Opposition Brief — Bank of Nova Scotia v. United States

Office- Supreme Court,

FILED "

G NOV 27 1964

i

No. 84-329 | AMOR STEVES,

| CLERK

—

On the Supreme Court of the Hnited States

OCTOBER TERM, 1984

BANK OF NOVA SCOTIA, PETITIONER

V.

UNITED STATES OF AMERICA

ON PETITION FOR A WRIT OF CERTIORARI TO

THE UNITED STATES COURT OF APPEALS FOR

THE ELEVENTH CIRCUIT

BRIEF FOR THE UNITED STATES IN OPPOSITION

Rex E. LEE

Solicitor General

GLENN L. ARCHER, JR.

Assistant Attorney General

MICHAEL L. PAUP

ROBERT E. LINDSAY

ALAN HECHTKOPF

Attorneys

Department of Justice

Washington, D.C. 20530

(202) 633-2217

QUESTIONS PRESENTED

1. Whether the lower courts’ enforcement of a grand jury

subpoena issued to petitioner was proper despite petition-

er’s Claim that compliance with the subpoena would violate

foreign law and a foreign judicial decision.

2. Whether a fine of $25,000 per day imposed as a con-

tempt sanction to coerce petitioner’s compliance with the

grand jury subpoena was civil in nature.

(I)

TABLE OF CONTENTS

Page

ecu abe bhesssss cbncHinseacsews l

ee a a, ea kh ees kw anake'a l

Ne cane ke bes eek ekekesenes |

ES AEE a ean a eee eae eee 7

a ks ew ew eae es 18

TABLE OF AUTHORITIES

Cases:

Banco Nacional de Cuba v. Sabbatino,

re awa ee us 13

California Bankers Ass'n v. Shultz,

cane en wes 9

Chase Manhattan Bank, In re, 297 F.2d

ek cn ig 0 6 6.0.0 10, 14

Grand Jury Proceedings (Bank of Nova Scotia I),

In re, 691 F.2d 404, cert. denied, 462 U.S.

RE ede ke cake eee cineess 4, 8, 13, 14

Grand Jury Proceedings (Field), In re,

532 F.2d 404, cert. denied, 429 U.S.

Ri SOR aT ee, ee rr 14-15

Ings v. Ferguson, 282 F.2d 149 ............ 10, 14

Rogers v. Lodge, 458 U.S. 613 ...........005- 17

Shillitani v. United States, 384 U.S.

NEE SR oer eee See eee 15

Societe Internationale Pour Participations

Industrielles v. Rogers, 357 U.S.

See eck eke es We EN Sy 6 6 CSW ORS ¥O4 8 ee 10, 11, 12

IV

Page

Cases—Continued:

United States v. First National Bank,

3 fb errr er er 10, 13, 14

United States v. First National City Bank,

CoS | er ere errr ree 14

United States v. Powell, 379 U.S. 48 .......... 14

United States v. Ryan, 402 U.S. 530 .......... 12

United States v. Vetco, Inc., 644 F.2d

1324, cert. denied, 454 U.S. 1098 ......... 11, 15

Westinghouse Electric Corp. Uranium Litigation,

) @ ia y 6 Sereerr Tyr Per ie 15

Miscellaneous:

Restatement (Second) of Foreign Relations

Law of the United States (1965) ..... 7, 13, 14, 15

In the Supreme Court of the Hnited States

OCTOBER TERM, 1984

No. 84-329

BANK OF NOVA SCOTIA, PETITIONER

Vv.

UNITED STATES OF AMERICA

ON PETITION FOR A WRIT OF CERTIORARI TO

THE UNITED STATES COURT OF APPEALS FOR

THE ELEVENTH CIRCUIT

BRIEF FOR THE UNITED STATES IN OPPOSITION

OPINIONS BELOW

The opinion of the court of appeals (Pet. App. 1a-28a) is

reported at 740 F.2d 817. A prior opinion of the court of

appeals (Pet. App. Ic-3c) is reported at 722 F.2d 657.

Orders of the district court (Pet. App. 1b-17b, Id-3d, le-2e,

1f-2f, and 1g-2g) are unreported.

JURISDICTION

The judgment of the court of appeals was entered on

August 14, 1984, and the petition for a writ of certiorari was

filed on August 31, 1984. The jurisdiction of this Court is

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

STATEMENT

Petitioner challenges orders of the United States District

Court for the Southern District of Florida holding it in civil

contempt for failing to comply with prior orders of the

(1)

2

court enforcing a federal grand jury subpoena and imposing

a fine of $1,825,000.

