Antitrust Law Daily Wrap Up, ANTITRUST—9th Cir.: FBI recordings from investigation in optical disk drive price fixing suit discoverable, (Sep 11, 2015)

By Linda O’Brien, J.D., LL.M.

An unindicted employee of a company in the optical disc drive industry that was being investigated by the Department of Justice Antitrust Division has been unable to block the government from disclosing to plaintiffs in a civil suit FBI tape recordings and transcripts of conversations to which he was a party. The U.S. Court of Appeals in San Francisco upheld a district court’s denial of the employee’s motion to quash a subpoena filed by the plaintiffs in the private suit seeking those materials (In re Optical Disk Drive Antitrust Litigation, September 10, 2015, Smith, M.).

Background. A group of computer technology companies and retailers, including Dell, Inc., Hewlett-Packard Company, Ingram Micro, Inc., Synnex Corporation, Acer America Corp., and Gateway, filed class action complaints against Toshiba Corporation and other electronic product manufacturers, alleging that the manufacturers engaged in a conspiracy to rig bids and fix prices for optical disk drives (ODDs) that are included in various electronic devices.

As part of a criminal antitrust investigation into the ODD industry, the FBI made secret tape recordings and transcripts of conversations of various individuals, including the employee who moved to stop their disclosure. Although the employee testified before the grand jury, he was not indicted. After the grand jury concluded, plaintiff Dell issued a subpoena to the government seeking the recordings and transcripts relating to the investigation. The employee, not a party to the civil suit, intervened and moved to quash the subpoena pursuant to the grand jury secrecy rule—Federal Rule of Criminal Procedure 6(e). The rule prohibits disclosure of a matter occurring before a grand jury. The district court denied the motion and the employee appealed.

Rule 6(e). The district court did not err in determining that Rule 6(e) did not apply because the recordings at issue were not “a matter occurring before a grand jury” within the definition of material protected by the rule, according to the appellate court. The court rejected the employee’s contention that the district court abused its discretion by failing to apply the “effects test,” which requires a factual inquiry on a document-by-document basis to determine whether disclosure of a particular item would reveal some secret aspect of the inner workings of a grand jury. The court determined instead that the grand jury’s deliberative process would not be compromised by the disclosure of business records that predated the grand jury investigation.

The appellate court found that, while the long established policy of nondisclosure acts in part as a shield for those who are exonerated by a grand jury, the fundamental purpose of Rule 6(e) is only to protect against disclosure only what was said or took place in the grand jury room and not to foreclose from all future disclosure to proper authorities the same information that was presented to the grand jury. The subpoena in this case seeks only to discover the recordings of conversations in which a present or former employee of the one of the ODD manufacturers was present, not what took place before the grand jury.

Additionally, the employee offered no evidence showing that the disclosure of the tape recordings would compromise the integrity of the grand jury’s deliberative process, the appellate court determined. The mere fact that the recordings were created as part of a criminal investigation did not automatically trigger Rule 6(e) protection. The recorded conversations occurred two months before the grand jury was empanelled. Although the information developed by the FBI might have been gathered with an aim toward its use in a grand jury proceeding, it existed apart from and was developed independently of the grand jury process. Even if a particular document was reviewed by a grand jury, that did not convert it into a “matter occurring before the grand jury” within the meaning of Rule 6(e), the appellate court concluded.

The case is No. 14-17502.

Attorneys: Sean F. O’Shea ((O’Shea Partners LLP) for the interested non-party appellant. Jeff D. Friedman (Hagens Berman Sobol Shapiro LLP) for the direct and indirect purchaser plaintiffs. Michael P. Kenny (Alston & Bird LLP) for Dell, Inc. Daniel A. Sasse (Crowell & Moring LLP) for Hewlett-Packard Company, Ingram Micro, Inc., and Synnex Corp. David B. Esau (Carlton Fields Jorden Burt) for Acer America Corp. and Gateway, Inc. Daniel M. Wall Latham & Watkins LLP) for Toshiba Corp.

Companies: Dell, Inc.; Hewlett-Packard Co.; Ingram Micro, Inc.; Synnex Corp.; Acer America Corp.; Gateway, Inc.; Toshiba Corp.

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