U.S. v. Construction Products Research, Inc., No. 342

CourtU.S. Court of Appeals — Second Circuit
Writing for the CourtMcLAUGHLIN
PartiesUNITED STATES of America, Petitioner-Appellee, v. CONSTRUCTION PRODUCTS RESEARCH, INC.; Five Star Products, Inc.; and H. Nash Babcock, Respondents-Appellants. ocket 95-6067.
Decision Date02 January 1996
Docket NumberD,No. 342

Page 464

73 F.3d 464
33 Fed.R.Serv.3d 828
UNITED STATES of America, Petitioner-Appellee,
v.
CONSTRUCTION PRODUCTS RESEARCH, INC.; Five Star Products,
Inc.; and H. Nash Babcock, Respondents-Appellants.
No. 342, Docket 95-6067.
United States Court of Appeals,
Second Circuit.
Argued Oct. 30, 1995.
Decided Jan. 2, 1996.

Page 467

Michael F. McBride, LeBoeuf, Lamb, Greene & MacRae, L.L.P., Washington, D.C. (Deirdre G. Johnson, LeBoeuf, Lamb, Greene & MacRae, L.L.P., Washington, D.C.; Harold James Pickerstein, Trager and Trager, Fairfield, CT; Eugene R. Fidell, Mark M. Brandsdorfer, Feldesman, Tucker, Leifer, Fidell & Bank, Washington, D.C., of counsel), for Respondents-Appellants.

Katherine S. Gruenheck, Attorney, Appellate Staff Civil Division, Department of Justice, Washington, DC (Frank W. Hunger, Assistant Attorney General, Christopher F. Droney, United States Attorney, Barbara C. Biddle, Attorney, Appellate Staff Civil Division, Department of Justice, Charles E. Mullins, Senior Attorney, Office of the General Counsel, Washington, DC, of counsel), for Petitioner-Appellee.

Before: NEWMAN, Chief Judge, ALTIMARI, and McLAUGHLIN, Circuit Judges.

McLAUGHLIN, Circuit Judge:

The Nuclear Regulatory Commission ("NRC") issued a subpoena, requiring Construction Products Research, Inc. ("CPR"), Five Star Products, Inc. ("Five Star"), and their Custodian of Records, H. Nash Babcock (together, "Respondents") to produce employment records of certain employees and other employment-related documents. Respondents moved before the NRC to quash the subpoena, but their motion was denied. Asserting that the NRC lacked authority to enforce the subpoena and that certain documents were privileged, Respondents refused to comply.

The United States, on behalf of the NRC, petitioned to enforce the subpoena in the United States District Court for the District of Connecticut (Alan H. Nevas, Judge ). The district court referred the petition to a magistrate judge (Holly B. Fitzsimmons, Magistrate Judge ), who recommended that the petition be granted and that Respondents' claim of privilege be rejected. The district court adopted the magistrate judge's recommendation, issued an order of enforcement, and denied a motion for reconsideration of the privilege issue. Respondents appealed, and moved to stay the enforcement order in the district court, this Court, and in the Supreme Court. All three courts denied the motion. Respondents thereafter turned over to the NRC only those documents which they agreed were not privileged, refusing to surrender the allegedly privileged documents.

Respondents now appeal. We affirm.

BACKGROUND

The NRC is an administrative agency whose job is to regulate atomic energy and safety pursuant to the Atomic Energy Act of 1954 ("AEA"), 42 U.S.C. Sec. 2011 et seq., as amended by the Energy Reorganization Act of 1974 ("ERA"), 42 U.S.C. Sec. 5801 et seq. See County of Rockland v. United States Nuclear Regulatory Comm'n, 709 F.2d 766, 769 (2d Cir.), cert. denied, 464 U.S. 993, 104 S.Ct. 485, 78 L.Ed.2d 681 (1983). The NRC has authority over public health and safety issues relating to the nuclear power industry in general, and over safety aspects involved in constructing and operating nuclear power plants, in particular. See 42 U.S.C. Secs. 2012, 2201; 10 C.F.R. Sec. 1.11.

Five Star manufactures grout and structural concrete products used to construct and

Page 468

repair nuclear power plants. CPR holds the patents for products developed and sold by Five Star. During the period at issue, it also provided testing services to Five Star, thereby ensuring that the grout complied with NRC safety standards. CPR's testing enabled Five Star to certify to NRC licensees that its products met NRC safety regulations. Both CPR and Five Star operate out of the same facility in Fairfield, Connecticut.

In 1992, a CPR employee, Edward Holub, contacted the NRC to express his concern that improper procedures were being used to test Five Star products. The NRC investigated CPR's facility, but was denied access to the testing laboratory. The NRC obtained and executed a search warrant, seizing numerous documents related to CPR's testing of Five Star's products.

Before the NRC completed that investigation, CPR fired Holub. Contending that CPR terminated him in retaliation for tipping off the NRC, Holub filed a claim with the Department of Labor ("DOL"), seeking reinstatement and damages under the Whistleblower Protection Provision of the ERA, 42 U.S.C. Sec. 5851. After investigating Holub's claim, the DOL found that he had engaged in protected activity and was, indeed, unlawfully terminated. An appeal of that finding is still pending.

