Bouschor v. United States

• Decision Date: 20 May 1963
• Docket Number: No. 16976.,16976.
• Citation: 316 F.2d 451
• Parties: Royal G. BOUSCHOR, Appellant, v. UNITED STATES of America, Appellee.
• Court: U.S. Court of Appeals — Eighth Circuit

316 F.2d 451 (1963)

Royal G. BOUSCHOR, Appellant, v. UNITED STATES of America, Appellee.

No. 16976.

United States Court of Appeals Eighth Circuit.

April 22, 1963.

Rehearing Denied May 20, 1963.

Joseph B. Johnson of Reavill, Jenswold, Neimeyer and Johnson, Duluth, Minn., and Patrick J. McNulty, Duluth, Minn., made argument for appellant and filed brief.

Burton Berkley, Atty., Dept. of Justice, Washington, D. C., made argument for the United States and Louis F. Oberdorfer, Asst. Atty. Gen., Washington, D. C., and Meyer Rothwacks, Joseph M. Howard and Burton Berkley, Attys. Dept. of Justice, Washington, D. C., and Miles W. Lord, U. S. Atty., Minneapolis, Minn., and Patrick J. Foley, Asst. U. S. Atty., Minneapolis, Minn., on the brief.

Before SANBORN and BLACKMUN, Circuit Judges, and REGISTER, District Judge.

BLACKMUN, Circuit Judge.

The district court has denied the petition of Royal G. Bouschor for an order (a) discharging an earlier ex parte order which granted the government's application for the enforcement of an Internal Revenue Service summons served upon Bouschor and (b) quashing that summons. 200 F.Supp. 541. Bouschor has appealed.

The appellant is a Duluth lawyer. For over twenty years he has represented the taxpayer A. G. O'Brien, proprietor of a plumbing and heating company. Until the present case developed, however, he had done no tax work for this client. N. A. Stillman, a certified public accountant of Duluth in partnership with Oscar Oase, was employed by O'Brien in 1955 "principally for the purpose of taking care of his federal and state income tax matters". Stillman prepared O'Brien's federal and state returns for the taxable-calendar years 1955-1959 inclusive. In so doing Stillman reviewed O'Brien's books and records and prepared work sheets.

The chronology is pertinent:

a. Internal Revenue Agent Kaufer audited O'Brien's income tax returns for 1953-1955 inclusive. He conferred with the taxpayer in December 1955 and examined some canceled checks and bank statements. He also saw Stillman and reviewed the work papers on several occasions. He did not otherwise probe beyond the work papers themselves. As a result of the Kaufer audit tax deficiencies and penalties were assessed for 1953 and 1954. These were paid. The adjustment for 1954 resulted in an over-assessment for 1955 and a refund.

b. Internal Revenue Agent Falconer audited the O'Brien returns for 1956-1959 inclusive. He discussed these with the taxpayer but saw no files or records. He also discussed the returns several times with Stillman and Oase and they even gave him an office in which to work. He reviewed the work papers for those years and saw these papers on three or four occasions. He also saw withholding and employment tax records, checked the social security breakdown and saw the check register for at least some of the years. He proposed no deficiency for 1956 but did propose one for 1957. It was paid. He did not complete his audit for 1958 and 1959 because, while he was still working on it in November 1960, the file was transferred to the Intelligence Division which concerns itself with situations of suspected fraud.

c. In the fall of 1960 O'Brien consulted Bouschor concerning his federal income tax matters. Bouschor in turn consulted Stillman and Oase.

d. On December 5, 1960, Bouschor wrote these accountants stating that the taxpayer had instructed him to ask them to send him all O'Brien papers and records. O'Brien also had instructed the accountants to this effect. Stillman and Oase promptly complied with the request and delivered to Bouschor the documents they possessed and the work papers they had prepared. These have been in Bouschor's possession continuously since that time except for one occasion in early 1961 when Oase had them for a day or two as he was preparing O'Brien's 1960 returns, and except for their being in the possession of Bouschor's own attorneys. Oase looked at these papers a number of times in Bouschor's office.

e. Special Agent Kosowski conducted the continuing audit by the Intelligence Division. In February 1961 he conferred with Oase and asked for the work papers. Oase told him they had been turned over to Bouschor, that he did not know if he would get them back, and that if he did he would furnish them.

