EFTA00593661.pdf

INSIGHTS THE CORPORATE & SECURITIES LAW ADVISOR ASPEN PUBLISHERS Volume 24 Number 12. December 2010 SECURITIES LITIGATION "The Fifth Amendment Can & certainly appears most frequently in the popular imagination in criminal courtroom dramas and Will Be Used Against You In high-profile prosecutions, it also can have a cru- a (Federal) Court of Law" cial and even a case-determinative effect in just the type of civil litigation that in-house counsel Although it mar sound completely counterintui- must deal with day in and day out. Some fre- tive and unfair, an individual's exercise of his con- quently overlooked quirks of Fifth Amendment stitutional right against self-incrimination could jurisprudence in the civil arena may become traps jeopardize a company's right to defenditselfin civil for civil litigators and in-house counsel if they are litigation. Infact, even whenlimner employees and ignored or not fully appreciated in evaluating and non-parties "take the Fifth," an adverse inference defending a dispute. This is true whether the dis- of wrongdoing could arise against the company. pute involves issues relating to securities, antitrust, consumer protection, or other business related By David A. Battaglia and laws. In essence, and contrary to popular opin- Vanessa C. Adriance ion, assertion of the Fifth Amendment by pres- ent or former employees can lead to an adverse Attorneys and lay citizens alike feel that they inference of improper or wrongful conduct by have at least a passing familiarity with the Fifth the corporation in civil litigation, in certain cir- Amendment to the United States constitution cumstances and often within a court's discretion. and its protection against self-incrimination— Accordingly, care is required in addressing this they know that it will protect them and their potential issue. clients from being forced to give testimony that may incriminate them. Corporate in-house coun- Background sel may believe that the Fifth Amendment does not have much of a bearing on their day-to-day The Fifth Amendment to the United States con- civil practice, and think of it as mostly a creature stitution protects individuals from (among other of the criminal courts—a place where they rarely things) being forced to incriminate themselves. The find themselves. While the Fifth Amendment protection afforded by the Fifth Amendment is broad, applying in civil and criminal proceedings, and to guilty and innocent parties.' A witness may David A. Battaglia is a partner, and Vanessa C. Adriance assert his Fifth Amendment rights and refuse to is an associate, at Gibson, Dunn & Crutcher LLP in Los provide any "answers [that] could reasonably fur- Angeles, CA. nish a link in the chain of evidence against him."2 EFTA00593661 A witness also may assert his Fifth Amendment supported by independent evidences Second, the privilege any time that "a responsive answer to proponent must show that there is a substantial the question or an explanation or why it cannot need for the evidence sought, and that no less be answered might be dangerous because injurious burdensome way to get it exists9A disclosure could result."3 The Fifth Amendment privilege is broad because "truthful responses of In addition to these two prerequisites, the an innocent witness...may provide...incriminat- type of adverse inference that can be made is lim- ing evidence from the speaker's own mouth." It ited. An inference may be made only about the follows naturally from this protection that silence answers to the specific questions asked of the wit- following an invocation of the Fifth Amendment ness asserting his rights. An inference may be no privilege may not be used to support a criminal broader than the question asked, and the jury must conviction, and that a jury in a criminal proceeding be instructed about this limitation." Put another may draw no inference from a witness's invocation way, no inference can be made if the questions that of his or her Fifth Amendment rights. would give rise to that specific inference were not asked of the witness12 Though these basic tenets In civil trials in most state courts, the same of federal privilege law are relatively clear and rule holds true.5 A witness may invoke Fifth well established, when they apply is murkier. Amendment rights in a civil proceeding, and the jury may not make any inference based on that Adverse Inferences by Non-Parties invocation that the witness is guilty of some wrongdoing. Indeed, if at all possible, the jury A factor complicating adverse inferences from should be prevented from hearing the invocation Fifth Amendment invocation in civil cases is the at all. However, this currently is not the case in stature of the party invoking the Fifth Amend- Federal court. Under the Federal Rules of Civil ment. In other words, can a fact finder in a fed- Procedure and the relevant case law,6 if a witness eral civil case be permitted to draw a negative invokes his or her Fifth Amendment right not to inference against a party based on the invocation incriminate himself in a civil trial, a jury may, in