Subpoenas: In Re Grand Jury Subpoena Issued June 18, 2009

U.S. Court of Appeals, Second Circuit

Subpoenas

Fifth Amendment Privilege — Corporate Officers
 
In Re Grand Jury Subpoena Issued June 18, 2009
09-3561-cv
Appealed from the Southern District of New York

Background: The appeal is from a district court order holding the appellants in contempt for failing to comply with a subpoena duces tecum. The appeal requires the court to determine whether a corporation with a sole shareholder, officer and employee may refuse to comply with a subpoena demanding production of corporate records under the Fifth Amendment’s “act of production” privilege. The companies, which are wholly owned by Douglas Rennick, their sole shareholder, officer and employee, argue they may resist the subpoena, involving an investigation into illegal gambling, bank fraud and money laundering on Fifth Amendment grounds since Rennick is the only person capable of producing the records and his act of production would be testimonial and potentially self-incriminating. Although the long-established collective entity rule prevents corporations from availing themselves of the Fifth Amendment privilege, the companies contend the U.S. Supreme Court’s decision in Braswell v. U.S., 487 U.S. 99 (1988), compels the court to carve out an exception for one-person corporations.

Ruling: The decision is affirmed; the court rejects the claim of privilege. The ruling prevents the erosion of the rule that the corporation itself is not entitled to claim any Fifth Amendment privilege. Further, “it recognizes that the decision to incorporate is freely made and generates benefits, such as limited liability, and burdens, such as the need to respond to subpoenas for corporate records.” Also, the decision “avoids creating a category of organizations effectively immune from regulation by virtue of being beyond the reach of the Government’s subpoena power.”

John V. Donnelly III of Cozen O’Connor for the appellants, and Arlo Devlin-Brown, assistant U.S. attorney, for the appellee