United States v. Kanan

• Decision Date: 04 February 1965
• Docket Number: No. 19395.,19395.
• Citation: 341 F.2d 509
• Parties: UNITED STATES of America, Appellant, v. Virgil F. KANAN, Donald R. Elbel, George M. Hill, R. E. Wolfe, Martin Breitenbach and James F. Byrne, Appellees.
• Court: U.S. Court of Appeals — Ninth Circuit

341 F.2d 509 (1965)

UNITED STATES of America, Appellant, v. Virgil F. KANAN, Donald R. Elbel, George M. Hill, R. E. Wolfe, Martin Breitenbach and James F. Byrne, Appellees.

No. 19395.

United States Court of Appeals Ninth Circuit.

February 4, 1965.

Beatrice Rosenberg, Jerome M. Feit, Doris R. Williamson, Dept. of Justice, Washington, D. C., for appellant.

Edward P. Morgan, Welch, Mott & Morgan, Washington, D. C., Morris A. Shenker, St. Louis, Mo., Harry J. Cavanagh, John P. Otto, John E. Savoy, O'Connor, Anderson, Westover, Killingsworth & Beshears, John J. Flynn, Phoenix, Ariz., for appellees.

Before ORR, BARNES and KOELSCH, Circuit Judges.

BARNES, Circuit Judge:

This is an appeal by the United States from an order of the United States District Court for the District of Arizona entered on September 24, 1963, dismissing an indictment on the ground that all the evidence before the grand jury had been illegally obtained. Appellant asserts this court possesses jurisdiction to entertain this appeal under the Criminal Appeals Act, 18 U.S.C. § 3731. The relevant portion of that section reads as follows:

"An appeal may be taken by and on behalf of the United States from the district courts to a court of appeals in all criminal cases, in the following instances: From a decision or judgment setting aside, or dismissing any indictment or information, or any count thereof except where a direct appeal to the Supreme Court of the United States is provided by this section."

Contrary to what is asserted by appellant, appellees allege that the district court improperly entered an order dismissing the indictment at the behest of the government; that in so doing, the district court attempted to provide the government with an unauthorized appellate review of two suppression orders.

This dispute as to the essential nature and propriety of the district court order presents a threshold question for our consideration, i. e., whether or not we possess jurisdiction to entertain this appeal. If we determine that such jurisdiction does exist, then, and only then, are we faced with an examination of the validity of the suppression orders.

The events leading up to the indictment of appellees are undisputed. At a meeting on June 14, 1959, between the Attorney General of the State of Arizona and a number of competitors of the Arizona Savings and Loan Association, it was decided that an ex parte order should be obtained appointing a receiver to exercise control over the Association, which was allegedly in perilous financial straits. The Attorney General forthwith obtained the appointment of a receiver on June 15, 1959, completely insulating the Association from the managerial control of the appellee-directors.

Late in 1959, a co-receiver of the Association, Mr. Colby, met with the local United States Attorney to inform him that an examination of the Association's assets and documents had revealed a possible violation of federal law on the part of appellees. Pursuant to this conversation, the United States Attorney initiated an investigation made by the Federal Bureau of Investigation. This investigation resulted in a search and subsequent seizure by the federal government of all corporate and personal records within the Association. All such records were searched and seized without benefit of search warrant, court order or subpoena.

As a result of the federal investigation, a thirty-one count indictment was returned on May 25, 1962, charging each of the appellees with mail fraud and fraud by wire as proscribed by 18 U.S.C. §§ 1341 and 1343. The essence of the charges was that the appellees had improperly diverted funds and had falsely misrepresented the financial condition of the Association to its depositors, shareholders and investors. Appellees subsequently moved to suppress all matter disclosed by the F.B.I. investigation on the ground that appellees' rights under the Fourth Amendment had been violated. This motion resulted in a court order of February 5, 1963, which denied the motion with respect to the books and records belonging to the Association on the ground that a receiver had the power to authorize a federal inspection, but granted the motion with respect to Mr. Kanan's personal papers.

