(This syllabus is not part of the opinion of the Court. It has been prepared by the Office of the Clerk for
the convenience of the reader. It has been neither reviewed nor approved by the Supreme Court. Please
note that, in the interests of brevity, portions of any opinion may not have been summarized).
Argued March 13, 1995 -- Decided August 2, 1995
O'HERN, J., writing for a unanimous Court.
This appeal addresses the authority and power of a New Jersey agency investigating securities
transactions involving New Jersey residents to issue a subpoena to a witness outside of the State's
boundaries, and the corresponding authority and power of a New Jersey court to enforce such a subpoena.
The New Jersey Bureau of Securities (the Bureau) was investigating the activities of certain broker-dealers registered with the Bureau. In connection with that investigation, the Bureau issued a subpoena to
Robert Gary Berkson, requiring him to appear at the Bureau's office in Newark, New Jersey, to testify about
certain securities transactions. Bureau personnel personally served Berkson with the subpoena at his home
in East Hills, New York. Berkson declined to appear in response to the subpoena.
Pursuant to N.J.S.A. 49:3-68 (the statute authorizing the Bureau to issue subpoenas or "the subpoena
statute"), the Bureau applied to the Superior Court for an order enforcing its subpoena. The Chancery
Division granted the order of enforcement, finding that Berkson was an "artful manipulator" of the securities
industry in New Jersey; that he "had repeated substantial contacts within New Jersey relating to the Bureau's
pending investigation;" and that it was not unreasonable to anticipate that Berkson, who was packaging
securities for sale to New Jersey investors, might be subject to jurisdiction in New Jersey. The court
concluded that to allow Berkson to reside in New York and do business in New Jersey without fear of
investigation or subpoena offends judicial notions of fair play and substantial justice.
Berkson appealed. The Appellate Division reversed, and ordered that the subpoena be quashed.
The Appellate Division agreed that Berkson had minimum contacts within New Jersey, but found that the
trial court could not issue a subpoena to compel Berkson's appearance and testimony because it violates his
due process rights. According to the Appellate Division, a court cannot give an agency greater subpoena
power than a subpoena issued in the name of the court via enforcement.
The Supreme Court granted the Bureau's petition for certification.
HELD: The New Jersey Bureau of Securities may subpoena a nonresident who has engaged in purposeful
conduct expressly aimed at the New Jersey securities market. In addition, a New Jersey court may,
consistent with due process principles, enforce such a subpoena.
1. Although conferring extraterritorial subpoena authority on the Bureau is unusual, it has been consistently
held that powers expressly granted to an administrative agency should be liberally construed so that the
agency can fulfill it legislative purpose. Where a statute is silent or ambiguous, it is the duty to chose a
construction that will carry out the legislative intent of the statute as a whole. The Court is not inclined to
create a presumption against any legislative intent that subpoena power extend beyond New Jersey borders.
General principles of administrative law suggest that the Legislature intended the agency to have the
authority necessary to fulfill its function to investigate, within and without the State, security transactions
involving New Jersey residents. (pp. 5-8)
2. Under International Shoe v. Washington, a state court's assertion of personal jurisdiction does not violate
the Due Process Clause if the nonresident defendant has certain minimum contacts with the State such that
the maintenance of the suit does not offend traditional notions of fair play and substantial justice. The
power to exert authority over nonresidents exists as a matter of sovereignty. (pp. 9-12)
3. The power to issue a subpoena and the power to enforce a subpoena are different incidents of
sovereignty, and such powers are not necessarily identical. The power to issue a subpoena is determined by
the jurisdiction. Consistent with the principles of International Shoe, a state agency may require the
appearance of witnesses from outside New Jersey. There is a difference between this case and International
Shoe. International Shoe deals with long-arm jurisdiction over a cause of action, in which the nonresident is
afforded the opportunity to appear and defend but need not do so, while a subpoena compels a person to do
something. Nonetheless, the measures of sovereign power are ultimately the same. (pp. 12-19)
4. For reasons of fairness and efficiency of administration, federal courts have drawn a sharp distinction
between agency power to issue subpoenas and judicial power to enforce them. Here, the issue is not what
Court Rules do or do not permit New Jersey courts to do. The issue is whether the State may grant an
agency extraterritorial authority over nonresident witnesses consistent with due process principles. If the
Legislature grants such power, the proper role of a court under the subpoena statute is to ensure that
principles of due process and comity between states have been observed in the issuance of the subpoena. In
deciding whether to exercise enforcement jurisdiction, courts should balance the interest it seeks to protect
against the interest of any other sovereign that might exercise authority over the same conduct. Because
each sovereign has an interest in the welfare of its citizens, a court must consider: 1) the extent and nature of
a hardship that inconsistent enforcement actions would impose on the person subpoenaed; 2) the extent to
which the required conduct is to take place in the territory of the other state; 3) the residence of the person
subpoenaed; and 4) the extent to which enforcement by action of either state can reasonably be expected to
achieve compliance with the rule prescribed by that state. Process should be served only by those authorized
to do so under the laws of this State. (pp. 19-24)
5. This decision comports with International Shoe and with the expanding role of states in the federalist
system. As the federal government reduces its regulatory role and state governments increase theirs, the
need to develop coherent principles of cooperation among states increases. Thus, it is reasonable to infer
that the Legislature would, consistent with the principles of due process, intend that the Bureau's
administrative power to compel the attendance of witnesses be coextensive with its substantive mandate to
investigate securities transactions within or outside of the State. Consistent with principles of due process,
that authority shall be limited to subpoenaing witnesses who have purposely availed themselves of the
privilege to enter the New Jersey securities market. Before enforcing an agency subpoena, a court must
determine that the party subpoenaed has engaged in such deliberate conduct. The court should consider the
fairness to the witness and whether other available methods of discovery would adequately serve that
agency's needs without having to bring the witness to New Jersey. In considering any civil sanctions to be
imposed, a court shall not impose an order of arrest and shall limit monetary sanctions in accordance with
the relevant principles applicable to Rule 1:10-3. (pp. 24-27)
Judgment of the Appellate Division is REVERSED and the matter is REMANDED to the Chancery
Division for further proceedings in accordance with this opinion.
