In re Grand Jury Subpoena Issued June 18, 2009, No. 09-3561 (2d Cir. 2010)
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09-3561-cv In re Grand Jury Subpoena Issued June 18, 2009 1 UNITED STATES COURT OF APPEALS 2 FOR THE SECOND CIRCUIT 3 -------- 4 August Term, 2009 5 (Argued: November 30, 2009 6 Decided: February 1, 2010) Docket No. 09-3561-cv 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 -----------------------------------------------------------X IN RE GRAND JURY SUBPOENA ISSUED JUNE 18, 2009 25 the Southern District of New York (Sullivan, J.) holding 26 Appellants in contempt for failing to comply with a subpoena 27 duces tecum. 28 corporation with a sole shareholder, officer, and employee may 29 refuse to comply with a subpoena demanding production of ACCOUNT SERVICES CORPORATION [ASC], KJB FINANCIAL CORPORATION [KJB], Appellants, - v. UNITED STATES OF AMERICA, Appellee.* -----------------------------------------------------------X Before: WALKER, McLAUGHLIN, RAGGI, Circuit Judges. Appeal from an order of the United States District Court for * This appeal requires us to determine whether a At oral argument, the parties agreed that the case, which had formerly been sealed, should be unsealed. The Clerk of the Court is directed to amend the official caption as set forth above. 1 corporate records under the Fifth Amendment s act of production 2 privilege. 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 We find it may not. AFFIRMED. JOHN V. DONNELLY III, Cozen O Connor, Philadelphia, Pennsylvania (L. Barrett Boss, Cozen O Connor, Washington, D.C., on the brief), for Appellants. ARLO DEVLIN-BROWN, Assistant United States Attorney (Michael A. Levy, Assistant United States Attorney, on the brief), for Preet Bharara, United States Attorney for the Southern District of New York, for Appellee. PER CURIAM: Account Services Corporation and KJB Financial Corporation 18 (collectively, the Companies ) appeal an August 17, 2009, order 19 of the United States District Court for the Southern District of 20 New York (Sullivan, J.) holding them in contempt for failing to 21 comply with a subpoena for corporate records. 22 which are wholly owned by Douglas Rennick, their sole 23 shareholder, officer, and employee argue that they may resist 24 the subpoena on Fifth Amendment grounds since Rennick is the only 25 person capable of producing the records and his act of production 26 would be testimonial and potentially self-incriminating. 27 Although the long-established collective entity rule prevents 28 corporations from availing themselves of the Fifth Amendment 29 privilege, the Companies contend that the Supreme Court s 30 decision in Braswell v. United States, 487 U.S. 99 (1988), 2 The Companies 1 compels us to carve out an exception for one-person corporations. 2 We disagree and affirm the district court s contempt order. 3 BACKGROUND 4 On June 18, 2009, a grand jury sitting in the Southern 5 District of New York issued a subpoena duces tecum to Account 6 Services Corporation in connection with an investigation of 7 alleged bank fraud, illegal gambling, and money laundering. 8 Government and the Companies agreed to construe the subpoena as 9 being directed not just to Account Services Corporation, but to The 10 both of the Companies. On July 10, 2009, Rennick moved to quash 11 the subpoena, arguing that his personal Fifth Amendment rights 12 permitted the Companies to resist the subpoena since he was the 13 only individual capable of producing the requested corporate 14 records and the act of production would be testimonial and 15 potentially self-incriminating. 16 Southern District s emergency part, denied the motion. 17 Grand Jury Subpoena Issued June 18, 2009, No. M11-189, 2009 U.S. 18 Dist. LEXIS 71610 (S.D.N.Y. Aug. 4, 2009). Judge Swain, sitting in the In re 19 On August 5, 2009, Rennick was indicted on charges of 20 conspiracy, bank fraud, illegal gambling, and money laundering. 21 Subsequently, the Companies refused to comply with the subpoena, 22 leading Judge Sullivan, who was then sitting in the emergency 23 part, to hold them in contempt. 24 June 18, 2009, No. M11-189 (S.D.N.Y. Aug. 17, 2009). In re Grand Jury Subpoena Issued 3 1 The Companies now appeal. DISCUSSION 2 3 We review a finding of contempt under an abuse of discretion 4 standard that is more rigorous than usual. EEOC v. Local 638, 5 81 F.3d 1162, 1171 (2d Cir. 1996). 6 incorporates, among other things, de novo review [of the] 7 district court[ s] rulings of law. 8 F.3d 161, 168 (2d Cir. 2009). Abuse of discretion review United States v. Hasan, 586 9 The Fifth Amendment guarantees that no person shall be 10 compelled in any criminal case to be a witness against himself. 11 U.S. Const. amend. V. 12 compelled incriminating communications to those that are 13 testimonial in character. 14 27, 34 (2000). 15 both incriminating and testimonial - such as when it confirms the 16 documents existence, possession, or authenticity - a subpoenaed 17 party may be able to resist production on Fifth Amendment 18 grounds. 19 This text limits the relevant category of United States v. Hubbell, 530 U.S. Because the act of producing documents can be See United States v. Doe, 465 U.S. 605, 612-13 (1984). Under the long-established collective entity rule, 20 however, corporations cannot avail themselves of the Fifth 21 Amendment privilege. 22 of this rule is that the custodian of corporate records, who acts 23 as a representative of the corporation, cannot refuse to produce 24 corporate records on Fifth Amendment grounds. Braswell, 487 U.S. at 104-10. 4 A corollary See Bellis v. 1 United States, 417 U.S. 85, 90 (1974). This is true (1) whether 2 the subpoena is directed to the corporation itself or to the 3 custodian in his representative capacity, see id. at 88, and (2) 4 regardless of how small the corporation may be, id. at 100. 