United States v. Russell McLaughlin Jr., in No. 96-1982. United States of America v. Mark McLaughlin in No. 96-2000

BECKER, Circuit Judge,

concurring.

This is a close and difficult case, with many complications. I believe that the result that Judge Schwarzer reaches is correct, but I write separately because I come to that result by a more tortuous route, which I feel compelled to explain. That explanation will also identify the many concerns I have about the law in this area, which I hope can be dealt with in future eases. These concerns arise, I hasten to add, not because of any deficiency in Judge Schwarzer’s opinion but because of the tensions created by Braswell *141 v. United States, 487 U.S. 99 , 108 S.Ct. 2284 , 101 L.Ed.2d 98 (1988) and the application of Braswell to cases that go beyond Braswell’s facts.

I.

The Supreme Court held in Braswell that a corporate records custodian may not invoke his Fifth Amendment privilege against self-incrimination to resist a government summons or subpoena for corporate records even if the act of producing such records would relate information that would incriminate him. However, because the act of production is a corporate act, i.e., the custodian produces the documents as an agent for the corporation, the Court also held that the government may not use that act against the custodian in a prosecution against him personally.

In part I.A. of his opinion, Judge Schwarzer implicitly assumes that all acts of non-production related to a summons or subpoena are corporate acts, and that the government therefore cannot introduce evidence of this non-production against the custodian. I believe this to be an uncritical assumption. Whether an act of non-production is a corporate act turns on principles of agency law. A good faith decision by a records custodian to withhold documents he believes to be irrelevant to a summons or a subpoena is a corporate act. But, what if the custodian fails to turn over documents sought by the government because of gross negligence, deliberate indifference, or recklessness? Or, what if the custodian willfully and unlawfully chooses not to comply (as may well have happened here)? Are these acts of non-production within the custodian’s agency? Hornbook agency law answers these questions with a “maybe.” See Restatement (Second) of Agency § 34 cmt. g (1957) (“Authority to do illegal or tortious acts, whether or not criminal, is not readily inferred.”). 1 In short, it is not clear to me that a records custodian will always be acting in his representative capacity when he fails to respond to a summons or a subpoena.

In this case, at least as I understand the record, there were no findings in the district court with respect to whether Russell McLaughlin, Jr. acted within his agency when he failed to comply adequately with the relevant IRS summons. I suppose, however, that such agency could be inferred. Building Inspections Underwriters, Inc. (“BIU”) and its closely related businesses were owned and operated by the McLaughlin family, three of whom were indicted for tax evasion. It would not be unreasonable to conclude that the corporation as an entity directed its agent Russell McLaughlin, Jr., the President of the company, to withhold certain documents. However, it would seem inappropriate for us to draw that inference on this record without further investigation into the governing structure of the interlocking companies. In other words, under straightforward application of principles of hornbook agency law, we cannot now say for certain that McLaughlin acted within his agency. To conclude that McLaughlin acted within his agency (as I ultimately do), we must therefore look beyond hornbook agency law.

If McLaughlin acted outside his agency, then the Braswell protections likely do not apply. See Braswell, 487 U.S. at 118 n. 11, 108 S.Ct. at 2295 n. 11 (“[T]he limitation [against introducing the act of production against a custodian personally] is a necessary concomitant of the notion that a corporate custodian acts as an agent and not an individual when he produces corporate records in response to a subpoena addressed to him in his representative capacity.”). Still, the government may be prohibited from introducing his act of non-production at a prosecution against him. For, if McLaughlin acted in his personal capacity and does not enjoy the protections afforded by Braswell , he may nevertheless enjoy a Fifth Amendment privilege against the compelled, incriminating testimony effected by the summons, if the elements of a privilege claim are met.

The elements of compulsion were arguably present here, for the summons or subpoena itself compelled McLaughlin not only to turn *142 over records, but also to exercise his discretion as to whether certain documents fall within the scope of the summons or subpoena. Subject to the reservations set forth in the margin, I reason that he was therefore compelled to make a choice. 2

Whether an act is testimonial and incriminating depends on the facts of a given case. See Fisher v. United States, 425 U.S. 391, 410 , 96 S.Ct. 1569, 1580-81 , 48 L.Ed.2d 39 (1976). There are a number of potential testimonial aspects of an act of production. Those aspects include the following: that the records produced existed; that the custodian had possession and control over the records; that the custodian believed the records to be subject to the subpoena or summons; and that the records are authentic. An act of non-production similarly has numerous testimonial aspects, including the following: that the documents requested do not exist; that the custodian did not possess or control the documents; that the custodian did not believe the documents to be subject to the subpoena or summons; and that the custodian believed that the withheld documents were relevant and that their contents or the act of producing them were incriminating.

In this case, the very act of non-production — the result of the compelled choice— related certain information. See Doe v. United States, 487 U.S. 201, 211 , 108 S.Ct. 2341, 2348 , 101 L.Ed.2d 184 (1988). That McLaughlin failed to comply fully with the summons arguably implied that he believed that the withheld documents were relevant and that their contents or the act of producing them were incriminating. That failure may have further implied that McLaughlin had earlier willfully failed to report the contents of the documents (income from BIU) to the IRS. The government used these implications against McLaughlin at trial, arguing that the non-production of the documents evidenced McLaughlin’s intent to evade federal taxes. The act of non-production, then, appears to have been incriminating. Thus, in this ease, even if McLaughlin were not acting within his agency, I believe that the government could not use his act of non-production against him because to do so would have violated his Fifth Amendment rights. But, if we so hold, would we be undermining Bras-well by permitting a non-producing custodian to claim his Fifth Amendment rights?

