Pleading The Fifth Amendment And Adverse Inferences In Civil Litigation
Ken over at Popehat has been chronicling the implosion of Prenda Law, a law firm that, on paper, represented copyright holders (particularly of adult films) suing individuals who had shared the films online. I would not dare try to summarize Ken’s comprehensive coverage, nor claim any direct knowledge of the facts, other than to point out the handful of allegations against the firm — and their tactical response — that prompted this post. Allegedly, Prenda Law’s “clients” were merely shells for the lawyers themselves (a fraud on the court), and the firm allegedly forged someone’s signature on corporate documents to create the appearance of a legitimate attorney–client relationship. The federal judge overseeing a number of lawsuits caught wind of this and held a sanctions hearing yesterday, in which essentially everyone associated with Prenda Law asserted their Fifth Amendment right against self-incrimination, and so did not testify.
That’s the issue I wanted to pick up for this post: the ramifications of asserting the Fifth Amendment right against self-incrimination in civil litigation. As a bonus, we’ll discuss what an adversary can do to maximize the negative impact of that assertion on their opponent. The issue comes up more often than you’d think; we see it frequently in egregious wrongful death cases (where the defendant is trying to avoid a manslaughter prosecution), drunk driving cases, and (obviously) fraud cases. I have a handful of civil cases now where the opposing party has either already asserted the Fifth or is expected to do so.
The Fifth Amendment says that “No person. . . shall be compelled in any criminal case to be a witness against himself.” As the Supreme Court has long held, “The privilege afforded not only extends to answers that would in themselves support a conviction under a federal criminal statute but likewise embraces those which would furnish a link in the chain of evidence needed to prosecute the claimant for a federal crime.” Hoffman v. United States, 341 U.S. 479, 486-487 (1951). There are rare circumstances in which a judge can deny the privilege and then compel the testimony, but that’s highly unusual. Once you assert it, your refusal to testify cannot be used against you in criminal proceedings.
But two problems remain for civil cases.
First, the privilege isn’t boundless, and it doesn’t prevent prosecutors (or adversaries in civil litigation) from finding the same evidence elsewhere. “A party is privileged from producing the evidence, but not from its production.” Justice Holmes, Johnson v. United States, 228 U.S. 457 (1913). The first place to look: corporate records. The right against self-incrimination is a personal privilege that does not extend to a corporation or its records. Bellis v. United States, 417 U.S. 85, 89-91 (1974)(Bellis, it should be noted, held that a lawyer couldn’t withhold his law firm’s documents, even if those documents would tend to incriminate him). Further, a corporate record custodian may not resist a subpoena on the grounds that the contents of the documents would be personally incriminating. See Braswell v. United States, 487 U.S. 99, 110 (1988)(there remains, however, an open question where the “custodian” is also the sole employee and officer of the corporation).
So all those entities ‘affiliated’ in one way or another with Prenda Law can expect some subpoenas coming their way, perhaps as part of the discovery by some of the people they sued into whether they violated Federal Rule of Civil Procedure 11 with their alleged misrepresentations.
Second, although in a criminal procedure, the court must instruct the jury that it cannot draw an inference of guilt from a defendant’s failure to testify about facts relevant to his case, Griffin v. California, 380 U.S. 609 (1965), in civil cases, “the Fifth Amendment does not forbid adverse inferences against parties to civil actions when they refuse to testify in response to probative evidence offered against them.” Baxter v. Palmigiano, 425 U.S. 308, 318 (1976).
The rule under Baxter is akin to Cicero’s maxim, “Though silence is not necessarily an admission, it is not a denial, either.” That is to say, an opposing party can’t simply point to the silence and claim victory in their civil case, but a court is entitled to draw adverse inferences against the party that “pleads the Fifth.” (Justice Brandeis said: “Silence is often evidence of the most persuasive character.” United States ex rel. Bilokumsky v. Tod, 263 U.S. 149 (1923)). Thus, pleading the Fifth in a civil case in federal court is never helpful, is rarely harmless, and is typically very damaging — indeed, it’s often fatal to the party’s claims or defenses.
There’s an interesting split among the federal Courts of Appeal as to when and how a party may use the silence in their favor. For example:
- In re Carp, 340 F.3d 15, 23 (1st. Cir. 2003)(“When all is said and done, the trial court has discretion over whether a negative inference is an appropriate response to the invocation of the Fifth Amendment in a particular civil case.”).
