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In re Grand Jury Investigation. John Does I

September 24, 1985

IN RE GRAND JURY INVESTIGATION. JOHN DOES I, II, III, IV, V AND JOHN DOES, INC. I, II, AND III, APPELLANTS,
v.
UNITED STATES OF AMERICA, APPELLEE



Expedited appeal by five anonymous individuals and three anonymous corporations from an order of the United States District Court for the Southern District of New York denying their motion to vacate an ex parte order entered under rule 6(e) of the Federal Rules of Criminal Procedure, and denying their motion for a protective order prohibiting disclosure of grand jury material by the antitrust division to the civil division of the Department of Justice and prohibiting use of the grand jury material in the civil action contemplated by the antitrust division. We reverse and vacate the rule 6(e) order, and grant the protective relief requested by the appellants.

Author: Pratt

Before KEARSE, PIERCE, and PRATT, Circuit Judges.

PRATT, Circuit Judge:

This is an appeal by five anonymous individuals and three anonymous corporations who were subjects of a grand jury investigation. After the investigation terminated without indictments, the Antitrust Division of the Department of justice obtained an ex parte order under rule 6(e) of the Federal Rules of Criminal Procedure allowing disclosure of grand jury material to the civil division of the justice department and subsequently filed a civil complaint against the appellants. Appellants appeal form the denial of their motion to vacate the rule 6(e) order and for protective relief preventing the antitrust division from using grand jury materials to litigate the civil action.

BACKGROUND

This appeal arises out of a federal grand jury investigation into bid-rigging and price-fixing by American companies in United States government-financed sales of the product to a foreign government. After notification by the Department of State that conduct by american companies engaged in these sales might warrant investigation for possible violations of the Sherman Act, 15 U.S.C. §§ 1 & 2, the Antitrust Division of the Department of Justice initiated a criminal investigation. During the investigation, a grand jury in the Southern District of New York heard the testimony of dozens of witnesses, including the individual appellants, and subpoenaed approximately 250,000 pages of documents, some of them documents from the corporate appellants.

In early June 1984 the antitrust division tentatively concluded that although appellants had violated § 1 of the Sherman Act, criminal prosecution was not warranted under the circumstances, and the grand jury dissolved without returning any indictments. Even though it had dropped the criminal investigation, the antitrust division concluded that a civil action might be appropriate. The same government attorneys in the antitrust division who had conducted the grand jury investigation were instructed to pursue a civil investigation and, if appropriate, to prepare a civil complaint.

In late June 1984 the United States issued civil investigative demands (CIDs) for documents, pursuant to the Antitrust Civil Process Act (ACPA), 15 U.S.C. § 1311-14, to approximately two dozen persons, including the corporate appellants here, from whom the grand jury had subpoenaed documents. Since the scope of the CIDs overlapped that of the grand jury subpoenas, the antitrust division notified the CID recipients that they could comply with the CIDs by returning a certificate of compliance certifying that all documents called for by the CIDs had been produced pursuant to the grand jury subpoenas. While nearly all of the companies complied with this procedure, two of the three corporate appellants refused to sign the certificate of compliance, although the antitrust division advises that these two corporations informed the division informally that all documents sought in the CIDs had been produced pursuant to the subpoenas.

After further investigation the antitrust division determined that the appellants' conduct had violated both the Sherman act and the false claims act, 31 U.S.C. § 3729-31, and considered whether to bring its civil suit under both act. Although the civil division of the justice department is charged with the primary duty of enforcing the false claims act, see 28 C.F.R. § 0.45(d), the antitrust division, as well, may bring such suits if the conduct in question also is alleged to violate the antitrust laws, see 28 C.F.R. § 0.40(a). In order to ensure "uniform and fair enforcement" of the false claims act, the antitrust division determined that it needed advice from the civil division as to whether, under the circumstances, a false claims action was warranted. The antitrust division also decided that in view of the venue of the action, it needed to secure similar advise from the office of the United States Attorney for the Southern District of New York.

The civil and antitrust divisions entered into preliminary discussions that did not involve disclosure of grand jury material. When the civil division indicated that it could not give the requested advice without access to certain grand jury materials, the antitrust division filed its ex parte motion, under seal, for an order pursuant to rule 6(e)(3)(C)(i) of the Federal Rules of Criminal Procedure permitting disclosure of certain matters that had occurred before the grand jury to both the civil division and the southern district United States Attorney's office.

After a hearing, Judge Palmieri entered a rule 6(e) order permitting "matters occurring before the grand jury" to be disclosed to specified attorneys or their designees in the two offices "provided that this information [would] be treated as confidential and its use [would] be limited solely to the purposes of this order."

The antitrust division subsequently prepared and provided the designated attorneys with four factual memoranda that analyzed and quoted from documentary and testimonial evidence presented to the grand jury. Some subpoenaed documents were attached to the memoranda. After reviewing this information, the civil division advised the antitrust division that a suit under the false claims act would be appropriate.

In early March 1985 the antitrust division notified appellants that it would file a civil complaint against them within two weeks. Appellants immediately moved in the district court to vacate the rule 6(e) order and for a protective order "prohibiting the use of grand jury material obtained in the * * * investigation in preparing, filing or litigating the civil action contemplated by the Antitrust Division". After a hearing, Judge Palmieri denied the requested relief.

After filing a notice of appeal, appellants moved in this court to prohibit any further disclosure or use of the grand jury material pending resolution of the appeal. We denied the requested interim relief, but ordered that the appeal be expedited and that the anticipated complaint be sealed upon its filing in the district court. We also prohibited any disclosure of grand jury material to anyone not already privy to the information.

The complaint then filed under seal by the government does not quote from or refer to any grand jury transcripts or documents subpoenaed by the grand jury, and does not mention any witnesses before the grand jury or even refer to the existence of a grand jury.

On appeal, the appellants contend that: (1) an ex parte proceeding on the rule 6(e) motion was improper; (2) the principle of grand jury secrecy requires vacatur of the rule 6(e) order; and (3) the antitrust division may not use grand jury materials to litigate this ...


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