DI Operating Company v. United States

• Decision Date: 22 August 1963
• Docket Number: No. 17859.,17859.
• Citation: 321 F.2d 586
• Parties: D. I. OPERATING COMPANY, Appellant, v. UNITED STATES of America, Appellee.
• Court: U.S. Court of Appeals — Ninth Circuit

321 F.2d 586 (1963)

D. I. OPERATING COMPANY, Appellant, v. UNITED STATES of America, Appellee.

No. 17859.

United States Court of Appeals Ninth Circuit.

August 22, 1963.

Morse & Graves, and J. A. Donnelley, Las Vegas, Nev., for appellant.

Louis F. Oberdorfer, Asst. Atty. Gen., Lee A. Jackson, Joseph M. Howard, Burton Berkley, Meyer Rothwacks, Attys., Dept. of Justice, Washington, D. C.; and John W. Bonner, U. S. Atty., Las Vegas, Nev., for appellee.

Before MAGRUDER, JERTBERG and BROWNING, Circuit Judges.

JERTBERG, Circuit Judge.

Before us is an appeal from an order of the District Court denying the appellant's motion to quash an Internal Revenue summons, and granting the government's petition directing compliance therewith.

An Internal Revenue summons directed to Allard Roen, secretary of the D. I. Operating Company, hereinafter referred to as appellant, was served upon Mr. Roen on September 28, 1961. The summons was entitled "In the Matter of the tax liability of D. I. Operating Co., Wilbur Clark's Desert Inn," and was for the fiscal years ending November 30, 1956, November 30, 1957, November 30, 1958, November 30, 1959 and November 30, 1960. The summons issued under the provisions of 26 U.S.C. § 7602, and directed Mr. Roen to appear before the revenue agent at a fixed time and place to give testimony relating to the tax liability of appellant for the period set forth above, and to produce certain books and records hereinafter described.

Under date of October 9, 1961, Mr. Roen directed a letter to the revenue agent stating that certain of the requested documents would be available for inspection, but declining to produce the other requested documents for various reasons stated in the letter. On October 19, 1961, the cause was commenced by the filing of a petition, setting forth, inter alia, the above recited facts and concluding:

"Wherefore, petitioner prays that this Court order the D. I. Operating Company, its officers, agents and employees to forthwith comply with the summons served upon them September 18 (sic), 1961."

The petition was supported by an affidavit of the revenue agent.

The appellant timely answered the petition and moved to quash the summons. The answer and motion to quash was supported by an affidavit of Mr. Roen.

On December 28, 1961, the District Court denied the motion to quash the summons, and ordered the appellant "shall have to and including the 31st day of January, 1962, to comply with the terms and conditions of the summons." Subsequently the order was amended to extend the time for compliance.

On oral argument of the cause before this Court, counsel for the government suggested a probable lack of jurisdiction of this Court to entertain an appeal for the reason that the order appealed from was not a final decision under 28 U.S.C. §§ 1291. Decision by this Court was deferred pending the order or opinion of the Supreme Court of the United States in Davis, Trustee, v. Soja, Internal Revenue Agent, C.G., 371 U.S. 810, 83 S.Ct. 45, 9 L.Ed.2d 53, reported below Application of Davis, 303 F.2d 601 (7th Cir. 1962). Certiorari was granted in that case to resolve a conflict in the circuits on the question of appealability of an order of the type before us in this case. The instant cause was resubmitted to this Court for decision following per curiam opinion by the Supreme Court in the Davis case filed June 17, 1963 vacating the judgment of the Court of Appeals for the Seventh Circuit and remanding the case to the District Court with directions to dismiss the complaint as moot.

We will first consider whether the order appealed from is a final decision under 28 U.S.C. § 1291.

A distinction is everywhere recognized between orders denying motions to quash subpoenas issued in aid of administrative proceedings, and orders of similar import with respect to subpoenas issued out of court proceedings unrelated to any administrative proceedings. The former are appealable, the latter are not. This distinction is pointed out in Ellis v. Interstate Commerce Commission, 237 U.S. 434, 35 S.Ct. 645, 59 L.Ed. 1036 (1915) wherein the Supreme Court held appealable an order compelling compliance with a subpoena issued by the Interstate Commerce Commission. In that case, Mr. Justice Holmes stated, at page 442, 35 S.Ct. at page 646:

"There is no doubt that this appeal lies. The order is not like one made to a witness before an examiner or on the stand in the course of a proceeding inter alios in court. Alexander v. United States, 201 U.S. 117 50 L.Ed. 686, 26 Sup.Ct.Rep. 356. It is the end of a proceeding begun against the witness."

