Territorial Court of Virgin Islands v. Richards

• Decision Date: 21 October 1987
• Docket Number: Civ. No. 1987/24.
• Citation: 673 F. Supp. 152
• Parties: TERRITORIAL COURT OF the VIRGIN ISLANDS, Plaintiff, v. James R. RICHARDS, in his capacity as Inspector General, Office of Inspector General, U.S. Department of Interior, and Neal Littlefield, in his capacity as Regional Audit Manager, Caribbean Region, St. Thomas, V.I., Office of Inspector General, U.S. Department of Interior, Defendants.
• Court: U.S. District Court — Virgin Islands

673 F. Supp. 152

TERRITORIAL COURT OF the VIRGIN ISLANDS, Plaintiff, v. James R. RICHARDS, in his capacity as Inspector General, Office of Inspector General, U.S. Department of Interior and Neal Littlefield, in his capacity as Regional Audit Manager, Caribbean Region, St. Thomas, V.I., Office of Inspector General, U.S. Department of Interior, Defendants.

Civ. No. 1987/24.

District Court, Virgin Islands, D. St. Thomas and St. John.

October 21, 1987.

COPYRIGHT MATERIAL OMITTED

Brenda J. Hollar, Leon Kendall (argued), Gen. Counsel, Territorial Court of the U.S. Virgin Islands, St. Thomas, V.I., for plaintiff.

Richard K. Willard, Asst. Atty. Gen., Michael F. Hertz, Robert L. Ashbaugh (argued), Civ. Div., U.S. Dept. of Justice, Washington, D.C., Terry M. Halpern, U.S. Atty., James S. Carroll III, Asst. U.S. Atty., St. Thomas, V.I., Thomas E. Robinson, Associate Sol., William S. Fields, U.S. Dept. of Interior, Washington, D.C., for defendants.

MEMORANDUM and ORDER

DAVID V. O'BRIEN, Judge.

The Territorial Court of the Virgin Islands seeks to prevent an audit of its operations by the Inspector General of the United States Department of the Interior. It cites the separation of powers doctrine as a constitutional limitation on any such intrusion into its affairs. It claims as well an absence of statutory authority allowing such an audit. We find no constitutional impairment, and that there is ample statutory permission to enforce the Inspector General's subpoena directed to the Territorial Court.

I. FACTS

Neal H. Littlefield, the Caribbean regional audit manager for the Inspector General of the United States Department of Interior, recommended an audit of the Territorial Court of the Virgin Islands in the fall of 1985. He did so because his office had never directly audited the Territorial Court, and the predecessor office charged with similar duties had not audited the Court since 1976, when it was known as the Municipal Court of the Virgin Islands.¹

After approval, Littlefield, by letter dated May 13, 1986, notified the Territorial Court's Presiding Judge, Hon. Verne A. Hodge, of this audit. An entrance conference was held on June 26, 1986, attended by members of Littlefield's staff and by Judge Hodge, among others.

The federal officials told Judge Hodge that the audit had three objectives. It would seek to determine whether funds received by the Territorial Court were accounted for; whether procurement practices were in compliance with Virgin Islands law; and whether the Territorial Court was achieving its program directives. This was to be accomplished by exploring the Territorial Court's

(a) revenues and cashier collection procedures;

(b) expenditures and procurement practices;

(c) recording and collection of receivables for Court fines;

(d) control over escrow accounts for bail funds;

(e) control over equipment and other assets;

(f) time and attendance and payroll procedures.

Although initially receptive to the audit's subject matter, Judge Hodge immediately voiced strong concerns regarding the reasons for the audit, the timing of the audit and the status of other indirect audits of the Territorial Court by the Inspector General's Office. Specifically, he was concerned with the propriety of the Inspector's involvement in various published articles in the Virgin Islands Daily News concerning these indirect audits. He also challenged two of the objectives of the audit.

These concerns were first expressed by phone to assistant Inspector General Harold Bloom on August 16, 1986. Subsequently, Judge Hodge wrote Bloom on September 16, 1986 requesting Bloom's confirmation as to the conditions under which Judge Hodge would permit the audit. In addition, Judge Hodge retained counsel for the Territorial Court who wrote Bloom on September 23, 1986 challenging the Inspector's authority to audit the Territorial Court.

Despite Bloom's and Littlefield's continued assurances in the fall of 1986 that the audit would be properly conducted, Judge Hodge was not satisfied and did not consent to the audit. As a result, Inspector General James R. Richards ("Inspector") issued a subpoena duces tecum ("subpoena") in November, 1986 directed to Viola Smith, Clerk of the Territorial Court. The subpoena was served in late January 1987. It required compliance by production of the relevant documents no later than February 2, 1987.

