Petition for Writ of Certiorari — Freedman v. United States
Supreme Court brief1976
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CONSTITUTIONAL PROVISION INVOLVED ..............e0e0e05 2
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REASONS FOR GRANTING THE WRIT
I. The Third Circuit Discarded and Then Rewrote Bellis
v. United States So as to Exclude Virtually All Busi-
ness Records From the Scope of the Fifth Amend-
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APPENDIX B
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TABLE OF CITATIONS.
Cases: Page
Andresen v. Maryland, 24 Md. App. 128, 331 A. 2d 78 (1975)
cert. granted 44 U. S. L. W. 3200-01 (U.S. Oct. 7, 1975) 14
Bellis v. United States, 417 U. S. 85 (1974) .......... 6, 7, 8, 9, 10,
11, 12, 13, 14
Boyd v. United States, 116 U. S. 616 (1886) ............... ll
In re Grand Jury Proceeding, 486 F. 2d 85 (3 Cir. 1973)
i al ila aie nani ks 3, 4
In re Grand Jury Proceedings, 507 F. 2d 963 (3 Cir. 1975)
ee Us ee whale a al bara nb tie acne ae 0 3,4
In re Jeffords, 519 F. 2d 1398 (3 Cir. 1975), cert. denied 44
Oo. 9.4. W. cee 00. ©. Get. BA, BERS) nn cnn n cess 10
Kuta v. United States, 518 F. 2d 947 (7 Cir. 1975), cert.
denied 44 U. S. L. W. 3344 (U.S. Dec. 9, 1975) ....... 10
Reamer v. Beall, 506 F. 2d 1345 (4 Cir. 1974) ............. 10
Shaffer v. Wilson, No. 74-1671 (10 Cir., May 23, 1975) peti-
tion for cert. filed, 44 U. S. L. W. 3321 (U. S. Nov. 25,
ae oe ae ns ice ak wie thane, 14
United States v. Beattie, 522 F. 2d 267 (2 Cir. 1975), petition
for cert. filed (Sept. 15, 1975) (No. 75-407) ........... ll
United States v. Cobb, No. 75-1034 (6 Cir., May 16, 1975)
cert. denied 44 U. S. L. W. 3144 (U.S. Nov. 4, 1975) .. 10
United States v. Fisher, 500 F. 2d 683 (3 Cir. 1974) cert.
granted 43 U. S. L. W. 3416 (U. S., Jan. 27, 1975) ..... ll
United States v. Hansen-Niederhauser Co., Inc., 522 F. 2d
I a ia a sw wail mare '@ 10
United States v. Kahler, No. 74-1203 (4 Cir., Aug. 1, 1974) .. 10
United States v. Mahady & Mahady, 512 F. 2d 521 (3 Cir.
ale Rta tae aa i a wk ee w wh wwe ee wie.b 10
United States v. Scornavocco’s Restaurant, Inc., No. 75-1483
a hs ain ins Avia hen cw ee eae 10
United States v. White, 322 U. S. 694 (1944)
ee ee ee ow a aed © |
TABLE OF CITATIONS (Continued).
Miscellaneous: Page
United States Constitution:
SRA LOC OLE ETOP OTST. Sk
Fifth Amendment ...........2, 3,4, 5, 6, 7, 8, 10, 11, 12, 13, 14
ee I sah pwn adv onde 0s 2
SO a a 2
IN THE
Supreme Court of the United States
OcToBER TERM, 1975.
No.
IN THE MATTER OF
GRAND JURY IMPANELED
JANUARY 21, 1975.
ABRAHAM E. FREEDMAN, Appellant.
PETITION FOR A WRIT OF CERTIORARI TO THE
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT.
The petitioner Abraham E. Freedman respectfully
prays that a writ of certiorari issue to review the decision
of the United States Court of Appeals for the Third Circuit
entered in this proceeding on January 8, 1976.
OPINION BELOW.
The opinion of the Court of Appeals, not yet reported,
appears in the Appendix hereto. The opinion of the Dis-
trict Court for the District of New Jersey is reported at
399 F. Supp. 668 (D. N. J. 1975) and appears in the
Appendix hereto.
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to
Petition for Writ of Certiorari
JURISDICTION.
The judgment of the Court of Appeals for the Third
Circuit was entered on January 8, 1976. A timely petition
for rehearing en banc was denied on February 4, 1976, and
this petition for certiorari was filed within 30 days of that
date. The jurisdiction of the Court of Appeals was in-
voked under 28 U. S. C. § 1291. This Court’s jurisdiction
is invoked under 28 U. S. C. § 1254(1).
QUESTION PRESENTED.
Whether an individual who has absolute ownership
and control of a law practice, and the exclusive right of
access to its records, has a privilege under the Fifth
Amendment to resist compulsory production of such
records.
CONSTITUTIONAL PROVISION INVOLVED.
Fifth Amendment to the Constitution of the United
States:
No person . . . shall be compelled in any criminal
case to be a witness against himself . . .
; REGAN PB ELI DIG LOOSE LIRIAS NSA EGA IEE EEE LONI EE Js]
eee RA
Petition for Writ of Certiorari 3
STATEMENT OF THE CASE.
On June 18, 1975, a Grand Jury sitting in Newark in
the District of New Jersey caused a subpoena duces tecum
to be served on the law offices of Freedman, Borowsky and
Lorry in Philadelphia, Pennsylvania. The subpoena pur-
ported to command the production of twenty-six categories
of financial records and other documents involving the
relationships between Freedman, Borowsky and Lorry and
every one of its clients for the past ten years. The alleged
subject matter of the grand jury investigation was possible
violations of federal criminal laws involving one of the
clients of Freedman, Borowsky and Lorry, the National
Maritime Union.
Appellant Abraham E. Freedman asserted from the
outset that he owned, possessed and controlled the sub-
poenaed records, and, in various proceedings before the
District Court, resisted the subpoena principally on the
basis of his Fifth Amendment privilege against self-
incrimination.'
In an evidentiary hearing held to resolve the Fifth
Amendment issue, Mr. Freedman established by uncontra-
dicted evidence that he formed the predecessor to Freed-
man, Borowsky and Lorry in 1933 and since then has
practiced law under various firm names, the most recent
being Freedman, Borowsky and Lorry (F. F. 3-6, 467a-
468a; 144a-149a ); * he has and always had exclusive power
1. Mr. Freedman also asserted that (a) the subpoena was over-
broad under the Fourth Amendment; (b) the ad jury investiga-
tion may have been the product of unauthorized electronic surveil-
lance; and (c) the government had failed to demonstrate
jurisdiction, relevancy, and proper purpose as required by In re
Grand Jury Proceeding, 486 F. 2d 85 (3 Cir. 1973) (Schofield I)
and In re Grand Jury Proceedings, 507 F. 2d 963 (3 Cir. 1975)
(Schofield IT).
2. Record references suffixed by an “a” are to pages of the
Appendix filed with the Court of Appeals on November 24, 1975.
“F. F.” refers to the Findings of Fact in the Opinion of the District
Court.
4 Petition for Writ of Certiorari
over the management and policy decisions of Freedman,
Borowsky and Lorry (15la); the law practice has no policy
making body, and is not governed by a charter, by-laws,
or any other oral or written partnership agreement (F. F.
9, 468a; 15la; 226a); Mr. Freedman alone can refuse a
case or terminate representation of a client, and he alone
decides the annual compensation of the other attorneys in
the office (F. F. 20, 470a; F. F. 21, 470a; 15la; 154a; 203a;
228a); Mr. Freedman has sole power to hire and fire and
owns all of the assets and the case files themselves (96a;
109a; 156a-158a; 167a; 226a-227a ).
Moreover, the undisputed evidence established that
Mr. Freedman has exclusive rights of control over and
access to the subpoenaed records. It was uncontradicted
and found by the District Court as a fact that Mr. Freed-
man has absolute dominion over the records, maintains
them under lock and key, and other attorneys can examine
them only at Mr. Freedman’s pleasure (F. F. 32, 472a;
F. F. 71, 478a; 158a-159a). The exclusiveness and extent
of Mr. Freedman’s control over the records was under-
scored by the further finding of the District Court that Mr.
Freedman’s associate, Mr. Lorry, in his 22 year association
with Mr. Freedman, never once saw the firm’s records or
tax returns (F. F. 70, 478a; F. F. 72, 478a; 227a).
The District Court denied all of Mr. Freedman’s
claims, including his claim of the Fifth Amendment privi-
lege. On appeal from a civil contempt order, the Court of
Appeals, in an opinion written by Judge Gibbons,” affirmed
the denial of Mr. Freedman’s Fourth Amendment, Fifth
Amendinent and electronic surveillance contentions, but
reversed and remanded for non-compliance by the Gov-
ernment with the Third Circuit's decisions in Schofield I
and Schofield II. The Government was directed on re-
3. The panel consisted of Chief Judge Seitz, Judge Gibbons,
and Judge Rosenn.
Petition for Writ of Certiorari 5
mand to make a more sufficient showing of the relevancy of
the items sought by the subpoena to the subject matter of
the grand jury’s investigation. Mr. Freedman’s Petition
For Rehearing En Banc on the Fifth Amendment issue
was denied on February 4, 1976 with Judge Arlin Adams
dissenting and voting to grant rehearing.
6 Petition for Writ of Certiorari
REASONS FOR GRANTING THE WRIT.
I. The Third Circuit Discarded and Then Rewrote Bellis
v. United States So as to Exclude Virtually All
Business Records From the Scope of the Fifth Amend-
ment Privilege.
Both parties and both lower courts agree that the out-
come of Mr. Freedman’s claim of privilege must be deter-
mined by application of the test set forth by this Court in
Bellis v. United States, 417 U. S. 85 (1974). The problem
with the opinion below, however, and the reason why this
Court's review is of critical necessity, is that the Third
Circuit has applied Bellis in name only. The actual test
set forth in Bellis has been discarded and a test has been
substituted that is without precedent and in direct conflict
with the language of Bellis and with the purposes of the
privilege against self-incrimination.
In Bellis, a partner in a three man law firm organized
as a partnership under Pennsylvania law refused to pro-
duce subpoenaed partnership records on the grounds of
his personal privilege against self-incrimination. This
Court held that the privilege against self-incrimination was
inapplicable in the circumstances. It recognized, how-
ever, that if business records are cloaked by an expectation
of privacy and confidentiality on the part of an individual
person, they like any other record, could be privileged
under the Fifth Amendment. Id. at 87-88, 91.
In the key passage of the Bellis opinion, this Court
set down the following test to determine when business
records are subject to the privilege:
“This analysis presupposes the existence of an or-
ganization which is recognized as an independent
entity apart from its individual members. The group
RLEED THF OUGH
Petition for Writ of Certiorari 7
must be relatively well organized and structured, and
not merely a loose, informal association of individuals.
