In Re: Grand Jury Investigation

Opinions of the United
2001 Decisions States Court of Appeals
for the Third Circuit
2-21-2001
In Re: Grand Jury Investigation
Precedential or Non-Precedential:
Docket 00-5186
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Filed February 20, 2001
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
No. 00-5186
I M P O U N D E D
On Appeal from the United States District Court
for the District of New Jersey
D.C. Civil Action No. 97-MC-00389
(Honorable Nicholas H. Politan)
Argued October 31, 2000
Before: SCIRICA, NYGAARD and BARRY , Circuit Judges
(Filed February 20, 2001)
ALLAN TANANBAUM, ESQUIRE
(ARGUED)
GEORGE S. LEONE, ESQUIRE
Office of United States Attorney
970 Broad Street, Room 700
Newark, New Jersey 07102
Attorneys for Appellant
CATHY FLEMING, ESQUIRE
Wolf, Block, Schorr & Solis-Cohen
250 Park Avenue
New York, New York 10177
Attorney for Appellee, John Doe 1
PAUL J. FISHMAN, ESQUIRE
(ARGUED)
Friedman, Kaplan & Seiler
One Gateway Center, 25th Floor
Newark, New Jersey 07102
Attorney for Appellee, John Doe 2
OPINION OF THE COURT
SCIRICA, Circuit Judge.
In this grand jury proceeding, the issue on appeal is
whether, on the facts presented, the crime-fraud exception
overrides the attorney-client privilege. In the proceedings
below, the District Court declined to enforce a grand jury
subpoena issued to an attorney. Citing the crime-fraud
exception, the government has appealed.1
I.
Over four years ago in April 1996, a federal grand jury
commenced investigating the target's business transactions
and issued several subpoenas to the target's affiliated
businesses. The target's attorney assumed responsibility in
responding to the United States Attorney's office. The
government's first subpoena sought,
all records . . . relating to work performed [by the
target] . . . . These records should include but are not
limited to: All business checks, check registers, cash
receipt and disbursement records. These records
should also include contracts, invoices, billing
documents, bid documents and correspondence
specifically relating to [the target's activities] for the
[relevant] period.
_________________________________________________________________
1. In order to preserve the confidentiality of the proceedings, we will
refer
to the dramatis personae as the target (the target of the investigation)
and the attorney (the target's attor ney who is the witness under
subpoena).
2
The attorney produced several documents. But believing
them inadequate, the government requested fuller
document production. The attorney r esponded that certain
categories of requested documents did not exist.
In May 1996, the government again requested the
documents under its initial subpoena and advised the
attorney that "the grand jury will also r equest that the
target appear before it with regar d to the production of the
documents in question." The attorney pr ovided some
additional documents including check ledgers and canceled
checks. The target was not summoned to appear before the
grand jury.
In September 1996, the government issued a second
subpoena requesting additional documents including:
general ledgers, cash disbursement journals, cash receipts,
sales and accounts payable journals, as well as calenders,
diaries and appointment books for all of the tar get's
business officers and employees. The attor ney again
responded that most of the requested documents did not
exist. On January 10, 1997 the government advised the
attorney that it was subpoenaing "the custodian of records
[of one of] the target business[es] to produce all responsive
original records before the Grand Jury next Thursday
[January 16]." The government also subpoenaed an officer
of the target business to testify befor e the grand jury (also
on January 16) about her knowledge of the existence of the
subpoenaed documents. The government never enforced its
subpoenas.
In April 1997, November 1998, and March 1999 the
government subpoenaed more recor ds from the target
business. The attorney produced some of the requested
documents but again represented that certain categories of
documents did not exist. On March 8, 1999, the Federal
Bureau of Investigation executed search warrants on the
target's home and also on the target's business offices. The
FBI uncovered and seized many recor ds and documents the
attorney had represented did not exist. On April 30, 1999,
the government subpoenaed the attorney to testify before
the grand jury about the "source[s] of information for [his]
. . . factual assertions . . . and basis for failing to produces
[sic] certain categories of recor ds."
3
After the attorney invoked the attorney-client privilege,
the government filed a motion to compel his testimony.
Claiming the crime-fraud exception invalidated the
attorney-client privilege, the government argued the target
used the attorney to obstruct justice in violation of 18
U.S.C. S 1503.2 Holding it was "fundamentally unfair" to
compel the attorney's testimony, the District Court declined
to assess the applicability of the crime-fraud exception. In
the Matter of the Grand Jury Empaneled on December 4,
1997, Misc. No. 97-389, slip op. at *8 (D. N.J. February 8,
2000).
