Opinion ID: 2646723
Heading Depth: 3
Heading Rank: 1

Heading: Origins and Interpretations

Text: The act of production privilege contains exceptions, and among them is the required records doctrine, first articulated in Shapiro v. United States, 335 U.S. 1 (1948). The required records exception applies only when the Fifth Amendment privilege would otherwise allow a witness to avoid producing incriminating documents. It abrogates the protection of the privilege for a subset of those documents that must be maintained by law. Shapiro was a prosecution of a fruit purveyor for illegal pricing under the Emergency Price Control Act during the Second World War. Id. at 3. Shapiro, the wholesaler, was served with a subpoena in September 1944 for invoices and 9 other business information “required to be kept pursuant to [Section 14 of Maximum Price Regulation 426, 8 Fed. Reg. 9546 (1943)] 271 and 426.” Id. at 4‐5. Although the Court acknowledged “that there are limits which the government cannot constitutionally exceed in requiring the keeping of records which may be . . . used in prosecuting statutory violations committed by the record‐keeper himself,” the Court nonetheless compelled un‐immunized disclosure of these documents. Id. at 32. Subsequently, the Court set forth a three‐factor test to determine whether documents are “required records.” “[F]irst, the purposes of the United Statesʹ inquiry must be essentially regulatory; second, information is to be obtained by requiring the preservation of records of a kind which the regulated party has customarily kept; and third, the records themselves must have assumed ‘public aspects’ which render them at least analogous to public documents.” Grosso v. United States, 390 U.S. 62, 67‐68 (1968). In Grosso’s sister case, the Court applied the three‐factor test to find the required records exception inapplicable. Marchetti v. United States, 390 U.S. 39 (1968). Marchetti asserted his Fifth Amendment privilege in response to a prosecution under a statutory scheme that required illegal gamblers to register 10 and pay an occupational tax. Id. at 41 (1968); see also Grosso, 390 U.S. at 64. Marchetti was not inclined to disclose his illegal gambling for good reason. By maintaining receipts of his illegal gambling successes (or failures) he admitted to a crime. Those who break the law understandably are unlikely to register their misdeeds with the government. Even assuming that the “United States’ principal interest [was] the collection of revenue, and not the punishment of gamblers,” the Court found that Shapiro was distinguishable. Marchetti, 390 U.S. at 57. The records were not “of the same kind as he has customarily kept;”3 there were no “public aspects . . . to the records at issue;” and the records were collected about a group largely or entirely defined by their illegal activities. Id. (internal quotation marks omitted); see also Grosso, 390 U.S. at 68 (deciding the same thing in the context of a gambler’s refusal to pay excise taxes and the occupation tax because “[h]ere, as in Marchetti, the statutory obligations are directed almost exclusively to individuals inherently suspect of criminal activities”). Marchetti’s refusal to comply with the 3 Indeed, it seems plausible that a gambler would not keep any records relating to his gambling activities. The Court needed only to note that the information required was “unrelated to any records which [Marchetti] may have maintained[] about his wagering activities.” Marchetti, 390 U.S. at 57. 11 statute was protected by the Fifth Amendment and not subject to the required records exception. Id. at 60. His conviction was overturned. 2. Interaction with the act of production privilege Doe and amicus contend that the required records doctrine is no longer valid or that it applies only in exigent circumstances. To support this argument, they point out that Shapiro was a wartime case that drew heavily on the reasoning of Boyd v. United States, 116 U.S. 616 (1886), which has been either reconfigured or abrogated by the Fisher line of cases. Prior precedents of this Court squarely foreclose this argument. Courts have consistently applied the required records doctrine and its analytical framework as an exception to the Fifth Amendment privilege, long after the expiration of any exigency. See, e.g., Baltimore City Dep’t of Social Servs. v. Bouknight, 493 U.S. 549, 556‐559 (1990). This Court has twice explicitly rejected the idea that the required records exception has been abrogated by the act of production cases. In re Two Grand Jury Subpoenae Duces Tecum Dated Aug. 21, 1985, 793 F.2d 69, 73 (2d Cir. 1986) (“Two Subpoenae”); In re Doe, 711 F.2d 1187, 1192‐93 (2d Cir. 1983). 