of the Fifth Amendment by a non-party? There certain circumstances, make an inference of guilt is no definitive answer to this question. Rather, or wrongdoing by the party against whom the tes- courts must engage in a fact-intensive inquiry that timony is offered. Such an inference may be per- will inevitably be different in each case to deter- missible regardless of whether or not the witness mine how a non-party's invocation of the Fifth is a party himself. Amendment may be used against a party. When Are Negative Inferences Protected? The most prominent case on this issue comes from the Second Circuit and sets up a loose set In stark contrast to most states' laws, federal of factors to determine when adverse inferences law can permit a jury to hear and draw nega- should be drawn. In LiButti v. United States, the tive inferences based on invocations of the Fifth court, after outlining the relevant case law, dis- Amendment privilege against self-incrimination in tilled four "non-exclusive factors which should civil trials? Under federal law, an adverse inference guide the trial court" in making determinations can follow from a witness's exercise of his or her regarding whether adverse inferences can be made rights under the Fifth Amendment to the United from non-parties' decisions to invoke the Fifth States Constitution when two conditions are met. Amendment.13 The four LiButti factors are: First, the proponent of the inference must 1. The nature of the relevant relationships. While show that the inference sought is separately no particular relationship governs, the nature of INSIGHTS, Volume 24, Number 12, December 2010 2 EFTA00593662 the relationship will invariably be the most sig- Former employees do fit within the LiBuzzi nificant circumstance. The relationship should framework. However, there also is a large body be examined from the perspective of a non-party of case law that specifically addresses inferences witness' loyalty to the plaintiff or defendant, as based on privilege invocations by former employ- the case may be. The closer the bond between ees. Generally, courts have held that the fact that witness and party, the less likely the non-party a proffered witness invoking the Fifth Amend- witness would be to render testimony that would ment is a former employee is not a per se bar to damage the relationship. an adverse inference based on that testimony. For example, the Second Circuit addressed this issue 2. The degree of control of the party over the in the case of Brinks v. City of New York.17 In nonparty witness. The degree of control which the Brinks, the Second Circuit allowed the jury to party has over the non-party witness in regard to make adverse inferences against Brinks due to the key facts and general subject matter of the lit- the invocation of the Fifth Amendment by its igation will likely inform the trial court whether former employeesis Similarly, the Third Circuit the assertion of the privilege should be viewed as in RAD Services Inc. v. Aetna Casualty and Surety akin to testimony admissible under Fed. R. Evid. Co., also allowed evidence of the invocation of 801(dX2), and may accordingly be viewed, as in the Fifth Amendment by former employees to Brink's, as a vicarious admission. be used to infer an answer unfavorable to the former employer.19 In RAD Services, the Third 3. The compatibility of the interests of the Circuit wrote, "the mere fact that the witness no party and non-party witness in the outcome of the longer works for the corporate party should not litigation. The trial court should evaluate whether preclude as evidence his invocation of the Fifth the nonparty witness is pragmatically a noncap- Amendment."20 tioned party in interest and whether the assertion of the privilege advances the interests of both the Courts have rejected a non-party witness and the affected party in the outcome of the litigation. mechanical approach to determining whether the 4. The role of the nonparty witness in the litiga- jury may make negative tion. Whether the non-party witness was a key fig- inferences about an ure in the litigation and played a controlling role in respect to any of its underlying aspects also employer because of an logically merits consideration by the trial court.14 employee's silence. LiButti makes clear that the "overarching con- In the employee or former employee context, cern is fundamentally whether the adverse infer- courts generally are willing to allow the invocation ence is trustworthy under all of the circumstances of the Fifth Amendment by a non-party employee and will advance the search for truth."15 The to be used to draw a negative inference against the LiButti court thus set up a test that requires an employer, provided all of the other criteria for an intense, fact-based analysis in each case, putting inference are met. However, the issue is still a fact- broad discretion in the hands of the trial court and case-specific inquiry. As with adverse infer- and leaving lawyers guessing about which circum- ences generally, courts have rejected a mechanical stances might produce