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USCA1 Opinion
UNITED STATES COURT OF APPEALS
FOR THE FIRST CIRCUIT
____________________
No. 94-2262
CAROL SAWYER PARKS,
Plaintiff - Appellant,
v.
FEDERAL DEPOSIT INSURANCE CORPORATION,
AS RECEIVER FOR OLYMPIC INTERNATIONAL
BANK AND TRUST COMPANY,
Defendant - Appellee.
____________________
APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MASSACHUSETTS
[Hon. Edward F. Harrington, U.S. District Judge] ___________________
____________________
Before
Torruella, Chief Judge, ___________
Bownes, Senior Circuit Judge, ____________________
and Selya, Circuit Judge. _____________
_____________________
David G. Hanrahan, with whom Ross D. Ginsberg and Gilman, __________________ ________________ _______
McLaughlin & Hanrahan, were on brief for appellant. _____________________
Jaclyn C. Taner, Counsel, with whom Ann S. Duross, Assistant _______________ _____________
General Counsel, Colleen B. Bombardier, Senior Counsel, John P. _____________________ _______
Parker, Senior Attorney, and Juanita L. Dean, Counsel, were on ______ ________________
brief for appellee, Federal Deposit Insurance Corporation.
____________________
September 13, 1995
____________________
TORRUELLA, Chief Judge. Plaintiff-appellant Carol TORRUELLA, Chief Judge. ____________
Sawyer Parks filed suit in the United States District Court for
Massachusetts to enjoin defendant-appellee Federal Deposit
Insurance Company ("FDIC") from enforcing a subpoena duces tecum _____ _____
seeking Parks' personal financial papers and records. The
district court granted the FDIC's motion to dismiss Parks'
complaint, and for summary enforcement of the subpoena. Parks'
appeal of that decision presents the following important
question: Does the Fourth Amendment's proscription against
unreasonable searches and seizures require the FDIC to articulate
some quantum of individualized suspicion of wrongdoing before
subpoenaing a citizen's private financial papers? Relying on the
Supreme Court's long-held distinction between the Fourth
Amendment rights accorded private -- as opposed to corporate --
papers, we answer in the affirmative. Because the district court
did not review the subpoena under the standard we announce today,
we reverse and remand for further proceedings consistent with
this opinion.
BACKGROUND BACKGROUND __________
The FDIC insures deposits in financial institutions and
is authorized by statute to act as receiver for insured
institutions that fail and are closed by their chartering
authority. 12 U.S.C. 1811, 1821(c)(2) & (3). When the FDIC
is appointed receiver for a failed institution, it succeeds by
law to "all rights, titles, powers, and privileges" of the
institution's officers and directors with respect to the assets
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of the institution. Id. at 1821(d)(2)(A). As a receiver, the __
FDIC is authorized to collect all obligations and moneys owed to
failed institutions for the benefit of the institution's
creditors and shareholders. Id. 1821(d)(2)(B). To facilitate __
this function, Congress has authorized the FDIC to issue
subpoenas and subpoenas duces tecum "for purposes of carrying out _____ _____
any power, authority, or duty with respect to an insured
depository institution (including determining any claim against
the institution and determining and realizing upon any assets of
any person in the course of collecting money due the
institution). . . ." Id. 1818(n), 1821(d)(2)(I)(i). The FDIC __
is empowered to avoid fraudulent transfers, assert claims against
directors and officers, and seek court orders attaching assets.
Id. 1821(d)(17), 1821(k), 1821(d)(18). In addition, Congress __
directs the FDIC, generally, to maximize the return for the sale
of assets, and to minimize losses. Id. 1821(d)(13)(E). __
Ms. Parks was a director of Olympic International Bank
and Trust Company ("Olympic") from May 1987 through July 1990.
On June 26, 1992, Olympic was declared insolvent and the FDIC was
appointed its receiver. On June 28, 1994, the FDIC issued an
Order of Investigation to determine whether (1) former directors
and officers may be liable as a result of any actions or failures
to act which may have affected Olympic; (2) pursuit of litigation
would be cost effective, considering the extent of the potential
defendants' ability to pay a judgment; (3) the FDIC should seek
to avoid a transfer of assets; and (4) the FDIC should seek an
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attachment of assets.
On July 28, 1994, the FDIC issued a subpoena duces _____
tecum to Ms. Parks requesting the following information: _____
1. Your current financial statement and all
financial statements listing your assets and
liabilities, (alone or with others).
2. All financial statements of your spouse.
3. All credit applications submitted by you
or your spouse, alone or with others, to any
depository institution or any other person or
entity.
4. All records prepared, generated, or
received on or after August 1, 1993 through
August 1, 1994, referring or relating to the
source and amount of any income received by
you or on your behalf, including but not
limited to all wages, salary, commissions,
bonuses, interest and dividend payments, and
any other form of income received by you.
5. All federal, state and local tax returns
filed by you either individually or jointly
with another, along with all forms and
schedules filed with such returns from
January 1, 1989 through April 15, 1994.
6. All records prepared, generated, or
received from August 1, 1993 through August
1, 1994 which refer or relate to stocks,
bonds, securities or other investments
currently owned by individually or with
others, including but not limited to any
statements showing their value.
7. All documents that reflect, refer or
relate to any financial, real or personal
property transactions, including cash, in
which you, or anyone acting on your behalf,
or under your control or influence, have been
involved, (except as the attorney, employee
or agent of another party on transactions in
which you had no personal interest), having a
value of $5,000 or more, per person or
organization per year, including, but not
limited to, the following:
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a. all real and personal property
purchases, sales or transfers, with or
without consideration;
b. all trust participants;
c. mortgages, trusts or other liens on
security interests obtained or supplied
to any third party;
d. lawsuits; and
e. repossessions and returns.
