U.S. v. Sears, Roebuck & Co., Inc.

• Decision Date: 05 March 1984
• Docket Number: No. 81-1420,81-1420
• Citation: U.S. v. Sears, Roebuck & Co., Inc., 719 F.2d 1386 (9th Cir. 1984)
• Parties: UNITED STATES of America, Plaintiff-Appellant, v. SEARS, ROEBUCK AND COMPANY, INC., Defendant-Appellee.
• Court: U.S. Court of Appeals — Ninth Circuit

Page 1386

719 F.2d 1386

UNITED STATES of America, Plaintiff-Appellant, v. SEARS, ROEBUCK AND COMPANY, INC., Defendant-Appellee.

No. 81-1420.

United States Court of Appeals Ninth Circuit.

Argued and Submitted Dec. 11, 1981.

Decided Sept. 19, 1983.

Certiorari Denied March 5, 1984.

See 104 S.Ct. 1441.

Herbert Hoffman, San Diego, Cal., for plaintiff-appellant.

Stephen D. Miller, Inc., Stephen D. Miller, Thomas J. Nolan, Maryann R. Marzano, Beverly Hills, Cal., Latham, Watkins & Hills, Roderick M. Hills, Irwin Goldbloom, Maureen E. Mahoney, James F. Rogers, Washington, D.C., for defendant-appellee.

Appeal from the United States District Court for the Central District of California.

Before SCHROEDER, CANBY and NORRIS, Circuit Judges.

NORRIS, Circuit Judge:

The district court dismissed an indictment charging Sears, Roebuck and Company, Inc. (Sears) with customs fraud because of prosecutorial misconduct in presenting the case to the grand jury. We reverse and remand.

I

On February 26, 1980, a grand jury returned an indictment against Sears alleging that Sears had conspired to defraud the United States government by overstating to customs agents the price it had paid for television receivers purchased from Japanese manufacturers. See 18 U.S.C. Secs. 371 and 542 (1976). The indictment charged that customs documents filed by Sears failed to disclose rebates and credits that Sears had privately arranged with its Japanese suppliers, thus misrepresenting the net price Sears had paid for the merchandise. Evidence presented to the grand jury consisted primarily of testimony by Sears employees and documents from Sears' files. The evidence indicated two possible motives for Sears' alleged overstatement of the prices it had paid: first, to bring the declared prices into conformity with the floor or "check prices" established by Japan's Ministry of International Trade and Industry (MITI); and second, to avoid dumping duties for selling imported merchandise in the United States at less than fair value.

The indictment was returned following a long, complex grand jury investigation that began in June 1978. Twenty witnesses testified over the course of thirteen grand jury sessions. Because the indictment alleged that members of the company had conspired with Japanese manufacturers, seventeen of those twenty witnesses were Sears employees or representatives. In fact, only three were not: two were Customs agents and one, John Nevin, was Chairman of the Board of Zenith Radio Corporation.

Sears moved to dismiss the indictment on grounds of prosecutorial misconduct in the treatment of witnesses and the presentation of evidence. After a hearing, Judge Kelleher denied the motion. After Sears' unsuccessful interlocutory appeal, see United States v. Sears, Roebuck & Co., 647 F.2d 902 (9th Cir.1981), the case was transferred to Judge Real, who held that the prosecutor had abused the grand jury process, and granted Sears' renewed motion to dismiss. ¹ United States v. Sears, Roebuck & Co., 518 F.Supp. 179 (C.D.Cal.1981). The government appeals.

II

In dismissing the indictment, Judge Real relied upon five separate examples of prosecutorial abuse of the grand jury process. He found that the prosecutor had: (1) failed to control the testimony of John Nevin, thus permitting him to make inflammatory and potentially prejudicial statements, 518 F.Supp. at 189; (2) expressed his personal views by commenting on the evidence, id. at 188, 189; (3) examined the Sears employees and lawyers called as witnesses with excessive hostility, id. at 185-87; (4) failed to offer allegedly exculpatory evidence necessary to permit the grand jury to make an informed judgment about Sears' intent to defraud the United States government, id. at 187 n. 15; and (5) issued forthwith subpoenas in violation of the United States Attorneys' Manual, id. at 182-85.

Judge Real viewed John Nevin's testimony as the "culminat[ion]" of the prosecutor's abuse of the grand jury process. 518 F.Supp. at 188. Nevin, Chairman of the Board of Zenith Radio Corporation, a domestic manufacturer of television receivers and a competitor of Sears, testified "as a complaining witness so to speak, for the American television industry." Grand Jury Transcript, Testimony of John J. Nevin at 21 (September 11, 1979). His 85 pages of testimony were, in the words of the trial judge, "packaged in patriotic fervor by both Mr. Nevin and [the prosecutor]." 518 F.Supp. at 189. Judge Real found that the prosecutor's conduct in presenting Nevin's testimony, including the prosecutor's expression of his own views on Nevin's remarks, precluded the grand jury from making an impartial determination of probable cause.

