U.S. v. Greenleaf

• Decision Date: 28 January 1977
• Docket Number: No. 75-2194,75-2194
• Citation: 546 F.2d 123
• Parties: 77-1 USTC P 9168 UNITED STATES of America and Lawrence Plave, Special Agent of the Internal Revenue Service, Plaintiffs-Appellees, v. John W. GREENLEAF, Jr., Defendant-Appellant, John J. Santell, Jr., et al., Movants-Appellants.
• Court: U.S. Court of Appeals — Fifth Circuit

Page 123

546 F.2d 123

77-1 USTC P 9168

UNITED STATES of America and Lawrence Plave, Special Agent

of the Internal Revenue Service, Plaintiffs-Appellees, v. John W. GREENLEAF, Jr., Defendant-Appellant, John J. Santell, Jr., et al., Movants-Appellants.

No. 75-2194.

United States Court of Appeals,

Fifth Circuit.

Jan. 28, 1977.

Richard B. Wallace, Miami, Fla., Richard J. Trattner, Mark D. Pastor, Beverly Hills, Cal., for John J. Santell et al.

Robert J. Paterno, Miami, Fla., for John W. Greenleaf, Jr.

Robert W. Rust, U. S. Atty., Miami, Fla., Scott P. Crampton, Asst. Atty. Gen., Tax Div., U. S. Dept. of Justice, Gilbert E. Andrews, Acting Chief, Appellate Section, Meyer Rothwacks, George G. Wolf, Dept. of Justice, Washington, D. C., for plaintiffs-appellees.

Appeal from the United States District Court for the Southern District of Florida.

Before MORGAN and GEE, Circuit Judges, and HUNTER, ^* District Judge.

GEE, Circuit Judge:

Greenleaf, et al., appeal the order of the Florida federal district court enforcing an Internal Revenue Service summons that required Greenleaf, as custodian of the partnership records of Greenleaf/Telesca, to turn over partnership records, and denying motions to intervene by appellants Telesca and Santell. Appellants argue (1) that the summons violates the fourth amendment rights of the co-partners; (2) that the fifth amendment privilege against self-incrimination applies to protect against disclosure of the partnership records; (3) that the summons is overbroad and seeks irrelevant and immaterial items; and (4) that Santell and Telesca were entitled to intervene in the proceedings below to protect their personal ownership and contractual interests in the summoned records and writings.

The IRS is investigating the tax years 1969-72 of taxpayer John Santell, a former partner (1967-70) in the Florida architectural and engineering partnership of Greenleaf/Telesca. The IRS issued a summons to Greenleaf as custodian of the partnership records to produce material related to its investigation of Santell. ¹

When Greenleaf refused to produce the records, the IRS brought an action to enforce the summons by petitioning the district court under 26 U.S.C. §§ 7402(b) ² and 7604(a) ³ on behalf of the United States and IRS Special Agent Lawrence Plave. The petition named Greenleaf as respondent and prayed for an order requiring Greenleaf to comply with the summons. Greenleaf answered, and appellants Santell and Telesca filed motions to intervene. After a hearing at which Plave and Greenleaf testified, the district court granted the enforcement order with minor modifications. ⁴ Greenleaf, et al., bring this appeal.

In urging his fourth amendment claim, Greenleaf argues on behalf of Greenleaf/Telesca that the partnership possesses a right of shared privacy or a legitimate expectation of privacy that, under the fourth amendment, entirely insulates it from the IRS summons. See In re Subpoena Duces Tecum, 81 F.Supp. 418, 420-21 (N.D.Cal.1948). Accepting such a view would be according partnerships broader fourth amendment rights than are possessed by individuals. In United States v. Powell, 379 U.S. 48, 85 S.Ct. 248, 13 L.Ed.2d 112 (1964), the Supreme Court held that an individual taxpayer's right to privacy will not defeat an IRS summons if (1) the summons is issued for a proper purpose; (2) the inquiry is relevant to the purpose; (3) the Commissioner does not already possess the information; and (4) the requisite administrative steps are followed. United States v. Powell, supra at 58, 85 S.Ct. 248. See United States v. Rountree, 420 F.2d 845, 849 (5th Cir. 1969). See also United States v. Sun First National Bank, 510 F.2d 1107, 1160 (5th Cir. 1975). If the Powell formula satisfies the requirements of the fourth amendment for an individual, then aged, questionable ⁵ and distinguishable ⁶ holdings of a district court under the fourth amendment will not avail against the combined effect of Powell and the self-evident maxim that a stream cannot rise above its source, the partner's individual rights.