8. All documents referring or relating to
any transfer of assets exceeding $5,000 to
any entity, account, place or person located
outside the United States of America.
9. All records referring or relating to any
interest you hold in any real personal or
other type of property exceeding $5,000 in
value not described above.
10. All documents referring or relating to
any transfer or assets exceeding $5,000 to
any entity, account, place or person located
outside the United States of America.
11. All records referring or relating to any
interest you hold in any real personal or
other type of property exceeding $5,000 in
value not described above.
Ms. Parks refused to produce the information. Instead,
she filed a complaint for declaratory and injunctive relief in
the United States District Court for Massachusetts arguing, among
other things, that compelled production of the documents would
violate her rights under the Fourth Amendment. The FDIC filed a
motion to dismiss the complaint, and for summary enforcement of
the subpoena. On the same day that the FDIC filed its motion,
the district court, without the benefit of a hearing, or even a
response from Parks, granted the FDIC's motion to dismiss and for
summary enforcement of the subpoena. We granted Parks'
subsequent motion to stay enforcement of the subpoena pending
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appeal.
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DISCUSSION DISCUSSION __________
Ms. Parks argues that the FDIC subpoena constitutes an
"unreasonable search" of her private financial papers in
violation of her rights under the Fourth Amendment. The Fourth
Amendment protects the "right of the people to be secure in their
persons, houses, papers, and effects, against unreasonable
searches and seizures . . . ." The Supreme Court has described
the subpoena as a "constructive" search, Oklahoma Press Pub. Co. _______________________
v. Walling, 327 U.S. 186 (1945), which is therefore subject to _______
Fourth Amendment limitations. Donovan v. Lone Steer, Inc., 464 _______ _________________
U.S. 408, 415 (1984); United States v. Morton Salt Co., 338 U.S. _____________ _______________
632, 651 (1950) ("[T]he 'right to be let alone -- the most
comprehensive of rights and the right most valued by civilized
men,' is not confined literally to searches and seizures as such,
but extends as well to the orderly taking under compulsion of
process . . . .") (citations omitted). It is beyond dispute that
Ms. Parks' has a "legitimate expectation of privacy" in her
privately held financial papers and records, and thus that her
Fourth Amendment rights are implicated by the FDIC's subpoena.
See United States v. Jacobsen, 466 U.S. 109, 113 (1984); Nixon v. ___ _____________ ________ _____
Admin. of General Serv., 433 U.S. 425, 457-58 (1976) (President ________________________
has legitimate expectation of privacy in his private papers).
Cf. United States v. Miller, 425 U.S. 435, 440-44 (1975) (no __ _____________ ______
Fourth Amendment interest of depositor implicated because
financial papers ceased to be "private papers" when transferred
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to bank).1
The question then becomes whether the subpoena issued
by the FDIC was "reasonable" within the meaning of the Fourth
Amendment. Florida v. Jimeno, 500 U.S. 248, 250 (1991) ("The _______ ______
touchstone of the Fourth Amendment is reasonableness."); United ______
States v. Calandra, 414 U.S. 338, 354 (1974) ("The purpose of the ______ ________
Fourth Amendment is to prevent unreasonable governmental
intrusions into the privacy of one's person, house, papers, or
effects."). Our review of the relevant case law persuades us
that, although the FDIC met the lenient standard of
reasonableness for administrative subpoenas of corporate records, _________
it failed to meet the stricter standard of reasonableness that
applies to administrative subpoenas of personal papers and ________
records.
I. I.
The FDIC asserts that the only constraints on its power
to subpoena an individual's private financial papers are that the
investigation be within its authority, the subpoena be
____________________
1 The Supreme Court has recognized that:
Of all the rights of the citizen, few are
of greater importance or more essential
to his peace and happiness than the right
of personal security, and that involves,
not merely protection of his person from
assault, but exemption of his private _______________________________
affairs, books, and papers from the _________________________________________
inspection and scrutiny of others. ________________________________________
Without the enjoyment of this right, all
others would lose half their value.
Interstate Commerce Comm'n v. Brimson, 154 U.S. 447, 479 (1894) __________________________ _______
(citation and internal quotation marks omitted; emphasis added).
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sufficiently definite, and the information reasonably relevant.2
The FDIC relies on our decision in United States v. Comley, 890 _____________ ______
F.2d 539, 541 (1st Cir. 1989), where we stated that:
In general, an agency subpoena is
enforceable if it is for a proper purpose
authorized by Congress, the information
sought is relevant to that purpose and
adequately described, and statutory
procedures are followed in the subpoena's
issuance. . . . "As long as the
investigation is within the agency's
authority, the subpoena is not too
indefinite, and the information sought is
reasonably relevant, the district court
must enforce an administrative subpoena."
Id. at 541 (internal citations omitted) (quoting EEOC v. Tempel __ ____ ______
Steel Co., 814 F.2d 482, 485 (7th Cir. 1987)). Comley, however, _________ ______
concerned corporate papers, not private papers. As explained
below, the Supreme Court has long recognized a distinction
between the two.
Comley relied on United States v. Powell, 379 U.S. 48, ______ _____________ ______
57-58 (1964), which concerned a challenge by a corporate taxpayer
to a request by the IRS to produce corporate tax records. In _________
rejecting the taxpayer's contention that the IRS must establish
probable cause of wrongdoing as a prerequisite to judicial
enforcement of the request, the Powell Court relied on the two ______
cases principally relied on here by the FDIC -- Oklahoma Press, ______________
327 U.S. 186 and Morton Salt 338 U.S. 632. Both cases involved ___________
corporate records, a fact the Supreme Court evidently considered
____________________
2 As noted previously, the FDIC is empowered to avoid fraudulent
transfers, assert claims against directors and officers, and seek
court orders attaching assets. Id. 1821(d)(17), 1821(k), __
1821(d)(18).