The distinction mentioned in Ellis was elaborated upon in Cobbledick v. United States, 309 U.S. 323, 60 S.Ct. 540, 84 L.Ed. 783 (1939), which held that an order compelling compliance with a grand jury subpoena was not final and therefore not appealable. At page 330, 60 S. Ct. at page 543, the court stated:

"The doctrine of finality is a phase of the distribution of authority within the judicial hierarchy. But a proceeding like that under § 12 of the Interstate Commerce Act may be deemed self-contained, so far as the judiciary is concerned — as much so as an independent suit in equity in which appeal will lie from an injunction without the necessity of waiting for disobedience. After the court has ordered a recusant witness to testify before the Commission, there remains nothing for it to do. Not only is this true with respect to the particular witness whose testimony is sought; there is not, as in the case of a grand jury or trial, any further judicial inquiry which would be halted were the offending witness permitted to appeal. The proceeding before the district court is not ancillary to any judicial proceeding. So far as the court is concerned, it is complete in itself."

Several circuits faced with the question before us have observed the foregoing distinction and concluded that an order compelling compliance with a summons issued pursuant to 26 U.S.C. § 7602 (or the equivalent provision in the 1939 Code) is a final decision and appealable. Brownson v. United States, 32 F.2d 844 (8th Cir. 1929); Falsone v. United States, 205 F.2d 734 (5th Cir. 1953); In re Albert Lindley Lee Memorial Hospital, 209 F.2d 122 (2nd Cir. 1953); O'Connor v. O'Connell, 253 F.2d 365 (1st Cir. 1958); Bouschor v. United States, 316 F.2d 451 (8th Cir. 1963). Compare Application of Colton, 291 F.2d 487 (2nd Cir. 1961) proceeding initiated by witness by filing of motion to vacate I.R.S. summons. In several cases appealability seems to have been assumed sub silentio, notably, First National Bank of Mobile v. United States, 267 U.S. 576, 45 S.Ct. 231, 69 L.Ed. 796 (1925), and Local 174, International Brotherhood of Teamsters v. United States, 240 F.2d 387 (9th Cir. 1956).

The seventh circuit has held otherwise. Jarecki v. Whetstone, 192 F.2d 121 (7th Cir. 1951); Application of Davis, supra. The circuit court held in those cases that the proceeding of the lower court which culminated in the order appealed from was one for contempt of the administrative summons. Applying the familiar appealability standard in proceedings for contempt of court orders, the seventh circuit concluded that finality would not attach until sentence for contempt had been imposed. This rationale is grounded upon the nature of the specific statutory provision involved in those cases. 26 U. S.C. § 7604(b).¹ In the Davis case, the court acknowledged the line of cases holding orders such as here involved to be appealable, but submitted that those cases

"have failed to recognize the distinction between a contempt proceeding initiated pursuant to § 7604 — which is not terminated by the order directing compliance — and other types of statutory enforcement procedures in which the enforcement order is the end of the proceeding, complete in itself, and the order, if not obeyed, the basis for a contempt adjudication in a separate proceeding." 303 F.2d at 602.

We feel that determination of the finality of the order before us now can best be made by examining the order itself and the actual proceedings below upon which it is predicated. The government petitioned for an order compelling compliance with the summons. The government was granted just that, and in so many words. The government did not petition for "an attachment as for contempt," as contemplated by the language of § 7604(b). The government did petition for such a writ in both of the seventh circuit cases.

Even if a proceeding pursuant to § 7604(b) is to be characterized as one for contempt, as the government urges, it does not appear that the government instituted such a proceeding. Its petition quotes the provisions of § 7604(a), § 7604(b) and § 7402(b). Sections 7604 (a) and 7402(b) both deal with the jurisdiction of district courts. Both sections are identical in substance and form, reading as follows:

"If any person is summoned under the internal revenue laws to appear, to testify, or to produce books, papers, or other data, the district court of the United States for the district in which such person resides or may be found shall have jurisdiction by appropriate process to compel such attendance, testimony, or production of books, papers, or

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