United States v. Carl Simon, Robert Kaiser and Melvin Fishman, and Harold Roth, Irving L. Wharton
373 F.2d 649
2d Cir.
1967
Check Treatment

*1 proce- 1966), or federal dural law. judgment so that modified attorneys plaintiff’s shall

$20,000 fee payable to Uris Sales out of the award

Corporation, individual- Penn

ly award, as so in addition Jones modified is affirmed. Mrs. her from Penn two-thirds

recover appeal.

costs America,

UNITED STATES Plaintiff, SIMON, Melvin Robert

Carl Fishman, Defendants-Appellees, Roth, Defendant.

Harold Wharton,

Irving Appellant. 31012.

No. Docket Appeals

United States Court Circuit. Second

Argued Feb. 1967.

Decided March 1967. 8,May 1967.

Certiorari Granted

See S.Ct. *2 Judge:

LUMBARD, Chief appeal question on is whether this for an order en- basis is sufficient tered the Southern on December District of New York 1966, enjoining Irving Wharton, trus- receivership bankruptcy tee in Vending Corpora- Machine Continental York, tion in Eastern District New days taking period ninety for depositions action an July the Eastern District 1965 of since defendant-appellees, the three are named in an indictment filed Southern District on Octobér part the same facts as involves the Eastern District action. judge Mishler, the Rule 2 action,1 Eastern District 24, had on October application 1966 denied an made defendant-appellee Kaiser after the protective indictment was or- filed for 30(b), staying der under Fed.R.Civ.P. deposition ground op- on the that it was pressive and his Fifth Amend- violated privilege against ment self-incrimination. Judge Mishler observed that Kaiser response specific assert his questions deposition. at None of the appellees invoked the point. self-incrimination Although the indictment was returned in October has been for date set the criminal trial in Southern Dis- trict. As have made no show- ing depositions would interfere with the trial Schwartz, City Marvin York New preparation dictment or with the (Thomas Patton, E. Sullivan & Crom- trial, defense in that we reverse well, City, New brief), York on the for Bryan’s order. defendants-appellees. dili- that the trustee is It is conceded Joseph Marcheso, J. City New York gently pressing forward (Robert Giordano, Bauman, Christy, trial, for of the Eastern Frey Christy, City, York New on the good seeking take faith to that he is brief), appellant. for purposes appellees’ for es- action, LUMBARD, Judge, that the Before and Chief An preparation for trial. FEINBERG, Judges. sential to his SMITH and Circuit including judge purposes fol- all Dis of the Eastern General Rule pre- (1) lowing: provides part: all motions to bear (2) applications; liminary to conduct approval of “The chief with the conference; (3) pre- pre-trial judges, upon mo- his own his associate the action.” any party, trial of side at the as- tion or motion complicated sign long case to a fraud, reorganiza- counts mail Stat. six involuntary petition amended, Vending 18 U.S.C. § Machine Continental tion of conspiracy to fraud commit mail Chapter X of *3 Corporation under misleading Judge willfully re- by to file a false and granted Bankruptcy Act was Exchange Irving port the Securities and July 1963, with and in Mishler of 48 qualified as in violation Stat. Commission appointed and was Wharton 78ff, amended, 15 U.S.C. § July 1965, the 1, On trustee.2 1001, certifying, by mail- 18 U.S.C. § the Eastern in civil action commenced filing materially ing, false and accounting firm of and against District misleading for Continental Montgomery, Har- balance sheet Lybrand, Bros. Ross year All for the audit 1962. of president of Conti- Roth, former old in 1962 bal- Continental’s statements National nental, Meadowbrook and alleged alleged by damages indictment seeking ance sheet Bank, for an misleading seem to be be false and would despoil as- conspiracy to Continental’s actions, despoliation to the trustee’s and material conceal sets and alleged specifically in the including false least two of the certification means July complaint. Lybrand trustee’s for statements financial 1962, through and for years 1958 audit Judge After Mishler had denied Ly- negligence of alleged and recklessness pro- appellee application for Kaiser’s al- permitting others in brand and staying deposition order on tective con- leged despoliation. was This action 1966, 24, deposed at October Kaiser was brought September one solidated 31, on October 26 and 1966. two sessions Roth, officers various Judge appellees then The moved before (but Continental, and others of directors Bryan 1, on November 1966 for an order against Lybrand, pending settlement enjoining taking trustee from consoli- failed), and talks later which depositions prior Dis- to the Southern Judge assigned to were dated actions hearing trict criminal of trial. At pur- all for Rule 2 Mishler as 1966, Judge 4, this motion on November poses. restraining Bryan temporary issued a expended pending substantial order The trustee its determination. On De- legal accounting application fees cember sums without Lybrand, Judge trustee, proceedings Kai- Mishler directed shortly July began appear deposition. 