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of paramount importance in analyzing the Fourth Amendment issue.
In Oklahoma Press, several newspaper publishing ________________
corporations challenged the right of a government agency to
judicial enforcement of subpoenas duces tecum for corporate _____ _____
records absent a showing of wrongdoing. In rejecting a probable
cause standard for issuance of an administrative subpoena, the
Court explained that because corporations are created by the
state, they "are not entitled to all of the constitutional
protections which private individuals have." Oklahoma Press, 327 ______________
U.S. at 204-05. The court made it quite plain that its holding,
and the standard it established for enforcement of an
administrative subpoena duces tecum under the Fourth Amendment, _____ _____
was predicated on the fact that corporate, as opposed to private
papers were at issue.
Historically private corporations have
been subject to broad visitorial power,
both in England and in this country. And
it long has been established that
Congress may exercise wide investigative
power over them, analogous to the
visitorial power of the incorporating
state, when their activities take place
within or affect interstate commerce.
Correspondingly it has been settled that _________________________________________
corporations are not entitled to all of _________________________________________
the constitutional protections which _________________________________________
private individuals have in these _________________________________________
matters. _______
Id. at 204-05 (footnotes omitted). __
The respondent corporations in Morton Salt challenged ___________
the Federal Trade Commission's ("FTC's") power to require them to
file reports indicating compliance with a federal court of
appeal's decree enforcing an FTC cease and desist order. In
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language relied on heavily by the FDIC in this case, the Court
compared the subpoena power of an administrative agency "to the
Grand Jury, which does not depend on a case or controversy for
power to get evidence but can investigate merely on suspicion
that the law is being violated, or even just because it wants
assurance that it is not." Id. at 642-43. The comparison, __
however, was made in reference to the corporate respondent's
claim that the agency had invaded the court of appeals
jurisdiction, it had nothing to do with respondent's Fourth
Amendment claim.3 The Court made this clear: "Whether the
Commission has invaded any private right of respondents' we
consider under later rubrics. Our only concern under the present
heading is whether the Commission's order infringes prerogatives
of the court." Id. at 643. __
The Morton Salt Court did hold -- in the section of the ___________
opinion which actually concerned the Fourth Amendment -- that the
FTC need not establish wrongdoing by the respondent corporations
in order to subpoena their financial documents. The Court based
this decision on the fact that corporations do not merit the same
degree of Forth Amendment protections as private individuals.
While they may and should have
protection from unlawful demands made in
the name of public investigation,
corporations can claim no equality with _________________________________________
individuals in the enjoyment of a right _________________________________________
to privacy. They are endowed with public __________
attributes. They have a collective
impact upon society, from which they
____________________
3 The above quoted language came under a section of the opinion
entitled "Invasion of Court of Appeals Jurisdiction".
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derive the privilege of acting as
artificial entities.
Id. at 651-52 (emphasis added; internal citations omitted). __
We think the clear import of Oklahoma Press and Morton ______________ ______
Salt is that the standard for judicial enforcement of ____
administrative subpoenas of a private citizen's private papers is
stricter than that for corporate papers. Our research indicates
that the Supreme Court has never extended the lenient Morton Salt ___________
standard for administrative subpoenas of corporate records to
private records. Rather, the Court has always couched the
standard in the context of the corporate status of the subpoena
target.4 The FDIC argues that we should nevertheless apply the
lenient Morton Salt standard governing administrative subpoenas ___________
of corporate papers to subpoenas for private papers because three
federal appeals courts have recently done so. We find the cases
cited by the FDIC unpersuasive.
In Resolution Trust Corp. v. Walde, 18 F.3d 943 (D.C. ______________________ _____
Cir. 1994), the court implicitly held that the RTC is not
required to articulate an individualized suspicion of wrongdoing
when it subpoenas private records for determining liability,
____________________
4 For example, in Donovan, supra, the Court stated that, "when _______ _____
an administrative agency subpoenas corporate books or records, _________
the Fourth Amendment requires that the subpoena be sufficiently
limited in scope, relevant in purpose, and specific in directive
so that compliance will no be unreasonably burdensome." 464 U.S.
at 415 (quoting See v. City of Seattle, 387 U.S. 541, 544 (1967) ___ _______________
and citing Morton Salt, 338 U.S. at 652-53). ______ ___________
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avoiding asset transfers, and freezing assets. Id. at 946.5 __
The court's discussion of this issue begins and ends with its
quoting of the Morton Salt standard for judicial enforcement of ___________
an administrative subpoena. The court completely ignores Morton ______
Salt's sharp distinction between corporate and private papers. ____
See id. at 946. Walde, then, is unpersuasive to the extent that ___ __ _____
it ignores the Supreme Court's explicit recognition in both
Oklahoma Press and Morton Salt that private financial papers _______________ ____________
deserve stricter Fourth Amendment protection than corporate
papers.
