Document: 400 U.S. 517 91 S.Ct. 534 27 L.Ed.2d 580 Kevin L. DONALDSON, fka Merton H. Sweetv.UNITED STATES et al. No. 65. Argued Nov. 19, 1970. Decided Jan. 25, 1971. Syllabus In furtherance of an investigation petitioner's tax returns, respondent Grady, Internal Revenue Service (IRS) Special Agent, issued summonses to putative former employer (Acme) and its accountant for the production Acme's records employment compensation during years under investigation. The were § 7602 Code 1954, which authorizes IRS examinations witnesses purpose determining liability. Thereafter respondents, pursuant 26 U.S.C. §§ 7402(b) 7604(a), filed in District Court petitions enforcement summonses. Petitioner motions intervene proceeding, relying on Fed.Rule Civ.Proc. 24(a)(2), inter alia, provides intervention action 'when applicant claims interest relating property or transaction is subject * *.' alleged that agents investigating him solely obtain evidence concerning criminal violations laws consequently not any within scope could be enforced. court denied ordered produced. Appeals affirmed. Held: 1. has no proprietary Acme (his sole therein being they presumably contain details payments him), since he oher protectable by way privilege otherwise, absolute right 24(a)(2) summons proceeding. Pp. 527—531. 2. Under may used connection with a if (as this case) it good faith prior recommendation prosecution. 531—536. United States v. Mercurio, 5 Cir., 418 F.2d 1213, Robert E. Meldman, Milwaukee, Wis., petitioner. Lawrence G. Wallace, Washington, D.C., respondents. Mr. Justice BLACKMUN delivered opinion Court. 1 We are here concerned problems arising issuance judicial internal revenue directed someone other than individual taxpayer. 2 Donaldson, formerly known as Sweet, apparently was once employed by, performer for, Circus Operating Co., Inc., dba Clyde Beatty-Cole Bros. Circus.1 Donaldson (sometimes referred herein 'taxpayer') whose income returns calendar 1964 1967, inclusive, Service. 3 On September 12 13, 1968, Agent John P. purportedly acting authority 7602,2 served separate Joseph J. accountant, commanding their appearance before Grady 23 24 'to give testimony liability' produce certain having do specified 'applications and/or containing background data including Social Security number furnished you by' taxpayer; all contracts between taxpayer 'and various organizations sponsoring performances circus through inclusive'; Forms 1099 W—2 schedule made organizations; checks vouchers Acme; expense submitted information identification each organization; 'correspondence foregoing financial transactions Acme' 1964—1967, inclusive. 4 Shortly these summonses, Middle Florida, upon taxpayer, temporary restraining orders, then, preliminary injunction, Mercurio from complying Grady's requests subsequent directing 'until such time order competent jurisdiction been requiring compliance.' November 7604(a),3 same federal Acme. supported affidavits Bruce B. Miller.4 Each affidavit effect affiant conducting assisting conduct 'an ascertaining correct 'necessary' examine take requested ascertain taxpayer's liability those years. 6 response ensuing orders show cause, Fed.Rules proceedings. He accompanied motion proposed answer. answer Agents Miller guilty bad asserting question; two assigned Intelligence Divisions Service; 'for express obtaining statutes applicable States'; that, consequence 7602. It also asserted, although now urged here, overly broad 'without showing particularized relevancy,' Constitution, 'is entitled secure his personal papers effects unreasonable searches seizures.' 7 Acme, part, responses cause. 'were for' injunction theretofore entered, 'the Respondent would have complied summons.'5 8 cause returnable Judge Lieb. After submission memoranda argument, but without introduction testimony, appear requested. consolidated cases purposes appeal granted stays pending appeal. Fifth Circuit 1213 (CA5 1969). 