Searching over 5,500,000 cases.

Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.


November 7, 1978

In re GRAND JURY INVESTIGATION. Petition for Return of Documents and Motion to Quash Subpoena

The opinion of the court was delivered by: LUONGO

The petitioner, a corporation whose records have been subpoenaed by the grand jury, requests the aid of this court with respect to two subpoenas duces tecum. *fn1" Having already complied with the first subpoena, the petitioner seeks an order to compel the government to return the documents submitted to date or to bear the costs of reproducing those documents. In addition, the petitioner moves to quash a second subpoena.

On March 16, 1978, the grand jury issued to the president of the corporate petitioner a subpoena duces tecum commanding the production of 33 different categories of documents relating to the activities of 8 different corporations and spanning a period of 7 years. *fn2" The appearance date was April 5, 1978. Because the subpoenaed material comprised approximately 100,000 pounds of paper contained in 22 separate file cabinets, petitioner and the government reached an agreement that substantially reduced the scope of the subpoena. Moreover, as the petitioner indicated a need for the 1977 records to conduct current business, the government agreed to defer the date of full compliance. Petitioner delivered a significant portion of the documents to the grand jury on April 5, 1978, and although there is a discrepancy in the record with regard to the exact date, it appears that petitioner complied with the subpoena and agreements thereunder by May 31, 1978.

 Subsequent to delivery of the documents to the grand jury, petitioner apparently realized that it was unable to conduct its day-to-day business without the 1976 and 1977 records. Petitioner informed the government on June 22, 1978, that it needed the records by June 30, 1978. In a letter dated June 27, 1978, petitioner revised its target date and advised the government that it required its records by July 6, 1978. After failing in its attempt to negotiate with the government a mutually satisfactory alternative to return of the records, petitioner initiated this action. I held a conference with petitioner and the government in my chambers on July 11, 1978, at which time I ordered the government either to return the documents or to supply the petitioner with copies. I reserved the question of responsibility for costs.

 On August 22, 1978, the grand jury again issued to the president of the petitioner corporation a subpoena commanding the production of additional records from petitioner and its related companies. The August subpoena divided the requested documents into eight general categories, each of which covered a period of several years. *fn3" Prior to the designated return date of September 6, 1978, petitioner moved to quash the subpoena. After carefully weighing the competing considerations, I am persuaded that the balance must be struck in favor of the government and that both of petitioner's motions must be denied.

 I. The Motion to Compel The Government to Pay Costs

 A. The Court's Power Under Criminal Rule 17(c)

 Before reaching the merits of petitioner's motion to compel the government to bear the expense of reproducing records that are currently in its possession, I must decide whether this court has the power to grant the relief requested. Citing cases that derive from proceedings to enforce IRS summonses upon innocent third parties, petitioner urges that the order is neither novel nor beyond the power of the court. An examination of those cases, however, reveals that petitioner's reliance is misplaced.

 Because petitioner does not seriously advance a claim under either the fourth or the fifth amendment, United States v. Dauphin Deposit Trust Co., 385 F.2d 129 (3d Cir. 1967), Cert. denied, 390 U.S. 921, 88 S. Ct. 854, 19 L. Ed. 2d 981 (1968), is inapposite. Compare id. at 130 (fourth and fifth amendments might protect recipient of IRS summons from unreasonable and excessive burden) With United States v. Friedman, 532 F.2d 928, 934-35 (3d Cir. 1976) (discussion of fourth and fifth amendment challenges to IRS summons and subpoena duces tecum). The other authorities upon which petitioner relies are equally unavailing. United States v. First National Bank of Fort Smith, 173 F. Supp. 716 (W.D.Ark.1959), involved a challenge to an administrative summons issued to a bank, which was an innocent third party, in the course of a taxpayer investigation. The court held that full compliance at an expense to the bank of nearly $ 30,000 was unreasonable in light of the availability and practicability of less expensive alternatives. Id. at 720-21.

