RANDY BRASWELL, PETITIONER V. UNITED STATES OF AMERICA No. 87-3 In the Supreme Court of the United States October Term, 1987 On Petition for a Writ of Certiorari to the United States Court of Appeals for the Fifth Circuit Brief for the United States TABLE OF CONTENTS Opinion below Jurisdiction Question presented Statement Discussion Conclusion OPINION BELOW The opinion of the court of appeals (Pet. App. 6a-11a) is reported at 814 F.2d 190. JURISDICTION The judgment of the court of appeals was entered on March 31, 1987. A suggestion for rehearing en banc, which the panel treated as a petition for panel rehearing, was denied on April 30, 1987 (Pet. App. 4a-5a). The petition for a writ of certiorari was filed on June 26, 1987. The jurisdiction of this Court is invoked under 28 U.S.C. 1254(1). /1/ QUESTION PRESENTED Whether the custodian of records of a corporation may resist a subpoena for those records on the ground that the act of producing them would violate his personal privilege against compulsory self-incrimination. STATEMENT 1. Petitioner is the president and sole shareholder of Worldwide Machinery Sales, Inc., and Worldwide Purchasing, Inc. From 1965 to 1980, petitioner conducted his business, which includes the sale and purchase of equipment, oil and gas interests, and land and timber, as a sole proprietorship. In 1980, he incorporated Worldwide Machinery, a Mississippi corporation, and began conducting his business through that entity. In 1981, he incorporated Worldwide Purchasing, also a Mississippi corporation, out of concern that the name "Worldwide Machinery" did not adequately reflect the variety of his pursuits (Pet. App. 7a). Petitioner funded Worldwide Purchasing with the stock he held in Worldwide Machinery, and he retained ownership of 100 percent of the stock of Worldwide Purchasing. Both companies are active corporations, maintaining a current status with the State of Mississippi, keeping current corporate books and records, including financial records and minutes, and filing corporate tax returns. Petitioner, his wife, and his mother are directors of both corporations. According to petitioner, however, neither his wife nor his mother has any authority over the business affairs of the corporations, although they are secretary-treasurer and vice-president of the corporations, respectively (Pet. App. 7a). 2. On August 20, 1986, a federal grand jury sitting in the Southern District of Mississippi subpoenaed the books and records of Worldwide Purchasing and Worldwide Machinery. /2/ The subpoena permitted delivery of the subpoenaed documents to the agent serving the subpoena (Pet. App. 7a-8a) and thus did not require petitioner to testify. Petitioner moved to quash the subpoena, arguing that the act of producing the subpoenaed records would incriminate him in violation of his Fifth Amendment privilege against compulsory self-incrimination. The district court denied the motion (Pet. App. 17a-20a). Relying on the Fifth Circuit's decision in In re Grand Jury Subpoena (Lincoln), 767 F.2d 1130 (1985), the court held (Pet. App. 19a-20a) that the custodian of records of a collective entity, such as a corporation, has no Fifth Amendment privilege to refuse to comply with a subpoena for those records. The court rejected petitioner's contention that the so-called collectivel entity rule should not apply here because petitioner's business was a purported one-man operation (ibid.). Petitioner subsequently appeared before the grand jury but refused to produce the subpoenaed documents. On motion of the government, the district court held petitioner in contempt and ordered him committed to the custody of the United States Marshal until he complied with the court's order (Pet. App. 13a). The district court, however, stayed the commitment pending appeal (id. at 12a). 3. The court of appeals affirmed (Pet. App. 6a-11a). The court followed its prior decision in Lincoln, although it noted (id. at 10a-11a) the existence of a conflict among the circuits on the issue of whether a custodian of corporate records may resist a subpoena for those records on Fifth Amendment grounds. Relying on Bellis v. United States, 417 U.S. 85, 100 (1974), the court rejected petitioner's argument based on the size of his corporations, stating (Pet. App. 10a) that "corporations, no matter how small, are collective entities." The court of appeals denied a motion for a stay of the mandate pending the filing of a petition for a writ of certiorari (Pet. App. 3a). On June 10, 1987, Justice White entered an order staying the mandate of the court of appeals pending the disposition by this Court of a petition for certiorari (id. at 1a). DISCUSSION Petitioner renews his contention that he has a Fifth Amendment privilege to refuse to comply with the subpoena for corporate records. This Court repeatedly has held that the "books and records of corporations cannot be insulated from reasonable demands of governmental authorities by a claim of personal privilege on the part of their custodian." Curcio v. United States, 354 U.S. 118, 122 (1957); see also, e.g., Fisher v. United States, 425 U.S. 391, 411-412 (1976); Bellis v. United States, 417 U.S. at 88; Essgee Co. v. United States, 262 U.S. 151 (1923); Wilson v. United States, 221 U.S. 361 (1911). /3/ In so holding, the Court has reasoned that, because the custodian holds the records in a purely representative capacity on behalf of the corporation, production of the records is not a personal testimonial act of the custodian implicating his Fifth Amendment rights (see, e.g., Bellis, 417 U.S. at 90). If the law were otherwise, the custodian could prevent the government from obtaining the records of his corporation despite the settled rule that corporations and other collective entities have no Fifth Amendment privilege (ibid.). As a result, the very purpose of the "collective entity" rule -- to facilitate government regulation of corporations and other artificial entities -- would be defeated. In 1984, in United States v. Doe, 465 U.S. 605, the Court held that the production of business records by a sole proprietor may be a