Appeal Brief -- Required Records
| NOTE: The court's opinion in this case is: United States v. Spano, 21 F.3d 226 (8th Cir. 1994).
SUMMARY AND REQUEST FOR ORAL ARGUMENT
Appellant United States appeals here an order quashing a grand jury subpoena issued to appellee XXXXXX X. XXXXX. This subpoena was quashed despite the fact that it merely directed XXXXX to produce records he is required by federal and state laws to keep, and which must be produced on demand under the "required records" exception to the Fifth Amendment. The district court held that the grand jury subpoena violated XXXXX's Fifth Amendment privilege against forced self-incrimination because the act of producing these required records could incriminate XXXXX.
Oral argument is warranted because the district court's order raises a constitutional issue of considerable importance to the implementation of a key federal regulatory scheme. Although the district court's order is inconsistent with recent Supreme Court precedent, and directly contrary to rulings by several other circuits, the issue raised here is one of first impression in this Court. We suggest that 20 minutes of oral argument time be allotted to each party since a substantial constitutional law question is at stake.
ON APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MINNESOTA
BRIEF FOR APPELLANT UNITED STATES
This appeal is taken from a decision issued by District Judge David S. Doty on December 30, 1992, which was filed by the district court clerk on January 5, 1993. The district court had jurisdiction to enter this order under Federal Rule of Criminal Procedure 17(c). This Court has appellate jurisdiction under both 18 U.S.C. 3731,[FN1] and 28 U.S.C. 1291. The notice of appeal here was timely filed by the United States on February 3, 1993.
STATEMENT OF THE ISSUE
Whether a grand jury subpoena seeking records of a sole proprietorship is enforceable because it calls only for records covered by the "required records" exception to the Fifth Amendment, an exception recently applied by the Supreme Court in similar circumstances.
The relevant constitutional provision is the Fifth Amendment, which provides in pertinent part: "No person * * * shall be compelled in any criminal case to be a witness against himself."
The most apposite cases are:
(1) Baltimore City Department of Social Services v. Bouknight, 493 U.S. 549 (1990);
(2) Braswell v. United States, 487 U.S. 99 (1988);
(3) United States v. Lehman, 887 F.2d 1328 (7th Cir. 1989); and
(4) In re Grand Jury Subpoena Duces Tecum, Underhill, 781 F.2d 64 (6th Cir.), cert. denied, 479 U.S. 813 (1986).
STATEMENT OF THE CASE
I. Nature Of The Case
As noted above, this case involves a grand jury subpoena served on appellee XXXXXX XXXXX as part of a criminal investigation. The subpoena seeks production of various business records concerning XXXXXXX XXXX XXXXX, a sole proprietorship operated by XXXXX. The district court quashed the subpoena, finding that the forced production of the records sought could incriminate XXXXX, and was thus prohibited by the Fifth Amendment. The United States hereby appeals the order quashing the subpoena.
II. Statement Of The Facts
A. This case involves a grand jury investigation of possible criminal violation of odometer tampering laws (15 U.S.C. 1984) and related statutes. Two subpoenas duces tecum to produce records were served in June 1992, upon XXXXX, who operates XXXXXXX XXXX XXXXX as a sole proprietor, and Flyhigh Motors, Inc., a closely held corporation with a single shareholder. See Magistrate's Order of October 22, 1992, at 3 [NOTE: names changed from original].
Both XXXXX and Flyhigh filed motions in the United States District Court for the District of Minnesota to quash the subpoenas on grounds of overbreadth and Fifth Amendment protection.[FN2] The United States ultimately agreed to limit the scope of the subpoena directed to XXXXX to records required to be maintained by federal and state law. Thus, in its final form, the subpoena covered federal and state tax returns, W-2 forms, unemployment and workers' compensation records required under state law, certain automobile licensing, titling, and purchase/sale records required under the state law, and federally required odometer statements.
