IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
No. 96-40174
(Summary Calendar)
INTERNATIONAL BANK OF
COMMERCE-BROWNSVILLE,
Plaintiff-Appellant,
versus
RE: GRAND JURY 76-77,
ET AL.,
Defendants,
INTERNATIONAL ENERGY
DEVELOPMENT CORPORATION,
Defendant-Appellee.
Appeal from the United States District Court
for the Southern District of Texas
(B-95-MC-32)
April 18, 1997
Before HIGGINBOTHAM, WIENER and BENAVIDES, Circuit Judges.
PER CURIAM:*
In this appeal from the district court’s denial of the motion
of Plaintiff-Appellant International Bank of Commerce-Brownsville
*
Pursuant to Local Rule 47.5, the court has determined that
this opinion should not be published and is not precedent except
under the limited circumstances set forth in Local Rule 47.5.4.
(“the Bank”) for disclosure of grand jury materials, we are asked
to overturn the ruling of the district court for its purported
abuse of discretion. Concluding that the district court did not
abuse its discretion in determining that (1) the grand jury
materials sought by the Bank are covered by the secrecy rule
regarding disclosure of such materials, (2) any potential relevance
of the grand jury materials in the state court proceedings for
which they are sought does not outweigh the policy concerns
embodied in the secrecy rule, and (3) the Bank did not bear its
burden of showing a particularized need for the disclosure of the
grand jury materials in this case, we affirm.
I
FACTS AND PROCEEDINGS
After Defendant-Appellee International Energy Development
Corporation (“IEDC”) sued the Bank in state court on grounds of
lender liability, the matter was referred to arbitration under an
agreement between IEDC and the Bank. Such proceedings were
conducted under the Commercial Rules of the American Arbitration
Association (“AAA”). After IEDC and the Bank each struck five
potential arbitrators from the list of 15 furnished by the AAA, the
parties selected three arbitrators from among the remaining five.
The three thus selected constituted the panel that heard the
subject lender liability case in which the Bank asserted defenses
that it was furnished false information by IEDC in its loan
application. In a unanimous decision the panel awarded some
2
$3,800,000 to IEDC, which it then sought to enforce in state court.
Not surprisingly, the Bank scrambled to find all possible grounds
for vacating the panel’s award. The asserted ground that produces
the instant litigation is the Bank’s contention that one of the
three arbitrators (who shall remain nameless and is hereafter
referred to as “the Arbitrator”) would never have been allowed to
serve if he had disclosed —— as he should have, insists the Bank ——
that some 20 years earlier he had been investigated (but not
indicted) by a federal grand jury in connection with his own
dealings with financial institutions.
According to the Bank, the Arbitrator’s prior involvement with
the grand jury implicated his purported making of false statements
and filing of false reports with several financial institutions in
connection with his own loan applications. The Bank argues that if
these facts had been known prior to the instant arbitration, they
would have disqualified the Arbitrator from service on the panel.
In support of its motion before the district court for disclosure
of materials from the grand jury that investigated the Arbitrator,
the Bank asserts that the materials would show the Arbitrator’s
potential bias and partiality and would thereby avoid injustice in
the arbitration award in the state court proceedings in which IEDC
is seeking to enforce that award.
Despite the unavailability to date of the grand jury
materials, the Bank’s own investigation has produced the following
information: The Arbitrator was investigated by a federal grand
3
jury in the middle 1970's regarding the Arbitrator’s financial
disclosure statements to other banks, which statements were
purportedly false or inaccurate; the Arbitrator appeared before the
grand jury and testified for approximately one and one-half days;
although the Arbitrator does not recall the particular questions
put to him by the grand jury, he does recall being asked by an
attorney from the Public Integrity Section, Criminal Division,
United States Department of Justice, to resign from the federal
position held by the Arbitrator at the time, which request prompted
the Arbitrator to assemble his colleagues and discuss the matter;
a 1993 law review article had addressed the allegations that had
been made against the Arbitrator, as had a 1980 magazine article
and a 1978 article in a major newspaper. Most of the Bank’s
information was derived from its own December 11, 1995, deposition
of the Arbitrator.
