Before the court are the motions of Respondents Witmer and Kelly (hereafter "Witmer/Kelly" or "Respondents") for leave to serve discovery on Petitioners and to stay enforcement of the CIDs issued with respect to them. Also pending is the Government's motion to strike Witmer and Kelly's joint reply to the discovery motion or, in the alternative, for leave to file a sur-reply. Briefs have been filed and the motions are ripe for disposition.
This case involves a dispute over the issuance by the Attorney General and attempted enforcement by the Justice Department of several Civil Investigative Demands ("CIDs").
CIDs are a pre-complaint discovery tool made available to the Government by statute in several particular contexts. See 31 U.S.C. § 3733 (CID authority to investigate allegations of fraud in military procurement contracts); 15 U.S.C. § 1314(f) (CID authority to investigate antitrust violations); 15 U.S.C. § 57b-1(c)(1) (CID authority to investigate Federal Trade Commission Act violations). The CID allows the Government, prior to the institution of suit, to subpoena witnesses and documents and otherwise gather information normally obtained during pretrial discovery. The purpose of the CID is to "enable the Government to determine whether enough evidence existed to warrant the expense of filing [a civil] suit, as well as to prevent the potential Defendant from being dragged into court unnecessarily." H.R. Rep. 660, 99th Cong., 2d Sess. 26 (1986).
The particular CIDs involved in this case were issued as part of a Justice Department investigation into potential wrongdoing by Harsco Corporation ("Harsco"). Particularly, the CIDs before the court were issued to the Harsco Corporation, John Witmer, a current Harsco employee, and William Kelly, a former Harsco employee.
The investigation centers around a Harsco contract to sell 15,000 vehicles to the United States Army. Shortly after being awarded the contract, Harsco notified the government that it would seek an adjustment in the contract price because its initial bid on the vehicles did not include excise taxes on the vehicles sold after 1988.
The contract officer on the project rejected the claim but Harsco appealed to the Army Services Board of Contract Appeals (ASBCA), which awarded Harsco the adjustment that it sought. The Government is investigating whether, in seeking the contract adjustment, Harsco fraudulently misrepresented to the contract officer and to ASBCA that the disputed excise taxes were not included in the calculation of its initial bid.
These allegations are being contested on several fronts. First, the Army has sought to reopen the ASBCA decision. ASBCA has yet to issue a decision on the motion to reopen. Second, allegations of criminal wrongdoing arising out of the contract adjustment apparently are before a grand jury in Michigan. Finally, the Justice Department is conducting the instant investigation to determine whether or not to bring a civil fraud action against Harsco under the False Claims Act, 33 U.S.C. § 3729 et seq.
Pursuant to this investigation, the Attorney General (Acting Attorney General Stuart Gerson) issued CIDs to Harsco and to various Harsco employees ordering them to turn over certain information and documents and to submit to oral examinations. See 31 U.S.C. § 3733 (authorizing and establishing the procedure for the use of CIDs in False Claims Act cases). After Witmer and Kelly refused to submit to oral examination, the Government filed actions to enforce the Witmer and Kelly CIDs.
Subsequently, Harsco filed its action to set aside the CID issued to it. All three actions were consolidated by this court.
I. Witmer/Kelly Motion for Leave to Serve Discovery
A. Government's Motion to Strike
As an initial matter, the Government has moved to strike Respondent's reply as improper.
The Government claims that the reply is improper because it raises issues that should have been argued in Respondent's initial brief. The court agrees.
In their brief in support of their motion for discovery, Respondents claim that they are entitled to discovery as a matter of right in these proceedings. The bulk of Respondents' seven-page initial brief is devoted to that argument. In that brief, Respondents also argue, in the alternative, that they are entitled to limited discovery because they "have reason to believe" that the Government is using the CIDs for an improper purpose. (Brief in support of motion to serve discovery at 5 n.5). Respondents asserted this alternative argument in a single footnote in their initial brief. The allegation was utterly devoid of specificity and factual support, by affidavit or otherwise. It was not until they filed their reply brief that Respondents chose to support their alternative theory.
This clearly was improper. "It is improper for a party to present a new argument in his or her reply brief." United States v. Medeiros, 710 F. Supp. 106, 110 (M.D. Pa.), aff'd, 884 F.2d 75 (3d Cir. 1989). It is also improper for a party to make new factual assertions in a reply brief because doing so "leaves the opposing party no opportunity to respond." Center Dev. Venture v. Kinney Shoe Corp., 757 F. Supp. 34, 36 (E.D. Wis. 1991).
In this case, the alternative argument came as no surprise to Respondents. This argument was not raised for the first time in the Government's opposition brief; rather, Respondents themselves raised this alternative contention in their initial brief. Having done so, Respondents had an obligation to set forth both factual and legal support for their argument in that initial brief. A party may not merely allude to its claims in its initial brief and then argue them in detail in its reply, giving the opposing party no opportunity to respond. Medeiros, 710 F. Supp. at 110; Center Dev. Venture, 757 F. Supp. at 36. Principles of efficiency and sound administration do not allow such practices.
In some instances, the appropriate remedy in a situation such as this would be to allow the reply to stand and to grant the opposing party the opportunity to file a sur-reply. Indeed, in the alternative, the Government has requested just such relief. In this case, however, the court believes that the appropriate course is to strike Respondents' reply brief. When they filed their initial brief, Respondents clearly were aware that the Government would argue that Respondents' suggested standard was inappropriate for the instant proceedings. Harsco and its employee CID recipients have litigated the exact same discovery issue raised here in district courts in Ohio and Michigan. In each instance, the Government has argued that Respondents' alternative argument embodies the appropriate standard for granting discovery.
Respondents also should have realized that there was a significant chance that this court would reject their primary argument and reach their alternative contention. Under these circumstances, the court does not believe it is appropriate to allow the reply brief to stand.
Accordingly, Respondents' reply brief is deemed improper and will be stricken. The court will decide the merits of Respondents' motion for discovery based on their initial brief and the Government's opposition.
B. Discovery as of Right
CIDs are a form of administrative subpoena. Federal Trade Comm'n v. Invention Submission Corp., 296 U.S. App. D.C. 124, 965 F.2d 1086, 1087 (D.C. Cir. 1992), cert. denied, 122 L. Ed. 2d 654, 113 S. Ct. 1255 (1993). As a general rule, proceedings to enforce administrative subpoenas are summary. NLRB v. Interstate Dress Carriers, Inc., 610 F.2d 99, 112 (3d Cir. 1979). In such summary proceedings, a subpoena recipient does not have a right to discovery in the normal course of events. Id. Rather, a subpoena recipient is entitled to limited discovery only after making a substantial and supported showing that enforcement of the subpoena would work an abuse of the Court's process. Id.; SEC v. Wheeling-Pittsburgh Steel Corp., 648 F.2d 118, 127-28 (3d Cir. 1981) (en banc.)
In spite of the above-cited precedent, Witmer/Kelly argue that, as a matter of right, they are entitled to the full panoply of discovery available under the Federal Rules of Civil Procedure. Witmer/Kelly base their argument on 31 U.S.C. § 3733(j), which provides that "the Federal Rules of Civil Procedure shall apply to any petition under this subsection, to the extent that such rules are not inconsistent with the provisions of this section." Witmer/Kelly also rely on a portion of legislative history,
Section 5(e) of the Antitrust Civil Process Act (15 U.S.C. § 1413(c)) makes the Federal Rules of Civil Procedure applicable to any proceeding in the district court to modify or set aside a civil investigative demand. . . . This application of the Rules includes the right to discovery afforded by Rules 26-37.