Opposition — Freedman v. United States

No.-75-1215

On the Siiprene Court of the Hite States

OCTOBER =. 1975

_ ABRAHAM E. FREEDMAN, PETITIONER

ae |

UNITED STATES OF AMERICA

ON PETITION FOR A WRIT OF CERTIORARI TO

THE UNITED STATES COURT OF APPEALS FOR

THE THIRD CIRCUIT

BRIEF FOR THE UNITED STATES IN OPPOSITION

_ Ropert H, Bork,

. Solicitor General,

RICHARD L. THORNBURGH.

Assistant Attorney General,

JEROME M. Fert,

MIcHAEL J. KEANE,

Attorneys,

Department of Sastioe

Washington, D.C. 20530.

_

In the Supreme Court of the United States

OCTOBER TERM, 1975

No. 75-1215

ABRAHAM E. FREEDMAN, PETITIONER

Vv.

UNITED STATES OF AMERICA

ON PETITION FOR A WRIT OF CERTIORARI TO

THE UNITED STATES COURT OF APPEALS FOR

THE THIRD CIRCUIT

BRIEF FOR THE UNITED STATES IN OPPOSITION

OPINIONS BELOW

The opinion of the court of appeals (Pet. App. B) is

reported at 529 F.2d 543. The opinion of the district

court (Pet. App. C) is reported at 399 F. Supp. 668.

JURISDICTION

The judgment of the court of appeals was entered on

January 8, 1976. A petition for rehearing with Suggestion

of rehearing en banc was denied on February 4, 1976 (Pet.

App. Al). The petition for a writ of certiorari was filed

on February 25, 1976. The jurisdiction of this Court

is invoked under 28 U.S.C. 1254(1).

QUESTION PRESENTED

Whether a member of a law partnership is entitled

to invoke his Fifth Amendment privilege against self-

(1)

2

incrimination as a ground for refusing to comply with

a grand jury subpoena for financial records of the

partnership.

CONSTITUTIONAL PROVISION INVOLVED

The Fifth Amendment to the United States Con-

stitution states in pertinent part:

No person * * * shall be compelled in any criminal

case to be a witness against himself * * * .

STATEMENT

On June 16, 1975, a grand jury of the United

States District Court for the District of New Jersey

issued a subpoena duces tecum to the law firm of

Freedman, Borowsky and Lorry, directing “any responsi-

ble officer” of the firm to produce various specified

financial records of the partnership over the previous eleven

years.' Petitioner, a partner in the law firm, moved to

quash the subpoena on July 11, 1975, alleging that the

subpoena was unconstitutionally overbroad and that

there had been no showing that the subpoenaed documents

were relevant to any investigation over which the grand

‘The subpoena directed production of the following partnership

documents for the period from January |, 1964, to June 13, 1975:

general ledgers, general journals, cash disbursement journal, petty

cash books and vouchers, purchase journals. vouchers, paid bills.

invoices. cash receipts journal. billings, bank statements. can-

celled checks and check stubs, payroll records, contracts and copies

of contracts, including all retainer agreements, financial statements.

bank deposit tickets, retained copies of partnership income tax

returns, retained copies of payroll tax returns, accounts payable

ledger, accounts receivable ledger. telephone company statement of

calls and telegrams and all telephone toll slips, records of all

escrow trust or fiduciary accounts maintained on behalf of clients.

safe deposit box records. records of all purchases and sales of

stocks and bonds. a complete list of all partners, associates and

employees. together with their home addresses. and all W-2 forms

for each partner, associate and employee (Pet. App. A3, A36).

3

jury had jurisdiction. In response, the government sub-

mitted an affidavit disclosing that the grand jury was

investigating alleged criminal violations by a client

of the firm, the National Maritime Union (NMU), and

by the union’s officers and employees (Pet. App. A3).

On July 14, 1975, the district court denied petitioncr’s

motion to quash and directed him to produce the sub-

poenaed records on the following day. Petitioner was not

ordered to testify. Although petitioner appeared before

the grand jury on July 15, he refused to produce the

records on the ground that such production would violate

his Fifth Amendment privilege against self-incrimination.

The government thereupon moved to hold petitioner in

civil contempt, and the district court scheduled an evi-

dentiary hearing for July 23, 1975 (Pet. App. A4-A5).?

