United States District Court, Northern District of Illinois, E.D
September 18, 1981
RAY MARSHALL, SECRETARY OF LABOR OF THE UNITED STATES, PETITIONER,
AMALGAMATED INSURANCE AGENCY SERVICES, INC., ET AL., RESPONDENTS.
The opinion of the court was delivered by: Bua, District Judge.
Respondents,*fn1 Amalgamated Insurance Agency Services, Inc., Federal
Computer Systems, Inc., Southwest Insurance Agency of Illinois, Inc.,
American and Overseas, Inc., Health Plan Consultants, Inc., Union
Insurance Agency of Illinois, Dental Health Inc., Magna Charta
Investments, Inc., Dover Insurance Agency, Ltd., Conference Insurance
Consultants, and Federal Services Co. have moved pursuant to Rule 59,
Fed.R.Civ.P.,*fn2 for the entry of an order granting a new trial. The
court previously granted the respondents' motion for a stay of its order
enforcing the subpoenas and the petitioner has moved to dissolve that
stay. The court has been presented with memoranda in support of and in
opposition to the pending motions, has heard lengthy oral argument on the
motions, and has considered additional exhibits submitted at oral
argument, as well as the additional memoranda of the parties relating to
Securities and Exchange Commission v. McGoff, 647 F.2d 185 (D.C.Cir.
1981). This court finds no reason to vacate the order granting
enforcement or continue the stay in this case pending appeal.
A motion for a new trial is addressed to the discretion of the trial
court. Schybinger v. Interlake Steamship Company, 273 F.2d 307, 812 (7th
Cir. 1952). There are three grounds for granting new trials in
court-tried actions under Rule 59(a)(2); (1) manifest error of law; (2)
manifest error of fact; and (3) newly discovered evidence. Brown v.
Wright, 588 F.2d 708, 710 (9th Cir. 1978); 6A Moore's Federal Practice
¶ 59.07 at 59-94.
A new trial in a court action will not lie merely to
relitigate old matters, nor will a new trial normally
be granted to enable the movant to present his case
under a different theory than he adopted at the former
6A Moore's Federal Practice ¶ 59.07 at 59-93. See also Evans, Inc.
v. Tiffany & Co., 416 F. Supp. 224, 244 (N.D.Ill. 1976).
The respondents first claim that "the court erred in finding, contrary
to United States v. Powell, 379 U.S. 48, 85 S.Ct. 248, 13 L.Ed.2d 112
(1964) and United States v. Lenon, 579 F.2d 420 (7th Cir. 1978), that at
the hearing on enforcement, the respondents had the initial burden of
going forward with the evidence, and that the Department of Labor was not
required to make a prima facie showing that it is conducting an
investigation pursuant to a legitimate purpose, and that the subpoenaed
documents are relevant to the investigation." Motion for a New Trial and
Other Relief, p. 2, ¶ 1.
In United States v. Powell, 379 U.S. 48, 85 S.Ct. 248, 13 L.2d.2d 112
(1964), the Supreme Court stated that in order to obtain enforcement of
an investigative subpoena issued pursuant to 26 U.S.C. § 7602 (a),
the Internal Revenue Service must
show that the investigation will be conducted pursuant
to a legitimate purpose, that the inquiry may be
relevant to the purpose, that the information sought
is not already within the Commissioner's possession,
and that the administrative steps required by the Code
have been followed.
Id. at 57-58, 85 S.Ct. at 255. Once this prima facie showing has been
made, the burden rests on the respondent to show why the subpoena should
not be enforced. It is clear that in this Circuit, the government's prima
facie showing may be made by way of affidavits. Once the government makes
its prima facie showing, it is entitled to the issuance of a rule to show
cause why the subpoenas should not be enforced. It is then left to the
respondent to show compelling reasons why the subpoenas should not be
enforced or should be enforced only in a modified form. See United States
v. Moll, 602 F.2d 134
, 138 (7th Cir. 1979); United States v. Lenon,
579 F.2d 420
, 421-422 (7th Cir. 1978).
The respondents again maintain that the government's affidavits, filed
in support of the issuance of the rule to show cause in this case, failed
to make a prima facie showing of enforceability. They have contended that
there is no way that this court could determine whether the materials
subpoenaed were "relevant to a legitimate investigation." This court
disagrees. The question presented is whether materials "may be relevant
to the purpose" of the investigation. Powell does not require a showing
that the documents sought are directly related to a specific area of
inquiry. The Powell standard incorporates a standard of relevance akin to
the standard of discovery in civil actions. Cf. Rule 26, Fed.R.Civ.P.