12 A psychiatrist associated with a clinic that freely distributed quaaludes to patients without medical need was required to turn over subpoenaed W‐2 and prescription forms along with patient files. In re Doe, 711 F.2d at 1189. Conceding that “even Shapiro recognizes constitutional limits on the government’s power to compel record keeping which might circumvent the privilege contained in the Fifth Amendment,” we held that “there [wa]s a strong correlation between the purpose of the New York law which require[d] that patient files be kept and that for which their production [wa]s sought.” Id. at 1192. Finally, we rejected the argument that the act of production privilege recognized in Fisher shielded the state‐required records from disclosure: [T]he required records doctrine is an exception to the Fifth Amendment privilege. As such, it necessarily overrides the privilege in instances in which the privilege would otherwise apply. Fisher was not concerned with required records and nothing in its analysis could be construed as weakening the required records exception. Id. at 1192‐93 (emphasis in original, internal citations omitted). Three years later, an attorney appealed a contempt order entered because of his failure to comply with subpoenas related to contingency fee arrangements with his clients. Two Subpoenae, 793 F.2d at 70. After noting that the fee documents were not covered by the attorney‐client privilege, this Court rejected 13 the lawyer’s Fifth Amendment argument based in part on the fact “that the subpoenaed retainer agreements and closing statements . . . fall within the ‘required records’ exception to the fifth amendment.” Id. at 73. Although the lawyer “claim[ed] that the ‘required records’ exception to the fifth amendment is no longer valid after the Supreme Court’s decision in United States v. Doe, 465 U.S. 605 [(1984)],” we noted that “Doe did not involve required records, and [found] nothing in its ‘act of production’ analysis that c[ould] be construed as weakening the required records exception.” Id. (internal citation omitted). We further explained the rationale for the required records exception: First, if a person conducts an activity in which record‐keeping is required by statute or rule, he may be deemed to have waived his privilege with respect to the act of production – at least in cases in which there is a nexus between the government’s production request and the purpose of the record‐keeping requirement. Second, because the records must be kept by law, the record‐holder ‘admits’ little in the way of control or authentication by producing them. Two Subpoenae, 793 F.2d at 73.4 4 Doe argues that the rationale for the survival of the required records doctrine does not apply in his case. However, we view this argument as relating to the applicability of the exception to his current case. Insofar as his attempt to distinguish Two Subpoenae challenges the continued existence of the required records exception, this argument has been squarely foreclosed by our prior precedents. 14 Based in part on the Two Subpoenae reasoning, this Court still recognizes the required records exception. In 2008, we applied the exception to information obtained from immigrants from specified countries who had responded to a mandatory registration program following the attacks of September 11, 2001. See Rajah v. Mukasey, 544 F.3d 427, 433, 442 (2d Cir. 2008). Information obtained under this program was ultimately used by the government in the immigrants’ deportation proceedings. This Court denied the immigrants’ attempts to block the use of the records through the Fifth Amendment because “the Fifth Amendment’s act of production privilege does not cover records that are required to be kept pursuant to a civil regulatory regime.” Id. at 442. The required records exception remains a part of Fifth Amendment jurisprudence. B. Application of the Required Records Doctrine to the BSA Applying the Grosso test, several circuits have specifically held that the required records exception applies to cases indistinguishable from the present cases. See United States v. Under Seal, – F.3d —, No. 13‐4267 (4th Cir. Dec. 13, 2013); In re Grand Jury Proceedings, No. 4‐10, 707 F.3d 1262 (11th Cir. 2013); In re Grand Jury Subpoena, 696 F.3d 428 (5th Cir. 2012); In re Special February 2011‐1 Grand Jury Subpoena Dated September 12, 2011, 691 F.3d 903 (7th Cir. 2012); In re 15 M.H., 648 F.3d 1067 (9th Cir. 2011). For the reasons stated below, we agree with our sister circuits. 