U.S. v. Davis, s. 92-2822

• Decision Date: 12 October 1993
• Docket Number: 92-3153,Nos. 92-2822,s. 92-2822
• Parties: UNITED STATES of America, Plaintiff-Appellee, v. Daniel M. DAVIS, Defendant-Appellant.
• Court: U.S. Court of Appeals — Seventh Circuit

Page 606

1 F.3d 606

UNITED STATES of America, Plaintiff-Appellee, v. Daniel M. DAVIS, Defendant-Appellant.

Nos. 92-2822, 92-3153.

United States Court of Appeals, Seventh Circuit.

Argued April 6, 1993.

Decided Aug. 5, 1993.

Rehearing and Suggestion for Rehearing En Banc Denied Oct. 12, 1993.

Thomas Scorza (argued), Barry R. Elden, Asst. U.S. Atty., Crim. Receiving, Appellate Div., Chicago, IL, for plaintiff-appellee.

Matthew F. Kennelly (argued), Robert M. Stephenson, Cotsirilos, Stephenson, Tighe & Streicker, Chicago, IL, for defendant-appellant.

Before CUDAHY and POSNER, Circuit Judges, and ESCHBACH, Senior Circuit Judge.

CUDAHY, Circuit Judge.

A grand jury returned an indictment against Daniel Davis charging him with obstruction of justice in violation of 18 U.S.C. Sec. 1503. Specifically, the indictment alleges that Davis concealed a document during the course of a grand jury investigation. After the grand jury returned the indictment, the government sought and obtained leave from the district court to subpoena, for questioning at trial, Matthias Lydon, an attorney who had represented Davis during the portion of the grand jury's investigation that he allegedly obstructed. After the subpoena was served, Davis filed a motion in limine to bar the proposed questioning on the theory that the testimony the government intended to elicit called for the divulgence of privileged information. The district court denied Davis's motion, and he appeals. ¹

The case against Davis is still pending in the district court. These appeals are interlocutory and, therefore, present significant questions as to our jurisdiction. The jurisdiction of the courts of appeals in criminal cases is, for the most part, limited to "final decisions of the district courts of the United States." 28 U.S.C. Sec. 1291. The requirement of finality reflects a strong policy against piecemeal review, a policy particularly important in the context of criminal actions where the delays and disruptions of interlocutory appeals are especially troublesome. In fact, it is well settled that, as a general rule, a defendant in a criminal case may not take an appeal from an order denying a motion to suppress evidence. See, e.g., DiBella v. United States, 369 U.S. 121, 131, 82 S.Ct. 654, 660, 7 L.Ed.2d 614 (1962); United States v. Dorfman, 690 F.2d 1217, 1222 (7th Cir.1982). Ordinarily, when the validity of a subpoena is at issue, such as here, the final, appealable decision is an order holding the witness whose appearance is compelled in contempt. United States v. Ryan, 402 U.S. 530, 91 S.Ct. 1580, 29 L.Ed.2d 85 (1971). ²

The parties, however, rely on the judicially created exception to the finality rule first articulated in Perlman v. United States, 247 U.S. 7, 38 S.Ct. 417, 62 L.Ed. 950 (1918), which permits the holder of a privilege to intervene in order to assert the privilege and to appeal from the rejection of the assertion. ³ The Court reasoned that because the person called to testify may do so rather than be cited for contempt, the rejection of the claim of privilege is final as a practical matter and thus appealable. On the authority of Perlman, we have repeatedly held, albeit with some soul-searching, that clients are entitled to appeal as soon as their attorneys are required, in the face of an assertion of attorney-client privilege, to testify or produce documents. See, e.g., In the Matter of Klein, 776 F.2d 628 (7th Cir.1985); In re November 1979 Grand Jury, 616 F.2d 1021, 1024-25 (7th Cir.1980); Velsicol Chem. Corp. v. Parsons, 561 F.2d 671, 674 (7th Cir.1977), cert. denied, 435 U.S. 942, 98 S.Ct. 1521, 55 L.Ed.2d 538 (1978).