1965. All ser to for a after continued which relating stayed Lybrand’s 8, This on books and records Court December Judge years 12, question have been the audit Mishler’s order until December Ly- trustee, Judge Bryan’s to the and after decision on made available deposed, personnel stayed in- December 12 further Mish- brand have Lybrand cluding appellee Simon, hearing expedited ler’s order charge any appeal en- partner and determination Continental from dep- gagement whose 1960 to order of December open. deposition appeal perfected osition is still was later and is Lybrand appellee Kaiser, another now before us. partner connected the Continental pow- held that he had the engagement, scheduled be- had been enjoin toer the trustee from gin the Southern October 1966 when appellees’ depositions the All both under returned Oc- District was Act, 1651(a), Writs U.S.C. ex- § ' 17, 1966. tober power supervisory ercise of the court’s charged Roth and The indictment over the administration federal crimi- Simon, Kaiser, justice. See, g., and Fishman nal e. McNabb United appoint- Campbell, April 1963, had been P. the Southern John District appointed assets conservator Continental’s co-trustee ed with Wharton. Since Campbell’s resignation complaint Ex- September the Securities by Judge change Bonsai Wharton has Commission acted as sole trustee. 340-341, action, Eastern U.S. He concluded must be the bank- 87 L.Ed. 819 which ruptcy resolved before reorganization Continental, should be- al- that this be exercised reasonably likely years ready old, can cause “it three and one-half completed. result threatens It is conceded unfairness will tegrity good depose ap- proceedings” if trustee seeks in of these faith permitted appel- pellees purposes the Eastern Dis- to use deposition testimony action, has been lees’ that there when questioning be- consultation on lines of the Federal Rules of Criminal *4 discovery tween the trustee and the United States Procedure obtain criminal against (S.D.N.Y. Attorney for the Southern District. 262 64 them. circumstances, public these the Under progress the Eastern interest holdings present questions Both outweighs clearly ap- action District impression. district of first No federal pellees’ withholding their tes- interest enjoined court in criminal case has ever a timony until District after the Southern party juris to action in another a civil invoking privileges their without litigating diction from or the civil action against It could self-incrimination. taking testimony it, either under the hardly contended, appellees do not Act, compare All All Writs v. Steelman contend, Corp., Continent 301 U.S. 57 S.Ct. enjoined Southern District could be (1937) (injunction 81 1085 re L.Ed. given by using deposition testimony straining against in bank trustee appellee Simon before Southern ruptcy), supervisory power, or under the returned. As was Supreme implement which the Court has long appellees’ preparation as by formulating ed rules conduct for the not Southern District criminal is trials, g., of criminal e. Cheff v. Schnac hampered, we see distinction in no valid kenberg, 384 U.S. S.Ct. appellees’ remaining deposi- the fact that (1966); L.Ed.2d 629 United McNabb v. tions not until after be scheduled States, supra, by enjoining or com the indictment returned. In both mission of acts “federal law enforce appellees cases, if not to choose assert agencies.” ment Rea v. United privileges their tion, self-incrimina- 350 U.S. 100 L.Ed. why see their we no reason testi- assume We decid without mony should be withheld from the trus- ing that the lower court had to testimony tee. The fact that additional injunction, issue such an hold but we thereby govern- becomes to available so, that it should have done merely byproduct ment is the natural showing sought is that the judicial proceeding; another by the trustee would interfere might “discovery,” extent it but it is trial of appellees’ the indictment or the government which preparation of their defense. promoted purpose or initiated for the appeal requires ap- This us to balance circumventing the Federal Rules Crim- pellees’ prevent pretrial desire to disclo- right inal Procedure or constitutional sure of their factual contentions appellees. of the Indeed the constitution- prosecution in the Southern District rights appellees unimpaired; al are proceeding, asserting criminal without they suspension here are in because the their privileges Fifth Amendment appellees have not chosen avail them- against self-incrimination, against privileg- selves of their Fifth Amendment trustee, representing terest of the numer- es. public security ous creditors and holders of Continental, expeditious prog- appellees It is true that have tes ress of the Eastern District action. The tified in the trustee’s and be grand requires appellees’ deposition jury fore the that indicted them testimony complete asserting privileges against for without their against prosecution of however, injunctions Since, “it self-incrimination. fraught pos- independent actions that a waiver well established courts, conflict between proceeding not af- does sibilities in one appeals not in other rights the ac- a court of of a witness fect position resolve proceed- happy a independent in so cases be in another cused injunction were Miranti, If here. this ing,” as we are United States might Wigmore, 1958); upheld, well be issued a like one see (McNaugh- prosecution of an action 470-72 Evidence § circuit, or this 1961), a district court outside ton rev. Especially de- as a probably, in a court. certainly, even state and Simon Fishman depose upon a civil interposed when fendant called could have move court can sought depose federal district them after case the trustee under Fed.R.Civ.P. in that court returned. the indictment was deposition, stay or limit urge that, Appellees account case court in which professional ants, “would lose enjoin of such should by invoking privilege. We are lives” exceptional deposition only circum- *5 they would, made if it were not sure that held, no such cir- As have stances. we only privilege was claimed clear that the present here. cumstances are prevent to on of counsel order advice heavily upon