Completely Sealed Case: Twelve Grand Jury Subpoenas , 908 F.3d 525 ( 2018 )

FOR PUBLICATION
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
IN RE TWELVE GRAND JURY No. 17-17213
SUBPOENAS, Grand Jury Panel
17-02, D.C. No.
2:17-mc-00056-DGC
OPINION
Appeal from the United States District Court
for the District of Arizona
David G. Campbell, Senior District Judge, Presiding
Argued and Submitted September 5, 2018
San Francisco, California
Filed November 8, 2018
Before: Marsha S. Berzon and Michelle T. Friedland,
Circuit Judges, and Daniel R. Dominguez, * District Judge.
Per Curiam Opinion
*
The Honorable Daniel R. Dominguez, United States District Judge
for the District of Puerto Rico, sitting by designation.
2 IN RE TWELVE GRAND JURY SUBPOENAS
SUMMARY **
Grand Jury Subpoenas
The panel affirmed the district court’s order holding an
appellant in contempt for his failure to comply with the
court’s order to respond to twelve grand jury subpoenas in
his capacity as a records custodian for various collective
entities.
Appellant contended that because the corporations and
limited liability companies were small, closely-held entities
for which he was either the sole shareholder or sole
employee, or was solely responsible for accounting and
recordkeeping, he could invoke his Fifth Amendment
privilege against self-incrimination to resist producing those
collective entities’ documents.
The panel held that Braswell v. United States, 487 U.S.
99, 104 (1988), remained good law. The panel further held
that there were no circumstances under which a records
custodian could resist a subpoena for a collective entity’s
records on Fifth Amendment grounds, and that the size of
the collective entity, and the extent to which a jury would
assume that the individual seeking to assert the privilege
produced the documents, were not relevant.
**
This summary constitutes no part of the opinion of the court. It
has been prepared by court staff for the convenience of the reader.
IN RE TWELVE GRAND JURY SUBPOENAS 3
COUNSEL
Lori L. Voepel (argued), Jones Skelton & Hochuli P.L.C.,
Phoenix, Arizona; Rhonda Elaine Neff and Clark L. Derrick,
Kimerer & Derrick P.C., Phoenix, Arizona; for Respondent-
Appellant.
Mark S. Determan (argued) and Gregory Victor Davis,
Attorney; S. Robert Lyons, Chief, Criminal Appeals & Tax
Enforcement Policy Section; Richard E. Zuckerman,
Principal Deputy Assistant Attorney General; Tax Division,
United States Department of Justice, Washington, D.C.; for
Plaintiff-Appellee.
OPINION
PER CURIAM:
The district court held Appellant in contempt for his
failure to comply with the court’s order to respond to twelve
grand jury subpoenas in his capacity as a records custodian
for various corporate entities. He now appeals that order,
arguing that, because the corporations and limited liability
companies (“LLCs”) are small, closely held entities for
which he is either the sole shareholder or sole employee, or
is solely responsible for accounting and record keeping, he
may invoke the Fifth Amendment privilege against self-
incrimination to resist producing those collective entities’
documents. We join all of our sister circuits to have
considered the issue in holding that the Fifth Amendment
provides no protection to a collective entity’s records
custodians—and that the size of the collective entity and the
extent to which a jury would assume that the individual
4 IN RE TWELVE GRAND JURY SUBPOENAS
seeking to assert the privilege produced the documents are
not relevant. We therefore affirm.
I.
Appellant is the subject of an ongoing grand jury
investigation of various crimes, including obstruction of
justice, tax evasion, and bankruptcy fraud. The grand jury
issued twelve subpoenas to the custodian of records of
various entities in which Appellant holds an interest.
Appellant, who is the custodian of records for each of the
entities, objected to the subpoenas and refused to produce
the requested documents. Appellant argued that because, for
the years in question, he was either the sole shareholder,
officer, or member of the various entities, and because he
was the individual responsible for accounting and document
preparation for those entities, the compelled production of
the documents would incriminate him personally. He
therefore contended that his Fifth Amendment right against
self-incrimination protected him from complying with the
subpoenas.
