Steele, In re
| Decision Date | 19 August 1986 |
| Docket Number | No. 85-1191,85-1191 |
| Citation | 799 F.2d 461 |
| Parties | In re Motion to Compel Filed by Dudley M. STEELE, Jr. and Betty L. Kruger, UNITED STATES of America, Plaintiff/Appellant, v. Dudley M. STEELE, Jr. and Betty L. Kruger, Defendants/Appellees. |
| Court | U.S. Court of Appeals — Ninth Circuit |
Joyce Kallam McKee, Asst. U.S. Atty., Fresno, Cal., Howard P. Stewart, Fraud Section, Criminal Div., Dept. of Justice, Washington, D.C., for plaintiff/appellant.
Phillip S. Cronin, Isham, Macias, Lynch, Cronin & Rodriguez, Visalia, Cal., for Steele.
Richard Burda, Los Angeles, Cal., for Kruger.
Appeal from the United States District Court for the Eastern District of California.
Before SNEED, ANDERSON, and POOLE, Circuit Judges.
The Inspector General's office of the U.S. Department of Agriculture (the government) appeals from a district court order purporting to be issued pursuant to the Freedom of Information Act (FOIA). The order permits Dudley M. Steele, Jr., (Steele) and Betty L. Kruger (Kruger) to review memoranda of their pre-grand jury statements prepared by inspectors during an investigation into allegations that Tex-Cal Land Management (TCLM) made improper applications of Farmers Home Administration (FmHA) loan monies and improperly withheld from FmHA the proceeds from sales of loan collateral. We reverse and instruct the district court to dismiss for lack of jurisdiction.
In July 1983, an investigation was initiated by the Inspector General's Office (IG) of the U.S. Department of Agriculture against TCLM. TCLM is a management company for approximately 7,000 acres of farmland planted in grapes, almonds and kiwi fruit. The investigation was instituted to look into allegations that TCLM and its related companies made improper applications of FmHA loan monies and improperly withheld from FmHA the proceeds from sales of loan collateral. FmHA loans to TCLM totalled approximately $50 million between 1979 and 1983.
The investigation included interviews of Steele, the controlling shareholder of TCLM, and Kruger, Steele's personal secretary, as well as other TCLM and related companies' officers and employees. During the investigation, numerous documents were turned over to the IG. The IG's findings were referred to the Department of Justice, Criminal Division, Fraud Section, and a grand jury investigation was initiated. The allegations charged that loan monies received by TCLM had been improperly applied to nonfarming uses and that proceeds from the sale of loan collateral had been improperly diverted to the personal use of TCLM officers and employees.
Steele and Kruger appeared and testified before the grand jury on two separate occasions (November 8, 1984 and March 7, 1985). Steele appeared a third time on April 4, 1985. At the March 7, 1985 appearance, the federal prosecutor informed both Steele and Kruger that they were targets of the grand jury investigation. The grand jury investigation is continuing.
Steele then sent a fifteen-page letter to the federal prosecutor requesting informal discovery of copies of the memoranda prepared by federal investigators of the pre-grand jury statements made by Steele, Kruger, and other TCLM employees; transcripts of Steele's testimony before the grand jury; and the return of corporate records given to IG agents. Steele was informed by telephone that the government would not provide any of the requested documents. Steele then filed a motion for discovery to obtain the requested statements and testimony. The government filed a response and memorandum of law opposing the disclosure of any of the requested documents based on, inter alia, the defense that disclosure of the documents was exempt as investigatory records compiled for law enforcement purposes under 5 U.S.C. Sec. 552(b)(7) of the FOIA.
The district court set a hearing on Steele's motion. Prior to that hearing, Kruger filed a motion in pro per requesting copies of the memoranda prepared by federal investigators of her pre-grand jury statements and for transcripts of her grand jury testimony. At the hearing on the motion to disclose, Steele filed a rebuttal brief in reply to the government's FOIA exemption defense claiming that disclosure was required because the government failed to meet its burden of proof that the documents were exempt. The district court gave a preliminary indication that the government had not sustained its burden of proof that the exemption to disclose applied. The federal prosecutor argued that Steele and Kruger had not exhausted their administrative remedies. Specifically, he argued that they had failed to seek disclosure of their pre-grand jury statements under the FOIA from the Department of Agriculture, and had it been denied at that level, to seek review of that denial in district court. Steele and Kruger replied in turn that they had already requested the material, had been refused, and therefore the futility exception to the exhaustion doctrine was applicable.