CHIEF JUSTICE WILENTZ and JUSTICES HANDLER, POLLOCK, GARIBALDI, and STEIN
join in JUSTICE O'HERN's opinion. JUSTICE COLEMAN did not participate.
SUPREME COURT OF NEW JERSEY
A-
97 September Term 1994
A. JARED SILVERMAN, CHIEF
NEW JERSEY BUREAU OF SECURITIES,
Plaintiff-Appellant,
v.
ROBERT GARY BERKSON,
Defendant-Respondent.
Argued March 13, 1995 -- Decided August 2, 1995
On certification to the Superior Court,
Appellate Division, whose opinion is reported
at
276 N.J. Super. 6 (1994).
Michael Pariser, Deputy Attorney General,
argued the cause for appellant (Deborah T.
Poritz, Attorney General of New Jersey,
attorney; Andrea M. Silkowitz, Assistant
Attorney General, of counsel).
Richard F. Horowitz, a member of the New York
bar, argued the cause for respondent
(Hellring, Lindeman, Goldstein & Siegal,
attorneys; James A. Scarpone, on the brief).
The opinion of the Court was delivered by
O'HERN, J.
This appeal concerns the authority and power of a New Jersey
agency investigating securities transactions involving New Jersey
residents to issue a subpoena to a witness outside of the State's
boundaries, and the corresponding authority and power of a New
Jersey court to enforce such a subpoena. We hold that (1) the
New Jersey Bureau of Securities (the Bureau) may subpoena a
nonresident who has engaged in purposeful conduct expressly aimed
at the New Jersey securities market; and (2) a New Jersey court
may, consistent with due process principles, enforce such a
subpoena.
The case arises from the Bureau's investigation of securities transactions involving New Jersey residents. The Bureau's complaint states that it is conducting an investigation into the trading practices of L. C. Wegard & Co., Inc., and Hibbard Brown & Co., Inc., brokers-dealers registered with the Bureau, and of others. In connection with that investigation, the Bureau issued a subpoena to Robert Gary Berkson, requiring him to appear at the Bureau's office in Newark, New Jersey, to testify about certain securities transactions. Bureau personnel personally served Berkson with the subpoena at his home in East Hills, New York. Berkson declined to appear in response to the subpoena. Berkson's attorneys inform us that he "is not seeking to prevent the Bureau from conducting investigations or instituting proceedings; he is only seeking to prevent the unconstitutional use by the Bureau of an extraterritorial subpoena."
Pursuant to N.J.S.A. 49:3-68, the Bureau applied to the Superior Court for an order enforcing its subpoena. The Chancery Division granted an order of enforcement. It found that Berkson
was an "artful manipulator" of the securities industry in New
Jersey, that he "had repeated substantial contacts within New
Jersey related to the Bureau's pending investigation," and that
"[i]t was certainly reasonable to anticipate that Berkson, who
was packaging * * * securities for sale to New Jersey investors,
could have anticipated that he would be subject to jurisdiction
within the State." The court concluded that "[t]o allow
[Berkson] to reside in New York, do business in New Jersey more
than minimally, and [affect] a well-regulated industry in New
Jersey, without fear of investigation or subpoena, is offensive
to traditional notions of fair play and substantial justice."
Berkson appealed. The Appellate Division reversed the
Chancery Division's decision and ordered that the subpoena be
quashed.
Pursuant to long-arm jurisdiction, New Jersey
allows service of a summons and complaint to
the fullest extent possible in order to
afford due process of law, and maintenance of
an action with this type of service of
process does not offend notions of fair play
and substantial justice. We agree with the
trial judge that defendant had minimum
contacts with this State, but while that may
support initiation of an action here by [the
Bureau] against defendant, it does not
countenance issuance of a subpoena to compel
appearance and testimony.
Service of the subpoena here violates defendant's due process rights. A court cannot accord an agency's subpoena greater
power than a subpoena issued in the name of
the court via enforcement.
[
276 N.J. Super. 6, 9-10 (1994)
(citations omitted).]
The court observed that "[u]nder authority of R. 4:11-5, non-party witnesses may be compelled to testify at a deposition in
another state and the deposition may be used in an action here,"
and that "[i]t is this type of procedural format envisioned by
N.J.S.A. 49:3-68 [the statute authorizing the Bureau to issue
subpoenas]." Id. at 9. We granted the Bureau's petition for
certification,
138 N.J. 268 (1994).
While the Bureau's appeal was pending in this Court, the
Bureau, in accordance with a suggestion in the Appellate Division
opinion, moved in the Chancery Division, pursuant to Rule 4:11-5,
for issuance of an open commission to take Berkson's testimony in
New York. The Bureau made a similar motion for issuance of an
open commission to take the testimony of Peter F. Hibbard in
Maryland. The Bureau described Hibbard as "a broker-dealer at
the heart of the Bureau's investigation." The Chancery Division
entered orders directing issuance of open commissions to take the
testimony of Berkson and Hibbard in their respective states.