a negative inference for approach to determining whether the jury may their clients (or in what circumstance they may be make negative inferences about an employer able to procure an adverse inference that will be because of an employee's silence.2I Instead, a court helpful to their clients),I6 must perform a careful review of the facts in the 3 INSIGHTS, Volume 24, Number 12, December 2010 EFTA00593663 particular case before it when deciding whether the privilege in response to questions concerning to permit an inference based on an invocation by their employment status, it was unclear whether an former employee, and the invocation alone— the deponents were former or current employees.29 without further evidence—will not be held against Nonetheless, the court held that the employment the corporate employer party.22 status of the witnesses would not bar the admis- sion of the invocations as vicarious admissions of Since district courts employ the imputation the former employer.30 The court also found that analysis on a case by case basis, it is worthwhile although present employment serves to reduce to consider the factual circumstances underlying the chance that the witness will falsely testify, the most important precedent. In Brink's Inc, the "any factors suggesting that a former employee Second Circuit reviewed a district court judgment retains some loyalty to his former employer— allowing the questioning of third-party defen- such as the fact that the employer is paying for dants (including former employees) concerning his attorney—would serve the same purpose."3! matters about which they might (and ultimately Thus, the Third Circuit rejected an argument that did) invoke the Fifth Amendment, and allowing an ex-employee might seek to discredit or tarnish the jury to draw adverse inferences from their his former employer, and that for this reason a silence.23 The case involved a contract in which lack of the proof regarding his continuing loyalty Brink's agreed to collect coins from city parking to the employer should render an invocation of meters. After several Brink's employees were con- the Fifth Amendment privilege—and any infer- victed of stealing revenue from the meters, the ence arising therefrom—inadmissible.32 City canceled the Brink's contract. Brink's sued for damages, the City counterclaimed for breach There is no absolute bar of contract and negligence, and Brink's filed a third-party complaint against twelve of its pres- to permitting a jury to ent and former employees and their supervisor. hear a Fifth Amendment The Second Circuit affirmed the district court's invocation and make an judgments and concluded that the employee's adverse inference based claims of privilege were admissible and compe- tent evidence under the circumstances of the on that invocation. case. Given the probative value of the evidence to the City's case, its admission was not considered The Eighth Circuit also has held that infer- unduly prejudicial.24 The court also considered ences based on invocations by witnesses in a the fact that the same inference would be benefi- "similar" posture to ex-employees may be per- cial to Brink's in its third-party claims against its missible.33 First, in permitting an inference in former employees.25 As the court stated, Brink's Cerro Gordo, the court found that "[a]lthough it "conflicting interests...illustrate[d] the difficulty, is true that Richards [non-party witness] is not and perhaps the undesirability, of a bright-line presently listed as a director or voting member rule against drawing inferences."26 of the charity, there is some question whether he retained some control over the charity and In RAD Services a plaintiff brought suit whether his resignation as a voting member after against its insurer to recover costs incurred in these suits were filed was not purely a matter of disposing of hazardous waste materials.27 The litigation strategy... There is no evidence that defendant insurance company deposed an official would lead one to believe that Richards would and a managing employee of the plaintiff corpo- assert the privilege solely to harm Cerro Gordo's ration, both of whom invoked their Fifth Amend- chances of success in this litigation."34 Second, ment privilege.78 Because the deponents asserted the court concluded that the invocation of the INSIGHTS, Volume 24, Number 12, December 2010 4 EFTA00593664 privilege was only one of a number of factors In a case with some claims based on state law that the jury considered in determining whether and some founded on federal law, Erie and its a fraud was committed, and there was other evi- progeny require the court to apply state law to dence presented at trial that supported the infer- some claims and federal law to others. However, ence sought.35 Third, the non-party was a key courts have found that, in cases where the court's figure in the case.36 Finally, the court engaged in jurisdiction is based on a Federal Question and an analysis under Rule 403 and concluded that a second, state law claim is before the court via the probative value of the