denied the petition and this appeal followed. The grand jury has since been dismissed, having indicted several individuals whose connection, if any, with the appellants, all of which are corporations, is obscure.

The United States Attorney, who is defending the chief judge's order in this court, argues that these pharmacies do not have standing to contest the order, because the State of Illinois has an absolute right under federal and state law to see their business records, and the pharmacies therefore were not harmed by the order. See 42 C.F.R. Secs. 455.104-455.106; Ill.Rev.Stat.1981, ch. 23, p 5-5; Ill.Dept.Pub. Aid R. 4.014. If they were not harmed, their petition is not within the power of the federal courts to grant. See, e.g., People Organized for Welfare & Employment Rights v. Thompson, 727 F.2d 167, 169 (7th Cir.1984). But the petition claims that the district court violated state and federal law in releasing the appellants' business records to the state. The claim may be right or wrong but that is an issue on the merits and is irrelevant to standing. What is relevant is that the appellants are being hurt by the release because the state is busy using their records against them. See Douglas Oil Co. v. Petrol Stops Northwest, 441 U.S. 211, 218 n. 8, 99 S.Ct. 1667, 1672 n. 8, 60 L.Ed.2d 156 (1979).

Even so, it is not immediately obvious what they have to gain from winning this appeal. The cat has been out of the bag for a year. The state has had all that time to go through the records, copy them, and use them. What good would it do the appellants to get the records back now? They do not claim to need them for their business. They only want to keep them away from the state, and it seems too late for that. It is not enough, to give you standing, that you have been hurt by someone; you must have something tangible to gain from your suit--some alleviation of, or compensation for, the hurt. Otherwise the suit is as much an academic exercise as if it were brought to prevent a nonexistent harm. See, e.g., Valley Forge Christian College v. Americans United for Separation of Church & State, Inc., 454 U.S. 464, 472, 102 S.Ct. 752, 758, 70 L.Ed.2d 700 (1982).

But the appellants want an order preventing the state from making any use of the documents, and if such an order would be within the district court's power, the appellants do have something concrete to gain from winning this appeal. Rule 6(e) of the Federal Rules of Criminal Procedure creates a procedure by which a federal court can order the disclosure of matters occurring before the grand jury. If the court orders such disclosure erroneously, we suppose both that an injured person can complain by filing (as was done here) a petition with the court that ordered disclosure and that the court has inherent power to issue an appropriate curative order, including an order preventing the person to whom disclosure was erroneously made from using the information gained from it. See In re Grand Jury Investigation No. 78-184, 642 F.2d 1184, 1188 (9th Cir.1981), aff'd under the name of United States v. Sells Engineering, Inc., 463 U.S. 418, 103 S.Ct. 3133, 77 L.Ed.2d 743 (1983); cf. Gumbel v. Pitkin, 124 U.S. 131, 144, 8 S.Ct. 379, 383, 31 L.Ed. 374 (1888); Handler v. SEC, 610 F.2d 656, 659 (9th Cir.1979); 1 Moore's Federal Practice p 0.60, at p. 634 (2d ed. 1984). We do not think Congress meant to leave the courts powerless to correct such errors. So if the appellants are right that the district court erred in turning over their records to the state, they may be able to obtain a remedial order. This is possibility enough to confer standing, and we can turn to the merits, where two issues require discussion.

The first is whether the appellants' records are (or were) "matters occurring before the grand jury." Rule 6(e)(2) forbids "an attorney for the government" (among others) to disclose such matters, with limited exceptions (set forth in Rule 6(e)(3)) that the State of Illinois, in requesting the assistance of the United States Attorney, made no effort to fit itself within. Thus, if the appellants' records were "matters occurring before the grand jury," the district court erred in letting the state have them. In a literal sense they were matters occurring before the grand jury. But because the exceptions in Rule 6(e) to maintaining grand jury secrecy are so limited, a literal reading would have most unfortunate practical consequences, and is also unnecessary for the protection of that secrecy. The principle has therefore emerged that "matters occurring before the grand jury" do not include every document of which the grand jury happens to have custody. If a document is sought for its own sake rather than to learn what took place before the grand jury, and if its release will not seriously compromise the secrecy of the grand jury's deliberations, Rule 6(e) does not forbid its release. See, e.g., In re Grand Jury Proceedings, Miller Brewing Co., 687 F.2d 1079, 1089-90 (7th Cir.1982); In re Special February 1975 Grand Jury, 662 F.2d 1232, 1244 (7th Cir.1981) (supplemental opinion), aff'd under the name of United States v. Baggot, 463 U.S. 476, 103 S.Ct. 3164, 77 L.Ed.2d 785 (1983); United States v. Stanford, 589 F.2d 285, 291 (7th Cir.1978); United States v. Interstate Dress Carriers, Inc., 280 F.2d 52, 54 (2d Cir.1960).

Illinois needs the appellants' business records to determine the appellants' eligibility to participate in the Medicaid program. But if the appellants are right in their reading of Rule 6(e)(2), then by the simple expedient of not making copies of the records that they turned over to the grand jury in response to its subpoena they have succeeded in putting the records into perpetual cold storage. We are exaggerating, but only a little. The state might be able to make a "strong showing" of a "particularized need" for the records in connection with anticipated judicial proceedings against the appellants, and so come within the exception to grand jury secrecy in Rule 6(e)(3)(C)(i), as judicially glossed, for example in Lucas v. Turner, 725 F.2d 1095, 1101 (7th Cir.1984). Or it could forget about the records and terminate the appellants' participation in the Medicaid program because of their failure to maintain required records. See Ill.Rev.Stat.1981, ch. 23, p 12-4.25(A)(b). (Of course the appellants would fight this tooth and claw--are fighting tooth and claw, we infer, in the termination proceedings that the state has brought against them.) But these measures seem unduly cumbersome (as well as possibly ineffectual), given that--as we are about to see--releasing the records could not have compromised the secrecy of the grand jury to any appreciable extent.

Judge Friendly's compact summary of the interests that grand jury secrecy protects--"the interest of the government against disclosure of its investigation of crime which may forewarn the intended objects of its inquiry or inhibit future witnesses from speaking freely; the interest of a witness against the disclosure of testimony of others which he has had no opportunity to cross-examine or rebut, or of his own testimony on matters which may be irrelevant or where he may have been subjected to prosecutorial brow-beating without the protection of counsel; the similar interests of other persons who may have been unfavorably mentioned by grand jury witnesses or in questions of the prosecutor; protection of witnesses against reprisal; and the interests and protection of the grand jurors themselves," In re Biaggi, 478 F.2d 489, 491-92 (2d Cir.1973) (footnote omitted)--includes two distinct types of interest: the institutional and the personal. The institutional interests, which...