The Government moved to compel compliance, and the
district court thereafter granted the Government’s motion,
ordering Appellant to comply with all twelve grand jury
subpoenas. Appellant again refused, and the district court
held Appellant in contempt pursuant to 28 U.S.C. § 1826.
II.
We review de novo the legal question whether any
exception exists to the general rule that a corporate records
custodian may not assert a Fifth Amendment privilege to
refuse production of corporate documents. See United States
v. Sideman & Bancroft, LLP, 704 F.3d 1197, 1201 (9th Cir.
2013) (“We review de novo a district court’s application of
IN RE TWELVE GRAND JURY SUBPOENAS 5
the Fifth Amendment privilege against self-incrimination.”
(quoting United States v. Bright, 596 F.3d 683, 690 (9th Cir.
2010)); United States v. Leidendeker, 779 F.2d 1417, 1418
(9th Cir. 1986) (“The validity of an exercise of fifth
amendment privilege is a question of law and is reviewed de
novo.”). 1
A.
The Fifth Amendment guarantees that no person “shall
be compelled in any criminal case to be a witness against
himself.” U.S. Const. amend. V. The Fifth Amendment
privilege against self-incrimination extends only to
“compelled incriminating communications” that are
“‘testimonial’ in character.” United States v. Hubbell,
530 U.S. 27, 34 (2000).
Appellant’s challenge to the grand jury subpoenas
implicates two related Fifth Amendment doctrines: the “act
of production” doctrine and the “collective entity” doctrine.
The act of production doctrine recognizes “that the act of
producing documents in response to a subpoena may have a
compelled testimonial aspect,” in that the act “may
implicitly communicate ‘statements of fact,’” such as “that
the papers existed, were in [the producer’s] possession or
1
In some cases, the question whether a privilege applies involves a
mixed question of law and fact. See Tornay v. United States, 840 F.2d
1424, 1426 (9th Cir. 1988) (“The conclusion that the amount, date, and
form of legal fees paid is not a confidential communication protected by
the attorney-client privilege is a mixed question of law and fact.”). The
issues relevant to our decision in this case, however, are entirely legal.
Further, even if the question here could be viewed as a mixed question
of law and fact, we would nonetheless review the matter de novo because
“applying the law [would] involve[] developing auxiliary legal
principles of use in other cases.” U.S. Bank Nat’l Ass’n v. Vill. at
Lakeridge, LLC, 138 S. Ct. 960, 967 (2018).
6 IN RE TWELVE GRAND JURY SUBPOENAS
control, and were authentic.” Id. at 36. The collective entity
doctrine reflects the fact that the right to resist compelled
self-incrimination is a “personal privilege.” Bellis v. United
States, 417 U.S. 85, 90 (1974). The privilege applies to
individuals and to sole proprietorships, which do not, as a
legal matter, exist separately from the individuals who
comprise them, but “corporations and other collective
entities” do not enjoy the privilege. Braswell v. United
States, 487 U.S. 99, 104 (1988).
In Braswell, a corporate custodian of two small, closely
held corporations sought to assert his Fifth Amendment
privilege to refuse production of corporate documents,
arguing that producing the documents would incriminate
him personally. Id. at 100–01. Considering both the act of
production doctrine and the collective entity doctrine, along
with the “agency rationale undergirding” the latter, 2 id. at
109, the Supreme Court held that a corporate “custodian may
not resist a subpoena for corporate records on Fifth
Amendment grounds,” id. at 113, regardless of whether the
custodian could “show that his act of production would
entail testimonial self-incrimination,” id. at 104. In a
footnote in Braswell, however, the Court left “open the
question whether the agency rationale supports compelling a
custodian to produce corporate records when the custodian
is able to establish, by showing for example that he is the
sole employee and officer of the corporation, that the jury
2
As the Court explained, it had “consistently recognized that the
custodian of corporate or entity records holds those documents in a
representative rather than a personal capacity.” Braswell, 487 U.S. at109–110. Because “corporations may act only through their agents,” a
“custodian’s act of production is not deemed a personal act, but rather an
act of the corporation.” Id. at 110.
IN RE TWELVE GRAND JURY SUBPOENAS 7
would inevitably conclude that he produced the records.” Id.at 118 n.11 (the “Braswell footnote”).
