A federal appeals court decides that Trump tax returns and financial records can be subpoenaed by a state grand jury

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By Robert Willmann

Citing the age-old rationale that "the public is entitled to every man's evidence", especially through a grand jury, while asserting that federal courts can get involved in state criminal matters in the narrow context of this situation, the federal Second Circuit Court of Appeals decided that the Manhattan District Attorney's Office can subpoena president Donald Trump's income tax records and some other financial information.  In a 34-page opinion by three judges last Monday, 4 November, subpoenas to 10 Trump-related organizations, and the Mazars accounting firm, as "third parties", were held to be valid and enforceable at this time, and cannot be blocked by a temporary injunction.  The lawsuit focused on the accounting firm's records.  Trump's lawyers say they will ask the U.S. Supreme Court by today if it will agree to hear the case, but it does not have to if it does not want to.

This case in part focuses on an important legal issue about if or when federal courts can get involved in making rulings about state court matters in general, and criminal cases in particular.  It is called the "abstention doctrine", or, can a federal court stick its nose into state court business, or should it "abstain" from doing so?

The second issue is just as important:  how much immunity from legally authorized proceedings does a president have as an individual while in office?  This is different from the common situation in which a president or federal agency is a party in an official capacity in a lawsuit involving the federal government.  As the federal trial court said in its opinion on pages 43-44:  "… the precise question this action presents — the core boundaries of the president's immunity from criminal process — has not been presented squarely in any judicial forum, and thus has never been definitively resolved". 

The trial court in its 75-page opinion ruled that the abstention doctrine does apply and dismissed the president's lawsuit.  But realizing that if a court of appeals said federal courts should get involved, Judge Victor Marrero laid out an alternative result, so that the question of whether Trump is entitled to a temporary injunction could be addressed as part of one appeal.  A temporary injunction is a court order blocking specific activity while a case is pending; it is called a preliminary injunction in federal court.  As part of the final order and judgment ending a case, a permanent injunction can be ordered that extends into the future after the case is over.

On 1 August 2019, the Manhattan District Attorney, Cyrus Vance, Jr. — technically known as the DA of New York County — served a grand jury subpoena on the Trump Organization, which is wholly owned by the Donald J. Trump Revocable Trust, of which Trump is the grantor (creator) of the trust, and its beneficiary.  The subpoena asked for documents about alleged hush money payments to two women.  This likely refers to Karen McDougal, whom Trump met in 2006 at the Playboy Magazine mansion, and Stephanie Clifford, alias Stormy Daniels, a pornographic movie performer whom Trump came in contact with in 2006, a somewhat busy year for him, it seems.  At first, the Trump Organization cooperated and produced documents, but after becoming aware that the DA also wanted tax returns, it "resisted that interpretation" (court of appeals opinion, pages 4-5).

So then, on 29 August 2019, the DA served a grand jury subpoena on Mazars USA, LLP, an accounting firm which has some of Trump's financial and tax records.  The document request is reproduced in footnote 5 on pages 6-7, and covers the period from 1 January 2011 to the present. 

On 19 September 2019, Trump filed the lawsuit against the District Attorney and the Mazars accounting firm, to try to get a court order (an injunction) blocking and preventing them from acting on, using documents from, or enforcing the subpoena.  The opinion notes that the accounting firm is trying to stay out of the line of fire, saying:  "Mazars itself takes no position on the legal issues raised in this appeal".

The current baseline about the abstention doctrine comes from a 1971 supreme court opinion called Younger vs. Harris [1].  The court of appeals explained that–

"Under Younger and its progeny, however, federal courts must decline to exercise jurisdiction in three such exceptional categories of cases: “First, Younger preclude[s] federal intrusion into ongoing state criminal prosecutions. Second, certain civil enforcement proceedings warrant[] abstention. Finally, federal courts [must] refrain[] from interfering with pending civil proceedings involving certain orders uniquely in furtherance of the state courts’ ability to perform their judicial functions".

The court of appeals decided that federal courts would not abstain in this situation–

"Because Younger's policy of comity cannot be vindicated in light of the state‐federal clash before us, and because the President raises novel and serious claims that are more appropriately adjudicated in federal court, we conclude that abstention does not extend to the circumstances of this case".