It must maintain a distinct set of organizational
records and recognize rights in its members of control
and access to them. And the records subpoenaed
must in fact be organizational records held in a rep-
resentative capacity.” Bellis, supra at 92-93 (empha-
sis supplied ).
Under this test, this Court mandated in clear and une-
quivocal language that for records to be beyond the Fifth
Amendment privilege, there (1) “must” be an inde-
pendent entity, which (2) “must” maintain a distinct set
of records “and recognize rights in its members of control
and access to them”.
In the face of the crystal clear, mandatory require-
ment of Bellis that others “must” have rights of control and
access to the records, and despite the uncontradicted evi-
dence that no one other than Mr. Freedman has such
rights to the records subpoenaed in this case, the Third
Circuit reasoned:
“Freedman contends that the district court’s finding
that he alone among the lawyers had access to the
books and ledgers of Freedman, Borowsky & Lorry
establishes his privilege to the records under the sec-
ond prong of the Bellis test. This argument distorts
the holding of that case.
We do not understand Bellis to hold that once an in-
stitution is determined to be an entity independent of
its members, the records of that entity may nonethe-
less be protected by the purely personal privilege
against self incrimination if the members of the or-
ganization agree that access to those records will not
be shared. Access is one indicium bearing upon the
8 Petition for Writ of Certiorari
question of institutional separateness. In this case,
the facts found by the district court, including facts
pertaining to Freedman’s exclusive access to certain
financial books and records, fully support the conclu-
sion that Freedman, Borowsky & Lorry has an institu-
tional identity apart from Freedman. That being so,
the fact that Freedman preserves his exclusive access
to certain records is inconsequential for fifth amend-
ment purposes. To hold the members of an institu-
tion could resurrect the fifth amendment privilege
with respect to records that they individually for-
feited by identifying themselves with that institution
would seriously erode the established principle that
the privilege against self-incrimination is purely per-
sonal. See Hale v. Henkel, 201 U.S. 43 (1906). This
we decline to do. We therefore hold that Freedman
was not legally entitled to assert his fifth amendment
privilege in defense to production of the subpoenaed
records.” (emphasis supplied). See page A 8 of Ap-
pendix B hereto.
The gravamen of this reasoning is the Third Circuit’s con-
clusion that “access is one indicium bearing upon the ques-
tion of institutional separateness”. However, Bellis does
not make access “one indicium”. On the contrary, Bellis
makes access one of two essential prerequisites to over-
ruling a claim of privilege, and requires unequivocally that
the organization “must . . . recognize rights in its mem-
bers of control and access to them.”
By twisting the two prongs of Bellis into a single-
pronged test, the Third Circuit divorced the Bellis test
from the rationale upon which it was premised. That
rationale is that business records are subject to the privilege
against self-incrimination asserted by an individual who
72
BLEED THF OUGH
Petition for Writ of Certiorari 9
has in such records an expectation of privacy sufficient to
proscribe compulsory state intrusion. 417 U. S. at 91.
Whether there is such an expectation of privacy depends
upon the extent to which others have legal rights of control
and access to the records involved. To the extent others
have such rights, then a justifiable expectation of privacy
does not exist. On the other hand, where only one indi-
vidual has a right of control or access to records, then that
individual generally will have an expectation of privacy
sufficiently strong to justify a privilege against compulsory
government intrusion. This Court, in Bellis, supra at 92,
emphasized this direct relationship between an expectation
of privacy and exclusive access to and control over business
records when it said:
“characteristics of a clai:n of privacy and confidential-
ity (are) control over their (the records’) content and
location and the right to keep them from the view of
others.”
By relegating the second prong of the Bellis test to an
“indicium”, and an “inconsequential” one at that, the Third
Circuit has emasculated this Court's test and substituted a
new one that as a practical matter will never protect legiti-
mate expectations of privacy in business records. Some-
times, asking only whether an entity, such as a law firm,
has a “separate institutional existence” also will be deter-
minative of who has “rights of access” to the entity's
records. This is so because
“organization records “(u)sually, if not always .
are open to inspection by the members’, that ‘this right
may be enforced on appropriate occasions by avail-
able legal procedures, and that (t)hey therefore em-
body no element of personal privacy.” Bellis, supra
at 92 quoting United States v. White, 322 U. S. 694,
699 (1944).
10 Petition for Writ of Certiorari
In other words, an “independent entity” often is an entity
chartered under a state organic law or organized pursuant
to an operating agreement that expressly confers rights of
record inspection upon its members.
Thus, in every appellate case, to date, in which Bellis
has been applied to determine whether an individual has a
Fifth Amendment privilege against producing business
records of an entity, the entity always has been one created
under a state law which conferred “access” rights on the
members of the entity, just as the state chartered law part-
nership in Bellis itself. In re Jeffords, 519 F. 2d 1398 (3
Cir. 1975), cert. denied 44 U.S. L. W. 3238 (U. S. Oct. 21,
1975) (corporation); Kuta v. United States, 518 F. 2d 947
(7 Cir. 1975), cert. denied 44 U.S. L. W. 3344 (U. S. Dec.
9, 1975) (state chartered law partnership ); United States
v. Mahady & Mahady, 512 F. 2d 521 (3 Cir. 1975) (state
chartered partnership ); Reamer v. Beall, 506 F. 2d 1345
(4 Cir. 1974) (corporation); United States v. Hansen-
Niederhauser Co., Inc., 522 F. 2d 1037 (10 Cir. 1975)
(corporation); United States v. Kahler, No. 74-1203 (4
Cir., Aug. 1, 1974) (state chartered partnership ); United
States v. Cobb, No. 75-1034 (6 Cir., May 16, 1975) cert.
denied 44 U. S. L. W. 3144 (U. S. Nov. 4, 1975) (state
chartered partnership); United States v. Scornavocco’s
Restaurant, Inc., No. 75-1483 (7 Cir., Dec. 24, 1975)
(corporation ).
Thus, application of the first prong of the Bellis test,
whether there is an independent entity, often serves to re-
solve the critical issue of individual expectation of privacy.
However, the first prong does not necessarily dispose of
the critical issue. It breaks down when the entity in ques-
tion is not governed by state law or operating agreement,
as the District Court expressly so found with respect to
Freedman, Borowsky and Lorry (F. F. 9, 468a; 144a; 15la;
226a). For such entities the “access” question must be
a_e eag@emeem ame cam 2eae 6 £29 8
- S
Petition for Writ of Certiorari 11
asked directly to determine whether any one person has
an expectation of privacy with respect to subpoenaed
records of the entity. It makes no sense to conclude that
a Fifth Amendment privilege is inapplicable because an
entity exists when only one member of that entity has com-
plete, exclusive and personal control of the records of that
entity. That one member has the same expectations of
privacy with respect to those records as he has with respect
to any other of his personal papers. For that reason, this
Court, in Bellis set forth a two, not a one, prong test.
Nor is this revision of the Bellis test of academic in-
terest only. On the contrary, by recasting the Bellis test,
the Third Circuit has veered sharply down a path that no
other Court has travelled upon before. This is because
the practical effect of excision of the second prong of the
Bellis test is to limit the scope of the Fifth Amendment
privilege to non-business records contrary to the repeated
pronouncements of this Court.
In a longstanding line of cases, of which Bellis is the
most recent, this Court has continually emphasized that
business records can be protected by an individual's priv-
ilege against self-incrimination. See, e.g., Bellis, at 87-88;
United States v. White, 322 U. S. 694 (1944); Boyd v.
United States, 116 U. S. 616 (1886). While seeming to
adhere to this important principle, the Third Circuit's re-
vision of Bellis will have the practical effect of excluding
most, if not all, business records from the sphere of in-
formation potentially protected by the Fifth Amendment.*
4. In effect, this would be a step toward incorporating the new
philosophy of the Fifth Amendment privilege that has been sug-
gested by Judge Gibbons in his concurrence in United States v.
Fisher, 500 F. 2d 683 (3 Cir. 1974) cert. granted 43 U. S. L. W.
3416 (U. S., Jan. 27, 1975) and by Judge Friendly in United States
v. Beattie, 522 F. 2d 267 (2 Cir. 1975), petition for cert. filed (Sept.
15, 1975) (No. 75-407). In brief, this new philosophy would re-
move almost all documents from the scope of the Fifth Amendment
protections, except those which can be authenticated in no other
12 Petition for Writ of Certiorari
The Third Circuit has achieved this result by shifting
the focus of Bellis from the subpoenaed records, and ex-
pectations of privacy surrounding them, to a study of “en-
tities” and their external appearances. Under the recon-
stituted Bellis test, the key (and only) question is whether
there is something—an “entity’"—that “possesses an identity
separate and distinct from that of the” person claiming the
privilege. See page A 7 of Appendix B hereto. This meta-
physical question is answered, in turn, by examining
whether the “entity” possesses the “objective indicia of in-
stitutional status.” See page A 7 of Appendix B hereto.
The implications of this approach, and the reason why
it limits the Fifth Amendment privilege to non-business
records, is brought into sharp focus by the list of “indicia”
held sufficient to establish the existence of an independent
entity. The reason why Mr. Freedman could not assert
his privilege, according to the Third Circuit, was because
Freedman, Borowsky and Lorry has been held out
. to the public, the Courts and the legal pro-
fession as a partnership, has filed both federal and
local partnership tax returns, has leased office space
in the partnership name and purchased office equip-
ment, real estate, securities and insurance in the name
of the firm....”° See page A 7 of Appendix B hereto.
4. (Cont'd. )
way except by the act of turning them over. Business records, al-
most always can be authenticated by someone other than the pos-
sessor (e.g. accountants, employees) and, thus, would virtually
never be privileged regardless of the fact that the possessor may be
the only person having the right of control over and access to such
records.
5. It should be noted that the Court of Appeals chose to give
no weight to the Record facts and District Court findings that it
was Mr. Freedman who made the decision to hold his law practice
out as a partnership because he thought it was good business prac-
tice. His decision in no way changed the internal character of the
firm from that of a large, successful sole proprietorship (F. F. 68,
477a; F. F. 69, 477a; 232a; 259a).
RLEED THROUGH
Petition for Writ of Certiorari 13
The problem with relying on these “indicia” is that
they are present in practically every business, from the
smallest to the largest. Businesses almost always have
their own names, and the owner of that business often
will lease property, buy equipment, open a bank account,
trade with the public, and buy from suppliers in the busi-
ness name. By applying the Third Circuit's “indicia” ap-
proach, the business records of sole proprietorships, hereto-
fore privileged under Bellis, now will end up before grand
juries. To illustrate, a dentist might decide to call himself
“Family Dental Clinic”, hire a receptionist and a hygienist,
lease office space, buy equipment and supplies, send out
bills in his trade name, and manage the business affairs
and books of his practice all by himself. The public may
never realize that “Family Dental Clinic” is nothing more
than the alter ego of the dentist. Under Bellis, the dentist
nevertheless could invoke his Fifth Amendment privilege
against compulsory production of his business records.
