Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-ca10-15-01333/USCOURTS-ca10-15-01333-0/pdf.json

Parties Involved:
Commissioner of Internal Revenue
Respondent
Andrea E. Feinberg
Petitioner
Neil Feinberg
Petitioner
Kellie McDonald
Petitioner

Document Text:

FILED

United States Court of Appeals

Tenth Circuit

December 18, 2015

Elisabeth A. Shumaker

Clerk of Court

PUBLISH

UNITED STATES COURT OF APPEALS

TENTH CIRCUIT

NEIL FEINBERG; ANDREA E.

FEINBERG; KELLIE MCDONALD,

Petitioners,

v. 

COMMISSIONER OF INTERNAL

REVENUE,

Respondent.

No. 15-1333

Petition for Writ of Mandamus to the

United States Tax Court

(T.C. Nos. 10083-13, 10084-13)

James D. Thorburn of The Law Office of James D. Thorburn, LLC, Greenwood

Village, CO (Richard A. Walker of The Law Office of Richard A. Walker, P.C.,

Longmont, CO, with him on the petition) for Petitioners.

Patrick J. Urda, Attorney, Appellate Section, Tax Division (Caroline D. Ciraolo,

Acting Assistant Attorney General, Tax Division, and Gilbert S. Rothenberg and

Richard Farber, Attorneys, Appellate Section, Tax Division, with him on the

response) of the United States Department of Justice, Washington, D.C., for

Respondent.

Before GORSUCH, HOLMES, and MORITZ, Circuit Judges.

GORSUCH, Circuit Judge.

Appellate Case: 15-1333 Document: 01019541659 Date Filed: 12/18/2015 Page: 1 
This case owes its genesis to the mixed messages the federal government is 

sending these days about the distribution of marijuana. The Feinbergs and Ms.

McDonald run Total Health Concepts, or THC, a not-so-subtly-named Colorado

marijuana dispensary. They run the business with the blessing of state authorities

but in defiance of federal criminal law. See 21 U.S.C. § 841. Even so, officials

at the Department of Justice have now twice instructed field prosecutors that they

should generally decline to enforce Congress’s statutory command when states

like Colorado license operations like THC. At the same time and just across 10th

Street in Washington, D.C., officials at the IRS refuse to recognize business

expense deductions claimed by companies like THC on the ground that their

conduct violates federal criminal drug laws. See 26 U.S.C. § 280E. So it is that

today prosecutors will almost always overlook federal marijuana distribution

crimes in Colorado but the tax man never will. 

Our petitioners are busy fighting the IRS’s policy. After the agency

disallowed their business expense deductions and sent them a large bill, the

Feinbergs and Ms. McDonald challenged that ruling in tax court. Among other

things, they argued that the agency lacked authority to determine whether THC

trafficked in an unlawful substance and, as a result, they suggested that their

deductions should have been allowed like those of any other business. As the

litigation progressed, though, the IRS issued discovery requests asking the

petitioners about the nature of their business — no doubt seeking proof that they

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are indeed trafficking in marijuana, just as the agency alleged. The Feinbergs and

Ms. McDonald resisted these requests, asserting that their Fifth Amendment

privilege against self-incrimination relieved them of the duty to respond. 

It’s here where the parties’ fight took an especially curious turn. The IRS

responded to the petitioners’ invocation of the Fifth Amendment by filing with

the tax court a motion to compel production of the discovery it sought. Why the

agency bothered isn’t exactly clear. In tax court, after all, it’s the petitioners who

carry the burden of showing the IRS erred in denying their deductions — and by

invoking the privilege and refusing to produce the materials that might support

their deductions the petitioners no doubt made their task just that much harder. 

See Tax Ct. R. 142(a)(1). And harder still because in civil matters an invocation

of the Fifth Amendment may sometimes lawfully result in an inference that what

you refuse to produce isn’t favorable to your cause. See, e.g., Baxter v.

Palmigiano, 425 U.S. 308, 318 (1976). 

Still, the IRS chose to pursue a motion to compel. And in support of its

motion the agency advanced this line of reasoning. Yes, of course, the IRS said,

it thinks THC’s deductions are impermissible precisely because they arise from

activity proscribed by federal criminal statutes. Yes, the Fifth Amendment

normally shields individuals from having to admit to criminal activity. But, the

IRS argued, because DOJ’s memoranda generally instruct federal prosecutors not

to prosecute cases like this one the petitioners should be forced to divulge the

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requested information anyway. So it is the government simultaneously urged the

court to take seriously its claim that the petitioners are violating federal criminal

law and to discount the possibility that it would enforce federal criminal law. 

