Opinion ID: 3015065
Heading Depth: 1
Heading Rank: 1

Heading: The Enforcement Orders

Text: The District Court had jurisdiction over the subpoena enforcement proceedings under section 9 of the Federal Trade Commission Act, 15 U.S.C. § 49, as made applicable by section 504(c) of the Employee Retirement Income Security Act (“ERISA”), 29 U.S.C. § 1134(c), and section 502(e)(1) of ERISA, 29 U.S.C. § 1132(e)(1). District court orders enforcing administrative subpoenas are final and appealable under 28 U.S.C. § 1291 because “‘there is no ongoing judicial proceeding that would be delayed by an appeal.’” Univ. of Med. & Dentistry of N.J. v. Corigan, 347 F.3d 57, 63 (3d Cir. 2003) (quoting In re Subpoena Duces Tecum, 228 F.3d 341, 346 (4th Cir. 2000)). Respondents challenge both of the District Court’s enforcement orders. First, they argue that District Court’s grant of DOL’s Petition to Enforce Administrative Subpoenas in its May 11 Order was improper. Second, they dispute the District Court’s rejection of their privilege claims in its August 23 Order. We address each of these issues in turn. 3 A. The District Court’s Order Enforcing the Administrative Subpoenas We review a district court’s order enforcing administrative subpoenas for abuse of discretion. FDIC v. Wentz, 55 F.3d 905, 908 (3d Cir. 1995). The procedure for enforcing administrative subpoenas is well established. First, the agency must demonstrate, through affidavits of its agents, that its subpoena meets the threshold requirements for enforcement, SEC v. Wheeling-Pittsburgh Steel Corp., 648 F.2d 118, 128 (3d Cir. 1981) (en banc): “(1) the inquiry must be within the authority of the agency, (2) the demand for production must not be too indefinite, and (3) the information sought must be reasonably relevant to the authorized inquiry.” United States v. Westinghouse Elec. Corp., 638 F.2d 570, 574 (3d Cir. 1980). “If the government makes this preliminary showing, the burden then shifts to the respondent to prove that enforcement of the subpoena would be improper . . . .” Wheeling-Pittsburgh, 648 F.2d at 128. Enforcement of a subpoena is improper where it would amount to an abuse of the court’s process. Powell v. United States, 379 U.S. 49, 58 (1964). “Such an abuse would take place if the [subpoena] had been issued for an improper purpose, such as to harass the [respondent] or to put pressure on him to settle a collateral dispute, or for any other purpose reflecting on the good faith of the particular investigation.” Id. After each party has had an opportunity to argue its position, the District Judge may direct further proceedings, including discovery, if she concludes that the record is inadequate to make a final decision. On the other hand, if the judge finds that the record is sufficient, she may grant 4 or deny the petition for enforcement. At all times during this procedure, the respondent “bear[s] the initial burden of convincing the trial judge that the claimed abuse of process is not frivolous.” Wheeling-Pittsburgh, 648 F.2d at 128. Respondents raise three main objections to the District Court’s enforcement of DOL’s subpoenas. First, they argue that the District Court improperly relied on “conclusory” statements to find that the subpoenas satisfied the threshold enforcement criteria. Second, they contend that the District Court applied the wrong standard in evaluating their claim that DOL’s investigation was improperly motivated. Third, they assert that the District Court erred in refusing to inquire into DOL’s statutory authority to issue the subpoenas. As we explain below, we conclude that the District Court’s grant of DOL’s petition to enforce its subpoenas was proper in all respects. In this case, DOL supported its Petition for Enforcement with a declaration from Investigator Bindu A. George, and the District Court found that the declaration satisfied DOL’s obligation to establish that its subpoenas met the threshold requirements for enforcement. Chao v. Koresko, No. 04-MC-74, slip op. at 3 (E.D. Pa. May 11, 2004). Respondents argue that the District Court improperly relied on the “conclusory” statements in Investigator George’s declaration. As described above, however, our standard administrative subpoena enforcement procedure specifically contemplates that an agency will use affidavits or sworn declarations to satisfy its initial burden. See Wheeling-Pittsburgh, 648 F.2d at 128. Moreover, weighing the sufficiency of the parties’ 5 submissions is precisely the type of decision that is committed to the District Court’s discretion. Although we wonder how