Court Opinion

ID: 9470691
Source: CourtListenerOpinion
Date Created: 2023-08-05 03:13:14.925592+00
Date Added: 2024-06-11T17:42:03.214920
License: Public Domain

MERRITT, Circuit Judge,
dissenting.
The principles of res judicata and collateral estoppel and the subsidiary doctrines of claim preclusion and issue preclusion, see generally Restatement of Judgments (Second) (1982) reflect a judicial purpose to “relieve parties of the cost and vexation of multiple lawsuits, conserve judicial resources, and, by preventing inconsistent decisions, encourage reliance on adjudication.” Allen v. McCurry, 449 U.S. 90, 94, 101 S.Ct. 411, 414, 66 L.Ed.2d 308 (1980). These are sound policy objectives, but before deciding whether to give preclusive effect to a prior criminal judgment, we should consider any countervailing factors that might outweigh the salutary effects of a broad preclusion rule.
The Court holds for the first time in this Circuit that a taxpayer’s plea of guilty to tax fraud charges precludes him in subsequent civil proceedings from contesting liability for fraud penalties assessed on tax deficiencies for the period associated with those charges. Two federal circuit courts have upheld the application of collateral estoppel against taxpayers who — like the petitioner in the instant case — had pleaded guilty to tax evasion charges under 26 U.S.C. § 7201. See Fontneau v. United States, 654 F.2d 8 (1st Cir.1981); Plunkett v. Commissioner, 465 F.2d 299 (7th Cir. 1972). Gray contends, however, that both of these defendants are distinguishable from his case because, unlike the defendants in Fontneau and Plunkett, he did not understand and was not told that his guilty plea would have collateral consequences in subsequent civil proceedings. The majority implicitly rejects this distinction by observing that this Court has already held that the district judge who took Gray’s plea did not have to advise him of these collateral consequences in order to ensure the plea’s voluntariness. (Ante at p. 245, n. 4.)
Yet, whether Gray’s plea was voluntary as a matter of fifth amendment due process is a very different question from whether he should now be estopped from litigating the issue of the origin of his tax deficiencies under 26 U.S.C. § 6653(b). In Allen v. McCurry, supra, 449 U.S. at 94-95, 101 S.Ct. at 414-415, the Supreme Court reiterated the standards governing the use of collateral estoppel, recognizing that the doctrine may apply “once a court has decided an issue of fact or law necessary to its judgment . .. [but] cannot apply when the party against whom the earlier decision is asserted did not have a ‘full and fair opportunity’ to litigate that issue in the earlier case.” (citing Montana v. United States, 440 U.S. 147, 153, 99 S.Ct. 970, 973, 59 L.Ed.2d 210 (1979); Blonder-Tongue Laboratories, Inc. v. University of Illinois Foundation, 402 U.S. 313, 328-29, 91 S.Ct. 1434, 1442-43, 28 L.Ed.2d 788 (1971). The issue in Gray’s case is thus whether his guilty plea constitutes an adjudication on the fraud question, and, if so, whether the plea procedure afforded him a “full and fair opportunity” to litigate that question.
Although § 85 of the Second Restatement of Judgments specifically provides for the preclusive effect of a criminal judgment in subsequent civil proceedings, a comment following that section notes that this rule “presupposes that the issue in question was actually litigated in the criminal prosecution.” Restatement of Judgments (Second) § 85, Comment b (1982). Thus, the comment concludes that § 85 does not apply to a guilty plea “because the issue has not actually been litigated.” Id. Also espousing this view, Professor Moore states:
A judgment based upon the parties’ consent provides no reasonable basis for inference that the parties litigated, or the court adjudicated, any issue — it indicates the contrary. Since the rationale of collateral estoppel requires litigation and adjudication to make the issues conclusive in subsequent litigation, there is no more basis for applying the doctrine to a conviction by consent than to a civil judgment by consent, and generally this civil judgment does not have collateral estop-pel effect.
*2481B J. Moore, Moore’s Federal Practice ¶ 0.418[1] at 2707-08 (2d ed. 1982). Accord C. Wright, A. Miller, & E. Cooper, Federal Practice and Procedure § 4474, at 760 (1981) (“Conviction upon a plea of guilty does not rest on actual adjudication or determination of any issue. Just as issue preclusion should not rest on civil judgments by consent, stipulation or default, so it should not rest on a plea of guilty.”)
