PUBLISHED

UNITED STATES COURT OF APPEALS

FOR THE FOURTH CIRCUIT

MARK T. FINN,

Plaintiff-Appellant,

v. No. 94-2373

S. DAVID SCHILLER,

Defendant-Appellee.

Appeal from the United States District Court

for the Eastern District of Virginia, at Richmond.

Richard L. Williams, Senior District Judge.

(CA-94-743-R)

Argued: February 1, 1995

Decided: January 3, 1996

Before HALL and WILKINS, Circuit Judges, and

CHAPMAN, Senior Circuit Judge.

_________________________________________________________________

Affirmed but remanded for further proceedings by published opinion.

Senior Judge Chapman wrote the opinion, in which Judge Hall and

Judge Wilkins joined.

_________________________________________________________________

COUNSEL

ARGUED: Jed S. Rakoff, FRIED, FRANK, HARRIS, SHRIVER &

JACOBSON, Washington, D.C., for Appellant. Robert William Jaspen, Assistant United States Attorney, Richmond, Virginia, for

Appellee. ON BRIEF: Harvey L. Pitt, Debra M. Torres, Karl A.

Groskaufmanis, Gregory J. Ikonen, James A. Hutchinson, FRIED,
FRANK, HARRIS, SHRIVER & JACOBSON, Washington, D.C.;

Hunter W. Sims, Jr., L. Allan Parrott, Jr., KAUFMAN & CANOLES,

P.C., Norfolk, Virginia, for Appellant. Helen F. Fahey, United States

Attorney, Richmond, Virginia, for Appellee.

_________________________________________________________________

OPINION

CHAPMAN, Senior Circuit Judge:

Mark T. Finn filed suit in the United States District Court for the

Eastern District of Virginia against S. David Schiller, Assistant

United States Attorney, alleging an ongoing pattern of prosecutorial

misconduct including violations of Federal Rule of Criminal Procedure 6(e)(2) and seeking injunctive relief so as to prevent Schiller

from disclosing grand jury material. The district court determined that

only criminal contempt of court is provided by the Rule and, therefore, that only the court or the United States Attorney may institute

contempt proceedings thereunder. The district court dismissed the

suit, and Finn appeals. For the reasons discussed below, we affirm the

dismissal under Rule 12(b)(6) for failure to state a claim upon which

relief can be granted. However, we conclude that Rule 6(e)(2) provides both civil and criminal contempt but does not create a private

cause of action. Accordingly, we remand for further proceedings consistent with this opinion.

I.

Finn served on the Virginia Retirement System ("VRS") Board of

Trustees in the early 1990s. From May 1990 until August 1990, the

VRS increased its stock ownership in the Richmond, Fredericksburg

& Potomac Railroad Corporation through open-market purchases.

After learning of these stock purchases, Schiller, an Assistant United

States Attorney, commenced a grand jury inquiry into the VRS's

actions to determine if there had been securities laws violations.

On September 19, 1994, Schiller filed a plea agreement and a three

page criminal information charging Patrick Bynum with a federal

mail fraud violation. The information did not mention Finn. On Sep-

 2
tember 23, 1994, Schiller signed and filed an eighty-three page statement (the "Statement") in the criminal proceeding against Bynum.

Only six pages of the Statement dealt with the guilty plea of Bynum,

and the remainder of the Statement generally alleged that Finn and

other VRS officials conspired to commit mail, wire, and securities

fraud in acquiring the railroad stock. Finn was mentioned by name

over 370 times in the Statement.

On September 30, 1994, at Bynum's arraignment, his counsel

informed the court that Bynum did not accept the Statement for several reasons, including the fact that "the majority of the information

contained therein is not associated with Mr. Bynum." Schiller then

filed a one-and-one-half page stipulation of facts (the "Stipulation")

as the factual predicate for Bynum's plea.1 When the court asked

Schiller why he filed both the Statement and the Stipulation, Schiller

responded that the Stipulation reflects "the essential elements for

today," while the Statement "is the government's proffer as to the

entire matter."