Ultimately, the tax court sided with the IRS and ordered the petitioners to

produce the discovery the agency demanded — and it is this ruling the Feinbergs

and Ms. McDonald now ask us to overturn. Because the tax court proceedings are

still ongoing and no final order exists that might afford this court jurisdiction in

the normal course, the petitioners seek a writ of mandamus. But, of course,

courts of appeals only rarely intervene in ongoing trial court proceedings, and

winning a writ of mandamus poses a special challenge. To secure a writ, the

petitioners must show that no other adequate means exist to secure the relief they

seek. They must also show a clear and indisputable entitlement to that relief. 

And even if they can satisfy these two requirements, the petitioners still must

convince this court that exercising its discretion to intervene in an ongoing trial

court proceeding is “appropriate” in the interests of justice. See Cheney v. U.S.

Dist. Court, 542 U.S. 367, 380-81 (2004); Kerr v. U.S. Dist. Court, 426 U.S. 394,

403 (1976); United States v. Copar Pumice Co., 714 F.3d 1197, 1210 (10th Cir.

2013).1

1

 At times our cases have suggested that, when a petitioner seeks a writ of

mandamus to vindicate a claim of privilege in response to an adverse discovery

ruling, this court will apply a two-prong test before considering the merits of the

petition — asking first whether “(1) disclosure of the allegedly privileged or

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When it comes to establishing a clear and indisputable entitlement to relief,

you might wonder if the petitioners are indeed able to bear the burden the law

imposes on them. Of course it’s true, as the IRS argues, that to invoke the Fifth

Amendment you must “face some authentic danger of self-incrimination.” United

States v. Rivas-Macias, 537 F.3d 1271, 1277 (10th Cir. 2008) (internal quotation

marks omitted). And it’s true, as the IRS stresses, that two consecutive Deputy

Attorneys General have issued memoranda encouraging federal prosecutors to

decline prosecutions of state-regulated marijuana dispensaries in most

circumstances.2

 But in our constitutional order it’s Congress that passes the laws,

Congress that saw fit to enact 21 U.S.C. § 841, and Congress that in § 841 made

the distribution of marijuana a federal crime. And, frankly, it’s not clear whether

informal agency memoranda guiding the exercise of prosecutorial discretion by

field prosecutors may lawfully go quite so far in displacing Congress’s policy

directives as these memoranda seek to do. There’s always the possibility, too,

confidential information renders impossible any meaningful appellate review of

the claim of privilege or confidentiality; and (2) the disclosure involves questions

of substantial importance to the administration of justice.” Barclaysamerican

Corp. v. Kane, 746 F.2d 653, 654-55 (10th Cir. 1984) (internal quotation marks

omitted). The parties before us debate whether this test merely restates the

traditional test for mandamus relief we’ve outlined in the text or whether it

imposes a more onerous burden on the petitioner. Who’s right, though, proves

immaterial in light of our assessment that petitioners in this case fail even under

the traditional mandamus standard.

2

 See Memorandum from David W. Ogden, Deputy Att’y Gen., U.S. Dep’t

of Justice to Selected U.S. Att’ys (Oct. 19, 2009), revised by Memorandum from

James M. Cole, Deputy Att’y Gen., U.S. Dep’t of Justice (Aug. 29, 2013). 

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that the next (or even the current) Deputy Attorney General could displace these

memoranda at anytime — by way of illustration look no further than DOJ’s (still)

evolving views on corporate waivers of the attorney-client privilege expressed in

so many memoranda by so many Deputy Attorneys General over so many years.3

 

In light of questions and possibilities like these, you might be forgiven for

wondering whether, memos or no memos, any admission by the petitioners about

their involvement in the marijuana trade still involves an “authentic danger of

self-incrimination.” Maybe especially given the fact that the government’s

defense in this case is wholly premised on the claim that the petitioners are, in

fact, violating federal criminal law. And given the fact that counsel for the

government in this appeal candidly acknowledged that neither the existence nor

the language of the DOJ memoranda can assure the petitioners that they are now,

or will continue to be, safe from prosecution. And given the fact that this court

has long explained that, once a witness establishes that “the answers requested

would tend to incriminate [him]” under the law of the land, the Fifth Amendment

may be properly invoked without regard to anyone’s “speculat[ion] [about]

3

 See Memorandum from Eric H. Holder, Jr., Deputy Att’y Gen., U.S.

Dep’t of Justice to All Component Heads & U.S. Att’ys (June 16, 1999), revised

by Memorandum from Larry D. Thompson, Deputy Att’y Gen., U.S. Dep’t of

Justice (Jan. 20, 2003), revised by Memorandum from Robert D. McCallum, Jr.,

Acting Deputy Att’y Gen., U.S. Dep’t of Justice (Oct. 21, 2005), revised by

Memorandum from Paul J. McNulty, Deputy Att’y Gen., U.S. Dep’t of Justice

(Dec. 12, 2006), revised by Memorandum from Mark Filip, Deputy Att’y Gen.,

U.S. Dep’t of Justice (Aug. 28, 2008), revised by Memorandum from Sally Q.