The government appeals contending the District Court
erred in failing to decide whether the crime-fraud exception
applied. It also contends the District Court exceeded its
authority in quashing the subpoena because of
"fundamental unfairness."
II.
We review the decision to quash a grand jury subpoena
for abuse of discretion. In re Grand Jury Proceedings, 115
F.3d 1240, 1243 (5th Cir. 1997). W e exercise de novo review
over the legal issues underlying the application of the
crime-fraud exception to the attorney-client privilege.
United States v. Inigo, 925 F.2d 641, 656 (3d Cir. 1991). We
review the District Court's factual deter minations in
applying the attorney-client privilege for clear error. Id.
III.
The grand jury plays a unique role in our adversarial
system. The Supreme Court has recognized"the whole
theory of its function is that it belongs to no branch of the
institutional Government, serving as a kind of buffer or
_________________________________________________________________
2. 18 U.S.C. S 1503 provides:
Whoever corruptly, or by threats or for ce, or by any threatening
letter or communication, endeavors to influence, intimidate, or
impede any grand or petit juror, or officer in or of any court of
the
United States, . . . or endeavors to influence, obstruct, or impede
the
due administration of justice, shall be punished . .. .
4
referee between the Government and the people." United
States v. Williams, 504 U.S. 36, 47 (1992). It has stated,
Although the grand jury normally operates, of course,
in the courthouse and under judicial auspices, its
institutional relationship with the Judicial Branch has
traditionally been, so to speak, at arm's length. Judges'
direct involvement in the functioning of the grand jury
has generally be confined to the constitutive one of
calling the grand jurors together and administering
their oaths of office.
Id.
Several cases have recognized the judiciary's limited
authority over the grand jury's subpoena and indictment
power. See Williams, 504 U.S. at 54-55 (court can not
exercise it's supervisory power to requir e prosecutors to
present exculpatory evidence to the grand jury); Costello v.
United States, 350 U.S. 359, 363-64 (1956) (court may not
exercise its supervisory power to mandate a rule permitting
defendants to challenge grand jury indictments because of
inadequate or incompetent evidence). As we r ecently stated
in In re Grand Jury Subpoena,
Because it is essential to the federal criminal justice
system, [the grand jury] . . . has great powers of
investigation and inquisition. [It] . . . may generally
``compel the production of evidence or the testimony of
witnesses as it considers appropriate, and its operation
generally is unrestrained by the technical pr ocedural
and evidentiary rules governing the conduct of criminal
trials.'
223 F.3d 213, 216 (3d Cir. 2000) (quoting United States v.
Calandra, 414 U.S. 338, 343 (1974)).
"Any holding that would saddle a grand jury with minitrials
and preliminary showings would assuredly impede its
investigation and frustrate the public's inter est in the fair
and expeditious administration of the criminal laws." United
States v. Dionisio, 410 U.S. 1, 17 (1973).
As the Supreme Court has made clear,"the government
cannot be required to justify the issuance of a grand jury
subpoena . . . because the very purpose of r equesting the
5
information is to ascertain whether pr obable cause exists."
United States v. R. Enter., Inc., 498 U.S. 292, 297 (1991)
(citing Hale v. Henkel, 201 U.S. 43, 65 (1906)). "Requiring
the Government to explain in too much detail the particular
reasons underlying a subpoena threatens to compromise
``the indispensable secrecy of the grand jury proceedings.' "
Id. at 299 (quoting United States v. Johnson , 319 U.S. 503,
513 (1943)).
Despite these broad investigatory powers, ther e are some
limitations on the grand jury's authority to subpoena
evidence. See Calandra, 414 U.S. at 346 (the grand jury
"may not itself violate a valid privilege, whether established
by the Constitution, statutes, or the common law");
Branzburg v. Hayes, 408 U.S. 665, 688 (1972) ("the powers
of the grand jury are not unlimited and ar e subject to the
supervision of a judge"); Kastigar v. United States, 406 U.S.
441, 453-54 (1971) (holding grand jury may override a Fifth
Amendment claim only if the witness is granted immunity
co-extensive with the privilege against self-incrimination).
The Supreme Court has stated, "grand juries are not
licensed to engage in arbitrary fishing expeditions, nor may
they select targets of investigation out of malice or an intent
to harass." R. Enter., Inc., 498 U.S. at 299.
As a safeguard against potential abuse of the grand jury's
broad investigative power, the Federal Rules of Evidence
and the Federal Rules of Criminal Procedur e grant limited
authority for courts to review grand jury subpoenas. In this
case, the two principal mechanisms for judicial r eview are
Fed. R. Evid. 501,3 recognizing the attorney-client privilege
_________________________________________________________________
3. Fed R. Evid. 501 provides:
Except as otherwise required by the Constitution of the United
States or provided by Act of Congress or in rules prescribed by the
Supreme Court pursuant to statutory authority, the privilege of a
witness, person, government, State, or political subdivision
thereof
shall be governed by the principles of the common law as they may
be interpreted by the courts of the United States in light of
reason
and experience.