A) Procedural Background

Rather than comply or await a petition to enforce in this Court, the Territorial Court took the initiative and filed this action for declaratory and injunctive relief on January 23, 1987. It then moved to quash the subpoena. However, by stipulation approved by this Court on March 4, 1987, the parties agreed that no documents were to be produced before resolution of the conflict by this Court. Further, they agreed that the Inspector would file the appropriate "pleadings" to enforce the subpoena and join such action with the Territorial Court's motion to quash. The Inspector did just that. Briefing and oral argument followed.

B) Arguments

In opposition to enforcement, the Territorial Court disputes a portion of the Insular Areas Act of 1982, 48 U.S.C.A. § 1599 (Supp.1987), which grants the Inspector audit oversight of the government of the Virgin Islands. It argues that to the extent the statute is applied to allow the Inspector to audit the Territorial Court, it is unconstitutional as violative of the doctrine of separation of powers. The Territorial Court also cites 48 U.S.C.A. § 1544 in support of its constitutional argument. Relying on that provision for statutory support, it argues that Congress excepted the Territorial Court from the Inspector's jurisdiction, and placed the Territorial Court's supervision in the hands of the Administrative Office of the United States Courts ("Administrative Office").

Although not an argument against enforcement, the Territorial Court also asserts that if the Inspector is permitted to audit it, the Inspector will perform ultra vires acts similar to its behavior in earlier audits of territorial government affairs. It seeks discovery to substantiate these allegations, aiming to use such improprieties, if proved, as a further bar to an audit, and/or as a basis for an injunction limiting the audit.

At oral argument, counsel for the Territorial Court reiterated the plaintiff's reliance on its constitutional argument. However, he conceded that this defense was not asserted until, as he said, there developed a "meretricious" relationship between the Inspector and the local press concerning the earlier indirect audits of the Territorial Court by the Inspector. Apparently, the Territorial Court was collaterally audited by the Inspector on several occasions between 1983 and 1986. These indirect audits occurred during the Inspector's direct audits of various departments of the executive branch of the Government of the Virgin Islands.

II. DISCUSSION

Congress specifically transferred audit oversight functions from the government comptroller for the Virgin Islands to the Inspector by virtue of the Insular Areas Act of 1982. See 48 U.S.C.A. § 1599 (Supp. 1987).² Pursuant to the Inspector General Act of 1978, the Inspector has subpoena power to carry out his duties. 5 U.S.C.A. App 3 § 6 (Supp.1987). This power to subpoena, however, is not self executing. Rather, application must be made for a Court order enforcing compliance. 5 U.S. C.A. App at § 6(a)(4).³

A) Jurisdiction

A motion seeking enforcement of such a subpoena confers subject matter jurisdiction of the cause on this Court. Until enforcement is sought, there is not the immediate and irreparable injury of the type remedied by declaratory or injunctive relief as sought herein by plaintiff. Belle Fourche Pipeline Co. v. United States, 751 F.2d 332, 335 (10th Cir.1984), cert. denied, 474 U.S. 818, 106 S.Ct. 64, 88 L.Ed.2d 52 (1985) (citing Reisman v. Caplin, 375 U.S. 440, 84 S.Ct. 508, 11 L.Ed.2d 459 (1964)).

It was in Reisman that the Supreme Court strongly disfavored pre-enforcement review of investigative subpoenas. Challenges to enforcement are to be heard at the enforcement hearing. 375 U.S. at 449, 84 S.Ct. at 513. Thus, in the case at bar, only the Inspector's counterclaim seeking enforcement and not plaintiff's complaint, provided us with subject matter jurisdiction. Comet Electronics Inc. v. United States, 381 F.Supp. 1233, 1237 (W.D.Mo.1974), aff'd mem, 420 U.S. 999, 95 S.Ct. 1440, 43 L.Ed.2d 758 (1975).

We make this distinction because the Territorial Court asserts that the Inspector breached the March 4, 1987 stipulation by moving for enforcement. It claims that the stipulation allowed the counterclaim for enforcement, but not the follow-up motion.

We recognize, however, that enforcement hearings are summary in nature. E.E.O.C. v. Bay Shipbuilding Corp., 668 F.2d 304, 310 (7th Cir.1981). We believe, therefore, that the Territorial Court's contention represents a misunderstanding respecting the meaning of the term "pleadings" as used in the stipulation. We did not read the stipulation at the time of our approval, nor do we now, as a waiver by the defendants of their right to seek prompt resolution of this conflict, and enforcement of the subpoena. Indeed, we would not approve a stipulation which could effectively delay resolution of this conflict, recognizing the summary nature of the proceeding. Thus, we turn to that question.

B) Enforcement

Three criteria must exist before an administrative subpoena will be enforced. It must be within the statutory authority of the agency, it must seek relevant information and it must not be unduly burdensome. United States v. Westinghouse Elec. Corp., 788 F.2d 164, 166 (3d Cir.1986) (citations omitted). The Third Circuit also requires that a subpoena not be issued for an improper purpose such as harrassment. Id. at 166-167 (citations omitted).

Normally a Court will accept as sufficient an agency's pleading that the matter under...