Under the Third Circuit’s Opinion in his case, however, the
“objective indicia” of a “separate and distinct” entity are
present, and the dentist will lose his Fifth Amendment
privilege although only he controls and has access to his
business records. It is submitted that such a result is con-
trary to the expectations and values of our citizens who
do not understand or desire that our constitutional right
of privacy stop at the doors of sole proprietorships and
family businesses.
In short, the Third Circuit, while purporting to apply
Bellis, has altered dramatically its underlying philosophy.
The philosophical shift is significant particularly now when
grand juries and other law enforcement agencies through-
out the nation are taking an intense interest in private
business affairs. This Court’s guidance is urgently needed
so that lower courts, the public, and prosecutors will know
14 Petition for Writ of Certiorari
whether the philosophy of Bellis still has vitality or
whether other courts will be permitted to follow the Third
Circuit’s lead and carve business records out of the circle
of information potentially privileged under the Fifth
Amendment. Whatever the merits of this important issue
the scope of the Fifth Amendment privilege ought not to
be constricted so severely without express consideration
and guidance from this Court."
6. The “Family Dental Clinic” hypothetical above is substan-
tially similar to the facts in two cases currently awaiting decision
by this Court, and, thus, suggests still another reason why certiorari
should be granted. In one of these cases, Shaffer v. Wilson, No.
74-1671 (10 Cir., May 23, 1975) petition for cert. filed, 44 U. S.
L. W. 3321 (U.S. Nov. 25, 1975), this Court has not yet decided
whether to grant certiorari. In the other, certiorari has been
granted. Andresen v. Maryland, 24 Md. App. 128, 331 A. 2d 78
(1975) cert. granted 44 U. S. L. W. 3200-01 (U. S. Oct. 7, 1975).
Shaffer involved government seizure of business records of a small
dental practice. Andresen involved government seizure of business
records of a small law practice. In both cases, the issue is whether
the government can seize by search warrant under the Fourth
Amendment documents that are privileged under the Fifth Amend-
ment. Obviously, to decide this issue, this Court will have to de-
cide or assume that the appellants in Andresen (and Shaffer if
certiorari is granted) have a Fifth Amendment privilege with re-
spect to the records involved therein. However, a decision in favor
of the Fifth Amendment privilege in either of these cases cannot
stand together with the decision below of the Third Circuit. Under
the Third Circuit’s “indicia” test it is highly likely that the Shaffer
and Andresen records would not be privileged. Since the Fifth
Amendment issue herein overlaps with the same issue in Andresen
(and Shaffer if certiorari is granted), we respectfully request this
Court to grant certiorari and decide all of these cases together.
Petition for Writ of Certiorari 15
CONCLUSION.
For these reasons, a writ of certiorari should issue to
review the judgment and opinion of the Third Circuit on
the limited question presented by this Petition.
Respectfully submitted,
Howarp GITTISs,
ALAN J. Davis,
Mark A. ARONCHICK,
Attorneys for Petitioner
Abraham E. Freedman.
Of Counsel:
Ricuarp A. LEvIN,
AMSTER & LEVIN.
Wo tr, BLock, SCHORR
AND SOLIS-COHEN.
February 23, 1976.
Bde AM AKAN lle AINE AA ls LANE ig OLN a EW A el BP
RLEED THROUGH
TRE |
APPENDIX A.
UNITED STATES COURT OF APPEALS
For THE Turrp Circuit.
No. 75-2312
IN THE MATTER OF GRAND JURY IMPANELED
January 21, 1975
ABRAHAM E. FREEDMAN, Appellant
(D. C. Misc. No. 75-11)
SUR PETITION i OR REHEARING
Present: Serrz, Chief Judge, VAN DusEN, ALDISERT, ADAMS,
Gippons, RosENN, HunTER, Weis and Gartu, Circuit
Judges.
The petition for rehearing filed by Appellant in the
above entitled case having been submitted to the judges
who participated in the decision of this court and to all the
other available circuit judges of the circuit in regular active
service, and no judge who concurred in the decision hav-
ing asked for rehearing, and a majority of the circuit
judges of the circuit in regular active service not having
voted for rehearing by the court in banc, the petition for
rehearing is denied.
Judge Adams would grant rehearing by the court en
banc.
By the Court,
JoserH J. GrBBONS
Judge
Dated: February 4, 1976
(Al)
A2 Appendix B
APPENDIX B.
UNITED STATES COURT OF APPEALS
For tHe Turep Circuit
No. 75-2312
IN THE MATTER OF GRAND JURY IMPANELED
JANUARY 21, 1975
ABRAHAM E. FREEDMAN, Appellant
(D.C. Mise. No. 75-11)
AppEAL From tHe Unirep Srates District Court
FOR THE District or NEw JERSEY
Argued December 8, 1975
Before Serrz, Chief Judge, Gispons and Rosenn,
Circwt Judges
OPINION OF THE COURT
(Filed January 8, 1976)
Howard Gittis, Esq.
Alan J. Davis, Esq.
Mark A. Aronchick, Esq.
Wolf, Block, Schorr & Solis-Cohen
12th Floor, Packard Building
Philadelphia, Pennsylvania 19102
Of counsel:
Richard A. Levin, Esq.
Amster & Levin, Esqs.
11 Commerce Street
Newark, New Jersey 07102
Attorneys for Appellant
RLEED THROUGH
Appendix B A3
Jonathan L. Goldstein, United States Attorney
John J. Barry, Chief of Appeals,
Frank C. Razzano, Asst. United States Attorney
Federal Building
Newark, New Jersey 07101
Attorneys for Appellee
Gippons, Circuit Judge
This is an appeal from an order of the district court
adjudging appellant Abraham Freedman in civil contempt
for his refusal to obey a court order enforcing a grand jury
subpoena duces tecum.’ The subpoena, dated June 16,
1975, requested the production of 26 categories of docu-
ments dealing with various aspects of the financial affairs
of the Philadelphia law firm of Freedman, Borowsky &
Lorry for the previous 10 years. It was addressed to ‘‘ Any
Responsible Officer Freedman, Borowsky & Lorry,’’ was
served on Freedman on June 18, 1975, and was returnable
before the Grand Jury at Newark, New Jersey on June 23,
1975. By agreement with the United States Attorney the
return date was extended to permit disposition of a motion
to quash. On July 11, 1975 Freedman moved to quash.
The motion asserted that Freedman ‘‘owns, possesses and
controls the books, papers and records described in said
subpoena’’ and resisted compliance on grounds (1) that
there was no showing that the records were relevant to
any investigation over which the Newark Grand Jury had
jurisdiction, and (2) that the subpoena was unconstitu-
tionally overbroad both in scope and in time. In response
to this motion the government filed an affidavit which dis-
closed that the grand jury was investigating alleged viola-
tions of federal criminal law by the National Maritime
Union, its officers and employees, including potential vio-
lations of the Internal Revenue Code, 26 U.S.C. § 7201
et seq., the Interstate Travel Act, 18 U.S.C. § 1952 and the
1. The district court opinion is reported at 399 F. Supp. 668 (D. N.J.
1975).
A4 Appendix B
Federal Conspiracy Statute, 18 U.S.C. § 371. The affidavit
states in part:
In essence, the grand jury is investigating allegations
that officers and employees who are or were New Jer-
sey residents made and received illegal payments,
which payments may not have been reported as income
by the recipients and which may have been illegally
deducted as business expenses on the income tax re-
turns of the payors.
{I]n the context of this investigation there were allega-
tions of criminal wrongdoing on the part of members
of the firm of Freedman, Borowsky and Lorry.
The items sought in the subpoena were relevant
and necessary to the Grand Jury investigation and
are not sought primarily for another purpose.”
At a hearing on the motion to quash on July 14, 1975,
Freedman contended that the government’s affidavit was
an insufficient compliance with Jn re Grand Jury Proceed-
ings, 486 F.2d 85 (3d Cir. 1973) (Schofield I) and In re
Grand Jury Proceedings, 507 F.2d 963 (3d Cir. 1975)
(Schofield II). The district court ruled that the govern-
ment had satisfied the Schofield criteria, denied the motion
to quash, and directed Freedman to ‘‘produce at 10 A.M.
on Tuesday, July 15, 1975, to the Grand Jury, any and
all books, records, documents and correspondence set forth
in the Subpoena duly served upon the movant.’’ The order
did not direct Freedman to testify, but only to produce
specific records.
On July 15, 1975 Freedman appeared before the grand
jury but refused to produce the subpoenaed records for the
reasons previously asserted, and because the production of
such materials would violate his privilege against self-in-
2. Affidavit of Frank C. Razzano, Assistant United States Attorney for
the District of New Jersey, 1la-l3a.
es
RLEED THROUGH
Appendix B A5
crimination, and because he suspected that he had been the
subject of unlawful electronic surveillance by the United
States. On July 16, 1975 the district court entered an
order scheduling a hearing on July 23, 1975 to determine
(a) whether the law firm of Freedman, Borowsky & Lorry
is a sole proprietorship of Freedman, as he contended, and
(b) whether the grand jury subpoena was issued as a result
of any unlawful electronic surveillance.*
The hearing actually commenced on July 24, 1975. In
response to the suggestion that the grand jury subpoena
might have been the result of unlawful electronic surveil-
lance, the government produced the affidavit of Frank C.
Razzano, an Assistant United States Attorney, and a letter
from an official of the Department of Justice.‘ The hearing
was addressed primarily to Freedman’s contention that he
had the sole proprietary interest in the subpoenaed rec-
ords, and that they were covered by his privilege against
self incrimination. The district court concluded that the
subpoenaed records belonged to the law firm of Freedman,
Borowsky & Lorry, an institutional entity separate and
apart from Freedman, and thus that the records were not
held by Freedman as personal and private effects but ina
representative capacity for the entity. The court also con-
cluded that the government’s denial of unlawful electronic
surveillance satisfied 18 U.S.C. § 3504(a) (1) (Supp. 1973).
It denied the motion to quash and ordered Freedman to
produce the records to the grand jury on August 12, 1975.
As with the July 14, 1975 order, the court directed produc-
tion only, not testimony. 399 F. Supp. at 679.
When Freedman did not comply the court, on the gov-
ernment’s petition, directed that he show cause on Septem-
3. The order also directed Freedman to produce the records for examina-
tion in camera to assist the court in ruling on the contention that the law firm
was a sole proprietorship. When Freedman refused to comply with that part
of the order he was adjudged to be in civil contempt. On July 22, 1975 a panel
of this court summarily reversed both the finding of civil contempt and the
order for in camera production of the records, without prejudice to the right
of the United States to reinstate contempt proceedings following the evidentiary
hearings scheduled for July 23, 1975.
