Thursday, July 08, 2004
Not surprisingly, the SEC was not so eager to allow its employees to appear for a deposition. It inquired of Stewart as to her reason for subpoenaing Glotzer and Slansky. Stewart's attorneys told the SEC that they wanted to question the lawyers regarding their recollection of interviews that they had conducted with Steward Bacanovic and his assistant, Douglas Faneuil.
The SEC declined to allow its attorneys to testify, claiming that such a deposition would violate the attorney work product privilege.
Stewart moved to compel compliance with teh subpoena. The SEC claimed that Stewart had not exhausted her administrative remedies, but the district judge granted the motion, asserting that he would deal with any privilege issues as they arose.
The SEC filed an emergency motion with the Second Circuit, seeking a stay of the district court's order and for a petition for mandamus. The Court heard argument on the motion and granted the petition for mandamus, dismissing the stay motion as moot.
The Court found that there was a novel and significant issue of law -- whether the Administrative Procedure Act's exhaustion requirement applies to a motion to compel a government agency to comply with a subpoena -- and that resolution of the issue would "lend structure to the procedural framework for adjudicating discovery disputes involving government agencies."
Second, the Court found that mandamus was proper because the district court's order was not appealable and, hence, mandamus was the only adequate means available to the SEC to protect its interests. While the SEC could just refuse to comply and deal with the issue on a contempt motion, the Court noted that the circumstances of the case were unusual and that such a procedure was not appropriate under the facts of the case. First, the SEC was not arguing that the district court had abused its discretion in granting the motion. It was asserting that the district court lacked jurisdiction to consider the motion. Second, the Court felt it inappropriate to force a government agency to submit to a contempt order.
Third, the Court held that resolution of the issue would aid in the administration of justice.
Having found, based on the above, that mandamus was a proper remedy, the Court turned to the merits of the petition. The Court held that in order to seek judicial review of an agency's non-compliance with a subpoena, a party must exhaust administrative remedies pursuant to section 704 of the Administrative Procedure Act. Stewart failed to do so. Hence, the district court lacked jurisdiction to hear the motion, and, on that basis, the petition for mandamus was granted.
In re SEC ex rel. Glotzer can be found at the Second Circuit website. It was decided on July 6, 2004.