evidence substantially supplemental jurisdiction, the court should apply outweighed any danger of unfair prejudice to the federal privilege law to both claims. In the case party opposing the inference.37 in which two claims are before the court, and the court has jurisdiction over one as a federal ques- In other settings where the proffered witness tion, and independently has jurisdiction over the is even further removed from the parties, courts other due to diversity, the path of the court is are less willing to allow inferences to be drawn unclear. In such a case, the court would have juris- against a party based on the witness's invoca- diction over the state claim even if it were brought tion of the Fifth Amendment. For example, in separately from the federal claim, and thus would Kontos it Kontos, the court held that a negative clearly be bound to apply a state's more protec- inference could not be drawn against the benefi- tive privilege law to that claim. As of this writing, ciary of a life insurance policy when the sister of no court has cogently addressed the issue of what that beneficiary invoked the Fifth Amendment should be done in this scenario—when the same when she was deposed.311 However, even in Kon- evidence would be admissible to resolve one claim tos, the analysis is fact-specific, and there is no but not the other. absolute bar to permitting a jury to hear a Fifth Amendment invocation and make an adverse No court has cogently inference based on that invocation arising solely from the relationship between the witness and the addressed the issue of parties (or lack thereof).39 what should be done in this scenario —when the Choice of Law same evidence would be Beyond the question of whether an inference admissible to resolve one is permissible under relevant federal law, courts claim but not the other. must decide whether federal privilege law is appli- cable to particular claims at all, as federal courts In cases before the court pursuant to supple- sitting in diversity must apply the law of the state mental jurisdiction under 28 U.S.C. 1367, courts in which they sit to the claims before them, pur- have held that they should apply federal privilege suant to Erie and its progeny. This well-worn law to all claims.40 In the case of an invocation proposition applies with equal force to privilege of the Fifth Amendment, this means that the law, as articulated in Federal Rule of Evidence court would be able to permit adverse inferences 501, as to substantive law. In federal courts sit- by the jury to decide both claims. However, the ting in most states, this means that any inferences cases dealing with this issue are sparse. Further- based on an invocation of the Fifth Amendment more, even the cases cited above do not squarely would be flatly prohibited. However, in civil cases address the problem as they deal with privileges in which the Federal Court's jurisdiction is based that had never been recognized at all by federal on a federal question, pursuant to 28 U.S.C. law (Agster), or privileges that had been specifi- § 1331, the court may permit an inference. cally rejected by federal law (Jadwin). 5 INSIGHTS, Volume 24, Number 12, December 2010 EFTA00593665  The truly unresolved question is what a court Ninth Circuit had not explicitly addressed the should do when it is faced with two independent issue of what privilege law should control in cases claims—a diversity claim and a federal question involving independent state and federal claims:" claim—rather than a federal question claim and a The court then applied state privilege law to the pendent state law claim. This issue has never been state privilege claims and federal privilege law to addressed by the US Supreme Court nor dealt the federal claims in the case.46 However, Platypus with head-on by any federal appellate court. Inde- did not address this issue head-on, as the prof- pendent claims are categorically different from fered evidence would have been relevant only to pendent claims. Pendent jurisdiction is defined as the state law claims in the case—the very claim "[a] court's jurisdiction to hear and determine a for which the relevant privilege law excluded the claim over which it would not otherwise have juris- evidence.'t7 diction, because the claim arises from the same transaction or occurrence as another claim that The Platypus court also acknowledged in is properly before the court."a" Therefore, by dicta the possibility that in some cases involving definition, if a court has independent jurisdiction both federal and state claims a court might be over a claim based on diversity, that claim is not required—for the sake of ease and consistency— "pendent." In diversity cases, the privilege law of to apply only one set of privilege laws to two sets the state applies" Thus, it would appear that a of claims if identical evidence were required for federal court would be bound to apply the state's both claims, and that in such a case it appeared privilege law to a claim over which it has indepen- that Federal law should govern." But the court dent diversity