Opinion ID: 684066
Heading Depth: 2
Heading Rank: 2

Heading: The San Jacinto Subpoena

Text: 13 In considering Grant Thornton's challenge to the San Jacinto subpoena, we first must decide whether Grant Thornton's arguments are foreclosed--as the RTC vociferously contends they are--by our recent decision in Linde Thomson. In Linde Thomson, a law firm challenging enforcement of an RTC subpoena argued, inter alia, that the RTC's filing of a civil complaint terminated the agency's investigation into the existence of legal claims and the cost-effectiveness of filing suit, and, therefore, also mooted a subpoena issued in furtherance of that investigation. 5 F.3d at 1517. We rejected that argument for two reasons. First, we referred to our conclusion, reached earlier in the opinion, that two of the subpoena's investigative purposes--determining whether the RTC should seek to avoid the transfer of interests or incurrence of obligations, and determining whether the RTC should seek to attach assets--remained viable even after civil proceedings began. 5 Id. at 1517-18. Second, we found that the statute authorizing RTC investigations [does not] contemplate the termination of investigative authority upon the commencement of civil proceedings. Id. at 1518. The RTC argues that here, as in Linde Thomson, the purpose that animated the subpoena when it issued in November 1992--i.e., determining the cost-effectiveness of contemplated litigation--continues to justify enforcement. In the RTC's view, the fact that suit subsequently has been filed is mere happenstance. We disagree. 14 We perceive an important difference between this case and Linde Thomson. Unlike the subpoena at issue in Linde Thomson, the only purpose served by the San Jacinto subpoena is the determination whether pursuing litigation would be cost-effective. While we recognized in Linde Thomson that the RTC continues to exercise investigative authority after the commencement of civil proceedings, we did so only after finding that two of the subpoena's purposes, both related to uncovering further wrongdoing by the subpoena recipient, remained viable after suit was filed. See Walde, 18 F.3d at 950 (characterizing Linde Thomson as enforcing subpoena after commencement of civil proceedings because ongoing investigation might reveal information to underpin further charges). The very fact that we relied on these continuing investigative purposes to affirm the district court's enforcement order strongly suggested that the purpose of ascertaining the cost-effectiveness of litigation could not sustain the subpoena after civil proceedings began. Thus, while our Linde Thomson decision does establish that the commencement of civil proceedings fails to extinguish a subpoena supported by viable investigative purposes, it does not establish that ascertaining the cost-effectiveness of suit is such a purpose. 15 We now make clear what was implicit in Linde Thomson: the purpose of ascertaining the cost-effectiveness of pursuing litigation terminates once suit is filed. Indeed, there is a fundamental illogic to the RTC's argument that it requires Grant Thornton's financial and insurance information to determine the cost-effectiveness of pursuing litigation after litigation has begun. By filing suit against Grant Thornton, the RTC has made known its conclusion that such litigation is likely to be cost-effective. Enforcement of the subpoena at this juncture would serve only to allow the RTC to monitor the cost-effectiveness of its ongoing lawsuit. 6 The RTC cites no case, and we know of none, to support such an unprecedented use of the administrative subpoena power. 16 Nor can we discern any grant of authority in the FIRREA to subpoena documents for this purpose. The RTC emphasizes that the FIRREA authorizes it to issue subpoenas in furtherance of any power, authority, or duty under the statute, 12 U.S.C. Sec. 1821(d)(2)(I)(i), and that such duties include maximiz[ing] the net present value return from the sale ... of ... assets of [failed savings] institutions, mak[ing] efficient use of funds obtained from the ... Treasury, and minimiz[ing] the amount of any loss realized in the resolution of cases, 12 U.S.C. Sec. 1441a(b)(3)(C)(i), (iii), (iv). However, while the scope of this statutory language is broad, it also is general. We find it unreasonable to construe this general language to confer such an unprecedented power. We must emphasize that a subpoena is a tool of investigation. To construe the FIRREA to authorize the use of such a tool to monitor the cost-effectiveness of ongoing litigation would be to impute to Congress the intent to bestow a power that conflicts with two long-standing principles limiting the use of legal process to investigate, and discover. 