United States v. Bonnell, Civ. No. 4-78-190

• Decision Date: 27 December 1979
• Docket Number: Misc. 3-79-20.,4-78-191,Civ. No. 4-78-190
• Citation: 483 F. Supp. 1091
• Parties: UNITED STATES of America and Ralph G. Neumann, Special Agent of the Internal Revenue Service, Petitioners, v. Harold BONNELL, as Partner of Peat, Marwick, Mitchell & Co., and Peat, Marwick, Mitchell & Co., Respondents. UNITED STATES of America and Ralph G. Neumann, Special Agent of the Internal Revenue Service, Petitioners, v. Charles RICE, as Assistant Vice President of Cargill, Inc., and Cargill, Inc., Respondents. In re GRAND JURY SUBPOENAS DUCES TECUM INVOLVING CHARLES RICE AND OTHERS.
• Court: U.S. District Court — District of Minnesota

483 F. Supp. 1091

UNITED STATES of America and Ralph G. Neumann, Special Agent of the Internal Revenue Service, Petitioners, v. Harold BONNELL, as Partner of Peat, Marwick, Mitchell & Co., and Peat, Marwick, Mitchell & Co., Respondents.

UNITED STATES of America and Ralph G. Neumann, Special Agent of the Internal Revenue Service, Petitioners, v. Charles RICE, as Assistant Vice President of Cargill, Inc., and Cargill, Inc., Respondents.

In re GRAND JURY SUBPOENAS DUCES TECUM INVOLVING CHARLES RICE AND OTHERS.

Civ. Nos. 4-78-190, 4-78-191, Misc. 3-79-20.

United States District Court, D. Minnesota, Fourth Division.

December 27, 1979.

Boris Kostelanetz, Lawrence S. Feld, and Stuart Abrams, Kostelanetz & Ritholz, New York City, for Charles Rice and Cargill, Inc.; Dorsey, Windhorst, Hannaford, Whitney & Halladay, Minneapolis, Minn., of counsel.

Jeffrey R. Brooke and James S. Simonson, Gray, Plant, Mooty, Mooty & Bennett, Minneapolis, Minn., for Kenneth J. Andersen, Harold Bonnell and Peat, Marwick, Mitchell & Co.; Howard Krongard, Associate Gen. Counsel, Peat, Marwick, Mitchell & Co., New York City, of counsel.

Sheryl Ramstad Hvass, Asst. U. S. Atty., Minneapolis, Minn., for the United States of America (Internal Revenue Service) and Ralph Neumann; Stephen G. Fuerth and James P. Sites, Tax Division, Dept. of Justice, Washington, D. C., of counsel.

Thorwald H. Anderson, Jr., and Daniel W. Schermer, Asst. U. S. Attys., Minneapolis, Minn., for the United States of America.

MEMORANDUM AND ORDER

MacLAUGHLIN, District Judge.

Before the Court are motions by Cargill, Inc. and Peat, Marwick, Mitchell & Co., Harold Bonnell and Kenneth J. Andersen for certification of certain questions to the United States Court of Appeals for the Eighth Circuit, for a stay of enforcement of grand jury subpoenas pending appeal, and for a stay of enforcement pending appeal of certain summonses issued by the Internal Revenue Service. The Court believes the motions are meritorious.

A complete statement concerning the background of the above-entitled cases may be found in United States v. Bonnell, 483 F.Supp. 1070 (D.Minn. Dec. 27, 1979), and In re Grand Jury Subpoenas Duces Tecum Involving Charles Rice and Others, 483 F.Supp. 1085 (D.Minn. Dec. 27, 1979). Briefly, both cases arise out of the acquisition by the United States government of the so-called "questioned document," authored by an attorney, which summarized a meeting attended by the attorney, a Cargill lawyer, and personnel from Peat, Marwick. The issues in the two proceedings overlap to a significant extent. The Court's order in United States v. Bonnell concerning the enforceability of IRS tax summonses, is immediately appealable, Reisman v. Caplin, 375 U.S. 440, 449, 84 S.Ct. 508, 11 L.Ed.2d 459 (1964), while denials of motions to quash grand jury subpoenas, such as those involved in In re Grand Jury Subpoenas Duces Tecum, are ordinarily not appealable, Cobbledick v. United States, 309 U.S. 323, 60 S.Ct. 540, 84 L.Ed. 783 (1940).