The United States argued in response that the subpoena served on XXXXX, as modified, covered solely records required to be kept by federal or state law, and that production of these records can be demanded under the "required records" exception to the Fifth Amendment privilege. The Supreme Court long ago established this "required records" exception. See Shapiro v. United States, 335 U.S. 1, 33 (1948). The doctrine has been applied to require production of records that meet three criteria:
See Grosso v. United States, 390 U.S. 62, 67-68 (1968). Thus, the "required records" exception assumes that the Fifth Amendment privilege would otherwise apply, but is an exception to that privilege.
B. XXXXX's motion to quash the grand jury subpoena was referred to Magistrate Judge Floyd Boline, who, in a recommended decision in October 1992, first rejected XXXXX's claim of overbreadth. Magistrate's Order at 5-6 ("This Court is entirely without any factual basis on which to base an order to quash/modify on overbreadth grounds").[FN3]
FN4. The Magistrate appears to have been slightly confused by the position of counsel regarding the XXXXX subpoena as it has been limited. Counsel had agreed that the subpoena would not be enforced as to these materials anyway, but would cover only records required by federal or state law.
The Magistrate then decided that the "required records" exception does not permit required disclosure here since he had decided that the act of producing the records sought could incriminate XXXXX. Id. at 19-22. The magistrate based this ruling on dictum in the Supreme Court's decision in Braswell v. United States, 487 U.S. 99, 104 (1988), where the Supreme Court explained that, had a sole proprietorship, as opposed to a closely held corporation, been involved in that case, the respondent there would have been entitled to the opportunity to show that his act of production would entail testimonial self-incrimination.
The Magistrate further explained that the "act of production" doctrine would, however, not protect XXXXX if it were a "foregone conclusion" that the records sought here existed and were authentic. Magistrate's Order at 22-23. See United States v. Rue, 819 F.2d 1488, 1492-94 (8th Cir. 1987) (explaining "foregone conclusion" principle). But the Magistrate concluded that this factor did not apply because there is no indication that the Government was aware of the existence, location, or authenticity of any of the documents subpoenaed from XXXXX.
Thus, as to XXXXX, the Magistrate's key holding was that, regardless of the "required records" exception, the Fifth Amendment absolutely prohibits an incriminating act of production. The Magistrate recognized that at least two circuits had concluded that the "required records" doctrine is an exception to the privilege against forced self-incrimination and therefore applies regardless of whether that privilege is being invoked under the "act of production" principle or not. Magistrate's Order at 19-20.
Accordingly, with respect to records XXXXX was required by federal or state law to keep, the subpoena against him was quashed.[FN5] Magistrate's Order at 23.
FN6. The district court's order is reprinted in the Addendum to this brief.
SUMMARY OF ARGUMENT
As we demonstrate in our argument below, the ruling by the district court is illogical, as well as inconsistent with Supreme Court precedent and directly contrary to decisions by several courts of appeals applying the "required records" exception to the Fifth Amendment.
We show first that the Magistrate correctly concluded that the tax and compensation documents, automobile licensing, titling and transaction records, and odometer statements sought from XXXXX fall within the "required records" exception. These are all documents whose maintenance is mandated by essentially regulatory, rather than criminal, schemes, contain the type of information that those in the automobile sales industry would ordinarily keep, and have assumed public aspects because they are submitted to governmental agencies or are available for their inspection.
Next, we demonstrate that the district court erred because it failed to recognize that the "required records" exception is an exception to the Fifth Amendment privilege against compelled self-incrimination. Thus, the Magistrate's refusal to apply the exception because the act of producing the records sought here could incriminate XXXXX makes no sense. It is precisely because self-incrimination might result, and the Fifth Amendment therefore applies, that the Supreme Court established the "required records" exception, which compels disclosure of specialized records that are necessary for important regulatory schemes.
The Supreme Court has made clear that an act of production can itself be testimonial and incriminating, and therefore protected by the Fifth Amendment even if the contents of the materials being sought are not themselves protected. But nothing in any Supreme Court opinion indicates that the Court has determined that this fact eliminates the "required records" doctrine. Indeed, to the contrary, the Supreme Court has most recently employed the rationale of the "required records" exception in upholding a requirement that an individual make a compelled disclosure as part of a regulatory scheme, despite the fact that the disclosure could incriminate the individual.
