Opinion
No. 153194.
1938-12-29
DAVIES v. COLUMBIA GAS & ELECTRIC CO. et al.
Bricker, Power & Barton and J. W. Huffman, all of Columbus, and P. Chamberlain, of Chicago, Ill., for plaintiff. Peck, Shaffer & Williams, of Cincinnati, and E. P. Mathews and Chas. P. Pfan, both of Dayton, for defendants.
Action by John L. Davies, etc., against the Columbia Gas & Electric Company and others to recover damages because of alleged conspiracy by defendants to dilute and the dilution of natural gas sold by certain of the defendants. On motion by defendants to suspend taking of depositions, and on request of notary for instructions.
Motion denied, and instructions given.
Order affirmed in 68 N.E.2d 231.Bricker, Power & Barton and J. W. Huffman, all of Columbus, and P. Chamberlain, of Chicago, Ill., for plaintiff. Peck, Shaffer & Williams, of Cincinnati, and E. P. Mathews and Chas. P. Pfan, both of Dayton, for defendants.
SCARLETT, Judge.
The plaintiff filed, on behalf of himself and of all other consumers of natural gas from the Ohio Fuel Gas Company, the thirty-page petition herein, seeking the recovery of $14,000,000 damages (this to be troubled), from the Columbia Gas & Electric Company, a corporation, and six other corporate defendants and fourteen individuals, officers of said corporations, by reason of alleged conspiracy to dilute, and the dilution of, the natural gas sold over a period of years by the addition of an inert or waste gas without heating value, and to misrepresent and to conceal from the consumers and from the Public Utilities Commission of Ohio, engaged in the fixing of rates upon the basis of fair return upon invested capital and the cost of such gas delivered.
To the petition the defendant filed voluminous motions which are not before this branch of the court for consideration, while the plaintiff, after service was had upon certain of the defendant officers, proceeded by deposition to question them before a notary as upon cross-examination, as authorized by statute (G.C., §§ 11497, 11502, 11503, and 11526). Some 1,200 pages of testimony had thus been taken and some 107 exhibits produced by the defendants upon the demand of the plaintiff, when twelve indictments were returned by the Franklin County Grand Jury, eight of them charging six of the individual defendants with perjury in the annual reports filed with the Public Utilities Commission, and the other four charging that two of the companies and from twelve to fifteen of the officers presented for payment certain false bills for natural gas, and/or obtained certain money by false pretenses, all charges arising out of the alleged dilution of the natural gas as charged in the petition herein.
Thereafter the deposition-witnesses Weaver and Kerr, upon instruction of counsel, refused to present for inspection and examination certain ‘inter-office memoranda,’ calorimeter rolls and miscellaneous correspondence relating to stabilization on the ground of immateriality, irrelevancy and because it was sought, allegedly, for use in the prosecution of the criminal cases against them. A motion was also made for the supension of the taking of the depositions on the ground that the defendants were being harassed and oppressed by the joint prosecution of the criminal and civil cases and by these depositions. The notary thereupon applied to this court for instruction as to whether he was justified in committing the witnesses for contempt, and the defendants filed a motion appealing to the Court for a suspension of the deposition proceedings. The defendants' very elaborate briefs in support of their contention on these two issues covers some sixty-odd pages.
It must be conceded that when the motion was filed, ordinary fairness would have dictated a suspension of the deposition in order to give the defendants a chance to meet the criminal charges. Such was probably the thought which caused a long delay in the filing of the plaintiff's memorandum, and as a consequence all pressure in the criminal cases has now abated. However, there still remains the question of whether the deposition should be suspended until the criminal indictments are finally disposed of, as contended by the defendants; and if such suspension is not justified, the questions submitted by the notary should at this time be considered.
The Motion to Suspend.
The parties disagree as to whether or not the court has any such power. The defendant contends that there is inherent in the court this power over its process, and that especially is this true of a court possessed of equity powers when its process is used to harass and annoy the adverse parties, or is used in disregard of their privileges either against self-incrimination or as to certain communications. On the other hand, the plaintiff contends that under the statute his right to proceed with the deposition, after service has been made upon the adverse party, is absolute.