two relied pretrial con of their factual disclosure con- “it has been of in which lines cases would, they tentions. or Whether sistently civil that both held where however, same dilemma is faced proceedings of arise out criminal a civil or witness in criminal objecting an same or related transactions investigation in or who is himself under stay generally of party to a entitled a wit for other crimes. Such dictment discovery dis- action until in the civil either invoke his ness must * * * position matter of the criminal self-incrimination, assume or criminal in the whether the defendant testimony give general duty “the to what civil rules to obtain case seeks to use the Wig- capable giving.” one is of See 8 evidence,” disclosure of the Government’s more, (McNaughton rev. 2192 Evidence § Eastland, citing, example, Campbell v. 1961). is for same reason that It denied, 1962), cert. 478 immunity given witness who has 955, 502, 9 L.Ed.2d 371 U.S. 83 S.Ct. although testify must Government “or whether testimony may expose him to such his advantage secure evi seeks a similar extralegal job, pressures “loss ex of to the available dence not otherwise registra pulsion unions, from labor state McGuire, prosecution,” citing Perry v. investigation statutes, passport tion and (S.D.N.Y.1964), Paul Harri F.R.D. 272 general oppro eligibility, public gan Enterprise Sons, Animal & Inc. v. States, 350 brium.” v. United Ullmann (E.D.Pa. Co., Inc., Oil 14 F.R.D. 333 422, 100 L.Ed. U.S. 76 S.Ct. 1953), Corp. v. and National Discount (1955); v. United see Piemonte Holzbaugh, (E.D.Mich. States, 13 F.R.D. 236 6 L. 367 U.S. agree Ed.2d cannot We at 74. procedure of “civilized standards Both lines of cases to us to be seem evidence,” McNabb v. United inapposite. where the de- Cases criminal require supra, at 63 S.Ct. at govern- fendant of seeks disclosure witness evidence, government ment’s seeks given nonappearance option of defendant’s, disclosure any proceedings or crim in related civil tinguishable trustee, because here is conclud inal cases until his own trial depose appellees, pur- seeks ed. suing independent an on behalf . security reverse also led to Continental’s hold- We are creditors ers, Judge order the consideration which was commenced more than one year found. before the indictment the criminal trial of these that otherwise appear fundamentally And the cases in the line unfair. second will be defendants they us, did Mishler If the trial court order allowed opinion to rest criminal his October Government full deponent’s defendants, upon assertion of all would denied to case and agree against self-incrimination; basically unfair. would be that this not, happen be- the extent that do we decline Yet that is what well In Discount follow them. both National reversal. The absence cause of this Holzbaugh, Corp. supra, Har- Paul in the civil v. collusion between rigan Sons, Enterprise Animal Inc. criminal v. suit and Government controlling; Inc., supra, explicitly deponents effect Oil suit is discovery privileges self- criminal asserted their defendants Perry incrimination, majority distinc- see no the court case is. can McGuire, supra, hold- use of taken cited cases tion between both interrogatories ing after the criminal indictment. directed before and oppressive is clear. Once defendant “would be To me distinction filed, infringe court which and would rights.” his constitutional indictment was Moreover, charges were to tried had the 36 F.R.D. those at 273. duty keep proceedings mo- the criminal all three cases arose on Rule proceedings, civil In made in the which the fair.' the absence tions court in duty. course, was, pending; precedent correlative action was is a none injunction Bryan issued. addition, doubts about In if had I even course, ac- if district court Of court’s the correctness deposi should find that the I is total- not—the reversal *6 tion—and do injunction ly inter its tions of the threatens for. uncalled trial I see expires fere with the of the indictment in about two weeks. terms conflicting their defenses adequate why reason necessary, again appellees, may dis- be be left to interests cannot ap power judge district has the March take district cretion of the court propriate appraise time, action. he able will be At light again cir- the situation go Reversed. The mandate shall down example, existing. For cumstances then forthwith. he can consider whether the being unduly delayed by defendants FEINBERG, Judge (dissent- Circuit Simon, Fisher, whether ing): given on will adhere to the assurance dissent. I argument preparing for a oral May, judge has date in whether a Rule I would have basis affirmed on the trial, appointed expedite thorough opinion in the (as apparently it true whether it is now thing trial court. The do is next best was not on the record before opinion, to dissent on the basis of that Bryan) no other trustee has reported which is 64. It at 262 meaningful take, conjunction should be read with the signifi- whether, going if there is majority opinion because might delay, practical to allow cant clearly convincingly rea- states the appropriate prohibitions ninety-day injunction sons for the of them the use Government. adopt reasoning I attack. his basic only thoughts add a few addressed words, I In other district think the opinion. majority right, and, any event, would again him to exercise discretion allow Since district court’s to en- expires. injunction join on March 17 when the assumed, issue is one of majority largely ignores Erts-Tankersmaatschap cretion. The Nederlandse Cf. given by the basic reason district Co., pij, v. Isbrandtsen N. V. judge for his exercise of that discretion— (2d Cir.