On April 11, 1963, in the course of its opinion in Stowell v. Arizona Sav. & Loan Ass'n, 93 Ariz. 310, 380 P.2d 606, the Arizona Supreme Court asserted that the function of the superintendent of banks as a receiver "is wholly ministerial." (93 Ariz. at 311, 380 P.2d 606.) This state court decision related to the same receivership here involved. On the basis of this state court opinion, appellees in the present case filed a motion for reconsideration of the district court's denial of their motion to suppress the information obtained from the Association documents and records on the ground that the receiver had no power, without a court order, to authorize the federal inspection. On August 9, 1963, the district court reversed its order of March 6, 1963, with respect to the Association records and documents, and ruled they, as well as Kanan's personal records, were inadmissible.

On the date set for the trial, September 24, 1963, the government for the first time informed the appellees and the court that it was not prepared to proceed because "all of the evidence upon which the Indictment was based, all of the evidence which was presented to the Grand Jury was evidence which has now been suppressed by the Court's first order suppressing the private papers, or by the last order suppressing the corporate papers." (R.Tr. pp. 2-3.) Thereupon government counsel made the following statement:

"Mr. Dibble: If the Court pleases, the Government feels very strongly that the order of the Court should be subject to review, and should be reviewed, the last order suppressing the evidence, and we urge the Court to preserve the Government\'s right to appeal by either entering an order based on what I thought was Mr. Shenker\'s argument, too, that he wanted the Indictment dismissed; but other than that, I would urge the Court to enter an order sponte sua, and dismiss the Indictment so as to preserve the Government\'s right to appeal." (R.Tr. p. 4.)

Pursuant to this government request, and over defense objection, the court dismissed the indictment, stating:

"The Indictment having been obtained by evidence which I have found to be improperly taken before the Grand Jury, it inheres in the Indictment and the proceedings, and therefore that the Indictment itself should be dismissed." (R.Tr. p. 8.)

The government subsequently filed a motion for reconsideration on October 21, 1963. This motion was denied on March 9, 1964, leading to the filing of a notice of appeal on April 6, 1964 invoking this court's jurisdiction under 18 U.S.C. § 3731.

The threshold jurisdictional question facing us essentially involves this basic conflict: Appellant asserts it has the statutory right to review a dismissal of an indictment under 18 U.S.C. § 3731. Appellees, on the other hand, assert that no such right exists where the dismissal was obtained at the urging of the government and for the admitted purpose of avoiding the prohibition against appeal of non-final orders which suppress evidence. The controversy is thus put in sharp focus by two conflicting policy considerations — in favor of appeal from dismissal of indictments (§ 3731); and against appeal from suppression orders.

Many courts have been asked to treat this jurisdictional question in factual situations at times quite similar to that of the present case. The results of those cases mark a pinnacle of ambivalence between the two policy considerations. Typifying the irresolute status of the case law is the fact that both parties in the present action rely on this court's en banc opinion in United States v. Apex Distrib. Co., 9 Cir., 270 F.2d 747 (1959). That case involved the dismissal of indictments granted because the government refused to comply with certain pre-trial discovery orders. The defendants contested the jurisdiction of this court to entertain the government appeals. After exhaustively reviewing the legislative history of § 3731, we granted defendant's motion to dismiss, but, in so doing, used the following italicized language:

"It follows from all that has been said that reading § 3731 in the light of its legislative history, as we are required to do, the Government may appeal thereunder from a decision or judgment, `setting aside, or dismissing\' an indictment only if such decision or judgment is based upon a defect in the indictment or in the institution of the prosecution." Id. at 755. (Emphasis added.)

Appellees in the present case rely upon the result in Apex as conclusive support for the proposition that this court lacks jurisdiction to review the district court dismissal. Appellant, on the other hand, alludes to the language above quoted as indicative of this court's willingness to hear an appeal where the dismissal results from a defect in the "institution of the prosecution," and this is what the government alleges exists in the present case. Further examination of the Apex opinion is thus required in an effort to explore the meaning of the italicized language above.

In reaching the result of nonjurisdiction in Apex, we relied heavily (270 F.2d pp. 756-757) upon the third circuit opinion of United States v. Pack, 247 F.2d 168 (1957), a case whose facts are even more comparable to the present case than are the facts in Apex. In Pack, vital government evidence was suppressed by the district court by a pre-trial order. The defendants thereafter did not move to dismiss the indictment, but rather requested a "speedy" trial. The government, just as in the present case, informed the trial court that the suppression order had "virtually wiped out substantially all the Government's evidence," and the government urged the district court to dismiss the indictment sua sponte so that an appeal of the...