B.
Appellant offers two arguments in support of his
contention that he is entitled to resist producing the
subpoenaed documents on Fifth Amendment grounds. First,
he argues that Braswell is no longer good law in light of the
Supreme Court’s decisions in Burwell v. Hobby Lobby
Stores, Inc., 134 S. Ct. 2751 (2014), and Citizens United v.
Fed. Election Comm’n, 558 U.S. 310 (2010). Second, he
argues that we should answer the question left open in the
Braswell footnote by holding that a custodian who can
establish that a jury inevitably would conclude it was he or
she who produced the records may be excepted from the rule
that the Fifth Amendment does not shield records custodians
from being compelled to produce a collective entity’s
records. We reject both arguments.
1.
First, as to Appellant’s argument that we should treat
Braswell as having been overruled by Hobby Lobby and
Citizens United, we are skeptical that either case has any
bearing on the collective entity rule as articulated and
applied in Braswell. 3 But, regardless, we remain bound by
Braswell until the Supreme Court says otherwise. Where
Supreme Court precedent “has direct application in a case,”
the Supreme Court has instructed “the Court of Appeals [to]
follow the case which directly controls,” even if it “appears
3
In addition to Hobby Lobby and Citizens United, Appellant relies
heavily on Fisher v. United States, 425 U.S. 391 (1976). But Fisher was
decided before Braswell, hence Appellant’s argument that Fisher
undermines Braswell plainly fails.
8 IN RE TWELVE GRAND JURY SUBPOENAS
to rest on reasons rejected in some other line of decisions,”
and thereby to “leav[e] to th[e] Court the prerogative of
overruling its own decisions.” Agostini v. Felton, 521 U.S.
203, 237 (1997) (quoting Rodriguez de Quijas v.
Shearson/Am. Express, Inc., 490 U.S. 477, 484 (1989)).
Braswell has direct application in this case, and it is not for
us to question its continuing validity or persuasiveness.
2.
Appellant next argues that, even if Braswell remains
good law, we should reach the issue left open in the Braswell
footnote and hold that Appellant may refuse production on
Fifth Amendment grounds. Specifically, Appellant argues
that he is akin to a sole proprietor and that he could establish
that a “jury would inevitably conclude that [Appellant]
produced the records,” Braswell, 487 U.S. at 118 n.11.
Thus, Appellant claims, he fits into the exception whose
potential existence was left open by the Braswell footnote. 4
Reaching this question for the first time in this circuit, we
conclude that no exception exists to the rule that records
custodians lack any Fifth Amendment privilege against the
compelled production of a collective entity’s documents.
First, to recognize an exception for custodians of small,
closely held collective entities, including one-person
corporations or LLCs, would be inconsistent with the
reasoning and holding of Braswell. The Supreme Court in
Braswell reiterated the longstanding principle that “no
privilege can be claimed by the custodian of corporate
4
The Government argues that the record does not support
Appellant’s factual assertion that a jury inevitably would conclude he
produced the records. Because we conclude that the exception Appellant
hopes to take advantage of does not exist, it is not necessary to resolve
this factual dispute.
IN RE TWELVE GRAND JURY SUBPOENAS 9
records, regardless of how small the corporation may be.”
Id. at 108 (emphasis added) (quoting Bellis, 417 U.S. at 100).
Notably, Braswell itself involved two corporations entirely
owned or held (either directly or indirectly) by Petitioner
Braswell, with corporate boards consisting only of Braswell,
his wife, and his mother. Nevertheless, the Supreme Court
held that Braswell could not assert a Fifth Amendment
privilege to resist producing corporate records on the ground
that it would incriminate him personally.
In reaching this conclusion, the Court in Braswell
considered the possibility that a corporate custodian’s
production of records could be testimonial in nature. But the
Court concluded that this fact did not make the production
anything other than an act of the corporation, and that “[a]ny
claim of Fifth Amendment privilege asserted by the agent
would be tantamount to a claim of privilege by the
corporation—which of course possesses no such privilege.”
Id. at 110. As the Court explained, “a custodian’s
assumption of his representative capacity [on behalf of a
corporation] leads to certain obligations, including the duty
to produce corporate records on proper demand by the
Government.” Id. The Court thus treated the possible
testimonial consequences of fulfilling this obligation as
beside the point.