Following oral argument before this Court, the Appellate Division
reversed the decision of the Chancery Division issuing those
commissions to take the out-of-state testimony. In re Berkson,
280 N.J. Super. 180 (1995). It reasoned that its opinion in
Silverman, supra,
276 N.J. Super. 6, did not envision the use of
Rule 4:11-5 to authorize the issuance of a commission to compel
the testimony of an out-of-state resident "solely for
investigative purposes." 280 N.J. Super. at 183-84.
The first question in this case is one of agency authority. Government agencies have only those powers the Legislature confers on them. General Assembly v. Byrne, 90 N.J. 376, 393 (1982). Unless compelled to do otherwise, courts seek to avoid a statutory interpretation that might give rise to serious constitutional questions. New Jersey Bd. of Higher Educ. v. Shelton College, 90 N.J. 470, 478 (1982). Conventional wisdom might suggest, as the Appellate Division concluded in Berkson, supra, 280 N.J. Super. at 184, that "[i]f the Legislature had wished to bestow such extraordinary extraterritorial authority upon the Bureau, it could have done so in plain language." That court's conclusion was "reinforced by the absence of any provision in New Jersey's version of the Uniform Securities Law affording a procedure for the Bureau to take out-of-state testimony of a non-resident witness." Ibid. The court noted that the 1985 version of the Uniform Securities Act (not adopted in New Jersey, New York, or Maryland) specifically provided for the taking of testimony in the state of a nonresident witness for the purpose of an investigation being conducted in another state. Ibid.
We understand that conferring extraterritorial subpoena authority on the Bureau is unusual; to our knowledge, no other
jurisdiction grants such authority to its agencies except through
reciprocal legislation, such as in the Uniform Securities Act.
On the other hand, our courts have consistently recognized that
powers expressly granted to an administrative
agency should be liberally construed so that
the agency can fulfill the Legislature's
purpose, Barry v. Arrow Pontiac, Inc.,
100 N.J. 57, 70 (1985), and that an agency's
express authority is augmented by such
incidental authority as may be reasonably
necessary or appropriate to effectuate the
expressly delegated authority, New Jersey
Guild of Hearing Aid Dispensers v. Long,
75 N.J. 544, 562 (1978).
[In re Solid Waste Util. Customer Lists,
106 N.J. 508, 516 (1987).]
Thus, for example, in Customer Lists we inferred that even in the
absence of an express authority conferred on it, the Board of
Public Utilities might require solid-waste haulers to provide it
with proprietary information, such as customer lists. Ibid. And
finally we have, when the interpretation is reasonable, deferred
to an agency's interpretation of its own enabling act. "Where a
statute is silent or ambiguous, `it is our clear duty to choose
that construction which will carry out the legislative intent of
the statute as a whole * * * .'" Accountemps v. Birch Tree
Group, Ltd.,
115 N.J. 614, 622 (1989) (extending regulation of
employment practices to out-of-state agencies doing business in
New Jersey) (quoting Horwitz v. Reichenstein,
15 N.J. 6, 8
(1954)).
In this case, the Bureau and respondent insist that the
statute is neither silent nor ambiguous, and that the statute's
language plainly resolves the issue in their favor. Respondent
acknowledges that N.J.S.A. 49:3-68(a) authorizes the Bureau to
conduct investigations within and without the State. The
authority to subpoena in N.J.S.A. 49:3-68(b), however, is silent
about whether a subpoena may be issued both within and without
the State. Thus, according to respondent, the Legislature did
not intend that a subpoena be issued outside of the State. The
Bureau contends that the absence of any restriction implies that
the Legislature intended that the Bureau's subpoena power reach
the limits of the Constitution.
Federal courts have required a clear expression from
Congress before authorizing extraterritorial service of an
investigative subpoena. See, e.g., Commodity Futures Trading
Comm'n v. Nahas,
738 F.2d 487, 492-93 (D.C. Cir. 1984). However,
entry upon the territory of another nation is far more intrusive
than the service of a subpoena in another state. We are not
inclined to create a presumption against any legislative intent
that the subpoena power extend beyond our borders. We realize
there may have been a settled understanding that under judicial
rules of practice and procedure in New Jersey a subpoena could
not be served outside New Jersey. Recall, however, Justice
Brennan's concurring opinion in Burnham v. Superior Court,
495 U.S. 604, 631, n.3,
110 S. Ct. 2105, 2122, n.3,
109 L. Ed.2d 631, 652, n.3 (1990), noting that it should not be assumed "that
there is no further progress to be made and that the evolution of
our legal system, and the society in which it operates, ended 100
years ago."
Had the Legislature resolved this issue with sufficient
clarity, there would be no debate about the agency's powers. We
believe, however, that general principles of administrative law
suggest that the Legislature intended the agency to have the
authority necessary to fulfill its function to investigate,
within and without the State, securities transactions involving
New Jersey residents. We must then turn to the questions of
constitutional jurisdiction.
In an analogous context, a federal court wrote: "The jurisdictional questions posed by this case are peculiarly complex because the jurisdiction of three institutions is at issue * * * ." Federal Trade Comm'n v. Compagnie de Saint-Gobain-Pont-`a-Mousson (SGPM), 636 F.2d 1300, 1315 (D.C. Cir. 1980). The questions here involve: (1) the jurisdiction of a state to exercise authority over a nonresident; (2) the jurisdiction of an administrative agency of such a state to exercise that authority in the name of the state through the issuance of an administrative order (a subpoena) to the resident of a foreign state; and (3) the jurisdiction of a court of the issuing state to enforce such a subpoena when the party subpoenaed is not physically present in the issuing state. Cf. id. at 1315-22 (using similar approach to decide validity of
service of federal agency subpoena on French corporation by
registered mail). We shall consider those questions separately.