Judge Real was understandably troubled by Nevin's testimony. The prosecutor allowed Nevin to range far afield and to discourse with patriotic rhetoric on the quality of American workmanship and the devastating effect of Japanese products on the American economy. ² More disturbingly, the prosecutor made no effort to control the testimony ³, instead punctuating Nevin's observations with his own thoughts on the profit motive and the American system of government. ⁴ In large part, both Nevin's testimony and the prosecutor's comments were irrelevant to any customs violations by Sears; more importantly, they were at times inflammatory and potentially prejudicial to Sears.

The prosecutor's encouragement of John Nevin was not the only example of his excessive zeal in pursuing the Sears indictment. Judge Real also found that the prosecutor had engaged in a running commentary on the evidence and witnesses, and that "the statements of [the prosecutor] read like a scathing argument giving the personal opinion of a prosecutor on the credibility of a witness that would not withstand attack for misconduct if made to a petit jury during trial." 518 F.Supp. at 185-86. In making this finding, the trial judge pointed to the prosecutor's remark that "I do not want to influence you.... But to me, anyway, and if anybody in the Grand Jury thinks it is different it defies logic in that scenario--he testified to the fact that he knew they were getting that entire overbilling back," id. at 186 n. 11, and to other "comments amounting to unsworn testimony and misstatements of the law." Id. at 188.

Judge Real identified several other instances of improper behavior to support his finding that prosecutorial misconduct permeated the entire grand jury proceeding. He found that the prosecutor had impermissibly harassed the Sears employees called as witnesses: "[the prosecutor's] incessant commands ... ordering SEARS employees to respond 'yes' or 'no' to complex, unintelligible and argumentative questions girded with his sarcastic remarks was calculated to and did deprive the Grand Jury of its ability to fairly view the testimony of SEARS employees." 518 F.Supp. at 187-88. He had already determined that the issuance of forthwith subpoenas to Sears attorneys violated Department of Justice policy ⁵ and "define[d] at the outset the overreaching of the government in its presentation to the Grand Jury." 518 F.Supp. at 185. He had also faulted the government for misrepresenting to the grand jury Sears' willingness to comply with the subpoenas duces tecum issued to it, id. at 182, and for failing to introduce the deposition of Sears' attorney John Rehm. Id. at 187. Rehm's deposition contained allegedly exculpatory statements that Sears did not have the requisite intent to violate the customs laws by falsifying its customs documents because it had formulated its rebate programs on the advice of counsel. Sears here supplements those findings with claims that the prosecutor withheld additional information "vital to the grand jury's informed and independent judgment," United States v. DeMarco, 401 F.Supp. 505, 514 (C.D.Cal.1975), aff'd 550 F.2d 1224 (9th Cir.), cert. denied, 434 U.S. 827, 98 S.Ct. 105, 54 L.Ed.2d 85 (1977), on the issue whether Sears did in fact report the rebate arrangements to Customs Service officials.

We agree with Judge Real that the prosecutor's behavior before the grand jury was at times abusive, and stress that we cannot condone such excessive prosecutorial zeal. In determining whether such misconduct warrants dismissal of the indictment, however, we must bear in mind that the judicial power to intervene in grand jury proceedings is "frequently discussed, but rarely invoked." United States v. Samango, 607 F.2d 877, 881 (9th Cir.1979). Because the constitutional doctrine of separation of powers mandates judicial respect for the independence both of the grand jury, United States v. Chanen, 549 F.2d 1306, 1312 (9th Cir.), cert. denied, 434 U.S. 825, 98 S.Ct. 72, 54 L.Ed.2d 83 (1977), and of the prosecutor, id.; see also United States v. Gonsalves, 691 F.2d 1310, 1318-19 (9th Cir.1982), an indictment may be dismissed only in "flagrant case[s]" of prosecutorial misconduct. United States v. Kennedy, 564 F.2d 1329, 1338 (9th Cir.1977). ⁶

With this admonition in mind, we proceed to a consideration of Judge Real's dismissal of the Sears indictment.

III

A

The grand jury clause of the Fifth Amendment provides that "[n]o person shall be held to answer for a capital, or otherwise infamous crime, unless on a presentment or indictment of a Grand Jury." ⁷ Implicit in that language is the guarantee that a defendant will be indicted only upon the informed and independent determination of a legally constituted grand jury. See, e.g., Stirone v. United States, 361 U.S. 212, 218-19, 80 S.Ct. 270, 273-74, 4 L.Ed.2d 252 (1960) ("The very purpose of the requirement that a man be indicted by grand jury is to limit his jeopardy to offenses charged by a group of his fellow citizens acting independently of either prosecuting attorney or judge.... The right to have the grand jury make the charge on its own judgment is a substantial right which cannot be taken away with or without court amendment"). Dismissal of an indictment is...