As a result of Schiller filing the Statement, Finn's picture appeared

on the front page of the Richmond Times Dispatch the next day under

the heading "Fraud Alleged in VRS Takeover of RF&P."2 The

Washington Post featured a similar article the same day in its front

page headlines.3 Articles referring to or quoting from the Statement

continued to appear in newspapers throughout October 1994.4 The

_________________________________________________________________

1 Finn's name does not appear in the Stipulation.

2 When Schiller filed the Statement, Bynum was the only person

charged, and the charges did not mention the VRS stock purchases.

3 The Washington Post article discussed alleged violations of state and

federal law by three senior officials of VRS: Jacqueline Epps, Mark

Finn, and Glen Pond. The article cited the Statement as the source for the

information contained therein. The article quoted from the Statement that

all three officials "sought to enrich themselves financially, reputationally,

politically and obtain business benefits for their careers."

4 A Richmond Times Dispatch article on September 27, 1994 stated that

the Statement implicated Finn. The same day, another article from the

same newspaper stated:

Now the federal government has alleged that in a scheme to

hide the VRS takeover of the RF&P, three former officials of the

 3
last newspaper article appeared on October 12, 1994 and featured a

picture of Finn with a caption under the picture that read: "The U.S.

attorney . . . alleges that Mark T. Finn . . . , president of a Virginia

Beach money-management firm and a former board member of the

[VRS], plotted with a former board chairman to have the pension fund

illegally take control of RF&P Corp." A magazine article in the

December 1994 issue of Managed Derivatives incorrectly stated that

"Mark Finn . . . pleaded guilty to charges of felony mail fraud."

Finn claims that the release of the Statement and the resulting

media coverage have harmed his reputation and his business. On

October 7, 1994, Finn filed suit alleging that because the Statement

disclosed matters occurring before the grand jury, Schiller had violated Federal Rule of Criminal Procedure 6(e) and had violated his

constitutional rights under the Fifth and Sixth Amendments. Finn

sought both preliminary and permanent injunctions to enjoin Schiller

from further violations of Rule 6(e) and from an ongoing pattern of

prosecutorial misconduct. Also, Finn requested the district court to

strike the Statement from the record in United States v. Bynum.

Finally, Finn asked the court to poll the grand jurors to determine if

they could continue deliberations in an unbiased manner. In response,

Schiller filed a motion to dismiss.

The district court heard the motions on October 20, 1994 and noted

that it had never seen a stipulation of facts, accompanying a plea, that

accused individuals of criminal activity who were not included in the

indictment. The court asked Schiller's counsel if the United States

Attorney was "initiating some new technique of in terrorem tactics in

the Eastern District of Virginia that is going to create a lot of stressors

for district judges like myself?" However, the court concluded that

without an indictment, Finn could not establish that the Statement

_________________________________________________________________

VRS -- Jacqueline Epps, Mark Finn, and Glen Pond-- broke

securities laws, mail- and wire-fraud laws, and state statutes concerning prohibitions against secret meetings, perjury, misuse of

public funds, falsification of records, and more. The document is

not an indictment, although federal prosecutors say they expect

to file criminal charges.

The newspaper articles appearing throughout October continued to discuss the charges against Finn and the others.

 4
prejudiced him and that the contempt of court remedy provided by

Rule 6(e)(2) was limited to criminal contempt. The district court dismissed Finn's complaint, finding that it lacked jurisdiction over

Finn's civil claims and that the complaint did not state a claim upon

which relief could be granted. The judge indicated that Finn could file

a motion to strike the Statement from the public record in United

States v. Bynum. On October 27, 1994, Finn filed an application to

intervene in Bynum for the limited purpose of moving to strike the

Statement. On November 2, 1994, the government filed a motion

seeking to withdraw the Statement from the Bynum record on the

ground that the Stipulation rendered the Statement superfluous. Concurrently, the government moved to dismiss Finn's motion to strike

as moot. On November 4, 1994, Finn responded to the government's

motion to dismiss and claimed that because the Statement was filed

for an improper purpose,5 the district court should strike it from the

record. On November 14, 1994, the district court granted Finn's

motion to intervene, granted the government's motion to withdraw the

Statement from the record, and found moot Finn's motion to strike.

