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Circuit Rules Court Lacked Authority to Compel Compliance with Subpoena Issued by Expired Grand Jury

On June 3, 2020, the Circuit (Winter, Pooler, Sullivan) issued a noteworthy decision in In re: Grand Jury Proceeding regarding the authority of a district court to enforce a grand jury subpoena.  Relying in part on a nearly 100-year-old decision and exposing a circuit split on an issue central to the enforcement of grand jury subpoenas, the decision reaffirms the importance of the grand jury as an independent investigative entity and serves as a reminder to defense counsel to diligently monitor the authority underlying government demands for documents and testimony in connection with an investigation.

Background

In re: Grand Jury Proceeding concerns challenges brought by attorney Frederick Oberlander related to a series of grand jury subpoenas that he received in connection with a criminal investigation into Oberlander’s possible public disclosure of sealed information in defiance of various sealing orders. 

The sealed information at issue related to Felix Sater, a notorious individual who pleaded guilty in 1998 to participation in a securities fraud scheme and thereafter secretly cooperated with the government in an undercover capacity to provide valuable foreign intelligence and information about criminals of interest to law enforcement.[1] The fact of Sater’s cooperation remained sealed until it was inadvertently disclosed by the Office of the Clerk of Court in 2012. 

Between 2010 and 2013, Oberlander brought a series of lawsuits on behalf of clients who alleged that Sater had defrauded them, and in connection with those lawsuits Oberlander repeatedly sought to publicly disclose sealed information about Sater’s cooperation with the government.  In 2011, the Circuit enjoined Oberlander from publicly disclosing sealed information and directed that a special master be appointed to oversee compliance with the relevant sealing orders.  In 2012, Sater initiated a civil contempt proceeding against Oberlander, alleging that he had intentionally violated the Court’s injunction.  In 2015, Judge Cogan of the Eastern District of New York, who was then serving as the special master overseeing compliance with the sealing orders, referred the matter to federal law enforcement for a criminal investigation.

What followed this referral was roughly three years of subpoenas and challenges by Oberlander, each of which took time to resolve.  This created a tangled procedural history that took several pages for the panel to carefully review.  After Judge Cogan’s referral, a grand jury was impaneled (the “First Grand Jury”) to investigate Oberlander’s conduct.  In June 2016, the First Grand Jury issued a subpoena requesting documents from Oberlander related to his communications with reporters.  Oberlander refused to comply and in December 2016 the First Grand Jury’s term expired.  Apparently unaware of that expiration, the government served Oberlander with another grand jury subpoena in April 2017 (the “April 2017 Subpoena”), which was directed to the custodian of records for Oberlander’s law firm and sought the same records requested in the June 2016 subpoena as well as testimony from the custodian.  Neither Oberlander nor a different records custodian appeared to give testimony, and no records were produced.  Approximately two weeks after the April 2017 Subpoena issued, a new grand jury (the “Second Grand Jury”) was impaneled to investigate the same conduct as the First Grand Jury.

In August 2017, the government moved to compel Oberlander to comply with the April 2017 Subpoena.  The district court granted the motion.  Nevertheless, Oberlander subsequently moved eight months later to quash the subpoena.  The district court denied the motion in June 2018 but directed the government to reissue the April 2017 Subpoena with some minor changes.  The district court also ordered Oberlander to produce the documents demanded by the forthcoming revised subpoena within one month, noting also that failure to comply would result in sanctions.  On June 12, 2018, the Second Grand Jury issued a revised subpoena (the “June 2018 Subpoena”) which again sought communications between Oberlander and reporters regarding Sater, as well as testimony from the custodian of records for Oberlander’s firm.  On June 22, 2018, Oberlander moved for reconsideration of his motion to quash and an order staying enforcement of the district court’s June 2018 order. The district court denied that order and warned Oberlander that coercive sanctions would be imposed if he continued to fail to produce responsive documents.