Despite the view of these commentators and the American Law Institute that a guilty plea conviction does not represent an adj.udication of the issues in the case, the majority refuses to distinguish between guilty pleas and jury trial convictions for collateral estoppel purposes. In reaching its decision, the majority observes that “[a] guilty plea is as much a conviction as a conviction following jury trial.” Ante, at 246. While clearly correct as a statement of substantive law, this observation begs the essential question that we confront in this case: as a matter of judicial policy, should the courts give preclusive effect to guilty pleas?
Even assuming arguendo that — contrary to the consensus of the legal commentators discussed above — a guilty plea conviction does constitute a formal adjudication, I do not agree that the plea procedure and its attendant circumstances afforded Gray a “full and fair opportunity” to litigate the fraud issue. Like most criminal defendants, Gray faced a powerful incentive to strike a plea bargain in which he exchanged his right to litigate the government’s charges in return for a relatively lenient sentence. See Bordenkircher v. Hayes, 434 U.S. 357, 98 S.Ct. 663, 54 L.Ed.2d 604 (1978) (permitting prosecutors to reduce guilty pleas by threatening defendants with more serious charges); J. Bond, Plea Bargaining and Guilty Pleas (2d ed. 1982) (describing incentives to plead guilty); Klein, Inducements to Plead Guilty: Frontier Justice Revisited, in P. Wickman and P. Whitter, Readings in Criminology (1978) (describing tactics used by prosecutors to persuade defendants to plead guilty). In the United States, guilty pleas account for approximately 90% of all criminal convictions. U.S. Dep’t of Justice, Nat’l Inst. of Justice, Plea Negotiation (1980).
Widely recognized as an effective device to further the important societal goal of reducing the number of criminal trials on crowded court dockets, see, e.g., Borden-kircher v. Hayes, supra, at 364, 98 S.Ct. at 668 (Supreme Court “has necessarily accepted as constitutionally legitimate the simple reality that the prosecutor’s interest at the bargaining table is to persuade the defendant to forego his right to plead not guilty”); Blackledge v. Allison, 431 U.S. 63, 71, 97 S.Ct. 1621, 1627, 52 L.Ed.2d 136 (1977) (characterizing guilty plea and concomitant plea bargain as “important components of this country’s criminal justice system”); Santobello v. New York, 404 U.S. 257, 261, 92 S.Ct. 495, 498, 30 L.Ed.2d 427 (1971) (disposition of charges after plea discussions considered essential and highly desirable part of the criminal process), plea bargaining fundamentally alters the strategy that a defendant would otherwise pursue in responding to criminal charges. Acknowledging this effect, Justice Roger Traynor found that the additional considerations presented by plea bargaining render collateral estop-pel inappropriate in guilty plea settings:
When a plea of guilty has been entered in the prior action, no issues have been “drawn into controversy” by a “full presentation” of the case. It may reflect only a compromise or a belief that paying a fine is more advantageous than litigation. Considerations of fairness to civil litigants and regard for the expeditious administration of criminal justice ... combine to prohibit the application of collateral estoppel against a party who, having pleaded guilty to a criminal charge, seeks for the first time to litigate his cause in a civil action.
Teitelbaum Furs, Inc. v. Dominion Insurance Co., 58 Cal.2d 601, 605-06, 25 Cal.Rptr. 559, 561, 375 P.2d 439, 441 (1962).
The majority’s collateral estoppel rule permits the government to whipsaw tax fraud defendants by first inducing them to enter guilty pleas through attractive plea *249bargain offers and then suing them in civil proceedings where the taxpayers cannot contest their liability. A defendant’s decision whether to plead guilty is often difficult when limited to criminal law considerations. I believe that the appending of civil consequences unfairly complicates the criminal defendant’s position, and that for purposes of plea bargaining, the criminal process should stand alone. As in other settings where the government invites the cooperation of criminal defendants, the furthering of society’s interest in expediting its judicial process should not entitle the government to reap collateral dividends. Cf. Note, Standoff Situations and the Fifth Amendment, 91 Yale L.J. 344 (1981) (desirability of having police negotiate surrenders in hostage situations should not supersede suspects’ fifth amendment rights).
