Source: https://casetext.com/case/united-states-v-kovel
Timestamp: 2020-04-04 03:00:13
Document Index: 447620671

Matched Legal Cases: ['§ 353', '§ 2192', '§ 2290', '§ 2301', '§ 353', '§ 2317', '§ 2106']

United States v. Kovel, 296 F.2d 918 | Casetext Search + Citator
Although there is no accountant-client privilege, seeCouch v. United States, 409 U.S. 322, 334, 93 S.Ct. 611,…
Cavallaro v. U.S.
As in the district court proceedings, three categories of documents requested by the IRS are at issue: (1)…
Full title:UNITED STATES of America, Appellee, v. Louis KOVEL, Defendant-Appellant
Date published: Dec 5, 1961
holding that the attorney-client privilege covers communications from a client to an attorney's non-lawyer employee
Kovel is a former Internal Revenue agent having accounting skills. Since 1943 he has been employed by Kamerman Kamerman, a law firm specializing in tax law. A grand jury in the Southern District of New York was investigating alleged Federal income tax violations by Hopps, a client of the law firm; Kovel was subpoenaed to appear on September 6, 1961, a few days before the date, September 8, when the Government feared the statute of limitations might run. The law firm advised the Assistant United States Attorney that since Kovel was an employee under the direct supervision of the partners, Kovel could not disclose any communications by the client or the result of any work done for the client, unless the latter consented; the Assistant answered that the attorney-client privilege did not apply to one who was not an attorney.
Later on September 7, they and Kovel's employer, Jerome Kamerman, now acting as his counsel, appeared again before Judge Cashin. The Assistant told the judge that Kovel had "refused to answer some of the questions which you had directed him to answer." A reporter reread so much of the transcript heretofore summarized as contained the first two refusals. The judge offered Kovel another opportunity to answer, reiterating the view, "There is no privilege to this man at all." Counsel referred to New York Civil Practice Act, § 353, which we quote in the margin, and sought an adjournment until co-counsel could appear; the judge put the matter over until the next morning.
Decision under what circumstances, if any, the attorney-client privilege may include a communication to a nonlawyer by the lawyer's client is the resultant of two conflicting forces. One is the general teaching that "The investigation of truth and the enforcement of testimonial duty demand the restriction, not the expansion, of these privileges," 8 Wigmore, Evidence (McNaughton Rev. 1961), § 2192, p. 73. The other is the more particular lesson "That as, by reason of the complexity and difficulty of our law, litigation can only be properly conducted by professional men, it is absolutely necessary that a man * * * should have recourse to the assistance of professional lawyers, and * * * it is equally necessary * * * that he should be able to place unrestricted and unbounded confidence in the professional agent, and that the communications he so makes to him should be kept secret * * *," Jessel, M.R. in Anderson v. Bank, 2 Ch.D. 644, 649 (1876). Nothing in the policy of the privilege suggests that attorneys, simply by placing accountants, scientists or investigators on their payrolls and maintaining them in their offices, should be able to invest all communications by clients to such persons with a privilege the law has not seen fit to extend when the latter are operating under their own steam. On the other hand, in contrast to the Tudor times when the privilege was first recognized, see 8 Wigmore, Evidence, § 2290, the complexities of modern existence prevent attorneys from effectively handling clients' affairs without the help of others; few lawyers could now practice without the assistance of secretaries, file clerks, telephone operators, messengers, clerks not yet admitted to the bar, and aides of other sorts. "The assistance of these agents being indispensable to his work and the communications of the client being often necessarily committed to them by the attorney or by the client himself, the privilege must include all the persons who act as the attorney's agents." 8 Wigmore, Evidence, § 2301; Annot., 53 A.L.R. 369 (1928).
N.Y.Civil Practice Act, § 353, is a legislative recognition of this principle. We doubt the applicability of the New York statute in a Federal grand jury proceeding; plainly, under F.R.Crim.Proc. 26, 18 U.S.C. it would not be applicable in a Federal criminal trial and we cannot believe the framers of the Criminal Rules intended state law to apply in the former case when it would not in the latter. However, decision of the issue is unnecessary, for there is nothing to indicate the New York legislature intended to do more than enact the principles of the common law.