However, the court of appeals agreed with the trial court that a subpoena to the Mazars accountants requesting documents was valid, it could be enforced in this instance, and Trump was not entitled to a court injunction against it.  The discussion rests on three fascinating American historical events:  the treason trial of Aaron Burr in 1807, the subpoena to president Richard Nixon in the midst of the Watergate criminal prosecutions in 1974, and the civil lawsuit by Paula Jones against president Bill Clinton for his sexual misconduct toward her, resulting in a supreme court opinion in 1997. 

Supreme Court Chief Judge John Marshall presided over the federal criminal trial in Virginia of Aaron Burr for treason, and he issued a subpoena on behalf of the defendant Burr to president Thomas Jefferson to produce documents, but apparently Jefferson never did produce them.  But the fact that a judicial decision was made to authorize a subpoena to a sitting president provided a precedent.

In the midst of the political turmoil around president Richard Nixon during the criminal prosecutions emerging from the Watergate burglary, and the impeachment investigation, a subpoena was served on him to "produce certain tape recordings and documents relating to his conversations with aides and advisers", to the federal district court with a deadline of about three months before a criminal trial was set to start. The subpoena "required the production, in advance of the September 9 trial date, of certain tapes, memoranda, papers, transcripts, or other writings relating to certain precisely identified meetings between the President and others" [2].  Nixon was like the Mazars accountants are here — a third party with information and records for a proceeding not directly involving him, although Nixon was identified in the criminal charges against the others as an unindicted co-conspirator.

Paula Corbin Jones was an Arkansas state employee when Bill Clinton was governor.  She filed a civil lawsuit against Clinton when he was president and alleged, in part, that when he was governor, "… Ferguson persuaded her to leave her desk and to visit the Governor in a business suite at the hotel, where he made 'abhorrent' sexual advances that she vehemently rejected. She further claims that her superiors at work subsequently dealt with her in a hostile and rude manner, and changed her duties to punish her for rejecting those advances" [3].  The case was appealed right after it started, and the issue was whether the trial would be delayed until after Clinton left office, as the trial judge had ordered.  The U.S. Supreme Court reversed that order, and directed that the civil trial could proceed in the normal course. 

Using the reasoning and rulings from those prior cases, the court of appeals in this matter involving Trump reached a narrow decision–

"… we conclude only that presidential immunity does not bar the enforcement of a state grand jury subpoena directing a third party to produce non-privileged material, even when the subject matter under investigation pertains to the President".  

Back during the investigation of the Trump 2016 campaign by "special counsel" Robert Mueller, some members of the mass media and others quivered with excitement that Trump might be indicted by the Mueller group, until two long-standing opinion memos of the Justice Department from 1973 and 2000 percolated up, disclosing that it had a "policy" — which is not an existing legal doctrine — that it would not charge a sitting president with a federal crime while in office.  These memos were used by Trump's lawyers to argue that the subpoena should not be enforced, but the court of appeals noted that those memos talked about whether a sitting president could be charged with a crime, which is not the question here.  Pointing out that the Department of Justice does not decide what the law is, the court in an amusing footnote said, "The President appropriately does not argue that we owe any deference to the OLC memoranda, for '[t]he federal Judiciary does not … owe deference to the Executive Branch's interpretation of the Constitution' " [4].

The court again made it clear on page 33 that the ruling does not address other obvious matters–

"We emphasize again the narrowness of the issue before us.  This appeal does not require us to consider whether the President is immune from indictment and prosecution while in office, nor to consider whether the President may lawfully be ordered to produce documents for use in a state criminal proceeding.  We accordingly do not address those issues".