Petitioner is a Canadian banking corporation headquar-

tered in Toronto (Pet. App. 2a). On March 4, 1983, its office

in Miami, Florida, was served with a grand jury subpoena

issued by the United States District Court for the Southern

District of Florida (ibid.). The subpoena required petitioner

to produce financial documents pertaining to two individu-

als and three companies from its branches in the Bahamas,

the Cayman Islands, and Antigua (ibid.).' In a letter dated

March 23, 1983, to the Assistant United States Attorney

handling the grand jury proceedings, counsel for petitioner

requested, inter alia, “ ‘a sworn statement regarding the

nature of the evidence sought by the subpoena and its

relation to the investigation’ ” (id. at 3b). On March 29,

1983, one of petitioner’s agents appeared before the grand

jury and declined to produce the subpoenaed documents

(ibid.).

On April 4, 1983, petitioner filed a motion to quash the

subpoena, contending that compliance with the subpoena

would violate the bank secrecy laws of the Bahamas and the

Cayman Islands (Pet. App. 2a-3a). On April 27, 1983, the

district court denied petitioner’s motion and ordered peti-

tioner to comply with the subpoena by May 31, 1983 (id. at

1g-2g). The district court also directed the government “to

provide any reasonable assistance” to the petitioner, “espe-

cially in dealing with the foreign governments,” but ex-

pressly held that the government was not required to for-

ward letters rogatory (id. at 2g).

7

€

'Petitioner determined that there were no documents responsive to

the subpoena at its Antigua branch, and thus that aspect of the sub-

poena is not at issue. Pet. App. 2a n.1.

3

During May 1983, petitioner did not attempt to comply

with the district court’s order by searching for subpoenaed

documents (Pet. App. 3a). Instead, petitioner spent its time

making numerous requests of the government to send let-

ters rogatory and to show the materiality and necessity of

the subpoenaed documents to the grand jury investigation

(ibid.). The government repeatedly responded that it was

willing to furnish any requested assistance short of showing

materiality and necessity or sending letters rogatory (ibid.).

Petitioner’s only effort to comply with the court’s order

during May consisted of the filing on May 27, 1983, of a

petition with the Grand Court of the Cayman Islands, in

which it sought permission to disclose documents called for

by the subpoena (Pet. App. 3a, 4b). The Cayman court

denied the petition on May 31, 1983, and ordered petitioner

not to produce the subpoenaed documents (id. at 5b). Peti-

tioner never appealed this order to the Court of Appeals in

Jamaica (id. at 4a, 5b).

On June |, 1983, the district court conducted a hearing at

which petitioner again requested the court to direct the

government to make a showing of the materiality and

necessity of the subpoenaed documents to the grand jury

investigation and to issue an order containing findings of

materiality and necessity (Pet. App. 5b). At the same time,

however, petitioner’s counsel expressed uncertainty as to

whether the requested showing and findings would satisfy

the Cayman court (id. at 5b-6b). The government, “declin-

ing to lay open its entire grand jury in\«stigation for the

purpose of proceeding in the foreign court,” again expressed

willingness to provide any assistance short of making the

showing requested by petitioner or sending letters rogatory

(id. at 6b).

On October 10, 1983, the district court issued an order in

which it concluded that “the government has done all that it

is required to do by law and by this Court’s order of April

4

27, 1983 in connection with the enforcement of its subpo-

ena” and that “(tJhere can be no doubt that the Bank must

comply with the subpoena” (Pet. App. 2f). Thus, the court

directed petitioner to comply with the subpoena by October

17, 1983, or face a contempt hearing on October 21, 1983

(ibid.). Well before this time, petitioner knew, as a result of

litigation relating to a different grand jury subpoena, that

the Eleventh Circuit had rejected its claims that it was

entitled, by virtue of the conflict between the enforcement

of the subpoena and the requirements of foreign bank

secrecy laws, to a showing of materiality or the issuance of

letters rogatory before being compelled to produce subpo-

enaed records; petitioner also knew that this Court had

declined review of these issues. Jn re Grand Jury Proceed-

ings (Bank of Nova Scotia I), 691 F.2d 1384 (11th Cir.

1982), cert. denied, 462 U.S. 1119 (1983).