testimonial act protected by the Fifth Amendment. Unlike a corporation, however, a sole proprietorship is not a collective entity, and nothing in the Doe opinion even faintly purported to reject the collective entity rule. Nevertheless, as both petitioner (Pet. 12-13) and the court below (Pet. App. 10a-11a) point out, in the wake of Doe the courts of appeals have adopted differing approaches to the question of the continuing validity of the rule. Several circuits, including the court below in this case and in Lincoln, have reaffirmed the traditional rule, holding that a custodian of corporate records may not invoke his Fifth Amendment privilege to refuse to comply with a subpoena for those records. See In re Grand Jury Subpoena, 784 F.2d 857 (8th Cir. 1986), cert. granted sub nom. See v. United States, No. 85-1987 (Oct. 6, 1986), cert. dismissed (Jan. 15, 1987); In re Grand Jury Proceedings (Morganstern), 771 F.2d 143 (6th Cir. 1985) (en banc), cert. denied, No. 85-658 (Dec. 16, 1985); United States v. Malis, 737 F.2d 1511 (9th Cir. 194); In re Grand Jury Proceedings (Vargas), 727 F.2d 941 (10th Cir.), cert. denied, 469 U.S. 819 (1984). On the other hand, four circuits -- although they differ considerably with one another in approach -- hold, contrary to the traditional rule, that there are at least some limited circumstances in which a custodian of corporate records may resist a subpoena on the basis of his personal Fifth Amendment privilege. See In re Grand Jury No. 86-3 (Will Roberts Corp.), supra; United States v. Lang, 792 F.2d 1235, 1240 (4th Cir. 1986), cert. denied, No. 86-420 (Dec. 1, 1986); United States v. Antonio J. Sancetta, M.D., P.C., 788 F.2d 67, 74 (2d Cir. 1986); In re Grand Jury Matter (Brown), 768 F.2d 525 (3d Cir. 1985) (en banc). Of course, no circuit allows a corporation to resist production of its records altogether through the custodian's personal privilege; the four circuits that permit the custodian to invoke his personal privilege all hold that, if the government so requests, the corporation must produce the records through some other person. See, e.g., In re Special Federal Grand Jury Empanelled October 31, 1985, 819 F.2d 56, 57 n.1 (3d Cir. 1987); Roberts, 816 F.2d at 573-574; Lang, 792 F.2d at 1240-1241; In re Two Grand Jury Subpoenae Duces Tecum, 769 F.2d 52, 57 (2d Cir. 1985). As the Second Circuit stated in Two Grand Jury Subpoenae, "(t)here simply is no situation in which the fifth amendment would prevent a corporation from producing corporate records" (ibid.). In the present case, the subpoena is directed to petitioner personally, and the court of appeals, applying the traditional rule, upheld the subpoena on that basis. Cf. Roberts, 816 F.2d at 573-574. Although petitioner has yet to demonstrate how his act of production would be self-incriminatory, the ruling of the court of appeals is based on the traditional rule that custodians may not invoke the Fifth Amendment in response to a subpoena for corporate records and not on findings about the incriminating nature vel non of the act of production in this case. Cf. Lang, 792 F.2d at 1241-1242. Therefore, even though it correctly applies the rule set down in this Court's cases, the decision of the court of appeals is in clear conflict with the decisions of other circuits, and we do not oppose the petition for certiorari. We note that this Court previously granted certiorari in another case raising the same issue, but that case later was dismissed by agreement of the parties. See v. United States, No. 85-1987 (Jan. 15, 1987). CONCLUSION The petition for a writ of certiorari should be granted. Respectfully submitted. CHARLES FRIED Solicitor General WILLIAM F. WELD Assistant Attorney General JOEL M. GERSHOWITZ Attorney AUGUST 1987 /1/ Ordinarily, a suggestion for rehearing en banc, when not accompanied by a petition for rehearing, does not extend the time to petition for a writ of certiorari. See R. Stern, E. Gressman & S. Shapiro, Supreme Court Practice 313 (6th ed. 1986). But for the panel's decision to treat the suggestion as a petition for panel rehearing, therefore, the petition for a writ of certiorari would be out of time under Rule 20 of the Rules of this Court. It appears, however, that the Fifth Circuit, through its Internal Operating Procedures, allows a party to seek panel rehearing through a suggestion for rehearing en banc without the need to file a petition for panel rehearing. See 5th Cir. R. App. IV, Loc. R. 35, I.O.P. ("A suggestion for rehearing en banc will be treated as a petition for rehearing by the panel if no petition is filed."). /2/ The subpoena requested "'all books, records, papers, and other data relating to Worldwide Machinery Sales, Inc., and Worldwide Purchasing, Inc., for the years 1982, 1983, 1984, and 1985, to include, but not limited to the following: (1) receipts and disbursements journals; (2) general ledger and subsidiaries; (3) accounts receivable/accounts payable ledgers, cards, and all customer data; (4) bank records of savings and checking accounts, including statements, checks, and deposit tickets; (5) contracts, invoices -- sales and purchase, conveyances, and correspondence; (6) minutes and stock books and ledgers; (7) loan disclosure statements and agreements; (8) liability ledgers; (9) retained copies of Forms 1120, W-2, W-4, 1099, 940 and 941.'" Pet. App. 8a n.1; see id. at 21a-22a. /3/ The Court has stated in the clearest possible terms that this rule applies to corporations such as petitioner's: "It is well settled that no privilege can be claimed by the custodian of corporate records, regardless of how small the corporation may be" (Bellis, 417 U.S. at 100). Petitioner, however, finds this language from Bellis "not at all clear" (Pet. 16), and one court of appeals, without discussing this language from Bellis, appears to have based its departure from the traditional collective entity rule on a distinction between one-man corporations and others. In re Grand Jury No. 86-3 (Will Roberts Corp.), 816 F.2d 569, 573 (11th Cir. 1987), stay denied sub nom. Roberts v. United States, No. A-770 (Apr. 27, 1987).