9 Certiorari granted, 397 933, 90 942, 25 114 (1970), because case appeared raise important questions administration laws, courts appeals differed reading Reisman Caplin, 375 440, 84 508, 11 459 (1964).6 10 Despite contrary intimations intervene, there constitutional issue case. oral argument so conceded.7 event, question appears settled long ago when upheld, against Fourth Amendment challenge, Act 1921 third-party bank. First Nat. Bank Mobile, Ala. States, 267 576, 45 231, 69 L.Ed. 796 (1925), aff'g 295 F. 142, 153 (SD Ala.1924). See Pikeville, 274 F.Supp. 283, 284 (ED Ky.1967), aff'd sub nom. 390 199, 88 901, 19 1038 (1968), Shlom, 420 263, 266 (CA2 1969), cert. denied, 1074, 1521, 809 (1970). II emphasize initially, did Tuttle Appeals, at 1214, what sought Further, emphasized, where himself seeking access books mouth. Neither hands attorney attendant privilege, even anyone whom confidential relationship kind. we repeat, third person respect established legal client, exists, had kind, owned person, hands, relate person's business III Clark, Part unanimous Reisman, U.S., 445—446, 511—512, reviewed statutory structure Congress provided summons. will perhaps rewarding us outline again. 13 Section 7601 1954 Code, 7601, directs Secretary delegate extent deems practicable' Treasury Department officers employees proceed inquire after concerning' persons 'who liable pay tax.' section thus flatly imposes duty canvass inquire. This old statute. roots first modern general acts, namely, Tariff October 3, 1913, II, I, 38 Stat. 178 3172, amended, Revised Statutes 1874. 14 correctness return collecting (t)o summon possession, custody, care account entries deem proper, books, papers, records, data, oath, relevant material inquiry 15 7603 service There provision delegate. If desired, must 7402(b), sister essentially identical statute, see n. supra, grants district 'by appropriate process compel attendance, production.' 16 Then, Clark pointed out, 446, 512: 17 'Any (§ 7402(b)) adversary proceeding affording challenges giving complete protection witness. only refusal comply judge subjects witness contempt proceedings.' 18 Finally, 7605(a) place examination 'shall fixed reasonable circumstances' and, summons, date shall less days summons.' Thus administratively proceeding' opportunity challenge 'complete witness.' IV 20 action, instituted attorneys husband wife, declaratory injunctive relief Commissioner accounting firm working taxpayer-couple's request. work correspondence. contended enforced unlawful appropriation attorneys' product trial preparation. concluded petitioner-attorneys possessed adequate remedy law complaint, therefore, dismissal reaching conclusion, emphasized assist them civil proceedings the' taxpayers; products joint accountants kept firm's files labeled of' attorneys; 'there four Tax contesting deficiencies' addition, 'a Bromley matters progress.' 21 noted petitioners claim 'suffers infirmity face' Government conceded interested party attack hearing officer.' agreed. went observe 'in officer power levy sanctions'; procedures either Commissioner, ground.' Among grounds included defenses improper use prosecution' defense protected attorney-client privilege. say, 'In parties might protect interests, event officer, he, too, intervene' 'would true whether nature.' said difference should indicate 'that voluntarily turn over.' 22 Ten months later decided Powell, 379 48, 85 248, 112 (1964), companion case, Ryan 61, 232, 122 (1964). These concerned, respectively, president corporate re-examinations assessments barred except fraud. primarily standards meet orders. held probable suspect fraud required need conducted legitimate purpose, already Commissioner's administrative steps followed. *' Again ordered, ground. stated burden abuse court's V With background, our central Donaldson's obtained (in form succeeding well) self-instituted actions restrain Mercurio's voluntary compliance But successful restraint. (but F.2d, 1215), comfort provisions 24(a)(2).8 asserts rule's literal language, possesses (enforcement) situated disposition practical matter impair impede ability interest,' adequately represented (Mercurio Acme) buttress approach reliance reference both 7604(a) Civil Rules 58, 2559 language appearing 445, 511.10 view, however, goes too far Rule quotations Powell Reisman. Rules, course, application 81(a) (3) expressly provides.11 inflexible application. 