4. The electronic surveillance issue is discussed hereinafter at p. All.
ORR Operas, ee RE a
A6 Appendix B
ber 8, 1975 why he should not be adjudged in criminal
and/or civil contempt. In answer to the petition Freedman
asserted that he should not be adjudged in contempt
because :
‘‘(a) Mr. Freedman is entitled to assert his privilege
against self-incrimination with respect to the
records ;
(b) the government has failed sufficiently and ade-
quately to attest to relevancy, jurisdiction and
proper purpose;
(c) the subpoena is overbroad and amounts to an
unreasonable search and seizure; and
(d) the government insufficiently denied Mr. Freed-
man’s claim of electronic surveillance ....’’
On the adjourned return date of the order to show
cause the government pressed only the application for civil
contempt. After hearing testimony and argument the dis-
trict court concluded that Freedman was in civil contempt
and entered an order remanding him to the custody of the
Attorney General until he complied with the order for pro-
duction of the records. It also assessed a coercive fine of
$1500 per day until such time as he complied. From that
order Freedman appeals, asserting the four objections to
the production order set forth in his answer to the govern-
ment’s contempt petition, and the additional contention
that in a civil contempt proceeding the court may not im-
pose a coercive monetary fine.’ We vacate the order of
the district court and remand.
A. FREEDMAN’s PERSONAL INTEREST IN THE
Law Firm’s Recorps
Freedman, relying on Bellis v. United States, 417 U.S.
85, 92-93 (1974), urges that before books, records and
5. The order was stayed by the district court pending an appeal to this
court.
RLEED THROUGH
Appendix B A7
papers can be said to fall outside the scope of the fifth
emendment privilege against self incrimination the court
must find (1) that the records reflect the organized insti-
tutional activity of an entity independent of individual
members, and (2) that the records subpoenaed are held by
the possessor in a representative capacity for that entity.
He contends that although the law firm of Freedman,
Borowsky & Lorry has held itself out to the public, the
courts and the legal profession as a partnership, has filed
both federal and local partnership tax returns, has leased
office space in the partnership name and purchased office
equipment, real estate, securities and insurance in the name
of the firm, all the objective indicia of institutional status
should in this instance be disregarded because internally
Freedman has at all times since 1932 been the sole proprie-
tor of the professional practice in question, under an ar-
rangement whereby his word with respect to every decision
is final. He contends that as a law firm Freedman, Borow-
sky & Lorry has no institutional existence apart from him,
and that every book, paper, chair, desk and file is his per-
sonal property.
We believe the district court correctly concluded that
Freedman’s fifth amendment privilege did not embrace the
subpoenaed records, and affirm that judgment. On the
basis of the facts adduced and found by the district court,®
we are satisfied that it correctly held that Freedman,
Borowsky & Lorry possesses an identity separate and dis-
tinct from that of the petitioner. It is true that Freedman,
and several members of the firm, testified that despite all
objective external manifestations, Freedman, Borowsky &
Lorry is not an institution having separate existence from
Freedman, and is his alter ego only. But their testimony
to that effect reflects only their legal conclusion. The ob-
jective facts found by the district court fully support the
contrary legal conclusion.
6. The district court's findings of fact are set forth in its opinion. 399
F. Supp. at 669-75
AON RES ER EEE TPIT. IP ITA RL OO LLP IES POP DI I Me E SN ALN LR
A8 Appendix B
Freedman contends that the district court’s finding
that he alone among the lawyers had access to the books
and ledgers of Freedman, Borowsky & Lorry establishes
his privilege to the records under the second prong of the
Bellis test. This argument distorts the holding of that
case.
We do not understand Bellis to hold that once an in-
stitution is determined to be an entity independent of its
members, the records of that entity may nonetheless be
protected by the purely personal privilege against self-
incrimination if the members of the organization agree that
access to those records will not be shared. Access is one
indicium bearing upon the question of institutional sepa-
rateness. In this case, the facts found by the district court,
including facts pertaining to Freedman’s exclusive access
to certain financial books and records, fully suppert the
conclusion that Freedman, Borowsky & Lorry has an insti-
tutional identity apart from Freedman. That being so,
the fact that Freedman preserves his exclusive access to
certain records is inconsequential for fifth amendment pur-
poses. To hold the members of an institution could resur-
rect the fifth amendment privilege with respect to records
that they individually forfeited by identifying themselves
with that institution would seriously erode the established
principle that the privilege against self-incrimination is
purely personal. See Hale v. Henkel, 201 U.S. 43 (1906).
This we decline to do. We therefore hold that Freedman
was not legally entitled to assert his fifth amendment
privilege in defense to production of the subpoenaed
records.
B. Tue GovernMENT’s SHOWING oF RELEVANCY,
JURISDICTION, AND Proper PuRPOsE
In Schofield I we held that the district courts in this
circuit should not casually rubber stamp petitions for the
enforcement of grand jury subpoenas, but should require
that the government show (1) the grand jury’s jurisdic-
RLEED THF OUGH
See aE a |
Appendix B AQ
tion, (2) relevancy of the subpoenaed materials to an in-
vestigation within that jurisdiction, and (3) the absence
of an unrelated purpose.
Freedman’s objection to the grand jury investigation
in Newark is territorial. The law firm has offices in Phila-
delphia and New York. The National Maritime Union has
its headquarters in New York. Although some members
of the law firm and some officers of the union reside in
New Jersey, he urges that the investigation will necessarily
center around activities in New York and in Philadelphia.
We have said ‘‘Historically, Grand Juries have been con-
stituted for the purpose of ascertaining whether or not
crimes have been committed in their district. United
States v. Neff, 212 F.2d 297, 303 (3d Cir. 1954) (emphasis
supplied). See also Brown v. United States, 245 F.2d
549 (8th Cir. 1957); United States v. Lazaros, 480 F.2d
174, 178 n.6 (6th Cir. 1973); Comment, United States v.
Dionisio: The Grand Jury and the Fourth Amendment, 73
Colum. L. Rev. 1145, 1147-48 (1973). But since the grand
jury is investigating allegedly illegal payments which may
not have been reported as income by residents of the dis-
trict of New Jersey, or which may have been illegally de-
ducted in computing the income tax paid by residents of
New Jersey, the contention that the subpoena was issued
by a grand jury which lacked jurisdiction is fanciful.’
Turning to relevancy and purpose, we note that the
government’s affidavit discloses that the subpoena is for
the purpose of a proper grand jury investigation, and not
primarily for another purpose. It cannot be gainsaid that
much of the material subpoenaed would be relevant to an
inquiry into illegal payments allegedly made to officers of
the National Maritime Union. Here, however, we come to
the question of overbreadth. If the subpoena seeks large
quantities of documents some of which appear to be rele-
7. We reject as incompatible with our holding in Schofield I the govern-
ment’s argument that the person to whom a grand jury subpoena is directed
lacks standing to challenge the jurisdiction of the issuing body.
PSFK SIRE IME ES RRB LE PLP IE BLE EI EMRE NY OED ET RI I IE ERIN LRT OE am
Al0 Appendix B
vant to the investigation which has been identified by the
government as the jurisdictional predicate for grand jury
action, the court cannot without further inquiry accept at
face value the conclusory allegation that the subpoena is
not for a purpose unrelated to that inquiry.
The subpoena in this case commands production of 26
categories of documents for a ten year time span. Al-
though only the relationship between Freedman, Borowsky
& Lorry and the National Maritime Union has been iden-
tified as the focus of the investigation, the subpoena seeks
financial records relating to non-maritime clients as well.®
The overbreadth objection was made at the outset. The
district court ruled:
‘‘I’m sure the Department of Justice has no interest
in Jones to McLaughlin, any conveyance for real estate,
for example, or as to a bill paid, but it should be pro-
duced, in this Court’s opinion, and it will be returned
forthwith, I am sure it will.’’ (Tr. July 14 hearing,
36a-37a).
With deference, we conclude that this ruling was an insuf-
ficient compliance with the requirements of Schofield I.
Freedman was entitled to some explanation why records
of the firm’s dealings with other clients, or with suppliers
of office supplies, was relevant to the grand jury’s investi-
gation of graft in the NMU. Without some explanation,
the district court simply cannot discharge its obligation to
guard against misuse of the court’s process. It is not
enough to require the indiscriminate production of records
and then permit the return of irrelevant documents after
the government has rummaged through them. The over-
breadth problem is particularly acute with respect to insti-
tutions such as law offices, with which third parties often
deal with significant expectations of privacy.
8. A good example of the breadth of the subpoena is category 14, “Con-
tracts and copies of contracts including all retainer agreements.”
RLEED THF OUGH
— ~<« a
Appendix B All
C. FrREEDMAN’s OVERBREADTH CONTENTION
Freedman would have us not only rule on the suf-
ficiency of the government’s showing of relevance, but also
hold that as a matter of law the subpoena is so overbroad
as to violate the fourth amendment and thus can be ig-
nored. This we cannot do at the appellate level on this
record. It is conceivable that the government will be able
to satisfy the district court that most, if not all, of the
subpoenaed materials are relevant to the grand jury’s in-
vestigation. And while we have held that the district court
required too little disclosure of relevancy, at the same time
we disapprove the remedy to which Freedman resorted:
the withholding of all records, even those clearly relevant.
There are materials listed in the schedule attached to the
subpoena which under the narrowest definition of relevancy
should have been produced. It is arguable, of course, that
when the government draws an overbroad subpoena the
court should merely decline enforcement under 28 U.S.C.
§ 1826(a). Such a wooden construction of the civil en-
forcement remedy would result in the multiplication of
civil enforcement proceedings. Our ruling in Schofield I
was not intended as an opportunity for gamesmanship, but
as a device for the protection of substantial interests of
privacy. Nor should it make any difference that the pro-
ceedings were commenced by Freedman’s motion to quash
rather than by a government motion to enforce. The
proper remedy for overbreadth is an order directing par-
tial compliance. The district court should then rule on the
disputed items. At a minimum the records relating to the
firm’s relationship with the National Maritime Union
should have been ordered produced immediately.
(D) THe GovernMeEnT’s Dentau or ELECTRONIC
SURVEILLANCE.
When a grand jury witness raises the issue of possible
electronic surveillance as the source of a subpoena or ques-
Al2 Appendix B
tions, the government is bound to affirm or deny the occur-
rence of such surveillance. 18 U.S.C. § 3504(a) (1) (Supp.
1973). An insufficient denial is just cause for refusing to
answer questions or produce subpoenaed records. Gelbard
v. United States, 408 U.S. 41 (1972). Freedman raised the
issue. In response the government filed the affidavit of
Frank C. Razzano, an Assistant United States Attorney
conducting an investigation of alleged violations of the
federal criminal law by the National Maritime Union. He
swore that he had received no information that would indi-
cate any electronic surveillance of Freedman or of any
premises owned, leased or licensed by him, that he in-
quired of the United States Attorney for the District of
New Jersey whether there was any electronic surveillance
and had been informed that none was authorized or en-
gaged in, and that on July 16, 1975 he caused a similar
inquiry to be made of the Department of Justice. The
government also produced a response to that inquiry in a
letter quoted in the margin.’ The district court concluded:
This court is satisfied on the basis of the representa-
tions of the United States and the lack of proof on the
part of petitioner that there was no electronic surveil-
lance in this case on the part of any government
agency.’°
9. The government’s response, addressed to Jonathan Goldstein, United
States Attorney for the District of New Jersey and signed by William Lynch,
Chief of the Organized Crime and Racketeering Section of the Criminal Divi-
sion of the Justice Department, read as follows (426a) :
“This is with regard to your request that we ascertain whether the
following individual was monitored by electronic surveillance.