Thus, the "required records" exception has freshly been applied by the Supreme Court in a situation highly analogous to the one now before this Court.
Moreover, the district court's decision is directly at odds with rulings by the Second, Third, Fifth, Sixth, Seventh, and Ninth Circuits. All of these courts have concluded that, if documents fall within the "required records" exception, their disclosure may be compelled even if the act of their production could be self-incriminating. This rule is based on the fact that required records take on a public aspect, and, when an individual chooses to begin or continue operating a business in a field with record keeping requirements, he is deemed to have waived any Fifth Amendment protection concerning that record keeping.
Finally, the Magistrate was concerned here with the point that criminal or civil penalties can be assessed for failure to maintain some of the records at issue; therefore, XXXXX would be making an incriminating admission if he does not produce them. But the Supreme Court has emphasized that the question of the use of an act of production against an individual in criminal proceedings is wholly separate from the issue of whether their production can be compelled.
Moreover, if the district court's ruling is correct, the "required records" exception would have little or no meaning as applied to sole proprietorships. There is no indication that the Supreme Court has intended such a result.
The Magistrate here correctly determined that the federal and state tax records, unemployment and workers' compensation records, other compensation records, certain automobile licensing, titling, and transaction records, and federally required odometer statements are all within the "required records" exception.
As explained earlier, that exception encompasses materials that meet three criteria:
See Grosso, 390 U.S. at 67-68.
These criteria plainly apply to the federal and state tax information, which are required for regulatory reasons. See Heligman v. United States, 407 F.2d 448, 451-52 (8th Cir.), cert. denied, 395 U.S. 977 (1969) (purpose of tax laws is to raise public funds, not punish crimes). These records manifestly contain the types of materials that a regulated party would ordinarily keep, and they "have assumed public aspects which render them at least analogous to public documents." Magistrate's Order at 9. To meet this final criterion, records need not be available to the public, but must be the sort that must be submitted to a public agency. See In re Dr. Doe, 711 F.2d 1187, 1192 (2d Cir. 1983) (W-2 forms are "required records").
This reasoning also applies to the unemployment insurance and workers' compensation records requested by the XXXXX subpoena. As the Magistrate explained, these documents are required for a regulatory purpose, would ordinarily be kept by a businessman, and must be available to a state public agency. See Magistrate's Order at 10-11. This analysis is also true for the automobile licensing, titling, and transfer records. Id. at 11-14.
The odometer statements, whose creation and maintenance are mandated by federal law (15 U.S.C. 1988), also come within the "required records" exception. These odometer statements have assumed public aspects because every transferor is required to provide a signed copy to the buyer, and every transferee is required to sign the statement to acknowledge receipt. See 15 U.S.C. 1988(a); 49 C.F.R. 580.5. And, automobile dealers must by law permit inspection of the records by designated federal officials. See 15 U.S.C. 1990d and 1990f.
For these reasons, the Sixth Circuit concluded that this very type of document must be produced under the "required records" exception. In re Grand Jury Subpoena Duces Tecum, Underhill, 781 F.2d 64, 67-69 (6th Cir.), cert. denied, 479 U.S. 813 (1986). There, the court explained that, while a grand jury inquiry is criminal in nature, these statements are mandated as part of a scheme that is regulatory. Id. at 67. This is true regardless of the fact that the provisions of relevant law may have some criminal applications: "these provisions serve the overall purpose of enforcement of an essentially regulatory program." Ibid. In addition, "[o]dometer mileage is but one aspect of the overall records that automobile dealers can be expected to maintain on motor vehicles they buy and sell, for their own protection, and in order to place a value on the vehicles." Id., at 68.