f. In June 1961 Kosowski served on the appellant Bouschor a summons to produce all work papers and other material which he had received from Oase or Stillman relating to O'Brien's federal income tax liability for 1954 through 1959. This was stated to be pursuant to the authority of § 7602 of the Internal Revenue Code of 1954, 26 U.S.C.A. § 7602. Bouschor appeared in response to that summons and was accompanied by Oase and by attorneys representing O'Brien and Bouschor. He had the papers with him but stated that he was not going to comply with the request in the summons because the papers were privileged, because they had already been examined, because it would violate the Fifth Amendment's privilege against self-incrimination on the part of O'Brien, and because it would violate the Fourth Amendment's guaranty against unreasonable searches and seizures.

g. This action was then instituted. The United States attorney filed an application for the enforcement of the summons and the district court issued its ex parte order commanding Bouschor to comply. Before the return date Bouschor filed his petition to discharge that order and to quash the summons. A hearing followed. Bouschor's petition was denied and he was directed to produce the materials specified in the earlier ex parte order.

The district court found, p. 542 of 200 F.Supp., that the documents in question were records of the taxpayer of the kind required by § 6001 of the 1954 Code.¹ It held that their examination was authorized under § 7602; that this authority to examine was not violative of either the Fourth or the Fifth Amendments; that the taxpayer could be lawfully compelled to surrender records for examination; and that their transfer to his attorney did not give rise to the attorney-client privilege.

1. Three government's concessions. We are met at the outset with certain concessions on the part of the government. The first is that the "summons in question was intended to obtain nothing from him Bouschor except the work papers, etc., prepared by the accountants, Stillman & Oase" and that it "did not direct appellant to produce the personal records of the taxpayer, O'Brien, which the accountants turned over to appellant". The second is "that Section 6001 does not apply to the work papers of an accountant who prepares a taxpayer's return, and that the reason upon which the District Court based its order of enforcement is incorrect". The third is that the record establishes "rightful indefinite possession" of the work papers in Bouschor. These concessions obviously tend to simplify the issues.

2. The finality of the district court's order. We are also met at the outset with the government's claim that the order from which the appeal is taken "is probably interlocutory and non-appealable" under 28 U.S.C. § 1291. Because this suggestion goes to jurisdiction, it must be disposed of first.

The government's argument here is that we are concerned with "a contempt proceeding ab initio" ; that this is indicated by the language of § 7604(b) of the 1954 Code which authorizes application to a district judge "for an attachment * * * as for a contempt"; that punishment is authorized by the statute for "contempt of the summons itself, rather than contempt of any subsequent court order" ; that this differentiation is justified by the legislative history, particularly as it has to do with the enactment of § 7604(b)'s original predecessor which was part of § 14 of the Revenue Act of June 30, 1864, 13 Stat. 226, and with the amendment of that section by § 9 of the Act of July 13, 1866, 14 Stat. 101, and as that history is disclosed in 65 Congressional Globe, 2440-41 and 2660-61, and in 66 Congressional Globe 2997; that if the enforcement of an Internal Revenue summons under § 7604(b) is no more than a step in a single contempt proceeding, the only final and appealable order is the one which imposes punishment; that an order which merely compels compliance is interlocutory and not appealable; and that a rule of non-appealability is consistent with the need for speed in the assessment and collection of federal taxes.

Whether the order is final and hence appealable depends, it seems, on whether it corresponds with the type of order held appealable in Ellis v. I.C.C., 1915, 237 U.S. 434, 35 S.Ct. 645, 59 L.Ed. 1036, or with that kind held not to be final in Alexander v. United States, 1906, 201 U.S. 117, 26 S.Ct. 356, 50 L.Ed. 686, and Cobbledick v. United States, 1940, 309 U.S. 323, 60 S.Ct. 540, 84 L.Ed. 783.

This question of appealability has been presented to this court at least twice in the past although the formal opinions do not disclose that the legislative history was urged here in support of the government's position. Over thirty years ago, in Brownson v. United States, 8 Cir., 1929, 32 F.2d 844, the court itself raised the question of jurisdiction. The district court had ordered a Western Union superintendent to appear before a revenue agent and produce records showing a taxpayer's receipt of telegraphed funds. This court said, p. 846 of 32 F.2d, "That such an order is appealable we think is established", and cited Ellis and other cases in support of that statement. In Sale v. United States, 8 Cir., 1956, 228 F.2d 682, cert. denied 350 U.S. 1006, 76 S.Ct. 650, 100 L.Ed. 868, the district court had ordered an attorney to appear before a revenue agent and produce work papers prepared by an accountant for taxpayer-clients of the lawyer. We said, p. 683 of 228 F.2d, "It would seem that the order appealed from is a final order and that an appeal lies".

All other courts of appeals which have touched upon the question appear, with one...