Fed. R. Evid. 1101(d)(2) provides that the rules on privileges
articulated by Fed. R. of Evid. 501 are applicable to grand jury
proceedings. The government here does not contest the attorney's right
to assert the attorney-client privilege.
6
which protects confidential communications between an
attorney and his client from disclosur e, and Fed. R. Crim.
P. 17(c), providing that "[t]he court on motion made
promptly may quash or modify the subpoena if compliance
would be unreasonable or oppressive."
IV.
The District Court did not refer to Fed. R. Crim. P. 17(c)
nor to the attorney-client privilege when it declined to
compel the attorney's testimony. It stated,
The Court will assume for purposes of its analysis that
[the attorney] is innocent of any wr ongdoing and has
been used merely as a conduit for wrongdoing, i.e., the
obstruction of justice. Nevertheless it is fundamentally
unfair for the U.S. Attorney's Office to seek [the
attorney's] testimony in this case.
In the Matter of the Grand Jury Empaneled on December 4,
1997, at *8.
Reasoning that to obtain the desired infor mation, the
government could have pursued avenues less har mful to
the attorney-client privilege, including enfor cing its
subpoenas on the target and the recor ds custodian, the
District Court stated,
The award for neither appointing nor insisting upon a
custodian of records cannot be securing the testimony
of the subject's attorney. Instead the U.S. Attorney's
Office should have acted upon the subpoenas it
procured and not assume that it could fall back on the
subject's attorney.
Id. at *9.
Compelling the lawyer's testimony, the court said,"goes
against the core of the adversarial system and would
unnecessarily ``drive a wedge' between a client and his
attorney, thereby ``chilling' communications."4 Id. at *10
_________________________________________________________________
4. In discussing the impact of this subpoena on criminal practice, the
District Court stated it is common for criminal defense attorneys and the
government to informally negotiate the production of materials for grand
jury investigations. By forcing attorneys to testify against their
clients,
the court feared many criminal defense attor neys would be "unwilling to
informally satisfy the subpoena for fear of the consequences." In the
Matter of the Grand Jury Empaneled on December 4, 1997, at *10.
7
(citing Loatman v. Summit Bank, 174 F .R.D. 592, 605 (D.
N.J. 1997)).
V.
Because the District Court relied on neither Fed. R. Crim.
P. 17 nor an analysis of the crime-fraud exception, the
government contends the Court exceeded its authority in
quashing the subpoena.
A.
In R. Enter., Inc., 498 U.S. at 299, the Supreme Court
discussed the court's limited role in r egulating grand jury
subpoenas. A grand jury target sought to quash a
government subpoena on the grounds of r elevancy. The
Court of Appeals for the Fourth Circuit held the
government must establish the relevancy and admissibility
of the evidence subpoenaed. The Supreme Court r eversed
holding the Court of Appeals improperly placed the burden
on the government to prove relevancy. Citing the grand
jury's historical independence from the judiciary, the Court
said a grand jury subpoena is presumed r easonable unless
its recipient demonstrates otherwise. Fed. R. Crim. P. 17(c)
permits judicial oversight only when "compliance would be
unreasonable or oppressive." 498 U.S. at 298-99. Thus, the
Court held trial courts can not place an initial bur den on
the government to prove a grand jury subpoena is
necessary and relevant.
Similarly, in Baylson v. Disciplinary Bd. of the Supreme
Ct. of Pennsylvania, 975 F.2d 102 (3d Cir . 1992), cert.
denied, 507 U.S. 984 (1993), we held a Pennsylvania Rule
of Professional Conduct governing grand jury subpoena
procedures was unenforceable because it interfered with
the grand jury's institutional independence. The Supreme
Court of Pennsylvania had adopted a Rule of Pr ofessional
Conduct which provided:
A public prosecutor or other governmental lawyer shall
not, without prior judicial approval, subpoena an
attorney to appear before a grand jury or other tribunal
investigating criminal activity in circumstances where
8
the prosecutor or other governmental lawyer seeks to
compel the attorney/witness to provide evidence
concerning a person who is or has been r epresented by
the attorney witness. (Citation omitted).