The unfairness that Justice Traynor discusses is compounded by the rule’s asymmetrical orientation. Because of the government’s enhanced burden of proof in criminal eases, acquittal at the criminal stage will not create any estoppel against the government at the civil level. Under the doctrine of mutuality of parties that formerly governed the application of collateral estoppel, “neither party could use a prior judgment as an estoppel against the other unless both parties were bound by the judgment.” Parklane Hosiery v. Shore, 439 U.S. 322, 326-27, 99 S.Ct. 645, 649, 58 L.Ed.2d 552 (1979) (citing Bigelow v. Old Dominion Copper Co., 225 U.S. 111, 127, 32 S.Ct. 641, 642, 56 L.Ed. 1009 (1912). Both parties thus enjoyed equal access to the judgment for collateral estoppel purposes. Although recent federal and state cases display a distinct trend repudiating the mutuality doctrine, Parklane Hosiery Co. v. Shore, supra, 439 U.S. at 326-27, 99 S.Ct. at 649; 1B J. Moore, Moore’s Federal Practice 1412[1] at 1804 (2d ed. 1982) (Supp.), these cases do not discuss the problem of asymmetry resulting from different burdens of proof. On the contrary, they involve purely civil settings, which do not engender the same “settlement” inducements that characterize plea negotiations. This qualitative difference between civil and criminal cases convinces me that the lack of mutuality assumes critical importance in tax fraud cases.
Of course, under the majority’s rule, taxpayers facing criminal charges would appear to have the benefit of collateral estop-pel if they first prevailed against the government in civil proceedings. See Yates v. United States, 354 U.S. 298, 335-36, 77 S.Ct. 1064, 1085, 1 L.Ed.2d 1356 (1957) (adverse findings in civil proceeding may prevent government from relitigating issue in criminal prosecution). However, the government follows a policy which obviates such a turn of events. It simply prosecutes the criminal case first, a policy that ensures the government’s advantageous position regarding collateral estoppel. This observation highlights yet another negative ramification of the majority’s rule. In establishing the procedures governing conventional tax litigation, Congress has decided that the taxpayer who wishes to challenge the Commissioner’s assessment may choose to sue in the Tax Court, the Court of Claims, or a federal district court. See B. Bittker, Federal Taxation of Income, Estates and Gifts ¶ 115-1, at 115-2-115-4 (1981) (discussing various factors that influence taxpayer’s choice of forum in deficiency cases). The majority’s rule effectively eliminates this choice from the arsenal of the taxpayer in Gray’s position, for it transfers the initiative to the government and restricts litigation of tax liability to the district courts conducting the criminal proceedings. Note, Collateral Estoppel in Civil Tax Fraud Cases Subsequent to Criminal Conviction, 64 Mich.L.Rev. 317, 323 (1965).
The benefits likely to accrue from the majority’s position are meager. As noted above, the policy of precluding litigation following judgment embodies the goals of conserving judicial resources, preventing inconsistent decisions, and insulating parties from the harassment of multiple lawsuits. Of these three objectives, only the first is even arguably furthered by this Court’s holding today. But application of collateral estoppel to the fraud issue in civil tax cases will not markedly increase the yield of judicial efficiency. Extending only to the question of liability for tax fraud, this estoppel *250will not establish the precise amount of a taxpayer’s deficiency attributable to the fraud, an issue that the taxpayer will remain free to contest in the civil forum. See Note, Collateral Estoppel in Civil Tax Fraud Cases Subsequent to Criminal Conviction, 64 Mich.L.Rev. 317, 322 (1965).
Finally, this Court need not adopt so drastic a measure in order to protect the government’s right to use guilty pleas in civil cases. Like any judicial admission, a guilty plea would be admissible in court. Federal Rule of Evidence 803(22) specifically establishes the unqualified admissibility of guilty pleas in civil cases.1 I would rely on the solution provided by the Federal Rules of Evidence making the plea admissible on the issue of civil liability, rather than a solution that takes unfair advantage of the taxpayer’s decision to plead guilty, a decision made perhaps only to avoid the risks and uncertainty of a criminal trial and of years of imprisonment, a decision made without knowledge that the taxpayer, after paying his fine, would automatically lose his property as well in a later civil proceeding where he would be barred from litigating the issue of civil liability.

. The same rule also explicitly excludes pleas of nolo contendere from the scope of this exception to the hearsay rule. Such pleas are also not considered admissions, hence the distinction between pleading guilty and pleading nolo contendere. See Restatement of Judgments (Second) § 85, Comment b (1982).