(We refer to a "state" as a state of the United States, unless we
identify the state as being a foreign nation.)
Does a state have jurisdiction to exert authority over nonresidents?
A lawsuit is not the only manner in which a state may exert
authority over a nonresident. The landmark case of Pennoyer v.
Neff,
95 U.S. 714, 733,
24 L. Ed. 565, 572 (1878), held that the
judgment of a court lacking personal jurisdiction violated the
Due Process Clause of the Fourteenth Amendment. Perhaps
influenced by Austinian concepts of law, Pennoyer held that
jurisdiction to adjudicate derived from a "power" theory of a
state's "exclusive jurisdiction and sovereignty over persons and
property within its territory." 95 U.S. at 722, 24 L. Ed. at
568. It drew on principles of "public law" derived from Justice
Story's Commentaries on the Conflict of Laws:
[N]o State can exercise direct jurisdiction
and authority over persons or property
without its territory. Story, Confl. L., ch.
2; Wheat. Int. L., pt. 2, ch. 2. The several
States are of equal dignity and authority,
and the independence of one implies the
exclusion of power from all others. And so
it is laid down by jurists, as an elementary
principle, that the laws of one State have no
operation outside of its territory, except so
far as is allowed by comity; and that no
tribunal established by it can extend its
process beyond that territory so as to
subject either persons or property to its
decisions. "Any exertion of authority of
this sort beyond this limit," says Story, "is
a mere nullity, and incapable of binding
such persons or property in any other
tribunals." Story, Confl. L., sec. 539.
[95 U.S. at 722-23, 24 L. Ed. at 568-69.]
Later years, however, saw the weakening
of the Pennoyer rule. In the late 19th and
early 20th centuries, changes in the
technology of transportation and
communication, and the tremendous growth of
interstate business activity, led to an
"inevitable relaxation of the strict limits
on state jurisdiction" over nonresident
individuals and corporations. Hanson v.
Denckla,
357 US 235, 260,
2 L Ed 2d 1283,
78 S Ct 1228 (1958) (Black, J., dissenting).
[Burnham, supra, 495 U.S. at 617, 110 S. Ct.
at 2114, 109 L. Ed.
2d at 643.]
The U.S. Supreme Court formerly resorted to various
fictions, such as implied consent. E.g., Hess v. Pawloski,
274 U.S. 352,
47 S. Ct. 632,
71 L. Ed. 1091 (1927). Eventually, in
International Shoe Co. v. Washington,
326 U.S. 310,
66 S. Ct. 154,
90 L. Ed. 95 (1945), the Court cast those fictions aside and
held that a state court's assertion of personal jurisdiction does
not violate the Due Process Clause if the defendant has "certain
minimum contacts with it such that the maintenance of the suit
does not offend `traditional notions of fair play and substantial
justice.'" 326 U.S. at 316, 66 S. Ct. at 158, 90 L. Ed. at 102
(quoting Milliken v. Meyer,
311 U.S. 457, 463,
61 S. Ct. 339,
343,
85 L. Ed. 278, 283 (1940)). The concomitant understanding
of legislative jurisdiction was similarly modified.
Until recently, it was unclear whether
the due process limitation upon a state's
extraterritorial application of law mirrored
the due process analysis for determining the
limits of a state court's judicial
jurisdiction. The concepts are closely
linked, and commentators have suggested that
essentially the same principle should be
applied with reference to both situations.
[McCluney v. Jos. Schlitz Brewing Co., 649 F.
2d 578, 581 (8th Cir.), aff'd,
454 U.S. 1071,
102 S. Ct. 624,
70 L. Ed.2d 607
(1981).]
In Allstate Insurance Co. v. Hague,
449 U.S. 302, 312-13,
101 S. Ct. 633, 640,
66 L. Ed.2d 521, 531 (1981), the Court said
that "for a State's substantive law to be selected in a
constitutionally permissible manner, that State must have a
significant contact or significant aggregation of contacts,
creating state interests, such that choice of its law is neither
arbitrary nor fundamentally unfair."
That elucidation mirrors the principle of prescriptive
jurisdiction among nations. "It has long been settled law that a
country can regulate conduct occurring outside its territory
which causes harmful results within its territory." Laker
Airways Ltd. v. Sabena, Belgian World Airlines,
731 F.2d 909, 922
(D.C. Cir. 1984). Similarly, a state may proscribe conduct
occurring outside its borders. In the criminal context, "[t]he
common law adopts as the principal basis of jurisdiction a
territorial theory of jurisdiction over crimes: a state has
power to make conduct or the result of conduct a crime if the
conduct takes place or the result happens within its territorial
limits." 1 Wayne R. LaFave & Austin W. Scott, Jr., Substantive
Criminal Law § 2.9(a), at 180 (1986) (footnotes omitted). The
New Jersey Code of Criminal Justice reflects that understanding
of a state's jurisdiction. A person may be convicted under the
laws of this State of an offense if "[e]ither the conduct which
is an element of the offense or the result which is such an
element occurs within this State." N.J.S.A. 2C:1-3a(1).