One day before the production deadline for the June 2018 Subpoena, Oberlander produced responsive materials for the period spanning January 9, 2013, which was the date when Oberlander had incorporated his law practice, through the June 2018 Subpoena’s end date.  Oberlander thereafter submitted additional responsive records to the district court covering the subpoena’s start date to January 8, 2013 on the grounds that Oberlander had operated his law firm as an unincorporated sole proprietorship during this period.  Oberlander requested that the district court review these materials in camera to determine whether they constituted personal records protected by the Fifth Amendment’s “act of production” privilege.  This was an argument that Oberlander had previously raised unsuccessfully, and the district court denied the request in September 2018 and ordered Oberlander to produce the withheld materials to the government within six days.

Flouting that order, Oberlander still had not produced the withheld documents by October 17, 2018 – the date on which the Second Grand Jury expired.  On October 22, 2018, the government moved to compel Oberlander to produce all withheld documents despite the absence of an impaneled grand jury.  The district court thereafter issued two orders requiring Oberlander to produce any remaining responsive documents or be subject to civil contempt sanctions in the form of a $1,000 daily fine until he complied.  Oberlander did not comply and appealed from the district court’s order on November 16, 2018.  The appeal challenged the district court’s (i) refusal to quash the April 2017 Subpoena, (ii) denial of his motions for reconsideration of the motion to quash, and (iii) order directing compliance with the June 2018 Subpoena on pain of coercive monetary sanctions.

On November 29, 2018, a newly impaneled grand jury issued a new subpoena to Oberlander that was identical in all material respects to the June 2018 Subpoena.

The Court’s Analysis

The most significant aspect of the Court’s decision concerns the validity of the grand jury subpoenas and the district court’s authority to compel Oberlander’s compliance.  Short story:  once a grand jury expires, the government cannot move to enforce a subpoena issued by the now-expired grand jury.  However, another grand jury can start an investigation that covers the same territory as the initial investigation and issue an identical subpoena.

The Court first addressed Oberlander’s argument that the April 2017 Subpoena was invalid.  On this issue, the Court agreed with Oberlander and held that the subpoena was invalid because it was served by the government in the name of an expired grand jury.  The Court noted that it would have been impossible for Oberlander to produce documents and appear before the First Grand Jury after it had expired. 

Citing Judge Learned Hand’s 1926 decision in Loubriel v. United States, 9 F.2d 807, 809 (2d Cir. 1926), the Court explained that the impaneling of the Second Grand Jury before the April 2017 Subpoena’s return date did not alter its conclusion that the April 2017 Subpoena was a nullity.  The Court noted that “each grand jury’s investigation is separate and independent from its predecessor’s,” and it stated that “the duty imposed by a subpoena to produce documents to, or testify before, a specific grand jury ceases once that grand jury’s term expires.”  The Court observed that its Loubriel decision was consistent with the law in the First Circuit, although the D.C. Circuit and Tenth Circuit have come out the other way on the issue.  The Court recognized that Loubriel is “nearly a century old” but said that this was “neither here nor there,” reflecting the panel’s adherence to the rule that one panel’s decision is law of the Circuit absent an en banc proceeding or a decision by the Supreme Court.  The Court also noted that the invalid April 2017 Subpoena did not taint the June 2018 Subpoena, which had been duly issued by the Second Grand Jury.

Because the Second Grand Jury had expired in October 2018 (i.e., before the district court had issued its sanctions order), the Court next considered whether the district court had authority to issue coercive sanctions to compel compliance with the duly issued June 2018 Subpoena.  The Court again agreed with Oberlander, concluding that the district court lacked the authority to issue sanctions because “the law does not compel the impossible.”  The Court arrived at this conclusion because the district court had waited until after the Second Grand Jury’s term had expired before finally holding Oberlander in contempt.  The Court reasoned that Oberlander’s duty to comply with the June 2018 Subpoena ceased when the Second Grand Jury expired because “[t]o hold otherwise would place Oberlander in the untenable position of being subject to civil sanctions without the ability to purge himself of contempt.” 