jurisdiction, even if that claim is also acknowledged that "a bright line rule, coupled with a federal question claim. However, requiring the application of federal common the real-world result in such a case is far from law privilege principles to a case containing clear. any federal claim, is neither appropriate nor necessary."49 Popular culture and Platypus may not provide a useful barom- American public eter for how courts should address this question consciousness make vis-à-vis the Fifth Amendment for another rea- frequent and broad son. The privilege in question in Platypus was invocations of the not the Fifth Amendment privilege against self incrimination, but rather the New Mexico state privilege the rule rather accountant-client privilege—a privilege that is than the exception. not recognized by federal law at all and therefore could not reasonably be applied to any federal The only case to address a similar issue is question.50 Thus, courts and practitioners are Platypus Wear, Inc. v. RD. Co.03 Platypus was a left with very little guidance about what to expect case with multiple claims: some state law claims when faced with a potential adverse inference over which the court had jurisdiction based on based on the Fifth Amendment combined with diversity, and some federal law claims over which state and federal law claims over which the court the court had federal question jurisdiction. The has independent jurisdiction. court was asked to decide how to handle evidence that would be admissible under federal privi- What Federal Courts Should Consider lege law and excluded under the state's privilege law, but that was relevant only to the state law Courts faced with this issue should carefully claims.'" The Platypus court first noted that the consider whether or not they should prohibit any INSIGHTS, Volume 24, Number 12, December 2010 6 EFTA00593666 adverse inference based on the invocation of the inference based on an invocation of the Fifth Constitutional privilege against self-incrimination Amendment can only result in a deprivation of and (if the issue is applicable) whether to apply protections that both witnesses ad litigants are state privilege law or federal law to a state-law entitled to in prosecuting their state law claims claim. merely due to the chosen forum. In other cases applying disparate privilege laws to claims Courts also should carefully consider the brought together may prove simply impracti- evidentiary value of this type of evidence and cal and overly burdensome for the Court, and whether, given the inherently unreliable nature of impossibly confusing to the jury. Applying fed- such evidence, its use should be limited to only eral privilege law to state law claims more often those cases in which it is clearly admissible. In than necessary also has the potential to create this respect, the Supreme Court has observed that differing results based solely on choice of forum, "one of the Fifth Amendment's basic functions and therefore encourage forum shopping—an is to protect innocent men who otherwise might issue that federal courts consistently have sought be ensnared by ambiguous circumstances."5! Wit- to minimize. Indeed, this is exactly the problem nesses frequently invoke the Fifth Amendment that Erie and its progeny sought to avoid.54 For solely because they are advised to do so by coun- this reason, courts should consider seriously the sel, regardless of whether they are guilty or inno- application of state privilege law to state law cent. As Justice Jackson noted, "any lawyer worth claims brought in federal court. This is true even his salt will tell the suspect in no uncertain terms if they are brought in conjunction with a federal to make no statement to police under any circum- question claim, and whether there is a risk that stances."52 Whether true or not, a person is well doing otherwise will encourage forum shopping advised to heed the advice of their counsel when unnecessarily.55 it comes to such matters. In addition, the breadth of the protection combined with the place the Fifth Amendment has taken in not only Ameri- Federal courts have can law but also popular culture and American recognized the potential public consciousness make frequent and broad for prejudice inherent invocations of the privilege the rule rather than in presenting a witness the exception. to the jury whose entire Furthermore, an innocent witness may (very testimony consists of reasonably) believe that a prospective piece of tes- repeated invocations of timony would tend to incriminate him in spite of the Fifth Amendment. the fact that he is innocent.53 Therefore, the mere fact that a witness relies on the Fifth Amendment is indicative of nothing more than that he may In the interests of comity to the states, the have received the advice of counsel or may believe protection of important constitutional rights, that his answer might potentially lead, howeverand fairness to witnesses and litigants, federal indirectly, to some piece of incriminatingevidence, courts should consider carefully preventing juries however small. It is not, however, even remotely from making inferences based on invocations of or reliably indicative of guilt or wrongdoing and the Fifth Amendment in cases involving indepen- therefore has negligible probative value. dent state law claims. To do otherwise threatens to erode rights guaranteed by the Fifth Amend- The choice of law issue also should not be ment to the Constitution as well as state law, and taken lightly. In some instances permitting an should not be done lightly. 