Comment
It is intended that the required ``prior judicial approval'
will normally be withheld unless, after a hearing
conducted with due regard for the appr opriate need for
secrecy, the court finds (1) the infor mation sought is
not protected from disclosure by Rule 1.6 [concerning
confidentiality of information], the attorney-client
privilege or the work product doctrine; (2) the evidence
sought is relevant to the proceeding; (3) compliance
with the subpoena would not be unreasonable or
oppressive; (4) the purpose of the subpoena is not
primarily to harass the attorney/witness or his or her
client; and (5) there is no other feasible alternative to
obtain the information sought.
Id. at 104 (quoting Rule 3.10 of the Pennsylvania Rules of
Professional Conduct).
The pre-service judicial review mandated by the
Pennsylvania rule, we held, exceeded the district court's
authority to intervene in grand jury proceedings. Noting the
Supreme Court's reluctance to place judicial restraints on
the grand jury, see id. at 106-08, and the grand jury's
historically recognized independence, we held"the district
court may not under the guise of its supervisory power or
its local rule-making power, impose the sort of substantive
restraint on the grand jury that is contemplated by Rule
3.10." Id. at 110. We also held the Pennsylvania Rule could
not be justified under Fed. R. Crim. P. 17 reasoning that
neither
Rule 17 nor any other provision in the federal rules or
statutes allows for judicial intervention befor e a
subpoena is served. Instead subdivision (c) pr ovides
that a party may move to quash a subpoena on the
grounds that compliance would be unreasonable or
oppressive only after it has been served.
Id. at 108.
9
B.
It is well established that courts may not impose
substantive limitations on the power of the grand jury to
issue subpoenas nor place the initial burden on the
government to prove the validity of its subpoenas. See
Baylson, 975 F.2d at 106-08. In W illiams, the Supreme
Court stated,
Any power federal courts have to fashion, on their own
initiative, rules of grand jury procedur e is a very
limited one, not remotely comparable to the power they
maintain over their own proceedings. It certainly would
not permit judicial reshaping of the grand jury
institution, substantially altering the traditional
relationships between the prosecution, the constituting
court, and the grand jury itself. (citation omitted).
504 U.S. at 50.
Similarly in Costello, the Court stated,"it would run
counter to the whole history of the grand jury institution, in
which laymen conduct their inquiries unfetter ed by
technical rules" to permit federal courts to establish
independent rules governing the enforcement of grand jury
subpoenas. 350 U.S. at 364.
One form of restraint, however, may be found in Fed. R.
Crim. P. 17(c). But as noted, the District Court never
applied Fed. R. Crim. P. 17(c). Instead, it held that the
government must demonstrate the evidence sought could
not be obtained by other means. The District Court's
prescribed course of action may be salutary and efficacious
to safeguard the attorney-client privilege. Under appropriate
circumstances, it may well constitute the better practice.
But we see no authority for it in the rules or the case law.
See R. Enter., Inc., 498 U.S. at 298-99. Generally, the
government does not bear the initial bur den to justify its
grand jury subpoena. See id.; see also Stern v. United
States Dist. Ct. for the Dist. of Massachusetts, 214 F.3d 4,
16 (1st Cir. 2000) (holding local rule which permitted
judicial approval of subpoena "alter[ed] the grand jury's
historic role, place[d] it under overly intrusive court
supervision, curb[ed] its broad investigative powers,
reverse[d] the presumption of validity accorded to its
10
subpoenas, undermine[d] the secr ecy of its proceedings,
and create[d] procedural detours and delays").
The institutional independence and secrecy of the grand
jury has been a hallmark of criminal indictments for over
three centuries. Any deviation from the established
practices governing court involvement should not be taken
lightly. We recognize the District Court was concerned with
the effect of this subpoena on the attor ney-client
relationship. But the proper course under Fed. R. Crim. P.
17(c) was to rule on whether the lawyer's testimony was
protected under the attorney-client privilege. By employing
"a different analysis" based on"fundamental fairness" the
District Court deviated from the established pr ocedures
which ensure the institutional independence of the grand
jury.5 Therefore, the District Court abused its discretion.
VI.
We now turn to whether the District Court erred in its
application of the crime-fraud exception to the attorney-
client privilege. "Worthy of maximum pr otection," Haines v.
Ligget Group Inc., 975 F.2d 81, 90 (3d Cir. 1992), the
attorney-client privilege is one of the "oldest of the
privileges for confidential communications known." Upjohn
Co. v. United States, 449 U.S. 383, 389 (1981). As noted by
the Supreme Court, "courts have long viewed[the
privilege's] . . . central concern as one to ``encourage full
and frank communication between attorneys and their
clients and thereby promote broader public interests in the
observance of law and administration of justice.' " United
States v. Zolin, 491 U.S. 554, 562 (1989) (quoting Upjohn,
449 U.S. at 389).6
_________________________________________________________________
5. It bears noting that the United States Attor ney Manual provides,
"Approval [of the Assistant Attor ney General for the Criminal Division]
is
required to issue [a] grand jury or trial subpoena to attorneys for
information relating to the representation of [a] client." U.S. Atty's.