81(a)(3) specifically recognize court, local rule order, limit rules Moore, Federal Practice, 81.06(1), p. 4442 (2d ed. 1970). feature recognized purposeful Advisory Committee pertinent added 1946. Id., 81.01(6), 4413 post-Powell cases, clearly consistently footnote intended summary rights summoned hearing, requested, available. Gajewski, 419 1088, 1090—1092 (CA8 1040, 1361, 651 (1970); Venn 207, 212 1968); McGarry's, Inc. Rose, 344 416, (CA1 1965). agree conclusion. Similarly, set forth 10, does guarantee Certainly recites 'or party' well certainly one 'affected disclosure court. comments Reisman,12 permissive mandatory. recognizes Court, customary showing, allow intervene. Two instances specified, 'it privilege.' Thus, allowed circumstances proper. pronounce, confronted situation attorney's product, usual balancing opposing equities called for. We, thus, agreement holdings implications Benford, 406 1192, 1194 (CA7 1969); Commerce, 405 931 (CA3 365 312, 314 (CA6 1966), simply Instead, conclusion reached 1218, re Cole, 342 5, 7—8 (CA2), 381 950, 1803, 723 (1965), O'Donnell Sullivan, 364 43, 44 (CA1), 385 969, 87 501, 433 (1966). VI 28 turn, particular situation. sought, noted, consists routine enjoy interest—and course looms large eyes—lies fact Acme-to-Donaldson possessing significance purposes. 29 asserted interest, nothing more desire counter overcome willingness, records. 30 nature 'interest' apparent (once assume relevance) suppression means, independent identifiable deductions own witness, subpoena trial. cannot kind contemplated speaks terms action.' What obviously meant significantly interest. And as, example, process, always assert due proper Cf. Blue, 384 251, 86 1416, 510 31 therefore hold enough sufficient magnitude conclude Were do, unwarrantedly cast doubt stultify Service's every investigatory move. VII 32 dispose main concern strenuously urges, utilized aid potentiality resulting prosecution argues invalid unenforceable outside naturally contrary. 33 centers above-mentioned dictum 449, 513: 34 '(T)he include, circuits held, prosecution, Boren Tucker, 239 767, 772—773, 35 note initially despite dictum, opinions decided, uniformly approve likely lead prosecution.13 approved, uncover crime, yet instituted.14 hand, said, usually citing objective denied.15 This, 36 precisely latter situation—where object gather prosecution—that dictum. evident itself embraces citation 772—773 (CA9 1956), which, pages cited, Ninth very carefully distinguished O'Connor, 118 248 (Mass.1953), indictment. read light Boren, Boren's O'Connor; read, comes into focus charge or, most, 37 Any holding, thwart defeat powers placed delegate.' When indictment indeed, That indicted prosecuted possibility, undergoing audit. Prosecution necessarily depend result audit reveal. bear mind organized carry out responsibilities 7801(a) laws.16 Organization Functions, 1112 seq., Fed.Reg. 2417 seq. further offices, division division; Audit Division's program emphasizes aspects 'participation special Division investigations,' 1118.4; enforces affecting taxes develops violations, 1118.6; assistant regional commissioner intelligence programs frauds 'certain laws' 'approves disapproves recommendations prosecution,' 1114(10); processed office counsel Justice, 1116(3). demonstrates agent jointly Division; combined efforts infractions; decision recommend sufficiently along support conclusions. full-scale mean ensues becomes apparent.17 39 authorized prove conduct. regulations positive. Treas.Regs. 301.7602—1(c)(4), CFR 301.7602—1(c)(4). underlying just authoritative. 6659(a)(2) defines term 'tax,' hence, authorizing 7602, include addition penalty. contains restriction; further, ascertainable 1939 Code's 3614 also, 3615(a)—(c), proximity 3616 3654, authorize suggestion meaningful line distinction, compared purposes, point agent's appearance. Mathis 391 1, 4, 1503, 1504, (1968). To draw require Service, suspected undetermined fraud, forgo ultimate refuse law. Kordel, 11, 763, 769, 40 41 Affirmed. 42 BRENNAN, believing facts petitioner concurs result. 43 DOUGLAS, concurring. seeks regarding petitioner-taxpayer Co. Summonses review attempting prevent enforcing proceedings, alleging vital litigation enforceable improperly, challenged stayed mandate. affirmed continued stay As agent, issued. facts, I concur Court's decision. investigations. Therefore, though investigation, bar who testifying violate Amendments. standing violation belonging 7, 766—767, 1; 511—514, 459. difficult how summoning party, can progress. free incrimination others. 