The district court ordered the government to disclose to Steele and Kruger his or her own grand jury testimony prior to any subsequent grand jury appearance. The government does not appeal this portion of the order. The district court further ordered the government to allow Steele and Kruger to review, immediately prior to any future scheduled grand jury appearance, memoranda of their pre-grand jury interviews made during the IG investigation. The district court based its order on the FOIA and the dissenting views of Judge Tate in Linsteadt v. IRS, 729 F.2d 998 (5th Cir.1984). It held that the government had not met its burden of proof for an exemption from disclosure. In addressing the government's argument that neither Steele nor Kruger properly invoked the FOIA by requesting the memoranda of interviews from the IG's office, the court stated:
"This court sees no reason to require Steele and Kruger to first comply with FOIA procedures inasmuch as opposition to production and the reasons therefor have been presented to the court in connection with these motions."
The government filed a motion for reconsideration seeking an order vacating the district court's order on the ground that the district court was without jurisdiction or authority to order disclosure pursuant to the FOIA because neither Steele nor Kruger had initiated a FOIA request and thus could not have exhausted their administrative remedies as required under the FOIA. The government's motion was denied. The government appealed to this court, but only that part of the district court's order that permits Steele and Kruger to review their pre-grand jury statements prior to any future grand jury appearance.
The first issue we must address is whether this court has jurisdiction to review this appeal. We find that we do. Steele and Kruger contend that the jurisdictional requirements of 18 U.S.C. Sec. 3731 govern this appeal and that Sec. 3731 deprives this court of jurisdiction. Because we find that we have jurisdiction under either 28 U.S.C. Sec. 1291 or 28 U.S.C. Sec. 1292(a)(1), we do not address this issue.
1. 28 U.S.C. Sec. 1291 1 and/or 28 U.S.C. Sec. 1292(a)(1) 2
Steele and Kruger argue that the district court's order compelling disclosure of their pre-grand jury statements is interlocutory and therefore not appealable as a final decision under 28 U.S.C. Sec. 1291. We disagree. The District of Columbia Circuit defines a "final decision" in a FOIA case 3 as "an order by the District Court requiring release of documents by the Government to the plaintiff, or order denying the plaintiff's right to such release." Green v. Department of Commerce, 618 F.2d 836, 841 (D.C.Cir.1980). Thus, an order compelling disclosure is appealable as a final decision under Sec. 1291. This court is in agreement with the D.C.Circuit. In Theriault v. United States, 503 F.2d 390 (9th Cir.1974), the party made a request for Air Force agency records and, upon refusal, instituted a FOIA proceeding. The party moved, under Federal Rule of Civil Procedure 34, for an order requiring production of the documents. The district court granted the motion and ordered the production of the documents. The government appealed. This court held that Rule 34 orders are ordinarily interlocutory and non-appealable under 28 U.S.C. Sec. 1291. Id. at 391. Id.
Furthermore, in Warth v. Department of Justice, 595 F.2d 521 (9th Cir.1979), a FOIA case, this court noted without explanation that jurisdiction existed under 28 U.S.C. Sec. 1291. Id. at 522. The appeal stemmed from the denial of a request under the FOIA for the transcript of a criminal trial. See also Church of Scientology v. United States Department of the Army, 611 F.2d 738, 741 (9th Cir.1979) ().
Steele and Kruger argue that even if an order compelling disclosure pursuant to the FOIA is normally a final decision appealable under Sec. 1291, the conditional nature of the order in this case renders it interlocutory and non-appealable. The district court's order permitted Steele and Kruger "to review their factual statements ... prior to the commencement of the Grand Jury investigation and none other and to make notes in connection with these statements, such review to take place immediately prior to any scheduled appearance before...
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