Finn appealed the district court's final order dismissing his suit.

II.

The following issues are presented for our review:

1. Has Finn stated a claim upon which relief can be granted under

Federal Rule of Criminal Procedure 6(e) to enjoin violations of the

Rule?

2. Does the district court have the authority under its inherent

supervisory power over grand jury proceedings to entertain a suit by

a private litigant seeking civil relief?

We review questions of law de novo. Richmond, Fredericksburg &

Potomac R.R. v. United States, 945 F.2d 765, 768-69 (4th Cir. 1991),

cert. denied, 503 U.S. 984 (1992).

_________________________________________________________________

5 Finn claims that Schiller filed the Statement in an effort to pressure

him into a plea agreement. Based on the record before us, this is certainly

a reasonable conclusion.

 5
III.

The central issue in this appeal is whether Federal Rule of Criminal

Procedure 6(e) provides a civil remedy for its violation.6 Rule 6(e)(2)

provides:

General Rule of Secrecy. A grand juror, an interpreter, a

stenographer, an operator of a recording device, a typist who

transcribes recorded testimony, an attorney for the government, or any person to whom disclosure is made under paragraph (3)(A)(ii) of this subdivision shall not disclose matters

occurring before the grand jury, except as otherwise provided for in these rules. No obligation of secrecy may be

imposed on any person except in accordance with this rule.

A knowing violation of Rule 6 may be punished as a contempt of court.

At the heart of the present controversy is the last line of the Rule. We

must decide whether this language creates a private cause of action

-- that is, whether a private person who claims damage because of

a violation of this general rule of grand jury secrecy may bring an

action against a violator of the rule to enjoin such violation or any

threatened future violations and seek sanctions for contempt. We con-

_________________________________________________________________

6 Rule 6 was enacted in an effort to guard the secrecy of grand jury proceedings. The Supreme Court has consistently acknowledged the important interests that the secrecy requirements aim to protect.

First, if preindictment proceedings were made public, many prospective witnesses would be hesitant to come forward voluntarily, knowing that those against whom they testify would be

aware of that testimony. Moreover, witnesses who appeared

before the grand jury would be less likely to testify fully and

frankly, as they would be open to retribution as well as to

inducements. There also would be the risk that those about to be

indicted would flee, or would try to influence individual grand

jurors to vote against indictment. Finally, by preserving the

secrecy of the proceedings, we assure that persons who are

accused but exonerated by the grand jury will not be held up to

public ridicule.

Douglas Oil Co. v. Petrol Stops N.W., 441 U.S. 211, 219 (1979).

 6
clude that Rule 6(e)(2) does not establish a private cause of action,

but a person claiming damage as a result of a violation of the rule has

the right to call such violation to the court's attention, and the court

shall take action as hereinafter directed. Notice to the court may be

by way of petition or by letter to the district judge. See Lance v.

United States Dep't of Justice (In re Grand Jury Investigation), 610

F.2d 202, 209 (5th Cir. 1980).

Plaintiff argues that if the rule provides for civil contempt then it

follows that a private cause of action may be maintained thereunder.

Several courts have adopted this reasoning. E.g. , Lance, supra, 610

F.2d 202; Blalock v. United States, 844 F.2d 1546 (11th Cir. 1988);

and Barry v. United States, 865 F.2d 1317 (D.C. Cir. 1989). Contra

In re Grand Jury Investigation (90-3-2), 748 F. Supp. 1188 (E.D.