The parties have apparently failed to apprehend, however, that Perlman, Klein and Velsicol, the cases cited to us in their jurisdictional statements, all involved pending grand jury proceedings. Because an indictment has already been returned against Davis, the jurisdictional inquiry that we must undertake here is considerably different. In fact, DiBella v. United States, 369 U.S. 121, 82 S.Ct. 654, 7 L.Ed.2d 614 (1962) and Cogen v. United States, 278 U.S. 221, 49 S.Ct. 118, 73 L.Ed. 275 (1929) could be read to deny us jurisdiction here, because in those cases the Court refused to apply the Perlman exception when the intervening party seeking suppression was a defendant in the underlying criminal case. But neither DiBella nor Cogen involved assertions of privilege. On the other hand, United States v. Calandra, 706 F.2d 225 (7th Cir.1983), our case most similar to the present one, did. Calandra was an appeal from a district court's order denying three criminal defendants' motion to suppress. The motion was based on the defendants' assertion that an attorney-client privilege existed that would bar the testimony of lawyers whom the government intended to call at trial. The appeal was taken while the trial was still in progress. We stated that "[i]t is the possibility of disclosure of information which is thought to be confidential that is central to the Perlman exception," and reasoned that, since the allegedly confidential information had already been disclosed to government agents, there was no need for immediate appellate review. Id. at 228. We thus dismissed the appeal for want of jurisdiction. The record here discloses no substantial breach of the claimed privilege that has already occurred. For this reason alone, we take jurisdiction over these appeals.

Since we will reach the merits, we must more fully set forth the relevant facts. Davis allegedly obstructed a grand jury that was investigating official corruption in the administration of former Cook County Sheriff James O'Grady. Before taking office, O'Grady, along with his undersheriff, James Dvorak, served as an officer of Special Operations Associates, Inc. (SOA), a Chicago security firm. Upon taking office in 1986, O'Grady and Dvorak resigned as officers of SOA but continued to be shareholders in the company. Michael Caccitolo and the appellant, Davis, also owned shares of SOA and served as its corporate officers after O'Grady and Dvorak left for the sheriff's office.

During O'Grady's tenure as sheriff, the Cook County Board of Commissioners, upon the recommendation of O'Grady and Dvorak, awarded Home Incarceration Systems of Northern Illinois, Inc. (HISNI), whose sole shareholder was Audrey Tokarz, a contract to provide and service equipment used as part of the County's home incarceration program. In late 1989, some people, including apparently some in the United States Attorney's office, suspected that HISNI was actually a front for SOA and that O'Grady and Dvorak had impermissibly used their influence to steer the home incarceration contract to HISNI. A grand jury was convened to investigate, and, on January 3, 1990, Davis was served, as president of SOA, with a subpoena demanding the following:

For the period from January 1986 to the present, any and all ORIGINAL records and ORIGINAL received correspondence, and copies of any and all outgoing correspondence, involving business and/or financial transactions between Special Operations Associates and any of the following persons or entities: Audrey Tokarz; Home Incarceration Systems....

Government's App. at 5. Shortly after the subpoena was served, Lydon informed the government that he would be representing Davis during the grand jury's investigation.

On January 8, 1990, Lydon met with an assistant United States attorney and an agent of the Federal Bureau of Investigation. He presented a completely innocent explanation of the relationship between SOA and HISNI. He further disclosed that Davis had made a series of personal loans to Tokarz to "start-up" HISNI. The assistant United States attorney responded that the grand jury was interested in Davis's relevant personal records as well as the corporate records of SOA. He indicated that he would serve a "personal records" subpoena on Davis to supplement the first, corporate-records subpoena. This subpoena was issued on January 9, 1989 and commanded Davis to produce "[a]ny and all ORIGINAL documents, checks and other records of any kind relating to financial, loan, and/or business transactions between Daniel Davis and any of the following persons or entities: Audrey Tokarz; Home Incarceration Systems of Northern Illinois...." Government's App. at 8.

Caccitolo instructed Betty Ann Wasson, SOA's office manager, to compile the documents demanded by the January 3 subpoena of SOA's corporate records. On January 12, 1990, Lydon transmitted to the government the assembled documents under a cover letter stating that they were "all original documents which respond to the subpoena ... dated December 28, 1989." ⁴ Government's App. at 10. On January 16 and February 1, Lydon sent to the government documents demanded by the January 9 personal records subpoena. On May 30, 1990, the government learned of the existence of an unexecuted agreement pursuant to which Tokarz would have been required to sell, upon demand, all of her HISNI shares to Davis and Caccitolo at a pre-arranged, bargain price. ⁵ The next day, Davis delivered to Lydon for the first time an unsigned copy of this proposed agreement. Lydon informed the government of this document's existence on July 13, 1990, more than five months after Davis ostensibly complied with both subpoenas.

Davis himself then became the target of a grand jury probe. Lydon was subpoenaed to testify before the grand jury. In response to certain questions put to him about his dealings and conversations with Davis regarding Davis's compliance with the subpoenas, Lydon asserted the attorney-client privilege. Davis was nevertheless indicted. The government thereafter informed Lydon of its intention to call him as a witness at Davis's trial. The government also informed Lydon of its position that Davis had waived his attorney-client privilege as to communications with Lydon under the so-called "crime/fraud exception." This prompted...