Petitioner’s only effort to locate any documents either in

the Bahamas or the Caymans between June |, 1983, and the

scheduled contempt hearing was an October 14, 1983,

search of petitioner’s office in Nassau, which produced no

documents (Pet. App. 4a). Petitioner produced only one

document during the seven months foliowing the issuance

of the subpoeiia (ibid.).

The district court held a contempt hearing on October 20,

1983 (Pet. App. le). In an order issued that day, the court

determined that, “[a]s of Octoder 20, 1983, there is clear and

convincing evidence that the Bank has not turned over the

subpoenaed materials and thus, the Court finds the Bank in

contempt of the order of October 10, 1983” (ibid.). The

court also made a supplemental finding, dated October 24,

1983, that petitioner had not exercised good faith in its

efforts to comply with the subpoena (id. at 2d). The court

imposed a fine of $25,000 per day, to take effect on October

26, 1983, and to remain in effect until the sooner of peti-

tioner’s purging itself of civil contempt by complying with

ef

5

the October 10 order or the expiration of the grand jury (id.

at 2e). Petitioner appealed from the order of contempt, and

the court of appeals stayed the accrual of the fine from

October 25, 1983, until November 14, 1983 (id. at 4a).

On November 11, 1983, the Attorney General of the

Bahamas issued an order allowing petitioner to produce

those subpoenaed documents that might be located in the

Bahamas (Pet. App. 4a). The Attorney General concluded

that the Bahamian bank privacy statute did not prohibit

disclosure because petitioner’s Bahamian branches did not

have an account relationship with the subjects of the sub-

poena (ibid.). Thus, on November 14, 1983, just before the

court of appeals lifted the stay of the fine, petitioner pro-

duced several documents from its Bahamian branches and

asserted that there were no other documents in the Bahamas

(id. at 4a-Sa). The Assistant United States Attorney in-

sisted, however, that other Bahamian documents were still

missing (id. at 5a). Although petitioner disagreed, it subse-

quently produced numerous additional documents from its

Bahamian branches (id. at S5a-9a).

On November 11, 1983, the Grand Court of the Cayman

Islands reconsidered petitioner's application for permission

to disclose the subpoenaed documents but again refused to

grant such authority (Pet. App. Sa). However, on November

17, 1983, pursuant to Section 3(2)(b)(iv) of the Confidential

Relationship (Preservation) Law of 1976 (as amended in

1979) (the Cayman bank secrecy statute), the Governor of

the Cayman Islands authorized the disclosure of the subpo-

enaed documents (Pet. App. 5a). On that same day, peti-

tioner produced all of the documents called for by the

subpoena from its Cayman branch (ibid.). At that time, the

government again informed petitioner that a substantial

number of documents from the Bahamian branches still

had not been produced (ibid.). Petitioner did not complete

the production of Bahamian documents until January 25,

1984 (id. at 6a-9a).

—————

6

The court of appeals heard oral argument on petitioner’s

appeal from the contempt order on December 12, 1983 (Pet.

App. 8a). Thereafter, the court remanded the case to the

district court for further proceedings but retained jurisdic-

tion over the case (id. at Ic-3c). One reason for the remand

was to permit the district court to consider the significance

of informal procedures developed through an exchange of

letters between the governments of the United States and

the Cayman Islands, which were alleged to have afforded a

means by which the government could have obtained the

subpoenaed documents (id. at 8a n.7).

At a hearing on February 14, 1984, the district court

received evidence concerning the “letter agreements”

between the United States and the Cayman Islands, known

as the “Gentlemen’s Agreement” (Pet. App. 9b-12b). The

district court determined that the Gentlemen’s Agreement

was not binding on the United States and that, even if it

were, it did not require the government to resort to the

procedures under the agreement in this case (id. at 15b).

Thus, on February 28, 1984, the district court issued an

order in which it held that enforcement of the subpoena in

this case was proper and directed entry of judgment against

petitioner in the amount of $1,825,000 — a fine of $25,000

per day from the date that the court of appeals lifted the stay

of the fine through the date on which petitioner completed

production of all documents called for by the subpoena

(Pet. App. 1b-17b).

Petitioner then appealed the imposition of the fine (Pet.