This analogy of the client speaking a foreign language is by no means irrelevant to the appeal at hand. Accounting concepts are a foreign language to some lawyers in almost all cases, and to almost all lawyers in some cases. Hence the presence of an accountant, whether hired by the lawyer or by the client, while the client is relating a complicated tax story to the lawyer, ought not destroy the privilege, any more than would that of the linguist in the second or third variations of the foreign language theme discussed above; the presence of the accountant is necessary, or at least highly useful, for the effective consultation between the client and the lawyer which the privilege is designed to permit. By the same token, if the lawyer has directed the client, either in the specific case or generally, to tell his story in the first instance to an accountant engaged by the lawyer, who is then to interpret it so that the lawyer may better give legal advice, communications by the client reasonably related to that purpose ought fall within the privilege; there can be no more virtue in requiring the lawyer to sit by while the client pursues these possibly tedious preliminary conversations with the accountant than in insisting on the lawyer's physical presence while the client dictates a statement to the lawyer's secretary or is interviewed by a clerk not yet admitted to practice. What is vital to the privilege is that the communication be made in confidence for the purpose of obtaining legal advice from the lawyer. If what is sought is not legal advice but only accounting service, as in Olender v. United States, 210 F.2d 795, 805-806 (9 Cir. 1954), see Reisman v. Caplin, 61-2 U.S.T.C. ¶ 9673 (1961), or if the advice sought is the accountant's rather than the lawyer's, no privilege exists. We recognize this draws what may seem to some a rather arbitrary line between a case where the client communicates first to his own accountant (no privilege as to such communications, even though he later consults his lawyer on the same matter, Gariepy v. United States, 189 F.2d 459, 463 (6 Cir. 1951)), and others, where the client in the first instance consults a lawyer who retains an accountant as a listening post, or consults the lawyer with his own accountant present. But that is the inevitable consequence of having to reconcile the absence of a privilege for accountants and the effective operation of the privilege of client and lawyer under conditions where the lawyer needs outside help. We realize also that the line we have drawn will not be so easy to apply as the simpler positions urged on us by the parties — the district judges will scarcely be able to leave the decision of such cases to computers; but the distinction has to be made if the privilege is neither to be unduly expanded nor to become a trap.
We do not deal in this opinion with the question under what circumstances, if any, such communications could be deemed privileged on the basis that they were being made to the accountant as the client's agent for the purpose of subsequent communication by the accountant to the lawyer; communications by the client's agent to the attorney are privileged, 8 Wigmore, Evidence, § 2317-1. See Lalance Grosjean Mfg. Co. v. Haberman Mfg. Co., 87 F. 563 (C.C.S.D.N.Y., 1898).
City County of San Francisco v. Superior Court, etc., 37 Cal.2d 227, 231 P.2d 26, 25 A.L.R.2d 1418 (1951), and State v. Kociolek, 23 N.J. 400, 129 A.2d 417 (1957), accord generally with the above analysis.
