U.S. v. Miller

• Decision Date: 15 January 1975
• Docket Number: No. 73-2405,73-2405
• Citation: 508 F.2d 588
• Parties: 76-1 USTC P 9382 UNITED STATES of America, Plaintiff-Appellee, v. Mitchell MILLER, Susan McDuffie Weeks, and John Henry McDuffie, Defendants-Appellants.
• Court: U.S. Court of Appeals — Fifth Circuit

Page 588

508 F.2d 588

76-1 USTC P 9382

UNITED STATES of America, Plaintiff-Appellee, v. Mitchell MILLER, Susan McDuffie Weeks, and John Henry

McDuffie, Defendants-Appellants.

No. 73-2405.

United States Court of Appeals, Fifth Circuit.

Jan. 15, 1975.

D. L. Rampey, Jr., Warner Robins, Ga., for Miller.

W. W. Larsen, Jr., Dublin, Ga., for Weeks and McDuffie.

William J. Schloth, U.S. Atty., Ronald T. Knight, O. Hale Almand, Asst. U.S. Attys., Macon, Ga., Ivan Michael Schaeffer, Appellate Sect., Crim. Div., Dept. of

Justice, Washington, D.C., for plaintiff-appellee.

Appeal from the United States District Court for the Middle District of Georgia; Wilbur D. Owens, Jr., Judge.

ON PETITION FOR REHEARING AND PETITION FOR REHEARING EN BANC

(Opinion Sept. 13, 1974, 5 Cir., 1974, 500 F.2d 751).

Before GEWIN, GOLDBERG and CLARK, Circuit Judges.

PER CURIAM:

The Petition for Rehearing filed on behalf of Appellee (U.S.A.) is denied and the Court having been polled at the request of one of the members of the Court and a majority of the Circuit Judges who are in regular active service not having voted in favor of it, (Rule 35 Federal Rules of Appellate Procedure; Local Fifth Circuit Rule 12) the Petition for Rehearing En Banc is also denied.

Before BROWN, Chief Judge, and WISDOM, GEWIN, BELL, THORNBERRY, COLEMAN, GOLDBERG, AINSWORTH, GODBOLD, DYER, SIMPSON, MORGAN, CLARK, RONEY and GEE, Circuit Judges.

SIMPSON, Circuit Judge, joined by BROWN, Chief Judge, and BELL, AINSWORTH, DYER, RONEY and GEE, Circuit Judges, dissenting:

With deference, we here enter our vigorous dissent from the full court's failure, by a narrow 8-7 vote, to grant the Petition of the United States for Rehearing en Banc. Our dissent is dictated by two basic reasons.

In the first place, the panel opinion departs radically from prior decisions denying to bank customers the standing to challenge subpoenas of bank records of their accounts. We disagree with the panel holding that such a result is either required or supported by California Bankers Association v. Shultz, 1974, 416 U.S. 21, 94 S.Ct. 1494, 39 L.Ed.2d 812. Neither may the panel decision be justified under the copying and reporting requirements of the Bank Secrecy Act of 1970, 12 U.S.C., 1829b, 1730d, 1951-1959, and its implementing regulations, 31 C.F.R. 103.34(b)(3) (1973) and 31 C.F.R. 103.36 (1973). The panel opinion appears to be oblivious to the momentous change it would put in motion by its cursory treatment of the question of standing and its bland assumption that the depositor-appellant Miller had standing here to attack the subpoenas duces tecum directed to the banks.

Secondly, if the presence of standing on the part of the depositor is assumed arguendo, and the merits of the panel decision are considered, we disagree that the process involved here was so infirm as to dictate reversal of the district court. Finding the process faulty, the panel reverses without determining whether the alleged error is of such a nature as to require reversal. The implication is that faulty process per se is reversible error. We do not at all agree that the process below was faulty, but assuming that it was, prejudice to the appellant from such defect was not shown to have resulted and hence reversal is not indicated.

The following facts emerge from the panel opinion and from the briefs of the parties before the panel and the petition for rehearing en banc of the United States.

The appellant Miller and four others were indicated for conspiracy to defraud the United States in connection with the manufacture and possession of non-taxpaid distilled spirits, 18 U.S.C. 371 and 26 U.S.C. 5601 et seq., and corresponding related substantive offenses. Miller was the hub of the conspiracy, its source of necessary operating funds, its guiding intelligence and the director of its operations. At a second trial, following a mistrial, he was convicted by a jury of conspiracy and of the three substantive charges for which he was tried. Concurrent three year confinement sentences were imposed on him. Miller's conviction is reversed for retrial by the panel decision.

The alleged trial error with which we are concerned on the Petition for the United States for Rehearing en Banc is the admission into evidence of microfilm copies of Miller's bank checks kept pursuant to the record-keeping provisions of the Bank Secrecy Act and obtained by grand jury subpoenas duces tecum directed to two banks at which he conducted banking business. On appeal, Miller challenged the legality of the subpoenas as not issued under the direction of the court, because no return was made on them, and because they were returnable to a date when the grand jury was not scheduled to be in session. ¹ The two banks allowed inspection by revenue agents on the bank premises; the bank representatives were then relieved of any obligation to appear before the U.S. Attorney or before the grand jury.