A review of the Department of Justice files discloses no information
indicating that conversations of Abraham E. Freedman were at any time
overheard by electronic surveillance or that premises known to be owned,
leased or licensed by him were covered by electronic surveillance by the
Federal Bureau of Investigation.
Also, the above-named individual was never subjected to electronic
surveillance by the Internal Revenue Service, the United States Postal
Service, the United States Secret Service, the Bureau of Alcohol, Tobacco,
and Firearms, the Drug Enforcement Administration, or the Bureau of
Customs.”
10. 399 F. Supp. at 678-79.
RLEED THF OUGH
Appendix B Al3
In United States v. D’ Andrea, 495 F.2d 1170 (3d Cir.) (per
curiam), cert. denied, 419 U.S. 855 (1974), this court held
that a denial based on third-party information is sufficient
compliance with 18 U.S.C. § 3504(a) (1) where the complain-
ing party has come forward with nothing more than a bald
allegation of illegality. See also In re Horn, 458 F.2d 468
(3d Cir. 1972) (per curiam). Freedman argues that a more
formal denial is necessary in this case because he has sub-
stantiated his charge with more than conclusory allegations.
Specifically, Freedman stated in an affidavit that ‘‘[flor
some time prior to June 18, 1975’? he was aware of
‘‘[s]trange noises or ‘clicks’’’ during phone conversa-
tions, and that ‘‘on occasion, calls were inexplicably dis-
connected.’’ Freedman’s affidavit further recites that he
engaged a private investigator to scan the law firm’s
offices for the presence of electronic surveillance. During
this scan the investigator detected a positive response,
‘‘indicating that electronic surveillance might be present’?
(emphasis supplied). Subsequent checks of the firm’s tele-
phone lines by the telephone company and another private
investigator did not uncover any surveillance. We do not
believe that these minimal factual allegations require the
government to respond to Freedman’s inquiry with any
more formal denial than was entered here. We find no
error in the court’s ruling that the government’s denial was
adequate. We reject Freedman’s contention that we should
reconsider our D’Andrea holding and place a heavier bur-
den on the government than the case imposed.
(E) THe Coercive Fine
After adjudging Freedman to be in civil contempt the
court ordered him jailed until he complied and also ordered
him to pay $1500 for each day he continued to be in con-
tempt of its order. The $1500 per day fine is intended as
a coercive sanction to force compliance with the order.
Freedman urges that there is no statutory authority for
Al4 Appendix B
such a sanction. Authority for civil coercion for disobedi-
ence of court orders in connection with grand jury proceed-
ings is found in Title III, § 301(a) of the Omnibus Crime
Control Act of 1970, 28 U.S.C. §1826(a). The statute in
terms refers only to coercion by confinement, but its legis-
lative history indicates that it was intended to ‘‘codify
present civil contempt practice.’’'' We have found no case
where a coercive fine was imposed on a contumacious wit-
ness under 28 U.S.C. § 1826(a). In United States v. Liddy,
510 F.2d 669, 676 (D.C. Cir. 1974)(en bane), cert. denied,
420 U.S. 980 (1975), the District of Columbia Circuit sug-
gested in dicta that the court might lack power under the
statute to utilize such a remedy. But monetary penalties
for civil contempt have been justified in other contexts as
valid attempts to coerce compliance with court orders.
See, e.g., United States v. United Mine Workers of Amer-
ica, 330 U.S. 258 (1947); International Business Machines
Corp. v. United States, 493 F.2d 112 (2d Cir. 1973), cert.
denied, 416 U.S. 976 (1974). In at least one case prior to
the enactment of § 1826 a federal court imposed a coercive
fine on a witness who failed to appear before a grand jury.
United States v. Germann, 370 F.2d 1019 (2d Cir.), vacated
per curiam on other grounds, 389 U.S. 329 (1967). We do
not detect in the enactment of § 1826 an intention on the
part of Congress to remove from the arsenal of the federal
courts on enforcement weapon they were long thought to
possess.
This conclusion is reinforced by the manifest neces-
sity for some civil sanction other than imprisonment of a
civil contemnor. By the terms of §1826(a)(2), a person
who refuses to purge himself of his contempt can be im-
prisoned only for the life of the grand jury whose order
he has ignored, As the term of a grand jury draws to a
close, the coercive effect of the jail sanction is obviously
attenuated. If the grand jury were denied an effective
11. H.R. Rep. No. 91-1549, 91st Cong., 2d Sess. (1970), 1970 U.S. Code
Cong. & Admin. News 4008, quoted in Schofield I, supra, 486 F.2d at 88.
BLEED THROUGH
Appendix B Al5
sanction for disobedience occurring late in its life, its abil-
ity to discharge its duties would be seriously impaired.
We do not believe that in enacting the Omnibus Crime Con-
trol Act—a decidedly hard-line piece of anti-crime legisla-
tion—Congress intended to accomplish such a result. We
therefore conclude that the district court has power to im-
pose upon a civil contemnor a coercive monetary fine.
It does not necessarily follow, however, that the range
of penalties available to a court under § 1826 are cumula-
tive. We have not been cited to any case where a coercive
monetary fine was levied in conjunction with imprison-
ment. These flexible sanctions, in our view, allow the dis-
trict court to apply the degree of coercion minimally neces-
sary to gain compliance with its orders, but do not vest the
court with the power to visit Draconian punishment upon
the civil contemnor. We therefore hold that a district
court may use these civil sanctions interchangeably or suc-
cessively, but not simultaneously in the absence of findings
supported by the record showing the necessity for such
severe action. The court should apply the least sanction
(e.g., a meetary penalty) reasonably ealeulated to win
compliance with its orders. If compliance is not fortheom-
ing, the initial penalty may be increased, or a new penalty
appropriate under the circumstances may be selected. We
do not believe that the simultaneous imposition of mone-
tary and jail sanctions necessarily adds to the in terrorem
effect of a properly devised solitary sanction. Cf, 18
U.S.C. § 401.
ConcLUSION
The order of the district court directing compliance
with the grand jury subpoena was correct in all respects
except for the court’s failure to require a more complete
showing of the relevancy to the grand jury investigation of
some of the materials subpoenaed. Freedman should have
complied with the order at least to the extent of furnishing
Al6 Appendix B
all materials relating to the National Maritime Union’s
dealings with Freedman, Borowsky & Lorry. Since, how-
ever, he had at the outset objected to the subpoena on over-
breadth grounds the order of the district court adjudging
him in contempt will be vacated and the case remanded to
the district court for the purpose of (1) affording Freedman
an opportunity promptly to furnish those materials listed in
the schedule attached to the subpoena relating to the deal-
ings between the National Maritime Union, its officers and
agents, and the firm of Freedman, Borowsky & Lorry, and
(2) affording the government the opportunity to demon-
strate that other records listed in the schedule are relevant
to the grand jury’s investigation.
A True Copy:
Teste:
Clerk of the United States Court of Appeals
for the Third Circutt.
(A.O.—U. S. Courts, International Printing Co., Phila., Pa.)
BLEED THROUGH
Appendix C Al7
APPENDIX C.
UNITED STATES DISTRICT COURT
District or New Jersey.
Misc. No. 75-11
IN THE MATTER OF GRAND JURY PROCEEDINGS
Re: Grand Jury Empanelled
January 21, 1975.
Appearances:
Jonathan L. Goldstein, Esq.
United States Attorney
— and —
Andrew R. Jacobs, Esq., and
Frank C. Razzano, Esq.,
Assistant U. S. Attorneys
970 Broad Street
Newark, New Jersey 07101
Amster & Levin, P. A.
By: Richard A. Levin, Esq.
11 Commerce Street
Newark, New Jersey 07102
Wolf, Block, Schorr & Solis-Cohen
By: Howard Gittis, Esq.
Packard Building
Philadelphia, Pennsylvania 19102
Als Appendix C
OPINION
Wuipp ce, Chief Judge
On June 18, 1975, a subpoena duces tecum was de-
livered to the law offices of Freedman, Borowsky and
Lorry, directing an appropriate representative to produce
before the grand jury certain books, papers and records.
On July 11, 1975, Abraham E. Freedman (hereinafter peti-
tioner ), filed a motion to quash the subpoena. After oral
argument on July 14, 1975, this Court denied the motion
and petitioner was directed to produce all of the records
described in the subpoena the next morning. On July 15,
1975, petitioner appeared before the Grand Jury and re-
fused to produce the subpoenaed records on the ground
that, inter alia, the production of such materials would be
in violation of the self-incrimination provision of the fifth
amendment to the Constitution. The United States moved
this Court, at that time, to hold petitioner in civil con-
tempt.
It was the ruling of this Court that petitioner be re-
quired to produce the subpoenaed records, in camera,
on July 16, 1975. On that date, petitioner failed to pro-
duce the records in question and, after oral argument, this
Court adjudged petitioner to be in civil contempt pursuant
to 28 U. S. C. § 1826. The Court ordered that petitioner
be placed in custody and be fined the sum of $1,500.00
daily, until such time as he produced the records in ques-
tion. The sentence was immediately suspended “until
further order of this Court pending disposition of other
issues which have been raised in this cause.” The Court
also ordered that a hearing be held on July 23, 1975 to
determine whether petitioner should be held in criminal
contempt.
ae _ |
RLEED THF OUGH
Appendix C Al19
On July 17, 1975, petitioner filed a notice of appeal
to the Third Circuit Court of Appeals from this Court's
adjudication and sentence of contempt.
On July 22, 1975, petitioner filed with the Third Cir-
cuit Court of Appeals an application for a stay of the
hearing scheduled for July 23, 1975, pending appeal. On
July 22, 1975, the Third Circuit, while denying petitioner's
motion for a stay, entered an Order reversing the Order
of this Court directing petitioner to produce the sub-
poenaed records. The Court of Appeals further reversed
this Court's Order of Contempt, without prejudice to the
rights of the United States to reinstitute contempt pro-
ceedings following the evidentiary hearing then scheduled
to begin July 23, 1975.
An evidentiary hearing concerning the basis for
petitioner's assertion of the fifth amendment privilege was
held on July 24, 1975. Also the subject of inquiry at the
hearing was petitioner's contention that he may have been
the subject of illegal surveillance by the United States.
Finpincs oF Fact.
1. Petitioner is an attorney-at-law (T-7).
2. Petitioner was admitted to the Bar of the Common-
wealth of Pennsylvania in 1933 (T-84).
