Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-ca9-08-16912/USCOURTS-ca9-08-16912-0/pdf.json

Parties Involved:
Benjamin Bright

Cherie J. Bright
Appellant
United States of America
Appellee

Document Text:

FOR PUBLICATION

UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

UNITED STATES OF AMERICA, 

Petitioner-Appellee,

No. 07-17027

v.  D.C. No.

CHERIE J. BRIGHT; BENJAMIN CV-07-00311-ACK

BRIGHT,

Respondents-Appellants. 

UNITED STATES OF AMERICA, 

Petitioner-Appellee,

v. No. 08-16912

CHERIE J. BRIGHT, D.C. No.  Respondent-Appellant, 1:07-cv-00311-

and ACK-KSC

BENJAMIN BRIGHT,

Respondent. 

UNITED STATES OF AMERICA, 

Petitioner-Appellee,

No. 08-16913

v.

D.C. No. BENJAMIN BRIGHT,

 1:07-cv-00311- Respondent-Appellant, ACK-KSC

and OPINION

CHERIE J. BRIGHT,

Respondent. 

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Appeal from the United States District Court

for the District of Hawaii

Alan C. Kay, District Judge, Presiding

Argued and Submitted

October 15, 2009—Honolulu, Hawaii

Filed February 26, 2010

Before: Robert R. Beezer, Susan P. Graber and

Raymond C. Fisher, Circuit Judges.

Opinion by Judge Fisher

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COUNSEL

Christopher J. Cannon (argued), Suzanne M. Morris, San

Francisco, California, Michael Jay Green, Honolulu, Hawaii,

for the respondents-appellants.

Carol A. Barthel (argued), Robert W. Metzler, John A. Dudeck, Jr. and David I. Pincus, Tax Division, Department of Justice, John Dicicco, Acting Assistant Attorney General, Gilbert

S. Rothenberg, Acting Deputy Assistant Attorney General,

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Richard T. Morrison, Deputy Assistant Attorney General,

Nathan J. Hochman, Assistant Attorney General, Washington,

D.C., and Edward Kubo, Jr., United States Attorney, Honolulu, Hawaii, for the petitioner-appellee.

OPINION

FISHER, Circuit Judge:

The Fifth Amendment protects individuals from having to

disclose documents when the very act of production would

constitute self-incrimination. Cherie and Benjamin Bright (the

Brights), subjects of an Internal Revenue Service investigation concerning past tax liability, jointly appeal the district

court’s order enforcing IRS summonses requiring production

of documents, including those relating to offshore accounts.

The Brights invoked their Fifth Amendment privilege and

refused production. They also separately appeal the district

court’s subsequent order finding them in contempt for failing

to produce the documents. We hold that the district court

acted properly in enforcing the IRS summonses and finding

the Brights in contempt, although we modify the conditions

necessary to purge the contempt.

BACKGROUND

Cherie Bright is a co-owner of Bright Enterprises, a tax

consulting business. In 2007, the Department of Justice filed

a civil fraud action against Bright Enterprises and its owners,

accusing them of promoting tax shelters. Before bringing that

action, the IRS investigated Cherie and her business partner’s

personal returns, seeking information concerning the same

shelters that would appear in the fraud complaint. Specific to

this appeal, on June 19, 2006, the IRS issued and served identical summonses to Cherie and her husband, Benjamin Bright,

directing them to appear before an IRS Revenue Agent to

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address suspected past tax liability. The summonses also

directed the Brights to bring numerous categories of documents — including records relating to two credit cards identified with the Brights that were linked to offshore accounts and

“any other offshore credit cards.” The Brights failed to appear

or to produce any documents. 

The government then filed an enforcement petition in the

United States District Court for the District of Hawaii, which

ordered the Brights to show cause why they should not be

compelled to comply with the summonses. The Brights

appeared and each asserted an “intention to evoke all rights

afforded to” them, including the Fifth Amendment right

against self-incrimination. The district court granted the IRS’s

petition on September 11, 2007, ruling that the Brights’ privilege claim failed because they had not specified which portions of the summonses requested privileged documents or

what facts supported a privilege claim. The court specifically

found that 

[t]he IRS knows the name and location of the [offshore] banks, the credit card numbers, and that the

[Brights] used and maintained these cards. Thus the

existence of the offshore credit card accounts is a

foregone conclusion, and the production of the

records relating to these credit card accounts has no

testimonial significance.