In In re McVane, 44 F.3d 1127 (2d Cir. 1995), the _____________
Second Circuit concluded that "although the Morton Salt case ___________
recognized that individuals enjoy greater rights of privacy than
do corporations, courts have nevertheless applied the lenient
Morton Salt test to administrative subpoenas seeking personal ____________
records." Id. at 1137. The court cited two cases as examples of __
this seemingly anomalous practice -- Walde and the Supreme _____
Court's decision in United States v. Stuart, 489 U.S. 353 (1989). _____________ ______
____________________
5 As noted previously, these three areas of investigation are
authorized by statute. The court held, however, that the RTC's
fourth asserted area of investigation -- determining the cost-
effectiveness of a potential lawsuit -- is not authorized by its
statutory directive to maximize the return for the sale of
assets, and to minimize losses. Id. at 949; 12 U.S.C. __
1821(d)(13)(E). The court therefore held that when issuing a
subpoena for this purpose, the RTC must demonstrate at least an
articulable suspicion of wrongdoing. Id. See also In Re McVane, __ ________ ____________
44 F.3d 1127, 1139-40 (2d Cir. 1995) (holding that, absent at
least an articulable suspicion that a former director is liable
to the failed bank, determining the cost-effectiveness of
litigation is not a proper purpose for the issuance of a
subpoena).
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As noted, Walde sheds little light on this subject because it _____
ignores the Morton Salt Court's distinction between corporate ____________
documents and personal records. At least, however, Walde is on _____
point; Stuart is not. ______
Stuart concerned a treaty between the United States and ______
Canada that obliged the United States to obtain and convey
information to Canadian authorities to assist them in determining
a Canadian taxpayer's income tax liability. The respondents were
Canadian citizens and residents who maintained bank accounts in
the United States. They challenged the authority of the IRS to
issue an administrative summons to their bank for their private
financial documents, pursuant to a request by Canadian
authorities, without first determining that the Canadian tax
investigation had reached a stage analogous to a domestic tax
investigation's referral to the Justice Department for criminal
prosecution. 489 U.S. at 357. The Fourth Amendment was never
raised as a defense by the respondent taxpayers; indeed, the
Fourth Amendment is never even mentioned in the Stuart opinion. ______
The reason is manifest. Because the documents were located at
the bank, and had thus been exposed to third parties, the
respondents had no reasonable expectation of privacy, and,
consequently, no Fourth Amendment interest in the documents. See ___
Securities and Exchange Comm'n v. O'Brien, Inc., 467 U.S. 735, _______________________________ _____________
743 (1984) (Fourth Amendment does not protect information
communicated to a third party); United States v. Payner, 447 U.S. _____________ ______
727, 731-32 (1979) (no legitimate expectation of privacy in
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documents voluntarily turned over to bank); United States v. _____________
Miller, 425 U.S. 435, 441-43 (1975) (depositor has no expectation ______
of privacy and thus no "protectable Fourth Amendment interest" in
financial records retained by bank). Stuart thus provides no ______
support for the proposition asserted here by the FDIC.
The FDIC also directs us to the Third Circuit's recent
decision in Federal Deposit Insurance Corp. v. Wentz, 1995 WL _________________________________ _____
329921 (3d Cir. 1995). Wentz is the only administrative subpoena _____
case we have found that contains more than a passing reference to
the distinction between corporate and private papers. Contrary
to the FDIC's assertions, however, we think it provides as much
support for Parks' position as that of the FDIC.
In Wentz, the court upheld an FDIC subpoena of the _____
personal financial documents of former officers and directors of
a failed bank. The court began by citing the lenient Morton Salt ___________
test for enforcement of an administrative subpoena. The court
recognized, however, that "[w]hen personal documents of
individuals, as contrasted with business records of corporations,
are the subject of the subpoena, privacy concerns must be
considered." Id. at *2 (citing Whalen v. Roe, 429 U.S. 589, 599 __ ______ ___
(1977)). The court then balanced the governmental need for the
information against the respondents' privacy interest in their
personal financial documents, and concluded that the public
interest in "safeguarding the FDIC's legislative mandate
outweighs the minimal intrusion into the privacy that surrounds
the directors' personal financial records . . . ." Id. at *4. __
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Wentz recognized that subpoenas for privately held _____
financial documents implicate privacy concerns and should
therefore be evaluated by a stricter standard than corporate
documents. As explained below, we agree with Wentz that the _____
proper inquiry requires a balancing between the governmental need
to search and the privacy interests of the subpoena target.6
Where we part company with Wentz is solely in the mechanics of _____
the balancing itself. We address this issue below.7
II. II.
The FDIC asserts the power to rummage through the
financial papers of private citizens based on nothing more than
the hope that illegal conduct might be revealed. We do not think
that Ms. Parks waived her Fourth Amendment interest in her
private papers by serving on the board of directors of a
federally regulated bank. See In re Sealed Case, 42 F.3d at ___ __________________
1418. Moreover, we think it inconceivable that the Framers of
the Constitution, who knew so well and cared so deeply about
arbitrary governmental interference in private citizen's affairs,
would countenance such unbridled power in the hands of an
administrative agency. See Camara v. Municipal Court, 387 U.S. ___ ______ ________________
523, 528 (1967) (the "basic purpose" of the Fourth Amendment "is
____________________
6 Interestingly, although Wentz did not explicitly state that _____
the respondent's privacy interest derived from the Fourth
Amendment, the court posited what is essentially a Fourth
Amendment reasonableness test.
7 Other federal court of appeals cases cited by the FDIC are
inapposite because, like Comley, they concern corporate records. ______
See, e.g., Linde Thomson Langworthy Kohn & Van Dyke, P.C. v. RTC, ___ ____ ______________________________________________ ___
5 F.3d 1508 (D.C. Cir. 1993).
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to safeguard the privacy and security of individuals against
arbitrary invasions by government officials"). As Justice Holmes
observed:
Anyone who respects the spirit as well as
the letter of the Fourth Amendment would
be loath to believe that Congress
intended to authorize one of its
subordinate agencies to sweep all our
traditions into the fire and to direct
fishing expeditions into private papers
on the possibility that they may disclose
evidence of crime. We do not discuss the
question whether it could do so if it
tried, as nothing short of the most
explicit language would induce us to
attribute to Congress that intent.
