United States of America and Gerald T. Culver v. Robert I. White

AINSWORTH, Circuit Judge

(dissenting) :

With deference I dissent because of a strongly held belief that taxpayers’ constitutional rights against self-incrimination are being violated by the action taken by the majority in affirming the district court in this case.

On December 7, 1970, Special Agent Gerald T. Culver of the Intelligence Division served an Internal Revenue Service summons on Robert I. White, attorney at law, who represented taxpayers, Mr. and Mrs. Roberts, under a written power of attorney filed with the Service, demanding production of certain work papers pertaining to taxpayers’ federal income tax returns. These work papers were prepared by taxpayers’ accountant and delivered to Mr. White at his request on behalf of his clients.1 They remained in his possession for approximately a year when the summons was served.2

Attorney White declined to produce the papers demanded by the summons and the present enforcement proceeding was begun on February 22, 1971 by the United States and Special Agent Culver for enforcement of the summons, pursuant to 26 U.S.C. §§ 7402(b) and 7604(a).

A hearing was held before the district court on March 15, 1971, at which time Special Agent Culver testified that he had not reached any conclusions relative to criminal prosecution of taxpayers for violation of federal revenue statutes because he had not completed his investigation. The district court resumed the hearing again on April 5, 1971, and Special Agent Culver further testified: “In *765my opinion, based on what I know at this point, I think there is a criminal violation involving the offer and compromise and the financial statement that accompanied that offer which was filed by [taxpayer] Mr. Roberts.” Mr. Culver then listed several federal criminal statutes apparently violated by taxpayers, namely, 18 U.S.C. § 1001, 26 U.S.C. §§ 7206(1) and 7206(5).

While this appeal has been pending, taxpayers’ counsel has furnished the court with information to the effect that the Chief of the Intelligence Division of the office of the District Director of the Internal Revenue had written taxpayer, Mr. Roberts, that a recommendation has been made to Regional Counsel to criminally prosecute him for attempted income tax evasion, for making and subscribing false and fraudulent income tax returns, for wilfully attempting to evade payment of income tax, for concealing property with intent to evade or defeat the collection of taxes, for filing a false financial statement, and for making false statements in an offer in compromise. The Government’s response is that this information is irrelevant because at the time the summons was issued no recommendation for prosecution had been made.

There is strong reason to believe that the Government was not acting in good faith when it served the instant summons. The case had initially been investigated for some time by an Internal Revenue agent and the Special Agent of the Intelligence Division was called in later. Even though a recommendation for prosecution had not been made at the time the summons issued, the Service had sufficient information available upon which to base a recommendation. The recommendation should not have been delayed to take advantage of a civil summons. I doubt, therefore, that the requisites of Donaldson v. United States, 400 U.S. 517, 536, 91 S.Ct. 534, 545, 27 L.Ed.2d 580 (1971), have been complied with- since the evidence points most strongly to an absence of good faith on the part of the Government, as required by Donaldson, in issuing the summons.

Nevertheless, I do not rest my dissent on this ground, but on the more important ground that taxpayers’ constitutional rights under the Fifth Amendment against compulsory self-incrimination have been violated. The work papers involved here are documents that would be privileged under the Fifth Amendment if actually possessed by taxpayers when the summons was issued. See United States v. Cohen, 9 Cir., 1967, 388 F.2d 464.3 In Cohen a summons was issued to obtain work papers prepared by taxpayer’s accountant and then in taxpayer’s possession. The Ninth Circuit maintained taxpayer’s Fifth Amendment privilege against self-incrimination and declined to require taxpayer to produce the papers in response to the summons.

In the present ease the work papers prepared by taxpayers’ accountant from their books and records were not in taxpayers’ possession but in that of a third person, the attorney at law charged with responsibility of representing them in their federal income tax matters. Attorney White was thus in constructive possession of these work papers on behalf of his clients. During the enforcement proceeding, he claimed the constitutional privilege on behalf of his clients. Then taxpayer, Mr. Roberts, filed a motion for leave to intervene “to claim the benefit of certain constitutional provisions which inured to his benefit,” which was denied by the district judge. It is clear, therefore, that Mr. Roberts attempted also to assert his constitutional privilege. However, though the privilege is a personal one, there is no reason why it cannot be asserted in clients’ behalf by their attorney at law. *766See United States v. Judson, 9 Cir., 1963, 322 F.2d 460; In re House, N.D.Cal.1956, 144 F.Supp. 95.4 In Judson, an Internal Revenue summons was served on an attorney in possession of clients’ papers, demanding production of the documents. The Ninth Circuit maintained the Fifth Amendment privilege asserted by taxpayers’ attorney in their behalf. There is no difference in principle between Judson and the present case.

The majority attempts to make a distinction in principle based upon the fact that the work papers in the present case are not owned by taxpayers but belong to taxpayers’ accountant who prepared them from taxpayers’ books and records. However, actual ownership of the documents is not necessary to the assertion of the privilege. See Couch v. United States, 409 U.S. 322, 330 n. 12, 93 S.Ct. 611, 617 n. 12, 34 L.Ed.2d 548 (1973). The critical question is the right of a possessor rather than that of an owner. In the present case, though the papers are not in the possession of taxpayers, they are in the possession of taxpayers’ attorney, and constructively for their benefit.