II.

It is at this point that the complexities and problems of the case begin to crystallize. Going forward, how are we to apply this case and Braswell to future Russell McLaughlins? Assume that a grand jury issues a subpoena to a records custodian (as happened in Bras-well). He refuses to comply, and seeks to quash the subpoena, invoking his Fifth Amendment privileges. The government opposes the motion to quash. What is the court to do? As a first step, the court should determine whether Braswell applies and prohibits the custodian from invoking his personal Fifth Amendment rights. But that would require the court to determine whether the custodian planned to act outside the scope of his agency in responding to the subpoena. Such a question could effectively require the custodian to imply that he fil *143 tends to act unlawfully by withholding relevant documents. As a condition of claiming his privilege against self-incrimination, then, the custodian would need to incriminate himself. Perhaps the court could prohibit the government from using that admission against the custodian at some future prosecution, but this prohibition further complicates an already complicated problem.

Even undertaking an analysis as to whether Braswell applies may undermine it. By undertaking such an analysis, the court might signal to the custodian that there is a way around Braswell , and a way around complying with the subpoena. If the custodian knows that compliance with the subpoena would force him to turn over documents the contents of which are personally incriminating or the act of production of which is personally incriminating, then he may claim that he plans to act outside his agency when he responds to the subpoena (and risk that his admission might lead to or support some future prosecution). In that case, a devious custodian can invoke his Fifth Amendment privilege and resist the subpoena, the very outcome Braswell sought to avoid.

As suggested above, the court might attempt to limit the use of the results of complying with the subpoena, i.e., the act of production or non-production, to ensure that any testimonial aspects of being compelled to respond to the subpoena are not used to incriminate. Under United States v. Doe, 465 U.S. 605, 616-17 , 104 S.Ct. 1237, 1244-45 , 79 L.Ed.2d 552 (1984), the court cannot by itself prospectively limit the use of testimonial acts that have been compelled. The court can, however, suggest that if the government wants to compel a response to the subpoena that might be testimonial it must do so by resort to a statutory grant of use immunity pursuant to 18 U.S.C. §§ 6002 and 6003. But, such a suggestion violates at least the spirit of Braswell . The Court in Braswell strove mightily to ensure that the government could compel a records custodian to comply with a subpoena without first providing him statutory use immunity, an immunity that could stymie any prosecution directed at him. 3

The only way to avoid this morass altogether, at least as I see it, is to assume in all cases (as Judge Schwarzer seems to do) that a records custodian will always act within his agency when he responds to a government subpoena or summons. Working from that assumption, this case and our hypothetical case are easy; under Braswell , neither McLaughlin nor our hypothetical records custodian can invoke his personal Fifth Amendment rights to resist a summons or a subpoena served on the entity he represents, but the government cannot use any act of production or non-production in a prosecution against him. However, as I noted above, I believe that such an assumption stretches hornbook agency law. I am willing to accept such a stretch because the alternative is to undermine either Braswell or Fifth Amendment jurisprudence more generally. However, I think that the problems that I have identified need exploration in future cases.

Whichever way the pie is sliced here, I believe that the use of McLaughlin’s act of non-production against him personally would be unlawful. I therefore join Judge Schwarzer’s opinion.

. A further potential complication is determining whether state or federal common law applies to define the scope of the agency, and, if state law applies (which I suspect it does), determining which state law to apply.

. It is not entirely clear that a records custodian who inadequately complies with a summons or subpoena has been compelled, and, of course, if there is no compulsion, then the act of non-production could be introduced against the custodian (assuming that act was outside the scope of his agency). There are at least two ways of describing the factual scenario in such a way as to conclude that there is no compulsion (neither of which is wholly satisfying). First, it could be said that any compulsion is directed at the corporation or at least at an individual in his representative capacity, not the individual in his personal capacity. Although I am unaware of any discussion on this precise point, the Supreme Court, in cases such as Braswell , has focused on the testimonial aspects of a records custodian’s producing records. It seems to have assumed that personal compulsion is present; otherwise, it would not have needed to create evidentiary limitations on introducing the act of production because there would be no concerns at all about violating the individual's Fifth Amendment privileges. Second, it could he said that the government did not compel the act of non -production, but only the act of production; at least in the case of the custodian who acted willfully, he may be said to have voluntarily chosen to disregard the summons or subpoena. Yet that voluntary act of non-compliance occurred only after the government compelled the custodian to engage in the decisional process in the first place. See infra.

. The court might also choose to appoint an alternate custodian (for example, outside legal counsel) to respond to the subpoena. Braswell strongly discourages this course. How, the Supreme Court asks, is an alternate custodian, unfamiliar with the record-keeping machinery of the entity, to respond adequately to a subpoena? The Court assumes, correctly I believe, that resort to an alternate custodian all but ensures that the entity will not turn over the documents the government seeks.