Vargas, In re, s. 83-1691

• Decision Date: 22 December 1983
• Docket Number: 83-1836,Nos. 83-1691,s. 83-1691
• Citation: 723 F.2d 1461
• Parties: In re Grand Jury Proceedings, Subpoena to Ray M. VARGAS. SANGRE DE CRISTO COMMUNITY MENTAL HEALTH SERVICE, INC., Appellant, v. UNITED STATES of America, Appellee. Ray M. VARGAS, Petitioner, v. Santiago CAMPOS, United States District Judge, Respondent.
• Court: U.S. Court of Appeals — Tenth Circuit

Page 1461

723 F.2d 1461

In re Grand Jury Proceedings, Subpoena to Ray M. VARGAS.

SANGRE DE CRISTO COMMUNITY MENTAL HEALTH SERVICE, INC., Appellant, v. UNITED STATES of America, Appellee.

Ray M. VARGAS, Petitioner, v. Santiago CAMPOS, United States District Judge, Respondent.

Nos. 83-1691, 83-1836.

United States Court of Appeals Tenth Circuit.

Dec. 22, 1983.

James L. Brandenburg and Leo Romero, Albuquerque, N.M., for appellant and petitioner.

William L. Lutz, U.S. Atty., Albuquerque, N.M., for appellee and respondent.

Before McWILLIAMS, McKAY and SEYMOUR, Circuit Judges.

McKAY, Circuit Judge.

This case concerns a Petition for Writ of Mandamus and/or Prohibition by an attorney and an appeal by his client, a community health center, from an order of the district court pursuant to a subpoena duces tecum that the attorney turn over to a federal grand jury his client files for the community health center and another corporation.

In March 1983, the attorney was subpoenaed by a federal grand jury to produce his billings to the community health center and another nonprofit corporation. The attorney complied with that request. Subsequently, on March 29, 1983, a second subpoena duces tecum was served on the attorney commanding him to produce on April 19 his client files for the community health center and the nonprofit corporation reflecting the services provided by the attorney since August 1, 1983. The basis of that subpoena was the government's allegation that the attorney, the community health center and the nonprofit corporation were involved in a common scheme to use public grant monies for their private gain.

On April 18, one day before the attorney was to appear, he filed a motion to quash the subpoena, asserting attorney-client and work-product privileges. On April 28, the community health center moved to intervene and join the motion to quash. The motion to quash was denied by Judge Burciaga. He instructed the attorney to appear before the grand jury on June 1 with his records. If at that time the attorney still claimed a privilege the clerk of the court would seal the records and the judge would review them in camera. The community health center did not attempt to appeal Judge Burciaga's order.

On June 1 the attorney appeared before the grand jury with no records and refused to answer anything other than his name. He also asserted a fifth amendment privilege regarding the records. On that afternoon a hearing was held before Judge Campos, who had replaced Judge Burciaga as the supervising judge for the grand jury. The community health center attorney was excluded from that hearing and its continuation on June 6 because grand jury matters and testimony were to be discussed.

Judge Campos again reviewed the attorney's claims of attorney-client privilege, work-product privilege and fifth amendment privilege. Finding that those privileges were not applicable under the facts before him, Judge Campos ordered the attorney to produce the records on June 7 before the grand jury and informed the attorney that if he failed to do so he would be held in contempt.

On June 7 the community health center filed an appeal from Judge Campos' order and obtained a stay of that order from this court. That stay went into effect before the attorney was required to produce the records. Thus, he was never held to be in contempt. Subsequently the attorney filed a Petition for Writ of Mandamus and/or Prohibition directing that the order be vacated pending final disposition of the community health center's appeal.

Before addressing the arguments raised concerning the attorney-client, work-product and fifth amendment privileges, we must first determine whether either the community health center or the attorney is properly before this court. We will first address that inquiry with regard to the community health center's appeal.

I.

Ordinarily only a party who has been aggrieved by an order or judgment of a district court may appeal that decision. Deposit Guaranty National Bank v. Roper, 445 U.S. 326, 333, 100 S.Ct. 1166, 1171, 63 L.Ed.2d 427 (1980). There is some question as to whether the community health center is such a party. Although it filed a motion to intervene and join in the attorney's motion to quash, record, vol. 1, at 17, there is no indication in the record that the motion was ever ruled upon. Despite the absence of any indication that the motion was granted, the community health center participated in the hearing on May 2, 1983, before Judge Burciaga dealing with the initial motion to quash and was initially present at the hearing before Judge Campos and was asked to leave only because grand jury testimony was going to be discussed. Record, vol. 3, at 4 and 8. Consequently, we consider it to be a party to the proceedings before both Judge Burciaga and Judge Campos and entitled to appeal from any appealable decision or order.