The district court conducted a hearing on November 30, 1995,
after which supplemental briefing was requested. Following
completion of that briefing, a magistrate judge conducted a hearing
on December 14, 1995. After being reviewed and approved by the
district court, an order denying the Bank’s emergency petition was
entered by the magistrate judge. In that order the court found
that the Bank had failed to demonstrate that the grand jury
material it was seeking was necessary to avoid possible injustice
in another judicial proceeding, i.e., the Bank failed to show a
“particularized need for disclosure. Relying on Douglas Oil Co. V.
4
Petrol Stops Northwest1 and United States v. Miramontez2 to reach
this conclusion, the court emphasized the sufficiency of the
evidence already garnered by the Bank to support its contention in
the state court as well as the likelihood that the results of
arbitration would not have differed, given that it was a unanimous
decision of a three-person panel. The court also found inapposite
the Bank’s purported reliance on the rules of the Federal
Arbitration Act (FAA) and the guidelines of the AAA, concluding
that they are inapplicable to situations, such as the one now
before us, in which there are no allegations that would support a
conclusion that a conflict of interest existed between any
arbitrator and one or more of the parties to the arbitration.
The Bank’s motion for reconsideration was denied by the
district court in January 1996. In so doing, the court concluded
that:
“[i]t is apparent to this Court that virtually all of the
matters [the Bank] seeks to obtain by production of the
grand jury records have already been divulged. The state
court should be able to make a decision as to whether or
not the arbitrator’s failure to disclose that he had
testified before a grand jury in a matter involving the
arbitrator’s banking relationships tainted the
arbitration process to the extent that the award of the
arbitration panel should be vacated.”
The Bank timely filed its notice of appeal to this court one week
before the state court rejected the Bank’s motion to vacate the
1
441 U.S. 211, 222 (1979).
2
995 F.2d 56, 59 (5th Cir. 1993).
5
arbitration award. To the best of our knowledge, the Bank’s state
court appeal from that rejection is still pending.
II
ANALYSIS
A. Standard of Review
We review the district court’s denial of the request to
disclose grand jury material for abuse of discretion.3
B. Particular Need for Disclosure
Although Federal Rule of Criminal Procedure 6(e) protects all
aspects of grand jury proceedings from disclosure,4 subsection
(3)(C)(i) of that Rule empowers the court to make an exception to
the rule of secrecy in connection with a judicial proceeding.5 The
test for granting such an exception requires the proponent of the
disclosure to demonstrate a “particularized need” for the
information.6 To meet this standard the proponent must demonstrate
that “the material [sought] is needed to void a possible injustice
in another judicial proceeding, that the need for disclosure is
grater than the need for continued secrecy and that [the] request
3
Douglas Oil Co. v. Petrol Stops Northwest, 441 U.S. at 223;
United States v. Miramontez, 995 F.2d at 59.
4
In Re: Grand Jury Investigation, 610 F.2d 202, 216-17 (5th
Cir. 1980).
5
Fed. R. Crim. P. 6(e)(3)(C)(1).
6
United States v. Proctor & Gamble Co., 356 US. 677, 682-83
(1958).
6
is structured to cover only material so needed.”7 We are satisfied
that the district court’s analysis leading to its conclusion that
the Bank had failed to meet its burden under the foregoing test in
no way constituted an abuse of discretion.
Like the district court, we acknowledge that the state court
must determine whether the Arbitrator’s failure to disclose his
involvement in the grand jury investigation in the 1970's violated
the arbitration agreement between the Bank and IEDC, which in turn
depends at least in part on whether such non-disclosure violated
the AAA rules and thus the FAA.8 To the extent the Bank would
contend that such non-disclosure is per se evidence of partiality
requiring that the arbitration award be vacated, its argument is
unavailing: The Bank’s cites no authority for that position and we
are aware of none. Thus the district court does not automatically
abuse its discretion by concluding that the Bank had failed to show
“particularized need” for obtaining the grand jury records sought.
