Two Grand Jury Subpoenae Duces Tecum (Jan. 28, 1985, and Undated), In re

• Decision Date: 28 January 1985
• Citation: 769 F.2d 52
• Court: U.S. Court of Appeals — Second Circuit
• Parties: , 18 Fed. R. Evid. Serv. 1304 In re TWO GRAND JURY SUBPOENAE DUCES TECUM, One Dated

Page 52

769 F.2d 52

54 USLW 2086, 18 Fed. R. Evid. Serv. 1304

In re TWO GRAND JURY SUBPOENAE DUCES TECUM, One Dated January 28, 1985, the Other Undated.

No. 1273, Docket 85-6067.

United States Court of Appeals Second Circuit.

Argued May 24, 1985.

Decided July 25, 1985.

Michael S. Feldberg, New York City (Charles Novack, Shea & Gould, New York City, of counsel), for appellant.

Michael Chertoff, Asst. U.S. Atty., New York City (Stacey J. Moritz, Asst. U.S. Atty., Rudolph W. Giuliani, U.S. Atty. for the S.D. of N.Y., New York City, of counsel), for appellee.

Before FEINBERG, Chief Judge, MANSFIELD and PRATT, Circuit Judges.

GEORGE C. PRATT, Circuit Judge:

This is an expedited appeal from an order entered in the United States District Court for the Southern District of New York, Charles L. Brieant, Judge, denying appellant's motion to quash two grand jury subpoenas duces tecum. Appellant is the custodian of records of a corporation whose name, along with the briefs and record in this case, remains under seal to protect the secrecy of the grand jury proceedings. Fed.R.Crim.P. 6(e)(6). Appellant claims We deny the government's motion to dismiss the appeal, and affirm the district court's order declining to quash the subpoenas.

that the effect of the subpoenas is to compel testimony in violation of the fifth amendment "act of production" doctrine. The government has moved to dismiss the appeal on jurisdictional grounds.

BACKGROUND

On or about February 7 and 8, 1985, two grand jury subpoenas duces tecum issued by the United States District Court for the Southern District of New York were served at the offices of a corporation ("the corporation") being investigated by the grand jury. One subpoena was addressed to the corporation and called for testimony and production of the corporation's business records. The second subpoena was addressed to "Custodian of Records" of the corporation ("the custodian"), and it, too, called for testimony and production of the corporation's business records.

On February 22, 1985, the custodian moved to quash the subpoenas. At the hearing on the motion before Judge Brieant on March 12, 1985, and in an affidavit accompanying the motion to quash, the custodian's attorney explained that the corporation has three shareholders but is essentially a one-man operation, since the custodian is the corporation's majority shareholder and its sole operating officer and director. The government admitted at the hearing that the custodian is in fact a target of the grand jury investigation. The custodian's argument for quashing the subpoena of corporate records was the "simple proposition" that the Supreme Court's decision in United States v. Doe, 465 U.S. 605, 104 S.Ct. 1237, 79 L.Ed.2d 552 (1984), means that when records are subpoenaed from a corporation like the one involved here, a corporate representative has a fifth amendment privilege to prevent production of the subpoenaed records, because the act of producing the documents may incriminate him.

After argument the district judge entered an order limiting the subpoenas to corporate business records and declining to quash the subpoenas as limited. The district judge directed that the records "be produced by a person who is not a target and that the government assure whoever produces them that that person is not a target of the grand jury investigation", and he also stated that "any employee of the corporation, who works in the main office where the records are, can be the proper person to produce [the records]."

Because the district court believed that this case presented "an interesting legal question of first impression in this circuit" after the Supreme Court's decision in United States v. Doe, 465 U.S. 605, 104 S.Ct. 1237, 79 L.Ed.2d 552 (1984), it stayed its order pending appeal. The custodian then brought this expedited appeal, and the government filed a motion with this court asking that the stay be vacated, the appeal dismissed, and the case remanded for further proceedings, such as any contempt adjudication, so that the grand jury investigation would not be further delayed.

