Attorney 99-37 v. Barbara G. Stuart ( 2001 )

United States Court of Appeals
FOR THE EIGHTH CIRCUIT
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No. 00-3030
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In Re Charges of Unprofessional *
Conduct Against 99-37, An Attorney *
at Law of the State of Minnesota, *
*
Petitioner - Appellant, * Appeal from the United States
* District Court for the
v. * District of Minnesota.
*
Barbara G. Stuart, *
United States Trustee, *
*
Respondent - Appellee. *
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Submitted: March 12, 2001
Filed: April 26, 2001
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Before LOKEN, MURPHY, and BYE, Circuit Judges.
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MURPHY, Circuit Judge.
United States Trustee Barbara G. Stuart sent documents from two bankruptcy
cases filed by a Minnesota attorney to the state Office of Lawyers Professional
Responsibility. That office subsequently filed charges of unprofessional conduct
against the attorney who it designated by file number 99-37 (counsel for the attorney
referred to him as "he" at oral argument so we do likewise). The attorney attempted
to depose the Trustee and subpoenaed her to testify in the disciplinary proceedings
which had been initiated as a result of her communication. When she declined to
appear, he brought a motion to compel and for civil contempt in Minnesota state court.
The Trustee removed the matter to federal court under 28 U.S.C. § 1442(a)(1), and the
district court1 granted her motion to quash the subpoena and to dismiss the matter. The
attorney appeals, and we affirm.
Attorney 99-37 filed an application in the United States Bankruptcy Court to
represent debtors in two proceedings under Chapter 11 of the Bankruptcy Code. See
11 U.S.C. § 327(a). An evidentiary hearing was held, and his application was rejected.
The bankruptcy court found that the attorney had intentionally mischaracterized a
$17,500 prepetition payment from the debtors so that it would not appear to be a
preferential transfer and that he had intentionally concealed a prepetition transfer of real
estate from the debtors to himself. The court also concluded that transfer of real estate
is not appropriate under the rules of compensation for professionals.
The United States Trustee forwarded the bankruptcy court's findings and related
documents to the Minnesota Office of Lawyers Professional Responsibility with a letter
indicating that she was "referring a matter of possible attorney misconduct."2 Appendix
at 14. She also said that she was "making this referral based on Judge O'Brien's
findings that the transfer of real estate and the transfer of money were intentionally
concealed from the Bankruptcy Court." Id. at 15. After an investigation, the Office of
Lawyers Professional Responsibility brought charges against attorney 99-37.
The Office of Lawyers Professional Responsibility requested that the Department
of Justice (DOJ) allow the testimony of Sarah J. Fagg, an attorney in the Trustee's
1
The Honorable James M. Rosenbaum, United States District Judge for the
District of Minnesota.
2
The related documents included docket entries, transcripts, the judge's rulings
and orders, filings by the parties, and real estate documents.
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office, in preparation for a hearing on its charges against attorney 99-37. Fagg was the
person in that office most knowledgeable about the facts underlying the referral
because she had been the attorney assigned to the particular bankruptcy cases and she
had brought the matter to the Trustee's attention. Congress has provided that the head
of a federal executive department may regulate the use of department records, papers,
and property. See 5 U.S.C. § 301. Under this statute the Department of Justice
promulgated 28 C.F.R. § 16.21 et seq. (the Touhy regulations). These regulations
require an employee to have department permission before testifying in a state
proceeding. DOJ granted the request to depose Fagg. After her deposition, attorney
99-37 sought to depose the Trustee, but she declined. He then served the Trustee with
a subpoena under Minnesota Rules on Lawyers Professional Responsibility 9(d), and
DOJ instructed her not to comply because her testimony would be duplicative,
burdensome, and disruptive of the operation of her office.
When the Trustee did not attend the scheduled deposition, the attorney moved
in state court for an order holding her in civil contempt and to compel her to testify and
pay his expenses and fees. The Trustee removed the contempt action to federal court
under 28 U.S.C. § 1442(a)(1). She then moved to quash the subpoena and for
dismissal. The attorney moved for a remand to state court or to compel the Trustee to
testify. The district court granted the Trustee's motions and denied those of the
attorney.
The attorney appeals, arguing that the district court did not have subject matter
jurisdiction over the attorney disciplinary proceedings, that DOJ had waived sovereign
immunity, and that the attorney has the right to obtain the Trustee's testimony under the
Minnesota constitution and the Fifth and Fourteenth Amendments to the United States
Constitution.
The district court found that it had jurisdiction over the matter under 28 U.S.C.
§ 1442(a)(1), which provides:
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A civil action or criminal prosecution commenced in a State court
against any of the following may be removed by them to the district
court of the United States . . . : [] The United States or any agency
thereof or any officer (or any person acting under that officer) of the
United States or of any agency thereof, sued in an official or individual
capacity for any act under color of such office . . . .
This provision confers jurisdiction on federal courts when the officer who has removed
the case has a colorable federal defense to the claims brought in state court. See Mesa
v. California, 489 U.S. 121 (1989).
