ON APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF PENNSYLVANIA (D.C. Misc. No. 79-0330)
Before Gibbons, Rosenn and Garth, Circuit Judges.
C. Schmidt & Sons, Inc. (Schmidt), a Philadelphia brewer, and six of Schmidt's employees, appeal from an order of the district court denying their motions to quash federal grand jury subpoenas directed to those employees. The United States Attorney has moved to dismiss the appeal as interlocutory. We grant the government's motion to dismiss the appeals of the six employees. We reach the merits of Schmidt's appeal, and we affirm.
According to the government, in mid-1978 a number of "short-fill" bottles of beer, manufactured by Schmidt, appeared in the marketplace. "Short-fills" are bottles containing less than the quantity indicated on the label. The grand jury began an investigation in which Schmidt initially cooperated. Later Schmidt instructed its employees not to cooperate, taking the position that the grand jury was not investigating federal crimes, and that the investigation was being conducted in bad faith for improper purposes. Faced with Schmidt's change in position the Philadelphia Strike Force of the Department of Justice caused six subpoenas ad testificandum to be served on six Schmidt employees. Schmidt and the six employees applied to the district court for an order quashing the subpoenas, asserting that the grand jury was not investigating any federal crimes, in that sale of "short-fills" violated no federal law, and that the investigation was being conducted in bad faith.
Before ruling on the motion to quash, the district court, on the authority of In re Grand Jury Proceedings (Schofield I), 486 F.2d 85 (3d Cir. 1973) and In re Grand Jury Proceedings (Schofield II), 507 F.2d 963 (3d Cir.), cert. denied, 421 U.S. 1015, 95 S. Ct. 2424, 44 L. Ed. 2d 685 (1975), directed the government to furnish an affidavit disclosing the sections of the United States Code pertinent to the grand jury investigation and the reason why each witness' testimony was relevant to the investigation and not primarily for another purpose. The government complied, submitting an affidavit identifying 26 U.S.C. §§ 5671-74 (1976) (excise tax violations), 26 U.S.C. §§ 7201, 7206 (1976) (income tax violations), 26 U.S.C. § 5412 (1976) (removal of beer not in compliance with regulations), and 18 U.S.C. § 371 (1976) (conspiracy). The affidavit identified the employees as people who worked in areas of the Schmidt brewery that made it likely for them to possess knowledge on the methods used to dispose of "short-fills" and on the existence and location of records reflecting such disposition. The trial court concluded that the Schofield affidavit was sufficient, denied the application to quash, and directed the witnesses to appear before the grand jury on a specific date. When a motion for reconsideration was denied, Schmidt and the six employees filed a notice of appeal, and the district court stayed the compliance order pending appeal. Since the compliance order was stayed pending appeal the witnesses were never faced with the question whether they would disobey the order directing compliance and thus invite a contempt citation.
We turn first to the government's motion to dismiss the appeal. Insofar as that motion is addressed to the appeal of the six employees it is well taken. The denial of a motion by a witness to quash a subpoena may not ordinarily be appealed under 28 U.S.C. § 1291 (1976) absent disobedience of an enforcement order and a contempt citation. United States v. Ryan, 402 U.S. 530, 91 S. Ct. 1580, 29 L. Ed. 2d 85 (1971); Cobbledick v. United States, 309 U.S. 323, 60 S. Ct. 540, 84 L. Ed. 783 (1940); Alexander v. United States, 201 U.S. 117, 26 S. Ct. 356, 50 L. Ed. 686 (1906). The Court has recognized that the unique official status of the witness to whom the subpoena was addressed may make it inappropriate to insist upon contempt in order to achieve finality. United States v. Nixon, 418 U.S. 683, 691, 94 S. Ct. 3090, 3099, 41 L. Ed. 2d 1039 (1974). The subpoenaed employees here can claim no such status, and have presented no argument for an exception to the Alexander-Cobbledick-Ryan rule. The stay of the compliance order pending appeal removed the necessity for the employees making a choice, but it did not make that order final, and the stay will end with the disposition of this appeal.
Schmidt's appeal, however, involves different considerations. It was not subpoenaed, and is in the case as an intervenor. The option of resisting compliance and standing in contempt is not available to it, and it is unlikely that a third party, even an employee, would risk a contempt citation in order to provide it with immediate review. Thus, in contrast with the Alexander-Cobbledick-Ryan rule on finality, it has been recognized that when a party, other than the one to whom a subpoena has been addressed, moves to quash the subpoena, the denial of his motion disposes of his claim fully and finally. Perlman v. United States, 247 U.S. 7, 38 S. Ct. 417, 62 L. Ed. 950 (1918). See also Gravel v. United States, 408 U.S. 606, 608 n. 1, 92 S. Ct. 2614, 2618, 33 L. Ed. 2d 583 (1972); United States v. Nixon, 418 U.S. at 691, 94 S. Ct. at 3099. In this court we have had several occasions to recognize the distinction between the Perlman and the Alexander-Cobbledick-Ryan rule. E.g. In re Grand Jury Proceedings (FMC I), 604 F.2d 798, 800 (3d Cir. 1979) (order denying client's application to quash grand jury subpoena to attorney is final); United States v. RMI Co. (N.L. Industries), 599 F.2d 1183, 1186 (3d Cir. 1979) (order denying motion for a protective order re corporate documents in possession of grand jury is final); In re Grand Jury Investigation (Intervenor A), 587 F.2d 589, 592 n. 2 (3d Cir. 1978) (order denying Congressman's motion to quash subpoena directed to Custodian of Records of House of Representatives on speech and debate clause grounds is final); In re Grand Jury Proceedings (Cianfrani), 563 F.2d 577, 580 (3d Cir. 1977) (order denying State Senator's motion to quash subpoena to custodian of records of Pennsylvania Senate is final); In the Matter of Grand Jury Impaneled Jan. 21, 1976 (Freedman), 541 F.2d 373, 377 n. 4 (3d Cir. 1976) (order denying attorney's motion to quash subpoena to prothonatary for copies of contingent fee agreements is final). We have recognized that the Alexander-Cobbledick- Ryan rule restricting appellate review is limited to situations where the contempt route to a final order is available to the appellant. Thus, where a district court granted a protective order with respect to a grand