9). The court of appeals consolidated that appeal with

petitioner’s pending appeal from the contempt order and

affirmed both of the district court’s orders (Pet. App. la-

28a). The court of appeals agreed with the district court’s

finding that petitioner had failed to exercise good faith in its

efforts to comply with the subpoena, adding that the “flurry

of activity undertaken by the Bank to discover documents

7

after the trial court entered its order of contempt cannot

save the Bank from the consequences of its previous exten-

sive pattern of delay” (id. at 15a). The court of appeals

rejected petitioner’s contention that the government was

required to demonstrate the relevance of the documents

sought (id. at 13a) and held that the district court had

properly analyzed this case under the balancing test of the

Restatement (Second) of Foreign Relations Law of the

United States (1965) [hereinafter cited as Restatement]

(Pet. App. 16a-20a). The court of appeals also held that

“(t]he gentlemen’s agreement procedure is a far cry from

constituting a substantially equivalent alternative to a

grand jury subpoena” (id. at 23a). The court emphasized

that the Gentlemen’s Agreement was not even applicable to

cases such as this one, in which the United States is concur-

rently investigating tax and narcotics offenses (id. at 22a-

23a). The court of appeals further noted that the procedures

under the agreement had not, in any event, resulted in the

expeditious production of bank records (id. at 23a n.21).

The court summed up its conclusions as follows (id. at

27a-28a (citations omitted)):

The district judge in this case was extremely patient.

He gave the Bank ample chances to comply with the

subpoena. But the Bank was just sloppy in its search.

The remedy for violation of the district court’s order is

civil contempt. The imposition of a coercive fine is not

improper * * * and will be reversed only for an abuse

of discretion. * * * The order of contempt and the fine

in this case did not constitute an abuse of the district

court’s discretion.

ARGUMENT

1. Petitioner urges this Court to address the question

whether “a neutral non-party witness [may] be held in civil

contempt for abiding by foreign criminal laws and judicial

decisions barring the production of documents located

abroad when an effective alternative means of securing the

8

same documents on a government-to-government basis

exists” (Pet. i). As it did in Bank of Nova Scotia v. United

States, 462 U.S. 1119, in which this Court denied a petition

for a writ of certiorari on June 13, 1983, petitioner contends

(Pet. 9) that the decision below conflicts with principles

enunciated by this Court and other courts of appeals. Peti-

tioner also contends (Pet. 15-16) that the decision of the

court below solicits “international lawlessness” and thus

represents a departure from the accepted and usual course

of judicial proceedings requiring this Court’s intervention.

Contrary to petitioner’s argument, the decision below is

not in conflict with any decision of this Court, and the

courts of appeals are in basic agreement on the appropriate

analytic framework to employ in cases of this sort. More-

over, the record in this case does not support petititoner’s

contentions and does not raise the question petitioner seeks

to have reviewed. Accordingly, review by this Court is not

warranted.

a. Two principal premises underlying the question posed

by petitioner are contrary to the record in this case. First,

petitioner was not held in contempt and fined “for abiding

by foreign criminal laws and judicial decisions” (Pet. 1).

Petitioner bases its entire argument on the bank secrecy law

of the Cayman Islands, conveniently ignoring the fact that

virtually the entire fine in this case was attributable to

petitioner’s failure to produce documents located in the

Bahamas (Pet. App. 16a n.14).? But the bank secrecy law of

the Bahamas did not bar petitioner’s production of subpo-

enaed records located in that country (id. at 4a), and peti-

tioner knew that fact three days before the contempt fine

2Of the total fine, only $100,000 is attributable to days on which

petitioner was found to be in contempt for its failure to produce

documents located in both countries. Thereafter, the fine continued

mounting solely because of petitioner’s failure to conduct a diligent

search of its Bahamian branches (Pet. App. |4a-1 5a).

9

began to accrue (see page 5, supra). Thus, a determination

that the fine was proper does not require consideration of

the impact of the law of the Cayman Islands on petitioner’s

ability to comply with the subpoena.3

Second, this is not a case in which “an effective alterna-

tive means of securing the same documents on a government-

to-government basis exists” (Pet. i). As both the district

court and the court of appeals determined (Pet. App. 22a-

23a & n.21, 15b), the “Gentlemen’s Agreement” between the

United States and the Cayman Islands did not bind the

United States, had proven to be ineffective as a means of

obtaining bank documents, and was not even available in

this case because the grand jury investigation concerned tax

offenses as well as narcotics offenses. Thus, the factual

predicate for petitioner’s argument is totally lacking.¢

3For the same reason, the briefs of amici curiae filed in support of the

petition address irrelevant issues by focusing solely on the asserted

conflict between the laws of the United States and the Cayman bank

secrecy statute.