17 First, the RTC's asserted authority conflicts with the general principle that an investigation terminates once suit has been filed. Because an administrative agency's subpoena power is analogous to that of a grand jury, see Morton Salt Co., 338 U.S. at 642-43, 70 S.Ct. at 363-64; Walling, 327 U.S. at 216, 66 S.Ct. at 509, the law governing grand juries provides a particularly apt illustration of this principle. While a grand jury wields broad investigatory powers prior to returning an indictment, courts uniformly have held that, [o]nce a targeted individual has been indicted, the government must cease its use of the grand jury in preparing its case for trial. United States v. Phibbs, 999 F.2d 1053, 1077 (6th Cir.1993), cert. denied, --- U.S. ----, ----, 114 S.Ct. 1070-71, 127 L.Ed.2d 389 (1994); see also, e.g., United States v. Badger, 983 F.2d 1443, 1458 (7th Cir.), cert. denied, --- U.S. ----, 114 S.Ct. 76, 126 L.Ed.2d 44 (1993); United States v. Jenkins, 904 F.2d 549, 559 (10th Cir.), cert. denied, 498 U.S. 962, 111 S.Ct. 395, 112 L.Ed.2d 404 (1990); United States v. Vanwort, 887 F.2d 375, 387 (2d Cir.1989), cert. denied, 495 U.S. 906, 110 S.Ct. 1927, 109 L.Ed.2d 290 (1990), and cert. denied, 495 U.S. 910, 110 S.Ct. 1936, 109 L.Ed.2d 299 (1990); In re Grand Jury Proceedings (Diamante), 814 F.2d 61, 70 (1st Cir.1987); United States v. Moss, 756 F.2d 329, 332 (4th Cir.1985); In re Grand Jury Proceedings (Johanson), 632 F.2d 1033, 1041 (3d Cir.1980); United States v. Sellaro, 514 F.2d 114, 122 (8th Cir.1973), cert. denied, 421 U.S. 1013, 95 S.Ct. 2419, 44 L.Ed.2d 681 (1975); United States v. Star, 470 F.2d 1214, 1217 (9th Cir.1972); Beverly v. United States, 468 F.2d 732, 743 (5th Cir.1972); 2 SARA S. BEALE & WILLIAM C. BRYSON, GRAND JURY LAW AND PRACTICE Sec. 10:15 (1986) (It is universally recognized that it is improper to use the grand jury for the purpose of preparing an already pending indictment for trial.); PAUL S. DIAMOND, FEDERAL GRAND JURY PRACTICE AND PROCEDURE Sec. 4.01[C] (1991 Supp.) (stating that most common misconduct associated with grand jury investigations is the abuse of the jury to gather evidence for a pending indictment). Although an exception to this rule allows the Government to continue to employ the grand jury process as part of an ongoing investigation, possibly leading to further charges against the subject of the former indictment, Phibbs, 999 F.2d at 1077, this exception embodies nothing more than the criminal law analogue to the principle we recognized in Linde Thomson--i.e., that an agency's investigative powers survive the commencement of litigation where the agency seeks to uncover additional wrongdoing. However, the more far-reaching power asserted by the RTC here--a power that effectively would allow the RTC to use subpoenas in aid of ongoing litigation--is utterly foreign to the law defining the traditional scope of investigative authority. 18 The RTC's asserted power also conflicts with well-established limits on a litigant's ability to discover an adversary's financial and insurance information. The federal discovery rules generally prohibit a litigant from discovering an opponent's assets until after a judgment against the opponent has been rendered. FTC v. Turner, 609 F.2d 743, 745 (5th Cir.1980); accord Sanderson v. Winner, 507 F.2d 477, 479-80 (10th Cir.1974), cert. denied, 421 U.S. 914, 95 S.Ct. 1573, 43 L.Ed.2d 780 (1975); RTC v. Feffer, 793 F.Supp. 11, 14 (D.D.C.1992); cf. FED.R.CIV.P. 69(a) (allowing discovery in aid of judgment). With regard to an opponent's insurance information, the Federal Rules of Civil Procedure specifically provide for disclosure only of any insurance agreement under which any person carrying on an insurance business may be liable to satisfy part or all of a judgment which may be entered in the action or to indemnify or reimburse for payments made to satisfy the judgment. FED.R.CIV.P. 26(a)(1)(D). The RTC's claimed power would enable it to evade both of these limitations. Even after unilaterally restricting the scope of its San Jacinto subpoena, the agency still seeks a broad variety of