3. In approximately 1934, petitioner formed the law
firm of Freedman, Goldstein and Pechner of Philadelphia,
representing itself to third parties and to the public as
partners (T-88).
4. From 1938 to 1944, petitioner practiced as a mem-
ber of the firm of Freedman and Goldstein. During that
time, Freedman and Goldstein held themselves out as part-
ners to the public and to third parties (T-91).
OME, OF APR OR EST pins 2 8 ets oor te
Daher ogy
A20 Appendix C
5. From 1944 to 1962, petitioner practiced law as a
member of the firm of Freedman, Landy and Lorry, hold-
ing the firm out during that time as a partnership to third
parties and to the public (T-92).
6. The law firm of Freedman, Borowsky and Lorry,
which is the successor firm to Freedman, Landy and Lorry,
came into existence in 1962. Between 1962 and the pres-
ent, petitioner and others, including Wilfred Lorry, have
represented themselves to third parties and the public as
partners in that firm. The firm is located at 5th and
Chestnut Streets, Philadelphia, Pennsylvania (T-34).
7. There are two categories of lawyers employed at
Freedman, Borowsky and Lorry, salaried and profit-shar-
ing. The profit-sharing attorneys are held out to third
parties and the public as partners (T-95, 97).
8. From 1934 to date, petitioner and other so-called
profit-sharing attorneys have referred to or represented
their association with various law firms, including their
present association with Freedman, Borowsky and Lorry,
and its predecessor firm, Freedman, Landy and Lorry, as
a partnership and have made this reference orally and in
writing (T-10, 11).
9. Throughout the period 1934 to date, petitioner
has never entered into any formal partnership agreement,
written or oral, with any of the attorneys with whom he
has been associated (T-88, 90, 92, 94, 170).
10. Petitioner is a member of the Advisory Committee
of the United States Supreme Court on Admiralty Rules
and Civil Rules. In connection therewith, he holds him-
self out to the Supreme Court of the United States as a
member of the firm of Freedman, Borowsky and Lorry
(T-70, 71).
RLEED THROUGH
2 A te em
Appendix C A21
11. Petitioner is a member of the Bar of the 2nd,
3rd, 4th, 5th and 6th U. S. Circuit Courts of Appeals, the
Supreme Court of Pennsylvania, and the Court of Ap-
peals of the State of New York (T-85).
12. Petitioner has throughout his legal career re-
mained a member in good standing of all bars to which
he has been admitted (T-87).
13. Petitioner is a member of the American, Phila-
delphia, Pennsylvania and New York Bar Associations (T-
85).
14. Petitioner is a fellow and past president of the
International Academy of Trial Lawyers, fellow and
former members of the Board of Governors of the Ameri-
can College of Trial Lawyers, and a permanent member
of the judicial conferences of the 3d and 4th Judicial Cir-
cuits (T-85, 86).
15. The admission fees paid to the various Courts of
which the petitioner has become a member were paid out
of the firm account of Freedman, Borowsky and Lorry
(T-110).
16. The expenses of petitioner incurred at the Judi-
cial Conferences of the 3d and 4th Circuits were paid by
the law firm of Freedman, Borowsky and Lorry (T-111).
17. The law firm of Freedman, Borowsky and Lorry
is one of the largest law firms in the United States in the
field of Maritime and Admiralty law (T-200).
18. The law firm of Freedman, Borowsky and Lorry
holds itself out to the general public and the legal profes-
sion as a law firm consisting of 12 members and 9 associ-
ates (T-41).
19. Presently, the law firm of Freedman, Borowsky
and Lorry has approximately 50 employees other than at-
r
A22 Appendix C
torneys (T-34). It maintains offices in Philadelphia, Penn-
sylvania, and New York City (T-34, 35, 36).
20. Petitioner alone determines the salaries or share
of profits of each lawyer employed at Freedman, Borow-
sky and Lorry and consults with no one in making this
determination (T-95, 172).
21. Petitioner alone decides when a lawyer employed
at Freedman, Borowsky and Lorry shall begin to receive
as compensation a share in profits (T-98).
22. Upon becoming a profit-sharing employee at
Freedman, Borowsky and Lorry, a lawyer makes no cap-
ital contribution (T-98).
23. Petitioner assigns all matters for handling by both
profit-sharing and salaried lawyers or designates another
attorney to discharge this function. Petitioner has, on oc-
casion, taken assignments away from _ profit-sharing
lawyers (T-101).
24. When a lawyer terminates his association at
Freedman, Borowsky and Lorry, he may take with him
only his personal files authorized by petitioner (T-101,
172).
25. The law firm of Freedman, Borowsky and Lorry
leases its office premises in Philadelphia, Pennsylvania, in
the firm’s name, from Reid and Stambaugh, a Pennsylvania
corporation. In its lease of October 8, 1965, Freedman,
Borowsky and Lorry is described as a Pennsylvania part-
nership. The lease is signed by Abraham E. Freedman,
Wilfred Lorry and Milton Borowsky as partners of the
law firm (T-13) (G-2).
26. Petitioner negotiated the terms of said lease for
the office to include the designation of Freedman, Borow-
sky and Lorry as a Pennsylvania partnership (T-15) (G-2).
RLEED THF OUGH
od
Appendix C A23
27. Petitioner caused to be included in the lease a
provision limiting the liability of the partnership (T-18)
(G-2).
28. In a letter dated October 18, 1965 from Reid and
Stambaugh to the law firm of Freedman, Borowsky and
Lorry, requesting approval of additional terms in the lease,
acceptance is made on behalf of the law firm by Abraham
E. Freedman as a partner of the firm (T-20) (G-2).
29. The law firm has stationery on which the firm
name of Freedman, Borowsky and Lorry is prominently
displayed with the legend “Counsellors at Law and Proc-
tors in Admiralty”. Said stationery sets forth the names of
the attorneys in the firm together with the addresses of the
firm's offices in Philadelphia and New York (T-44).
30. The law firm of Freedman, Borowsky and Lorry
has 3 bookkeepers who maintain the books and records
of the law firm on the premises of the law firm (T-41, 42).
31. 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 (T-60-67).
32. The financial records of Freedman, Borowsky and
Lorry are maintained in the bookkeeper’s office under lock
and only petitioner and the bookkeeper have access keys
(T-103, 171).
33. Members of the firm of Freedman, Borowsky and
Lorry have access to ledger sheets of only the cases they
are handling and consult with the bookkeeper concerning
the financial aspects of these cases (T-103).
34. The law firm of Freedman, Borowsky and Lorry
has three bank accounts in the firm name, including one
at the Central Pennsylvania National Bank, and two at
the Continental Bank (T-42).
wR POOLE ae |
SDS ey EATEN DUE OEE IE RIE ENTE EIT ORNS
A24 Appendix C
35. Bills sent out for legal services performed by
members of the firm are sent out in the name of Freed-
man, Borowsky and Lorry, at the direction of various at-
torneys in the firm (T-74, 75).
36. Renumeration for the legal services is made pay-
able to the law firm and deposited in bank accounts in the
firm’s name (T-75).
37. The law firm of Freedman, Borowsky and Lorry
may have purchased municipal bonds with monies of the
firm (T-46).
38. The law firm of Freedman, Borowsky and Lorry
has purchased in the firm name bonds of the Common-
wealth of Pennsylvania (T-48).
39. The law firm of Freedman, Borowsky and Lorry
has purchased State of Israel Bonds for several years in
the firm name (T-48).
40. Freedman, Borowsky and Lorry has an organiza-
tional structure whereby a member of the firm assigns
various cases to various partners and associates depending
upon the potential recovery estimated in each case (T-
198).
41. The monthly payroll of the law firm of Freedman,
Borowsky and Lorry is at least $25,000.00 (T-49).
42. The law firm of Freedman, Borowsky and Lorry
pays for its day-to-day services and bills, including monthly
rental of office premises, telephone bill, xerox, etc., in the
firm name with monies from bank accounts held in the
name of Freedman, Borowsky and Lorry (T-50, 51).
43. Petitioner has no bank account of his own at the
Continental Bank (T-51).
RILEED THRE OUGH
Appendix C A25
44. The law firm of Freedman, Borowsky and Lorry
enters into agreements, including retainers for legal serv-
ices, with clients in the firm name of F reedman, Borow-
sky and Lorry (T-54).
45. For the years 1970, 1971 and 1972, the total bill-
ings of the law firm of Freedman, Borowsky and Lorry
were respectively $3,726,510.37, $3,331,986.59 and $3,337,-
819.16 (T-127) (G-10a, b, c).
46. $600,000 in bank certificates were purchased,
probably in the firm name, for the purpose of paying the
individual federal income taxes of each of the law firm’s
partners (T-46).
47. The assets of the law firm of F reedman, Borow-
sky and Lorry, including the desks, tables, typewriters,
chairs, etc., were paid for from the law firm’s account (T-
112).
48. The law firm of Freedman, Borowsky and Lorry
maintains a legal malpractice insurance policy in the firm’s
name, covering all of the lawyers in the firm. This insur-
ance policy is paid for by the firm of Freedman, Borowsky
and Lorry (T-79, 80).
49. The law firm of Freedman, Borowsky and Lorry
pays Workmen’s Compensation Insurance in the firm’s
name with the firm monies covering employees of the firm
(T-80).
50. The law firm of Freedman, Borowsky and Lorry
makes payments on behalf of the firm to the Common-
wealth of Pennsylvania Commission on Sales Tax (T-81).
51. The law firm of Freedman, Borowsky and Lorry
carries group life insurance covering all of the profit-shar-
ing attorneys in the firm and perhaps the salaried attorneys
as well (T-81, 141).
A26 Appendix C
52. The law firm of Freedman, Borowsky and Lorry
makes payment in the firm name for Blue Cross, Blue
Shield Medical Insurance for all of the members, associ-
ates and employees thereof (T-82).
53. The law firm of Freedman, Borowsky and Lorry
has a Retirement Plan to which the firm makes contribu-
tions in the firm name (T-138).
54. The law firm of Freedman, Borowsky and Lorry
may have held title to real estate in Philadelphia (T-45).
55. Petitioner himself refers to members of his firm as
“partners , specifically testifying during the course of this
hearing that “all partners share in the profits” (T-40).
56. The law firm of Freedman, Borowsky and Lorry
holds itself out to the legal profession in Martindale-Hub-
bell as a law firm with 12 members and 9 associates (T-41).
57. Petitioner, Wilfred Lorry, Milton Borowsky, M.
Vigderman, Joseph Weiner, Marvin Levin, Abram Adler,
Marvin Barish, Charles Sovel, Bert Zibelman, Robert C.
Daniels and Arnold Levin are listed in Martindale-Hub-
bell as members of the firm (T-39).
58. At least 1 member of the law firm of Freedman,
Borowsky and Lorry has at various times, and in various
ways, held himself out as a partner of the firm (T-23).