DOL could possibly need all of the documents it has listed in its subpoenas, we find no basis for concluding that the District Court abused its discretion in this first phase of the enforcement analysis.1 In the second phase of its enforcement analysis, the District Court evaluated Respondents claims that DOL was improperly motivated and concluded that, even assuming the facts that Respondents alleged were true, Respondents had failed to meet their burden of establishing that DOL was acting in bad faith or for an improper purpose. Koresko, No. 04-MC-74, slip op. at 4-5. Respondents contend that the District Court erred by applying the standard from United States v. Aero Mayflower Transit Co., 831 F.2d 1142, 1145-47 (D.C. Cir. 1987), which held that a respondent had to show that the agency was acting in bad faith or for an improper purpose to overcome the agency’s prima facie enforcement showing, id. at 1145, rather than analyzing their claims under the framework that we laid out in Wheeling-Pittsburgh, which allows that a respondent might be able to establish that enforcement of a subpoena would abuse the court’s process even where the respondent fails to demonstrate bad faith. 648 F.2d at 125. Respondents’ contention lacks merit. Even if we were to find that Wheeling-Pittsburgh articulates a broader standard than Aero Mayflower, the outcome of the case would not change–the 1 Judge Weis considers the request for production of thousands of employee applications for insurance which include medical and personal information to be unduly burdensome and would deny DOL’s requests as to those documents. 6 District Court has already determined that the facts alleged by Respondents do not meet the Wheeling-Pittsburgh standard. Although the District Court’s analysis was framed in terms of “bad faith” and “improper purpose,” the District Court compared the facts alleged by Respondents to those alleged in Wheeling-Pittsburgh on its way to finding that Respondents’ claims were insufficiently troubling to warrant further investigation. See Koresko, No. 04-MC-74, slip op. at 5 (“Even assuming that the investigation was prompted by a complaint by SCM, that fact does not rise to the level of bad faith or improper purpose by the agency. See Securities and Exchange Commission v. WheelingPittsburgh Steel Corp., 648 F.2d 118, 127 (3d Cir. 1981).”). Under these circumstances, we cannot find that the District Court abused its discretion in the second phase of the enforcement analysis. Respondents’ argument that the District Court erred by failing to inquire into DOL’s jurisdiction to investigate Respondents is similarly unfounded. As the District Court properly pointed out, the agency is not required to establish jurisdiction as an element of its prima facie case. Koresko, No. 04-MC-74, slip op. at 3 (quoting Donovan v. Shaw, 668 F.3d 985, 989 (8th Cir. 1982)). The case that Respondents cite to support their position, EEOC v. Shell Oil Co., 466 U.S. 54 (1984), is inapposite here because it is based on Title VII. Title VII, unlike ERISA, requires a valid charge of discrimination as a prerequisite to an EEOC investigation. A case decided by the Court of Appeals for the Eighth Circuit considering a subpoena issued by DOL pursuant to ERISA provides a 7 better comparison. The court there noted that “[i]t is well-settled that a subpoena enforcement proceeding is not the proper forum in which to litigate the question of coverage under a particular federal statute,” Donovan, 668 F.2d at 989 (citations omitted), and concluded that the district court’s refusal to entertain the respondent’s defense of lack of coverage under the statute was proper. Id. Similarly, here, the District Court found that DOL had established a prima facie case for enforcement. Because coverage by the statute is not an element of DOL’s prima facie case, and lack of coverage is not a defense to enforcement, the District Court’s failure to inquire into DOL’s jurisdiction to investigate Respondents was proper. In sum, none of the issues that Respondents raise regarding the District Court’s enforcement of DOL’s subpoenas amounts to an abuse of discretion. We will accordingly affirm the District Court’s May 11 Order. B. Respondents’ Privilege Claims Respondents assert that many of the documents requested by DOL in its subpoenas are covered by various privileges. After reviewing Respondents’ privilege log and various “samples” of the allegedly privileged documents, the District Court rejected Respondents’ privilege claims.2 The Court expressed frustration with Respondents’ 2 The Court allowed limited redaction of law firm bills to delete attorney-client privileged or work product-protected information and insurance forms to protect personal health and medical information. Chao v. Koresko, No. 04-MC-74 (E.D. Pa. Aug. 23, 2004). 