Man.
9-13.410.
6. Communications are protected under the attorney-client privilege
when:
(1) legal advice of any kind is sought (2) fr om a professional
legal
advisor in his capacity as such, (3) the communications relating to
11
The grand jury may not "itself violate a valid privilege,
whether established by the Constitution, statutes, or the
common Law." Calandra, 414 U.S. at 346. For this reason,
courts may quash an otherwise valid grand jury subpoena
for an attorney's testimony under the attor ney-client
privilege. Fed. R. Evid. 501. When legal advice is sought in
furtherance of a crime or fraud, however, the attorney-client
privilege is waived and a grand jury may compel a lawyer's
testimony. See, e.g., Clark v. United States, 289 U.S. 1, 15
(1933) ("A client who consults an attorney for advice that
will serve him in the commission of a fraud will have no
help from the law. He must let the truth be told."); Inigo,
925 F.2d at 656 ("when legal consultation is in furtherance
of a crime or fraud, the statements . . . will not be
protected."). We have described the crime-fraud exception in
this manner:
The attorney-client privilege is designed to encourage
clients to make full disclosure of facts to counsel so
that he may properly, competently, and ethically carry
out his representation. The ultimate aim is to promote
the proper administration of justice. That end,
however, would be frustrated if the client used the
lawyer's services to further a continuing or futur e
crime or tort. Thus, when the lawyer is consulted, not
with respect to past wrongdoing but to future illegal
activities, the privilege is no longer defensible and the
crime-fraud exception comes into play.
In re Grand Jury Proceedings, 604 F.2d 798, 802 (3d Cir.
1979) (citations omitted).
A party seeking to compel testimony under the crime-
fraud exception bears the initial burden of pr oving a prima
facie case of a crime or fraud before the attor ney-client
privilege is waived.7 Haines , 975 F.2d at 95-96 ("[T]he party
_________________________________________________________________
that purpose, (4) made in confidence, (5) by the client, (6) are at
his
insistence permanently protected (7) fr om disclosure by himself or
by the legal advisor, (8) except the pr otection [may] be waived.
In the Matter of the Grand Jury Empaneled on February 14, 1978, 603
F.2d 469, 474 (3d Cir. 1979) (citations omitted).
7. In Clark, 289 U.S. at 14-15, the Supr eme Court described the
evidentiary standard for the application of the crime fraud exception:
12
seeking discovery must present evidence which, if believed
by the fact-finder, would be sufficient to support a finding
that the elements of the crime-fraud exception wer e met.");
Feldberg v. Walters, 862 F.2d 622, 626 (7th Cir. 1988) ("[A]
prima facie case must be defined with regar d to its
function: to require the adverse party, the one with superior
access to the evidence and in the best position to explain
things, to come forward with that explanation."). Here, the
government asserts the target business obstructed justice
by failing to disclose documents subpoenaed by the grand
jury.8 The government maintains it has submitted sufficient
prima facie evidence of obstruction of justice to show the
existence of a crime, in the form of documents found
during the FBI's search of the target business' offices, as
well as from ex parte, in camera affidavits. Challenging this
assessment, the attorney contends the gover nment
presented insufficient evidence that the tar get and the
target business corruptly intended to obstruct justice.
The District Court declined to decide whether the
government submitted sufficient prima facie evidence of
intent to obstruct justice. Although it corr ectly outlined the
law, the Court stated,
Typically, at this point in the Opinion, the Court would
begin to analyze whether the Government has
articulated a prima facie showing of a fraud or a crime
pursuant to 18 U.S.C. S 1503(a) by first examining
_________________________________________________________________
There must be a showing of a prima facie case sufficient to satisfy
the judge that the light should be let in . . . T o drive the
[attorney
client] privilege away, there must be ``something to give colour to
the
charge;' there must be ``prima facie evidence that it has some
foundation in fact.' When the evidence is supplied, the seal of
secrecy is broken. (citations and footnote omitted).
8. The elements of a prima facie case of obstruction of justice under 18
U.S.C. S1503 are: (1) the existence of a judicial proceeding; (2)
knowledge
or notice of the pending proceeding; (3) acting corruptly with the intent
of influencing, obstructing, or impeding the pr oceeding in the due
administration of justice; and (4) the action had the "natural and
probable effect" of interfering with the due administration of justice.
