In re: Grand Jury Subpoena

IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
United States Court of Appeals
Fifth Circuit
No. 16-10181 FILED
July 19, 2017
Lyle W. Cayce
In re: Grand Jury Subpoena Clerk
Appeal from the United States District Court
for the Northern District of Texas
Before KING, OWEN, and HAYNES, Circuit Judges.
PRISCILLA R. OWEN, Circuit Judge:
Following the initiation of a federal criminal investigation for Medicare
fraud and other offenses into a business owned by [Company], several of
[Company’s] officers resigned and, upon leaving [Company], removed
electronic devices allegedly owned by [Company]. 1 [Company] filed suit in
state court and obtained a temporary restraining order (TRO) enjoining the
former officers and their counsels from using company funds to pay attorneys’
fees and from disclosing information contained on the removed electronic
devices. Counsel for one of the former officers was then subpoenaed by a
federal grand jury and asked to present the electronic devices. The United
States moved for a protective order in federal district court to enjoin the state
court litigation. After an evidentiary hearing, the district court enjoined the
state court civil proceedings until the conclusion of the government’s criminal
1 Names have been redacted.
No. 16-10181
investigation, or for a period of one year, whichever first occurred. [Company]
appealed. We affirm.
I
After becoming aware that their company was under federal
investigation for Medicare fraud and other offenses, [Company] officers
retained personal counsel at company expense. Two officers, [Employee A] and
[Employee B], subsequently resigned and removed several electronic devices
previously provided to them by [Company]. [Employee A] informed [Company]
that he was delivering the electronic devices in his possession to his personal
attorney, who would then cooperate with federal agents in the criminal
investigation. After demanding return of the company funds disbursed to
[Employee A] and [Employee B] for personal counsel, [Company] filed suit in
Texas state district court and obtained a TRO enjoining [Employee A],
[Employee B], and their attorneys from using the funds and from disclosing
any information or data on the electronic devices. The TRO also required
return of the funds and devices. [Company] then proceeded with discovery
requests.
[Employee A’s] attorney received a federal grand jury subpoena, ordering
the production of the electronic devices [Employee A] removed from
[Company]. The attorney notified [Company] of the subpoena and requested a
modification of the TRO to allow delivery of the devices. He also delivered a
check for the amount of disputed funds to the state court registry in compliance
with the TRO. After unsuccessfully moving in federal court to quash the
subpoena and in state court to dissolve the TRO, [Employee A’s] counsel
complied with the federal subpoena and turned over the electronic devices to
federal law enforcement. Discovery efforts in state court continued, and
[Company] moved for partial summary judgment. Shortly thereafter, the
United States filed a motion for a protective order in federal court. After an
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evidentiary hearing, the district court granted the protective order and
enjoined all proceedings in state court.
II
We first conclude that the district court had authority to enjoin the state
court proceedings. Although federal courts are generally prohibited from
granting injunctions to stay state court proceedings under the Anti-Injunction
Act, 28 U.S.C. § 2283, that general prohibition does not apply when the United
States seeks the injunction, as it does here. 2 We therefore need not consider
whether the Victim and Witness Protection Act, 18 U.S.C. §§ 1512, et seq.,
provides a statutory exception to the Anti-Injunction Act. 3
III
“[T]he fact that an injunction may issue under the Anti-Injunction Act
does not mean that it must issue.” 4 Rather, “[t]he power to enjoin state
proceedings is discretionary, allowing the [district] court to weigh those factors
both pro and con to the issuance of a stay.” 5 We review for abuse of discretion. 6
2 Leiter Minerals, Inc. v. United States, 352 U.S. 220, 225-26 (1957); NLRB v. Nash-
Finch Co., 404 U.S. 138, 145-47 (1971) (reiterating the holding in Leiter and extending this
exception to federal agencies); United States v. Lemaire, 826 F.2d 387, 388 n.2 (5th Cir. 1987)
(“The [Anti-Injunction] Act does not prevent the United States, or one of its agencies, from
acting to protect a federal interest.”); see also 17A CHARLES ALAN WRIGHT, ARTHUR R.
MILLER, & EDWARD H. COOPER, FEDERAL PRACTICE & PROCEDURE § 4222 (3d ed.).
3 See United States ex rel. Farmer v. City of Houston, 523 F.3d 333, 337-38 & n.8 (5th
Cir. 2008) (affirming on a different ground than the ground relied on by the district court
because this court “may ‘affirm the district court’s judgment on any grounds supported by
the record’” (quoting Sobranes Recovery Pool I, LLC v. Todd & Hughes Constr. Corp., 509
F.3d 216, 221 (5th Cir. 2007))).