On the civil side, "[a] State's power over its own citizens
should extend to protection of its own citizens' rights when
dealing with others even though there may be incidental effects
in other jurisdictions." Instructional Sys., Inc. v. Computer
Curriculum Corp.,
130 N.J. 324, 370 (1992). Because the power to
exert authority over nonresidents exists as a matter of
sovereignty, we turn to the next question.
May a state authorize its agencies to subpoena a nonresident to testify or produce documents in the forum state?
The Appellate Division reasoned that because a judicial subpoena may not be served beyond the State's boundaries, a court may not enforce an administrative subpoena issued beyond the State's boundaries. We find, however, that the power to issue a subpoena and the power to enforce a subpoena are different incidents of sovereignty, and such powers are not necessarily identical. A federal court considering a related issue explained that "[a] federal court's jurisdiction [to enforce a grand jury
subpoena] is not determined by its power to issue a subpoena; its
power to issue a subpoena is determined by its jurisdiction."
In re Marc Rich & Co., A.G.,
707 F.2d 663, 669 (2d Cir.), cert.
denied,
463 U.S. 1215,
103 S. Ct. 3555,
77 L. Ed.2d 1400 (1983).
A subpoena is simply "a command to appear at a certain time
and place to give testimony upon a certain matter." Black's Law
Dictionary 1279 (5th ed. 1979). "[T]he very etymology of the
word `subpoena' signifies `an order with a penalty for
disobedience.'" In re Simon,
297 F. 942, 945 (2d Cir. 1924)
(quoting Burns v. Superior Court,
73 P. 597, 598 (Cal. 1903)).
Under our law,
the acquisition of jurisdiction over a
foreign corporation through the process of
subpoena is governed by the same principles
of jurisdiction which apply in the case of
civil litigation involving the process of a
summons. Both a subpoena and a summons are
forms of judicial process by way of orders of
the court resulting in potential sanctions
for disobedience.
[In re Subpoena Duces Tecum, Inst'l
Management Corp.,
137 N.J. Super. 208, 216
(App. Div. 1975).]
The question is whether a different principle should apply when a
state agency issues an order in the form of a subpoena.
Cases analyzing a federal court's authority to enforce
subpoenas issued by federal agencies to foreign corporations have
first examined the agency's statutory authority to issue the
subpoena extraterritorially. Thus, in Nahas, supra,
738 F.2d 487, the court found that the authority of the Commodity Futures
Trading Commission was, at that time, strictly limited by
7 U.S.C. §15 to requiring the attendance of witnesses and the
production of records "from any place in the United States or any
State at any designated place of hearing."See footnote 1 The Nahas court
relied on a presumption that federal legislation is meant to
apply only within the territorial jurisdiction of the United
States, and it would not infer the existence of the power to
serve an investigative subpoena on a foreign national in a
foreign country. Id. at 493. The court emphasized, however,
that "this case does not pose a question about the authority of
Congress; rather, it poses a question about the congressional
intent embodied in
7 U.S.C.
§15." Id. at 495.
A federal court will enforce an investigative subpoena
issued to a foreign national when it has personal jurisdiction
over the subpoenaed party. In re Sealed Case (Iran-Contra
Investigation),
832 F.2d 1268, 1272 (D.C. Cir. 1987). A federal
court has personal jurisdiction over an individual or business
concern with respect to activities or effects within the United
States if that entity has certain minimum contacts with the
United States. Id. at 1273 (citing International Shoe, supra,
326 U.S. at 316, 66 S. Ct. at 158, 90 L. Ed. at 102). Thus, in
Marc Rich, supra,
707 F.2d 663, the court found that a Swiss
trading company doing business in the United States could be
required to respond to a grand jury subpoena served on a
representative within the forum. (Jurisdiction over a
representative of the subpoenaed nonresident is insufficient; the
nonresident entity must itself have the requisite contacts.
Sealed Case (Iran-Contra Investigation), supra, 832 F.
2d at 1272-73.)
Although the analogy is less precise in the domestic context
than in the international context (after all, the federal
government unquestionably may issue process across state lines),
we do note that federal courts analyzing issues of enforcement of
nationwide subpoenas by federal agencies have drawn a distinction
between the agency's statutory authority to issue the subpoena
and the corresponding grant of jurisdiction to a federal court to
enforce the subpoena. Although a federal district court's
process is generally confined to the territorial limits of the
state in which it sits, extraterritorial service of process is
proper "when authorized by a statute of the United States." Fed.
R. Civ. P. 4(k)(1)(D). The Federal Trade Commission, for
example, has the authority to compel the attendance and testimony
of witnesses "from any place in the United States, at any
designated place of hearing."
15 U.S.C. §49. In Federal Trade
Commission v. Browning,
435 F.2d 96 (D.C. Cir. 1970), the court
upheld the FTC's statutory power to subpoena witnesses in any
district in which an inquiry is being carried on, and the
corresponding district court's power to enforce such a subpoena.
In Federal Election Commission v. Committee to Elect Lyndon La
Rouche,
613 F.2d 849, 858 (D.C. Cir. 1979), cert. denied,
444 U.S. 1074,
100 S. Ct. 1019,
62 L. Ed.2d 755 (1980), the court
upheld the authority of the FEC (with which Congress has vested
"broad powers of compulsory process," id. at 860) to issue
nationwide subpoenas, giving it substantial leeway in selecting
its place of inquiry for subpoena-enforcement purposes.
We believe that, consistent with the principles of
International Shoe, a State agency may require the appearance of
witnesses from outside New Jersey. It is true that there is a
difference between this case and International Shoe. "The
distinction between service of notice and service of compulsory
process is a crucial one under principles of both domestic and
international law." SGPM, supra, 636 F.
