The opinion of the court was delivered by: WEINFELD
Defendant and cross-claimant, W. A. Krueger Co. ("Krueger"), seeks an order, pursuant to Fed.R.Civ.P. 37, overruling the claims by Sidney Pal and Michael Bash, additional defendants on Krueger's cross-claims (the "defendants"), of their Fifth Amendment privilege against self-incrimination asserted during the course of discovery proceedings, and directing them to answer questions propounded at their oral depositions, to answer interrogatories and to produce documents.
This action was commenced by the Camelot Group, formerly known as MBA Enterprises ("MBA") against Krueger. Krueger alleged counterclaims against MBA and cross-claims against six additional defendants three corporations and three individuals including Pal and Bash. At present the only claims remaining in the case are Krueger's cross-claims against the individuals.
Three of these cross-claims allege that, in connection with Krueger's entering into an agreement extending an existing contract with MBA, Pal and Bash
made false representations to Krueger regarding the finances of Transamerican Enterprises (a guarantor of payments under the agreement); the intention of Transamerican Enterprises to infuse capital into MBA; and the fact that MBA was to be the publisher of certain magazines the printing of which was the subject of the agreement. Krueger alleges that these representations were knowingly made to deceive Krueger and to induce it to enter the agreement.
A fourth cross-claim alleges that Pal and Bash intentionally procured MBA's breach of both the extension agreement and of the original contract between Krueger and MBA. Finally, Krueger also alleges that MBA is the alter ego of Pal and Bash and seeks to hold them liable for the corporation's obligations to Krueger. In the instance of these latter claims there are no allegations of fraudulent conduct.
Oral depositions of Pal and Bash were noticed by Krueger for May 1979. On the return day each appeared and after being sworn asserted a "blanket" constitutional privilege with respect to any question that might be posed. The same position was taken with respect to interrogatories served by Krueger. This motion followed. At oral argument on June 19, 1979, the Court rejected the defendants' "blanket" assertions of the privilege against self-incrimination. It directed Pal and Bash to appear for their depositions and, if they intended to assert their privilege, to do so with respect to individual questions.
Each invoked his privilege and refused to answer each and every question put to him over the course of a 350-page transcript.
That the privilege against self-incrimination may be asserted in connection with civil litigation is beyond dispute.
However, Fifth Amendment claims are not to be accepted at face value. To do so would leave no check on assertions of the privilege where the risk of incrimination is remote or even non-existent, thereby obstructing the administration of justice.
Thus, a claimant of the privilege is not immunized from answering a question upon his mere declaration that it would tend to incriminate him "his say-so does not of itself establish the hazard of incrimination. "
The determination whether the privilege is well-founded is to be made by the court based upon all of the circumstances of the case and the judge, in assessing the claim, "must be governed as much by his personal perceptions of the peculiarities of the case as by the facts actually in evidence."
While the privilege is to be accorded liberal application, the court may order a witness to answer if it clearly appears he is mistaken as to the justification for the privilege or is advancing his claim as a subterfuge.
Moreover, the burden of establishing a foundation for the assertion of the privilege lies with the party making it.
The standards to be applied in assessing a claim of privilege are well-established. The protection of the privilege is confined to instances where the witness has reasonable cause to apprehend danger from a direct answer; that is, reasonable cause to believe that a direct answer would support a conviction or furnish a link in the chain of evidence needed to prove a crime.
Further, the privilege against self-incrimination "protects against real dangers, not remote and speculative possibilities."
Thus the Court must be satisfied that given all the circumstances of the case, in connection with each area the questioning party wishes to explore, the claimant of the privilege is "confronted by substantial and "real', and not merely trifling or imaginary, hazards of incrimination."
A. Bash's Claim of the Privilege.
To demonstrate that his assertion of the privilege is well-founded, Bash relies upon a year-old determination by a New York state court declining to grant him immunity in connection with discovery in a proceeding completely unrelated to this lawsuit.
The state court action was a special proceeding to enforce a judgment against Bash. Bash asserted his Fifth Amendment privilege and the plaintiff-judgment creditor sought an order, pursuant to New York law,
granting him immunity. As required by New York law, the consent of local prosecutors, state and federal, to the proposed grant was solicited. Each prosecutor opposed immunity and the court denied the motion. Each local county prosecutor declined to consent to the grant of immunity on general principles. The federal prosecutor stated, however, that Bash is "currently the subject of an investigation being conducted by the Criminal Division of this office." No suggestion as to the possible subject matter of that investigation is contained in the affidavit submitted by the federal prosecutor. There is neither indication nor contention that it relates even remotely to the subject matter of the civil claims asserted here or even that it is still ongoing. Moreover, although more than a year has passed since the federal prosecutor opposed the grant of immunity, Bash, in the latest submissions to this Court, has made no effort to update the information in the prosecutor's affidavit.
The information proffered above serves as no basis for sustaining Bash's assertion of the privilege in this action. That he has asserted his privilege in an unrelated lawsuit and that a court declined to grant him immunity in order to overcome that assertion are of no probative value on the issue of whether or not he has reasonable cause to apprehend danger of incrimination from questions posed in this suit where the inquiry is directed toward matters relevant to the subject matter involved in the defendant's cross-claims against him.
To find that reasonable apprehension exists based only upon this dated and uninformative data requires indulging in remote, purely speculative possibilities. Any link between the answers sought in this lawsuit and the alleged investigation which may or may not be pending, is entirely conjectural.
B. Pal's Claim of the Privilege.
Pal also relies upon materials submitted in a prior state court proceeding to support his assertion of the privilege. Significantly, the relevant information in these materials predates the original motion in this case but was not presented to this Court until December 1979 and no explanation for this delay has been offered.
The state court proceeding upon which Pal relies was also a supplementary proceeding in the New York courts to enforce a judgment against him in which Pal successfully asserted his Fifth Amendment privilege. Pal's assertion of his privilege in the state court was initially sustained only in part by the trial court. Upon reargument further information was provided in the form of an affidavit by his counsel on the basis of which Pal's claim of privilege was ultimately sustained in full by the Appellate Division.
This same affidavit is now presented to this Court to sustain Pal's assertion of the privilege in this action.
The affidavit of Gustave H. Newman, sworn to April 26, 1979 and submitted to the State Court in the supplementary proceeding, avers that at that time the United States Attorney for the District of South Carolina was investigating and a federal grand jury was considering the bankruptcy of Cedric's Fish and Chips, Ltd., and its transactions with two companies, Transamerican Enterprises, Inc.
and Pollock Corporation; that Pal was an officer of both Transamerican and Pollock; and that Pal had asserted his Fifth Amendment privilege when called as a witness in bankruptcy proceedings in New York. The affidavit, in essence, argues that if Pal revealed ...