At common law there was no right to take the testimony of any witnesses before trial, and the only relief was by appeal to equity by means of a so-called bill of discovery. In such a case the necessity for securing the testimony or making the discovery must be first proved and equitable maxims satisfied, such, for instance, as ‘he who seeks equity must do equity.’ Hence any injustice in the plaintiff's case caused a denial of the relief sought, namely, the right to discover or take testimony.
The defendants have cited early English and American decisions in which relief upon a bill of discovery was refused when criminal and civil cases about the same subject matter were then pending, and especially when the petitioner was active in both proceedings. In such decisions it was emphasized that, if the facts sought were material, then the defendant in the criminal case could not answer ‘without contributing to the establishment of the criminal charge.’ Such was the conclusion of Lord Langdale in the English case of Lee v. Read, 1842, 5 Beav. 381, and of Chief Justice Marshall in the early American case of United States v. Saline Bank of Virginia, 1 Pet. 100, 7 L.Ed. 69. So also the later New York case of Baar v. United States F. & G. Co., 206 App.Div. 412, 201 N.Y.S. 391. In the 1896 case of United States v. National Lead Company, C.C., 75 F. 94, the Court refused to compel the production of corporate books because the tendency would be to incriminate the officers in the fraud charge.
However, it seems that the conclusion of the lower Federal Court in the Lead Company case is not supported by late Supreme Court cases, which hold that the privilege against self-incrimination is personal and not possessed by a corporation, and that no individual can object to the production of corporate books or refuse to produce them upon the ground that they will incriminate him, as there can be no personal privilege as to such books. It has, therefore, been repeatedly held in recent decisions by the United States Supreme Court that an officer or any custodian, who has the possession of corporate books or other corporate records, can not refuse to produce them because of a claim of personal privilege.
The rules in relation thereto are thus stated in the syllabus of Wilson v. United States, 221 U.S. 361, 362, 31 S.Ct. 538, 55 L.Ed. 771, Ann.Cas.1912D, 558:
‘An officer of a corporation is protected by the self-incrimination privileges of the Fifth Amendment against compulsory productionof his private books and papers, but this privilege does not extend to the books of the corporation in his possession.
‘An officer of a corporation cannot refuse to produce documents of a corporation on the ground that they would incriminate him simply because he himself wrote or signed them, and this even if indictments are pending against him.
‘Physical custody of incriminating documents does not protect the custodian against their compulsory production. The privilege which exists as to private papers cannot be maintained. * * *
‘An officer of a corporation cannot withhold the books to save it, or if he is implicated in its violation of law to protect himself, from disclosures, although he may decline to utter on the witness stand any self-incriminating word.
‘An officer cannot withhold from a grand jury corporate documents in his possession because the inquiry was directed against the corporation itself.
‘Notwithstanding English views as to the extent of protection against self-incrimination the duties of corporations and officers thereof are to be determined by our laws.’
Another question of privilege is answered in the case of Grant et al. v. United States, 227 U.S. 74, 33 S.Ct. 190, 57 L.Ed. 423, wherein it is held that corporate records in the possession of counsel at a particular time for the purpose of litigation are not privileged as communications between attorney and client. In the syllabus it is said:
‘Professional privilege does not relieve an attorney from producing under subpoena of the Federal grand jury books and papers of a corporation left with him for safe keeping by a client who claimed to be the owner thereof.
‘Independent books and documents of a defunct corporation left with an attorney for safe-keeping by a client claiming to own them are not privileged communications.
‘Books and documents of a corporation must be produced by an attorney with whom they were left for safe-keeping even if they might incriminate the latter.’