Even a summons issued in compliance with the fourth amendment cannot, however, force Greenleaf to produce the matter if he has a valid fifth amendment claim, i. e., if the summons compels Greenleaf to incriminate himself. ⁷ Nevertheless, Greenleaf's attempt to protect, by means of the fifth amendment, the partnership's papers in his possession fails in light of Bellis v. United States, 417 U.S. 85, 94 S.Ct. 2179, 40 L.Ed.2d 678 (1974), in which the Supreme Court held, consistent with the principle that collective entities have no fifth amendment rights, see United States v. White, 322 U.S. 694, 64 S.Ct. 1248, 88 L.Ed. 1542 (1944), that where a partnership has "an established institutional identity independent of its individual partners," 417 U.S. at 95, 94 S.Ct. at 2187, and the custodial partner "is holding the subpoenaed partnership records in a representative capacity," 417 U.S. at 97, 94 S.Ct. at 2187, the privilege against self-incrimination is no bar to the compelled production. In so holding, the Court recognized that the personal privilege of the custodian of the records (because artificial organizations have no fifth amendment privileges) should not bar production of the financial records of the organization if it is an independent entity such that "the records demanded are the records of the organization rather than those of the individual." 417 U.S. at 92-93, 94 S.Ct. at 2185. The facts in this case establish that the Greenleaf/Telesca partnership is an organized entity apart from its members.

Greenleaf/Telesca was formed in 1964 and has engaged in the general practice of architecture and engineering under that name since then. Originally, the partners were John W. Greenleaf, Jr., B. A. McAdams and Francis E. Telesca. In 1967, John J. Santell, Jr. joined the firm as a partner, and in 1969, McAdams withdrew from the partnership. On December 31, 1970, Santell's withdrawal from the partnership became effective. Subsequent to 1970, Greenleaf and Telesca have continued as partners under the firm name Greenleaf/Telesca. Greenleaf/Telesca occupies three floors of an office building and employs 40-60 persons. It has a bank account in the firm name, owns real property in the firm name, uses stationery with the firm name in the letterhead. Greenleaf describes the partnership as "a $2,000,000-a-year business." These facts, coupled with the firm's written partnership agreement imposing a certain organizational structure on the firm, establishes that:

This was not an informal association or a temporary arrangement for the undertaking of a few projects of short-lived duration. Rather, the partnership represented a formal institutional arrangement organized for the continuing conduct of the firm's . . . practice.

Bellis v. United States, 417 U.S. 85, 95, 94 S.Ct. 2179, 2187, 40 L.Ed.2d 678 (1974). Further, because Florida law both at the time in question and now grants partners a right of access to partnership records, ⁸ Greenleaf "lacks the control over their content and location and the right to keep them from the view of others which would be characteristic of a claim of privacy and confidentiality." 417 U.S. at 92, 94 S.Ct. at 2185. Because Greenleaf does not (and cannot) claim that the partnership records are his individual property, not subject to the access of others, Bellis controls. ⁹ See also Fisher v. United States, 425 U.S. 391, 408, 96 S.Ct. 1569, 1579, 48 L.Ed.2d 39, 54 (1976) ("neither a partnership nor the individual partners are shielded from compelled production of partnership records on self-incrimination grounds").

Greenleaf also seeks the shelter of the "small family partnership" and "other pre-existing relationships of confidentiality" exceptions to the Bellis rule. 417 U.S. at 101, 94 S.Ct. at 2189. Greenleaf/Telesca does not qualify as the type of small family partnership protected in United States v. Slutsky, 352 F.Supp. 1105 (S.D.N.Y.1972), the case cited by the Supreme Court as an example of this exception. In Slutsky, two brothers formed a partnership and ran a country club with a significant number of employees and a large payroll. The partners were intimately involved with the operation of the business, so much so that the district court was convinced that the partnership records were the purely private and personal records of the partner-brothers. The district court did not see the partnership as an impersonal entity independent of the partners. In contrast, Greenleaf/Telesca is not a family partnership; none of the partners are related. Further, its membership has changed twice without affecting the business entity. Although Greenleaf states that he is primarily responsible for the engineering services and Telesca is primarily responsible for the architectural services, the partnership employs other engineers and architects who also contribute substantially to the output of the firm. Despite Greenleaf's close management of the finances of the company, the contributions of other professionals to the output of the firm suggests an effort and a continuity exceeding that of a personal partnership built largely upon the efforts of the two partners.

Nor had the partners in Greenleaf/Telesca any pre-existing relationships of confidentiality that might protect against a summons. The partnership agreement requiring confidentiality does not create the type of confidentiality referred to in Bellis i. e., a confidentiality that traditionally creates a testimonial privilege, such as the confidentiality created by the attorney/client relationship. See Fisher v. United States, 425 U.S. 391, 96 S.Ct. 1569, 48 L.Ed.2d 39, 51 (1976). Because Bellis controls and Greenleaf/Telesca does not fit any of the Bellis exceptions, the district court correctly concluded that the fifth amendment does not bar enforcement of the IRS summons.

Greenleaf's argument that the summons is overbroad and...