Campbell v. Eastland
| Decision Date | 23 July 1962 |
| Docket Number | No. 19057.,19057. |
| Citation | 307 F.2d 478 |
| Parties | Ellis CAMPBELL, Jr., District Director of Internal Revenue, Appellant, v. J. M. EASTLAND and Montez Eastland, Appellees. |
| Court | U.S. Court of Appeals — Fifth Circuit |
COPYRIGHT MATERIAL OMITTED
Louis F. Oberdorfer, Asst. Atty. Gen., Lee A. Jackson, Atty., Dept. of Justice, Washington, D. C., Joe Tunnell, U. S. Atty., Tyler, Tex., Meyer Rothwacks, Myron C. Baum, Harold C. Wilkenfeld, Attys., Dept. of Justice, Washington, D. C., Wm. Wayne Justice, U. S. Atty., Lloyd W. Perkins, Asst. U. S. Atty., for appellant.
Allen E. Pye, E. Taylor Moore, Tyler, Tex., for appellees.
Before BROWN, WISDOM, and BELL, Circuit Judges.
This civil action for a tax refund is tied in a tight knot with a criminal prosecution for fraud.1 With patience some formidable knots may be untangled. A famous one was cut. Here, the trial judge attempted to cut away the criminal strand. We think that it would have been better to have waited and then patiently untangled the knot.
The controversy swirls around discovery. The plaintiffs moved to require the District Director of Internal Revenue to produce reports of agents who had investigated the plaintiffs for tax fraud. The reports were in the United States Attorney's criminal files. No assessment for deficiencies had been made. The Director asked for a stay of the motion in order to allow the criminal case to be disposed of first. He contended that the reports were privileged; that the motion for discovery was a cover-up to allow the taxpayers to inspect criminal files for information not available to them before the trial of the criminal case and then available only under the strict rules of criminal procedure and the "Jencks" Act, 18 U.S.C.A. § 3500. The trial judge held that the civil action was independent of any criminal action. He granted the taxpayer's motion, struck the defendant's answer and, without hearing any evidence in support of the complaint, gave judgment for the amount of the refund claimed, plus interest and costs. Rule 34, F.R. Civ.P., 28 U.S.C.A., allows discovery of documents only by court order "upon motion of any party showing good cause therefor". Our decision turns on the facts bearing on good cause. We reverse and remand.
The nature of the case requires a detailed review of the facts and proceedings below.
J. M. Eastland2 operates a chain of five and ten cent stores in Texas and Oklahoma. He and his wife filed a joint tax return for 1957 in which they declared an operating loss exceeding their income for that year. The loss would result in eliminating their tax liability for 1955, if the loss were carried back to that year under the loss carry-back provisions of Section 172 of the Internal Revenue Code of 1954, 26 U.S. C.A. § 172. March 29, 1958, the Eastlands filed a claim for refund of all of the income taxes originally paid for 1955. April 1, 1959, an Internal Revenue Agent commenced an examination of the taxpayer's books and records for the purpose of determining the correct income tax liability for the years 1955 and 1957. Two weeks later, two Special Agents began an investigation of the tax results. An investigation by Special Agents is a well-known storm warning to the taxpayer that he is being investigated for tax fraud. January 25, 1960, the agents completed an investigation of the taxpayer for alleged evasion of income taxes. They recommended that criminal proceedings be brought for tax evasion for the years 1955, 1956, and 1957. The District Director forwarded the files to the Department of Justice and, after a reasonable time, the Department concluded that the taxpayer should be indicted for wilful attempt to evade his income tax as reflected by the following amounts:
Taxes
Attempted
Taxes Taxes To Be
Year Reported Corrected Evaded
1955 $3,192.24 $21,487.51 $18,295.27
1956 7,746.93 22,894.95 15,148.02
1957 0 4,347.97 4,347.97
June 20, 1960, the Department of Justice forwarded the case to the United States Attorney for the Eastern District of Texas and instructed him to institute criminal proceedings against the taxpayer.
About the middle of June 1960 the taxpayer's attorney, Mr. Allen Pye, got in touch with Mr. Paul Brown, then United States Attorney for the Eastern District of Texas, and inquired if the Eastland file was "in the office for consideration for criminal prosecution". At that time the file had not been returned from the Department of Justice. Later, in the hearing on the motion for discovery, Mr. Brown testified that Mr. Pye "asked that when it was received and before the matter was presented to the Grand Jury, in the event we decided to present it to the Grand Jury, that he be given an opportunity to discuss the matter with me, and indicated at that time that there might be a plea of guilty", although Mr. Pye made no firm commitment as to such a plea. After the file came into the office June 27, 1960, Mr. Pye had two or three telephone conversations with the United States Attorney as to when the case would be presented to the grand jury. December 16 Mr. Brown and his successor, Mr. Tunnell, had a conversation with Mr. E. T. Moore, another of the taxpayer's attorneys, in the course of which Mr. Brown called Mr. Pye, and informed him that the case was being prepared for submission to the grand jury January 3, 1961, in Beaumont. He made an appointment with the taxpayer's attorneys for the following day. At this conference, the two United States Attorneys "anticipated that the discussion would be about a plea of guilty". The taxpayer's attorney, however, said that "he was firmly convinced of Eastland's innocence" and felt that "if the United States Attorneys would go into the file more thoroughly" they would agree. Mr. Tunnell, the incoming United States Attorney, then agreed to "defer presenting it to the Grand Jury so that he could do just what Mr. Moore had asked him to do".