After the evidentiary hearing, the district court con-

cluded that the subpoenaed records belonged to the law

firm of Freedman, Borowsky and Lorry, an institutional

entity separate and distinct from its members, and were

held by petitioner not as his personal and private

effects but in a representative capacity for the entity

(Pet. App. A38). Petitioner again was ordered to produce

the records before the grand jury on August 12, 1975

(Pet. App. A40). When petitioner refused on that day

to comply, the court ordered that he show cause why

he should not be held in contempt. Following a full

hearing on September 8, 1975, the district court adjudged

petitioner in civil contempt and ordered him imprisoned and

"The court also ordered petitioner to produce the subpoenaed

records for an in camera inspection. When petitioner failed to comply,

he was held in civil contempt. On July 22, 1975, the court of

appeals summarily reversed the contempt adjudication and the

order requiring im camera inspection, without prejudice to the

government's right to reinstitute contempt proceedings following

the evidentiary hearing (Pet. App. AS, n. 3).

4

fined $1.500 per day until he produced the documents. The

order was stayed by the district court pending appeal.

The court of appeals vacated and remanded. Although

it rejected petitioner’s claims that he had a Fifth

Amendment privilege to refuse production and that

the government’s showing of relevancy of the records

relating to the National Maritime Union had been in-

sufficient, the court held that there had been an inade-

quate explanation of the grand jury’s need for financial

records relating to other clients of the firm (Pet. App.

A6-A10). The order adjudging petitioner in civil contempt

was therefore vacated and the case remanded to the dis-

trict court to afford petitioner an opportunity to furnish

the materials relating to the NMU and to allow the

government to demonstrate the relevancy of the other

materials to the grand jury’s investigation (Pet. App. A16).

ARGUMENT

1. In Bellis v. United States, 417 U.S. 85, the

Court held that the Fifth Amendment privilege against

self-incrimination was not available to a member of a

law partnership which had “an established institutional

identity independent of its individual partners” (417

U.S. at 95), where a subpoena had sought financial

records of the firm that were held by the member in a

representative capacity (id. at 97). The court of appeals

correctly concluded (Pet. App. A7) that “Freedman, Borow-

sky & Lorry possesses an identity separate and distinct

from that of the petitioner,” that the records subpoenaed

were held by petitioner as a representative of the law

firm, and that Bellis therefore controls the situation

here.

The facts adduced at the evidentiary hearing indicate

that, during the period covered by the subpoena, Freed-

man, Borowsky and Lorry was one of the largest maritime

5

and admiralty law firms in the United States, with offices

in Philadelphia and New York (F.F. 17, 19).} It consisted

of twelve profit-sharing members (each of whom contrib-

uted capital to the firm), nine associate attorneys, and

approximately fifty other employees, including three book-

keepers who maintained the firm’s financial and other

records (F.F. 18-19, 30, 84). From 1970 to 1972 the

firm’s total billings exceeded $10 million (F.F. 45).

In addition, the firm filed both federal and state

partnership tax returns and held itself out to the public,

the courts, and the legal profession as a partnership

(F.F. 3-8, 10, 18, 56-57, 67, 74, 85); it maintained

bank accounts in the partnership name, used that name

on its stationery and retainer agreements, and accepted

payments in that name for legal services performed by its

members (F.F. 29, 34, 36, 44); ordinary operating expenses,

other business expenses, charitable contributions, legal

malpractice, medical and life insurance premiums, work-

men’s compensation insurance, and local taxes were paid

from the firm’s account (F.F. 42, 47-52, 78-82); and

depreciation on the firm’s assets was divided propor-

tionately among all of the profit-sharing members of the

firm (F.F. 77). These findings clearly reflect that petition-

er’s law firm was “an independent entity apart from its

individual members.” Bellis v. United States, supra, 417

U.S. at 92, and that it was “well organized and

structured” and “maintain[ed] a distinct set of organ-

izational records (id. at 93).

Petitioner contends (Pet. 8), however, that “Bellis makes

access [to the subpoenaed records] one of two essential

prerequisites to overruling a claim of privilege, and

requires unequivocally that the organization ‘must

“FF.” refers to the district court’s enumerated Findings of

Fact (Pet. App. A19-A32).

a)

. recognize rights in its members of control and access

to them.’ " We disagree. The critical question under

Bellis is whether, having found the existence of a separate

institutional entity, the subpoenaed documents should be

considered personal papers of a member of the entity

rather than organizational records of that entity held only

in a representative capacity. 417 U.S. at 88. While the

recognition or denial of a right of access to the records

by other members of the entity may be relevant to that

determination, the more important factor is the nature

of the records themselves.