1. The “essentially regulatory” test The first Grosso prong asks whether the record requirement is “essentially regulatory.” This precludes Congress from circumventing the Fifth Amendment privilege by enacting comprehensive legislation “directed at a ‘selective group inherently suspect of criminal activities.’” Marchetti, 390 U.S. at 57 (quoting Albertson v. Subversive Activities Control Bd., 382 U.S. 70, 79 (1965)). When legislation is not “directed at the public at large” and concerns “an area permeated with criminal statutes,” courts are more likely to hold that the required records exception does not apply. Albertson, 382 U.S. at 79. In addition to illegal gambling, courts have declined to apply the required records exception to records regarding marijuana sales, ownership of dangerous firearms, and other “area[s] permeated with criminal statutes,” Haynes v. United States, 390 U.S. 85, 99 (1968) (internal quotation marks omitted), but have applied the exception in the context of drivers involved in automobile accidents, custodians of state‐ supervised children, and even various sections of the BSA. 16 Determining the target population of a statute is frequently difficult. In California v. Byers, 402 U.S. 424, 430 (1971), the Supreme Court examined a California statute in the context of “all persons who drive automobiles in California,” despite the statute’s facial applicability only to people who have been involved in automobile accidents resulting in damage to property. Id. “Driving an automobile, unlike gambling, is a lawful activity. Moreover, it is not a criminal offense under California law to be a driver ‘involved in an accident.’” Id. at 431. Similarly, this Court upheld a conviction under the BSA for failure to report carrying over $5,000 in cash when leaving the country. United States v. Dichne, 612 F.2d 632, 633 (2d Cir. 1979). We noted that the reporting requirement had incriminating potential while also serving legitimate social interests; as a result, “a balance must be struck between the competing interest of the state and the individual when evaluating the constitutionality of a disclosure requirement.” Id. at 638 (citing Byers, 402 U.S. at 427). Because “the transportation of such amounts of currency is by no means an illegal act” in itself, “as such [the statute] cannot be faulted as being aimed at an inherently suspect group.” Id. at 639‐40. “In each of the Supreme Court cases holding a reporting 17 requirement invalid, the reporting individual was required to reveal to the Government information which would almost necessarily provide the basis for criminal proceedings against him for the very activity that he was required to disclose.” Id. at 640. Insofar as transporting large amounts of money across international borders is indicative of other illegal activity, this is still short of requiring reporting from users of marijuana or gamblers, who would be reporting the exact activity for which they would be susceptible for prosecution. Dichne and other cases concluding that the BSA’s purpose is “essentially regulatory” are informative but not dispositive with respect to the provisions at issue here. Our inquiry is not whether the BSA as a whole was motivated by civil or criminal concerns, but rather whether the specific section in question is “essentially regulatory” or directed at “‘an area permeated with criminal statutes.’” Byers, 402 U.S. at 430 (quoting Albertson, 382 U.S. at 79). The record keeping regulation at issue here, 31 C.F.R. § 1010.420, targets those engaged in the lawful activity of owning a foreign bank account. “There is nothing inherently illegal about having or being a beneficiary of an offshore foreign bank account.” M.H., 648 F.3d at 1074. Doe’s protestations notwithstanding, owners of these accounts are not “inherently suspect” and the statute is “essentially regulatory.” 18 Doe’s argument that the statute is criminally focused has some force. The BSA declares that its purpose is “to require certain reports or records where they have a high degree of usefulness in criminal, tax, or regulatory investigations or proceedings, or in the conduct of intelligence or counterintelligence activities, including analysis, to protect against international terrorism.” 