7 INSIGHTS, Volume 24, Number 12, December 2010 EFTA00593667 Taking the Stand to Take the Fifth with the burden of proof...resorted to less direct and more circumstantial evidence" "[o]therwise, Despite all of these choice of all issues, in the jury might have inferred the companies did practice adverse inferences are often permitted not call [the witness] because his testimony would in federal civil trials. A natural result of this is have damaged their case."62 Similarly, the Eighth that witnesses are more frequently permitted Circuit in Rosebud Sioux Tribe v. A&P Steel, Inc., (or required) to testify in front of the jury, even explained that the Fifth Amendment is concerned when it is known that they will assert their Fifth with "submitting any individual to the cruel trh Amendment rights. This is not the case, for exam- lemma of self-accusation, perjury or contempt" ple, under California law, where there is a strong but "retaining the availability of the privilege in presumption against permitting the admission of civil cases and simply allowing the jury to draw an testimony that consists only of a witness asserting adverse inference from its invocation neither jeop- their Fifth Amendment privilege.56 The reason ardizes the privilege nor the witness."63 Under this for this rule is based on the concern that an invo- rationale the court decided it was permissible for cation of privilege may "have a disproportionate witness to be called to the stand, even when the impact" on the jury's deliberations, because a jury calling party knew that the witness would merely may view an invocation of the privilege as "high invoke their Fifth Amendment rights.% courtroom drama of probative significance."57 The Fifth Circuit has taken a similar approach, Moreover, under California law, such testi- evaluating the prejudicial effect of such testimony mony serves "no purpose."58 In fact, rather than weighed against its probative value on a case by serving a proper purpose, California courts have case basis. In Federal Deposit Ins Corp. v. acknowledged that testimony of this type is prof- & Deposit Co., it left discretion to the district fered only for the purpose of creating the very court to determine if a party was allowed to call inference that is prohibited under California law.59 a witness simply to have that witness invoke the (Observing that the party presenting the testi- Fifth Amendment in front of the jury.65 The court mony must have "sought to present to the jury" wrote, "[s]imiarly, we refuse to adopt a rule that an adverse inference.) Permitting a party to put would categorically bar a party from calling, as a on witnesses who it knows in advance will invoke witness, a non-party who had no special relation- the privilege has been held to have only one fore- ship to the party, for the purpose of having the seeable result: it can only serve to "invite the jury witness exercise his Fifth Amendment right."66 to make an improper inference" and waste the Court's time with meaningless testimony.% This discretionary approach to certain witness testimony in federal civil cases is certainly not Federal courts also have recognized the poten- unique to the context of Fifth Amendment invo- tial for prejudice inherent in presenting a witness cation, but in terms of trial preparation, prepar- to the jury whose entire testimony consists of ing for the worst—assuming that both an adverse repeated invocations of the Fifth Amendment 61 inference and live testimony of any invocations of Nonetheless, federal courts are much more likely the privilege will be permitted—is probably the than state courts to permit this type of evidence, safest course of action. However, a practitioner is since inferences are permissible under federal law. not without a basis for arguing for the exclusion of the witness in his particular case, and motions For example, in Cerro Gordo Charity v. Fire- in limine arguing that, even if an adverse infer- man's Fund Am. Life Ins. Co., the court found that ence is permitted the actual testimony should not letting the jury hear a non-party invoke the Fifth be are not frivolous. Any practitioner seeking an Amendment "informed the jury why the parties inference must be careful to ask all of the relevant INSIGHTS, Volume 24, Number 12, December 2010 8 EFTA00593668 questions, because any inference that is permitted 3. Reiner. 532 U.S. 17, 21 (internal quotations omitted) (emphasis will be limited to the testimony that would have added) been elicited by the questions actually asked 67 4. 