‘The question posed by petitioner also assumes that petitioner is a

“neutral” non-party. But it is hardly clear that a bank in petitioner’s

position should be viewed as a completely neutral entity. This Court has

recognized that banks are not “ccnscripted neutrals” in transactions

involving negotiable instruments and that they derive significant bene-

fits from such transactions. California Bankers Ass'n v. Shultz, 416

U.S. 21, 48-49 (1974). It goes without saying that other types of transac-

tions with their customers are beneficial to banks as well. Bank secrecy

laws of tax havens such as the Cayman Islands undoubtedly attract

business for offshore banks. Indeed, as the court of appeals stated (Pet.

App. 1!7a), “{t]he Cayman Islands * * * sees preservation of bank

secrecy as vital to the expansion of the Island’s principal industry—

banking and off-shore finance.” As a beneficiary of the expansion of

that industry, a bank doing business in the Caymans would have an

obvious commercial interest in resisting compliance with a grand jury

subpoena and advancing the notion that the bank secrecy laws of that

country are an absolute bar to compliance with such a subpoena.

10

b. Petitioner contends (Pet. 11-15) that the decision of

the court of appeals conflicts with this Court’s decision in

Societe Internationale Pour Participations Industrielles v.

Rogers, 357 U.S. 197 (1958), and with the decisions of the

Second and Seventh Circuits in Jn re Chase Manhattan

Bank, 297 F.2d 611 (2d Cir. 1962); Ings v. Ferguson, 282

F.2d 149 (2d Cir. 1960); and United States v. First National

Bank, 699 F.2d 341 (7th Cir. 1983). Petitioner’s contention

lacks merit. The decision below is not in conflict with

Societe Internationale or First National Bank, and Chase

Manhattan Bank and Ings do not represent the current state

of the law in the Second Circuit.

In Societe Internationale, a Swiss holding company was

seeking to recover assets that had been seized by the Alien

Property Custodian under the Trading with the Enemy Act.

This Court held that the district court had properly ordered

production of Swiss records pursuant to the government’s

discovery request, despite the plaintiff/Swiss-holding-

company’s claim that Swiss law limited its ability to satisfy

the production order because those producing the records

would have been exposed to possible criminal sanctions

under Swiss law (357 U.S. at 204-206). Petitioner relies (Pet.

11-12) on the Court’s further holding that dismissal of the

holding company’s complaint was not an appropriate sanc-

tion for failure to comply with the discovery request in light

of the fact that the holding company had unquestionably

made good faith efforts to comply with the production

order and because the holding company had certain consti-

tutionally protected rights to maintain the suit (357 U.S. at

208-213). But the Court made it clear that the district court

had discretion to impose lesser sanctions (357 U.S. at 213).°

5For example, the Court recognized that in the absence of complete

disclosure, the district court might be justified in drawing inferences

adverse to the holding company as to particular events (357 U.S. at

213).

11

Accordingly, as recognized in United States v. Vetco, Inc.,

644 F.2d 1324, 1329 (9th Cir.), cert. denied, 454 U.S. 1098

(1981), Societe Internationale “did not erect an absolute bar

to summons enforcement and contempt sanctions when-

ever compliance is prohibited by foreign laws.”

In the instant case, unlike Societe Internationale, there

has been no alleged taking of petitioner’s property. Nor, in

light of the consent to disclosure ultimately received by

petitioner from the Caymans, has petitioner demonstrated

that it faced a genuine risk that compliance with the sub-

poena would subject it to criminal sanctions. Moreover,

the district court expressly found (Pet. App. 13b, 2d), and

the court of appeals agreed (id. at 14a), that petiticaer did

not make a good faith effort to comply with the subpoena.

Nearly all of petitioner’s efforts were devoted to trying “to

obtain from the goverment what it was clearly not entitled

to receive; a showing of materiality and necessity and the

issuance of letters rogatory” (ibid.).’? Although petitioner

sought the permission of the Grand Court of the Cayman

Islands to comply with the subpoena, it did not appeal the

Cayman court’s denial of its petition — a litigation decision

that stands in marked contrast to the vigor with which it has

pressed its arguments in the courts of this country.’ More-

over, petitioner apparently did not attempt to obtain

‘Furthermore, given the importance attached by the Cayman Islands

to its banking industry (see note 4, supra), it is by no means clear that

that country’s government would consider it appropriate to prosecute a

bank for disclosing records in a case such as this one.

