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Precedential or Non-Precedential: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

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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.

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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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