And in the opinion Chief Justice Hughes, in referring to the books and papers in Grant's possession, says (227 U.S. at page 79, 33 S.Ct. at page 192, 57 L.Ed. 423):
‘These were independent documents. Even if they had been received by Grant as attorney for the purposes of consultation, they could not be regarded as privileged communications.’
In the light of this now well-recognized conclusion that to compel a custodian of corporate records to produce them is not compelling him to be a witness against himself, the ruling in the National Lead case is not persuasive. If the circumstances are not such as to constitute a ‘harassing’ of the opposite party, then the case for discovery is not defeated by the fact that the corporate records when produced would tend to incriminate the custodian.
But the plaintiffs contend that it is not within the province of the court to weigh the surrounding circumstances and make the determination which was necessary upon a bill of discovery, because Ohio statutes give an absolute right to a party as soon as service has been made upon the opposite party (G. C. § 11526), to take the deposition of a party or corporation officers (11497) without any prior finding of necessity.
As to production of books and other documents and ‘things', however, our Supreme Court in Ex parte Schoepf, 74 Ohio St. 1, 77 N.E. 276, 6 L.R.A., N.S., 325, held that ‘the rule in chancery’ has been retained because the statute (11503), authorizing a subpoena requiring the production of books, is limited by the words ‘which he may be compelled to produce as evidence,’ and that these words in turn must be construed with Section 11551, which describes the books, etc., as those ‘which contain evidence pertinent to the issue, in cases and under circumstances where they might [have been produced] by the ordinary rules of chancery.’
The general conclusions of the Court as to the effect of these statutes are contained in the second and forth branch of the syllabus as follows:
‘2. The rule in chancery as to compelling the production of documents for the purpose of evidence and inspection was and is that a party is entitled to a discovery of such facts or documents in his adversary's possession or under his control, as are material and necessary to make out his own case; but that this right does not extend to the discovery of the manner in which the adverse party's case is to be established, nor to evidence which relates exclusively to the adverse party's case. * * *
‘4. While an officer before whom a deposition is being taken is empowered to punish as for contempt any person who refuses to obey an order to answer a question or to produce a document, he cannot do so unless it is so ‘lawfully ordered’; and where such question or document is not pertinent to the issues tendered or made, or is not material or necessary to make out the case of the party calling for it, or is incompetent or privileged, the witness cannot lawfully be ordered to answer such question or to produce such document.'
There is, however, no such limitation in the statute providing generally for the cross-examination of parties and corporate officers, so that the reasoning in old decisions nicely weighing the equities as to whether a bill of discovery should be allowed, are not controlling here. As was said by our Supreme Court in Re Rauh, 65 Ohio St. 128, 136, 61 N.E. 701, 702:
‘Whether or not the provisions of the statutes afford opportunity for obtaining undue advantage over and of oppressing an adverse party is a legislative and not a judicial question.’
It is apparent from the Schoepf syllabus, supra, that the witness has a remedy in his own hands during his examination because his reght to refuse to answer questions or produce the document is sustained, if the question or document is not material or relevant or if it is privileged; and this is in addition to the right to object at the time of the trial. In a nisiprius decisions it has also been held that the court has the right to protect by injunction or by the suppression of the deposition, if there is an unwarranted exercise or abuse of the right to take depositions, but that the burden of showing the abuse is upon the party resisting the taking of the depositions. 14 O. Jur. p. 11. See also Ex parte Frank, 30 Ohio N.P., N.S., 30.
Certainly in view of its questionable status in Ohio, the Court would not be justified in applying the old chancery rule unless a very clear case was made; and that has not been done by the circumstances of this case. Applying the test of the nisi-prius decisions, the plaintiff has not harassed or annoyed the defendants by unnecessary depositions. While the defendants claim that the plaintiffs have caused the institution of the criminal proceedings, this claim is based merely upon an inference from the fact that the indictments were returned after the civil case was filed and that witnesses in the civil case also appeared as witnesses before the grand jury by which the indictments were returned. The suggestion that counsel for plaintiffs voluntarily consulted with the prosecutor is met by the affidavits of such counsel that they had nothing to do with the criminal prosecutions, and only appeared before the Grand Jury when required by subpoena so to do. The Court, therefore, finds that the plaintiff and his counsel did not institute, and are not concerned in the prosecution of the indictments.