31 U.S.C. § 5311. It does list “criminal investigations” first, but this multifaceted statute clearly contributes to civil and intelligence efforts wholly unrelated to any criminal purpose.5 5 Doe points out that the Treasury Department’s Financial Crimes Enforcement Network (FinCEN) lists the BSA as one of the tools that it uses to pursue its goals of criminal investigation. It is neither surprising nor persuasive that a law enforcement organization uses a multi‐purposed statute for law enforcement ends. We assume that insofar as the Central Intelligence Agency uses the BSA, it uses it for intelligence and counter‐intelligence purposes, while the Internal Revenue Service uses it for revenue collection purposes. Doe asserts that “[t]he government has never pointed to a ‘regulatory’ act that FinCEN performs with FBAR [Report of Foreign Bank and Financial Account] data.” Doe Brief at 35. However, other agencies also use the data obtained through the challenged reports: The Treasury Department shares the information it collects pursuant to the Act’s requirements with other agencies—including the Office of the Comptroller of the Currency, the Consumer Financial Protection Bureau, the Federal Reserve Board, the Federal Deposit Insurance Corporation, the National Credit Union Administration, and the Office of Thrift Supervision—none of which are empowered to bring criminal prosecutions. Grand Jury Proceedings, No. 4‐10, 707 F.3d at 1271 (quoting Grand Jury Subpoena, 696 F.3d at 434). 19 Although portions of the statute’s legislative history support Doe’s characterization of the BSA as focused on criminal activity, “[t]he Supreme Court has already considered and rejected these arguments as they relate to the BSA generally.” M.H., 648 F.3d at 1074 (citing Cal. Bankers’ Ass’n v. Shultz, 416 U.S. 21, 76‐77 (1974)). Moreover, “the question is not whether Congress was subjectively concerned about crime when enacting the BSA’s recordkeeping and reporting provisions, but rather whether these requirements apply exclusively or almost exclusively to people engaged in criminal activity.” Grand Jury Proceedings, No. 4‐ 10, 707 F.3d at 1271; accord Grand Jury Subpoena, 696 F.3d at 434. Looking beyond “Congressional subjective intent” – if there could be such a thing – the BSA has considerable regulatory utility outside of the criminal justice context. The question becomes whether a statute with mixed criminal and civil purposes can be “essentially regulatory” with respect to the required records exception. We agree with our sister circuits: the fact “[t]hat a statute relates both to criminal law and to civil regulatory matters does not strip the statute of its status as ‘essentially regulatory.’” Grand Jury Proceedings, No. 4‐10, 707 F.3d at 1270. Because people owning foreign bank accounts are not inherently guilty of criminal activity, the BSA’s applicable recordkeeping requirement, designed to 20 facilitate “criminal, tax, or regulatory investigations or proceedings, or [] the conduct of intelligence or counterintelligence activities,” 31 U.S.C. § 5311, is still essentially regulatory. Doe argues that our reliance on Dichne and other cases involving ex post challenges to the validity of statutory reporting requirements are distinguishable from individual assertions of the privilege against self‐incrimination. These two categories of challenges are indeed distinct. However, Supreme Court precedent asks us to inquire into the purposes of the regulatory scheme pursuant to which records are required – a necessarily generalized inquiry, and a matter discussed in cases like Dichne. 612 F.2d at 640. Besides, in this case – as in Shapiro itself – the witness asserted the privilege against self‐incrimination in response to the subpoena issued. See Shapiro, 335 U.S. at 4‐5. “Shapiro did more than set the constitutional parameters for record‐keeping requirements; it determined that the Fifth Amendment is not a barrier to the enforcement of a valid civil regulatory scheme.” Special February 2011‐1 Grand Jury Subpoena Dated September 12, 2011, 691 F.3d at 907. The fact that the specific records sought would support a criminal prosecution did not defeat the “essentially regulatory” prong in that case; the analysis does not come out differently here. The BSA’s recordkeeping 21 requirement at issue, 31 C.F.R. § 1010.420, is “essentially regulatory” for the purposes of the required records analysis.