 In United States v. Farmers & Merchants Bank, 397 F. Supp. 418, 420-21 (C.D.Cal.1975), the case most helpful to petitioner, the court held that the duty to provide evidence did not entail incurring an expense of $ 2500 to aid the government's investigation of a third party. Yet, petitioner's analogy to this case fails in two crucial respects. First, petitioner is not a complete stranger to this investigation. The precise relationship of the petitioner to the target of the investigation is not expressly delineated in any of the papers filed in connection with this first motion. The government's affidavit submitted with its memorandum in opposition to the motion to quash the August subpoena, however, identifies the petitioner, its affiliated companies, officers, and employees as the focus of the grand jury's inquiry. Petitioner is therefore in a much less favorable position than was the Farmers & Merchants Bank, and the persuasive impact of that case is thereby reduced. Even the Tax Reform Act of 1976, which codified the courts' solicitude for innocent third parties, precludes reimbursement if "the person with respect to whose liability the summons is issued has a proprietary interest in the (material) required to be produced . . . ." Pub.L.No.94-455, § 1205(a), 90 Stat. 1702 (1976) (codified at 26 U.S.C. § 7610 (1976)).

 The second, and more compelling, point of divergence between United States v. Farmers & Merchants Bank and the matter before me is the fact that this case involves a grand jury subpoena. Although the Third Circuit Court of Appeals has recently held that the district court may, in an appropriate case, condition enforcement of an IRS summons upon the government's payment of the reasonable cost of compliance, See United States v. Friedman, supra, 532 F.2d at 937-38, *fn4" no court in this circuit has yet addressed the precise question presented by this case: shifting the cost of compliance with a grand jury subpoena. Mindful of the distinction between a grand jury subpoena and an IRS administrative summons, recently underscored by the Third Circuit in United States v. Genser, 582 F.2d 292, 306 (3d Cir. 1978), I hesitate to transpose the rationale of the IRS summons enforcement proceedings to the grand jury context. Cf. In re Grand Jury Subpoena Duces Tecum Issued to the First National Bank of Maryland Dated November 4, 1976, 436 F. Supp. 46, 49-51 (D.Md.1977) (bank's status as innocent record-keeper neither entitles it to reimbursement nor requires court to quash grand jury subpoena where cost of compliance is comparatively minimal).

 If I am to agree with petitioner that an order compelling the government to bear the cost of petitioner's compliance with this grand jury subpoena is within the discretion of the court, I must look elsewhere for guidance. A few courts, including the Fifth Circuit Court of Appeals, have held that a court modifying a subpoena pursuant to Rule 17(c) of the Federal Rules of Criminal Procedure may impose the costs of compliance upon the government. See In re Grand Jury No. 76-3 (MIA) Subpoena Duces Tecum, 555 F.2d 1306, 1308 (5th Cir. 1977); In re Grand Jury Subpoena Duces Tecum Issued to Southern Motor Carriers Rate Conference, Inc., Dated August 13, 1975, 405 F. Supp. 1192, 1197-1200 (N.D.Ga.1975); Cf. In re Grand Jury Subpoena Duces Tecum Issued to the First National Bank of Maryland Dated November 4, 1976, supra, 436 F. Supp. at 50-51.

 Rule 17(c) provides that a court "may quash or modify the subpoena if compliance would be unreasonable or oppressive." Although Rule 17(c) does not specifically empower the court to order the government to bear the cost of compliance, the Advisory Committee Note to Subdivision (c) suggests that the criminal rule is substantially the same as Rule 45(b) of the Federal Rules of Civil Procedure. Civil Rule 45(b) provides that the court "may (1) quash or modify the subpoena if it is unreasonable and oppressive or (2) condition denial of the motion upon the advancement by the person in whose behalf the subpoena is issued of the reasonable cost of producing the books, papers, documents, or tangible things." Given the broad powers traditionally accorded the grand jury in its criminal investigatory role, *fn5" I believe that it is more reasonable for a court faced with the option of quashing a subpoena, and thereby foreclosing an otherwise valid grand jury investigation, or shifting the cost of compliance to the government to choose the latter alternative. I therefore agree with those courts which have held that a district court confronted with a challenge to a grand jury subpoena under Rule 17(c) may compel the government to bear the cost of compliance.

 B. The Merits of Petitioner's Motion

 Petitioner avers that it made a good faith request based upon a legitimate business need for the records in question. It argues that the continued retention by the government is unreasonable and has prejudiced the petitioner's business interests. Appealing to the court's sense of fair play, petitioner takes the position that having fully cooperated with the government by negotiating a modification of rather than contesting the subpoena, it is now entitled to return of the records, or in the alternative, to copies at the government's expense. The government, on the other hand, subtly intimates that petitioner's failure to contest the subpoena at the outset or to raise the possibility, either during the ...

Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.