Finally, none of the relevant statutory or regulatory schemes covering the documents at issue is directed at a selective group inherently suspect of criminal activities. The Supreme Court has held that if they were, the "required records" exception would not apply. See Marchetti v. United States, 390 U.S. 39, 57 (1968). The laws covering used car dealerships are hardly like those that required Communist Party members to file registration statements (Albertson v. Subversive Activities Control Board, 382 U.S. 70, 79 (1965)), or gamblers to file taxes on wagering income (Marchetti, 390 U.S. at 57; Grosso, 390 U.S. at 68). See Underhill, 781 F.2d at 68 (the above cases "involved situations wherein the information required to be disclosed inescapably implicated the individual in criminal activity. By contrast, there is noting ordinarily criminally suspect about selling a motor vehicle * * *").
Thus, the Magistrate properly determined that the records at issue sought from XXXXX are within the "required records" exception.
The district court erred here in holding that the "required records" exception does not apply if the actual production of those records, rather than their contents, would be testimonial and incriminating. This view misunderstands the key point that the "required records" exception applies only if the required action will indeed cause self-incrimination; otherwise, there would be no need for an exception to the Fifth Amendment.
Simply put, the contention that the "required records" exception does not apply when production of those records would be incriminating makes no sense. It is precisely because that production would be incriminating that the exception has any relevance. If the act of producing the records were not incriminating, then the Fifth Amendment protection would not apply anyway and no exception to that doctrine would be needed.
Thus, it is true that the Supreme Court held in United States v. Doe, 465 U.S. 605 (1984), that, in light of the Fifth Amendment, sole proprietors often cannot be compelled to produce records even though the contents of those records are not themselves privileged. The Court explained that the act of producing documents can itself be incriminatory even though what is in those documents is not protected because it was voluntarily prepared. However, the Court there carefully pointed out that the subpoenas at issue concerned "only business documents and records not required by law to be kept or disclosed to a public agency." Id. at 607 n.3. See also In re J.W.O., 940 F.2d 1165 (8th Cir. 1991).
Since this ruling in Doe, the Supreme Court has recently made clear that an individual can be compelled to make a disclosure even if the act of doing so would be incriminatory. The rationale used for this ruling was that of the "required records" exception.
In Baltimore City Department of Social Services v. Bouknight, 493 U.S. 549 (1990), a mother was, despite the Fifth Amendment, required to produce her previously abused child over whom she had custody pursuant to a court order. The Court explained that "[t]he possibility that a production order will compel testimonial assertions that may prove incriminating does not, in all contexts, justify invoking the privilege to resist production." Id. at 555.
Bouknight's invocation of the Fifth Amendment privilege was not recognized because "she has assumed custodial duties related to production and because production is required as part of a noncriminal regulatory regime." 493 U.S. at 555-56. "The Court has on several occasions recognized that the Fifth Amendment privilege may not be invoked to resist compliance with a regulatory regime constructed to effect the State's public purposes unrelated to the enforcement of its criminal laws." Ibid.
The Bouknight Court further explained that "[w]hen a person assumes control over items that are the legitimate object of the government's noncriminal regulatory powers, the ability to invoke the privilege is reduced. * * * In assuming their custody he has accepted the incident obligation to permit inspection." 493 U.S. at 558.
Thus, the Court upheld the requirement that Bouknight produce her child as part of a legitimate "broadly applied regulatory" scheme, "[e]ven when criminal conduct may exist" in a particular instance. 493 U.S. at 561.
In so holding, the Court drew upon the "required records" exception. It instructed that there may be limits on a government's ability to use the testimonial aspects of a forced act of production of required records in subsequent criminal proceedings. 493 U.S. at 561. But that was viewed by the Court as a separate question from whether a person could be required to make the act of production itself.
The ruling in Bouknight is controlling here. The Magistrate brushed it aside in a footnote in his order (at 19 n.9) as "factually distinguishable." It is true that XXXXX is not being asked to produce an abused child over whom he has custody. But the Supreme Court's reasoning in Bouknight is fully applicable here, and mandates disclosure by XXXXX.