Here, as in Bellis, the documents demanded were

“merely the financial, books and records of the [law

lirm],” which “refleged] the receipts and disburse-

ments of the entire firm * * * .” 417 U.S. at 98. Not-

withstanding petitioner’s claim of his exclusive access to

these records—a claim that is disputed by the district

court’s findings that the firm’s bookkeeper had an access

key and that members of the firm were given access

to the ledger sheets of the cases they were handling

(F’F. 32, 33)—these impersonal financial records of an

extensive business enterprise cannot be characterized as

petitioner’s private papers. See Bellis v. United States,

supra, 417 U.S. at 97-98. Indeed, petitioner’s exclusive

focus on the right of access, regardless of the size or

structure of the business entity or the nature of the

documents involved, would allow any unincorporated

association to shield its organizational records from grand

7

jury subpoenas merely by limiting unrestricted access

to its records to a single individual.‘

.Nor is there merit to petitioner’s suggestion (Pet. 9-10)

that the existence of an independent entity is dependent

upon a state charter or formal operating agreement.

Not only was the adoption of such an agreement not

a consideration in Bellis, but the record in that case

was unclear as to whether a formal partnership agreement

even existed. See Bellis v. United States, supra, 417 U.S.

at 96, n. 4. See also United States v. Kuta, 518 F.2d

947, 953 (C.A. 7), certiorari denied, December 8, 1975

{No. 75-307), where a partner's Fifth Amendment claim

was rejected despite the absence of a formal partnership

agreement.

2. Finally, in light of events that have transpired sub-

sequent to the court of appeals’ vacation of petitioner's

civil contempt adjudication and its remand to the district

court for further proceedings, review of the instant case

would be inappropriate at this time.

On the basis of the evidence offered at the hearing held

on July 24, 1975, the district court had substantially

accepted petitioner’s claim of exclusive access to and

control over the firm’s records, although ruling that this

did not suffice to sustain the claim of privilege. In

‘In any event, even if petitioner could establish that the sub-

poenaed documents were his personal records rather than those of

a separate institutional entity, he would still have no Fifth

Amendment privilege to refuse production in view of Fisher v.

United States, No. 74-18, decided April 21, 1976. Petitioner does

not contend that he personally prepared any of the financial

records of the firm or that the subpoena would require him to

“restate, repeat or affirm the truth of the contents of the doc-

uments sought.” Slip op. 17. Indeed, the district court found

that petitioner “does not know or is unsure of what types of

financial books and records are maintained by the law firm of

Freedman, Borowsky and Lorry” (F.F. 31).

&

February and March 1976, however, seven members of

Freedman, Borowsky and Lorry withdrew from the firm

and took firm records with them. Proceedings have now

been begun in the district court to determine whether

petitioner’s testimony at the evidentiary hearing may have

been inaccurate. These proceedings may compel! the

district court to alter its findings on petitioner’s access

and control over the records, which findings are the

premise for petitioner’s present claims.‘

CONCLUSION

It is therefore respectfully submitted that the petition

for a writ of certiorari should be denied.

ROBERT H. Bork.

Solicitor General.

RICHARD L. THORNBURGH,

Assistant Attorney General.

JEROME M. Feit,

MICHAEL J. KEANE.

Attorneys.

May 1976.

‘Contrary to petitioner's contention (Pet. 14, n. 6), there is no

reason to hold this case pending the Court's decision in Andresen

v. Maryland, No. 74-1646, certiorari granted, October 6, 1975,

or Shaffer v. Wilson, No. 75-601, petition for a writ of certiorari

pending. Andresen presenis the question whether the introduction

into evidence of a person's books and records, seized in com-

pliance with the Fourth Amendment, may nonetheless violate the

Fifth Amendment. In Andresen, however, the law firm was a sole

proprietorship and the government did not allege that the

papers were held only in a representative capacity. Thus the Court's

decision could not affect the disposition of this case in a way that

would be favorable to petitioner.

DOJ-1976-04