’Petitioner notes (Pet. 15 n.14) that there is a conflict among the

circuits on the question whether the government should be required to

demonstrate the relevancy and materiality of information sought by a

grand jury subpoena. Petitioner does not, however, seek resolution of

this asserted conflict.

’Petitioner argues (Pet. 13) that an appeal would have been pointless

because it did not have information as to materiality necessary under

the Cayman statute and had no basis for challenging the legal standard

12

authorization to disclose from the Governor of the Cayman

Islands until it was faced with the $25,000 per day fine.°

Thus, petitioner’s position is significantly different from

that of the plaintiff in Societe Internationale, and the deci-

sion of the court of appeals is not in conflict with Societe

Internationale.'©

for releasing bank records. But petitioner points to no authority sug-

gesting that it would have been fruitless to attempt to persuade the court

of appeals in Jamaica to adopt a balancing test and defer to the superior

interests of the United States in this case.

%In light of the importance attached by the Cayman Islands to iis

banking industry, petitioner’s situation in this case was analogous to

that of a foreign company “in a most advantageous position to plead

with its own sovereign for relaxation of penal laws or for adoption of

pians which will at the least achieve a significant measure of compliance

with the production order.” Societe Internationale, 357 U.S. at 205.

\ONor is the decision below in conflict with any other decision of this

Court. Petitioner cites (Pet. 12) United States v. Ryan, 402 U.S. 530,

534 (1971), for the proposition that sanctions may not be imposed ona

witness who has made a good faith effort to comply with a subpoena but

is unable to do so for fear of criminal prosecution by a foreign govern-

ment. Ryan does not state that proposition. In that case, the respondent

had moved to quash a subpoena duces tecum requiring the production

of records located in Kenya on the ground that Kenyan law forbade the

removal of the records. The district court denied the motion and

ordered the respondent to seek from the Kenyan government permis-

sion to remove the documents from Kenya and, in the event that

permission was denied, tu grant United States agents access to the

documents in Kenya. This Court held that the district court’s order was

not an appealable temporary injunction. In reaching that conclusion,

the Court pointed out that a valid subpoena requires a good faith effort

to comply, noted that respondent had asserted that compliance with the

subpoena would violate Kenyan law, and read the district court’s order

as doing nothing more than informing “respondent before the event of

what efforts the District Court would consider sufficient attempts to

comply with the subpoena.” Significantly, this Court expressed no

opinion whether the district court was required to accept as a sufficient

attempt unsuccessful efforts to obtain permission to remove the docu-

ments from Kenya.