59. In correspondence to the Philadelphia Bar Asso-
ciation, at least one membex of Freedman, Landy and
Lorry, and its successor firm, Freedman, Borowsky and
Lorry, held himself out as a partner of the firm and has
referred to other members of the firm as partners (T-23).
60. In responding to complaints made to the Board
of Censors of the Philadelphia Bar Association, members
of the law firm of Freedman, Borowsky and Lorry spe-
RLEED THROUGH
Appendix C A27
cifically requested that complaints be viewed as a com-
plaint against the firm rather than a complaint against an
individual of the firm (T-30).
61. Wilfred Lorry is an attorney and member of the
Bar of the Commonwealth of Pennsylvania (T-167).
62. Wilfred Lorry was associated in the full-time
practice of law with petitioner from 1944 to 1967 (T-169).
63. Since 1944, Wilfred Lorry’s name has been used
together with petitioner's name in their association: from
1944 to 1962 as “Freedman, Landy and Lorry”, and from
1962 to date as “Freedman, Borowsky and Lorry” (T-170).
64. In written and and oral representations to the
public and the legal profession, Wilfred Lorry, pursuant
to his agreement with petitioner, held himself out as a
partner in the law firm of Freedman, Borowsky and Lorry
(T-186).
65. Wilfred Lorry held himself out to be a partner
in the firm of Freedman, Borowsky and Lorry for prac-
tical business purposes and knew that federal partnership
income tax returns were prepared in the partnership name
(T-184, 185).
66. Wilfred Lorry held himself out as a partner of the
law firm of Freedman, Borowsky and Lorry before the
Committee of Censors of the Philadelphia Bar Association,
and represented to that association that the firm included
other partners (T-190).
67. Wilfred Lorry held himself out to be a partner of
the law firm of Freedman, Borowsky and Lorry to the
Courts in which he practiced (T-190).
68. The firm of Freedman, Borowsky and Lorry held
itself out to the general public and legal profession as a
—_ . SEA AO LENIN I AONE TEE SR
PERRIN REE 2A ATE DELS %
A28 Appendix C
partnership because it was felt that this would be a good
business practice and aid in bringing in business (T-177,
178).
69. Petitioner represented the law firms of Freedman,
Landy and Lorry and, its successor firm, Freedman,
Borowsky and Lorry to the public as a partnership and
Wilfred Lorry never did anything to dissuade anyone from
that conclusion because it was believed to be a good busi-
ness practice to make and perpetuate this representation
(T-203).
70. During his twenty-two years with petitioner,
Lorry never looked at the financial records nor had access
to them (T-171).
71. To Lorry’s knowledge, no lawyer other than peti-
tioner had access to the financial records of Freedman,
Borowsky and Lorry (T-171).
72. During his twenty-two year association with peti-
tioner Lorry never saw the partnership tax returns filed
for either Freedman, Borowsky and Lorry or Freedman,
Landy and Lorry (T-173).
73. Petitioner refers to the junior profit-sharing mem-
bers of his firm as “Junior Partners” (T-106).
74. The law firm of Freedman, Borowsky and Lorry
files federal partnership tax returns (T-8).
75. On the Federal Partnership Income Tax return
of Freedman, Borowsky and Lorry, the employer identi-
fied thereon is the law firm of Freedman, Borowsky and
Lorry. Likewise, the firm name appears on W-2 forms
of the firm’s employees (T-114) (G-10a,b,c).
76. As set forth in the firm’s Federal Partnership Tax
Return for the years, 1970, 1971 and 1972, respectively,
BLEED THROUGH
Appendix C A29
the total income earned by the firm’s 11 partners was ap-
proximately $2,202,367.73, $1,673,834.94 and $1,497,223.50
(T-128, 129) (G-10a,b,c).
77. The firm’s Federal Partnership Tax returns re-
flected first year depreciation divided proportionately
among all of the partners of the law firm, not taken solely
by petitioner individually in its total amount (T-131, 133).
78. As reflected in the firm’s Federal Partnership Tax
returns, Freedman, Borowsky and Lorry deducts various
expenses, including automobile leasing for the members of
the firm and the firm investigators. The insurance cover-
age for these leased automobiles is in the law firm’s name
and paid by the firm (T-139).
79. The law firm of Freedman, Borowsky and Lorry
has claimed as a deduction promotional expenses in the
amount of $210,000.00 in its 1972 tax return which sum
was expended by various members of the firm (T-139)
(G-10c).
80. The firm, as reflected in its 1972 tax return, has
deducted approximately $71,000.00 in convention and
meeting expenses for various members of the firm (T-140)
(G-10c).
81. The law firm of Freedman, Borowsky and Lorry
has deducted proportionately from its gross income con-
tributions in excess of $54,000.00 made to various charities
on behalf of the firm (T-142) (G-10c).
82. The Federal Partnership Tax returns of the law
firm of Freedman, Borowsky and Lorry reflect that the
firm has paid Philadelphia City tax, Net profit tax, Mer-
cantile tax, General Business tax, Personal property tax,
and sales and occupancy tax (T-123) (G-10a,b,c).
Bera: ; PN IES Y PRTC ET pee arog? —
A30 Appendix C
83. The federal partnership returns of the firm of
Freedman, Borowsky and Lorry have set forth the firm’s
capital account, from beginning of the year as to each one
of the firm’s partners, ordinary income, additional first
year depreciation, contributions that were made, with-
drawals, distribution, capital income at the end of the year
(T-127) (G-10a,b,c).
84. All so-called profit-sharing members of Freedman,
Borowsky and Lorry contributed capital to the law firm
of Freedman, Borowsky and Lorry as reflected in their re-
spective capital accounts (T-108, 109) (G-10a,b,c).
85. On June 18, 1975 petitioner was served by an
agent of the United States Attorney's Office with a Grand
Jury Subpoena to produce certain books and records of the
law firm of Freedman, Borowsky and Lorry. At that time
the records subpoenaed were either in the firm’s Philadel-
phia office or in the firm’s New York office, and some in the
possession of the law firm’s accountant, Murray Axelrod
(T-54, 55, 56) including all of the accountant’s work papers;
financial statement file; copies of Federal Income Tax re-
turns of the Partnership; City Tax returns of the partner-
ship and Individual Partners and State Tax returns (G-9).
86. On or about June 27 and 30, 1975, petitioner
called the law firm’s accountant, Murray Axelrod, and
asked him to deliver to the firm of Freedman, Borowsky
and Lorry all of the records in his possession (T-56).
87. Pursuant to the direction of petitioner, Murray
Axelrod, the accountant for the firm of Freedman, Borow-
sky and Lorry, delivered on or about July 27, and July
30, 1975, to petitioner the various records of the law firm
of Freedman, Borowsky and Lorry as set forth in G-9 (T-
78, 79).
Appendix C A3l
88. Petitioner has submitted an affidavit in which he
contends that he may have been the subject of illegal sur-
veillance by the United States. In support of this allega-
tion, he submits that “the existence of unusual noises or
occurrences on the telephone system together with the
positive responses obtained . . . in his initial scan of the
offices, led [him] to believe that his office may have been
subjected to illegal electronic surveillance.”
89. The Government has submitted the affidavit of
Assistant United States Attorney Frank C. Razzano in
which he states that to his knowledge there has been no
electronic surveillance of the conversations of petitioner
or any electronic surveillance of conversations occurring
on premises owned, leased or licensed by him whether or
not he was present or participated in those conversations,
by the United States Attorney’s office or any agency in the
investigation.
90. The United States has also submitted a letter from
the United States Department of Justice to the effect that
an inquiry has been made with the appropriate federal
government agencies in order to determine if there has
been any electronic surveillance occurring on premises
owned, leased or licensed by him whether or not he was
present or participated in those conversations. Based
upon the results of such inquiry, the U. S. Department of
Justice has represented that there has been no electronic
surveillance of any conversation of petitioner or any elec-
tronic surveillance of any premises owned, leased or li-
censed by him.
91. Petitioner has failed to offer any evidence indicat-
ing that the affidavit of Assistant United States Attorney
Frank C. Razzano and the letter from the U. S. Depart-
ment of Justice were false or defective.
240
PRE SEI ELON LS ELOISE eas otek PO
SEEN LOT EDL LION L OL OO FL
Dt ee ee ee Tee re Ee wer ee Ne ore - Orn et ans ee ee ~~
A32 Appendix C
92."getitioner has contended that the grand jury sub-
poena requiring the production of the firm’s financial
books and records for the relevant period under investiga-
tion is overly broad, burdensome and unreasonable.
93. Petitioner has failed to establish these allegations
and the United States has demonstrated the relevancy,
necessity and reasonableness of the documents subpoenaed
in the affidavit of Assistant United States Attorney Frank
C. Razzano dated July 10, 1975.
ConcLusions OF Law.
The principal question presented for decision is
whether the nature and character of the documents sought
by the Grand Jury is such that petitioner, Abraham E.
Freedman, may assert the fifth amendment privilege
against self-incrimination with respect to their production.
In order to place the facts of this case in their proper
perspective it is necessary to consider the fifth amendment
privilege in the context of some basic postulates. It is of
course axiomatic in our system of justice that a witness
may not be compelled to give testimony which would
tend to incriminate him. This constitutionally inviolable
privilege, however, is a purely personal one which pre-
cludes the government from eliciting testimony from the
individual himself. In other words, the privilege inheres
to the person invoking it and may not be claimed by one
for the benefit of another. As Mr. Justice Holmes de-
scribed it, “A party is privileged from producing the evi-
dence but not from its production.” Johnson v. United
States, 228 U. S. 457, 458 (1913).
As early as 1886, the United States Supreme Court
held that the fifth amendment proscribes the compulsory
production of incriminating personal papers and effects
in addition to oral testimony. See Boyd v. United States,
eee
BLEED THROUGH
Appendix C A33
116 U. S. 616 (1886). As the Court stated in the im-
portant case of Bellis v. United States, 417 U. S. 85, 87-88
(1974):
The privilege applies to the business records of the
sole proprietor or sole practitioner as well as to per-
sonal documents containing more intimate informa-
tion about the individual’s private life [citations
omitted].
And in United States v. White, discussed at length in Bel-
lis, the Supreme Court described the principle thusly:
The constitutional privilege against self-incrimination
is essentially a personal one, applying only to natural
individuals . . . It is designed to prevent the use of
legal process to force . . . him to produce and authen-
ticate any personal documents or effects that might
incriminate him.
322 U. S. 694, 698 (1943).
Although the fifth amendment does not prevent the
compulsory production of an individual’s books or records,
it will not shield that individual from producing poten-
tially incriminating records which he holds in a represen-
tative capacity for a collective entity. See Wilson v.