Further, in light of this reasoning in the body of the
Braswell opinion, we are unable to identify any situation in
which the Braswell footnote would have any practical
import. The Court in Braswell contemplated—and
endorsed—the notion that although the Government could
“make no evidentiary use of the ‘individual act’ against the
individual” custodian, it could “use the corporation’s act of
production against the custodian.” Id. at 118 (emphasis
added). Thus, “if the defendant held a prominent position
10 IN RE TWELVE GRAND JURY SUBPOENAS
within the corporation that produced the records, the jury
may . . . reasonably infer that [the defendant] had possession
of the documents or knowledge of their contents.” Id. The
Court explained that “[b]ecause the jury is not told that the
defendant produced the records, any nexus between the
defendant and the documents results solely from the
corporation’s act of production and other evidence in the
case.” Id. In any situation where a jury would inevitably
conclude that a defendant produced the records in question,
the relevant nexus between the defendant and the documents
would still result, first and foremost, from the defendant’s
role in the corporation. Given the obvious—and wholly
permissible—inference that the defendant in such a case
must have had possession of the documents or knowledge of
their contents, the fact that a jury may also conclude that
Appellant produced the documents would be irrelevant to the
jury’s assessment of guilt or innocence as to the charges in
question.
Finally, recognizing an exception for small corporations
or LLCs operating like sole proprietorships but formally
organized as collective entities under state law would give
defendants like Appellant a windfall. Appellant argues that
it makes little sense to apply the collective entity doctrine to
small or family-owned corporations or LLCs that operate
like sole proprietorships. But by choosing to operate his
businesses as a corporation or LLC and not as a sole
proprietorship, Appellant knowingly sought out the benefits
of these forms. Having done so, he cannot now be shielded
from its costs. See United States v. Stone, 976 F.2d 909, 912
(4th Cir. 1992) (“[Appellant] chose the corporate form and
gained its attendant benefits, and we hold . . . that he cannot
now disregard the corporate form to shield his business
records from production.”).
IN RE TWELVE GRAND JURY SUBPOENAS 11
All of our sister circuits to consider this issue have
reached the same conclusion. See In re Grand Jury
Empaneled on May 9, 2014, 786 F.3d 255, 263 (3d Cir.
2015) (“Appellants have advanced no persuasive rationale
as to why the reasoning of Bellis and Braswell does not apply
to one-person corporations.”); In re Grand Jury Subpoena
Issued June 18, 2009, 593 F.3d 155, 158 (2d Cir. 2010)
(‘“[T]here simply is no situation’ in which a corporation can
avail itself of the Fifth Amendment privilege.” (quoting In
re Two Grand Jury Subpoenae Duces Tecum, 769 F.2d 52,
57 (2d Cir. 1985))); Amato v. United States, 450 F.3d 46, 51,
52 (1st Cir. 2006) (reaffirming that “production, including
implied authentication, can be required of a corporation
through a corporate officer regardless of the potential for
self-incrimination,” and stating that “the act-of-production
doctrine is not an exception to the collective-entity doctrine
even when the corporate custodian is the corporation’s sole
shareholder, officer and employee” (citing In re Grand Jury
Proceedings, 838 F.2d 624, 626–27 (1st Cir. 1988)); United
States v. Stone, 976 F.2d 909, 912 (4th Cir. 1992) (holding
that “the district court correctly answered the question left
open in Braswell” by concluding that a one-person
corporation could not assert the Fifth Amendment privilege).
We now join them in concluding that there are no
circumstances under which a records custodian may resist a
subpoena for a collective entity’s records on Fifth
Amendment grounds. Appellant’s challenge to the district
court’s contempt order therefore fails. 5
5
We need not resolve any factual dispute regarding the number of
shareholders or employees in each of the subpoenaed entities. Our
holding that there is no exception to the rule that a records custodian may
not assert a Fifth Amendment privilege to refuse production of a
12 IN RE TWELVE GRAND JURY SUBPOENAS
III.
For the foregoing reasons, we affirm.
collective entity’s documents applies with equal force to all of the
entities at issue in this case.