Federal Trade Comm'n v. American Tobacco Co., 264 U.S. 298, 305- _____________________ ____________________
06 (1924) (citation omitted).8
The question that remains is what quantum of suspicion
should be required for judicial enforcement of an FDIC subpoena
of an individual's private financial papers. Since
reasonableness is the touchstone, our inquiry requires a careful
balancing of "the nature and quality of the intrusion on the
individual's Fourth Amendment interests against the importance of
the governmental interests alleged to justify the intrusion."
United States v. Place, 462 U.S. 696, 703 (1983); Camara, 387 _____________ _____ ______
U.S. at 534-35 (1967). In this case there are compelling
____________________
8 The dissent relies heavily upon the fact that an
administrative subpoena, unlike a search in the criminal context,
is not self-executing. Whatever relevance this distinction may
have in the ordinary case, it surely has none in this one. As
noted previously, the district court granted the FDIC's motion to
dismiss, and for summary enforcement of the subpoena on the same
day the motion was filed. Ms. Parks thus never had an
opportunity to be heard on the motion, or even to respond to it.
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interests on both sides. There is a strong public interest in
promptly resolving the affairs of insolvent banks on behalf of
their creditors and depositors. Moreover, the FDIC's legislative
mandate is clear with respect to avoiding fraudulent transfers,
attaching assets, and generally asserting claims against
directors and officers of failed financial institutions. 12
U.S.C. 1821(d)(17), 1821(d)(18), 1821(k). On the other hand,
private citizens have a significant expectation of privacy in
their personally held financial papers. Indeed, "papers" are
specifically listed in the text of the Fourth Amendment.
We think the significant public interest in resolving
the affairs of failed institutions, as reflected by the FDIC's
legislative mandate, deserves considerable weight. Consequently,
we conclude that the "balancing of governmental and private
interests suggests that the public interest is best served by a
Fourth Amendment standard of reasonableness that stops short of
probable cause." New Jersey v. T.L.O., 325 U.S. 334, 341 (1985). __________ ______
In such cases, the Supreme Court has often utilized a
reasonableness standard which requires the government to
articulate a reasonable suspicion of wrongdoing by the target of
the search. See, e.g., id. at 342; Delaware v. Prouse, 440 U.S. ___ ____ __ ________ ______
873, 881 (1979); United States v. Mart nez-Fuerte, 428 U.S. 648, _____________ _______________
654-55 (1976); United States v. Brignoni-Ponce, 422 U.S. 873, 881 _____________ ______________
(1975); Terry v. Ohio, 392 U.S. 1 (1968). We think this standard _____ ____
strikes the appropriate balance between protecting private
citizens' private papers and enabling the FDIC to fulfill its
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statutory mandate.9
The district court did not consider whether the FDIC
had articulated reasonable suspicion of wrongdoing by Ms. Parks.
Moreover, we think that the affidavit supplied by one of the
FDIC's investigators, which was on record at the district court,
does not provide such an articulable suspicion of wrongdoing.
The affidavit simply states that the bank lost over eight million
dollars as a result of several insider loans which were approved
or ratified by the directors of Olympic, including Parks, after
the bank had received regulatory warnings regarding its loan
practices. The investigator concludes that the nature and extent
of the losses suggests that the directors "were grossly negligent
and violated their fiduciary duty of loyalty to Olympic in making
the insider loans."
The affidavit articulates a generalized suspicion of
wrongdoing by the bank directors, but fails to articulate the
required individualized suspicion of wrongdoing by the target of
the subpoena, Ms. Parks. Cf. Ybarra v. Illinois, 444 U.S. 85, __ ______ ________
____________________
9 In conducting this balancing, the Wentz court, supra, _____ _____
apparently concluded that the FDIC need not articulate any
quantum of suspicion because the targets of the subpoena had not
shown that the information contained in their personal financial
records was of such a sensitive nature that they were "likely to
suffer any adverse effects from disclosure." Wentz, 1995 WL _____
329921, at *4 (quoting United States v. Westinghouse Elec. Corp., _____________ ________________________
638 F.2d 570, 578 (3d cir. 1980)). But once it is conceded, as
it must be, that a citizen has a legitimate expectation of
privacy in privately held financial papers, see supra, the ___ _____
question is not whether the individual will suffer adverse
effects from disclosure, but whether the government has shown ______________
adequate justification for searching the documents. This, one
would think, is the whole point of the Fourth Amendment.
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93, 97 (1980); United States v. Lott, 870 F.2d 778, 783 (1st Cir. _____________ ____
1989). See also United States v. Jaramillo, 25 F.3d 1146, 1150 ________ _____________ _________
(2d Cir. 1994) ("any invasion of a person's Fourth Amendment
interests must be justified at least by 'specific and articulable
facts' directed to the person whose interests are to be
invaded"). Similarly, in McVane, the court rejected an FDIC ______
subpoena of certain former directors' familial records because
the FDIC affidavit stated only that another director has
transferred assets to family members. The court reasoned that
"the FDIC has articulated no grounds for suspecting that any of
these Directors (as opposed to the unnamed 'other former _____
director') has transferred assets to family members." McVane, 44 ______
F.3d at 1139.
The FDIC has not shown that Parks received an insider
loan or otherwise benefited from such a loan to another director.
Cf. Resolution Trust Corp. v. Adams, 869 F. Supp. 1, 3 n.4 ___ _______________________ _____
(D.D.C. 1994) (respondent directors paid themselves approximately
$8 million in preferred dividends of the failed institution).