46 may, interests hearings function agents.1 At 'investigations' put discretion agent. accountant. taken position investigated present 'ex parte investigations.'2 Moreover, normally given notice party. Our decisions, make clear confront cross-examine inspect him. 47 traditional method gathering grand jury. Before body confrontation, protections present, none exist here. five-to-four relied analogy jury Groban, 352 330, 333, 77 510, 513, 376, ruling testify fire marshal. Black stated, think, dissent: 48 '(A)ny surface practice lend disappears analysis institution. English American composed members selected citizenry locality crime committed. They bring room experience, knowledge viewpoint sections community. axes grind charged personally No prosecuting law-enforcement ferreting crime. state seriously deceive presence jurors offers substantial safeguard officers' misrepresentation, unintentional witness' statements call unbiased occurred them. 49 Fire Marshal's interrogation is, be, integral part arson similar examined crimes destroyed merely euphonious label 'administrative." 346 347, 349, S.Ct., 520, 521. 50 Anonymous Baker, 360 287, 79 1157, 1234, another decision, upheld New York, one-man jury, interrogate benefit counsel, again distinction 294, 1161. view dissent procedure official lay groundwork future counsel. 51 Hannah Larche, 363 420, 80 1502, 1307, registrars accused racial discrimination asked Commission Rights. A majority found 'adjudicate' 'issue orders' facts. prosecutions follow 'purely conjectural.' Solicitor General relies approval adopted My changed: 52 'There Chief Executive move deny confrontation cross-examination jury.' 497, 1548. 53 '(The is) accusatory Constitution. engine government, executive, legislative, (its) place—at least done cases.' 499, 1549. 54 Jenkins McKeithen, 395 411, 89 1843, 404, dealt investigative commission. There, commission limited reporting findings nonwitnesses witnesses. exercised empowered brand people criminals. 427—428, 1851—1852. afford 55 Given identity investigations applies suit. requirements procedural become lax rather involved. 56 determination charges. perform traditionally reserved Government. teaching attend, cross-examine, rebut. record performance context implied obviously, ascertainment fact. '§ Examination 'For return, making made, liability, authorized— '(1) inquiry; '(2) named '(3) inquiry.' 7402. Jurisdiction '(b) enforce summons.—If appear, testify, resides data.' 7604. Enforcement '(a) court.—If worked Tampa Office Orleans Office. address; Florida addresses. active review. advise 'ready nominal only.' Compare Circuit's holding case; 1192 312 1966). Tr. Oral Arg. 9—10. 'Rule 24. 'Intervention Intervention Right. Upon timely permitted action: (2) unless applicant's existing parties.' 'Because specifying followed invoking jurisdiction, Procedure apply *. filing hearing. 'However, concedes officer. among affected claims. reason why 81. 'Applicability Proceedings Applicable. documents accordance agency statute otherwise 'Furthermore, summmons intervene.' 513. Wild 362 206, 209 1966); McGarry Riley, 421, 424 502, (1966); 210 Sanford 358 685, 686 Hayes, 408 932, 936 (CA7), 396 835, 94, (1969); Giordano, F.id 564, 568 1037, 1355, 648 Chikata, 427 385, 1970); DeGrosa, 926, 928 (CA3), Zudick , 394 973, 1465, 753 285 Erdner, 422 836 Michigan Bell Tel 415 1284, 1286 Howfield, 409 694, 697 Ruggeiro, 425 1069, 1070 1970), petition certiorari Kyriaco 448, O.T.1970. 208—209; 210; Roundtree, 845, 851 (Mass.1953). 7801. Authority Powers duties Secretary.—Except law, title performed supervision Treasury.' 1969, 2,080 undertaken divisions. ly 1,049, approximately half, resulted 1,031 recommended some $20,000,000 deficiencies penalties earmarked collection civilly. 1969 Annual Report 28—31. Though results, final prosecute until admits 'as allegation indication conduct.' Indeed 'enforces developing thereof Functions 1118.6, 2454. An exception privileged summoned, attorney-client.

Category: 11