After denying the Brights’ motion for reconsideration, the district court entered an enforcement order (the enforcement

order), and the Brights jointly and timely appealed.

The IRS then established a new schedule for the production

of documents. On the day the documents were due, however,

the Brights unsuccessfully moved for a stay in the district

court. This court also denied a stay. 

The Brights finally began producing documents, but none

concerning offshore accounts or many other categories of

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documents. This refusal prompted the government to seek a

contempt order from the district court. Meanwhile, the Brights

continued to produce some documents. They also submitted

declarations outlining their attempts at compliance with the

document requests and their purported lack of possession or

control of any relevant documents not yet produced.

After affording the Brights additional time to finish production, the district court instituted contempt proceedings. Rather

than produce documents related to offshore accounts, Cherie

reasserted her Fifth Amendment privilege, and Benjamin contended that he had produced all documents in his possession

or control. Cherie eventually filed a substantial declaration

detailing compliance — with the exception of offshore

accounts — and Benjamin’s lack of involvement in the family

finances or “in any of the activities” that were the subjects of

the specific document requests. 

In an August 20, 2008 order (the contempt order), the district court found both Cherie and Benjamin Bright in contempt of the enforcement order, making five key findings and

conclusions: 

1. The Fifth Amendment privilege could not be

relitigated in contempt proceedings.

2. The enforcement order’s requirement that the

Brights produce documents related to “any other

offshore credit cards” mandated production of

documents concerning two additional offshore

accounts not specifically named in the summonses, even though the government did not discover the connection between these accounts

and the Brights until after entry of the enforcement order. However, the failure to produce

these particular documents was not necessary to

the finding of contempt. 

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3. The government had established that other documents remained outstanding.

4. The Brights were not in substantial compliance

because they had engaged in extensive delaying

tactics and had failed to argue during the

enforcement proceeding that relevant documents

were not in their possession or control. 

5. The Brights had failed to provide evidence

establishing that Benjamin did not have custody

or control of the requested documents.

The court imposed a $500 daily fine until the Brights “either

fully comply with the summonses or sufficiently establish that

they are unable to do so,” as well as a $11,593.59 compensatory sanction. The court further noted that “[a] satisfactory

response would include a more definitive declaration by [the

Brights] that documents do not exist, or documentation showing that despite making all reasonable efforts to comply, they

have a present inability to do so.” Benjamin and Cherie Bright

separately and timely appealed the order of contempt.

JURISDICTION

The United States brought its petition under 26 U.S.C.

§ 7604(b), and the district court had jurisdiction under 26

U.S.C. § 7604(a). The Brights’ appeals have been consolidated pursuant to Federal Rule of Appellate Procedure

3(b)(2), and we review under 28 U.S.C. § 1291.

DISCUSSION

I. Entry of the Enforcement Order

The Brights first assert that the district court erred in granting the enforcement order. They advance two parallel contentions. As a matter of procedure, they argue that the district

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court erred by issuing a “blanket denial” of their assertion of

a Fifth Amendment privilege as to the production of all

responsive documents. As a matter of substance, they argue

that the district court erred by finding that the production of

records concerning offshore bank accounts had no testimonial

significance, foreclosing a privilege claim.

We review de novo a district court’s application of the Fifth

Amendment privilege against self-incrimination. See United

States v. Chase, 340 F.3d 978, 981 (9th Cir. 2003) (privileges

generally); United States v. Rubio-Topete, 999 F.2d 1334,

1338 (9th Cir. 1993) (Fifth Amendment). Whether the existence of documents is a foregone conclusion is a question of

fact, which we review for clear error. United States v. Norwood, 420 F.3d 888, 895 (8th Cir. 2005) (citing United States

v. Doe, 465 U.S. 605, 613-14 (1984)). We affirm, although

we narrow the scope of the enforcement order to encompass

only records whose existence was known to the government

at the time the IRS issued the summonses.

A. Procedure: Applying Privilege to Document

Requests

[1] “A claim of Fifth Amendment privilege may be

asserted if there are ‘substantial hazards of self-incrimination

that are real and appreciable, not merely imaginary and

unsubstantial,’ that information sought in an IRS summons

might be used to establish criminal liability.” United States v.