The court of appeals opinion is pretty easy to read and is here–

https://turcopolier.typepad.com/files/trumptaxes_2nd_cir_ny_da.pdf

After the opinion was handed down, the lawyers for the parties agreed that Trump would file a request with the U.S. Supreme Court, called a writ of certiorari, by 14 November to see if it will hear and decide the case–

https://turcopolier.typepad.com/files/trumptaxes_agree_apply_supcourt.pdf

A paper on the Aaron Burr treason trial from the Federal Judicial Center, and the supreme court opinions in United States vs. Nixon and Clinton vs. Jones can be viewed and downloaded for reading–

The Aaron Burr Treason Trial, 66 pages.

https://turcopolier.typepad.com/files/aaron_burr_treason_trial.pdf

United States vs. Nixon, 418 U.S. 683 (1974), 34 pages.

https://turcopolier.typepad.com/files/us_v_nixon_418_us_683.pdf

Clinton vs. Jones, 520 U.S. 681 (1997), 44 pages.

https://turcopolier.typepad.com/files/clinton_v_jones_520_us_681.pdf

I think that the supreme court will be best served by refusing to hear the case in this instance. The ruling of the court of appeals is very limited in scope.  It does not extend or stretch or even match the decision in the Nixon case about a subpoena, but instead is within it.  The trial court's opinion emphasized that the district attorney stated, "… both his office and the grand jury are obligated to maintain confidential any documents produced in response to the Mazars subpoena" [5].  If the supreme court lets itself get involved in quibbling over a grand jury subpoena in an investigation that has nothing to do with the president's conduct while in office or about a function of his office, then every little thing in the DA's investigation will likely be yanked into federal court by Trump or another person being investigated, claiming theories of evidentiary privilege and immunity stretched out beyond recognition.  The trial court in the federal Southern District of New York and the Second Circuit Court of Appeals are on the same page and have set forth practical parameters.  If the DA proceeds to a criminal indictment, or a state court order or subpoena is directed at Trump personally while he is president, then perhaps it may be time to address those issues. 

What is highly unlikely but would really kick up sand is if the supreme court reached down to review the abstention doctrine in this situation, with the possibility that it would say it is not yet time for the federal courts to get involved, and order the lawsuit dismissed, as the trial court did, until the DA makes a major move at Trump personally while he is president.

 

[1]  Younger v. Harris, 401 U.S. 37 (1971).

[2]  Page 688, United States v. Nixon, 418 U.S. 683 (1974).

[3]  Page 685, Clinton v. Jones, 520 U.S. 681 (1997).

[4]  Footnote 16, page 29, court of appeals opinion.

[5]  Donald J. Trump v. Cyrus R. Vance, Jr., in his official capacity as District Attorney of the County of New York, and Mazars USA, LLP, No. 19 Civ. 8694, slip op. at 38-39 (S.D.N.Y. October 7, 2019).

 

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4 Responses to A federal appeals court decides that Trump tax returns and financial records can be subpoenaed by a state grand jury

  1. Avatar smoke says:

    “. . . apparently Jefferson never did produce [the documents subpoenaed by Chief Justice Marshall]”
    An age old tussle.
    What President today could get away with ignoring a subpoena? The possibility that Jefferson did neglect the subpoena probably indicates a broad, political support for Jefferson’s position. John Marshall as Chief Justice was, after all, a lame duck appointment by the defeated John Adams and an outgoing Federalist Congress, just before Jefferson and the Republicans took office.
    If the subpoena proved unenforceable, then one might argue that the precedent it creates is weak at best.
    At least, in the case of both the Jefferson and Nixon subpoenas, the case at hand was directly a matter of state: questions of treason and malfeasance within the Executive Branch.

