There is some testimony as to the choice by Masterson of Martin as the attorney to file his suit, and the Commission insists that the explanation of such choice is not considered credible.
Certain of the circumstantial facts here depended upon testimony, while others rest upon documentary evidence. It is insited by the defendants and intervenors that, inasmuch as the witnesses were not subject to cross-examination in the investigatory proceedings, their testimony should not be considered in determining whether or not a prima facie case of fraud has been made. With this I cannot agree, but, in determining whether or not testimony given under such circumstances in itself, or in conjunction with documentary evidence, constitutes a prima facie case, unquestionably it must be viewed in the light that the witnesses were not subjected to cross-examination. No one trained and experienced in considering the testimony of witnesses and making decisions based thereon can fail to realize that a witness' testimony cannot be considered to have the same reliability when his statements have not been subjected to full and fair cross-examination. This, in no sense, is concerned only with the veracity of the witness but as well with his choice of language, honest recollection and explanation. Of necessity, in investigatory proceedings frequently, and in grand jury proceedings uniformly, the examination of witnesses does not include cross-examination. Such testimony for that reason is not to be disregarded, as defendants and intervenors contend, but it must be subjected to the strictest scrutiny for possible ambiguity and equivocation.
It is insisted that inferences should be drawn from the evidence that Eaton, through the defendants and others, inspired and induced the filing of the Masterson suit. It is urged that, in considering whether or not the evidence is sufficient to pierce the attorney-client privilege, every inference favorable to the contention of the Commission should be made. In considering whether a prima facie case has been made, reasonable inference from circumstances proved should be made to support the ultimate facts constituting the prima facie case, but, of course, this does not mean that an inference of guilt or wrong doing can be made where that ultimate fact may not be reasonably drawn from the circumstantial facts established. It is quite apparent that the circumstantial facts proved are reasonably consistent with inquiries as to whether or not a derivative suit had been, or would be, filed, as with actually seeking to induce or cause the filing of such a suit. In this situation, I cannot believe that Curley v. United States, 81 U.S.App.D.C. 389, 160 F.2d 229, compels the conclusion that a prima facie case of guilt or wrong doing has here been established. In any event, I do not consider the circumstances here proved to be such, without more, as to reasonably justify a verdict of wrong doing which could be sustained, and I, therefore, must conclude that the requisite prima facie showing of fraud to pierce the attorney-client privilege and relieve the communications here sought to be disclosed from immunity has not been made.
The Court, in these proceedings, is not required, nor would it be proper, to make findings as to whether or not the fraud charged was perpetrated, but only to determine whether or not the evidence in the record, without more, constitutes a prima facie showing of such fraud. It should also be clearly understood that the Court is not passing on the claim of immunity respecting testimony other than communications between the intervenor and his attorneys. There is a note in the brief of the Commission to the effect that certain acts of the attorneys, about which the defendants were questioned, do not come within this scope, but no argument, oral or written, was made on this point, nor is any action by this Court sought on this ground.
With respect to the counterclaim, I am of the view that such relief as the defendants and intervenors claim therein, and which can be properly granted, will be afforded by the refusal of this Court to enforce obedience to the subpoenas in so far as they seek to require testimony concerning communications falling within the attorney-client privilege. I am of the further view that, in so far as the counterclaim seeks injunctive relief respecting the future conduct of the hearings in the investigatory proceedings, the defendants and intervenors are not entitled to the relief sought, and that this Court does not have the power by injunctive relief to control the conduct of such hearings by the Commission.
Other matters urged by the parties in this case, in addition to those mentioned in this memorandum, have been fully considered, but do not, in my opinion, alter the conclusions reached.
In the view stated, the motion to dismiss the complaint and the motion to strike the record filed in lieu of the Lund affidavit will be denied. The order sought by the Commission to enforce the subpoenas directed to the defendants in so far as they call for testimony and evidence relating to communications with their client, Cyrus S. Eaton, or require a disclosure of such communications, will be denied. The motion to dismiss the counterclaim and interrogatories with reference thereto will be granted. Counsel will prepare orders to carry this decision into effect.