The Bank never even speculates, much less alleges, that the
Arbitrator had a personal interest in the results of the issues
under arbitration or that he had any personal, financial, social,
civic, political, or other relationship whatsoever with either
party to the arbitration. Yet it is precisely that type of
7
Douglas Oil Co. v. Petrol Stops Northwest, 441 U.S. at 222;
United States v. Miramontez, 995 F.2d at 59.
8
9 U.S.C. 1 et seq.
7
information that must be disclosed under the FAA and AAA rules.9
Moreover, given the background of the presumption disfavoring
judicial review of arbitration awards,10 an arbitrator’s failure to
disclose his experience in matters similar to those being
arbitrated is not a sufficient basis on which to vacate an
arbitration award.11 It follows that in this regard the district
court did not abuse its discretion in determining that the Bank had
failed in its burden of demonstrating that the grand jury materials
sought were needed to avoid a possible injustice in the arbitration
award.
C. Balancing Need for Grand Jury Materials Against Policy
Concerns.
Even if the Bank had met its burden of demonstrating a need
for the materials sought to avoid an injustice, the district court
would not have abused its discretion by finding, as it did here,
that on balance such need did not outweigh the need for continued
grand jury secrecy, even some 20 years after the grand jury in
question had completed its work without indicting the Arbitrator.
In this regard, the Supreme Court’s pronouncement in Proctor &
9
See Commonwealth Coating Corp. v. Continental Casualty Co.,
393 U.S. 145; cf. Schmitz v. Zilveti, 20 F.2d 1043, 1049 (9th Cir.
1994); Morelite Constr. Corp. v. New York City Dist. Council
Carpenters Benefits Funds, 748 F.2d 79 (2nd Cir. 1984).
10
See, e.g., Morelite Constr. Corp., 748 F.2d at 81;
Teamsters Local Union 657 v. Stanley Structures, Inc., 745 F.2d
903, 906 (5th Cir. 1984).
11
See e.g., Remmy v. PaineWebber, Inc., 32 F.3d 143, 147048
(4th Cir. 1994). Cert. denied, 115 S.Ct. 903 (1995).
8
Gamble is instructive:
The grand jury as a public institution serving the
community might suffer if those testifying today knew
that the secrecy of their testimony would be lifted
tomorrow. This indispensable secrecy of grand jury
proceedings . . . must not be broken except where there
is a compelling necessity. There are instances when that
need will outweigh the countervailing policy. But they
must be shown with particularity.12
The presumption of maintaining secrecy is heightened in those
instances in which the target of the grand jury is never indicted,13
and the information sought is largely available from other sources.
When the balancing conducted by the district court is viewed in
light of all the facts and circumstances, we cannot say that the
court abused its discretion in finding that the policy embodied in
the rule of secrecy outweighed any conceivable need demonstrated by
the Bank. After all, the state court can be —— and presumably has
been —— made aware of the grand jury investigation, the purpose
thereof, the Arbitrator’s acknowledgment that the investigation
involved his dealings with the financial institutions, that he was
asked to resign his federal position, and that his financial
records and dealings were at issue. In addition to the deposition
of the Arbitrator and the affidavit of the Bank’s counsel, such
information is revealed by the law review article and other
published reports.
III
12
Proctor & Gamble, 356 U.S. at 682.
13
See Douglas Oil, 441 U.S. at 219.
9
CONCLUSION
For the reasons set forth above, we conclude that the district
court’s refusal to grant the Bank’s request for any or all of the
grand jury materials it sought did not constitute an abuse of
discretion. The rulings of the district court are, in all
respects,
AFFIRMED.
10