It just means the grand jury didn’t find probable cause that the person involved committed any crime. I guess rolled up in that definition would be the second two of your three, a grand jury that doesn’t find probable cause would also implicitly reason there is little chance of conviction and certainly no reason for a trial.
In general the court system almost never deals with the issue of determining genuine innocence. That really only seems to come up in cases of appealing criminal convictions to exonerate someone (where new evidence of genuine innocence can often be what gets someone set free.)
There is no standard on grand juries from State to State, so it will vary from one to another. The ancient concept of a grand jury was to protect citizens from malicious prosecutions, it’s a recognition that whatever happens at trial just being prosecuted can be used as a tool of the State to punish people unjustly. Since the grand jury only has to find that there is probable cause, they very rarely fail to indict, they are really just a check to make sure you don’t have a government that is outright maliciously and flagrantly going after people for no reason.
Probable cause is a low standard, in the hierarchy of burden of proof standards it’d go: reasonable suspicion --> probable cause (required for warrants / police arrests of people / indictments) --> preponderance of the evidence (required to rule in favor of a plaintiff in a civil matter) --> clear and convincing (required in certain situations, like an appeal of a criminal conviction, clear and convincing evidence of innocence may be required to get relief) --> beyond a reasonable doubt (required to convict in criminal court)
As for whether a grand jury is used or not, that’s where it matters what jurisdiction you are in. The “ordinary” flow chart for a grand jury case might be:
[Arrest] (Officer believes crime has been committed, effects arrest) --> [Preliminary Hearing] (Before a judge or magistrate, this person determines if there is probable cause, if not, the process stops here) --> [Bail / Detention Hearing] --> [Grand Jury] --> [Trial]
That’s for your garden variety crime, many of which start with a police officer being directly involved and making an arrest. The preliminary hearing before a magistrate early in the process is the first line of defense for the accused, you’re going to have that very shortly after being arrested and it’s again, designed to just get people out of jail for whom there is essentially no evidence supporting an arrest. So it’s a protection against vindictive arrest.
Another example of when a grand jury might be used would be any situation where a prosecutor suspects a person may be guilty of a crime but no arrest has been made. The prosecutor will go before a grand jury to get an indictment. In this scenario the indictment can actually precede the arrest, and there may not be a preliminary hearing at all since the indictment is considered a stronger proof that there is probable cause to support a charge and a trial.
There are complex reasons this might occur. Sometimes it’s because of the notoriety of a defendant, the prosecutor doesn’t want to make an arrest unless he can get an indictment. Remember all the stuff with Barry Bonds and BALCO and the grand jury involved there? In theory they could have arrested Barry, but he was a mega-millionaire and likely his lawyers would have gotten the charges dismissed in a preliminary hearing, so the prosecutors went through the grand jury process for strategic reasons.
Other times, a prosecutor is laying out a case against a criminal conspiracy and needs to present evidence on a wide range of issues and a wide range of individuals. The grand jury proceedings are absolutely secret, and this is a mechanism the prosecutor can use to get a large batch of indictments, and then police can execute the warrants en masse. This is important because in a criminal conspiracy / criminal organization if they didn’t arrest everyone at once, most would flee when they saw their co-conspirators getting arrested over the course of a few days or weeks.
In States and jurisdictions that do not use grand juries, the workflow is often similar to the first example above, but just without the grand jury. There is then just a preliminary hearing.
So basically deciding whether or not one will be used is a function of:
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The law, some States require it in all felony cases. The Federal government and the U.S. Constitution require one in all felony cases, this requirement does not apply to the States.
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If the law doesn’t require it in all cases, it’s typically a matter of prosecutorial discretion as to whether to use a grand jury or not, and in those cases the preliminary hearing may be the only test of probable cause prior to trial.
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In States with grand juries, the defendant sometimes has the opportunity to waive the right to a grand jury and can just be served with a charge information statement instead. There are reasons a defendant might go this route.
All States have statutes pertaining to grand juries on the books, only about half the States actually use grand juries regularly. The Federal government uses grand juries for all felonies.