Yates, Deputy Att’y Gen., U.S. Dep’t of Justice (Sept. 9, 2015).

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whether the witness will in fact be prosecuted.” United States v. Jones, 703 F.2d

473, 478 (10th Cir. 1983).

But even if their Fifth Amendment objection bears merit, the petitioners

still face a problem. As we’ve seen, a writ of mandamus isn’t available when an

appeal in the normal course would suffice to supply any necessary remedy. And

in Mid-America’s Process Service v. Ellison, 767 F.2d 684 (10th Cir. 1985), this

court expressly held that any error in a district court’s order compelling

production of civil discovery that the petitioners believed protected by the Fifth

Amendment could be satisfactorily redressed in an appeal after final judgment. 

Id. at 685-86. A holding that would seem to cover the very situation we now

face. 

Admittedly, the government unearthed Mid-America’s Process only after

briefing in this appeal finished, citing the case for the first time in a supplemental

letter to the court. But the petitioners have now had a chance to consider and

reply to the government’s submission concerning Mid-America’s Process. And,

in our judgment, they have identified no satisfactory way to distinguish the

decision. The petitioners do argue that their case involves the Fifth Amendment

rights of natural persons, while Mid-America’s Process involved a corporation’s

claim to a Fifth Amendment privilege against self-incrimination. And, they note,

the Supreme Court has cast doubt on the viability of corporate invocations of the

privilege. See Braswell v. United States, 487 U.S. 99, 116 (1988). But while not

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without some surface appeal, we don’t see how on more careful examination this

distinction will do. For Mid-America’s Process expressly looked past the

corporate form of the claimant in that case, took account of the individual

petitioners’ underlying privilege claims, and held that an appeal after final

judgment would suffice to remedy any individual injury as well. See 767 F.2d at

685-86 & n.1.4

 

Besides, even if Mid-America’s Process didn’t control this case (it does)

the petitioners still offer us no persuasive reason for thinking an appeal after final

judgment would fail to remedy any wrong they might suffer. Suppose the

petitioners are right and the tax court’s order compelling production violates their

Fifth Amendment rights. If they defy the tax court’s order and that court issues

an improper monetary or other sanction, this court would seem well able to undo

the sanction after final judgment. By contrast, if the petitioners choose to comply

with the discovery order under protest and the materials they produce are

unlawfully used against them at trial, this court would still seem to enjoy ample

4

 Despite the government’s urging, we do not think the disposition of this

appeal is controlled by Mohawk Industries, Inc. v. Carpenter, 558 U.S. 100

(2009). Mohawk involved not a mandamus petition raising the Fifth Amendment

privilege but an argument that a discovery order infringing upon the attorneyclient privilege was an immediately appealable collateral order under the Cohen

doctrine. Id. at 103. What’s more, in dismissing the appeal, the Court in Mohawk

relied on the fact that the appellant had at least three remaining options for

challenging the discovery order: interlocutory appeal, writ of mandamus, or postjudgment appeal. Id. at 110-11. In contrast and given that the tax court denied

the petitioners leave to file an interlocutory appeal, an adverse decision as to this

petition would leave the petitioners with none but the final option. 

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authority to offer a remedy, maybe even in the form of a new trial without resort

to the materials in question. 

Of course there are nuances here, but even they seem like they can be fairly

addressed later. For example, if the petitioners stand on their privilege we would

face the difficulty of separating out a permissible adverse inference (sometimes

employable, as we’ve seen, in civil cases even when the Fifth Amendment is

validly invoked) from an impermissible sanction. But no one suggests that task is

beyond us after final judgment. Similarly, if the petitioners choose to produce the

discovery under compulsion we might have to confront the question whether any

error by the tax court in ordering production was harmless and so beyond our

power to remedy after final judgment. But that sort of inquiry seems built into

the mandamus standard too. See, e.g., Petersen v. Douglas Cty. Bank & Trust

Co., 940 F.2d 1389, 1392 (10th Cir. 1991). Neither is it clear that an erroneous

order compelling production in this civil case would yield an unremediable

negative impact for the petitioners in a later criminal proceeding. For should they

elect, under threat of sanction, to comply with the tax court’s order — and should

it turn out that order was entered in error — the petitioners might later move to

suppress any of the evidence they produced on the ground that the production was

made involuntarily — a point even the government in this appeal does not

dispute. See, e.g., Minnesota v. Murphy, 465 U.S. 420, 425, 434 (1984);

Lefkowitz v. Cunningham, 431 U.S. 801, 805 (1977). 

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In the end, then, the petitioners fail to offer a convincing reason to think

that without an immediate remedy they will face an irreparable injury. Maybe

we’re missing something. Maybe a future party will show us what it is we’re

missing. But the petitioners have not done that much here. And that by itself

supplies an independent reason, beyond even our controlling precedent, to

withhold the extraordinary remedy of mandamus in this case.

The petition is denied.

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