Drollinger, 80 F.3d 389, 392 (9th Cir. 1996) (per curiam)

(quoting United States v. Rendahl, 746 F.2d 553, 555 (9th Cir.

1984). “ ‘[A] proper application of this standard requires that

the Fifth Amendment be raised in response to specific questions propounded by the investigating body.’ ” Id. (quoting

United States v. Pierce, 561 F.2d 735, 741 (9th Cir. 1977));

accord United States v. Bodwell, 66 F.3d 1000, 1001 (9th Cir.

1995) (per curiam). The privilege is not limited to oral questioning; an individual may refuse to provide documents to an

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nial. See, e.g., In re Grand Jury Subpoena, Dated April 18,

2003, 383 F.3d 905, 909 (9th Cir. 2004). The taxpayer bears

the burden of showing that testimony or documents are privileged. See United States v. Brown, 918 F.2d 82, 84 (9th Cir.

1990) (per curiam).

The Brights were able to litigate fully their asserted Fifth

Amendment privilege concerning document production in the

enforcement proceeding. The magistrate judge scheduled a

hearing over a month after the government filed its enforcement petition, setting a clear and reasonable deadline for submission of briefs and documents in support of a privilege

claim. The hearing occurred over a year after the IRS issued

summonses to the Brights, allowing the Brights more than

sufficient time to search for responsive documents. Before the

hearing, the Brights submitted both opposition papers and a

surreply. The Brights’ contention that the district court

addressed the privilege prematurely is not well taken. 

[2] Moreover, the scope of the Brights’ privilege claim

was clear: it applied to all documents responsive to each category and subcategory specified in the summonses. Had the

Brights wished to narrow their privilege claim or provide targeted support concerning particular documents, they had the

opportunity to produce a privilege log or turn over any contested documents for in camera review. “[I]n camera review

does not destroy the privileged nature of . . . contested communications . . . .” United States v. Zolin, 491 U.S. 554, 569

(1989). In the absence of such targeted support, the district

court was not precluded from making a reasoned assessment

of the claimed privilege with respect to each category of

requested documents. See Brown, 918 F.2d at 84. 

[3] The application of privilege to a document production

is different from a blanket privilege claim at an interview. An

unscripted interview is undefined, so a court cannot make a

reasoned assessment of privilege before particular questions

have been posed. See, e.g., Drollinger, 80 F.3d at 392. In conUNITED STATES v. BRIGHT 3143

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trast, a document request lays out categories of documents

requested.1 A claim of privilege over all documents can be

assessed as repeated assertions of privilege in response to

each category. See United States v. Grable, 98 F.3d 251, 255

(6th Cir. 1996) (“[T]he effect . . . was as if [the revenue agent]

had asked . . . ‘for each document listed in the summons, and

[the taxpayer] had responded by repeatedly raising his fifth

amendment privilege in response.’ ” (quoting United States v.

Argomaniz, 925 F.2d 1349, 1356 (11th Cir. 1991)). The scope

of the assertion is clear and circumscribed. Thus, although in

the context of oral questioning a taxpayer has not fully litigated the privilege by issuing a general claim of privilege,

Drollinger, 80 F.3d at 392-93; Rendahl, 746 F.2d at 555, the

same cannot be said of a claim of privilege over documents.2

[4] The district court gave the Brights an opportunity to

present evidence concerning issues such as privilege, possession and control at a hearing before a magistrate judge. A taxpayer cannot refuse to produce a privilege log or documents

for in camera review in response to an order to show cause

and then protest an insufficient opportunity to present a claim

of privilege. See United States v. W.R. Grace, 526 F.3d 499,

515 (9th Cir. 2008) (en banc) (holding that a party’s “discretion to investigate and present its case does not override the

district court’s authority to manage the trial proceedings —

1Examples in this case include “Applications for insurance” concerning

“Asia Pacific Mutual Insurance Company, Ltd.” and “All records of sales

transactions” “with respect to the Exotic Bird Business.” The merit of

privilege claims is a separate question. As discussed below, when categories are excessively broad it becomes difficult for the government to prove

the foregone conclusion exception to an act of production privilege claim.

