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When a federal grand jury wants all the documents in an ongoing civil case, its subpoena trumps any civil protective order unless the party challenging the subpoena can show “exceptional circumstances,” the 3rd U.S. Circuit Court of Appeals has ruled. The issue is one that has divided the federal circuits, but had not yet been addressed by the 3rd Circuit. The first appellate court to tackle the question was the 2nd Circuit, which held in 1979 in Martindell v. International Telephone & Telegraph Corp. that a protective order ordinarily takes priority over a grand jury subpoena unless prosecutors can show that the protective order was improvidently granted or the existence of “extraordinary circumstances” or a “compelling need” for the information. That position was later flatly rejected by three other circuits — the 4th, 9th and 11th — with opinions that established a per se rule that a grand jury subpoena always trumps a protective order. Most recently, the 1st Circuit struck out on its own in its 1998 decision in In re Grand Jury Subpoena (Roach) and held that there is a “rebuttable presumption” in favor of grand jury subpoenas. Under the 1st Circuit’s rule, a grand jury subpoena overrides a protective order unless the party seeking to avoid the subpoena demonstrates the existence of “exceptional circumstances that clearly favor subordinating the subpoena to the protective order.” Now the 3rd Circuit has adopted the 1st Circuit’s reasoning with its April 5 decision in In Re: Grand Jury. “We join the 1st Circuit in concluding that a strong but rebuttable presumption in favor of a grand jury subpoena best accommodates the sweeping powers of the grand jury and the efficient resolution of civil litigation fostered by protective orders,” 3rd Circuit Judge Julio M. Fuentes wrote. But Fuentes stressed that the “exceptional circumstances” test will only rarely call for quashing a grand jury subpoena. “We cannot overemphasize that the presumption we announce today in favor of a grand jury subpoena may only be rebutted in the rarest and most important of cases,” Fuentes wrote in an opinion joined by 3rd Circuit Judge Jane R. Roth and visiting Senior U.S. District Judge Marvin Katz of the Eastern District of Pennsylvania. Because the ruling deals with an ongoing grand jury matter, which is strictly secret, the factual portion of the opinion is laid out only in generic terms and the subpoena recipient is identified only as John Doe. But the lawyers who argued the case and the supervising judge are identified. Attorney Michael B. Himmel and Robert J. Kipnees of Greenbaum, Rowe, Smith, Ravin, Davis and Himmel in Woodbridge, N.J., represented Doe. Assistant U.S. Attorney Alain Leibman argued the case for the government and was joined on the brief by Assistant U.S. Attorneys Christopher J. Christie and George S. Leone. U.S. District Judge Katharine S. Hayden of the District of New Jersey presided below and filed her decision under seal. According to the 3rd Circuit’s decision, Doe and his wife filed a “commercial litigation” suit in 1998 in the Superior Court of New Jersey. The defendants later removed the case to the U.S. District Court for the District of New Jersey. In March 1999, the parties entered into a stipulation and consent order that was approved by the District Court, establishing confidentiality provisions that limited disclosure of deposition transcripts and other documents produced in discovery. The parties agreed that the protective order was designed to avoid public disclosure of sensitive personal and corporate financial information, and that the case did not involve trade secrets or other information which normally enjoys a high level of confidentiality. After Doe added defendants to his case with whom there was no diversity of citizenship, the case was remanded to the New Jersey Superior Court in August 1999. After remand, a Superior Court judge adopted the earlier protective order entered by the district court. The case, which also includes counterclaims against Doe, is still ongoing in state court and currently awaits trial. In April 2000, the U.S. Attorney’s Office for the District of New Jersey started a grand jury investigation of Doe and his wife into alleged mail fraud, wire fraud, income tax evasion and falsification of income tax returns. The investigation directly relates to issues raised in the civil case. The grand jury later issued a subpoena to Doe’s civil case counsel demanding all depositions, related exhibits, interrogatory answers and responses to requests for admissions. Doe’s lawyers moved to quash the subpoena, but Judge Hayden refused and instead granted the government’s motion to compel production. Hayden noted that the federal circuits had split on the question of whether a protective order may trump a grand jury subpoena, and that the 3rd Circuit had not decided the issue. Without adopting a specific rule herself, Hayden held that since the protective order at issue was improvidently granted, the grand jury subpoena overrode it. Hayden also questioned the extent of Doe’s reliance on the protective order and found that the public interest did not justify enforcing the protective order in the face of the grand jury subpoena. Now the 3rd Circuit has announced a flexible test that applies in all such situations. “In the vast majority of cases, a protective order should yield to a grand jury subpoena. On the other hand, we also understand that on very rare occasions, the public interest in speedy resolution of private civil litigation could outweigh the strong public interest in favor of prosecution of criminal wrongdoing,” Fuentes wrote. Fuentes said he rejected the per se rule adopted by the 4th, 9th and 11th Circuits because it “defers to the sweeping powers of the grand jury, but does so at the expense of flexibility.” A rule that grand jury subpoenas always trump a protective order “also forecloses enforcement of a protective order in the exceptional case in which the public interest demands that the civil litigation take priority over any criminal investigation,” Fuentes wrote. “Such a rigid test ignores idiosyncratic circumstances and fails to understand that the confluence of the relevant interests — generally, those of society at large and of the parties who are seeking to keep a civil protective order inviolate — occasionally may militate in favor of blunting a grand jury’s subpoena,” Fuentes wrote. The better view, Fuentes said, was the approach taken by the 1st Circuit’s case-by-case analysis in which the supervising judge has the power to quash a grand jury subpoena in the event of “exceptional circumstances.” In In re Grand Jury Subpoena (Roach), the 1st Circuit outlined eight factors for courts to consider in determining whether “exceptional circumstances” exist: � The government’s need for the information, including the availability of other sources. � The severity of the contemplated criminal charges. � Harm to society should the alleged criminal wrongdoing go unpunished. � The interests served by continued maintenance of complete confidentiality in the civil litigation. � The value of the protective order to the timely resolution of that litigation. � The harm to the party who sought the protective order if the information is revealed to the grand jury. � The severity of the harm alleged by the civil-suit plaintiff. � The harm to society and the parties should the encroachment [be] upon the protective order. Fuentes said, “We find these factors to be quite helpful and we adopt them today.” But Fuentes also stressed that the list “is not exhaustive” and said the supervising judge “need not weigh every one of these factors, and … may consider additional factors as the circumstances warrant.” Fuentes said he recognized that the exceptional circumstances rule “sacrifices some of the certainty which forms one of the most attractive features of the per se rule.” However, a more flexible rule is wiser, he said, because “we do not wish to eliminate any possibility of a court exercising its discretion in an extraordinary case.” Fuentes said he shared the fear of some courts that such quashing of grand jury subpoenas could amount to a “virtual grant of immunity” that would encroach on the exclusive power of U.S. Attorneys to grant immunity. But that fear was “alleviated” by the 1st Circuit’s approach, Fuentes said, because “in almost all cases, the grand jury subpoena should prevail.”

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