See
United States v. Collis, 128 F.3d 313, 318 (6th Cir. 1997).
13
whether there is evidence of criminal intent. This court
finds, however, that the unique cir cumstances
surrounding this case warrant a differ ent analysis than
that articulated by the parties.
In the Matter of the Grand Jury Empaneled on December 4,
1997, at *8.
We believe this was error. See, e.g., Clark, 289 U.S. at 15;
Haines, 975 F.2d at 90; In re Grand Jury Proceedings, 604
F.2d at 802. The proper course would have been to
determine the applicability of the crime-fraud exception to
the attorney-client privilege. If the gover nment has
submitted sufficient prima facie evidence of a crime or
fraud and legal advice was sought from or given by the
attorney in connection therewith,9 the attorney-client
privilege has been waived, and the grand jury may compel
the attorney to testify about his communications with the
target. See, e.g., In re Impounded Case (Law Firm), 879 F.2d
1211, 1213-14 (3d Cir. 1989); In Re Sealed Case, 754 F.2d
_________________________________________________________________
9. In In re Grand Jury Subpoena, 223 F.3d at 218-19, we held it is not
"violative of due process to rely on an ex parte government affidavit to
determine that the crime-fraud exception applies and thus compel a
target-client's subpoenaed attorney to testify before the grand jury." Id.
at 219. Because the need for secrecy in grand jury proceedings prohibits
an adversarial proceeding regarding ex parte, in camera evidence, courts
may rely exclusively on ex parte materials infinding sufficient prima
facie evidence to invoke the crime-fraud exception and "we must rely on
the district court's discretion and appellate r eview of the exercise of
that
discretion to ensure that the power of the grand jury is not abused while
preserving the secrecy that is a necessary element of the grand jury
process." Id. Where there are no secrecy or confidentialityimperatives,
however, there would seem to be no impediment to permitting the
attorney to challenge the government's prima facie evidence, subject also
to the Supreme Court's admonition to avoid"minitrials." See Dionisio,
410 U.S. at 17; but see Laser Industries, Ltd. v. Reliant Tech., Inc., 167
F.R.D. 417, 420 (N.D. Cal. 1996). In the civil context, we have permitted
this. See Haines, 975 F.2d at 96 ("fundamental concepts of due process
require that the party defending the privilege be given the opportunity to
be heard, by evidence and argument, at the hearing seeking an exception
to the privilege."); see also Feldberg, 862 F.2d at 626 (after prima facie
showing that exception applies, party asserting privilege should have
opportunity to rebut, "if the court finds the explanation satisfactory,
the
privilege remains.").
14
395, 399-401 (D.C. Cir. 1985). Absent thisfinding, the
attorney may validly assert the attorney-client privilege in
response to the grand jury subpoena. See In Re Grand Jury
Investigation, 918 F.2d 374, 384 (3d. Cir . 1990) (a party
may invoke a historically recognized privilege to protect
communications from disclosure to the grand jury). For
these reasons, the District Court must decide whether the
government has submitted sufficient evidence of the intent
to obstruct justice and determine whether this evidence
supports a waiver of the attorney-client privilege. Once the
court determines there is sufficient evidence of a crime or
fraud to waive the attorney-client privilege, we review its
judgment for abuse of discretion. In r e Grand Jury
Subpoena, 223 F.3d at 219; In r e Grand Jury Subpoenas,
144 F.3d 653, 663 (10th Cir. 1998) ("we find no abuse [of
discretion] in either the district court's r efusal to conduct a
separate rebuttal hearing or its refusal to reveal the
contents of the government's submission").
VII.
For the foregoing reasons, we will vacate and remand for
findings under Fed. R. Crim. P. 17(c) and the crime fraud
exception to the attorney-client privilege.
15
NYGAARD, Circuit Judge, dissenting :
Because I disagree with the Majority's conclusion that
"the District Court never applied Fed. R. Crim. P . 17(c) [and
instead] held that the government must demonstrate the
evidence sought could not be obtained by other means," I
respectfully dissent. Majority Opinion at 10. I believe that
the District Court validly exercised its discr etion under Rule
17(c) and did not impose a broad "no-alternative-means"
test. Therefore, I would affirm.
The Government claims that the District Court applied a
broad-reaching "no-alternative-means test" to determine
whether the attorney's subpoena was fair and therefore
enforceable. Appellant's brief at 39. Appar ently, the
Majority agrees.1 It holds that the court employed an
analysis "based on ``fundamental fairness' [that] deviated
from the established procedures which ensure the
institutional independence of the grand jury." Majority
Opinion at 11. I agree that such a blanket rule, if it were
imposed, would improperly place a substantive limitation
upon the grand jury, is outside the District Court's
supervisory powers, and has been implicitly r ejected by this
Court in Baylson v. Disciplinary Bd., 975 F .2d 102 (3d Cir.
