Opinion ID: 27195
Heading Depth: 1
Heading Rank: 6

Heading: Necessity for Third-Party Contacts

Text: 32 The United States attacks the district court finding that, on the facts and circumstances of this case, Payne was a reasonably available source of information and that the disclosures were unnecessary in order to obtain the information sought. The district court found that Payne's efforts to cooperate were sincere and made in good faith, and that Batista in contrast made little or no effort to use this cooperation to advance his investigation. The court then made a blanket finding of no evidence that any disclosure of Payne's return information was necessary. We must evaluate this finding, however, only to the extent that it led to any damages to Payne. In Barrett v. United States, 100 F.3d 35 (5th Cir.1996) ( Barrett III ), this court explained that the type of damages which must be proved by the taxpayer depends on the nature of the violation by the IRS. Thus, if the violation is simply an unnecessary third-party contact, an attorney-taxpayer such as Payne would have to prove that he lost business because of his clients' concerns over privacy issues. On the other hand, a violation occasioned by disclosure of the criminal nature of the investigation requires proof that Payne lost business because his clients thought him to be a tax cheat. Id. at 39. It is clear from the district court opinion and the record that Payne's proof of damages was of the latter type. Accordingly, we focus on the finding that Batista regularly revealed the criminal nature of his investigation of Payne when making third-party contacts, since Payne's damages can only be sustained on the basis of these disclosures. 33 This court has previously held that it was unnecessary for an IRS agent to disclose the criminal nature of an investigation when sending circular letters to the public requesting information regarding the taxpayer. See Barrett v. United States, 51 F.3d 475, 479 (1995) ( Barrett II ). Applying this standard, the district court here found that Batista's disclosure of the criminal nature of his investigation was not necessary to obtain the information sought. The district court specifically found that Batista issued a large number of administrative summonses and letters to third-parties which disclosed on their face that Payne was under criminal investigation. 91 F.Supp.2d at 1025. While the partial dissent considers this finding to be clearly erroneous, it is not directly challenged by the United States in this appeal. Instead, the United States argues that the circular letter cases do not apply to live, face-to-face interviews. As discussed infra, ultimate resolution of this issue will require further factual findings. 34