Mich. 1990).

We find that the question of whether this rule of grand jury secrecy

creates a private cause of action is not determined by the nature of the

contempt provided therein. The rule does not modify contempt as

being either civil or criminal or both.

In Gompers v. Buck's Stove & Range Co., 221 U.S. 418 (1911), the

United States Supreme Court held:

Contempts are neither wholly civil nor altogether criminal.

And "it may not always be easy to classify a particular act

as belonging to either one of these two classes. It may partake of the characteristics of both." But in either event, and

whether the proceedings be civil or criminal, there must be

an allegation that in contempt of court the defendant has disobeyed the order, and a prayer that he be attached and punished therefor. It is not the fact of punishment, but rather its

character and purpose, that often serve to distinguish

between the two classes of cases. If it is for civil contempt

the punishment is remedial, and for the benefit of the

complainant. But if it is for criminal contempt the sentence

is punitive, to vindicate the authority of the court. It is true

that punishment by imprisonment may be remedial as well

as punitive, and many civil contempt proceedings have

resulted not only in the imposition of a fine, payable to the

 7
complainant, but also in committing the defendant to prison.

But imprisonment for civil contempt is ordered where the

defendant has refused to do an affirmative act required by

the provisions of an order which, either in form or substance, was mandatory in its character. Imprisonment in

such cases is not inflicted as a punishment, but is intended

to be remedial by coercing the defendant to do what he had

refused to do.

Id. at 441-42 (citations omitted).

Guided by this reasoning and by the fact that Rule 6 does not modify or qualify in any way the phrase "contempt of court", we conclude

that the rule provides for both civil and criminal contempt.

If Plaintiff's allegations are true, both civil and criminal contempt

may be required to afford complete relief. Plaintiff alleges a continuing pattern of prosecutorial misconduct that includes release of grand

jury material in violation of Rule 6(e)(2). An injunction to stop further

or future release of grand jury material would be remedial and civil

in nature. However, Plaintiff also alleges that Defendant has already

violated the rule by making public the eighty-three page Statement.

If this were proved, a finding of criminal contempt would be proper

as punishment for the past violation of the rule and to vindicate the

authority of the court.

Although we find that the language of the rule provides both civil

and criminal contempt, it does not follow that the rule creates a private cause of action. A claimant may notify the court of a violation

of the rule or may petition the court to investigate an alleged violation, but such complainant may not proceed by way of a civil action

against the alleged violator. "[T]here is no such thing as an independent cause of action for civil contempt." Blalock v. United States, 844

F.2d at 1550 (citing McComb v. Jacksonville Paper Co., 336 U.S.

187, 191 (1949); and Gompers v. Buck's Stove & Range Co., supra,

221 U.S. at 441-42).

The rule by its clear language does not indicate that there is a right

of private enforcement, and we find that such a right may not be

implied. "The federal judiciary will not engraft a remedy on a statute,

 8
no matter how salutary, that Congress did not intend to provide."

California v. Sierra Club, 451 U.S. 287, 297 (1981). This reluctance

is more pronounced when one contemplates adding a remedy to a rule

of court.

Even if it may be argued that a civil remedy under Rule 6(e)(2)

would not be inconsistent with the congressional scheme, this is not

sufficient to justify a court-created cause of action where Congress

has not affirmatively indicated that it intended such. Federal Savings

& Loan Ins. Corp. v. Reeves, 816 F.2d 130, 138 (4th Cir. 1987).

In Cort v. Ash, 422 U.S. 66 (1975), the Supreme Court established

the preferred approach for determining whether a private right of

action should be implied from a federal statute. The Court listed four

factors to be considered:

First, is the plaintiff "one of the class for whose especial

benefit the statute was enacted," -- that is, does the statute

create a federal right in favor of the plaintiff? Second, is

there any indication of legislative intent, explicit or implicit,

either to create such a remedy or to deny one? Third, is it

consistent with the underlying purposes of the legislative

scheme to imply such a remedy for the plaintiff? And

finally, is the cause of action one traditionally relegated to

state law, in an area basically the concern of the states, so

that it would be inappropriate to infer a cause of action

based solely on federal law?