2d at 1311.
International Shoe held only that if a cause of action arises
within a state, and if it is fair to make a party come into the
state to defend, then the action may proceed under pain of
default judgment. The forum state does not care whether the
defendant comes in or not. It does not order the party to
attend; it does not tell the defendant to do anything. The
conclusion does not inevitably follow from International Shoe
that if a state may exercise personal jurisdiction pursuant to
long-arm service, it may exercise its jurisdiction to subpoena to
the same limits. A subpoena compels a person to do something.
Long-arm service of process is a state's assertion of
jurisdiction, not over a person, but over a cause of action.
Such a nonresident is afforded the opportunity to defend, but
need not do so--the consequence being a judgment entitled to full
faith and credit.
Still, we believe that the measures of sovereign power are
ultimately the same. The concepts of "jurisdiction to prescribe"
("the authority of a state to make its law applicable to persons
or activities") and "jurisdiction to adjudicate" ("the authority
of a state to subject particular persons or things to its
judicial process"), 1 Restatement (Third) of Foreign Relations
Laws of the United States Part IV, at 231 (1987), are closely
linked. Under principles of international law, "a nation having
some `basis' for jurisdiction to prescribe law" may do so unless
"exercising that jurisdiction `with respect to a person or
activity having connections with another [nation] * * * is
unreasonable.'" Hartford Fire Ins. Co. v. California, ___ U.S.
___, ___,
113 S. Ct. 2891, 2921,
125 L. Ed.2d 612, 653 (1993)
(Scalia, J., dissenting) (quoting Restatement (Third) of Foreign
Relations, supra, § 403(1)). Is not that articulation of the
power to prescribe (albeit expressed in the international
context) almost identical to International Shoe's delineation of
the jurisdiction to adjudicate consistent with due process
principles? McCluney, supra, 649 F.
2d at 581. See Institutional
Management, supra, 137 N.J. Super. at 216 (equating the
jurisdiction to subpoena with the jurisdiction to serve initial
process).
Respondent relies on Minder v. Georgia,
183 U.S. 559, 562,
22 S. Ct. 224, 225,
46 L. Ed. 328, 330 (1902), for the
proposition that "the lawmaking power of the state is powerless to make any provision which would result in the compulsory attendance of the [out-of-state] witnesses * * *." Minder was decided long before International Shoe, but even then it would have been only marginally relevant to the issues here. The issue in Minder was whether a criminal defendant in Georgia had received a fair trial when he could not subpoena material defense witnesses who were outside Georgia. At that time, Georgia law made no provision to subpoena out-of-state witnesses. (That issue has since been addressed by the Uniform Act to Secure the Attendance of Witnesses from Without a State in Criminal Proceedings, adopted in New Jersey as N.J.S.A. 2A:81-18 to -23.) The question in this case is not whether a state may compel attendance in the forum of any out-of-state witness, but rather whether it may require the attendance of one who has purposely availed himself of the privilege of entering regulated securities markets in the forum state. Finally, personal service of the subpoena within the territorial boundaries of the issuing state is not a prerequisite to a valid administrative order to appear. In his concurring opinion in SGPM, supra, 636 F. 2d at 1327, Judge McGowan observed that Congress had explicitly authorized extraterritorial service by registered mail of civil investigative demands in antitrust matters. See also id. at 1321 (majority opinion) (discussing agency's subject matter jurisdiction and technique of service, and investigative demands and issues of enforcement jurisdiction). We agree that absent
"purposeful availment," the jurisdiction to proscribe conduct in
another forum would not suffice to confer jurisdiction to enforce
a civil investigative demand in the territory of another state.
Cf. id. at 1316 (recognizing that a nation having jurisdiction to
prescribe a rule of law does not necessarily have jurisdiction to
enforce it).
What is the proper role of a state court in enforcing such an administrative subpoena?
Courts play a critical role in this administrative process. First, judicial involvement ensures administrative due process. "The system of judicial enforcement is designed to provide a meaningful day in court for one resisting an administrative subpoena." United States v. Security State Bank & Trust, 473 F.2d 638, 642 (5th Cir. 1973). "Bifurcation of the power, on the one hand of the agency to issue subpoenas and on the other hand of the courts to enforce them, is an inherent protection against abuse of subpoena power." United States v. Bell, 564 F.2d 953, 959 (Temp. Emer. Ct. App. 1977). Second, judicial enforcement clarifies the rights arising from specific disputes in matters concerning both the general public and the individuals involved. "One of the functions of a court is to compel a party to perform a duty which the law requires at his [or her] hands." Interstate Commerce Comm'n v. Brimson, 154 U.S. 447, 487, 14 S. Ct. 1125, 1137, 38 L. Ed. 1047, 1061 (1894). Agency law invokes enforcement "in the customary forms of judicial proceedings,
because its effect may be to aid an administrative or executive
body in the performance of duties legally imposed upon it
* * * ." Ibid. No question of contempt may arise until all
issues are determined adversely to a party and that party has
refused to obey a final order of the court. 154 U.S. at 488-89,
14 S. Ct. at 1137-38, 38 L. Ed. at 1061.
For those reasons of fairness and efficiency of
administration, "federal courts have drawn a sharp distinction
between agency power to issue subpoenas and judicial power to
enforce them." United States v. Hill,
694 F.2d 258, 263 (D.C.
Cir. 1982). Federal courts enforcing administrative subpoenas
are strictly limited by their jurisdictional grants. On the
other hand, the Legislature has given our courts plenary
jurisdiction to enforce the agency's subpoena. N.J.S.A. 49:3-68.
