Is the Second Circuit Ready to Recognize a Limited Fifth Amendment Privilege for One Person Corporations?

On Monday, November 30, 2009, oral argument will be held in the United States Court of Appeals for the Second Circuit before Justices Raggi, McLaughlin, and Walker in the matter of In re: Grand Jury Subpoena  Account Services v. U.S. Attorney’s Office, No.: 09-3561-cv.  This matter is being heard on appeal from the United States District Court for the District of New York [hereinafter “District Court”].  The question before the Second Circuit is whether the Fifth Amendment protection against self-incrimination applies in the context of a one-man corporation, where the sole employee, officer, and shareholder of a corporation is being compelled by subpoena to produce corporate documents and testify regarding same. 

This issue was addressed, but left unanswered, in a footnote in the Supreme Court case of Braswell v. United States, 487 U.S. 99 (1988). There, the Court held that, because a collective entity does not enjoy Fifth Amendment protections, an individual officer acting in a representative capacity for the collective entity can be compelled to produce business records, even if those records incriminate him.  In footnote 11 of its opinion, however, the Court reserved judgment on the issue of whether the rationale supporting compelling a custodian to produce corporate records extends to a situation where the custodian is able to establish, by showing that he is the sole employee and officer of the corporation, that the jury would inevitably conclude that he produced the records. 

Judge Swain, writing on behalf of the District Court, described the holding in Braswell as a “broadly stated categorical rule” that “[a] custodian may not resist a subpoena for corporate records on Fifth Amendment grounds.”  The District Court further opined that “it makes little sense to read footnote eleven as calling into question the scope of a rule expressed categorically and supported by detailed analysis several times within the very same opinion.”  Thus, although acknowledging Braswell’s footnote eleven, the District Court did not recognize a potential exception to what it described as the “broad,” general rule. 

Monday’s hearing will determine whether the Second Circuit will find that the Supreme Court expressly carved out an exception to the “broadly stated categorical rule” and whether it will extend Fifth Amendment protections to a sole employee acting in a representative capacity on behalf of a one-man corporation—a situation where there is no real distinction between the individual and the corporation itself.