A district judge may certify orders not otherwise appealable to the Court of Appeals in civil actions which involve a controlling question of law as to which there is substantial ground for difference of opinion, the resolution of which may materially advance the ultimate termination of the litigation. 28 U.S.C. § 1292(b).

1. A "civil" action

The threshold question is whether orders concerning grand jury subpoenas are issued in a "civil action." Grand jury proceedings are hybrids of civil and criminal proceedings. After reflecting upon the nature of this case, the purposes of grand jury proceedings, and the goals of § 1292(b), this Court believes that the term "civil action" may be interpreted to include grand jury proceedings such as this one. Although grand juries exist for the purpose of determining whether or not criminal indictments should issue,

criminal proceedings cannot be said to be brought or instituted until a formal charge is openly made against the accused, either by indictment presented or information filed in court, or, at the least, by complaint before a magistrate.

Post v. United States, 161 U.S. 583, 587, 16 S.Ct. 611, 613, 40 L.Ed. 816 (1896).

The Eighth Circuit has not passed on the precise question presented in this case, but several circuits have opined that a certification route is available with respect to grand jury questions. Matter of Grand Jury Impaneled Jan. 21, 1975, 541 F.2d 373, 376 (3d Cir. 1976) (certification accepted); In re Grand Jury Proceedings, 580 F.2d 13, 17 (1st Cir. 1978); Matter of Doe, 546 F.2d 498, 501-502 (2d Cir. 1976); In re Oswalt, 607 F.2d 645, 648 (5th Cir. 1979). See also In re Grand Jury Investigation, 338 F.Supp. 1379, 1380 (W.D.Pa.1972). Contrary authority is found in In re April 1977 Grand Jury Subpoenas (General Motors), 584 F.2d 1366 (6th Cir. 1978) (en banc) (5-2 decision). The Sixth Circuit majority relied heavily on Cobbledick v. United States, 309 U.S. 323, 60 S.Ct. 540, 84 L.Ed. 783 (1940), and its progeny, which express a policy against piecemeal appeals which cause inordinate delays in grand jury investigations. This Court is mindful of that policy, but believes that the delay factor is part of the determination as to whether certification would materially advance the litigation. Further, with all respect to the Sixth Circuit majority, this Court finds persuasive the reasoning and analysis of the dissenters.

In sum, it is difficult to label a grand jury proceeding as "civil" or "criminal" for all purposes. But, for the purpose of determining whether certification of grand jury questions is appropriate, a grand jury proceeding is a "civil action" within 28 U.S.C. § 1292(b).

2. § 1292(b)'s criteria for certification

Section 1292(b) establishes three prerequisites for certification in a civil action. First, the questions must be of such significance as to render them "controlling." In this case, had the questioned document not been obtained, the grand jury investigation might never have begun. Cargill, Peat, Marwick, and associated parties represent that their rights are greatly prejudiced by the fact that the document is the basis for the grand jury probe. By virtually any definition, the issues at stake are "controlling" for all parties involved in the grand jury proceeding.

The issues are also such as to create a substantial ground for difference of opinion. Whether, for example, a document such as the one here at issue may be used by a grand jury as the basis for subpoenas has never previously been decided. Although this Court carefully considered and weighed the competing policies in making its decision, it recognizes that several key issues in this litigation have been hotly contested and pose novel and difficult questions.

Finally, a resolution of the issues by the Court of Appeals for the Eighth Circuit would materially advance this litigation. Cargill may, and most likely will, appeal the denial of Peat, Marwick's motion to quash the grand jury subpoena, Perlman v. United States, 247 U.S. 7, 12, 38 S.Ct. 417, 62 L.Ed. 950 (1918). In addition, as noted above, this Court's order regarding the IRS summonses is immediately appealable. Therefore, the only part of these orders not appealable is that pertaining to the grand jury subpoenas on...