Respondent insists that because New Jersey's courts have not
the power to issue subpoenas beyond state lines, they have not
the power to enforce subpoenas issued to out-of-state witnesses
by agencies of the State. Citing King v. Hochberg,
17 N.J.
Super. 533 (Ch. Div. 1952), respondent contends that New Jersey
courts do not have the authority to compel the testimony of
nonresident witnesses. Our Court Rules do limit the power to
compel attendance of witnesses at a court hearing to those
witnesses who may be served "within the State of New Jersey." R.
1:9-4. And our Court Rules authorizing the use in this State of
the deposition of a non-party witness in a foreign state apply
only if the foreign state has a reciprocal procedure. Sylvia B.
Pressler, Current N.J. Court Rules, comment on R. 4:11-5 (1995).
We do not believe that those Rules resolve the issue of agency
power. The Appellate Division reasoned that "[a] court cannot
accord an agency's subpoena greater power than a subpoena issued
in the name of the court via enforcement." 276 N.J. Super. at 10
(citing Doumani v. Casino Control Comm'n,
614 F. Supp. 1465, 1471
(D.N.J. 1985)). Doumani does not establish that proposition, but
only that an agency's authority to regulate nonresident interests
may not exceed the due process limits that restrain courts. 614
F. Supp. at 1471.
The issue, then, is not what the Court Rules permit or do
not permit New Jersey courts to do. The issue is whether the
State may grant an agency extraterritorial authority over
nonresident witnesses consistent with due process principles. If
the Legislature grants such power, the proper role of a court
under N.J.S.A. 49:3-68 is to ensure that principles of due
process and comity between states have been observed in the
issuance of the subpoena.
In that connection, we turn first to the provisions of Rule
1:9-6. That Rule sets forth the procedures for enforcement of a
subpoena of a public officer or agency. Any application for
compliance shall be on notice to the party subject to subpoena.
Because the Bureau's enabling act does not specify the sanction
for failure of a person to obey a subpoena, we may infer that
only the usual procedures for relief to litigants under Rule
1:10-3 would be available. See In re Daniels,
118 N.J. 51, 60
(outlining the difference between criminal contempt and civil
contempt in the form of relief to litigants), cert. denied,
498 U.S. 951,
111 S. Ct. 371,
112 L. Ed.2d 333 (1990).
Because the party subpoenaed is, by definition, not within
the jurisdiction, an order of confinement to achieve compliance
would not be appropriate. See In re Bridge,
120 N.J. Super. 460,
468-69 (App. Div.) (discussing civil sanctions and confinement to
secure compliance with order), certif. denied.
62 N.J. 80 (1972),
cert. denied,
410 U.S. 991,
93 S. Ct. 1500,
36 L. Ed.2d 189
(1973). A court granting relief to an agency seeking civil
sanctions to enforce a subpoena would consider the provisions of
N.J.S.A. 2A:10-5 (maximum $50 fine as penalty) and any payment to
the aggrieved party authorized under Rule 1:10-3.
In considering other interests of due process and comity,
a court may be guided by the familiar principles of international
relations that seek to minimize "infringements upon foreign
sovereignty." SGPM, supra, 636 F.
2d at 1324. In deciding
whether to exercise enforcement jurisdiction, courts should
"balance the interests it seeks to protect against the interests
of any other sovereign that might exercise authority over the
same conduct." Republic of Phil. v. Westinghouse Elec. Corp.,
43 F.3d 65, 76 (3d Cir. 1994). Because each sovereign has an
interest in the welfare of its citizens, we would add, in this
context, that a court must consider (1) the extent and nature of
the hardship that inconsistent enforcement actions would impose
on the person subpoenaed; (2) the extent to which the required
conduct is to take place in the territory of the other state; (3)
the residence of the person subpoenaed; and (4) the extent to
which enforcement by action of either state can reasonably be
expected to achieve compliance with the rule prescribed by that
state. To minimize the degree of intrusion on the sovereignty of
the other state, we insist that in the future the process be
served only by those authorized to do so under the laws of that
state.
There is a concern that the State's efforts to subpoena an
out-of-state witness and the enforcement proceedings of the court
will be pointless because there will be no effective way
thereafter to enforce the subpoena in a New Jersey court without
the physical presence of the party in the forum. Respondent
reminds us that "`[t]he doctrine that a court of equity will not
do a useless or vain thing is an ancient maxim of hornbook
learning and general recognition.'
55 N.Y. Jur 2d Equity § 106
(1994)," and cites Fiedler v. Coast Finance Co., Inc.,
129 N.J.
Eq. 161, 169 (E. & A. 1941) ("Decrees that would in the final
result be nugatory should not be made.").
We agree that nugatory decrees should not be made. In the
normal course of events, "[w]hen the process of adjudication is
complete, all judgments are handed over to the litigant or
executive officers, such as the sheriff or marshal, to execute.