Nor has the FDIC shown "a suspicious asset transfer or a
questionable payment by the target, or deposition testimony of
other former officers and directors" casting suspicion upon
Parks. Walde, 18 F.3d at 949. Cf. In Re Sealed Case, 42 F.3d at _____ __ _________________
1417 (finding articulable suspicion due to respondent directors
involvement in unusual transfers "between two companies that they
owned within a bank that they controlled"). Under a reasonable
suspicion standard, if the FDIC has no "specific basis . . . upon
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which to suspect that the target engaged in wrongdoing, then the __________
subpoena cannot be enforced." Walde, 18 F.3d at 949 (emphasis _____
added). Based on the current record, we conclude that the FDIC
has failed to articulate specific facts for suspecting that Ms.
Parks has engaged in any wrongdoing with respect to her role as a
director of Olympic. Until the FDIC can do so, the Fourth
Amendment dictates that her privately held financial papers are
just that -- private.10
CONCLUSION CONCLUSION
The Fourth Amendment requires that the FDIC articulate
an individualized suspicion of wrongdoing by the petitioner as a
prerequisite to judicial enforcement of a subpoena duces tecum _____ _____
seeking her privately held financial documents. The judgment of
the district court is therefore reversed, and the case remanded ________ ________
for further proceedings to determine whether the FDIC can in fact
meet this standard.
-- Dissenting Opinion follows --
____________________
10 Of course, petitioner cannot assert any privacy claim with
respect to any documents that she has already disclosed to the
public. See Nixon, 425 U.S. at 459 (citing United States v. ___ _____ ______________
Dionisio, 410 U.S. 1, 14 (1973)). ________
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SELYA, Circuit Judge (dissenting). I believe that this SELYA, Circuit Judge (dissenting). _____________
case is less exotic than the majority suggests. The FDIC, acting
within its statutory authority, 12 U.S.C. 1821(d), issued an
order of investigation to determine, inter alia, whether former _____ ____
directors and officers of a failed bank, Olympic International
Bank and Trust Co., may be liable as a result of any acts or
omissions affecting Olympic. The agency then directed an
administrative subpoena to appellant Parks (a former Olympic
director). The record makes manifest that the agency issued this
subpoena in good faith and for a statutorily permitted purpose.
The majority concedes, ante at 7, that the subpoena "met the ____
lenient standard of reasonableness" imposed on administrative
subpoenas under longstanding case law. In my view, these
validations are sufficient. Precedent does not support the
additional limitation that the majority today unveils, the
Constitution does not require that limitation, and policy
considerations counsel against its imposition.
A A
In the first place, the majority's position is
completely unprecedented. An administrative subpoena is not
self-executing and is, therefore, not itself a search; it is a
direction to produce documents and/or testimony, subject to
judicial review should the subpoenaed party balk. See Oklahoma ___ ________
Press Pub. Co. v. Walling, 327 U.S. 186, 195, 202 (1945); In re ______________ _______ _____
Grand Jury Subpoena Served Upon Simon Horowitz, 482 F.2d 72, 75- _______________________________________________
79 (2d Cir.) (Friendly, J.), cert. denied, 414 U.S. 867 (1973). _____ ______
-22-
In other words, a person upon whom an administrative subpoena is
served unlike a person subjected to, say, an actual search or a
Terry stop has an opportunity to quash the subpoena before _____
producing the information.
At that stage, of course, the Fourth Amendment can be
interposed as a bar to enforcement of the subpoena. See Donovan ___ _______
v. Lone Steer, Inc., 464 U.S. 408, 415 (1984). Until today, _________________
however, no modern federal appellate court has ever held that an
administrative subpoena which satisfies the traditional four-part
test (that is, a subpoena issued after all appropriate
administrative steps have been taken, for a proper purpose,
seeking information that is relevant to that purpose and which is
not within the agency's possession) is unenforceable or subject
to curtailment solely on the ground that it implicates "personal
financial records" as opposed to "corporate records." The
decisions with which I am familiar run uniformly to the contrary.
See, e.g., RTC v. Frates, ___ F.3d ___, ___ (D.C. Cir. 1995) ___ ____ ___ ______
[1995 WL 471777 at *3] (rejecting articulable suspicion standard
for enforcing RTC subpoena of personal financial records); In re ______
McVane, 44 F.3d 1127, 1136 (2d Cir. 1995) (similar); RTC v. ______ ___
Walde, 18 F.3d 943, 946-47 (D.C. Cir. 1994) (similar); SEC v. _____ ___
Knopfler, 658 F.2d 25, 26 (2d Cir. 1981) (enforcing, on standard ________
showing for administrative subpoenas, SEC subpoena issued to
individuals for personal financial records relating to potential
insider trading), cert. denied, 455 U.S. 908 (1982). _____ ______
The majority, without citing a single case on point,
-23-
abruptly departs from this established precedent. The upshot is
to create a singular benchmark against which certain
administrative subpoenas henceforth will have to be evaluated in
the First Circuit and only in the First Circuit. I am
unwilling to venture along this rocky coast simply to answer a
siren's call.
B B
My principal substantive objection to the majority's
approach is to the notion that the Fourth Amendment distinguishes
between "personal financial records" and "corporate records" with
regard to administrative subpoenas. To be sure, language
faithfully quoted by the majority suggests that, in an earlier,
more genteel era, the Supreme Court took care to confine its
rulings to the exigencies of the particular administrative
subpoena cases then before it but those cases, whether read
individually or in the ensemble, do not constitute anything
approximating a conclusive holding that the privacy interest in
personal financial records must always be accorded greater
respect than a corporation's privacy interest in its records.
