The opinion of the court was delivered by: WALSH
This motion presents the question of whether the government may subpoena partnership records through one partner which will incriminate another partner or whether such a subpoena is forbidden by the Fourth or Fifth Amendments.
This is a civil action to recover certain ships from the defendants and for other relief on the ground that these ships were obtained from the government by fraud, by the misrepresentation that the corporations purchasing the vessels were controlled by citizens when in fact they were controlled by aliens.
The government has subpoenaed certain records from the partnership, Simpson, Spence & Young. The subpoena is directed to the senior partner of the firm, Charles A. Waters. Neither the partnership nor any of its members are parties to this action. As brokers, however, the firm has had extensive dealings with certain of the defendants. Some of these dealings related to the sale of the ships involved in the action. The government contends that the documents are necessary to show that these defendants are doing business in this state and are therefore within the jurisdiction of this court, and also to prove its cause of action.
The subpoena, although extensive, calling for the principal records relating to the partnership's dealings with these parties over a six year period from 1948 through 1954, is not unreasonable because of its scope. It calls for records obviously relevant and material to the extensiveness of the business done by these defendants within this jurisdiction. Consequently, it cannot be quashed on the grounds that compliance would be unreasonably onerous. Wilson v. United States, 1911, 221 U.S. 361, 376, 31 S. Ct. 538, 55 L. Ed. 771; Brown v. United States, 1928, 276 U.S. 134, 142, 48 S. Ct. 288, 72 L. Ed. 500; Oklahoma Press Pub. Co. v. Walling, 1946, 327 U.S. 186, 209-210, 66 S. Ct. 494, 90 L. Ed. 614; Cf. Hale v. Henkel, 1906, 201 U.S. 43, 76-77, 26 S. Ct. 370, 50 L. Ed. 652.
The question is whether the subpoena is invalid because the documents subpoenaed will incriminate a member of the partnership not himself subpoenaed, Charles Augenthaler. This single question presents the only possible basis for relief in this case under either the Fourth or the Fifth Amendment.
Augenthaler was indicted in a criminal proceeding now pending in the District of Columbia which grew out of the same transactions which are the subject of the present civil proceeding. Waters, the partner subpoenaed, has already received immunity because of his testimony before the District of Columbia Grand Jury. None of the other members of the partnership is in danger of incrimination, and, of course, the partnership itself is not subject to prosecution.
The records subpoenaed are likely to be incriminating to Augenthaler. Some of them may be expected to contribute proof of transactions which, directly or indirectly, are the basis of the indictment against him. They may also contain records, memoranda and correspondence actually written or approved by him.
The Supreme Court has held that the person subpoenaed may not decline to testify or to produce a record in his possession because of possible incrimination of a third person. Rogers v. United States, 1951, 340 U.S. 367, 371, 71 S. Ct. 438, 95 L. Ed. 344; United States v. White, 1944, 322 U.S. 694, 704, 64 S. Ct. 1248, 88 L. Ed. 1542; Hale v. Henkel, supra, 1906, 201 U.S. 43, 69-70, 26 S. Ct. 370, 50 L. Ed. 652; United States v. Field, 2 Cir., 1951, 193 F.2d 92, 97. Neither may the owner raise his privilege against self-incrimination, under either amendment, to prevent the production of his private records in the possession of third persons. Johnson v. United States, 1913, 228 U.S. 457, 458, 33 S. Ct. 572, 57 L. Ed. 919; Perlman v. United States, 1918, 247 U.S. 7, 15, 38 S. Ct. 417, 62 L. Ed. 950. See also Burdeau v. McDowell, 1921, 256 U.S. 465, 476, 41 S. Ct. 574, 65 L. Ed. 1048.
Does it make any difference that the person subpoenaed is a partner of the person incriminated? Or that the record instead of being in the exclusive possession of the person subpoenaed is taken from the main office of the partnership? Or that the person incriminated had a property interest in the record as joint tenant in partnership?
The first question is quickly disposed of because there is no contention that the fiduciary relationship between partners makes communication between them privileged. By statute, partners owe a fiduciary obligation to each other but no provision protects them from court disclosure of the communications with each other. Although privileged communications based on a few confidential relationships are recognized, there has been no disposition to increase the number of confidential categories. McMann v. S.E.C., 2 Cir., 1937, 87 F.2d 377, certiorari denied McMann v. Engle, 1937, 301 U.S. 684, 57 S. Ct. 785, 81 L. Ed. 1342, see also Rosenberg v. Carroll, D.C.S.D.N.Y.1951, 99 F.Supp. 629. In New York the courts have declined to recognize such testimonial privilege except as required by statute. People ex rel. Mooney v. Sheriff of New York County, 1936, 269 N.Y. 291, 199 N.E. 415, 102 A.L.R. 769; People v. Keating, App.Div., 1st Dept., 141 N.Y.S.2d 562. As to partnerships there is no such dominant public interest in assuring complete frankness between partners that it subordinates the public interest in having lawsuits decided on the true facts. See McMann v. S.E.C., 2 Cir., 1937, 87 F.2d 377, 378, 109 A.L.R. 1445. So if Waters were asked to testify as to Augenthaler's oral reports in firm meetings, he could be required to do so.
The records subpoenaed are nothing more than writings embodying reports of the same nature whether by book entry, memorandum or copies of correspondence. They are communications to the partnership and to each member of the partnership. No more than testimony as to oral admissions are they subject to privilege based upon a confidential or fiduciary relationship.
The relationship of mutual agency said to exist between partners is no bar to their production.
In Hale v. Henkel, supra., 201 U.S. at pages 69-70, 26 S. Ct. at page 377, the court held that the person subpoenaed must produce '* * * even though he were the agent of such person (incriminated). * * *'
The next question is whether the court can obtain them lawfully, without exerting compulsion on Augenthaler. Under the partnership agreement and the New York Partnership Law, which the agreement makes controlling, it can.
Augenthaler, as a partner, has no power to use or suppress these records as his personal property. He has a property interest in them as a tenant in partnership.
He has the right of access to them.
That is all. He has no right to exclusive possession.
Section 41 of the New York Partnership Law provides:
'The partnership books shall be kept, subject to any agreement between the partners, at the principal place of business of the partnership, and every partner shall at all times have access to and may inspect and copy any of them.'
He does not even have a sufficient private interest in them as specific property that he can assign to another the right to look at them.
They are not his private records.