4 Chick Kam Choo v. Exxon Corp., 486 U.S. 140, 151 (1988).
5 Commonwealth Edison Co. v. Gulf Oil Corp., 541 F.2d 1263, 1274 (7th Cir. 1976);
accord First Nat. Bank & Tr. Co. v. Lawing, 731 F.2d 680, 682 (10th Cir. 1984); see also 17A
CHARLES ALAN WRIGHT, ARTHUR R. MILLER, & EDWARD H. COOPER, FEDERAL PRACTICE &
PROCEDURE § 4222 (3d ed.) (“[E]ven when the power exists to stay state court proceedings,
the exercise of that power is discretionary, allowing the federal court to weigh all of the
factors for and against issuing a stay.”).
6 United States v. Simcho, 326 F. App’x 791, 792 (5th Cir. 2009) (per curiam)
(unpublished) (quoting Microfinancial Inc. v. Premier Holidays Int’l, Inc., 385 F.3d 72, 77 (1st
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We have previously recognized that due to the significant public interest
in law enforcement, criminal prosecutions often take priority over civil
actions, 7 and the government is permitted to seek stays of civil litigation to
protect the integrity of its criminal investigations. 8 Civil and criminal
proceedings are subject to different procedural rules; less restrictive civil
discovery could undermine an ongoing criminal investigation and subsequent
criminal case. 9
In determining whether a civil action or civil discovery should be allowed
to proceed in light of an impending criminal case, we have directed district
courts to employ “[j]udicial discretion and procedural flexibility” to “harmonize
the conflicting rules and to prevent the rules and policies applicable to one suit
from doing violence to those pertaining to the other.” 10 Formal criminal
proceedings are not a requirement to the proper issuance of a stay. 11 Although
the government had not yet issued any indictments pertaining to its criminal
investigation of [Company] at the time of the district court’s ruling, the grand
jury had convened and issued subpoenas when the district court enjoined the
Cir. 2004)); see also Campbell v. Eastland, 307 F.2d 478, 487 (5th Cir. 1962) (recognizing the
district court’s discretion to grant or deny a stay).
7 In re Eisenberg, 654 F.2d 1107, 1113 (5th Cir. Unit B Sept. 1981).
8 Campbell, 307 F.2d at 488 (holding that allowing civil discovery during a criminal
investigation would create “an open invitation to [parties] under criminal investigation to
subvert the civil rules into a device for obtaining pre-trial discovery against the Government
in criminal proceedings”); see also United States v. Kordel, 397 U.S. 1, 12 n.27 (1970) (“Federal
courts have deferred civil proceedings pending the completion of parallel criminal
prosecutions when the interests of justice seemed to require such action . . . .”) (citing
Campbell, 307 F.2d 478).
9 Campbell, 307 F.2d at 487 (“A litigant should not be allowed to make use of the
liberal discovery procedures applicable to a civil suit as a dodge to avoid the restrictions on
criminal discovery and thereby obtain documents he would not otherwise be entitled to for
use in his criminal suit.”); see also In re Eisenberg, 654 F.2d at 1113 (“[L]iberal civil discovery
procedures [are] not a ‘back door’ to information otherwise beyond reach under the criminal
discovery rules.”).
10 Campbell, 307 F.2d at 487.
11 See id. (noting that a trial judge should not “ignore the effect discovery would have
on a criminal proceeding that is pending or just about to be brought”).
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state civil proceedings, thereby demonstrating that the criminal case was more
than just “vague suspicions that might in the future lead to a criminal
charge.” 12 Sixteen individuals have since been indicted for Medicare fraud.
It is not necessary that the movant for civil discovery specifically intend
to circumvent the rules of criminal discovery: a movant with the “purest of
motives” would, in the event the civil case was allowed to proceed, gain access
to materials otherwise unobtainable and, in so doing, potentially harm the
related criminal investigation. 13 [Company] is pursuing a civil lawsuit in state
court seeking, among other things, return or ownership of electronic devices
currently held by federal investigators. If not enjoined, further proceedings in
state court, including civil discovery, could undermine the federal criminal
investigation into [Company]. Furthermore, [Company] will not be unduly
burdened if the civil proceedings do not proceed for the duration of the criminal
investigation: ownership of the electronic devices can be determined after the
investigation is complete, and the devices returned to [Company] if its
ownership is established.
* * *
We AFFIRM the district court’s order.
12 Id. at 488.
13 See In re Eisenberg, 654 F.2d at 1113-14.
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