The NRC thereafter instituted a second investigation. This time, it wished to determine whether Respondents' past treatment of whistleblowers posed a threat to public health and safety. It was specifically interested in whether, by discouraging would-be whistleblowers from coming forward, it increased the likelihood that safety defects escaped detection. As part of this second investigation, the NRC issued the subpoena involved here, requiring Respondents to produce: (1) all documents related to Holub's termination; (2) Holub's personnel file; (3) all of Respondents' policies, procedures, and requirements regarding involuntary terminations; and (4) "position descriptions of jobs" held by Holub and two other employees. Respondents moved before the NRC to quash the subpoena, but the NRC denied the motion. Asserting that the subpoena arose out of an unauthorized investigation, Respondents refused to comply with it.

The United States, on behalf of the NRC, filed a petition to enforce the subpoena in the United States District Court for the District of Connecticut. The district court referred the petition to a magistrate judge, who recommended that the petition be granted and that Respondents' claim of privilege be rejected as a general defense to enforcement of the subpoena. The district court adopted the magistrate judge's recommended ruling in toto, and issued an order of enforcement. This ruling appears not to have considered the applicability of the privilege to any particular document, though it is arguable that the district court's denial of Respondents' motion to reconsider constituted a rejection of the privilege as to all documents for which privilege had been claimed. Respondents appealed, but turned over to the NRC those documents which they conceded were not privileged, while refusing to produce allegedly privileged documents.

On appeal, Respondents argue that (1) the NRC did not have the authority to issue this subpoena; and (2) even if it did, the district court erred by failing to recognize that some of the documents sought by the subpoena were privileged.

DISCUSSION

I. Jurisdiction

There is a threshold problem. The parties assume we have jurisdiction under 28 U.S.C. Sec. 1291, to hear a direct appeal from an administrative subpoena enforcement order, prior to finding someone in contempt of that order. Although our conclusion is by no means obvious, we hold, as have other courts, that we do have jurisdiction.

Section 1291 permits review only of "final" district court orders. See 28 U.S.C. Sec. 1291. The general rule is that orders enforcing subpoenas issued in connection with civil and criminal actions, or grand jury proceedings, are not final, and therefore not appealable. United States v. Ryan, 402 U.S. 530, 532-33, 91 S.Ct. 1580, 1581-82, 29 L.Ed.2d 85 (1971); Cobbledick v. United States, 309 U.S. 323, 328, 60 S.Ct. 540, 542-

Page 469

43, 84 L.Ed. 783 (1940); Reich v. National Eng'g & Contracting Co., 13 F.3d 93, 95 (4th Cir.1993); Kemp v. Gay, 947 F.2d 1493, 1495 (D.C.Cir.1991). To obtain appellate review, the subpoenaed party must defy the district court's enforcement order, be held in contempt, and then appeal the contempt order, which is regarded as final under Sec. 1291. Ryan, 402 U.S. at 532, 91 S.Ct. at 1581; Cobbledick, 309 U.S. at 328, 60 S.Ct. at 543; National Eng'g, 13 F.3d at 95; Kemp, 947 F.2d at 1495. "The purpose of this rule is to discourage parties from pursuing appeals from orders enforcing these subpoenas, which would temporarily halt the district court's litigation process or the grand jury process." National Eng'g, 13 F.3d at 95.

There is a different rule, however, in administrative proceedings. A district court order enforcing a subpoena issued by a government agency in connection with an administrative investigation may be appealed immediately without first performing the ritual of obtaining a contempt order. Id.; Kemp, 947 F.2d at 1495; see, e.g., Church of Scientology v. United States, 506 U.S. 9, 11-12, 113 S.Ct. 447, 449, 121 L.Ed.2d 313 (1992); Reisman v. Caplin, 375 U.S. 440, 449, 84 S.Ct. 508, 513-14, 11 L.Ed.2d 459 (1964); Ellis v. ICC, 237 U.S. 434, 35 S.Ct. 645, 59 L.Ed. 1036 (1915). The rationale is that, at least from the district court's perspective, the court's enforcement of an agency subpoena arises out of a proceeding that "may be deemed self-contained, so far as the judiciary is concerned.... [T]here is not, as in the case of a grand jury or trial, any further judicial inquiry which would be halted were the offending [subpoenaed party] permitted to appeal." Cobbledick, 309 U.S. at 330, 60 S.Ct. at 543; see National Eng'g, 13 F.3d at 95-96; Kemp, 947 F.2d at 1496; In re Letters Rogatory Issued by Director of Insp. of Gov't of India, 385 F.2d 1017, 1018 (2d Cir.1967). Thus, although the NRC did not obtain the customary contempt order before it filed this appeal, we nonetheless have jurisdiction, pursuant to Sec. 1291, to review the district court's order enforcing the subpoena at issue here.

We further note that although Respondents have largely complied with the subpoena, they have not surrendered the allegedly privileged documents. Thus, this case is not moot, at least as to those documents. Even as to the surrendered documents,...

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