information from Grant Thornton to which it would have no right under the discovery rules. For example, the RTC continues to seek all of Grant Thornton's professional liability or malpractice policies; all of Grant Thornton's agreements of self-insurance, co-insurance, or re-insurance; and documentation detailing Grant Thornton's remaining coverage under such policies or agreements from January 1, 1983, to the present. See Brief of Appellee RTC at 4. Such information is well outside the bounds of the disclosure required by Rule 26(a)(1)(D). We see no reason to accord such special treatment to the agency once litigation has begun. The Supreme Court has stated that [t]he Government as a litigant is ... subject to the rules of discovery, United States v. Procter & Gamble Co., 356 U.S. 677, 681, 78 S.Ct. 983, 986, 2 L.Ed.2d 1077 (1958), and we find no evidence that Congress meant to discard this principle through its general pronouncements in the FIRREA. 19 We recognize, as the RTC points out, that we have on several occasions held that a prospective conflict between an administrative subpoena and the civil discovery rules provides no basis for refusing to comply with the subpoena. See Walde, 18 F.3d at 950 (If information is wrongly obtained through an administrative subpoena and used in a subsequent civil or criminal proceeding, the subpoenaed party remains free to challenge the use of the information in the appeal from that proceeding.) (internal quotations omitted); see also Linde Thomson, 5 F.3d at 1518 n. 8; Office of Thrift Supervision v. Dobbs, 931 F.2d 956, 959 (D.C.Cir.1991). However, we are here concerned not with the question of whether to invalidate a subpoena based on the potential for circumvention of the discovery rules, but rather with what motives may reasonably be imputed to the Congress that enacted the FIRREA. In conducting a similar inquiry under the FIRREA inWalde, 18 F.3d at 948-49, we found personal privacy interests protected by the Fourth Amendment to preclude any interpretation of the statute that would allow the RTC to peruse the personal papers of individuals in the absence of an articulable suspicion of wrongdoing. We reached this conclusion despite the fact that the Fourth Amendment generally presents little obstacle to the enforcement of administrative subpoenas. See Walling, 327 U.S. at 208, 66 S.Ct. at 505 (stating that Fourth Amendment, if applicable [to administrative subpoenas], at the most guards against abuse only by way of too much indefiniteness or breadth in the things required to be 'particularly described,' if also the inquiry is one the demanding agency is authorized by law to make and the materials specified are relevant). Similarly, here, while a conflict with the clear limits imposed by the discovery rules does not by itself invalidate the subpoena, it does inform our assessment of whether Congress intended to grant the RTC such an unprecedented subpoena power through the FIRREA. Having found nothing in the statute to support the power urged by the RTC, and having found that such a power would conflict with two well-established principles of federal law, we hold that the FIRREA confers no power on the RTC to subpoena information for the purpose of ascertaining the cost-effectiveness of litigation after the agency files suit against the subpoena recipient. 20 If cost-effectiveness is a relevant purpose and there is a legitimate basis for obtaining information relevant to that purpose in conjunction with a given investigation, the RTC has ample time to secure the information before filing suit. The RTC has suggested that the statute of limitations governing its claims sometimes forces it to file suit before completing an assessment of the cost-effectiveness of litigation. We find no basis for this claim. From the time the RTC is appointed to act as the receiver for a failed financial institution, the agency generally has three years to file tort claims on behalf of the institution. See 12 U.S.C. Sec. 1821(d)(14)(A)(ii)(I) (Supp. V 1993). District courts typically take up the RTC's enforcement motions without delay. In this case, for example, the District Court ordered enforcement of the subpoenas within two months after the RTC filed its enforcement action. It seems clear that in the vast majority of cases, the RTC can obtain the information necessary to make its cost-effectiveness determinations before it is required to file suit. 7