Although petitioner does not expressly seek review of the issue, it also

contends (Pet. 14.n.13) that the court of appeals “misapprehended the

13

Nor is the decision below in conflict with United States

v. First National Bank, supra. In that case, arising out of an

IRS summons enforcement proceeding seeking informa-

tion pertaining to the IRS’s collection efforts, the court

expressly recognized that a foreign bank secrecy law did not

automatically bar a domestic court from compelling pro-

duction of bank records (699 F.2d at 345). The court held,

however, that under the balancing test of Section 40 of the

Restatement, the summons in that case ought not to be

enforced (699 F.2d at 345). The court distinguished, on a

number of factual grounds, the Eleventh Circuit’s decision

in In re Grand Jury Proceedings (Bank of Nova Scotia 1),

691 F.2d 1384 (1982), cert. denied, 462 U.S. 1119 (1983), on

which the courts below relied in this case. The Seventh

Circuit pointed to, inter alia, the following distinctions: the

court of appeals in Bank of Nova Scotia [had the benefit of

findings of fact by the district court, including a finding that

the Bank had not made a good faith effort to comply with

tire subpoena; the information in Bank of Nova Scotia I was

teaching of this Court in Banco Nacional de Cuba v. Sabbatino, 376

U.S. 398 (1964).” However, the act of state doctrine considered in

Sabbatino is plainly inapplicable here because the courts below did not

sit in judgment on any acts of the government of the Cayman Islands

done within its own territory. See Sabbatino, 376 U.S. at 416. Rather,

the courts below determined that petitioner did not make a good faith

effort to obtain the consent of a foreign government. Furthermore,

whatever the merits of petitioner’s legal arguments as to the separation

of powers and act of state doctrines, the government did not in this case

“seek[] to use judicial power as a tool to achieve a political objective,

such as the alteration or subversion of domestic law in friendly foreign

countries” (Pet. 14n.13). The government's objective here was simply to

obtain evidence needed for the grand jury investigation. Any possible

effect of enforcement of the subpoena at issue on a foreign government's

policy decisions was purely incidental. As this Court pointed out in

Sabbatino, 376 U.S. at 423, “it cannot of course be thought that ‘every

case or controversy which touches foreign relations lies beyond judicial

cognizance.’ Baker v. Carr, 369 U.S. 186, 211.”

14

sought by a grand jury rather than by the civil tax collector;

Bahamian law permitted disclosure with the customer’s

consent, while the Greek law at issue in First National Bank

did not; and the power of a Bahamian court to permit

disclosure did not appear to be as strictly limited as that ofa

Greek court (699 F.2d at 346-347). Although the govern-

ment does not agree that all of these factual distinctions

advanced by the Seventh Circuit justify the result it

reached,!'! First National Bank is similarly distinguishable

from the instant case. Thus, there is no legal conflict requir-

ing this Court’s resolution.

Petitioner’s assertion that there is a conflict between the

Eleventh Circuit and the Second Circuit is erroneous. The

Second Circuit has receded from its position in Jn re Chase

Manhattan Bank, supra, and Ings v. Ferguson, supra, that

principles of international comity preclude enforcement of

a subpoena that might require the subpoenaed party to

violate foreign law. See United States \. First National

City Bank, 396 F.2d 897, 901-905 (2d Cir. 1968). Like the

Seventh Circuit in United States v. First National Bank,

supra, and the Eleventh Circuit in the instant case, the

Second Circuit employed the balancing test of Section 40 of

the Restatement in its analysis in First National City Bank

(396 F.2d at 902).

The Restatement’s test also has been adopted by the

Fifth, Ninth, and Tenth Circuits, and no circuit employs a

contrary test. See In re Grand Jury Proceedings (Field), 532

''\For example, there is no meaningful distinction between the

national interest in grand jury investigations and IRS investigations. As

this Court recognized in United States v. Powell, 379 U.S. 48, 57

(1964), the investigative function of the IRS is essentially the same as

that of the grand jury. And, of course, the collection of taxes is essential

to the financial integrity of this country. Jn re Grand Jury Proceedings

(Field), 532 F.2d 404, 408 (Sth Cir.), cert. denied, 429 U.S. 940 (1976).

15

F.2d 404, 408 (Sth Cir.), cert. denied, 429 U.S. 940 (1976);

United States v. Vetco, Inc., 644 F.2d at 1330; In re West-

inghouse Electric Corp. Uranium Litigation, 563 F.2d 992,

997 (10th Cir. 1977). Accordingly, there is no merit to

petitioner’s suggestion (Pet. 13) that this Court should

review the appropriateness of looking to the Restatement’s

balancing test for the resolution of cases such as this one.

2. Petitioner also contends (Pet. 16-18) that the assess-

ment of the fine in this case was punitive and that the fine

was imposed without petitioner’s being accorded rights to

which it would have been entitled in a criminal contempt

proceeding. But the record clearly establishes that the fine

was properly imposed to coerce pesitioner to comply with

the grand jury subpoena.

The district court set out the objective of its October 20

contempt order in no uncertain terms (Pet. App. 2e): “The

crux of what this Court seeks in this order is the submission

of the subpoenaed materials to the grand jury and not the

punishment of the Bank.” The order provided that peti-

tioner could purge itself of civil contempt by “complying

with this Court’s order of October 10, 1983” (ibid.). The

October 10 order required petitioner “to comply with sub-

poena duces tecum 83-1 served on the Bank on March 4,

1983 no later than October 17, 1983” (id. at 2f). Thus,

petitioner had a full opportunity to purge itself of contempt

and avoid the fine by simply producing the subpoenaed

records, and the contempt order and the fine imposed in this

case therefore were unquestionably civil in nature. See Shil-

litani v. United States, 384 U.S. 364, 368-370 (1966). !2

'21f immediate compliance with the subpoena had been impossible

despite the taking in good faith of all reasonable steps to comply,

petitioner could have sought relief from the district court. It did not seek

such relief while the fine was running. Moreover, as the court of appeals

determined (Pet. App. 14a-15a), the record establishes that petitioner’s

delay in the production of documents pursuant to the subpoena was far

16

Petitioner nevertheless contends that the fine was puni-

tive because it was assessed for a period of time after peti-

tioner had “complied” with the contempt order (Pet. 17-18).