An order to appear before a grand jury pursuant to a subpoena duces tecum, however, is ordinarily an interlocutory order and not appealable, at least not by the witness. United States v. Ryan, 402 U.S. 530, 532-33, 91 S.Ct. 1580, 1581-82, 29 L.Ed.2d 85 (1971). Recognizing that rule, the community health center and the attorney argue that the exception to the general rule, established in Perlman v. United States, 247 U.S. 7, 38 S.Ct. 417, 62 L.Ed. 950 (1918), is applicable in the case at bar.

The parties have not cited and we have not found any decisions where this circuit has applied the Perlman exception to the final judgment rule. Accordingly, a discussion of that exception and its scope is appropriate.

Perlman was a witness in a patent infringement case. At trial he offered into evidence documents and exhibits which belonged to him relating to his invention which was the subject of the suit. Pursuant to granting the plaintiff's motion to dismiss without prejudice, the trial court ordered that the exhibits be impounded and sealed, and kept in the custody of the clerk of the court. Subsequently the clerk of the court was ordered to turn the exhibits over to a grand jury and to provide the United States Attorney reasonable access to the exhibits. Perlman, claiming fourth and fifth amendment privileges, petitioned to restrain the clerk from releasing the exhibits. The petition was denied and Perlman appealed. The government moved to dismiss the appeal because the order was interlocutory. The Supreme Court held that Perlman would be "powerless to avert the mischief of the order" if he were not allowed to appeal the order. 247 U.S. at 13, 38 S.Ct. at 419. ¹

Subsequent Supreme Court cases have not defined the scope of the exception established in Perlman. In fact, the rationale for the exception has changed with time. ² The most recent pronouncements of the Supreme Court, however, have noted that Perlman falls "within the 'limited class of cases where denial of immediate review would render impossible any review whatsoever of an individual's claims.' " United States v. Nixon, 418 U.S. 683, 691, 94 S.Ct. 3090, 3099, 41 L.Ed.2d 1039 (1974) (quoting United States v. Ryan, 402 U.S. 530, 533, 91 S.Ct. 1580, 1582, 29 L.Ed.2d 85 (1971)).

Several circuits have read that language broadly and have concluded that

when a subpoena is directed to a person who has custody of material as to which another person may claim a privilege of non-disclosure, the person who holds the privilege may seek immediate review of the disclosure order. The justification for permitting immediate appeal under these circumstances is that the privilege-holder has no power to compel the custodian of the material to risk a contempt citation for his refusal to comply with the court's order. Thus, denying the holder of the privilege the right to immediate review would leave him "powerless to avert the mischief of the order...."

Branch v. Phillips Petroleum Co., 638 F.2d 873, 878 n. 3 (5th Cir.1981); accord e.g., In re International Horizons, Inc., 689 F.2d 996, 1001 (11th Cir.1982); In re Berkley and Co., 629 F.2d 548, 551 (8th Cir.1980).

Nevertheless, a minority of circuits have construed the exception more narrowly emphasizing the policies behind the final judgment rule and the nature of the relationship between the party subpoenaed and the party possessing the privilege. In re Sealed Case, 655 F.2d 1298 (D.C.Cir.1981) (attorney-client, not immediately appealable); In re Oberkoetter, 612 F.2d 15 (1st Cir.1980) (attorney-client, not immediately appealable); National Super Spuds, Inc. v. New York Mercantile Exchange, 591 F.2d 174 (2d Cir.1979) (employer-employee, not immediately appealable). We find these cases well reasoned and more persuasive in light of the facts of the case at bar.

To understand the appropriateness of an exception to a general rule, it is necessary first to understand the rule itself.

Finality as a condition of review is an historic characteristic of federal appellate procedure. It was written into the first Judiciary Act and has been departed from only when observance of it would practically defeat the right to any review at all.... To be effective judicial administration must not be leaden-footed. Its momentum would be arrested by permitting separate reviews of the component elements in a unified cause. These considerations of policy are especially compelling in the administration of criminal justice.

Cobbledick v. United States, 309 U.S. 323, 324-25, 60 S.Ct. 540, 541, 84 L.Ed. 783 (1940). Consequently, "one to whom a subpoena is directed may not appeal the denial of a motion to quash that subpoena but must either obey its command or refuse to do so and contest the validity of the subpoena if he is subsequently cited for contempt on account of his failure to obey." United States v. Ryan, 402 U.S. 530, 532, 91 S.Ct. 1580, 1581, 29 L.Ed.2d 85 (1971).

The policies that require a witness to risk a contempt citation before being able to appeal a motion to quash apply with equal force to a third party....