We follow the Government's argument at least to this extent: If we were here dealing with a trial at which a claim of privilege like Kovel's had been overruled and the witness had answered, we should not reverse, since "the burden is on the objector to show that the relation" giving rise to the privilege existed. Woodrum v. Price, 104 W. Va. 382, 389, 140 S.E. 346, 349 (1927). On the other hand, appellant is right that, in a prosecution for criminal contempt, the ultimate burden of persuasion on the issue of privilege remains the Government's, see Michaelson v. United States, 266 U.S. 42, 66, 45 S.Ct. 18, 69 L.Ed. 162 (1924); United States v. Fleischman, 339 U.S. 349, 70 S.Ct. 739, 94 L.Ed. 906 (1950); United States v. Patterson, 219 F.2d 659 (2 Cir. 1955); e.g., if Kamerman had testified he had told Hopps preliminarily to discuss with Kovel the transactions Kovel declined to disclose, and the Government challenged this testimony, it would have had the burden of convincing the judge on the facts. The burden that the Government's proof did shift to Kovel was that of going forward with evidence supporting the claim of privilege, United States v. Fleischman, supra. Kovel did not discharge that burden, on our view of the law; he claims he was relieved of any need of doing so since the course of the proceedings had made it apparent that no evidence he could have submitted would have influenced the district judge and the law does not require the ritual performance of a useless act, citing United States v. Zwillman, 108 F.2d 802 (2 Cir. 1940). However, the needs of the appellate court also must be considered; in order to preserve Kovel's position on appeal counsel should have proffered the necessary evidence and, if the judge would not receive it, should have made an offer of proof, along the lines prescribed in civil cases by F.R.Civ.Proc. 43(c), 28 U.S.C. Without this we are left in the dark whether a remand will serve any purpose; although the Zwillman opinion dispensed with a formal offer, 108 F.2d p. 804, the record there afforded more assurance that the evidence the judge had refused to consider might sustain the privilege than we have here with respect to evidence not mentioned before the judge, whether or not it exists in other grand jury minutes. However, the uncertainty as to the applicable legal principle, the fixed view of the judge, and the haste with which the proceedings were here conducted because of the prospective running of the statute of limitations, extenuate although they do not altogether excuse the failure of Kovel's counsel to make a proper offer of proof; and a remand for determination of a few simple facts by the judge will not be burdensome. With petitioner's liberty at stake, we believe that the proper course, 28 U.S.C. § 2106.
A final point requires consideration, namely, the Government's contention that the question appellant declined to answer was designed to provide the very factual basis which, on our view, was needed to determine whether the privilege existed. On one reading it was exactly that. If the judge had so explained the question, Kovel would have been bound to answer it to him; a witness claiming the attorney-client privilege may not refuse to disclose to the judge the circumstances into which the judge must inquire in order to rule on the claim, People's Bank of Buffalo v. Brown, 112 F. 652 (3 Cir. 1902); Steiner v. United States, 134 F.2d 931, 935 (5 Cir. 1943); Schwimmer v. United States, 232 F.2d 855, 864 (8 Cir.), cert. denied, 352 U.S. 833, 77 S.Ct. 48, 1 L.Ed. 2d 52 (1956). However, the question was susceptible of other meanings; Kovel could well have understood it as calling for an answer relating to the substance of what Hopps had told him, a substance that might have included admissions whose disclosure would be seriously damaging. On the previous day the direction to answer this question had been linked with two others relating to substance and, just prior to the critical refusal, the Assistant had made it plain that still other questions might come. Although not entirely clear, it seems that the "purpose" of Hopps in sending the figures may have been stated in a letter. If so, Kovel would doubtless have been thinking of whatever the letter said and we do not know what that was; yet the idea of allowing the judge preliminarily to examine the letter was not advanced by anyone. Moreover, the proper practice is for the judge to conduct his preliminary inquiry into the existence of the privilege with the jury excused, see Steiner v. United States, supra, 134 F.2d at 934-935; here the question was asked with the jury present. Kovel's understanding of the question also may be explored on the remand — although, in view of what we have been compelled to say on the subject, perhaps without too much practical effect.
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In Kovel, the Second Circuit held that third-party specialists, such as accountants, hired to assist lawyers in complicated matters, cannot be compelled to testify about client confidences.
In Kovel, the Second Circuit held that, because "the complexities of modern existence prevent attorneys from effectively handling clients' affairs without the help of others," the attorney-client "`privilege must include all the persons who act as the attorney's agents.'"
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In Kovel, the court examined the scope of the attorney-client privilege as it relates to communications with an accountant.
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In U.S. v. Kovel, 296 F.2d 918, 920 (2d Cir. 1961), the Second Circuit Court of Appeals considered "under what circumstances, if any, the attorney-client privilege may include a communication to a nonlawyer by the lawyer's client...."