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In re Subpoena

United States Court of Appeals, Fifth Circuit

July 19, 2017

In re: Grand Jury Subpoena

          Opinion Date July 31, 2017

         Appeal from the United States District Court for the Northern District of Texas

          Before KING, OWEN, and HAYNES, Circuit Judges.

          PRISCILLA R. OWEN, Circuit Judge

         Following the initiation of a federal criminal investigation for Medicare fraud and other offenses into a business owned by [Company], several of [Company's] officers resigned and, upon leaving [Company], removed electronic devices allegedly owned by [Company].[1] [Company] filed suit in state court and obtained a temporary restraining order (TRO) enjoining the former officers and their counsels from using company funds to pay attorneys' fees and from disclosing information contained on the removed electronic devices. Counsel for one of the former officers was then subpoenaed by a federal grand jury and asked to present the electronic devices. The United States moved for a protective order in federal district court to enjoin the state court litigation. After an evidentiary hearing, the district court enjoined the state court civil proceedings until the conclusion of the government's criminal investigation, or for a period of one year, whichever first occurred. [Company] appealed. We affirm.

         I

         After becoming aware that their company was under federal investigation for Medicare fraud and other offenses, [Company] officers retained personal counsel at company expense. Two officers, [Employee A] and [Employee B], subsequently resigned and removed several electronic devices previously provided to them by [Company]. [Employee A] informed [Company] that he was delivering the electronic devices in his possession to his personal attorney, who would then cooperate with federal agents in the criminal investigation. After demanding return of the company funds disbursed to [Employee A] and [Employee B] for personal counsel, [Company] filed suit in Texas state district court and obtained a TRO enjoining [Employee A], [Employee B], and their attorneys from using the funds and from disclosing any information or data on the electronic devices. The TRO also required return of the funds and devices. [Company] then proceeded with discovery requests.

         [Employee A's] attorney received a federal grand jury subpoena, ordering the production of the electronic devices [Employee A] removed from [Company]. The attorney notified [Company] of the subpoena and requested a modification of the TRO to allow delivery of the devices. He also delivered a check for the amount of disputed funds to the state court registry in compliance with the TRO. After unsuccessfully moving in federal court to quash the subpoena and in state court to dissolve the TRO, [Employee A's] counsel complied with the federal subpoena and turned over the electronic devices to federal law enforcement. Discovery efforts in state court continued, and [Company] moved for partial summary judgment. Shortly thereafter, the United States filed a motion for a protective order in federal court. After an evidentiary hearing, the district court granted the protective order and enjoined all proceedings in state court.

         II

         We first conclude that the district court had authority to enjoin the state court proceedings. Although federal courts are generally prohibited from granting injunctions to stay state court proceedings under the Anti-Injunction Act, 28 U.S.C. § 2283, that general prohibition does not apply when the United States seeks the injunction, as it does here.[2] We therefore need not consider whether the Victim and Witness Protection Act, 18 U.S.C. §§ 1512, et seq., provides a statutory exception to the Anti-Injunction Act.[3]

         III

         "[T]he fact that an injunction may issue under the Anti-Injunction Act does not mean that it must issue."[4] Rather, "[t]he power to enjoin state proceedings is discretionary, allowing the [district] court to weigh those factors both pro and con to the issuance of a stay."[5] We review for abuse of discretion.[6]

         We have previously recognized that due to the significant public interest in law enforcement, criminal prosecutions often take priority over civil actions, [7] and the government is permitted to seek stays of civil litigation to protect the integrity of its criminal investigations.[8] Civil and criminal proceedings are subject to different procedural rules; less restrictive civil discovery could undermine an ongoing criminal investigation and subsequent criminal case.[9]

         In determining whether a civil action or civil discovery should be allowed to proceed in light of an impending criminal case, we have directed district courts to employ "[j]udicial discretion and procedural flexibility" to "harmonize the conflicting rules and to prevent the rules and policies applicable to one suit from doing violence to those pertaining to the other."[10] Formal criminal proceedings are not a requirement to the proper issuance of a stay.[11] Although the government had not yet issued any indictments pertaining to its criminal investigation of [Company] at the time of the district court's ruling, the grand jury had convened and issued subpoenas when the district court enjoined the state civil proceedings, thereby demonstrating that ...


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