532 U.S. 17.21. Thus, follow-up questions must be asked, as if 5. See. eg,: Alaska R. Evid. 512(c): Ark. R. Evid. 512: Cal. Evid. the witness were giving substantive testimony.68 Code § 913(a): Del. R. Evid. 512: Haw. Rev. Stat. §626-1, R. 5l3: Idaho Where possible, stipulations should be considered R. Evid. 512: Ky. R. Evid. 511: N.D. R. Evid. 5l2: Net Rev. Stat. and accepted in lieu of live testimony. §27-513: Nev. Rev. Stat 49.405: NJ. R. Evid. 532; N.M. R. Evid. 11-513: Okla. Stat. Ann. §2513: Or. Rev. Stat. §40.290: Vt. R. Evid. 512. Conclusion 6. Baxter it Palmlgiono. 425 U.S. 308. 317 (1976) (permitting adverse inference in civil case). Companies involved in civil litigation pres- 7. 425 U.S. 308. 317. ently do not have the clear protections they 8. See Baxter. 425 U.S. 308. 317, Doe e Glanzer. 232 F.3d 1258. 1264 deserve when employees or former employees (9th Cir. 2000): Securities & Erchange Comma r. Coklk. 139 E3d assert their privilege against self-incrimination 674. 678 (9th Cir. 1998) (stating that the determination of whether an pursuant to the Fifth Amendment. The assertion adverse inference arising from an invocation of the Fifth Amendment of constitutional rights, even potentially by third constituted reversible error "turns on whether [the proponent of the parties who are former employees, can be used inference] presented additional evidence): Pedrtna v. Chun. 97 F.3d against the company on the issue of liability, as 1296. 1300-1301 (9th Cir. 1996) (declining to draw an adverse inference counterintuitive or inequitable as that sounds. from invocation of the Fifth Amendment, because the inference was Companies should be aware of this potential and "undermined- by other allegations). evaluate the civil action with this in mind. 9. See Nationwide Life Inc Co. v. Richard; 541 E3d 903. 912 (9th Cir. 2008). Whether a court will or will not draw an 10. Practitioners should always keep in mind that, in addition to the adverse inference from a non-party's invocation of case law dealing directly with the issue of the admissibility of inferences the Fifth Amendment currently is almost entirely based on invocations of the Fifth Amendment, the other Federal Rules within the discretion of the court. Further com- of Evidence also apply. Therefore, arguments to exclude (or permit) such plicating matters is the unresolved issue of what an inference should also address Rules 401 and 403. a court should do in the face of conflicting state II. See Glanzer. 232 E3d 1258. 1266 & n.2. and federal privilege laws. The inevitable result of 12. See 232 F.3d 1258, 1266 & n.2. these variables is a shifting and unpredictable land- 13. 107 F.3d 110, 124 (2d Cir. 1997). scape which can render the prediction of probable 14. 107 F.3d 110. 123-124. results difficult or impossible. The required factual 15. 107 F.3d 110. 124. and case-by-case analysis required by the existent 16. See. e.g. Banks r. Yokemick. 144 F. Supp 2d 272, 290 (S.D.N.Y. case law means that practitioners can make col- 2000 (applying LiButti factors. and finding that that the record orable and even highly persuasive arguments to showed insufficient evidence of the relevant relationship and the either permit or exclude adverse inferences based necessary degree of control to support granting plaintiff's request for on Fifth Amendment invocations in federal civil an adverse inference from the defendant's patrol partners' invocation cases. The resulting current uncertainty should of their Fifth Amendment privilege.): In Re: Handy & Hartman Refin- provide little comfort to corporate in-house ing Group. Inc.. 266 B.R. 32 (D. Con. 2001) (concluding insufficient counsel involved in civil litigation. grounds existed under the LiButti factors for the court to order an inference that. if not for his exercise of the privilege. the witness would NOTES have testified adversely to the interest of the debtor or the committee. I. See, eg., Ohio it Reiner. 532 U.S. 17. 21 (2001). and denying motion to admit into evidence its list of proposed ques- 2. 532 LI.S. 17. 19 (internal quotations omitted): see also Doe e tions and an order finding the answers to be in the affirmative.): Kon- Glanzer. 232 F.3d 1258. 1269 (9th Cir. 2000) (citing Union Liquor Co. it tos it Kontos. 968 F. Supp. 400. 406 (S.D.N.Y. 1997) (holding that no Gard, 705 F.2d 1499. 1501 (9th Cir. 1983). adverse inference can be imputed to a defendant by the invocation of 9 INSIGHTS, Volume 24, Number 12, December 2010 EFTA00593669 the Fifth Amendment privilege by her sister. since the drawing of such 36. 819 F.2d 1471. 1482. an adverse inference would only hinder the search for truth.): Garfish 37. 819 F.2d 1471. 1481. v. UA IV. 284 E Supp. 2d 782. 798 (ED. Mi. 2003) (allowing adverse 38. 968 F. Supp. 400..408 (S.D. Ind. 1997). inferences because the non-party witness was a key figure in the case, 39. 968 F. Supp. 400. 408. and had an interest in the dismissal of the lawsuit as the ultimate issues 40. See. e.g.. Agster v. Maricopa County. 422 F.3d 836 (9th Cr.. 2005). of liability involved his allegedly wrongful conduct, but also finding Jackson it County of Sacramento. 