1992). See Appellant's brief at 39-41.
However, I disagree with the Majority's characterization of
the District Court's holding. The District Court did not
impose a new substantive limitation upon the grand jury.
Rule 17(c) of the Federal Rules of Criminal Pr ocedure states
that "[t]he court . . . may quash or modify[a] subpoena if
compliance would be unreasonable or oppr essive." See also
United States v. R. Enters., Inc., 498 U.S. 292, 299 (1991).
The Majority recognizes Rule 17(c) as a valid"form of
restraint" upon the grand jury, but nonetheless holds that
the District Court failed to apply it. Majority Opinion at 10.
I concede that the District Court never explicitly invoked
Fed. R. Crim. P. 17(c), but such an omission is not fatal as
_________________________________________________________________
1. At the very least, the Majority believes that the District Court
"impose[d] substantive limitations on the power of the grand jury [and
placed] the initial burden on the gover nment to prove the validity of its
subpoenas." Majority Opinion at 10.
16
long as what the court did is clear.2 Furthermore, we "may
affirm the District Court on any grounds supported by the
record." Nicini v. Morra, 212 F .3d 798, 805 (3d Cir. 2000).
The District Court in his case considered the specific
facts and circumstances before it and found that it was
"fundamentally unfair for the U.S. Attorney's Office to seek
[the attorney's] testimony."3 Rule 17(c) empowers a court to
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2. See United States v. Baird, 109 F.3d 856, 862 (3d Cir. 1997)
("Although the court did not explicitly state that it was denying the
motion, nor did it state the reasons for doing so, it is clear from the
record that the court carefully considered Baird's cooperation within the
S 5K1.1 frame of reference.");Fellheimer, Eichen & Braverman, P.C. v.
Charter Techs. Inc., 57 F.3d 1215, 1228-29 (3d Cir. 1995) ("While it is
true that the bankruptcy court did not indicate that it was acting
pursuant to S 328(c), . . . we find that the denial of FE & B's fees
application may be upheld as an exercise of the bankruptcy court's
authority under S 328(c)."); United States v. Sallins, 993 F.2d 344, 346
n.2 (3d Cir. 1993) ("[T]he district court did not state its reason for
admitting the evidence. [However], we will assume that the district court
believed the evidence was admissible as backgr ound."); United States v.
Thomas, 961 F.2d 1110, 1120 (3d Cir . 1992) ("Although the district court
did not explicitly state in its written judgment that the foregone fifteen
year sentence was a basis for the upward departure, we believe Thomas'
firearm possession played a major, if not predominant, role in the court's
sentencing decision."); Inmates of the Allegheny County Jail v. Wecht, 901
F.2d 1191, 1198 (3d Cir. 1990) ("Although the district court did not state
whether it intended its July 17, 1989 order to be a civil contempt
sanction, it is clear from the circumstances that the order is most
properly characterized as a coercive civil contempt order entered in a
post-permanent injunction proceeding."); Myertech Corp. v. Myertech
Corp., 831 F.2d 410, 419 (3d Cir. 1987) ("The bankruptcy judge did not
explicitly state under which paragraph of S 2715 he fashioned his
remedy; however, we can presume that his calculation was rendered
under 2715(b)."); Chirinos de Alvarez v. Creole Petroleum Corp, 613 F.2d
1240, 1244 (3d Cir. 1980) ("Although the court did not clearly state so,
it is apparent from a review of its decision that the dismissal was based
primarily on the ground that the plaintif fs had not stated a ground upon
which relief could be granted.")
3. The court cited numerous avenues that the Government could have
pursued to obtain the same information, "which are far less offensive
[than] seeking to pierce the attor ney-client privilege." These included
subpoenas that the U.S. Attorney's Office choose not to enforce and the
Government's failure to insist that a custodian of records confirm the
attorney's assertions. The court also noted that compelling his testimony
could "unnecessarily ``drive a wedge' between a client and his attorney,
thereby ``chilling' communications."
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quash a subpoena if it is "unreasonable or oppressive."