The majority relies most heavily on the recent Supreme Court decision in Couch v. United States, 409 U.S. 322, 93 S.Ct. 611, 34 L.Ed.2d 548 (1973), where an Internal Revenue Service summons directed to an accountant was challenged by taxpayer based on the Fifth Amendment privilege against self-incrimination. The Court held that the constitutional privilege was not available for documents in possession of the accountant. The case is clearly distinguishable because the accountant-client relationship is essentially different from the attorney-client relationship. There is no expectation of privacy in the accountant-client relationship. On the other hand, the attorney-client relationship is a personal one, guaranteed by the Sixth Amendment right to counsel, the attorney-client privilege,5 and ethical restraints on the attorney.6 The attorney-client relationship does not depend on whether the attorney or the client possesses the documents. As Professor Wigmore concluded: “It follows, then, that when the client himself would be privileged from production of the document, either as a party at common law or as a third person claiming title or as exempt from self-incrimination, the attorney having possession of the document is not bound to produce.” 7 Moreover, the Ninth Circuit recognized: “The attorney and his client are so identical with respect to the function of the evidence and to the proceedings which call for his production that any distinction *767is mere sophistry.” United States v. Judson, 9 Cir., 1963, 322 F.2d 460, 467.8

In my view we are seriously weakening the attorney-client relationship and the Fifth Amendment privilege against self-incrimination by what the majority opinion decides in this case. I would accordingly deny the Government the right to production of documents in possession of taxpayers’ attorney.

I, therefore, respectfully dissent.

. The accountant, Stanley H. Voelkel, testified as follows:

Q. Mr. Voelkel, when Mr. White acquired possession of the documents did you know on whose behalf he was acting?
A. Yes, sir.
Q. Was it your understanding Mr. White was acquiring those records for himself or on behalf of Mr. Roberts?
A. On behalf of Mr. Roberts.
Q. Were you aware of the fact that Mr. White at that time was the attorney representing Mr. Roberts?
A. I did assume that he was, and it was implied that he represented Mr. Roberts. Otherwise, I wouldn’t have given him the files.
Q. So you turned the files over to Mr. White as Mr. Roberts’ attorney?
A. Yes.
Q. Was there any specific time limitation on Mr. White’s right as Mr. Robert’s attorney to keep possession of those records?
A. Well, he was to return them to me when he finished with them in connection with his representation of Mr. Roberts.
Q. So that the period of his possession as far as you were concerned was indefinite, is that correct?
A. Yes.

. See generally Lyon, Government Power and Citizen Rights in a Tax Investigation, 25 Tax Lawyer 79 (1971).

. But see United States v. Widelski, 6 Cir., 1971, 452 F.2d 1, 5 (declining to follow Cohen), cert. denied, 406 U.S. 918, 92 S.Ct. 1769, 32 L.Ed.2d 117 (1972). This case was decided before the Supreme Court cited Cohen favorably in Couch v. United States, 409 U.S. 322, 330 n. 12, 93 S.Ct. 611, 617 n. 12, 34 L.Ed.2d 548 (1973).

. There are eases to the contrary. See, e. g., Bouschor v. United States, 8 Cir., 1963, 316 F.2d 451, 458; In re Fahey, 6 Cir., 1961, 300 F.2d 383. But they rely on dicta from Supreme Court cases where a mere agency relationship existed for the benefit of a public entity which had no Fifth Amendment privilege, such as in Rogers v. United States, 340 U.S. 367, 71 S.Ct. 438, 95 L.Ed. 344 (1951); United States v. White, 322 U.S. 694, 64 S.Ct. 1248, 88 L.Ed. 1542 (1944); McAlister v. Henkel, 201 U.S. 90, 26 S.Ct. 385, 50 L.Ed. 671 (1966); and Hale v. Henkel, 201 U.S. 43, 26 S.Ct. 370, 50 L.Ed. 652 (1906).

. See Rule 503, Rules of Evidence for United States Court and Magistrates, 41 L.W. 4021 (U.S.Sup.Ct. Nov. 21, 1972).

. The new ABA Code of Professional Responsibility in its Ethical Consideration 4-4 notes: “The attorney-client privilege is more limited than the ethical obligation of a lawyer to guard the confidences and secrets of his client. This ethical precept, unlike the evidentiary privilege, exists without regard to the nature or source of information or the fact that others share the knowledge.”

. This rule is stated without regard for the path traveled by the documents. No policy would be served by requiring the client first to touch the documents before turning them over to his lawyer. The important fact in this case is that Voelkel gave the documents to White after assurances that he took possession for Roberts. See also Comment, The Attorney and His Client’s Privileges, 74 Yale L.J. 539, 548 (1965) (for an alternative rationale).

. Justice Marshall in his dissent to Couch suggested that the attorney’s possession is an example of protected third party custody:

A transfer to a lawyer is protected, not simply because there is a recognized attorney-client privilege, but also because the ordinary expectation is that the lawyer will not further publicize what he has been given.

409 U.S. at 350, 93 S.Ct. at 627, 34 L.Ed. 2d 548.