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Lamorte v. Mansfield

decided: January 14, 1971.


Moore, Friendly and Hays, Circuit Judges.

Author: Friendly

FRIENDLY, Circuit Judge:

Willard J. LaMorte, president and director of the Shattuck Denn Mining Corporation, is a defendant in actions now pending in the District Court for the Southern District of New York, which were brought by Alan Zients and other stockholders for alleged violations of the federal securities laws. In the course of taking LaMorte's deposition prior to trial, plaintiffs' attorneys inquired whether LaMorte possessed a copy of the transcript of testimony he had given in 1967, under subpoena, in a nonpublic investigation being conducted by the Securities and Exchange Commission, pursuant to § 20(a) of the Securities Act of 1933 and § 21(a) of the Securities Exchange Act of 1934, in the Matter of Shattuck Denn Mining Corp. Although LaMorte's counsel in the 1967 investigation had obtained, with the SEC's consent, copies of the transcript, which were in the possession of LaMorte's present counsel at all times here relevant, the latter halted any further inquiry into the matter, saying:

The copy is in the possession of counsel and counsel declines to produce it if that is the thrust of this area for the interrogation on the ground that it is a confidential communication. It is a nonpublic record all in accordance with certain communications that were sent to the court, copies of which were sent to counsel and that is the basis of the refusal.

After further communications between counsel for both parties and the judge as to the proper disposition of plaintiffs' request, Judge Mansfield ordered that defendant LaMorte turn over his copies of the transcript to plaintiffs and any co-defendants who requested them. LaMorte then petitioned this court for a writ of mandamus to require the judge to vacate this order as beyond his power and as an abuse of discretion. We called for an answer, F.R.A.P. 21(b), and heard argument. At the conclusion of this we denied the petition but stated that since the issue appears to be a recurring one, see White v. Jaegerman, 51 F.R.D. 161 (S.D.N.Y.1970), we would file an opinion for the benefit of the bar and of other district judges before whom a similar question may arise.

Petitioner relies principally on federal statutes and SEC regulations designed to preserve the secrecy of administrative investigations when this is necessary for proper discharge of the agency's functions. The thrust of his argument is that by availing himself of the opportunity, provided both by statute, 5 U.S.C. § 555(c), and regulation, 17 C.F.R. § 203.6, to obtain under some circumstances a transcript of his testimony before the SEC in a nonpublic investigation, he did not thereby forfeit his alleged privilege to maintain the confidentiality of this testimony.

In order to preserve the confidentiality of information it acquires in certain investigatory proceedings, the SEC promulgated regulations, 2 F.R. 1877 (1937), 2 F.R. 2053 (1937), amended in 1961 to cover specifically such nonpublic records as are here at issue, 26 F.R. 3102:

Information or documents obtained by officers or employees of the Commission in the course of any examination or investigation pursuant to section 17(a) (48 Stat. 897, sec. 4, 49 Stat. 1379; 15 U.S.C. 78q(a)) or 21(a) (48 Stat. 899; 15 U.S.C. 78u(a)) shall, unless made a matter of public record, be deemed confidential. Officers and employees are hereby prohibited from making such confidential information or documents or any other non-public records of the Commission available to anyone other than a member, officer, or employee of the Commission, unless the Commission authorizes the disclosure of such information or the production of such documents as not being contrary to the public interest. Any officer or employee who is served with a subpoena requiring the disclosure of such information or the production of such documents shall appear in court and, unless the authorization described in the preceding sentence shall have been given, shall respectfully decline to disclose the information or produce the documents called for, basing his refusal upon this section. Any officers or employee who is served with such a subpoena shall promptly advise the Commission of the service of such subpoena, the nature of the information or documents sought, and any circumstances which may bear upon the desirability of making available such information or documents.

17 C.F.R. § 240.0-4. See 17 C.F.R. § 230.122 for the virtually identical regulation under the 1933 Act. The SEC's regulations also provided that "information or documents obtained by the Commission in the course of any investigation or examination, unless made a matter of public record, shall be deemed non-public." 17 C.F.R. § 203.2.

The long-standing regulation, set out above, was an articulation of the discretion possessed by the agency in determining whether to disclose information acquired in the course of certain investigatory proceedings. In the interest of confining this discretion, which in some instances might be deemed to operate to the undue detriment of private parties, both Congress, by statute, and the SEC, by regulation, explicitly provided for access to testimony such a party has given in a nonpublic investigation. Section 555(c) of 5 U.S.C., 80 Stat. 385 (1966), which substantially reenacted § 6(b) of the Administrative Procedure Act of 1946, provided, in part, that:

A person compelled to submit data or evidence is entitled to retain or, on payment of lawfully prescribed costs, procure a copy or transcript thereof, except that in a nonpublic investigatory proceeding the witness may for good cause be limited to inspection of the official transcript of his testimony.

Likewise, the SEC has provided in 17 C.F.R. § 203.6 that:

Transcripts, if any, of formal investigative proceedings, shall be recorded solely by the official reporter, or by any other person or means designated by the officer conducting the investigation. A person who has submitted documentary evidence or testimony in a formal investigative proceeding shall be entitled to procure a copy of his documentary evidence or a transcript of his testimony on payment of the appropriate fees: Provided, however, That in a non-public formal investigative proceeding a person seeking a transcript of his testimony shall file a written request stating the reason he desires to procure such transcript, and the Commission may for good cause deny such request. In any event, any witness (or his counsel), upon proper identification, shall have the right to inspect the official transcript of the witness' own testimony.*fn1

Finally, the Information Act of 1966, 80 Stat. 250, substantially reenacted and codified in 1967, 81 Stat. 54, as 5 U.S.C. § 552, amended § 3 of the Administrative Procedure Act to increase significantly the public availability of agency records. Broadly speaking all identifiable records were to be made ...

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