2The taxpayer in Grable had not fully litigated the privilege because he

raised privilege concerns only before the revenue agent. 98 F.3d at 253.

When the taxpayer raised Fifth Amendment concerns to the district judge

for the first time during contempt proceedings, the judge replied, “There

is no [F]ifth [A]mendment right not to share information with the Internal

Revenue Service, period.” Id. at 254. The Sixth Circuit remanded for

proper consideration of the privilege. Id. at 258. 

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including by setting discovery and disclosure deadlines”).

Such dilatory tactics would undermine efficient tax enforcement, which appears to have been the Brights’ goal.

B. Substance: Fifth Amendment Privilege

[5] “The Fifth Amendment grants persons the privilege not

to ‘provide the State with [self-incriminatory] evidence of a

testimonial or communicative nature.’ ” United States v.

Rodriguez-Rodriguez, 441 F.3d 767, 772 (9th Cir. 2006)

(quoting Schmerber v. California, 384 U.S. 757, 761 (1966)).

The act of producing evidence in response to a subpoena . . . has communicative aspects of its own,

wholly aside from the contents of the papers produced. Compliance with the subpoena tacitly concedes the existence of the papers demanded and their

possession or control by the taxpayer. It also would

indicate the taxpayer’s belief that the papers are

those described in the subpoena. 

Fisher v. United States, 425 U.S. 391, 410 (1976). However,

where “[t]he existence and location of the papers are a foregone conclusion and the taxpayer adds little or nothing to the

sum total of the Government’s information by conceding that

he in fact has the papers[,] . . . enforcement of the summons”

does not touch upon constitutional rights. Id. at 411 (citing In

re Harris, 221 U.S. 274, 279 (1911)). For this foregone conclusion exception to apply, the government must establish its

independent knowledge of three elements: the documents’

existence, the documents’ authenticity and respondent’s possession or control of the documents. See United States v. Hubble, 530 U.S. 27, 40-41 (2000). The government bears the

burden of proof and must have had the requisite knowledge

before issuing the summons or subpoena. See In re Grand

Jury Subpoena, 383 F.3d at 910.

The Brights argue that the district court clearly erred in

finding that the act of producing records concerning offshore

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bank accounts had no testimonial significance, foreclosing a

claim of privilege under the Fifth Amendment. We conclude

that the foregone conclusion exception does apply to documents related to the two credit cards expressly named in the

summonses. The exception, however, does not apply to documents concerning the two additional credit cards named during contempt proceedings, and the production of those

documents is therefore privileged under the Fifth Amendment.

The IRS independently knew about the existence of documents related to the first two credit cards before it issued the

summonses. In the initial enforcement proceeding, an IRS

agent declared under oath that the IRS Offshore Credit Card

Project had gathered information showing that the Brights

maintained accounts at both Hallmark Trust and Butterfield

Bank and provided the Brights’ account numbers to the court.3

The government also showed that Hallmark Trust and Butterfield Bank provided their account holders with specific

account documents, demonstrating the existence of particular

documents responsive to the summonses. See Norwood, 420

F.3d at 895-96 (applying foregone conclusion exception when

the government could demonstrate the existence of accounts

and account documents even though it did not enumerate specific responsive documents); cf. Hubbell, 530 U.S. at 44-45

(holding foregone conclusion exception did not apply to

request for broad categories such as “tax records” when the

government made no showing “that it had any prior knowledge of either the existence or the whereabouts of the 13,120

pages of documents ultimately produced” under an immunity

agreement); Doe, 465 U.S. at 607 n.1, 612-14 & n.13 (holding

foregone conclusion exception did not apply to subpoena

3Although the government did not need to produce documentation of

transactions carried out using the cards in order to carry its burden, when

the Brights attempted to relitigate the privilege during contempt proceedings, the government produced its documentation, which predated the

summonses. 

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naming 28 broad categories of documents such as “financial

statements” and “workpapers”). 

[6] The government did not need the Brights to authenticate such documents, because the records could be independently authenticated by banking officials. See, e.g., United

States v. Sand, 541 F.2d 1370, 1376-77 (9th Cir. 1976). Nor

did the government need to prove that it had previously

authenticated the same documents or that it had used these

same bank officials in the past; it needed to show only that it

could do so without the taxpayer’s assistance, including without information gleaned from the documents. See In re Grand

Jury Subpoena, 383 F.3d at 912.4

[7] Finally, the government showed that account-holders at

both banks have access to basic account records through the

internet, thus demonstrating that the records were in the

Brights’ custody and control. In sum, the district court correctly found that the existence of offshore account records

was a foregone conclusion.