jury subpoena, we held that, in light of the unavailability to the government of the contempt route to review, Perlman, and not Alexander-Cobbledick-Ryan, controlled finality. In re Grand Jury Investigation (Sun Company), 599 F.2d 1224, 1226 (3d Cir. 1979); In re Grand Jury Empaneled Feb. 14, 1978 (Colucci), 597 F.2d 851, 858 (3d Cir. 1979). So, too, an order staying all further proceedings before a federal grand jury produces a final order. In re Grand Jury Proceedings (U. S. Steel, etc.), 525 F.2d 151, 154-156 (3d Cir. 1975). If in this case the district court had accepted Schmidt's contention that the grand jury was being used for an improper purpose and had brought its proceedings to a halt by permanently staying enforcement of its subpoenas, we have no doubt that the government would insist, on the authority of Colucci, Sun Company, and U.S. Steel, that the improper purpose claim had been finally adjudicated. Rejection of Schmidt's claim in this instance is no less final, for there is no other proceeding in which the claim of abuse of the grand jury process can be asserted. Schmidt cannot disobey an enforcement order not directed to it. If after the employees comply with the subpoenas the grand jury is disbanded without issuing an indictment, Schmidt will have been subjected to the alleged harassment of having its records removed from its place of business and its employees diverted from their business tasks without an opportunity for appellate review. Even if an indictment were returned against it Schmidt would still be foreclosed from complaining about the propriety of the methods used to obtain the evidence presented to the grand jury. See, e. g., Costello v. United States, 350 U.S. 359, 76 S. Ct. 406, 100 L. Ed. 397 (1956). Compare United States v. Serubo, 604 F.2d 807 (3d Cir. 1979) (indictment may be dismissed for prosecutorial misconduct tending to prejudice grand jury). The government does not argue that there might be another point in a future proceeding growing out of the grand jury investigation at which Schmidt's claim might be reconsidered. Thus, Schmidt is situated, insofar as finality is concerned, in the same position as the government in Colucci, Sun Company, and U.S. Steel. Review of its claim comes now or never. The order appealed from finally disposed of its claim for relief from unlawful harassment before the grand jury, and is reviewable under 28 U.S.C. § 1291 (1976).
Despite its tacit acknowledgement that there is no other point in any later proceeding at which Schmidt's claim of unlawful grand jury harassment may be raised, the government urges that its Colucci, Sun Company, and U.S. Steel appeals presented different issues. They did, indeed, but the differences do not bear upon finality, and on appellate jurisdiction, but on standing, and on the merits of the claim for relief. In substance what the government seeks is a holding that there is no set of circumstances in which anyone other than a witness subjected to grand jury process will be heard to complain about grand jury abuse. Conceding that in the Perlman, Gravel, Nixon, FMC, N.L. Industries, Intervenor A, Cianfrani, and Freedman cases parties who were not initially served with grand jury subpoenas were heard with respect to the manner in which the grand jury was being conducted, it urges that in each of those cases the intervening objector had some property interest in, or claim of privilege respecting, the information sought or the information about to be disclosed. That is an accurate description of the holdings of those cases, but it does not dilute their authority in the instant appeal. Most of those cases involved claims of privilege, but in N.L. Industries, for example, we held that the applicant for a protective order against disclosure of the contents of documents already in the possession of the grand jury could insist on the protection of its property interest in confidential data incorporated in these documents. Schmidt has a property interest in the books and records which had previously been subpoenaed; a property interest differing only in degree, or value, from that asserted in N.L. Industries.*fn1 Schmidt also has a property interest, contractual in nature, in the services of employees presently under subpoena whose time and attention, it contends, will be diverted from its business for unnecessary and improper grand jury appearances.*fn2 Again, the difference between this property interest and that considered in N.L. Industries is one of degree, or value, not one of substance. The difference in degree or value goes not to Schmidt's standing to seek protection for its property interests, but to the appropriateness of affording relief when balanced against competing considerations. As we noted in N.L. Industries, "property rights must yield to some extent both to a grand jury's investigations of crime and to a defendant's sixth amendment rights to confrontation and compulsory process. A balance must be struck between these competing interests." 599 F.2d at 1190. Striking such a balance requires that the courthouse door be open in the first instance.
More fundamentally, however, we think the government's suggestion that the courts limit standing to claims of abuse of the grand jury process to persons whose property interests or privileges have been invaded is not a viable one. We can imagine cases where neither property interests, nor privileges, have been affected, but other valued rights have. For instance, a political candidate's liberty interest could be infringed by serving grand jury subpoenas upon his workers to discourage them from soliciting nominating petitions or election support. Under the government's suggested test the affected candidate would be precluded from seeking relief because neither a property interest, nor a privilege would be at stake.*fn3 It seems to us that the case for letting such a victim of grand jury abuse be heard is stronger, rather than weaker, than any of the cases presented by the decisions listed above where we have already accepted third party standing. Third party standing to assert claims of grand jury abuse cannot be determined by categorizing the claimed interest as one of property or privilege, but only by examining the nature of the abuse, and asking whether, and in what manner, it impinges upon the legitimate interests of the party allegedly abused.
In this case Schmidt claims that the grand jury is not investigating violations of federal law, and that the Strike Force is attempting to harass it. It asserts that it is being deprived of the time and effort of its employees. It has ...