175 F.R.D. 653 (E.D. Cal. 1997): lad- that the adverse inference did not save the other party from summary win v. County of Kern. No. k07-cv-0026-OWW-TAG, 2008 WL 2025093 judgment). (ED. Cal. 2008). 17. 717 F.2d 700 (2d Cir. 1983). 41. Black's Law Dictionary 876 (8th ed. 2004) (emphasis added). 18. 717 F.2d 700. 710; me also Federal Deposit Insurance Corp it Fidel- 42. See Fed. R. Evid. 501 ("[Wlith respect to an element of a claim ity & Deposit Company of Maryland. 45 F.3d 969. 977 (5th Or. 1995) or defense as to which State law supplies the rule of decision. the (holding that 'the fact that the witness no longer serves the party in an privilege of a witness. person, government. State. or political subdivision 'officialcapacitydocs not present a bar to requiring the witness to assert thereof shall be determined in accordance with State law."): see also. the privilege in front of the jury."). Crenshaw Mony Life Ins Ca. 318 F. Supp. 2d 1015. 1024 19. 808 F.2d 271. 275 (3d Cir. 1986). (SD. Cal. 2004). 20. 808 F.2d 271. 275. 43. 905 F. Supp. 808 (N.D. Cal. 1995). 21. Data General Corp.. 825 F. Stipp. at 352. 44. 905 F. Supp. 808. 22. 825 F. Supp. at 352. see also Veranda Beach Club Limited Partnership 45. 905 F. Sapp. 808. 811. v. Western Surety Ca. et at. 936 E2d 1364. 1374 (1st Cir. 1991) (finding 46. 905 F. Supp. 808. 811-812. insufficient evidence to allow the invocation of the personal privilege 47. 905 F. Supp. 808. 811. to be imputed to the corporate defendants): Data General. 825 F. Supp. 48. See generally 905 F. Sum 808. txxxl. 352 (distinguishing case from Veranda Beach, because plaintiff 49. 905 F. Supp. 808. 812. laid sufficient grounds for admission of employee deposition. where as 50. 905 F. Supp. 808. 810. in Veranda Beach, there was little evidence to show that the corporate 51. Ohio v. Reiner. 532 U.S. 17.21 (2001). employer was closely involved or aware of the disputed transaction and 52. Watts v. Indiana. 338 U.S 49. 59 (1949) (Jackson. 1. concurring in alleged wrongdoing.). part and dissenting in part). 23. 717 F.2d 700. 53. Reiner. 532 U.S. 17. 21. 24. 717 F.2d 700. 710. 54. See Erie R. Ca it Tompkins 304 U.S. 64. 78 (1938) (superseded by 25. 717 F.2d 700. 708. statute on other grounds as stated in Chapman & Cole v. het Container 26. 717 F.2d 700. Intl AV, 865 E2d 676 (5th Cir. 1989)): Shannon-VailFire Inc it Bunch. 27. 808 F.2d 271. 270 F.3d 1207. 1210 (9th Cir. 2001): see also Stud it Duns Intern. Air- 28. 808 F.2d 271. lines. 727 E2d 880. 881 (9th Cir. 1984) (applying California law. because 29. 808 F.2d 271. 275-276. jurisdiction in that case was based on both diversity of citizenship and 30. 808 F.2d 271. 276. federal question). 31. 808 F.2d 271.276 (citing The Conjurer's Circle—The Fifth Amend- 55. See Pasadena Oil & Gat IVym. LLC v. Mont Oil Props, Inc. No. ment Privilege in Civil Cases, 91 Yale L.J. 1062. 1119 (1985)). 07-35896. 2009 WL 794678 at •1 (9th Or. March 26, 2009) (citing Fed. 32. 808 F.2d 271. 276. see alto AEL Industries. Inc. v. Abate: et at. No. R. Evid. 501. last sentence). 88-0391.1989 US. Dist. LEXIS 9821. •IO (ED. Pa. August U. 1989) (fol- 56. See People it Holloway. 33 Cal. 4th 96. 131-132 (Cal. 2004): see lowing RAD Services and holding that the assertion of the Fifth Amend- also People v. Mincey. 2 Cal. 4th 408. 441 (Cal. 1992) (holding that ment privilege and an adverse inference from this assertion were admissible trial court's refusal to compel a non-party witness to assert their Fifth in light of the relationship between the panics (employee—stockholder). Amendment privilege in the presence of the jury was proper). including the payment by defendant of the witness's legal fees). 57. People v Johnson. 39 Cal. App 3d 749. 760 (Cal. Ct. App. 1974) 33. Cerro Gordo Charity v Fireman's FundIns. 819 E2d 1471. 1481(8th (quoting Boit v. United States. 439 F.2d 536 (D.C. Cir. 1970)). Cir. 1987). 58. 39 Cal. App. 3d 749. 760. 34. 819 F.2d 1471. 1481-1482. 59. See Holloway. 33 Cal. 4th 96.. 132. 35. 819 F.2d 1471. 1481-1482. 60. People it Frierson. 53 Cal. 3d 730.743 (Cal. 1991). INSIGHTS, Volume 24, Number 12, December 2010 10 EFTA00593670 61. See. e.g. Arredondo n Ortiz. 365 E3d 778. 781. 783-784 (9th Cir. 62. 819 F.2d 1471. 1482 (8th Cir. 1987). 2004) (holding that trial court was correct in refusing to permit a witness 63. 733 F.2d 509.521-522 (8th Cu. 1980) (internal quotations omitted). to testify xten it had been informed in advance that the witness would 64. 733 F.2d 509. 521 assert his Fifth Amendment privikge): Sanders a United States. 373 F.2d 65. 05 F.3d %9 (5th Cir. 1995). 735. 735-736 (9th Cir. 1967) (reversing on the grounds that requiring 66. 05 F.3d 969.978. a witness to assert his privilege repeatedly on the stand was inherently 67. Glanzer. 232 E3d 1258. 1266 & n.2. prejudicial). 68. 232 F.3d 1258.1266 & n.2. 2011 Aspen Publishers. All Rights Reserved. Reprinted from Insights December 2010, Volume 24, Number 12, pages 13-22, with permission from As n Publishers, a Wolters Kluwer business, New York, NY, www.aspenpublishers.com. 0. Wolters Kluwer Law & Business 11 INSIGHTS, Volume 24, Number 12, December 2010 EFTA00593671