[8] On the other hand, application of the foregone conclusion exception to records of the two additional credit cards not

named during the enforcement proceeding was clear error.

The government asserts that at the time the IRS issued the

summonses, it knew of the cards’ existence and of their use

by Cherie’s business partner. However, the government made

no showing that it knew that the Brights maintained possession or control of the accounts and thus of the account documents. The government may not issue a summons for “other”

4At oral argument, the Brights suggested for the first time that when the

IRS issued the summonses, the government believed that it could not

authenticate the documents through bank officials because there were no

tax treaties between the United States and the jurisdictions in which the

banks were located. However, the Brights conceded that the government

can authenticate relevant documents through the American card servicing

company. Moreover, this argument was not raised in the district court or

preserved in the Brights’ briefs and is now waived. 

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documents and then apply the foregone conclusion exception

when it becomes aware of documents through an ongoing

investigation. See In re Grand Jury Subpoena, 383 F.3d at

911. Therefore, the act of producing these documents is protected by the Fifth Amendment. The enforcement order is narrowed accordingly to exclude documents related to these two

credit cards.

II. Contempt Order

Cherie and Benjamin Bright separately appeal the district

court’s contempt order. Each argues that neither of them was

in contempt of the enforcement order, and they collectively

argue that the district court’s order was deficient because it

was improperly punitive and did not specify purgation conditions. 

“We review the district court’s entry of sanctions for abuse

of discretion.” Mendez v. County of San Bernardino, 540 F.3d

1109, 1130 (9th Cir. 2008). We review for clear error factual

findings underlying contempt, including present inability to

comply. Irwin v. Mascott, 370 F.3d 924, 931 (9th Cir. 2004);

see also Falstaff Brewing Corp. v. Miller Brewing Co., 702

F.2d 770, 781 (9th Cir. 1983) (noting that present inability to

comply is a factual inquiry). For the reasons that follow, we

affirm, but we modify the purgation conditions to reflect our

narrowing of the enforcement order as discussed above.

A. Cherie Bright

[9] Cherie Bright was in contempt of the enforcement

order, on numerous grounds. The government bore the burden

to show “ ‘(1) that [Cherie] violated the court order, (2)

beyond substantial compliance, (3) not based on a good faith

and reasonable interpretation of the order, (4) by clear and

convincing evidence.’ ” Labor/Cmty. Strategy Ctr. v. L.A.

County Metro. Trans. Auth., 564 F.3d 1115, 1123 (9th Cir.

2009) (quoting In re Dual-Deck Video Cassette Recorder

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Antitrust Litig., 10 F.3d 693, 695 (9th Cir. 1993)). When

defending against a finding of contempt after an adversary

enforcement proceeding, a taxpayer cannot relitigate the Fifth

Amendment privilege or lack of custody or control. See

United States v. Rylander, 460 U.S. 752, 757 (1983) (custody

or control); Brown, 918 F.2d at 83 (constitutional claims). 

[10] The district court properly found that the government

had shown Cherie to be in violation of the enforcement order.

This finding is justifiable based solely on her failure to produce documents related to the two previously identified offshore accounts named in the summons. Crucially, the district

court explained “that even if it were . . . to exclude the additional offshore credit card documents as a basis for finding

contempt, the ultimate finding of contempt would remain

undisturbed.” Although we have held that the foregone conclusion exception does not apply to the two additional offshore credit cards, we agree that Cherie’s noncompliance as

to the two previously identified accounts justified the district

court’s finding of contempt. Moreover, her failure to produce

other documents named in the summonses concerning loans,

insurance claims and scholarships provided additional support

for the court’s finding.5

[11] Once the government has established a prima facie

case of contempt, a taxpayer may avoid sanctions by demonstrating a present inability to comply with the enforcement

order. See Drollinger, 80 F.3d at 393. When a party has taken

preemptive steps to make compliance more difficult, the burden to prove inability to comply is particularly high. See FTC

v. Affordable Media, LLC, 179 F.3d 1228, 1241 (9th Cir.