As described above, XXXXX voluntarily participates in a business enterprise that is subject to a "broadly applied regulatory" scheme for legitimate public policy reasons -- just as Bouknight participated in a child custody scheme. There can be no doubt that the tax and business records, and odometer statements that XXXXX is required to keep and produce for governmental agencies serve a proper regulatory purpose wholly beyond their possible value in a criminal investigation. Therefore, as the custodian of those records, XXXXX has assumed the societal obligation to produce them when they are relevant to a criminal investigation, even if doing so will possibly incriminate him -- just as Bouknight was also required to produce her child in like circumstances.
The Magistrate's reliance (Order at 20-21) on dictum in the earlier Supreme Court opinion in Braswell, supra, to find to the contrary is difficult to understand. There, the Supreme Court refused to apply the act of production doctrine to a custodian of corporate records who did not conduct his business as a sole proprietorship. The "collective entity" rule dictated that a corporate custodian could not resist a subpoena for corporate records on Fifth Amendment grounds. In such a situation, the custodian's act of production is not deemed a personal act, but rather an act of the corporation, and a corporation enjoys no Fifth Amendment privilege against forced self-incrimination. 487 U.S. at 109-110.
In its Braswell ruling, the Supreme Court nevertheless noted that, if the custodian there had instead conducted his business as a sole proprietorship, the holding in Doe, supra, would require that he be provided the opportunity to show that his act of production of documents would entail testimonial self-incrimination. 487 U.S. at 104.
The Magistrate here thought (Order at 20-21) that this reservation cast doubt on the continuing force of the "required records" exception. But this notion is refuted by the Supreme Court's later opinion in Bouknight, which, as explained earlier, applied the very logic of that exception to a situation in which an individual was resisting a compelled production that could lead to self-incrimination.
Moreover, the reservation by the Court in Braswell is easily explained by the breadth of the subpoena at issue there. As the Supreme Court described it (487 U.S. at 101 n.1), that subpoena sought some required records such as tax forms, but it also sought a wide range of material that would appear not to fall within the "required records" exception: "receipts and disbursement journals; general ledger and subsidiaries; accounts receivable/accounts payable ledgers, cards, and all customer data; * * * contracts, invoices -- sales and purchase -- conveyances, and correspondence; [etc.]."
In light of the wide range of material called for by the subpoena there, it was plainly correct for the Court in Braswell to make clear that, if the collective entity rule had not been applicable because the custodian there was a sole proprietor, he would have been entitled to try to show that the act of producing these voluntarily prepared records would be testimonial and incriminatory. This reservation, however, did not eliminate a substantial aspect of the "required records" exception, as demonstrated by the Court's opinion in Bouknight nearly two years later.
In reaching his conclusion here, the Magistrate also disagreed with all of the other courts of appeals to have examined this issue specifically; thus, XXXXX is asking this Court to create a direct conflict among the circuits.
In a ruling issued after Braswell, but even before the further support provided by Bouknight, the Seventh Circuit held in United States v. Lehman, 887 F.2d 1328 (7th Cir. 1989), that the Supreme Court has in no way undermined the application of the "required records" exception to the Fifth Amendment to cases such as this one. There, the custodian of the records sought -- Lehman -- was an operator of a dairy farm, and by federal law had a duty to keep various records regarding disposition of livestock. Lehman resisted a subpoena for such records, arguing that the Supreme Court's recent rulings had made clear that, under the Fifth Amendment, he could not be forced to produce them.
The Seventh Circuit applied the "required records" exception in rejecting this argument, noting that the purpose of any valid record keeping requirement would be frustrated unless required records may be inspected at the Government's request. 887 F.2d at 1332-33. In so holding, the Seventh Circuit found that the Supreme Court had not undermined the "required records" exception in its recent decisions. The Lehman court relied upon the Sixth Circuit's ruling in the case that is virtually identical to the one now before this Court, Underhill, supra, and on the illogic of assuming that the Supreme Court "intended to disarm many of the major regulatory enactments of the federal government" without directly addressing the issue. 887 F.2d at 1333.
As noted above, Underhill also involved grand jury subpoenas seeking odometer statements and other required records as part of a criminal investigation. The custodians of the records were sole proprietors who contended that the Supreme Court had in Doe, supra, essentially eliminated the "required records" exception for such businessmen. The Sixth Circuit fully analyzed this claim and rejected it (after determining that the odometer statements and other materials were indeed required records within the meaning of the exception).