Steps which the litigant or executive department lawfully takes
for their enforcement are a vindication rather than a usurpation
of the court's power." United States v. Morton Salt Co.,
338 U.S. 632, 641,
70 S. Ct. 357, 363,
94 L. Ed. 401, 410 (1950).
The sheriff of a New Jersey county has no authority to enter New
York. However, it does not follow that an adjudication of civil
contempt under our Court Rules is a fruitless exercise; such
civil sanctions are entitled to full faith and credit in the
foreign jurisdiction. New York v. Sacco,
242 N.J. Super. 699
(Law Div. 1990); Gedeon v. Gedeon,
630 P.2d 579 (Colo. 1981);
Robinson v. Robinson,
487 So.2d 67 (Fla. Dist. Ct. App. 1986).
By later resort to the courts of the other state, the subpoenaed
witness will be further guaranteed due process of law. In
considering whether to accord full faith and credit to a judgment
of another state, a forum state must consider whether the state
rendering the judgment had jurisdiction over the defendant. May
v. Anderson,
345 U.S. 528, 533,
73 S. Ct. 840, 843,
97 L. Ed. 1221, 1226-27 (1953).
Fifty years ago, the U.S. Supreme Court decided that the assertion of jurisdiction by the courts of one state over a defendant from another state does not violate the Due Process Clause of the Fourteenth Amendment if the defendant has "certain minimum contacts with it such that the maintenance of the suit does not offend `traditional notions of fair play and substantial justice.'" International Shoe, supra, 326 U.S. at 316, 66 S. Ct. at 158, 90 L. Ed. at 102 (quoting Milliken, supra, 311 U.S. at 463, 61 S. Ct. at 342, 85 L. Ed. at 283). Since International
Shoe, state and federal courts have asserted original
jurisdiction over residents throughout the United States, subject
to the "minimum contacts" test. We believe that our decision
today comports with the International Shoe doctrine and with the
expanding role of states in the federalist system. Berkson can
easily respond to the Bureau subpoena; trains, ferries, subways,
buses, taxis, and private-passenger vehicles regularly cross the
Hudson River to New Jersey. Moreover, the record suggests that
he has been in New Jersey on several occasions in connection with
the transactions that are the subject of the Bureau's
investigation.
As the federal government reduces its regulatory role and
state governments increase theirs, the need to develop coherent
principles of cooperation among states intensifies. Ultimately,
the U.S. Supreme Court may review this decision or a similar one.
That review will close the circle and return the issue to the
Court that decided International Shoe. In the meantime, a form
of horizontal federalism, one in which states cooperate with each
other in the discharge of their governmental duties, is both
timely and reasonable. An example of such cooperation is the
Uniform Child Custody Jurisdiction Act, codified in New Jersey at
N.J.S.A. 2A:34-28 to -52, which defines the roles of states in
enforcing conflicting claims to child custody.
Practical problems will inevitably arise concerning the
extraterritorial enforcement of subpoenas. One response would be
to wait until the state legislatures have adopted appropriate
laws. The need for such legislation extends throughout the
United States. Organizations such as the Commissioners on
Uniform State Laws and the American Law Institute are well
situated to propose uniform or model laws for adoption in every
state. See Pamela Jiminez, Comment, International Securities
Enforcement Cooperation Act and Memoranda of Understanding, 31
Harv. Int'l L.J. 295 (1990) (providing examples of such compacts
among nations). Our decision may serve to stimulate the adoption
of such legislation. We believe, however, that we should respond
to the issue now.
To sum up, we hold that it is reasonable to infer that the
Legislature would, consistent with principles of due process,
intend that the Bureau's administrative power to compel the
attendance of witnesses be coextensive with its substantive
mandate to investigate securities transactions "within or outside
of this State." N.J.S.A. 49:3-68(a). Consistent with principles
of due process, that authority shall be limited to subpoenaing
witnesses who have purposefully availed themselves of the
privilege to enter the New Jersey securities market. Before
enforcing an agency subpoena, a court must determine that the
party subpoenaed has engaged in such deliberate conduct. A court
should consider the fairness to the witness and whether other
available methods of discovery, such as videotaped depositions in
the foreign state, would adequately serve the agency's needs
without the inconvenience to the witness of appearing in New
Jersey. Although this case presents the circumstance of a
witness having to travel only a short distance from New York to
Newark, there will be cases in which witnesses will need to
travel from distant jurisdictions. In considering any civil
sanctions to be imposed, a court shall not impose an order of
arrest and shall limit monetary sanctions in accordance with the
relevant principles applicable to Rule 1:10-3 procedures.
We express no opinion on the wisdom or fairness of the
Bureau's policy of issuing subpoenas to those outside New Jersey,
or the extent to which such a policy affects the relations
between New Jersey and other states. We do not believe, however,
that the limited breadth that we give to such subpoena power will
offend principles of comity. Our decision does not authorize
restraints on the liberty interests of persons outside New
Jersey's borders. Finally, we acknowledge that the matter is
entirely within the legislative ambit and would best be resolved
there.
The judgment of the Appellate Division is reversed. The
matter is remanded to the Chancery Division for further
proceedings in accordance with this opinion.
CHIEF JUSTICE WILENTZ and JUSTICES HANDLER, POLLOCK, GARIBALDI, and STEIN join in JUSTICE O'HERN's opinion. JUSTICE COLEMAN did not participate.
NO. A-97 SEPTEMBER TERM 1994
ON APPEAL FROM
ON CERTIFICATION TO Appellate Division, Superior Court
A. JARED SILVERMAN, CHIEF
NEW JERSEY BUREAU OF SECURITIES,
Plaintiff-Appellant,
v.
ROBERT GARY BERKSON,
Defendant-Respondent.
DECIDED August 2, 1995
Chief Justice Wilentz PRESIDING
OPINION BY Justice O'Hern
CONCURRING OPINION BY
DISSENTING OPINION BY
Footnote: 1 7 U.S.C. §15 has since been amended to allow that agency to require the attendance of witnesses and the production of records "from any place in the United States, any State, or any foreign country or jurisdiction at any designated place of hearing."