Id. at 78 (citations omitted).

Cases subsequent to Cort have explained that the ultimate issue is

whether Congress intended to create a private right of action,

Universities Research Ass'n, Inc. v. Coutu, 450 U.S. 754, 771-72

(1981); but the four factors specified in Cort remain the test to determine congressional intent. Davis v. Pasman, 442 U.S. 228, 241

(1979).

A consideration of the first two Cort factors is dispositive. The language of the rule does not suggest that Congress intended to create

 9
a federal right for the special benefit of a class of persons; rather, the

rule was established to protect the grand jury process and to codify

"a practice the district courts had been following for eighty years."

Blalock, 844 F.2d at 1556 (Tjoflat, J., specially concurring).

Under the second step of the analysis, there is no evidence that

Congress anticipated that there would be a private remedy. Therefore,

it is unnecessary to inquire further because factors three and four are

only relevant "if the first two factors give indication of congressional

intent to create the remedy." California v. Sierra Club, 451 U.S. at

298.

Our decision that Finn may not bring a private action under Rule

6 does not preclude the district court from granting relief. To the contrary, once an alleged Rule 6(e)(2) violation is brought to the court's

attention, it is the district court's duty to investigate the matter and

impose contempt sanctions when it finds a violation has occurred.

Because the victim of a breach of grand jury secrecy cannot bring suit

on his or her own behalf, the district court has an inherent duty to preserve the integrity of Rule 6 by instituting contempt proceedings

when presented with a prima facie case of a violation. The United

States Attorney has a similar duty to preserve the integrity of the Rule

and to act promptly when he has information of a violation.7

At first glance, criminal contempt may appear to be a harsh remedy, but compromising grand jury secrecy is a serious matter. It can

endanger the lives of witnesses and law enforcement officers and

undermine the grand jury system. Courts must not tolerate violations

of Rule 6(e) by anyone, especially United States Attorneys who, as

alleged in this case, may do so in an effort to pressure a target into

a plea agreement. Overzealous prosecutors must not be allowed to file

sweeping statements of fact alleging violations of various laws by

_________________________________________________________________

7 In order to establish a prima facie case of a Rule 6(e) violation, the

complainant must show that (1) information was knowingly disclosed

about "matters occurring before the grand jury," and (2) the source of the

information is a person subject to Rule 6(e). If the allegations contained

in the eighty-three page Statement are "matters occurring before the

grand jury," it would appear that a prima facie case is present, as Schiller

is a person subject to the Rule.

 10
unindicted individuals. A primary purpose of Rule 6 is to protect the

unindicted, and the United States Attorney has a duty to protect the

innocent as well as to prosecute those indicted by the grand jury.

The Rule is intended to protect grand jury secrecy, and one of the

purposes of grand jury secrecy is to "assure that persons who are

accused but exonerated by the grand jury will not be held up to public

ridicule." Douglas Oil, 441 U.S. at 219. We hold that upon a prima

facie showing to the district court of an alleged Rule 6(e) violation,

the court must take appropriate steps to determine whether a violation

has occurred. If the court finds that a violation has, in fact, occurred,

the court should take appropriate action to prevent further violations

and to sanction the violator as provided by the Rule.

IV.

Next, we turn to Finn's assertion that, independent of any statutory

authority, the district court retains jurisdiction over his private action

pursuant to the court's inherent supervisory power over grand jury

proceedings.

Schiller maintains that the Fourth Circuit should decline to consider Finn's argument that the district court's inherent supervisory

authority is a basis for jurisdiction, because Finn never pursued this

issue in the district court. However, a review of the pleadings reveals

that Finn cites, as a basis for jurisdiction, the"inherent authority of

this court to supervise grand jury proceedings." In addition, Finn

raised the issue in his brief in support of his petition to strike the

Statement and to have the court interview the grand jurors to determine if they could continue deliberations in an unbiased manner. We

find that Finn adequately presented the issue to the district court.