The respondents cite In re Grand Jury Proceedings [In re Schofield],
486 F.2d 85 (3d Cir. 1973), for the proposition that "DOL must explain
how each item in the subpoena is reasonably calculated to lead to
information that may be relevant to its investigation." Respondents'
Memorandum in Support of their Motion for Rehearing and Other Relief, p.
10. In that case, a grand jury subpoena was served on Mrs. Schofield
requiring her to appear before the grand jury and allow handwriting
exemplars and a "mug shot" to be taken. When she refused to comply, the
government filed a motion to compel reciting simply that she had been
served with a subpoena and that she had "no right or privilege under the
fourth or fifth amendment to refuse to comply . . ." Id. at 87. Although
this statement was found insufficient to justify enforcement, Schofield
that the government be required to make some
preliminary showing by affidavit that each item is at
least relevant to an investigation being conducted by
the grand jury and properly within its jurisdiction
and is not sought primarily for another purpose.
This court believes that the DOL affidavits filed in this case suffice
for this preliminary showing. Under oath in this case two DOL agents
stated that DOL is investigating the operation of Central States,
Southeast and Southwest Areas Health and Welfare Fund for the purpose of
determining whether the fund business was being conducted in conformity
with the requirements of ERISA. To require a more specific recital of the
purposes for which this investigation is being conducted in order to
determine whether the materials sought by the subpoena may be relevant to
the investigation would, in practical effect, force the DOL to reveal its
investigative plan. Nothing in the Constitution, ERISA, or the case law
requires that DOL investigators afford respondents the specific right of
apprisal which they demand, see Hannah v. Larche, 363 U.S. 420
, 80 S.Ct.
1502, 4 L.Ed.2d 1307 (1960), or limit the areas of investigation to
specific ERISA violations.
In addition, the respondents again rely on Civil Aeronautics Board v.
United Airlines, 542 F.2d 394 (7th Cir. 1976). In that case, the Seventh
Circuit required disclosure of the specific purpose of the
investigation. This court failed to discuss United Airlines in its
previous opinion because that case does not appear to be relevant to the
issues raised by a challenge to enforcement of a subpoena duces tecum.
United Airlines involved a warrantless search of all records located on
the premises of United's corporate office. It seems apparent that the
holding in that case rested on the fact that the statute purported to
authorize a warrantless search of premises. No such intrusion is present
in this case. All that the subpoena asks for in this case is production
of certain categories of documents if they exist. It is left to the
responsible officials of the respondents to determine whether these
documents exist and to produce those requested at DOL's office. This
court believes that the distinction between on site administrative
searches which require warrant procedures and/or probable cause to
justify them, see e. g. Marshall v. Barlow's, Inc., 436 U.S. 307, 98
S.Ct. 1816, 56 L.Ed.2d 305 (1978); Camara v. Municipal Court, 387 U.S. 523,
87 S.Ct. 1727, 18 L.Ed.2d 930 (1967); See v. City of Seattle, 387 U.S. 541,
87 S.Ct. 1737, 18 L.Ed.2d 943 (1967), and subpoena enforcement
proceedings which require neither warrant procedures nor a finding of
probable cause in the usual sense, see e. g. United States v. Morton Salt
Co., 338 U.S. 632, 70 S.Ct. 357, 94 L.Ed. 401 (1950), is well established
in the law. Therefore, the court does not believe that United Airlines is
controlling precedent in this case. United Airlines has no applicability
to the enforcement of a subpoena which merely seeks an appearance and
production of documents or a statement under oath that the particular
respondent does not possess any requested documents. In fact, when Meyer
Breen, President of Amalgamated, indicated that subpoenaed entities other
than Amalgamated possessed no documents requested by the subpoenas, DOL
agents indicated that such a statement, if made under oath upon return of
the subpoenas, might be accepted as a sufficient response to the
The respondents' statement that the court "concluded that the purpose
of the subpoenas was to determine whether any of the respondents are
parties in interest" evidences a misconception as to the court's February
26th opinion. In determining the relevance of the subpoenaed documents in
light of the broad investigative power of DOL to uncover violations of
ERISA (the stated purpose of the investigation), the court pointed to the
party in interest provisions of ERISA as an example of how the subpoenaed
documents might be relevant to the DOL investigation of the Fund.
