Saturday, April 13, 2013

Negative Inference from NonParty Alleged Co-Conspirator's Invocation of Fifth Amendment in a Civil Case (4/13/13)

Last week, in the class that Larry Campagna, here, and I teach on Tax Fraud at UH Law School Larry, a student asked about the assertion of the Fifth Amendment by a third party witness -- alleged to be a co-conspirator -- permits a negative inference against a party alleged to be a co-conspirator.  It is a good question, so I took a look and thought I would post my very brief research -- I have not chased this to the ground.

Of course, it is common-place in criminal cases that a nonparty co-conspirator's testimony can be used against a co-conspirator defendant.  The applicable Federal Rule of Evidence, Rule 801(d)(2)(E), here, so provides:
(d) Statements That Are Not Hearsay. A statement that meets the following conditions is not hearsay: 
* * * * 
(2) An Opposing Party’s Statement. The statement is offered against an opposing party and: 
* * * * 
(C) was made by a person whom the party authorized to make a statement on the subject; 
(D) was made by the party’s agent or employee on a matter within the scope of that relationship and while it existed; or 
(E) was made by the party’s coconspirator during and in furtherance of the conspiracy.   
The statement must be considered but does not by itself establish the declarant’s authority under (C); the existence or scope of the relationship under (D); or the existence of the conspiracy or participation in it under (E).
The Notes of the drafting Committee say:
(E) The limitation upon the admissibility of statements of co-conspirators to those made “during the course and in furtherance of the conspiracy” is in the accepted pattern. While the broadened view of agency taken in item (iv) might suggest wider admissibility of statements of co-conspirators, the agency theory of conspiracy is at best a fiction and ought not to serve as a basis for admissibility beyond that already established. See Levie, Hearsay and Conspiracy, 52 Mich.L.Rev. 1159 (1954); Comment, 25 U.Chi.L.Rev. 530 (1958). The rule is consistent with the position of the Supreme Court in denying admissibility to statements made after the objectives of the conspiracy have either failed or been achieved. Krulewitch v. United States, 336 U.S. 440, 69 S.Ct. 716, 93 L.Ed. 790 (1949); Wong Sun v. United States, 371 U.S. 471, 490, 83 S.Ct. 407, 9 L.Ed.2d 441 (1963). For similarly limited provisions see California Evidence Code §1223 and New Jersey Rule 63(9)(b). Cf. Uniform Rule 63(9)(b).
Of course, the proponent of the testimony must establish the essential conditions of the rule.  As to a conspiracy, as I say in my Federal Tax Crimes text dealing with the prosecution use of a co-conspirator's statement under Rule 901(d)(2)(E):
The Government must prove and the district court must find by a preponderance of the evidence that “(1) a conspiracy existed; (2) the conspiracy included the declarant and the defendant against whom the statement is offered; and (3) the statement was made during the course and in furtherance of the conspiracy.” n429 When the proof is made, the statement becomes like an admission against interest, another exception to the hearsay rule.  n430
  n429 United States v. Hasner, 340 F .3d 1261, 1274 (11th Cir. 2003).  See Bourjaily v. United States, 483 U.S. 171 (1987).  Rule 801(d)(2)(E) was subsequently amended to adopt some aspects of Bourjaily.  See also United States v. Coplan, 703 F.3d 46 (2d Cir. 2012) (citing Bourjaily).  To show the potential scope of this exception to the hearsay rule, in Coplan, the Government identified 50 people as co-conspirators with the indicted defendants.
   n430  See also FRE Rule 804(b)(3) (declaration against penal interest).
As to the question I started with, on my quick survey, the best authority seems to be LiButti v. United States, 107 F.3d 110, 123-124 (2d Cir. N.Y. 1997).  There, the Court summarized the “evolving law” -- sweeping broader than just co-conspirator's but any relationship with agency like authority -- as:
Although the issue of the admissibility of a non-party's invocation of the Fifth Amendment privilege against self-incrimination in the course of civil litigation and the concomitant drawing of adverse inferences appropriately center on the circumstances of the case, the evolving case law and its underlying rationale accordingly suggest a number of non-exclusive factors which should guide the trial court in making these determinations: 
1. The Nature of the Relevant Relationships: While no particular relationship governs, the nature of the relationship will invariably be the most significant circumstance. It should be examined, however, from the perspective of a non-party witness' loyalty to the plaintiff or defendant, as the case may be. The closer the bond, whether by reason of blood, friendship or business, the less likely the non-party witness would be to render testimony in order to damage the relationship.