Presumably, the Majority believes that a finding of
"fundamental unfairness" is insufficient to satisfy this
standard. In contrast, I fail to see a dif ference. A subpoena
described as "fundamentally unfair" could just as easily be
described as "unreasonable and oppressive." Therefore, I
believe that the District Court sufficiently invoked the
authority of Rule 17(c). Unlike the Majority, I would not
reverse based entirely upon an unimportant semantic
distinction.4
Assuming the District Court did act under Rule 17(c), we
review its decision to quash a grand jury subpoena solely
for abuse of discretion. We must "uphold the district court's
decision ``unless it is clearly arbitrary or without support in
the record.' " United States v. Dent, 149 F.3d 180, 191 (3rd
Cir. 1998).5 There is nothing in the record to suggest that
the District Court's decision to quash the Gover nment's
subpoena under these specific facts constituted an abuse of
discretion. The court was concerned that enforcing the
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4. It is beyond dispute that "unfair," "unreasonable," and "oppressive"
are
often used synonymously. A Westlaw sear ched revealed 1710 federal
decisions, 40 of which were Supreme Court decisions, where "unfair"
appeared within five words of "unreasonable" or "oppressive." See e.g.
Bush v. Gore, 121 S. Ct. 525, 546 (2000) (Ginsburg, J., dissenting)
("Refusing to supplant Illinois law with a federal definition of waiver,
we
explained that the state court's declaration ``should bind us unless so
unfair or unreasonable in its application to those asserting a federal
right as to obstruct it.' "); Asahi Metal Co. Ltd. v. Superior Court of
California, 480 U.S. 102, 116, 107 S. Ct. 1026, 1034 (1987) (O'Connor,
J., concurring) ("[T]he exercise of personal jurisdiction by a California
court over Asahi in this instance would be unr easonable and unfair.");
Ramseur v. Beyer, 983 F.2d 1215, 1234-35 (3d Cir. 1992) ("We believe
that factors such as the nature of the pr ocess by which jury lists are
composed, the length of time of underrepr esentation, and the strength of
the evidence that purports to establish an ``unfair and unreasonable'
representation should be examined under Duren.").
5. See also In re Grand Jury Subpoena , 138 F.3d 442, 444 (1st Cir.
1998); United States v. Chen, 99 F.3d 1495, 1499 (9th Cir. 1996); In re
Grand Jury Matters, 751 F.2d 13, 16 (1st Cir. 1984) ("We review a district
court decision to quash, or not quash, a grand jury subpoena, solely for
abuse of discretion, with much deference being owed to the lower court's
authority.").
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Government's subpoena would put attorneys in a "very
precarious position," subjecting them to grand jury
subpoena any time they made representations pertaining to
the existence of subpoenaed records. See App. at 172-73 ("I
guess the lawyer can't say a word to the U.S. Attorney's
office about those things because he'd be subject to coming
in to testify as to what his course of knowledge is.").
This threat would certainly chill communication between
attorney and client. Both the government and the Majority
seem to believe, however, that the attor ney-client privilege
is the only means by which a district court can protect that
relationship. See Majority Opinion at 11 ("[T]he proper
course under Fed. R. Crim P. 17(c) was to rule on whether
the lawyer's testimony was protected under the attorney-
client privilege."); Appellant's brief at 13-14 ("The only
proper substantive limitation on the grand jury's ability to
compel [the attorney's] testimony is the attorney-client
privilege."). I do not read a district court's discretion so
narrowly. American jurisprudence has long r ecognized the
central importance of the attorney-client r elationship. The
privilege is the most common means of protecting the
relationship, but it is not the only one. In appropriate
factual situations, such as the present case, a district court
can, within its discretion, conclude that a subpoena is
unreasonable and oppressive because it har ms the
attorney-client relationship, even if the privilege does not
apply.
A constant threat of subpoena would also af fect the
ability of lawyers to cooperate with the gover nment. The
Government contends that "[t]he duty to safeguard ``the
healthy relationship between the criminal defense bar and
the U.S. Attorney's Office' lies squar ely with the parties to
that relationship itself, not the district court." Appellant's
brief at 52. It appears that the Government
misunderstands the court's concern. If a court were to
enforce a grand jury subpoena against an attor ney in a
case such as this, where there wer e numerous alternative
avenues of gathering the desired information, it would
impose the threat of subpoena over all r epresentations
made by counsel. It does not escape my attention that this
would grant the U.S. Attorney's Office tr emendous leverage
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-- so much in fact that any competent counsel would
produce a custodian rather than respond to inquires. See
App. at 171-75. This would severely hamper the efficient
administration of justice, a matter of paramount concern to
this Court.
These consequences might be acceptable (and
reasonable) if the Government had no other means of
obtaining the desired information. In this case, however,
the U.S. Attorney's Office repeatedly served subpoenas that
were never enforced, and it failed to insist upon
authentication from a custodian of recor ds. As a result, the
District Court found that the burden upon the attorney was
unreasonable, and I cannot disagree.
A True Copy:
Teste:
Clerk of the United States Court of Appeals
for the Third Circuit
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