5Although we expressed concerns at oral argument concerning whether

the district court had considered Cherie’s final, detailed declaration, the

Brights conceded that the district court had reviewed all materials de novo

prior to finding Cherie and Benjamin in contempt. They take issue only

with the court’s finding that they were not in full compliance. This finding

was not clearly erroneous. 

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1999). Cherie failed to show that she could not produce offshore credit card documents. Nor was the district court

required, in the absence of corroborating evidence, to credit

Cherie’s declaration that other documents named in the summonses did not exist. See Maggio v. Zeitz, 333 U.S. 56, 75-76

(1948). Finally, although Cherie’s former business partner did

not produce some documents upon her request, the district

court properly found that Cherie’s late, perfunctory effort to

obtain documents did not satisfy her burden. Cf. United States

v. Hayes, 722 F.2d 723, 725-26 (11th Cir. 1984) (per curiam)

(holding that a request for documents is insufficient to establish present inability to comply without proof of pursuit of

legal avenues to compel production).

B. Benjamin Bright

Benjamin Bright separately argues that he was not in contempt of the enforcement order, contending that he had produced all responsive documents in his custody or control.

However, Benjamin waited until six months after entry of the

enforcement order to assert that only Cherie had custody or

control of the documents. Lack of custody or control is a

defense to enforcement and “may not be raised for the first

time in a contempt proceeding.” Rylander, 460 U.S. at 757.

[12] Even if we construe Benjamin’s argument as a claim

of present inability to comply, however, he remained in contempt. The Brights defended this action jointly until a change

in strategy during contempt proceedings (and even now have

filed joint briefs on appeal). Their joint defense provided a

substantial basis for the finding that Benjamin could comply

with the enforcement order, even if Cherie maintained primary possession of the documents. Moreover, Cherie’s declaration that she is “solely responsible for compliance, or lack

thereof with the summons in this case” does not absolve Benjamin of his responsibility to comply with his separate summons. Nor does her declaration that Benjamin was not

involved in the activities that generated the requested docu3150 UNITED STATES v. BRIGHT

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ments demonstrate a present inability to produce those documents. Finally, the district court had the discretion to discredit

Cherie’s self-serving affidavit in light of the history of joint

litigation. Cf. FTC v. Publ’g Clearing House, Inc., 104 F.3d

1168, 1171 (9th Cir. 1997) (“A conclusory, self-serving affidavit, lacking detailed facts and any supporting evidence, is

insufficient to create a genuine issue of material fact.”).

C. Purgation Conditions

[13] “Civil contempt is characterized by the court’s desire

to compel obedience to a court order or to compensate the

contemnor’s adversary for the injuries which result from the

noncompliance.” Falstaff Brewing Corp., 702 F.2d at 778

(internal citations omitted). Given the remedial purpose of the

sanction, a finding of contempt must be accompanied by conditions by which contempt may be purged, spelled out in

either the original order or the contempt order. Moreover,

although the district court generally must impose the minimum sanction necessary to secure compliance, see Whittaker

Corp. v. Execuair Corp., 953 F.2d 510, 517 (9th Cir. 1992),

the district court retains discretion to establish appropriate

sanctions, see Richmark Corp. v. Timber Falling Consultants,

959 F.2d 1468, 1473 (9th Cir. 1992).

[14] Here the district court expressly stated that the Brights

would no longer be in contempt if they fully comply with the

summonses, provide a definitive declaration that documents

do not exist or furnish documentation corroborating their

present inability to comply with the summonses. Because we

have narrowed the scope of the enforcement order to exclude

documents related to the two offshore credit card accounts not

expressly named in the summonses — because they are not

subject to the foregone conclusion exception — the Brights

need not produce documents concerning those accounts in

order to purge their contempt. The district court’s imposition

of a $500 daily fine and payment of the government’s costs

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was well within the range of appropriate sanctions to secure

compliance with a tax summons. 

CONCLUSION

The district court’s September 11, 2007 order enforcing the

IRS summonses is affirmed, as modified. The district court’s

August 20, 2008 order finding both Cherie and Benjamin

Bright in contempt and imposing sanctions is affirmed, with

modified purgation conditions.

AFFIRMED.

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