- Stichting Ter Behartiging Van de Belangen v. Schreiber, 407 F.3d 34, 55 (2d Cir.2005) (“Even assuming that a jury might draw [an adverse inference from asserting the privilege against self-incrimination], however, we are required at summary judgment to draw all reasonable inferences in favor of the nonmoving party[.]”);
- SEC v. Graystone Nash, Inc., 25 F.3d 187, 192 (3d Cir.1994)(“Because the privilege [against self-incrimination] is constitutionally based, the detriment to the party asserting it should be no more than is necessary to prevent unfair and unnecessary prejudice to the other side.”).
- The Ninth Circuit has been particularly active on this front: SEC v. Colello, 139 F.3d 674, 677-78 (9th Cir. 1998) (holding that district court did not err in drawing an adverse inference against defendant based on his Fifth Amendment invocation in a summary judgment proceeding because there was “additional evidence” to support the SEC’s case); Doe ex rel. Rudy-Glanzer v. Glanzer,232 F.3d 1258, 1264-65 (9th Cir.2000)(“The Baxter holding is not a blanket rule that allows adverse inferences to be drawn from invocations of the privilege against self-incrimination under all circumstances in the civil context”); SEC v. Jasper, 678 F. 3d 1116, 1126 (9th Cir. 2012) (“Jasper has no legal support for the proposition that a district court must make its evidentiary rulings and tailor its adverse inference instructions on a “question-by-question basis.” … But Jasper has no warrant for treating every individual question as an “instance where the adverse inference was drawn” under Glanzer. As properly instructed, the jury could have concluded that the sum total of his Fifth Amendment invocations supported the adverse inference against him.”)
- SEC v. Smart, 678 F. 3d 850, Fn 8 (2012) (10th Cir. 2012)(noting the Stichting and Colello split, and deciding it did not need to resolve the conflict)
One interesting point of particular relevance to Prenda Law: As Ken notes in his post summarizing the available sanctions, when a judge notices misconduct in their court, one tool they have available is the ability to refer matters to the attorney’s state bar association. Can the silence be used against them in a disciplinary proceeding? Well, there’s a case on that in the First Circuit, involving an attorney who fraudulently concealed property during a bankruptcy, then asserted her right against self-incrimination: “While refusal to waive the Fifth Amendment might increase the risk that she would be disbarred, disbarment would not result automatically and without more. Hence, she was not threatened with a penalty within the meaning of [Garrity v. New Jersey, 385 U.S. 493 (1967)] for invoking her Fifth Amendment privilege.”
Thus, under federal law, a bar association can use the assertion of the Fifth Amendment against an attorney in a disciplinary action, so long as disbarment isn’t automatic, but some state laws preclude their state courts from drawing negative inferences against a party who asserts a privilege and refuses to testify. As two corporate defense lawyers at Gibson Dunn noted back in 2010, several states have statutes or rules of evidence that forbid courts from drawing adverse inferences after a party asserts a testimonial privilege. See, e.g., Alaska R. Evid. 512(c); Ark. R. Evid. 512; Cal. Evid. Code § 913(a); Del. R. Evid. 512; Haw. Rev. Stat. § 626-1, R. 513; Idaho R. Evid. 512; Ky. R. Evid. 511; N.D. R. Evid. 512; Nev. Rev. Stat. § 27-513; Nev. Rev. Stat 49.405; N.J. R. Evid. 532; N.M. R. Evid. 11-513; Okla. Stat. Ann. §2513; Or. Rev. Stat. § 40.290; Vt. R. Evid. 512. In those states, the court has to tell the jury to not use the silence against the party. I’m sure Cicero wouldn’t approve, but those are issues for another day, and they’re state-specific.
Yet another interesting question is when the adverse inference may be used to break through attorney–client privilege by way of the crime–fraud exception, and force an attorney to disclose communications with the client, over the client’s objection. The Southern District of New York tore through that one back in February: “Stern invoked his privilege against self-incrimination in response to nearly every question asked of him during his deposition. By refusing to answer any questions, Stern obstructed the discovery process, which justifies drawing an inference that any answers he gave in response to the questions would have been unfavorable to him. … Accordingly, plaintiff will be permitted to draw adverse inferences against Stern to support its efforts to invoke the crime/fraud exception.” The Court then used those negative inferences to find the crime–fraud exception likely applied.
Now, the question for a lawyer is, when an opposing party asserts their right against self-incrimination, what do you do? You can move on to another subject, but that’s not the right way to do it. When a party asserts the Fifth, you make them dig as deep and as wide a hole as you can, asking as many specific questions as possible to prompt the assertion of the privilege. That way, you can both (a) examine the contours of the asserted privilege, to see if it is being asserted improperly and (b) develop a thorough record on every issue upon which you are seeking an adverse inference. The more “I plead the Fifth” answers you get, the better.
If you’re curious for more background on the right against self-incrimination and its relationship to civil cases, see this thorough article by Andrew Schulman.