In United States v. Shaffer Equip. Co., 11 F.3d 450 (4th Cir. 1993),

this court recognized:

Due to the very nature of the court as an institution, it

must and does have an inherent power to impose order,

respect, decorum, silence, and compliance with lawful mandates. This power is organic, without need of a statute or

 11
rule for its definition, and it is necessary to the exercise of

all other powers. Because the inherent power is not regulated by Congress or the people and is particularly subject

to abuse, it must be exercised with the greatest restraint and

caution, and then only to the extent necessary.

Id. at 461-62 (citations omitted). Additionally, in Chambers v.

NASCO, Inc., 501 U.S. 32, 50 (1991), the Supreme Court noted that

when there is bad-faith conduct in the course of litigation

that could be adequately sanctioned under the Rules, the

court ordinarily should rely on the Rules rather than the

inherent power. But if in the informed discretion of the

court, neither the statute nor the Rules are up to the task, the

court may safely rely on its inherent power.

The district court's inherent supervisory power over grand jury

proceedings is sufficient for it, upon proper proof, to impose either

civil or criminal contempt sanctions because its inherent powers are

not proscribed by Rule 6.8 However, the court's supervisory power

does not authorize a private cause of action because such power is

vested in the court, and only the court may invoke it.

V.

Finally, we turn to Finn's assertion that the district court has jurisdiction over his complaint directly under the Fifth Amendment. Finn

argues that the Due Process Clause of the Fifth Amendment guarantees that he will not be charged with criminal misconduct by a U. S.

Attorney or by a grand jury absent a proper indictment, and he claims

that the district court erred in dismissing his complaint for lack of

subject matter jurisdiction because the district court has "original

_________________________________________________________________

8 Rule 6(e)(2) states in part,"No obligation of secrecy may be imposed

on any person except in accordance with this rule." However, 18 U.S.C.

§ 401 gives the court authority to punish"misbehavior of any of its officers in their official transactions." The Assistant United States Attorney

is an officer of the court, and if he did what has been alleged in the present case, it would certainly qualify as "misbehavior" and subject him to

punishment under § 401.

 12
jurisdiction of all civil actions arising under the Constitution, laws or

treaties of the United States." 28 U.S.C. § 1331 (1988).

In response, Schiller asserts that Finn did not request relief based

upon alleged due process violations, but rather limited his request for

relief to alleged violations of Rule 6(e). Therefore, Schiller argues, we

should not consider this jurisdictional claim because it was not raised

below. Under a liberal reading of the complaint, one might find a constitutional question presented, and Finn did mention due process in

his argument and in his brief before the district court, but the district

judge did not mention this claim of jurisdiction in his ruling. Because

this matter is being remanded, we will not consider the due process

claim and allow the district court the opportunity to first consider it.

For the foregoing reasons, we find that the district court correctly

dismissed Finn's complaint under Rule 12(b)(6) because neither Rule

6(e)(2) nor the district court's inherent power creates or provides a

private cause of action for its enforcement. However, we find that the

district court has a duty to protect the integrity of grand jury proceedings. Upon remand, the district court must investigate the matter to

determine whether the information contained in the statement violates

Rule 6(e)(2). If so, the court shall impose such sanctions as it may

find appropriate. Additionally, the district court may, under its inherent power impose either civil or criminal contempt sanctions if it

finds that sanctions under Rule 6(e)(2) are not appropriate. Also, the

district court shall, on remand, consider Finn's claim of jurisdiction

for denial of due process. Consequently, the district court's order is

AFFIRMED BUT REMANDED FOR FURTHER

PROCEEDINGS CONSISTENT WITH THIS OPINION.

 13