  2. On the question  of Judicial control of or interference with the Executive am I right in believing that this lecture from Attorney General Barr at the Federalist Society’s National Lawyers Convention goes directly to the point?
    https://www.youtube.com/watch?time_continue=1298&v=8NdbANrjFWE&feature=emb_logo
    It’s a truly great lecture, covering the issues from first principles up. If we over here had a good look at our own constitution we might find that the American solution to the problem that the Framers were wrestling with – how do you get the job of government done when the elected Legislature is inevitably faction ridden and therefore slow and divided – should be considered if ever we attempt to make our own constitution more fit for use.  But that’s a separate issue, particularly since there’s a growing body of concerned opinion in the UK that reform of the House of Commons might more properly be undertaken by a bulldozer than by constitutional theorists.  
    Transcript (not always verbatim) –
    https://www.justice.gov/opa/speech/attorney-general-william-p-barr-delivers-19th-annual-barbara-k-olson-memorial-lecture
    But to the immediate point.  I had expected to be baffled by the lecture because of the difference between your and our constitution.  Your Executive is separate from the Legislature and cannot be removed, or not easily removed, by the Legislature.  Our Executive serves at the pleasure of the majority in the House of Commons and is easily removed if it loses that majority.  Maybe not as simple as that because a UK Prime Minster has great powers of patronage and can also control the legislature by his powers of selecting who in his party is to be a Member of Parliament. Even so, the two systems are so different that lessons from one cannot easily be transferred to the other.  
    But to my astonishment I found AG Barr’s lessons work here.  Because for a period of several months in the UK we had a Prime Minister who did not have the support of the House of Commons but was nevertheless retained as Prime Minister.  The reasons for this are not here relevant – the majority of the MP’s could not decide on an alternative leader for that time. nor perhaps on an alternative policy to his – but the effect was that for that short time we had a system that looked a little like yours – three separate  branches, the Executive, the Legislature and the Judiciary.  And during that time the first two at loggerheads.
    So for that short period the Attorney General’s masterful analysis of the relationship between the three separate branches of government – what it should be and how it is currently being distorted  – fitted us.
    That’s why I found myself at home with this analysis coming out of what is normally a very different tradition, and that even though the HoC is now effectively a unicameral Legislature.  There were two points in particular that struck home.
    The first is that the House of Commons, finding itself with an Executive it could not remove, resorted to much the same devices to hamstring the Executive as we saw in the States. The HoC had an activist speaker.  The devices he permitted or assisted with have now, I think, been disowned by his successor.  We shall not see them again.  But for that short time he was in practice though obviously not in theory the equivalent of such as Mrs Pelosi. And a battery of obstructive devices was deployed to render the Executive little more than a puppet, able only to carry out the House of Commons’ uncertain bidding and not able to act as a true Executive.
    Just as well, some would say, but that’s not the point.  The point was that the House of Commons was able to hamstring the Executive.  It had never needed to do that before because it can normally get rid of the Executive whenever it pleases.  But for this period when it couldn’t or refused to do that, we saw what AG Barr refers to as the necessary and fruitful interplay between the Legislature and the Executive turning into stalemate.  We had a government that could not govern and that, AG Barr warns us, is what is occurring in the United States when similar devices are resorted to there.
    The second area of comparison is not as transient.  In the UK the Courts have, certainly since Lord Denning, overtly regarded themselves as being able to get ahead of the pack when it comes to adapting law to changing circumstances or to a different climate of opinion.  Denning was no revolutionary activist.  He was, I believe, if at times somewhat capriciously, doing what the Courts have always done.  Making those adjustments that are, whether one is conservative or progressive, always necessary to adapt law to changing circumstances and often without waiting for the legislature to give them a lead.
    That can, however, easily lead to activist judges and from then on to the next disastrous step.  Politically activist Judges who not only seek to override democratic consensus, but who extend their grasp as far as they possibly can into the political process and seek to be, not one of the three essential branches of government, but the supreme and undisputed arbiter of all.
    That is, I think, what AG Barr is observing and what he is warning us about.  Both sides of the Atlantic we are at risk of having a judiciary that thinks it’s boss.  And that isn’t right.  Ultimately, we the people must be the boss.

  3. Avatar vig says:

    Yes, maybe vaguely?* And no, it feels considering the respective matters at hand. But yes, sometimes our inner spontaneous mode takes over.
    * There surely has been a lot of talk concerning the constitutional power of the president, led for me by Col. Lang’s take on matters.
    Concerning the specific case that seems to have triggered this: Didn’t check. It shouldn’t depend on where you stand campwise in Trump’s case. (Is someone still seriously interested in those hush money Trump (supposedly) paid? Or ever was, thus one camp’s argument would be: simply another fishing expedition)
    I guess we continental outsiders cannot be truely part of either the Resistance or the Trump support camp? Were we British maybe we could be? Should law be partisan?

  4. Avatar turcopolier says:

    vig
    Given the history of the British Monarchy and politics I would be mildly surprised and annoyed if paying off a couple of whores excited and titillatedthe British.

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