Indeed, I read the language on which the majority relies as
denoting nothing more than that the Court desired at the time to
keep the question open. And more recent developments in the law
have blurred whatever distinction these earlier cases may have
sought to preserve.
The proof of the pudding is the long line of cases
starting with United States v. Powell, 379 U.S. 48 (1964) cases _____________ ______
-24-
that repeatedly have sanctioned the authority of a particular
agency, the Internal Revenue Service (IRS), to issue summonses
for either personal or corporate records on the minimal showing
that the majority today explicitly rejects. See id. at 57-58 ___ ___
(explaining that the IRS need only "show that the investigation
will be conducted pursuant to a legitimate purpose, that the
inquiry may be relevant to the purpose, that the information
sought is not already within the [IRS's] possession, and that the
administrative steps required by the Code have been followed").
Though Powell itself dealt with a corporate taxpayer, it is ______
transpicuously clear that the Powell standard applies to the ______
production of private financial papers and records of
individuals, that is, to the production of records pertaining to
economic or fiscal activity (which, for simplicity's sake, I will
henceforth call financial records). See, e.g., Ryan v. United ___ ____ ____ ______
States, 379 U.S. 61, 62 (1964) (upholding IRS summons to ______
individual taxpayer "for the reasons given in United States v. _____________
Powell"); United States v. McAnlis, 721 F.2d 334, 336-37 (11th ______ ______________ _______
Cir. 1983), cert. denied, 467 U.S. 1227 (1984); United States v. _____ ______ _____________
Roundtree, 420 F.2d 845, 847-51 (5th Cir. 1969). _________
The Powell standard remains both the law of the land, ______
see, e.g., Tiffany Fine Arts, Inc. v. United States, 469 U.S. ___ ____ _________________________ ______________
310, 323 (1985), and the law of this circuit, see, e.g., Copp v. ___ ____ ____
United States, 968 F.2d 1435, 1437 (1st Cir. 1992), cert. denied, _____________ _____ ______
113 S. Ct. 1257 (1993). What is more, Powell is the building ______
block around which, up to now, our modern administrative subpoena
-25-
jurisprudence has been constructed. See, e.g., United States v. ___ ____ _____________
Comley, 890 F.2d 539, 541 (1st Cir. 1991) (citing Powell and ______ ______
applying Powell principles to administrative subpoena issued by ______
the Nuclear Regulatory Commission); SEC v. Howatt, 525 F.2d 226, ___ ______
229 (1st Cir. 1975) (same, with respect to subpoena issued by the
SEC). There is no valid reason why this standard, undiluted,
should not apply here. If Congress can authorize the IRS to
issue summonses calling for the production of personal financial
records on such a bareboned showing without running afoul of the
Fourth Amendment, then it is clear to me that Congress can
authorize other agencies to do the same. The cases and the
commentators bear witness to this verity. See, e.g., SEC v. ___ ____ ___
Kaplan, 397 F. Supp. 564, 570 (E.D.N.Y. 1975) (enforcing subpoena ______
issued by SEC for personal financial records of an individual);
Wayne R. LaFave, Search & Seizure 4.13(e), at 383 (2d ed. 1987) ________________
(acknowledging rule).
Believing, as I do, that an individual has no greater
(legitimate) expectation of privacy in her financial records than
does a business, I see no reason to conduct the kind of balancing
that the majority covets in order to test the reasonableness of
an administrative subpoena that seeks the production of personal
financial records. Oklahoma Press and Morton Salt, read together ______________ ___________
with the Powell-Ryan line of cases, lead inexorably to the ______ ____
conclusion that, to borrow a leaf from Gertrude Stein's book,
financial records are financial records are financial records.
This conclusion holds true whether the records belong to an
-26-
individual or to an enterprise, and administrative subpoenas
seeking such records are per se reasonable a long as they are
lawfully authorized, relevant, sufficiently specific, and
procedurally unblemished.
Let me be perfectly clear. I do not suggest that the
minions of an administrative agency can roam at will, like a herd
of zebra on the veldt, through an individual's personal papers or
effects. I am open to the idea that there may be a heightened
privacy interest in certain non-business records (e.g., personal
diaries, letters, medical records, and the like) requiring, in
turn, a more finely calibrated balance between public and private
interests before a court lawfully can order such records produced
in response to a summons. See, e.g., FDIC v. Wentz, 55 F.3d 905, ___ ____ ____ _____
908 (3d Cir. 1995); see generally LaFave, supra, at 383 ___ _________ _____
(suggesting that, "[i]n the case of private individuals, perhaps
the mere relevance standard is sufficient to protect privacy
interests in documents related to economic activity, but arguably
purely private papers should be protected by requiring the
investigatory body to meet a more stringent standard").
Recognizing, however, that "[w]e are not so outraged by the
intrusion on privacy that accompanies the seizure of [financial]
records as we are by the seizure of a diary," Couch v. United _____ ______
States, 409 U.S. 322, 350 (1973) (Marshall, J., dissenting), I ______
discern no constitutional impediment to the administrative
subpoena that the FDIC served on Parks. Since the record shows
conclusively that the FDIC issued the subpoena for a legitimate
-27-
purpose (an investigation into, inter alia, whether Parks may be _____ ____
liable to the FDIC),11 that the inquiry is relevant to that
purpose, that the information requested is not already within the
agency's ken, and that the necessary procedural bases were
touched, the subpoena should be enforced.
C C
Apart from the fact that the majority's brand-new
standard is unmoored both from precedent and from the Fourth
Amendment, the standard also fares poorly on policy grounds. I
will not dwell on this aspect, except to note that the rule
envisioned in the majority opinion is inconsistent with the bases
of the modern administrative state.