The government challenged this conclusion, arguing that Oberlander could purge himself of contempt because (i) the underlying order directed Oberlander to produce documents to the government, not the grand jury, and (ii) a successor grand jury had since been impaneled.  The Court rejected both arguments.  As to the former, it reasoned that the district court’s directive that the documents be produced to the government was of no moment because the government is not authorized to stand in the shoes of the grand jury, and to allow it to do so would “reduce the grand jury to a quaint fiction.”  As to the latter argument, the Court stated that a grand jury “cannot merely pick up an investigation from where its predecessor left off.”  The Court somewhat dismissively noted that requiring subsequent grand juries to issue nearly identical subpoenas “may result in more paperwork for the government.”  But it stated that this posed “no great administrative difficulty” while observing that “it certainly will not require much effort on the part of the government to stay abreast of the expiration dates of the grand juries charged with investigating serious and potentially criminal conduct.”

The Court also made a point to note that its decision did not leave the district court “powerless in the face of Oberlander’s recalcitrance and repeated violations of court orders.”  The Court noted that the district court was free to consider whether to initiate criminal contempt proceedings on remand.  The Court distinguished criminal contempt from civil contempt, noting that the former was punitive in nature.  As a result, Oberlander’s ability to purge the contempt would be irrelevant in the context of criminal contempt proceedings.

After addressing the contempt issue, the Court quickly dispatched with the “merits” arguments advanced by Oberlander in support of his motion to quash.  The Court found that the motion was not moot, even though the June 2018 Subpoena was held to be unenforceable, because a successor grand jury had already initiated a similar investigation and issued a new subpoena to Oberlander that sought the same materials as the June 2018 Subpoena.  The dispute therefore fell into the mootness exception of being “capable of repetition, yet evading review.”  The Court ruled that the June 2018 Subpoena was reasonable in scope and was not issued in bad faith or otherwise used for an improper purpose.  The Court also rejected Oberlander’s First Amendment challenge, holding that compliance was not excused just because the subpoena concerned communications with reporters.  Finally, the Court rejected Oberlander’s Fifth Amendment “act of production” challenge, concluding that the documents sought were “corporate in nature” (even if created before Oberlander shifted from a sole practice to an incorporated law firm) and therefore fell within the “collective entity” exception to the Fifth Amendment privilege.

Commentary

The Court’s decision appears to have arisen from an unusual set of facts that raise questions about the government’s underlying investigation.  To be sure, Oberlander did not make things easy for the government, with his pattern of evading the enforcement of grand jury subpoenas. However, as the Court noted in its decision, federal law allows for grand jury terms to be extended for up to 36 months under certain circumstances, and it is not clear why the government allowed the First Grand Jury to expire rather than seek an extension.  To a certain degree, the Court’s decision appears to suggest a measure of bewilderment at the government’s management of the investigation by expressly noting that the grand jury could have been extended and mentioning that it does not “require much effort” for the government to keep track of the expiration dates of grand juries. 

The Court’s reference to the possibility of criminal contempt proceedings against Oberlander also appears to suggest frustration with Oberlander’s apparent obstruction of the government’s investigation.  While Oberlander has the right to challenge the legality of grand jury subpoenas, the panel pointed out that there are limits on how such challenges can be lodged.  Despite that frustration, the Court’s decision reflects that rules and process matter and also reaffirms the importance of the grand jury as a distinct investigative entity that cannot be readily cast aside for the sake of convenience.  Finally, we can see the Circuit’s continuing respect for its own precedent and for the decisions rendered by great Second Circuit judges of the past, with the panel following Judge Hand’s 1926 decision, despite a circuit split with the D.C. and Tenth Circuits.

 

[1] Katlyn Polantz, “Felix Sater was informant for feds on mob and bin Laden, docs reveal,” CNN, found at https://www.cnn.com/2019/08/23/politics/felix-sater/index.html (last visited June 6, 2020).