United States, 221 U.S. 361 (1911) (officer of corporation
could not claim privilege against self-discrimination where
Grand Jury subpoena was directed to corporation itself);
Dreier v. United States, 221 U. §. 394 (1911) ( Officer of
corporation could not claim privilege against self-incrimi-
nation where subpoena seeking corporate books and
records was directed to the individual corporate officer);
Wheeler v. United States, 226 U. §. 478 (1913) (fifth
amendment privilege could not be claimed with respect
to corporate records even though the corporation had pre-
METER te eh em gee
i a ee pew
cesses
A34 Appendix C
viously been dissolved ); see also Grant v. United States,
227 U.S. 74 (1913).
The aforementioned cases relied, at least in part, upon
the fact that the documents sought were those of corpora-
tions—artifical entities to which limited powers were
granted by the State and which were subject to the re-
tained right of the State to investigate corporate activities.
See, e.g., Wilson v. United States, supra, at 382-85. How-
ever, in United States v. White, supra, the Court clearly
enunciated that the prior decisions were by no means lim-
ited to records of corporations alone. In that case, the
Court held that an officer of a labor union, an unincorpor-
ated association, could not claim a privilege against self-
incrimination and was required to comply with a Grand
Jury subpoena directed at the union’s records. An indi-
vidual, therefore, could not assert a fifth amendment
privilege where he held the records of an organization in a
representative capacity. 322 U. S. at 699-700. Justice
Murphy reasoned that
individuals, when acting as representatives of a col-
lective group, cannot be said to be exercising their
personal rights and duties nor to be entitled to their
purely personal privileges. Rather they assume the
rights, duties and privileges of the artificial entity or
association of which they are agents or officers and
they are bound by its obligations.
322 U. S. at 699.
The Court, in subsequent decisions, has upheld the
production of various organizational records over the fifth
amendment claims of individuals. See, e.g., McPhaul v.
United States, 364 U. S. 372, 380 (1960) (Civil Rights
Congress ); Rogers v. United States, 340 U. S. 367, 371-72
(1951) (Communist Party of Denver); United States v.
eIeecn THR OLUGH
Appendix C A35
Fleischman, 339 U. S. 349, 357-58 (1950) (Joint Anti-
Fascist Refugee Committee). See also Curcio v. United
States, 354 U. S. 118 (1957) (local labor union).
In Bellis v. United States, supra, the Supreme Court
ruled that a partner in a smal! law firm could not inter-
pose the fifth amendment privilege to vindicate his re-
fusal to comply with a subpoena requiring the production
of partnership books and records. Notwithstanding the
limited size of the firm in Bellis, the Court was satisfied
that it nevertheless had an institutional identity independ-
ent of its constituent partners. Since the attorney had
possession of the documents in “what can be fairly said to
be a representative capacity”, the Court held that his per-
sonal privilege was inapplicable.
Petitioner herein vigorously argues that, in contrast
to Bellis, the law firm of Freedman, Borowsky and Lorry,
despite its size, is a sole proprietorship, the books and
records of which are the private and personal property of
petitioner. He asserts that the documents are not in fact
organizational and are not held by him in a representative
capacity. This Court cannot agree.
While the government suggests that the Court char-
acterize Freedman, Borowsky and Lorry as either a part-
nership or an unicorporated association, it is unnecessary
to do so. See Bellis, supra at 101. Whatever the precise
label which may be ascribed to the firm, it is clearly not
the sole proprietorship which petitioner would have this
Court believe. Upon careful consideration of all the facts
and circumstances disclosed by the record, this Court con-
cludes that the firm of Freedman, Borowsky and Lorry is
an independent institutional entity separate and apart
from its individual members.
Although the Court in Bellis found that a partnership
did exist, the decision rested upon the fact that the firm
ERC AR RO 5 ct PTS FE, TEL NR I RTT TARAS BAR EE
eT A bee
. noe ee wes Sie oe PIMA 23
2 PAST DE DEANS EER A EEA ELAR EOE: fe oe A Cede SALI PEI. oe at . | 3
A36 Appendix C ;
was indeed a distinct institutional entity. Stated differ-
ently, characterization of the firm as a partnership was not
the ultimately determinative factor.
In determining that the firm in Bellis possessed an
identity separate and apart from its individual members,
the Court examined a number of factors. Of importance
to the Court were the following:
The firm maintained a bank account in the partner-
ship name, had “stationery” using the firm name of its
letterhead, and, in general, held itself out to third
parties as an entity with an independent institutional
identity. It employed six persons in addition to its
partners, including two other attorneys who practiced
law on behalf of the firm, rather than as individuals
on their own behalf. It filed separate partnership
returns for federal tax purposes, as required by § 6031
of the Internal Revenue Code, 26 U. S. C. § 6031.
State law permitted the firm to be sued, Pa. Rule Civ.
Proc. 2128, and to hold title to property, Pa. Stat.
Ann., Tit. 59, § 13(3), in the partnership name, and
generally regarded the partnership as a distinct entity
for numerous other purposes.
417 U. S. at 96-97. The government correctly points out
that each of those indicia is present in the case at bar.
Freedman, Borowsky and Lorry had at least three
bank accounts in the firm name. In addition, both peti-
tioner and Wilfred Lorry have admitted representing them-
selves as partners in the firm of Freedman, Borowsky and
Lorry on numerous occasions. These representations have
been made over a period of many years to the courts,
bar associations, clients, and to the public at large. The
firm employs approximately fifty individuals other than
attorneys, in both Philadelphia and New York City. The
man aeacemn are 26> £e8 6 78S
ame —_ _
ECR ets AV VIPS ERASE ELLOS LP LGEALD IER ILE GRAD,
Appendix C | A37
firm consists of twelve profit-sharing attorneys who are
held out as partners in the firm, and nine salaried at-
torneys. The firm files separate partnership returns for
federal tax purposes and may have held title to real prop-
erty in the firm name. Furthermore, the lease to its office
space was negotiated in the firm name by petitioner and
two of his “partners”.
There are several other factors which lend support
to this Court's conclusion. For example, the hearing dis-
closed the following:
aie he Die ete he, ela ee eon met tee Tt
(a) the firm represents itself in Martindale-
Hubble as consisting of twelve members and _ nine
associates;
(b) the firm has purchased in the name of Freed-
man, Borowsky and Lorry, bonds of the State of
Pennsylvania and the State of Israel:
(c) the firm makes payments for Blue Cross or
Blue Shield medical insurance policies;
(d) the firm pays Workmen’s Compensation,
Pennsylvania Unemployment taxes and Sales taxes in
the firm name;
Te
(e) depreciation on firm assets is divided propor-
tionally among all of the profit-sharing members of
the firm;
(f) charitable contributions are made in the firm
name;
(g) business expenses are deducted from the
gross income of the firm;
(h) all of the profit-sharing attorneys have con-
tributed capital to the firm as reflected in their respec-
tive capital accounts.
‘
‘
&
SS a
A38 Appendix C
In light of the foregoing, there can be no doubt that
the firm of Freedman, Borowsky and Lorry possesses an
identity separate and distinct from that of the petitioner.
The Court’s analysis, however, must go one step fur-
ther in order to determine whether the records sought by
the grand jury are those of the organization or those of the
petitioner, and thus exempt from compulsory production.
Despite the conclusions embodied in petitioner's testi-
mony with respect to his dominion and control over the
books and records of the firm, it is the finding of this Court
that such records are the property of the collective entity
and are held by petitioner in a representative capacity.
The Court is mindful of the differences between the
facts in this case and those in both Bellis and White. In
Bellis, the Court recognized that the books and records
were partnership property subject to the rights of other
partners under Pennsylvania law. The Court in White
acknowledged the right of union members to inspect or-
ganizational books and records. Although it appears that
no such absolute right of inspection exists in the firm of
Freedman, Borowsky and Lorry, that can have little con-
sequence in view of the nature, origins and uses of the
organizational records under consideration herein.
Indeed, it is the attorneys in the firm of Freedman,
Borowsky and Lorry, rather than petitioner alone, whose
activities are primarily responsible for creating the books
and records in question. As in Bellis:
These reflect the receipts and disbursements of the
entire firm, including income generated by and sal-
aries paid to employees of the firm, and the financial
transactions of the other partners.
417 U. S. at 98. It is inconceivable to this Court that the
records of a firm which generates in excess of three mil-
lion dollars annually represent the purely personal inter-
——
BLEED THROUGH
a ee Re
PDR LAE Te ea phy An we
Appendix C A39
ests of petitioner. Quite the contrary, the records sought
here are merely the “impassive and impersonal records of
business events transacted between the firm and those with
whom it dealt.” United States v. Quick, 336 F. Supp. 744
(E. D. N. Y. 1972). Despite the manner in which petitioner
controls the firm’s books and records, it is this Court’s
opinion that he holds them as a representative for the en-
tity known as Freedman, Borowsky and Lorry.
It is therefore the holding of this Court that the law
firm of Freedman, Borowsky and Lorry is an institutional
entity separate and apart from petitioner and the other
members of the firm. Further, the documents sought by
the grand jury are not the personal or private effects of
petitioner but are held by him in a representative capacity.
Accordingly, there can be no rational basis for upholding
the claim of fifth amendment protection against compul-
sory self-incrimination. The sentiments of Mr. Justice
Murphy are particularly appropriate here:
The scope and nature of the economic activities of
incorporated and unincorporated organizations and
their representatives demand that the constitutional
power of the federal and state governments to regu-
late those activities be correspondingly effective. The
greater portion of evidence of wrongdoing by an or-
ganization or its representatives is usually to be found
in the official records and documents of that organiza-
tions. Were the cloak of the privilege to be thrown
around these impersonal records and documents, ef-
fective enforcement of many federal and state laws
would be impossible. The framers of the constitu-
tional guarantee against compulsory self-disclosure,
who were interested primarily in protecting individual
civil liberties, cannot be said to have intended the
privilege to be available to protect economic or other
25 RANGA RG TRAC ILS, 5A ET te SET BOAR RE ED RSA EIT PS LEAR RAINE IS easenetpet TS TANS + SMR
A40 Appendix C
interests of such organizations so as to nullify ap-
propriate governmental regulations.
United States v. White, supra at 700 [citations omitted].
The only other issue that must be resolved at this
time is whether petitioner was the subject of illegal elec-
tronic surveillance. This Court is satisfied on the basis of
the representations of the United States and the lack of
proof on the part of petitioner that there was no electronic
surveillance in this case on the part of any government
agency. See United States v. D'Andrea, 495 F. 2d 1170
(3d Cir. ), cert. denied, 419 U. S. 855 (1947); In re Tiernay,
465 F. 2d 806 (5th Cir. 1972).
In accordance with this Opinion, the petitioner will
produce before the grand jury sitting in Newark, New
Jersey the documents and records listed in the subpoena.
Petitioner shall comply with this directive on August 12,
1975.
The government shall submit an appropriate order
forthwith.
LAWRENCE A. WHIPPLE
Lawrence A. Whipple
Chief Judge, U. S. D. C.
Dated: August 1, 1975.
RIEFED THRE OUGH
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