The attorney argues that state disciplinary proceedings are not removable under
28 U.S.C. § 1442(a)(1) because they are neither civil nor criminal. The civil matter that
was removed was the action for civil contempt, however, not the disciplinary
proceedings pending in Minnesota. The purpose of 28 U.S.C. § 1442(a)(1) is to
protect federal officials from civil or criminal liability for the performance of their
official duties. See Florida v. Cohen, 887 F.2d 1451, 1453 (11th Cir. 1989) (per
curiam); Wisconsin v. Schaffer, 565 F.2d 961, 963-64 (7th Cir. 1977); North Carolina
v. Carr, 386 F.2d 129, 131 (4th Cir. 1967) (per curiam). Removal of this matter was
proper under the governing law.3
The attorney also challenges federal jurisdiction on the grounds that the Trustee
does not have a colorable federal defense to the matter he brought in state court. There
is no question that the Trustee was acting in her official capacity when she made her
3
The attorney states in his reply brief that he will withdraw his motion for civil
contempt if that is the only basis for federal jurisdiction, leaving only his motion to
compel the Trustee to testify. That would not deprive the federal court of jurisdiction,
however, because "[t]he form of the action is not controlling; it is the state's power to
subject federal officers to the state's process that § 1442(a)(1) curbs." Nationwide
Investors v. Miller, 793 F.2d 1044, 1047 (9th Cir. 1986) (per curiam); see also
Schaffer, 565 F.2d at 963-64; Carr, 386 F.2d at 131.
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referral to the Office of Lawyers Professional Responsibility. The office of United
States Trustee was established to "protect[] the public interest and ensur[e] that
bankruptcy cases are conducted according to the law." H.R. REP. NO. 95-595, at 109
(1977), reprinted in 1978 U.S.C.C.A.N. 5963, 6070. A United States Trustee "may
be compared with . . . a prosecutor," id. at 6071, and "serve[s] as [a] bankruptcy watch-
dog[] to prevent fraud, dishonesty, and overreaching in the bankruptcy arena." Id. at
6049. An action against a federal official is an action against the United States and is
barred by sovereign immunity unless that immunity is waived. See Coleman v. Espy,
986 F.2d 1184, 1189 (8th Cir. 1993). Sovereign immunity protects a federal officer
from being compelled to testify when instructed not to do so by her department. See,
e.g., Smith v. Cromer, 159 F.3d 875, 878-81 (4th Cir. 1998); Edwards v. United States
Dep't of Justice, 43 F.3d 312, 316-17 (7th Cir. 1994).
The only real immunity issue is whether DOJ waived its sovereign immunity
from this state process. Such a waiver "cannot be implied but must be unequivocally
expressed." United States v. Mitchell, 445 U.S. 535, 538 (1980) (quotation marks and
citation omitted). Waivers of sovereign immunity should be strictly construed. See
Coleman, 986 F.2d at 1189. The attorney claims that the Trustee made herself a party
to the state proceedings by her communication to the Minnesota Office of Lawyers
Professional Responsibility and that this waived the government's sovereign immunity.
The Trustee's referral was in the course of carrying out her official duties. See H.R.
REP. NO. 95-595, at 109. Her referral consisted of materials from the bankruptcy court
file, and it was not based on personal observations. She did not make herself a party
to the proceedings by forwarding the court documents, nor did her action waive the
government's sovereign immunity. The attorney also claims that DOJ waived its
immunity by allowing Fagg to testify, citing United States ex rel.Touhy v. Ragen, 340
U.S. 462, 468 (1951) (federal employee may not be held in contempt in state court for
complying with a superior's order not to answer a subpoena). Waiver was not an issue
in Touhy, and the Court did not elaborate on the principle. See id. at 468. Other courts
have ruled that an agency's partial participation in discovery is not a waiver of
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sovereign immunity. See Smith, 159 F.3d at 880 (prosecutor's letter to parole board
and testimony at bail hearing did not waive immunity from document production and
testimony at trial); Swett v. Schenk, 792 F.2d 1447, 1452 (9th Cir.1986) (employee in
authorized deposition may not be compelled to answer questions the agency has
instructed him not to). There are no facts amounting to waiver of sovereign immunity
in the matter before the court, and the district court did not err in quashing the subpoena
on the Trustee or in dismissing the contempt action.
The attorney also claims he has a constitutional right to depose the Trustee. He
claims that he has been deprived of his right to due process under the Fifth and
Fourteenth Amendments of the United States Constitution and §§ 2, 6, and 7 of the
Minnesota constitution. Attorney disciplinary procedures require notice and an
opportunity to be heard, but they do not require all the constitutional protections
provided in criminal prosecutions. See Sealed Appellant 1 v. Sealed Appellee 1, 211
F.3d 252, 254 (5th Cir. 2000); Pacific Harbor Capital, Inc. v. Carnival Air Lines, Inc.,
210 F.3d 1112, 1118 (9th Cir. 1999); see also In re Disciplinary Action Against
Schmidt, 586 N.W.2d 774, 775-76 (Minn. 1998) (per curiam); In re Rerat, 28 N.W.2d
168, 172-73 (Minn. 1947). The attorney has obtained discovery from the individual in
the Trustee's office who was familiar with the bankruptcy proceedings and who brought
them to the Trustee's attention. He has not shown that his constitutional rights to due
process have been violated or that the district court erred in its order.
Accordingly, we affirm the order of the district court quashing the subpoena and
dismissing the contempt action.
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A true copy.
Attest:
CLERK, U.S. COURT OF APPEALS, EIGHTH CIRCUIT.
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