Securities and Exchange Commission v. Jerry T. O'Brien, Inc.

PETITIONER: Securities and Exchange Commission
RESPONDENT: Jerry T. O'Brien, Inc.
LOCATION: Clifford Residence

DOCKET NO.: 83-751
DECIDED BY: Burger Court (1981-1986)
LOWER COURT: United States Court of Appeals for the Ninth Circuit

CITATION: 467 US 735 (1984)
ARGUED: Apr 17, 1984
DECIDED: Jun 18, 1984

Kenneth Steven Geller - on behalf of the Petitioners
William D. Symmes - on behalf of the Respondents

Facts of the case


Media for Securities and Exchange Commission v. Jerry T. O'Brien, Inc.

Audio Transcription for Oral Argument - April 17, 1984 in Securities and Exchange Commission v. Jerry T. O'Brien, Inc.

Warren E. Burger:

We will hear arguments first this morning in Securities and Exchange Commission against O'Brien.

We'll hear argument next in Spaziano against Florida.

Mr. Geller, you may proceed whenever you're ready.

Kenneth Steven Geller:

Thank you, Mr. Chief Justice, and may it please the Court.

The Court of Appeals for the Ninth Circuit has held in this case that the Securities and Exchange Commission, and in effect every other government agency, must provide to the so-called targets of its nonpublic investigations notice whenever it issues a subpoena to a so-called third party.

We've sought certiorari because the Ninth Circuit's ruling is without any basis in the law, conflicts with the decisions of this Court, and threatens to impede law enforcement investigations by the SEC and other administrative agencies.

The facts that give rise to this case can be briefly stated.

In September 1980, the Commission issued a formal order, authorizing its staff to begin a private investigation into possible violations of the securities laws in connection with certain mining stocks.

Several of the respondents were named in this formal order.

During the course of the investigation, the Commission staff issued subpoenas to the respondents and several other people.

Shortly thereafter, respondents brought this suit to enjoin the investigation on the grounds that the Commission's formal order was defective, and that the staff was proceeding with the investigation improperly.

Respondents also claimed that as the so-called targets of this investigation, they were entitled to be notified of all subpoenas issued to people other than themselves during the course of the investigation.

The District Court denied all of this relief.

The Court held that respondents had available to them an adequate remedy of law for challenging the propriety of the Commission's investigation as it was directed to them, simply by defending against any proceedings that might be brought against them.

And the District Court also declined to fashion what it called the novel remedy of requiring that the Commission give notice to targets whenever it issues a subpoena to a third party.

The District Court held in this regard that respondent had no legally cognizable interest in preventing compliance with subpoenas issued to anyone other than themselves.

And the Court of Appeals affirmed the denial of injunctive relief, challenging the SEC's actions directed at respondents.

But, as I mentioned a moment ago, the Court of Appeals reversed as to the so-called third party notice issue.

The essence of the Court of Appeal's reasoning seems to be the following two sentences from its opinion, which are reprinted at page 7a cf the Appendix to the Government's petition, the last two sentences in the first paragraph on page 7a, the Ninth Circuit said, and I quote:

"While respondents lack any right to maintain confidentiality of information held by third parties, they do have the right to be investigated consistently with the Powell standards. "

Here, the Court of Appeals is referring to this Court's decision in United States v. Powell, which simply concerned what an administrative agency must show in order to get judicial enforcement of its subpoenas.

The Court then goes on to says:

"To assure that the target has the opportunity to assert this right. "

this so-called right to be investigated consistently with the Powell standards,

"notice of third party subpoenas is necessary. "

The Ninth Circuit therefore ordered the Commission to notify the targets of its investigation, a term it did not define, whenever the Commission issues a subpoena to a third party.

And this is all apparently so that the target can bring some sort of legal proceedings, to assure that the subpoena to the third party complies with the Powell standards.

Now, one of the problems one has in analzying the Court of Appeals' decision in this case is that it is not at all clear from the Court's short and somewhat cryptic opinion, exactly what source of legal authority the Court of Appeals thought it was relying on in imposing this unprecedented notice requirement.

It seems tolerably clear that the Court of Appeals was not relying on any provision of the Constitution, and respondents seem to concede as much.

I think this Court's decision in cases such as Hannah v. Larche and Fisher v. United States, United States v. Miller, leave little doubt that the Fourth and Fifth Amendments don't give anyone a protectable interest in records held by third parties, don't give anyone the right or the opportunity to challenge the validity of subpoenas for records held by third parties.