2. The Degree of Control of the Party Over the Non-Party Witness: The degree of control which the party has vested in the non-party witness in regard to the key facts and general subject matter of the litigation will likely inform the trial court whether the assertion of the privilege should be viewed as akin to testimony approaching admissibility under Fed. R. Evid. 801(d)(2), and may accordingly be viewed, as in Brink's, as a vicarious admission.  
3. The Compatibility of the Interests of the Party and Non-Party Witness in the Outcome of the Litigation: The trial court should evaluate whether the non-party witness is pragmatically a noncaptioned party in interest and whether the assertion of the privilege advances the interests of both the non-party witness and the affected party in the outcome of the litigation. 
4. The Role of the Non-Party Witness in the Litigation: Whether the non-party witness was a key figure in the litigation and played a controlling role in respect to any of its underlying aspects also logically merits consideration by the trial court.
Whether these or other circumstances unique to a particular case are considered by the trial court, the overarching concern is fundamentally whether the adverse inference is trustworthy under all of the circumstances and will advance the search for the truth. See, e.g., Idaho v. Wright, 497 U.S. 805, 819, 111 L. Ed. 2d 638, 110 S. Ct. 3139 (1990) (analyzing the admissibility of a hearsay statement under Fed. R. Evid. 803(24)) ("We agree that 'particularized guarantees of trustworthiness' must be shown from the totality of the circumstances, but we think the relevant circumstances include only those that surround the making of the statement and that render the declarant particularly worthy of belief.").
Here is a recent summary of Libutti in the context of a claimed conspiracy (In re Ethylene Propylene Diene Monomer (EDPM) Antitrust Litig., 681 F. Supp. 2d 141, 153-154 (D. Conn. 2009)):
The Second Circuit does not preclude drawing an adverse inference against an opposing party from a non-party witness's invocation of the Fifth Amendment privilege against self-incrimination. In LiButti v. United States, 107 F.3d 110, 123-24 (2d Cir. 1997), the Second Circuit set forth four non-exclusive factors a trial court should consider when determining the admissibility of a non-party's invocation of the Fifth Amendment: (1) the nature of the relevant relationships; (2) the degree of control of the party over the non-party witness; (3) the compatibility of the interests of the party and non-party witness in the outcome of the litigation; and (4) the role of the non-party witness in the litigation. Ultimately, the "overarching concern is fundamentally whether the adverse inference is trustworthy under all of the circumstances and will advance the search for the truth." Id. at 124. 
The first factor -- the nature of the relationship -- is the most significant for determining admissibility. Id. at 123. When the party and the non-party witness are claimed co-conspirators, generally courts have required there to be sufficient, independent proof of a conspiracy between them  before permitting the jury to draw an adverse inference against the party. See, e.g., Jury Instructions, In re Scrap Metal Antitrust Litig., No. 1:02cv844, 2006 U.S. Dist. LEXIS 75873 (N.D. Ohio 2006) (doc. # 631) (instructing jury that it could draw a "negative inference" against defendant from non-party witnesses' invocation of the Fifth Amendment privilege if, and only if, "there is independent . . . evidence to support the conclusion that such defendant participated in a conspiracy with the particular witness or with the particular corporation with which that witness was affiliated"); State Farm Mut. Auto. Ins. Co. v. Abrams, No. 96-C-6365, 2000 U.S. Dist. LEXIS 6837, 2000 WL 574466, at *7 (N.D. Ill. May 11, 2000) (agreeing that an adverse inference may be drawn against a party from an alleged co-conspirator's invocation of the Fifth Amendment, but concluding that the court need not decide the issue on a motion for summary judgment because there was enough additional evidence of the conspiracy to create a genuine issue of material fact); United States v. Dist. Council of N.Y. City & Vicinity of the United Bhd. of Carpenters & Joiners of Am., 832 F. Supp. 644, 652 (S.D.N.Y. 1993) (agreeing that "the refusal to testify by a proven co-conspirator may justify an adverse inference against the other co-conspirators," but concluding that whether the proof of the conspiracy at trial "support[ed] the inference remain[ed] to be seen").
I picked up a few more cases that essentially parallel this discussion.  Like I said, I did not do anything like definitive research.  The foregoing is a starting point only.

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