Administrative investigations differ significantly from
criminal investigations: government agencies typically
investigate in order to enforce compliance with complicated
structures of economic regulation. The ability to obtain
information from regulated parties and those persons in privity
with them typically is vital to the success of the regulatory
scheme. See United States v. Morton Salt Co., 338 U.S. 632, 642 ___ _____________ _______________
(1950); Oklahoma Press, 327 U.S. at 216; Stephen G. Breyer & ______________
Richard B. Stewart, Administrative Law & Regulatory Policy 975 ________________________________________
(2d ed. 1985). And it is a fact of life that agencies charged
____________________
11 In this instance, it is immaterial that the FDIC's order of
investigation listed other objects as well. See ante at 3. The ___ ____
requirement that an administrative subpoena must be issued for a
proper purpose is satisfied in the case of a multi-purpose
subpoena as long as any one of the underlying purposes is proper.
See Tiffany Fine Arts, 469 U.S. at 324; FTC v. Carter, 636 F.2d ___ _________________ ___ ______
781, 789 (D.C. Cir. 1980).
-28-
with regulating economic activity often cannot articulate
probable cause or even reasonable suspicion that a violation has
transpired without first examining documents reflecting a party's
economic activity. See Kenneth C. Davis & Richard J. Pierce, ___
Jr., Administrative Law Treatise 4.1, at 138 (3d ed. 1994). ____________________________
This incipient problem the need to hitch the horse in front of
the cart is frequently exacerbated because the subpoena power
has great significance for most administrative agencies in the
conduct of important public business.
Partially for that reason and partially out of a
concern for separation of powers it is trite but true that the
Judicial Branch must respect the Executive Branch's prerogatives
to enforce the laws, see, e.g., Howatt, 521 F.2d at 229 the ___ ____ ______
courts historically have had a very circumscribed role in the
oversight of administrative subpoenas. See, e.g., Morton Salt, ___ ____ ___________
338 U.S. at 642-43; EEOC v. Bay Shipbuilding Corp., 668 F.2d 304, ____ ______________________
308-09 (7th Cir. 1981); Goodyear Tire & Rubber Co. v. NLRB, 122 ___________________________ ____
F.2d 450, 451 (6th Cir. 1941). To this end, judicial proceedings
regarding the enforcement of such subpoenas are intended to be
relatively informal and summary in nature. See Donaldson v. ___ _________
United States, 400 U.S. 517, 529 (1971); Bay Shipbuilding, 668 _____________ _________________
F.2d at 309. The court's sole function is to ensure that a
subpoena is issued for a proper purpose and in compliance with
the law. See Comley, 890 F.2d at 541; FTC v. Texaco, Inc., 555 ___ ______ ___ ____________
F.2d 862, 872 (D.C. Cir.) (en banc), cert. denied, 431 U.S. 974 _____ ______
(1977). By handing the targets of agency investigations a potent
-29-
new weapon, cf. SEC v. Jerry T. O'Brien, Inc., 467 U.S. 735, 750 ___ ___ ______________________
(1984) (rejecting a notice requirement for third-party SEC
subpoenas in part because it "would substantially increase the
ability of persons who have something to hide to impede
legitimate investigations by the Commission"), the majority
facilitates the insertion of monkey wrenches into the
administrative machinery, and creates the potential not only for
delaying agency probes (thereby further eroding agency
effectiveness), but also for increasing the extent of judicial
intrusions into the agency sphere.
It is clear that Congress feared these very dangers.
Having written the FDIC's organic statute broadly, requiring the
agency to assess the conduct of officials employed by or
affiliated with federally insured banks from a variety of
different perspectives, most of which relate to the governmental
interest in minimizing the public's exposure to financial loss,
Congress vested generous, easily enforceable subpoena power in
the FDIC so that the agency could pursue its public mission. See ___
H.R. Rep. No. 681(I), 101st Cong., 2d Sess. 170, 186 (1990),
reprinted in 1990 U.S.C.C.A.N. 6472, 6576, 6592. Without the _________ __
ability to use this power as Congress intended including the
ability to subpoena individuals' personal financial records based
on relevance and nothing more the FDIC likely will be hamstrung
in its efforts to perform the full range of its statutory
responsibilities. Thus, the majority's suggested standard
(which, as I have explained, is mandated neither by precedent nor
-30-
by constitutional doctrine) unaccountably undermines the ability
of the FDIC and every other administrative agency to do
Congress's bidding, and thereby frustrates the congressional will
for no good reason.12 See Federal Maritime Comm'n v. Port of ___ ________________________ ________
Seattle, 521 F.2d 431, 433 (9th Cir. 1975) (explaining that the _______
"very backbone of an administrative agency's effectiveness in
carrying out the congressionally mandated duties of industry
regulation is the rapid exercise of the power to investigate").
D D
Because I am convinced that my colleagues are
needlessly infringing upon the lawful powers of administrative
agencies, and because I fear the mischief that this well-
intentioned effort to resurrect a moribund view of the Fourth
Amendment may produce, I respectfully dissent.
____________________
12 This does not mean, of course, that I endorse, as a matter of
policy, either the FDIC's penchant for riding roughshod or its
aggressive use of administrative subpoenas. But the rule of law
requires judges to subrogate such personal reservations to
precedent and reason. After all, constitutional adjudication
"must be an overriding judgment founded on something much deeper
and more justifiable than personal preference." Sweezy v. New ______ ___
Hampshire, 354 U.S. 234, 267 (1957) (Frankfurter, J., _________
concurring).
-31-
Document Info
Docket Number： 94-2262
Filed Date： 9/13/1995
Precedential Status： Precedential
Modified Date： 9/21/2015