Opinion ID: 457704
Heading Depth: 2
Heading Rank: 3

Heading: Would enforcement of the summonses constitute abuse of process?

Text: 22 The initial issue relevant to determining whether the summonses are enforceable is the retroactivity of the Supreme Court's decision in United States v. Baggot, 463 U.S. 476, 103 S.Ct. 3164, 77 L.Ed.2d 785 (1983). The parties agree that, if Baggot is not subject to retroactive application, the summonses are enforceable because the Rule 6(e) order leading to them would be valid and no illegal conduct would underlay the IRS's investigation of the taxpayers. See supra part III.A. 23 The Baggot Court addressed the question whether an Internal Revenue Service investigation to determine a taxpayer's civil tax liability is 'preliminar[y] to or in connection with a judicial proceeding' within the meaning of [Fed.R.Crim.P. 6(e)(3)(C)(i) ]. Id. at 3165; see supra note 1 (text of rule). In that case, as in the cases presently before us, the IRS had obtained, on the basis of Rule 6(e)(3)(C)(i), an order from a district court at the close of a grand jury investigation that permitted the Service to use grand jury materials to determine civil tax liabilities. The Court held in Baggot that disclosure [of grand jury information] is not appropriate for use in an IRS audit of civil tax liability, because the purpose of the audit is not to prepare for or conduct litigation, but to assess the amount of tax liability through administrative channels. Id. at 3167. 24 We believe that the question of the retroactive effect of Baggot is not a simple one; in any event, we need not answer the question here. Because we hold in favor of the government on other grounds, see infra at 758, we will assume without deciding that Baggot must be applied retroactively. 6 Two corollaries follow from this assumption: (1) the Rule 6(e) order under attack in these appeals was invalid when issued; and (2) the IRS agents who initiated the investigation of both the Glucks and the Steins did so in reliance on information obtained in violation of grand jury secrecy. 25 The question thus remains: did this action by the IRS agents so taint the investigation that enforcement of the summonses would amount to an abuse of the court's process? As a first step in answering this question we look again to Powell, where the Court gave some indication as to the type of conduct by IRS agents that would constitute an abuse of process. The Court stated: 26 Such an abuse would take place if the summons had been issued for an improper purpose, such as to harass the taxpayer or to put pressure on him to settle a collateral dispute, or for any other purpose reflecting on the good faith of the particular investigation. 27 379 U.S. at 58, 85 S.Ct. at 255. The taxpayers do not contend in the cases at hand that the summonses were issued for an improper purpose. There is ample precedent, however, for the proposition that even when an IRS summons is issued for a proper purpose, illegal conduct by the agents during the investigation (and prior to the issuance of the summons) may so reflect[ ] on the good faith of the ... investigation, id., that enforcement would amount to an abuse of process. 28 In United States v. Bank of Commerce, 405 F.2d 931 (3d Cir.1969), for example, the taxpayer claimed that the information which called [the IRS agent's] attention to the 1960 bank records [the records being summoned] was the product of an unlawful search and seizure, that this information--'the leads'--is tainted by the search and seizure and that, therefore, the bank records are also tainted and their production should not be compelled. Id. at 934. This court held that the district court should hear and determine appellant's Fourth Amendment claim and thus assure itself that its process will not be abused. Id. at 935; see also United States v. Beacon Federal Savings and Loan, 718 F.2d 49, 54 (2d Cir.1983) (holding that if taxpayers could show on remand that an unconstitutional search and seizure had led to the summonses at issue, they might--if the violation was serious enough--be entitled to have those summonses quashed); United States v. Deak Perera & Co., 566 F.Supp. 1398 (D.D.C.1983) (IRS motion to enforce summons denied where it was based upon information improperly obtained during audit to determine compliance with Currency and Foreign Transactions Reporting Act, 31 U.S.C. Secs. 5311-14, 5316-22 (1982)). 29 It is clear from Bank of Commerce and Beacon Federal that quashal of a summons does not follow automatically from improper agency conduct. We do not believe that the conduct by the agents in the present cases, even if technically illegal, rises to the level necessary to justify a refusal to enforce the summonses. First, unlike the situations in Bank of Commerce and Beacon Federal, there is no contention here that the agents acted in violation of anyone's constitutional rights, only that they violated a rule of criminal procedure designed to protect the secrecy of grand jury materials. More important, the agents complied with the rule as it was widely interpreted at the time: they went before a district court for a Rule 6(e) order permitting them access to the grand jury materials, and the court granted them a facially valid order. The agents acted in good faith reliance thereon. In short, the conduct of the agents in no way reflects negatively on the good faith of the investigation, see Powell, 379 U.S. at 58, 85 S.Ct. at 255, and enforcement of the summons would not constitute an abuse of process. 30 Two Supreme Court cases dealing with the exclusionary rule in the fourth amendment context lend strong support to our conclusion: United States v. Peltier, 422 U.S. 531, 95 S.Ct. 2313, 45 L.Ed.2d 374 (1975) and United States v. Leon, --- U.S. ----, 104 S.Ct. 3405, 82 L.Ed.2d 677 (1984). In Peltier, the Court considered whether it should apply the holding in Almeida-Sanchez v. United States, 413 U.S. 266, 93 S.Ct. 2535, 37 L.Ed.2d 596 (1973)--that a warrantless border patrol search approximately twenty-five miles from the border violated the fourth amendment--to exclude evidence from a search conducted under similar circumstances before Almeida-Sanchez was decided. The Court noted that 31 if the law enforcement officers reasonably believed in good faith that evidence they had seized was admissible at trial, the 'imperative of judicial integrity' is not offended by the introduction into evidence of that material even if decisions subsequent to the search or seizure have broadened the exclusionary rule to encompass evidence seized in that manner. 32 Peltier, 422 U.S. at 537, 95 S.Ct. at 2317. The court also stated that, in light of the good faith reliance of the officers on the state of the law as they found it, retroactive application of Almeida-Sanchez would have no deterrent effect. Id. at 538-39, 95 S.Ct. at 2318. Accordingly, it reversed the court of appeals' determination that the evidence seized was to be excluded. 33 In Leon, police officers obtained a facially valid search warrant, 104 S.Ct. at 3410, from a state superior court prior to conducting a search of defendant's residence for contraband. The defendant was indicted by a federal grand jury and charged with conspiracy to possess and distribute cocaine, and a number of substantive drug counts. The United States District Court for the Central District of California concluded that, although the police officers had acted in good faith pursuant to what they believed to be a valid warrant, the search was invalid because the warrant was not supported by probable cause. The court thus suppressed evidence gathered during the search. The Court of Appeals for the Ninth Circuit affirmed. The Supreme Court held, however, that 34 the marginal or nonexistent benefits produced by suppressing evidence obtained in objectively reasonable reliance on a subsequently invalidated search warrant cannot justify the substantial costs of exclusion. 35 Id. at 3421. 36 The conduct by the IRS agents in the cases before us is remarkably similar to the conduct of the police officers in Peltier and Leon. Here, the IRS agents acted in good faith reliance on a facially valid Rule 6(e) order issued by a United States District Court. 7 Under such circumstances, enforcement of the resultant summonses will not offend the integrity of the judicial process, nor would refusal to enforce the summonses deter future misconduct by IRS agents. 8 These agents will, of course, continue to act pursuant to facially valid court orders--as they indeed they should. Moreover, deterrence is unnecessary because Baggot forecloses access by the IRS to grand jury materials for the purpose of determining civil tax liabilities. There is thus no justification supporting the quashing of the summonses in the present cases.