Petitioner reads that order as merely requiring it to end its

assertion of foreign law as a bar to compliance with the

subpoena. Thus, petitioner argues that it “complied” with

the order once it stopped asserting that foreign law pre-

cluded the production of subpoenaed documents and it

produced the Cayman documents. Petitioner’s reading of

the contenipt order is untenable. Under the plain terms of

that order and the October 10 enforcement order, nothing

less than production of all of the subpoenaed documents

(the Cayman documents and the Bahamian documents)

would have sufficed to purge petitioner of contempt.

Petitioner also argues (Pet. 18) that the purpose of coerc-

ing it to produce documents was satisfied by December 5,

1983, when it had produced all documents from its Baham-

ian branches except copies of four vouchers pertaining to

certificates of deposit that had been redeemed in April 1979;

these vouchers were turned over to the government on

January 25, 1984 (Pet. App. 9a). Petitioner asserts (Pet. 18)

that by December 5, neither the government, petitioner, nor

the district court had any reason to believe that any of

petitioner’s evidence had not been produced.

The continuing need for a coercive fine after December 5

is an entirely fact-bound issue, and petitioner has not

advanced any sound reason why this Court should review

from excusable. Petitioner did not perform a diligent search upon

receipt of the district court’s enforcement order. And until the fine

started to accrue, petitioner ignored numerous warnings from the

government that its production of Bahamian documents was incom-

plete, and it failed to search for records in obvious places. In short, the

coercive effect of the fine was unquestionably necessary to obtain

petitioner's compliance with the subpoena and the court’s enforcement

order.

17

the factual determinations of the two courts below. See

Rogers v. Lodge, 458 U.S. 613, 623 (1982). In any event, in

claiming that a fine was unnecessary, petitioner ignores the

record. At the December 12, 1983, oral argument before the

court of appeals, the government disagreed with petitioner's

assertion that it had fully complied with the subpoena (Pet.

App. 8a n.7). Moreover, petitioner had reason to know that

its production was incomplete. Each of the vouchers was

one of the copies included in a four-part form whose parts

were separated and independently routed through the Bank

(id. at 9a n.8). Petitioner’s personnel should have been

familiar with the Bank’s own procedures and forms. Thus, it

should have been obvious to Bank personnel that submis-

sions before January 25, 1984, lacked these vouchers. While

petitioner attempts to minimize the significance of the

vouchers (Pet. 18), each is the only document of a four-part

form on which a “paid” stamp appears (Supp. C.A. Br. for

the United States 30). Thus, these documents were neces-

sary to present a complete series of transactions regarding

the certificates of deposit to which they pertained. At any

rate, whatever the importance of these documents, peti-

tioner was under an obligation to produce them, and its

failure to exercise due diligence to find them manifested a

continuing failure to take the district court’s enforcement

order seriously.

Further evidencing petitioner's continuing failure to take

the district court’s enforcement order seriously even after

December 5, 1983, was petitioner’s failure to send a repre-

sentative to appear before the grand jury. On December 9,

the Assistant United States Attorney informed petitioner

that a Bank employee was needed to appear before the

grand jury on December 20, 1983, to authenticate docu-

ments that had been produced (Pet. App. 8a). Petitioner

waited until December 19 to notify the employee who was

to appear (ibid.). Because of this delay, the witness’s

appearance before the grand jury had to be rescheduled for

January 24, 1984 (ibid.).

It is clear from petitioner’s conduct throughout this pro-

ceeding that, absent a coercive fine, there was no assurance

that petitioner would fully comply with the subpoena.

Thus, the fine in this case was not punitive, and its imposi-

tion does not raise any issue requiring review by this Court.

CONCLUSION

The petition for a writ of certiorari should be denied.

Respectfully submitted.

a

Rex E. Lee

Solicitor General

GLENN L. ARCHER, JR.

Assistant Attorney General

MICHAEL L. PAUP

RoBeERT E. LINDSAY

ALAN HECHTKOPF

Attorneys

NOVEMBER !1984

DOJ-1984-11