The plaintiffs emphasize the quantity of testimony already taken and the numerous exhibits as proof that they are being harassed and annoyed. Quantity is a relative matter, and certainly a large quantity of testimony is reasonably to be expected in proof of an extensive conspiracy extending over a long period of years and involving an entire business so large and covering such a large territory as in this case.
The individual defendants are, of course, entitled to have all their privileges against self-incrimination fully protected, but these privileges are fully protected by the remedies pointed out in the Schoepf case, supra. They are entitled to refuse to answer questions calling for answers in them which tend to involve them in a criminal conspiracy charge.
The Court, therefore, concludes that at this time the circumstances do not warrant the unusual interference sought in suspending the taking of the depositions. A case of this magnitude will require a long time to try and progress should not be indefinitely stayed. It is only fair that the corporate records be fully identified at this time, and their preservation provided for. In a case of this magnitude, if the reasons were sufficient, witnesses might be tempted to leave the jurisdiction of the court and records might be removed so that they would not be available at the time of the trial. To avoid such a situation is the purpose of these depositions ‘de bene esse.’ If the witnesses are in the jurisdiction of the court at the time of the trial, the depositions, of course, are not competent.
Request of Notary for Instructions.
The defendants, Weaver and Kerr, officers of the defendant corporations, refuse, upon the advice of counsel, to produce certain corporate documents, records and inter-office correspondence demanded through the process of subpoenas duces tecum regularly served. This refusal was based upon the claim of immateriality and irrelevancy and because it is alleged they were sought for the use in criminal prosecutions.
Burden of Proof. The defendants claim that the burden is upon the plaintiff to show the relevancy of the documents whose production is demanded. The Court believes this is not a true rule as to cross-examination, because the cross-examiner is not supposed to know what the witness may answer. It is only necessary that his questions relate to what is apparently relevant; and this is the implication in plaintiff's quotation from Wigmore, who says that the burden is upon the one offering testimony ‘if the fact offered is in itself apparently irrelevant.’ The true rule is stated in Ex parte Frank, 30 Ohio N.P.,N.S., 30:
‘The burden of showing an abuse of process in the taking of a deposition rests upon the party who resists the taking.’ (2 Syl.)
The broad rule as to the relevancy and materiality of corporate records when the corporation and its officers are charged with a conspiracy in the conduct of the corporate business is clearly stated in the recent case of Ex parte Bevan, 126 Ohio St. 126, 184 N.E. 393 (Syl.):
‘7. In an action charging fraudulent conspiracy by the officers of a corporation, because of the tendency toward liberality in cases of this character, the range of the testimony is wide, and subpoenas duces tecum, which command that the entire correspondence file, records and documents of such corporation for many years back, be produced before the notary public by the officers of the corporation, to be used in connection with the giving of their depositions as upon cross-examination, are not so broad and sweeping as to be violative of due process, and do not constitute unreasonable searches and seizures.’
The Bevan case presents exactly the situation which we have here except that the officers there refused to give any testimony or offer any documents. This difference is one of degree, and not of kind. The rule stated is merely the general one recognized in all conspiracy cases. In such cases all of the acts of the conspirators in relation to the conspiracy and during its progress are part of the res gestae. Not only are those acts done in furtherance of the conspiracy competent and relevant but also all statements of the individual conspirators or documents, which may tend to prove the knowledge of any one of the conspirators, are competent and relevant.
Coming now to the objections to specific documents, attention will first be given to the Shinholser memoranda which Mr. Kerr refused to produce. As to what this is, the Court is only advised that it relates to ‘stabilization’ as practiced by the company and to the proposed construction of the new Crawford Reforming Plant.