The panel accorded to Miller the requisite standing to complain of the claimed illegality of the subpoenas duces tecum, and held that the subpoenas were fatally defective. The bank's waiver of defects was held not to bind the depositor Miller because of his protected interest in bank records kept pursuant to the Bank Secrecy Act and pertaining to his account.

The panel's grounds for this decision are unclear. Language in the opinion indicates both that the panel considered Miller to have an ownership interest and a cognizable privacy interest. ² But the new interest is recognized in the customer in order to prevent the copying requirements of the Bank Secrecy Act from being used as a means of circumventing the protection accorded an individual's 'private papers' by the Fourth Amendment. See Boyd v. United States, 1886, 116 U.S. 616, 6 S.Ct. 524, 29 L.Ed. 746. ³ Once a protected right in the bank records is established, a depositor's standing follows.

Ruling sub silentio that a depositor has standing to challenge a grand jury subpoena of bank records of his account, ⁴ the panel renounces earlier case law and accords to a depositor rights that he never enjoyed prior to passage of the Bank Secrecy Act. With unanimity the earlier cases denied to a depositor the standing to challenge IRS subpoenas of bank records pertaining to his banking transactions, including microfilm copies of checks. See Harris v. United States, 9 Cir. 1969, 413 F.2d 316; Galbraith v. United States, 10 Cir. 1968, 387 F.2d 617; O'Donnell v. Sullivan, 1 Cir. 1966, 364 F.2d 43, cert. denied 385 U.S. 969, 87 S.Ct. 501, 17 L.Ed.2d 433; Application of Cole, 2 Cir. 1965, 342 F.2d 5, cert. denied 381 U.S. 950, 85 S.Ct. 1803, 14 L.Ed.2d 723; DeMasters v. Arend, 9 Cir. 1963, 313 F.2d 79, cert. dism. 375 U.S. 936, 84 S.Ct. 341, 11 L.Ed.2d 269; Foster v. United States, 2 Cir. 1959, 265 F.2d 183, cert. denied 360 U.S. 912, 79 S.Ct. 1297, 3 L.Ed.2d 1261. ⁵ Such records were deemed to be the property of the bank, and the cases denied recognition of any depositors' rights to them, whether sought under an ownership theory, see Harris, supra, Galbraith, supra, O'Donnell, supra, Application of Cole, supra, DeMasters, supra, Foster, supra, or by virtue of an agency theory, see Harris, supar, and Schulze v. Rayunec, 7 Cir. 1965, 350 F.2d 666, cert. denied Boughner v. Schulze, 382 U.S. 919, 86 S.Ct. 293, 15 L.Ed.2d 234. Accordingly, as the Ninth Circuit held in DeMasters, supra, if any right was violated, the right was that of the bank, not the customer, and the bank could waive any right it might have to resist production under subpoena. 313 F.2d at 85.

While we have not located any case in which a depositor claimed a cognizable privacy interest sufficient to confer standing under Katz v. United States, 1967, 389 U.S. 347, 88 S.Ct. 507, 19 L.Ed.2d 576, at least one post-Katz case which denied standing recognized that a check cannot be considered a confidential communication. See Harris, supra. When a customer writes a check, he 'set(s) the check afloat on a sea of strangers', and knows when he does so that it

will be viewed by various employees at the bank where it is cashed or deposited, at the clearing house through which it must pass, and at his own bank to which it will eventually return.

413 F.2d at 319-320. It is a negotiable instrument in commerce. See Harris, supra; California Bankers, 416 U.S. at 48-49, 94 S.Ct. at 1511, 39 L.Ed.2d at 833. A drawer has no assurance that his payee will not endorse, nor that the endorsee will not further endorse. Nor can he prevent this. In drawing a check, he does not exhibit an actual expectation of privacy which society is prepared to accept as reasonable. See Katz, 389 U.S. at 361, 88 S.Ct. at 516, 19 L.Ed.2d at 588 (Harlan, J., concurring).

The question presented by the government petition, which this Court by a onevote margin declines to consider en banc, is whether the intervening statutory requirement of the Bank Secrecy Act of 1970 that banks compile and retain records of transactions with their customers, in cluding microfilming, held constitutional in California Bankers, conferred standing upon depositors where it was not previously recognized. ⁶ Our position is that standing was not so conferred.

The fact that the United States by statute now requires banks to microfilm checks and other records of dealings with customers makes such records no more the property of the customer than they were when the banks microfilmed voluntarily. As the Supreme Court noted in California Bankers, the bank is not a disinterested bystander, but is a party to the transaction. 416 U.S. at 48-49, 94 S.Ct. at 1511, 39 L.Ed.2d at 833. It pays for the records and stores them. It could not be seriously contended that a customer has a right to them sufficient to obtain and retain possession of them. While of course the records pertain to customers' accounts, they do not ipso facto become the depositors' records.

Nor is it any more reasonable now than heretofore to...