St. Vincent Medical Group, Inc. v. DOJ

In the
United States Court of Appeals
For the Seventh Circuit
____________________
No. 22-3009
ST. VINCENT MEDICAL GROUP, INC.,
d/b/a ASCENSION MEDICAL GROUP – INDIANA,
Plaintiff-Appellant,
v.
UNITED STATES DEPARTMENT OF JUSTICE,
Defendant-Appellee.
____________________
Appeal from the United States District Court for the
Southern District of Indiana, Indianapolis Division.
No. 1:22-mc-00011 — James P. Hanlon, Judge.
____________________
ARGUED MAY 24, 2023 — DECIDED JUNE 22, 2023
____________________
Before SCUDDER, ST. EVE, and KIRSCH, Circuit Judges.
KIRSCH, Circuit Judge. Ascension Medical Group sought to
depose a DEA agent and a federal prosecutor in state court
litigation. Their testimony would help Ascension prove that
one of its doctors failed to disclose that he was under federal
investigation, in violation of his employment agreement. Af-
ter the Department of Justice refused to make either employee
available for depositions, Ascension sued to compel their
2 No. 22-3009
testimony. The district court determined that the Depart-
ment’s refusal was reasonable and entered judgment in its fa-
vor. Ascension appeals; we affirm.
Thanks to the federal housekeeping statute, 5 U.S.C. § 301,
each federal agency has promulgated regulations—called
Touhy regulations, see United States ex rel. Touhy v. Ragen, 340
U.S. 462 (1951)—governing when it will disclose information
or make its employees available for depositions. The Depart-
ment of Justice is no exception; its Touhy regulations live at
28 C.F.R. § 16.21 et seq. Ascension argues the Department
skirted its Touhy regulations when it refused to make the pros-
ecutor and agent available.
The Administrative Procedure Act’s arbitrary-and-capri-
cious standard governs challenges to an agency’s withholding
of documents or testimony in response to a state court sub-
poena. Edwards v. U.S. Dep’t of Just., 43 F.3d 312, 314−17
(7th Cir. 1994) (citing 5 U.S.C. § 706(2)). Put another way: un-
less the Department unreasonably applies its Touhy regula-
tions, a federal court is powerless to compel its participation
in state court discovery. FCC v. Prometheus Radio Project, 141
S. Ct. 1150, 1158 (2021).
Ascension disagrees. It says that proportionality and rele-
vance, which control civil discovery in federal courts, should
govern whether an agency can withhold documents or testi-
mony. See Fed. R. Civ. P. 26(b)(1). Some circuits apply those
principles to discovery requests emanating from federal
No. 22-3009 3
litigation. 1 But when it comes to state court litigants seeking
discovery from an agency, the circuits are unanimous: the
APA controls. 2 We see no reason to chart a new course and
depart from Edwards or our sister circuits. The APA confers no
federal subject matter jurisdiction. See, e.g., Okere v. United
States, 983 F.3d 900 (7th Cir. 2020). Rather, it confers statutory
standing on Ascension and contains the waiver of sovereign
immunity that allows a federal court to entertain a challenge
to an agency’s interpretation and application of its Touhy reg-
ulations. 5 U.S.C. § 702; Thompson v. N. Am. Stainless, LP, 562
U.S. 170, 177–78 (2011). In other words, without the APA, As-
cension has no recourse against the Department. Thus, only
when the Department’s decision contravenes the APA’s famil-
iar arbitrary-and-capricious standard can a district court force
it to take part in state court discovery.
1 Compare Linder v. Calero-Portocarrero, 251 F.3d 178, 180 (D.C. Cir.
2001) (applying federal discovery standards because 5 U.S.C. § 702 waives
sovereign immunity to federal nonparty subpoenas), and Exxon Shipping
Co. v. U.S. Dep't of Interior, 34 F.3d 774, 778–79 (9th Cir. 1994) (holding that
nonparty subpoenas under Rules 26 and 45 fall within the APA’s waiver
of sovereign immunity for all actions seeking nonmonetary relief), with
COMSAT Corp. v. Nat'l Sci. Found., 190 F.3d 269, 277–78 (4th Cir. 1999)
(applying the APA’s arbitrary-and-capricious standard to agency’s refusal
to comply with a nonparty Rule 45 subpoena), and Moore v. Armour Pharm.
Co., 927 F.2d 1194, 1197 (11th Cir. 1991) (same).
2 Watts v. SEC, 482 F.3d 501, 508−09, 508 n.* (D.C. Cir. 2007) (Ka-
vanaugh, J.); Puerto Rico v. United States, 490 F.3d 50, 60−61 (1st Cir. 2007);
Davis Enters. v. EPA, 877 F.2d 1181, 1186 (3d Cir. 1989); COMSAT Corp.,
190 F.3d at 277−78; CF Indus., Inc. v. ATF, 692 F. App’x 177, 181−82 (5th Cir.
2017); Exxon Shipping Co., 34 F.3d at 778; see also Alltel Commc’ns, LLC v.
DeJordy, 675 F.3d 1100, 1102−05 (8th Cir. 2012) (concluding that third-party
subpoenas to Indian tribes are barred by sovereign immunity, just like
state court subpoenas to federal agencies).
4 No. 22-3009
Viewed through that highly deferential lens, the Depart-
ment’s refusal must be affirmed. To prevail, Ascension needs
to show that the Department’s application of its Touhy regu-
lations was “arbitrary, capricious, an abuse of discretion, or
otherwise not in accordance with law.” 5 U.S.C. § 706(2)(A).
Those regulations allow the Department to refuse disclosure
when it determines that disclosure is unwarranted. 28 C.F.R.
§ 16.26(c). And they prohibit disclosure when doing so
“would reveal investigatory records compiled for law en-
forcement purposes[] and would interfere with enforcement
proceedings or disclose investigative techniques and proce-
dures the effectiveness of which would thereby be impaired.”
Id. § 16.26(b)(5).
As the district court noted, Ascension hoped to learn
whether, when, and to what extent the doctor knew that he
was the subject or target of a federal investigation. It asked to
depose a federal prosecutor and a federal agent to those ends.
The Department considered the policy interests reflected in
§ 16.26(b)(5) and concluded that disclosure was unwarranted.
It explained how it arrived at that conclusion: allowing either
deposition would interfere with the Department’s law en-
forcement mission by not only distracting two employees
from their work, but by jeopardizing its ability to obtain co-
operation in future investigations, too. The APA allows us to
discard an agency’s conclusion if the path it took cannot be
discerned. Motor Vehicle Mfrs. Ass’n v. State Farm Mut. Auto.
Ins. Co., 463 U.S. 29, 43 (1983). Here the dots almost connect
themselves. Because the Department reasonably applied its
Touhy regulations to the particulars of Ascension’s request, its
refusal was neither arbitrary nor capricious. Underscoring all
of this is the reality that what Ascension seeks is, as best we
can tell, cumulative: If the doctor denies that he was under
No. 22-3009 5
investigation, Ascension can point to the DEA proffer letter he
signed acknowledging that he was “a subject of a federal in-
vestigation.”
At bottom, whether to comply with a state court subpoena
“is essentially a policy decision about the best use of the
agency’s resources.” COMSAT, 190 F.3d at 278. The Depart-
ment considered the facts and the law, made a reasoned deci-
sion, and explained itself. Ascension might prefer a different
outcome, but it should not be surprised by today’s result.
It points us to no case when a federal court has compelled a
federal prosecutor to sit for a civil state court deposition.
This will not be the first.
AFFIRMED