That court noted that three other circuits (the Second, the Third, and the Fifth)[FN8] had determined that the fact that an act of production might be testimonial or incriminating did not undermine the "required records" exception. The Sixth Circuit found that this result is based upon two rationales: first, because required records have taken on a public aspect and the law requires that they be kept, an individual admits little of significance by producing them; and second, if an individual chooses to begin or continue to do business in an area in which the Government requires record keeping, he may be deemed to have waived any Fifth Amendment protection concerning that record keeping. 781 F.2d at 69.
The Sixth Circuit concluded in Underhill that "the Supreme Court has directed that where the narrow parameters of the [required records] doctrine are met, and the balance weighs in favor of disclosure, the information must be forthcoming even in the face of potential incrimination. * * * In our view, in order to have meaning the required records exception must apply to the act of production as well as the contents of the documents to which the doctrine applies" (781 F.2d at 70 (emphasis in original)).
Shortly thereafter, the Second Circuit agreed with Underhill that the Supreme Court had done nothing to cast doubt on the vitality of the "required records" exception, and that circuit reaffirmed the validity of the rule. See In re Two Grand Jury Subpoenae Duces Tecum, 793 F.2d 69 (2d Cir. 1986). The court there applied the same rationale as the Sixth Circuit in relying upon the exception to uphold grand jury subpoenas seeking required records from an attorney.
Since that time, the Ninth Circuit has also agreed with these other circuits regarding the continuing validity of the "required records" exception. See In re Grand Jury Proceedings John Doe, M.D., 801 F.2d 1164, 1169 (9th Cir. 1986).
Thus, the Magistrate and then the district court here failed to deal with the rationale supporting the "required records" exception and the fact that it is an exception to the Fifth Amendment privilege. The Supreme Court has recognized that the exception represents a balancing between the protection against forced self-incrimination and the need for particular records in order to make a valid and socially beneficial regulatory scheme work.
For this reason, in California v. Byers, 402 U.S. 424 (1971), the Court upheld under the "required records" exception a state law requiring that a person involved in an automobile accident stop and give his/her name. The Chief Justice explained in a plurality opinion that this requirement was valid because it did not involve an inherently criminal activity, and because self reporting was indispensable to fulfillment of a legitimate statutory scheme designed to serve a useful purpose. Id. at 430-31. Accord United States v. Flores, 753 F.2d 1499 (9th Cir. 1985)(in banc) (upholding against Fifth Amendment challenge a required disclosure provision involving shipment of firearms because of "the important regulatory purpose of the [statute at issue], the neutral purpose of [that statute], and the fact that the notice requirement is directed to the public at large").
The Magistrate here focused (Order at 18-19) on the fact that there are potential criminal and civil penalties for failure to keep the odometer statements sought, and thus a subpoena demanding them could certainly lead to self-incrimination. But, as explained already, this confuses two separate issues. As the Supreme Court pointed out in Bouknight, 493 U.S. at 561, the fact that a person can be required to make a disclosure is distinct from determining what use the Government can make of any testimonial aspects of the act of production. Accord Braswell, 487 U.S. at 97-98.
Moreover, even if Bouknight did not answer this concern, it was not a ground upon which to quash the entire subpoena here. XXXXX made no showing that there were potential criminal penalties for failure to keep all of the records sought by the subpoena. Therefore, although the subpoena should have been enforced in its entirety, at most the district court should have quashed only the part of the subpoena calling for material covered by such a provision.
For the foregoing reasons, the order by the district court quashing the grand jury subpoena against appellee XXXXX should be reversed.
STUART E. SCHIFFER Acting Assistant Attorney General
THOMAS B. HEFFELFINGER United States Attorney
DOUGLAS LETTER (202) 514-3602 Appellate Litigation Counsel Civil Division, Room 3617 Department of Justice Washington, D.C. 20530-0001
APRIL 9, 1993
Updated February 19, 2015