The White Collar Appeal: Corporate Cooperation Documents Produced to Grand Jury Not Subject to FOIA

• The Ninth Circuit recently rejected an attempt to use FOIA to obtain documents that Volkswagen produced in connection with the Dieselgate investigations, reversing the lower court’s rulings that the documents were not subject to grand jury secrecy rules.

• In its ruling, the Ninth Circuit provided a three-factor test for determining whether investigative materials in the government’s possession are subject to Rule 6(e) and thus exempt from FOIA.

• In adopting an expansive view of grand jury secrecy, Kalbers v. DOJ provides important insights for corporate counsel in responding to government investigations.

Background

Kalbers arises out of the “Dieselgate” investigation, in which the Justice Department’s Criminal Division Fraud Section investigated Volkswagen for implementing software that circumvented emissions testing and falsely indicated that certain diesel vehicles complied with emissions standards.  Throughout the course of the government’s investigation, Volkswagen produced some six million documents in response to a grand jury subpoena and instructed its counsel “to present factual evidence to the DOJ” in an effort to “resolve US criminal law charges.”  Volkswagen’s cooperation included conducting an extensive internal investigation including hundreds of witness interviews, disclosing non-privileged facts about individuals and companies involved in the misconduct, providing translations of documents, obtaining documents from overseas, and facilitating and encouraging cooperation by current and former employees.  Volkswagen ultimately entered into a plea agreement that included a parent-level guilty plea and a $2.8 billion criminal penalty, and it separately paid many more billions in civil fines and other settlements. 

Professor Lawrence Kalbers, however, suspected that Volkswagen got a “sweetheart deal.”  So he sought to obtain, via the Freedom of Information Act (FOIA), the documents that Volkswagen produced to the government.  DOJ declined to produce the documents, citing the FOIA provision that exempts from disclosure materials “complied for law enforcement purposes.” By DOJ’s reasoning, all but four documents out of the six million Volkswagen produced indicated they were “FOIA Confidential – Produced Pursuant to Rule 6(e),” which indicated they were grand jury materials subject to secrecy under Rule 6(e) of the Federal Rules of Evidence.  Kalbers sued to compel DOJ to produce the documents.

A special master, and ultimately the district court, rejected DOJ’s position.  Because DOJ had not shown “that there is something inherent in the documents—e.g., witness lists, summaries of grand jury testimony, copies of subpoenas, and the like—that would reveal any information about the grand jury,” the documents were not protected by Rule 6(e).  The special master recommended, and the district court agreed, that DOJ should produce the documents “in their entirety.” 

Holding

The Ninth Circuit reversed.  It began by construing the scope of Rule 6(e), which prohibits “an attorney for the government” from disclosing “a matter occurring before the grand jury.”  Because the Rule does not define “matter,” the court looked to Black’s Law Dictionary and concluded that “a rule that prohibits disclosing ‘matter[s] occurring before a grand jury’ bars revealing any ‘subject’ under the grand jury’s consideration.”  From that broad construction of “matter,” the court concluded that Rule 6(e) protects both the “subpoena itself,” as well as “the file prepared in response to that request … [because s]ubpoenaed documents when considered in the aggregate and in their relationship to one another, make possible inferences about the nature and direction of the grand jury inquiry.” 

Taken together, the court held that any one of the following three factors will protect documents from disclosure under FOIA:  (1) the government obtained the documents solely from a grand jury subpoena and not any other source; (2) the requester is not seeking the documents for “a reason independent of the grand jury investigation”; or (3) disclosure of the documents could compromise the integrity of the grand jury process.

The court further held that Kalbers’ request implicated all three factors.  First, the record established that the government obtained the documents only from a grand jury subpoena—not a voluntary production, civil investigative demand, law enforcement investigation, or anything else.  Second, the Kalbers specifically requested all factual evidence presented by Volkswagen’s outside counsel to the government, which—but for four documents—consisted entirely of materials Volkswagen produced in response to the grand jury subpoena.  Finally, disclosure of the documents necessarily would reveal the matter before the grand jury, because “[t]his is not a case where the commingling of documents subpoenaed by the grand jury and by other governmental agencies makes it impossible to determine which documents were obtained through which process.” 

Key Takeaways

Kalbers creates a disincentive for voluntary productions.  Defense counsel often prefer to agree to voluntary document productions without a grand jury subpoena.  Among other things, a voluntary-production paradigm can provide more flexibility in production timelines, wider latitude over the scope of the production, and better insight into the direction of the government’s investigation.  And it deprives the government of an immediate enforcement mechanism in the case of any disputes.  But Kalbers presents an important downside to voluntary production:  no grand jury secrecy to prevent disclosure under FOIA.  In high-profile investigations or ones that otherwise seem likely to pique public interest, counsel should consider whether the risk of later public disclosure outweighs the potential benefits of voluntary productions.  In such situations, no matter how cooperative the client’s posture, it might make sense to ensure strict compliance with subpoena requests and ask the government to issue new subpoenas for any supplemental requests prosecutors might make.

At a minimum, label document productions with Rule 6(e) language.  Volkswagen labeled all but four of the documents it produced with language indicating the production was pursuant to a grand jury subpoena.  Kalbers seemed to place nearly dispositive weight on that fact.  Failure to include such a label could “make it impossible to determine which documents were obtained through which process,” which could render the documents subject to disclosure under FOIA.  For example, the court explicitly noted that “[w]e leave open the question … whether the government must disclose an intact grand jury file … if nothing on the face of the documents reveals they were the subject of a grand jury subpoena.”   

Kalbers’ expansive construction of “matter” conflicts with case law analyzing that term in the context of the no-contact rule. ABA Model Rule 4.2 and most states’ analogous disciplinary rules prohibit a lawyer (subject to exceptions) from communicating directly with someone the lawyer knows to be represented by another lawyer “in the matter.”  In the context of grand jury investigations, however, courts generally have construed “matter” narrowly.  See, e.g., In re Amgen, No. 10 Misc. 249, 2011 WL 2442047, at *10–13 (E.D.N.Y. Apr. 6, 2011) (collecting cases).  Counsel litigating no-contact issues in grand jury investigations may wish to contrast these precedents with the broad approach Kalbers has taken in construing “matter.”