It is claimed that stabilization is primarily a defense, and under the rule in the Schoepf case the plaintiffs can not inquire into it, but the rule in the Schoepf case is as to that ‘which relates exclusively to the [adverse party's] case.’
The physical process which the defendant calls ‘stabilization’ is the very process which the plaintiff calls ‘dilution,’ and is of the very essence of the plaintiff's case. How then can the practice of ‘stabilization’ be considered as relating exclusively to the defense offered by these defendants? The Court can not see any merit in defendants' contention in this respect.
It is also suggested that some of these documents are to be considered as communications between attorney and client, the documents now being in the possession of counsel. The true rule in that regard has already been stated in the quotation from Chief Justice Hughes in the Grant case, 227 U.S. 74, 33 S.Ct. 190, 57 L.Ed. 423. Other phases of the question are dealt with in the Schoepf case, 74 Ohio St. 1, 77 N.E. 276, 6 L.R.A.,N.S., 325, where it is said that a report made up for the information of the claim agent for the purpose of settlement or for the use of counsel in the litigation is privilege, if such report after its preparation remains exclusively in the possession of such claim agent or attorney. This is an application of the English rele, so that the limitations of that rule as noted in the Frank case, 30 Ohio N.P., N.S., at page 34, are pertinent. In the case of Fenner v. London, Q.B. 767, it is said, ‘if they fall short of being notes of the case to be laid before counsel they are not privileged.’
Certainly there is nothing to indicate that the documents which the defendants refuse to produce, were prepared exclusively for counsel with a view to litigation and remained in counsel's possession continuously after their preparation.
It is also argued that reports of employees are not binding upon the company. Whatever employees did in the performance of the duties regularly delegated to them and in furtherance of the company business, does bind the company. But regardless of such question, the fact that reports were made to corporate officers, defendants herein, makes the reports themselves competent and material, upon the question of the knowledge possessed by each of the defendant officers and their participation in the conspiracy.
A voluminous part of the evidence in question consists of calorimeter charts or rolls. These are automatic records of the British-Thermal-Unit content of the natural gas as it passed through the mains, as registered by pen or needle upon a continuous strip of paper, the rolls being 100 feet in length and each covering a period of some months.
The objection is that these records are only partial ones and that there are many gaps. It is also objected that the record was only made of the content of the gas after stabilization, and therefore does not prove the difference in the content of the gas before and after the process. The answer to this is very simple. All the facts of any case of any equation need not be proved by any particular piece of evidence. It is only necessary that the particular evidence offered proves or tends to prove any fact involved in the case, or any fact from which a material inference may be directly drawn. The plaintiffs, of course, may prove the content of the gas before stabilization by any other evidence available, and when the heat contents of the gas before and after dilution or stabilization are separately arrived at, the conclusion may be had as to the loss in heat value by the dilution by deducting the one from the other.
It is also to be noted, as suggested by the plaintiff, that at some points on the chart, when the diluting or stabilizing process was not in operation, the chart shows the original B. T. U. content.
The demand made upon Mr. Weaver was for the production of ‘all correspondence, telegrams, inter-office ans intercompany memoranda, including engineering studies and reports.’ The propriety of this demand seems to be completely answered by the syllabus of the Bevan case, quoted supra, and by the general rule as to the latitude required in conspiracy cases.
In the briefs of the defendant, but not in the subpoenas, there is some reference to ‘desk-pad memos'. Of course, any personal memorandum by an officer or employeefor the purpose of refreshing that individual's recollection only, would not be a record or property of the corporation and would not be included in this demand. It would seem to be a personal paper and as such privileged as self-incriminating.
The Court therefore concludes that all the documents named in the subpoena, relating to the process of dilution or stabilization, are apparently relevant in this conspiracy case.
The notary is therefore instructed that he may require their production and proceed according to statute, if and when a refusal is persisted in. He is also instructed that each one of the individual defendants is entitled to claim the privilege protecting against self-incrimination as to any questions the answers to which would tend to prove a criminal conspiracy in which he participated.