5 In In re Two Grand Jury Subpoenae Duces Tecum, 769 F.2d 52 6 (2d Cir. 1985), we considered whether there was an exception to 7 the collective entity rule for a corporation that was 8 essentially a one-man operation (nominally, it had three 9 shareholders). Id. at 54. There, the subpoenaed party made much 10 the same argument that the Companies make here: the custodian of 11 corporate records for a one-person corporation could resist the 12 subpoena since he was the only person capable of producing the 13 documents and the act of production would incriminate him 14 personally. 15 is no situation in which the fifth amendment would prevent a 16 corporation from producing corporate records, for the corporation 17 itself has no fifth amendment privilege. 18 it remains good law, this case appears to resolve the issue now 19 before us. 20 Cir. 2004) ( [We] are bound by the decisions of prior panels 21 until such time as they are overruled either by an en banc panel 22 of our Court or by the Supreme Court. ). We disagreed, stating emphatically, [t]here simply Id. at 57. Assuming See United States v. Wilkerson, 361 F.3d 717, 732 (2d 23 Since our ruling in In re Two Grand Jury Subpoenae, the 24 Supreme Court decided Braswell v. United States, 487 U.S. 99 5 1 (1988), a very similar case. There, the targeted corporations 2 were also essentially one-person operations (the owner s wife and 3 mother served alongside the owner as figurehead directors). 4 Although the Supreme Court held that the corporations custodian 5 of records could not resist a subpoena on Fifth Amendment 6 grounds, it also held that, should the custodian stand trial, the 7 Government could not introduce evidence that the custodian 8 himself produced the records since he acted in his representative 9 and not personal capacity. Id. at 117-18. The Court 10 acknowledged, however, that the jury might permissibly infer that 11 the custodian was the source of the documents based on his 12 position at the corporation. 13 Court le[ft] open the question of whether a custodian could 14 resist a subpoena where he is able to establish . . . that the 15 jury would inevitably conclude that he produced the records, 16 such as where the corporation was truly a one-person operation. 17 Id. at 118 n.11. 18 Id. at 118. In a footnote, the We conclude that Braswell did not overrule In re Two Grand 19 Jury Subpoenae. The Supreme Court explicitly withheld decision 20 on the question of whether an actual one-person corporation could 21 resist a subpoena on Fifth Amendment grounds. 22 does not call into question our categorical finding that [t]here 23 simply is no situation in which a corporation can avail itself 24 of the Fifth Amendment privilege. 6 This non-decision In re Two Grand Jury 1 Subpoenae, 769 F.2d at 57. 2 circuit court to conclude that Braswell did not overrule such 3 precedent. 4 2006). 5 We note that we are not the first See Amato v. United States, 450 F.3d 46, 51 (1st Cir. Our conclusion that a one-person corporation cannot avail 6 itself of the Fifth Amendment privilege is not only supported by 7 our precedent, but is sensible. 8 of the unchallenged rule that the [corporation] itself is not 9 entitled to claim any Fifth Amendment privilege. First, it prevents the erosion Bellis, 417 10 U.S. at 90. Second, it recognizes that the decision to 11 incorporate is freely made and generates benefits, such as 12 limited liability, and burdens, such as the need to respond to 13 subpoenas for corporate records. 14 Third, it avoids creating a category of organizations effectively 15 immune from regulation by virtue of being beyond the reach of the 16 Government s subpoena power. 17 U.S. 694, 700 (1944) ( Were the cloak of the [Fifth Amendment] 18 privilege to be thrown around these impersonal [corporate] 19 records and documents, effective enforcement of many federal and 20 state laws would be impossible. ); see also Braswell, 487 U.S. at 21 115 (noting the importance of subpoenaing corporate records in 22 the fight against white collar crime). 23 considered this issue has reached the same conclusion for largely 24 the same reasons. See Amato, 450 F.3d at 52. See United States v. White, 322 Every other court to have See, e.g., Amato, 450 F.3d 46, 51-53; United 7 1 States v. Stone, 976 F.2d 909, 912 (4th Cir. 1992); United States 2 v. Milligan, 371 F. Supp. 2d 1127, 1129 (D. Ariz. 2005); SEC v. 3 Bremont, No. 96 Civ. 8771, 1997 U.S. Dist. LEXIS 6125, at *3 4 (S.D.N.Y. May 6, 1997); United States v. Maxey & Co., 956 F. 5 Supp. 823, 829 (N.D. Ind. 1997); United States v. Raniere, 895 F. 6 Supp. 699, 706-07 (D.N.J. 1995); United States v. Moseley, 832 F. 7 Supp. 56, 58-59 (W.D.N.Y. 1993). 8 9 Finally, we question the basic premise of the Companies argument, namely, that a jury would inevitably conclude that 10 Rennick himself produced the documents. 11 would be strong, it would not be automatic. 12 jury might believe the Government obtained the documents entirely 13 on its own, such as by conducting a search. 14 learned that the Government obtained the documents via a 15 subpoena, they might infer that the corporation engaged a third 16 party to search its records and make the production on its 17 behalf. 18 Although the inference For example, the Even if the jurors In sum, the district court did not abuse its discretion in 19 holding the Companies in contempt for failing to comply with the 20 subpoena. 21 We observe in closing that the subpoena in question requires 22 only that the Companies, and not any particular individual, 23 produce the requested documents; how best to accomplish this is a 24 question for the Companies and not this Court. 8 1 2 CONCLUSION For the foregoing reasons, we AFFIRM. 9
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