DISCUSSION

A. The motion to dismiss the appeal.

The government's motion is based on the general rule that "a person who has been served with a subpoena may not appeal an order denying a motion to quash without first resisting and undergoing the penalty of a citation for contempt." In re Katz, 623 F.2d 122, 124 (2d Cir.1980); see Cobbledick v. United States, 309 U.S. 323, 60 S.Ct. 540, 84 L.Ed. 783 (1940). Appellant's response is that this appeal falls within the exception created by Perlman v. United States, 247 U.S. 7, 38 S.Ct. 417, 62 L.Ed. 950 (1918), which allows an immediate appeal from the denial of a motion to quash a subpoena, without at first resisting and being found in contempt, "when the subpoena is directed to a third party and the one seeking to quash the subpoena claims that its enforcement will violate one or more of his constitutional rights." In re Grand Jury Subpoena Served Upon John Doe, Esq., 759 F.2d 968, 970, 971 n. 1 (2d Cir.1985) (citing Perlman ); see also In re Katz, 623 F.2d at 124. Appellant's attorney points out that the subpoenas in question seek records of a corporation, yet it is the custodian of the record--an individual distinct, at least for these purposes, from the corporation--who moves to quash. In these circumstances, the corporation stands in the position of a third party who "will not be expected to risk a contempt citation and will surrender the documents sought, thereby letting the 'cat out of the bag' and precluding effective appellate review at a later stage." In re Katz, id. Therefore, the argument goes, the appeal should be allowed pursuant to Perlman.

Although one of the subpoenas in question was originally addressed to the custodian himself, rather than to the corporation, the district court's limitations on both subpoenas had the effect of directing them solely to the corporation, which therefore stands as a third party in the present appeal. The district judge specified that the corporation could have the records produced by any employee who works at the main office, and he specifically excluded any grand jury target from having to produce the records. The custodian who brings the present appeal, therefore, is not himself compelled to produce records. Only the corporation is being directed to produce the records, and it is directed to produce them not through the act of the custodian who is appealing, but through the act of some other employee or agent who is not a grand jury target. At least one condition of Perlman's third-party subpoena doctrine is therefore met.

The district court's order, however, also leaves appellant with a new problem which threatens to take away the fundamental ground for the appeal. Appellant's motion to quash is based on the alleged fact that the act of producing records in this case will compel the custodian to testify against himself. As explained below in section B, in certain circumstances a custodian of records may have a fifth amendment right to refuse to comply with a subpoena directing him, individually, to produce records when the act of producing them would constitute self-incriminating testimony. Fisher v. United States, 425 U.S. 391, 96 S.Ct. 1569, 48 L.Ed.2d 39 (1976). The problem for appellant is that under the district court's limitation of the subpoenas the custodian as an individual is not required to produce anything at all, and is therefore apparently not being required to testify against himself.

This problem is only partly solved by looking to the custodian's argument that United States v. Doe, 465 U.S. 605, 104 S.Ct. 1237, 79 L.Ed.2d 552 (1984), changes or extends the act of production doctrine. The custodian's position is that Doe gives a corporate representative a fifth amendment privilege to prevent the corporation itself from producing records in at least some circumstances. Other things being equal, such a position would help the custodian's claim that the denial of his motion to quash was immediately appealable. Yet here other things are not equal, because there is an unresolved tension between the argument the custodian gives to support his claim that Doe gives him the fifth amendment privilege he wants, and the underlying rationale for the immediate-appeal doctrine of Perlman.

To explain this requires anticipating at least part of section B below, which covers the custodian's full argument concerning Doe and his fifth amendment rights. The essence of the custodian's argument is that because his corporation is so much like a sole proprietorship, the fifth amendment privilege available to sole proprietors should also be extended to him. The custodian's total position then comes down to this: for purposes of the appeal, he is, under Perlman, distinct from the corporation, but for purposes of the act of production doctrine in light of Doe he is not distinct from the corporation.

Although this combination of views on appealability and on the act of production doctrine is neither inconsistent nor incoherent, there is little logic to it. The reason for the Perlman doctrine is that the party seeking an immediate appeal cannot control the third party to whom the subpoena is addressed. See In Re Katz, 623 F.2d at 124. Yet here the custodian is arguing that he is in complete control of the corporation, so much so that he is in practical terms not significantly different from a sole proprietor, and that to compel his corporation to testify by producing documents would be to compel him personally to testify. When the custodian argues that he is for practical purposes identical with the corporation, he cuts away any reason to allow an immediate appeal. If appellant is right on the merits of his fifth amendment claim, in other words, he is wrong on the immediate appealability issue.

Our decision to allow the appeal rests, in the end, on two points....