DOL must know what entities are related to the Fund as parties in
interest. Moreover, to phrase the issue presented in terms of this
court's inability to determine relevance
is to attempt an end run around the holdings of the Endicott Johnson
Corp. v. Perkins, 317 U.S. 501, 63 S.Ct. 339, 87 L.Ed. 424 (1943) and
Oklahoma Press Publishing Co. v. Walling, 327 U.S. 186, 66 S.Ct. 494, 90
L.Ed. 614 (1946) cases which mandate that the courts allow the agency to
determine jurisdiction. In this case, it seems clear that the subpoenaed
materials will allow the DOL to make an initial determination of which of
the various respondents are parties in interest or fiduciaries of the
This court believes that the permissible scope of the investigation,
the fact that the evidence showed each of the moving respondents to have
some relationship to the Health and Welfare Fund, and the kinds of
violations that DOL may inquire into make the categories of documents
sought by each of the subpoenas "relevant" to an investigation of the
Fund pursuant to ERISA.
Finally, this court again rejects the contention that Marshall v.
Robbins has an effect on this case. Respondents failed to persuade the
court of any impermissible relationship between these two cases.
Moreover, there is no reason why respondents should fear duplicative
production. On several occasions respondents have sought to oppose
discovery in Robbins by arguing to Judge McMillan that the materials
sought in Robbins were the subject of the subpoenas in this case, while
at the same time arguing the opposite in this court. See e. g. Memorandum
of Defendant-Intervenor Amalgamated Insurance Agency Services, Inc. in
Opposition to Plaintiff's Motion to Compel Discovery, docketed on June
19, 1979 in Marshall v. Robbins, No. 78 C 4075. The obvious way to avoid
any duplicative production of subpoenaed material would be to respond to
the subpoenas with a simple statement of those items already produced
pursuant to discovery in Robbins. The respondents also argue that DOL
failed to show that the materials sought by the subpoenas were not
already in its possession. The necessity for such a showing in this case
escapes the court.
The respondents have vigorously resisted all requests for the materials
sought by the subpoenas and the undisputed evidence at the hearing on
enforcement indicated that none of the respondents have ever voluntarily
produced any material in their possession nor have they been served with
any DOL subpoenas prior to those involved in this proceeding. Moreover,
it was not until more than a year after these subpoenas were issued that
the Secretary instituted Marshall v. Bobbins.
Finally, the subpoena seeks some material, copies of which are in the
possession of the Fund. Nonetheless, given the provisions of ERISA, it is
reasonable for DOL to seek production of the respondents' materials in
order to satisfy itself that there are no discrepancies in the copies
that are made available to the Fund by its services providers.
During oral argument, respondents' counsel offered several exhibits to
show that the Department of Justice was conducting a criminal
investigation of Allen Dorfman. After reviewing this material, this court
fails to see the relevance of this material to this proceeding. Allen
Dorfman is not and never has been a party to this proceeding, no subpoena
has been served on him, none of his personal records are sought by the
subpoenas and his fifth amendment rights cannot be implicated in any way
by respondents' compliance with the subpoenas. See e.g. United States v.
Alderson, 646 F.2d 421 (9th Cir. 1981).
The petitioner has moved to dissolve the stay of this court's order
granting enforcement of the subpoenas. The court agrees with the
petitioner that there is no sound reason to continue the stay. This
court's experience in presiding over this hard fought and unfortunately
lengthy proceeding gives the court reason to fully appreciate the most
recent statement of the Seventh Circuit Court of Appeals in United States
v. Kis, 658 F.2d 526 (7th Cir. September 4, 1981). Although that
consolidated appeal concerned Internal Revenue Service Summons
enforcement proceedings, this court believes that much of Judge Swygert's
cogent reasoning applies with equal
force to administrative subpoena enforcement generally. In the Kis
opinion, Judge Swygert stated:
In discussing the relative burdens of the parties in
summons enforcement actions, we cannot stress too
emphatically that these proceedings are intended to be
summary in nature. They occur, after all, at only the
investigative stage of any action against a taxpayer,
and no guilt or liability on the part of the taxpayer
is established. The sole reason for the proceedings .
. . is to ensure that the IRS has issued the summons
for proper investigatory purposes . . . and not for
some illegitimate purpose (such as, for example, using
a civil summons to gather evidence to be used solely
in a criminal prosecution).
At p. 14, at p. 535.
This court has no doubt that the DOL is engaged in a civil
investigation of the Fund pursuant to ERISA and can see no need to
further delay the progress of this investigation pending appeal.
Therefore, for the reasons stated above and in this court's prior
opinion, the respondents' motion for rehearing is DENIED, and the
petitioner's motion to dissolve the stay is GRANTED.
IT IS SO ORDERED.