8 submissions and concluded that they should not be allowed more time to support their claims. Chao v. Koresko, No. 04-MC-74, slip op. at 4 (E.D. Pa. Aug. 2, 2004). On appeal, Respondents contest the District Court’s legal finding that the statutory tax preparer privilege does not apply to this dispute, the Court’s factual findings as to the applicability of the attorney-client and other privileges to the requested documents, and the District Court’s refusal to allow Respondents to supplement their initial privilege submission. We reject all of Respondents’ arguments and conclude that the District Court’s privilege decisions were proper. Our review of the District Court’s determinations as to the scope of asserted privileges is plenary. United States v. Liebman, 742 F.2d 807, 809 (3d Cir. 1984). We agree with the District Court’s that the tax preparer privilege does not apply here. The language of the statute is clear–the “privilege” “may only be asserted in–(A) any noncriminal tax matter before the Internal Revenue Service; and (B) any noncriminal tax proceeding in Federal court brought by or against the United States.” 26 U.S.C. § 7525(a)(2) (emphasis added). This case, a civil proceeding by DOL to enforce an administrative subpoena, is neither. Respondents’ primary concern seems to be that DOL will share information it receives with the IRS, but they have not cited any authority that expands the tax preparer privilege beyond its express statutory limits. Because this proceeding is clearly outside of the statutory bounds of the tax preparer privilege, we conclude that the privilege is inapplicable here. 9 Determinations of the applicability of privileges to particular documents are committed to the District Judge’s discretion. Rossi v. Standard Roofing, Inc., 156 F.3d 452, 477 n.16 (3d Cir. 1998). The burden rests upon the party who claims that requested documents are privileged to “describe the nature of the documents . . . in a manner that . . . will enable other parties to assess the applicability of the privilege or protection.” Fed. R. Civ. P. 26(b)(5). In this case, the District Court specifically found that Respondents had failed to carry that burden: [T]he respondents have not supported their claims with the kind of specific information that is required. The Court cannot tell what documents the respondents claim are protected by what privilege[s], by whom the document was prepared, from whom and to whom it was sent, and why it is a privileged communication. Koresko, No. 04-MC-74, slip op. at 4 (E.D. Pa. Aug. 2, 2004). Respondents have attempted to relitigate the privilege issues before us, explaining why they think that various privileges apply to various documents. Their arguments establish only that they disagree with the District Court’s decision; they do not establish that the District Court’s ruling was incorrect or that the Court abused its discretion in any way. We will not disturb that ruling. Finally, Respondents argue that the District Court “should have” allowed them more time to clarify their privilege submissions and provide additional information. Like determinations of whether the privilege applies, decisions as to the amount of information that the District Court needs in order to make such determinations are committed to the 10 District Judge’s discretion. Cf. Schwimmer v. United States, 232 F.3d 855, 863-64 (8th Cir. 1956) (finding that district court has “discretion or latitude in the receiving of proof” on questions of waiver of attorney-client privilege). The District Court in this case “spent hours” evaluating Respondents’ privilege claims, Koresko, No. 04-MC-74, slip op. at 5 (Aug. 2, 2004), and allowed Respondents the opportunity to present their privilege claims both orally and in writing. Id. at 4. The Court concluded that Respondents were “unable . . . to state with any precision why any of the documents are privileged.” Id. Given the circumstances, we find that the District Court acted well within its discretion when it declined to give Respondents a third opportunity to advance their privilege claims. Because Respondents have failed to show that the District Court committed a legal error or abused its discretion with respect to the applicability of privilege to the subpoenaed documents, we will affirm the District Court’s August 23 Order.