December 5, 1960, the Eastlands instituted an action in the Northern District of Texas for the tax refund claimed for 1955. Mr. Brown testified at the hearing on the discovery motion that notwithstanding this recent filing — just ten days before Mr. Moore's conference with the United States Attorneys for the Eastern District — Mr. Moore did not "at that time or any time, mention the fact that the taxpayer had filed a civil action". Mr. Tunnell also testified that there was no conversation relative to a civil action. In response to repeated questions from Mr. Moore, he said: "We were talking about whether this case was going to be submitted to a grand jury or not * * * I was not aware of your connection or anybody's else's connection with any civil action in this case." Mr. Tunnell, as the new United States Attorney, agreed to give the case the study suggested and to make an independent judgment on it. This would require deferring presentation of the case to the grand jury until it met again in March. This testimony underscores the fact that the taxpayer's attorneys in their dealings with the United States Attorney's office were interested only in the criminal case then about to be submitted to the grand jury. At the hearing Mr. Moore contradicted the testimony of the two United States Attorneys. He stated that at the outset of his conference he "told them that he had filed a civil action; that settling the civil liability was highly important."
The District Director filed his answer in the civil suit January 31, 1961, denying that a refund was due. He neither counterclaimed nor pleaded any affirmative defense. The answer contains no reference to any deficiency. The taxpayer had not paid any deficiency; the tax deficiency had not even been assessed.
February 13, 1961, the taxpayer filed a motion under Rule 34 for discovery. There was no pre-trial conference; the case was months and months distant from trial. The taxpayer asked for production of the following documents:
The affidavit attached to the motion to produce asserted that the several taxable years were interrelated, because an adjustment in one year might affect the tax liability for every year at issue.
February 21, 1961, the District Director filed an answer stating:
"That said files and documents in the custody of the United States Attorney for the Eastern District of Texas in connection with a criminal proceeding are privileged except as they might be ordered produced under the holding of Jencks v. U. S., 353 U.S. 657, 77 S.Ct. 1007, 1 L.Ed. 2d 1103 or Title 18, U.S.C., Section 3500, relating to production of documents in criminal cases."
The answer pointed out that the case, having been recently filed, "is not set for trial, and in the normal sequence of events would not be reached for trial for several months". In addition, the Director asserted:
"Tax refund suits such as this case are handled by attorneys from the Department of Justice, and since the filing of this motion on February 14, 1961, said attorneys have not had time to prepare an answer to said motion on the merits, or to come to Dallas for a hearing on the merits."
Accordingly, the defendant prayed for a stay of proceedings pending disposition of the criminal case.
The motion was filed in the District Court for the Northern District of Texas. That court transferred the action to the Eastern District of Texas.
March 21, 1961, a hearing was held on the taxpayer's motion to produce. We have previously...
To continue reading
Request your trial
-
Keese v. United States
...plaintiff establishes her "claim or right to relief by evidence satisfactory to the court." Fed.R.Civ.P. 55(e). See Campbell v. Eastland, 307 F.2d 478, 491-92 (5th Cir.1962), (discussing the public interest protected by and the liberal construction of Rule 55(e)), cert. denied, 371 U.S. 955......
-
Clay v. United States
...therefore, be sensitive to the rules of discovery, which are far more restrictive governing criminal discovery. Campbell v. Eastland, 5 Cir., 1962, 307 F.2d 478, 487. Application for relief under Rule 16, Federal Rules of Criminal Procedure, is a matter within the sound discretion of the Co......
-
Kennedy v. State
...v. One 1964 Cadillac Coupe DeVille, 41 F.R.D. 352 (S.D.N.Y.1966); United States v. Steffes, 35 F.R.D. 24 (D.Mont.1964); Campbell v. Eastland, 307 F.2d 478 (5th Cir.1962), cert. denied, 371 U.S. 955, 83 S.Ct. 502, 9 L.Ed.2d 502 (1963). Under Rule 26(c) of the West Virginia Rules of Civil Pro......
-
Kurio v. United States
...of discovery." United States v. Proctor & Gamble Co., 356 U.S. 677, 681, 78 S.Ct. 983, 986, 2 L.Ed.2d 1077 (1958); Campbell v. Eastland, 307 F.2d 478, 485 (5th Cir. 1962), cert. denied, 371 U.S. 955, 83 S.Ct. 502, 9 L.Ed.2d 502 (1963). The Government therefore had no right to ignore plainti......
-
Criminal Enforcement of Air Pollution Control Laws
...grand jury itself was investigated for violating Rule 6(e). 189. Landis v. North American Co., 299 U.S. 248 (1936); Campbell v. Eastland, 307 F.2d 478 (5th Cir. 1962). See also Elizabeth M. Ojala, Legal Issues Arising in Parallel Proceedings , Nat’l Envtl. Enfor. J., Apr. 1996, at 3. 190. E......
-
Fighting the battle against health care fraud: federal enforcement actions.
...a pending criminal case in ruling on motions to stay discovery in related civil proceedings. In the leading case of Campbell v. Eastland, 307 F. 2d 478 (5th Cir. 1962), the Fifth Circuit recognized that criminal prosecutions often must take priority over the rights of litigants in civil cas......