Gannet v. First Nat. State Bank of New Jersey, s. 75-2362 and 76-1234
Decision Date | 27 December 1976 |
Docket Number | Nos. 75-2362 and 76-1234,s. 75-2362 and 76-1234 |
Citation | 546 F.2d 1072 |
Parties | 77-1 USTC P 9126, 1 Fed. R. Evid. Serv. 537 Herbert M. GANNET, Appellant, v. FIRST NATIONAL STATE BANK OF NEW JERSEY. UNITED STATES of America and Carl E. Reichelt, Special Agent of Internal Revenue Service, v. FIRST NATIONAL STATE BANK, Herbert M. GANNET, Intervenor in D. C., Appellant. |
Court | U.S. Court of Appeals — Third Circuit |
Before BIGGS, VAN DUSEN and ROSENN, Circuit Judges.
This is an appeal by intervenor Herbert M. Gannet from a district court enforcement order 1 directing the First National State Bank of New Jersey to comply with an Internal Revenue Service summons requesting the identity of the purchaser of two cashier's checks, and the sources of the funds used to purchase those checks. 2 The question presented here is whether the attorney-client privilege protects this information from disclosure, since the cashier's checks were deposited in an attorney's trust account to facilitate anonymous transmission to the IRS in payment of a tax deficiency of an unknown taxpayer. We hold that it does not.
Since the facts of this case have been set forth in detail in United States v. First National State Bank of New Jersey, 540 F.2d 619, No. 76-1261 (3d Cir., 1976), 3 we need not restate them here, and proceed directly to consideration of the issues raised on this appeal.
The instant case is similar to that of Schulze v. Rayunec, 350 F.2d 666 (7th Cir. 1965). There, Boughner, a tax attorney, was retained to represent a taxpayer who wished to remain anonymous, and delivered a cashier's check for $215,499.95 to the Internal Revenue Service without disclosing the taxpayer's identity. As in this case, when the IRS received the check, a special agent attempted to summon from the issuing bank information calculated to reveal the purchaser's identity. Upon the bank's refusal to comply, the IRS petitioned the district court for enforcement of the summons, and the attorney intervened. Boughner sought to invoke the attorney-client privilege, claiming that the bank had acted as his agent, and that he had forwarded the check in the course of offering confidential legal services to a client.
The court held that bank records pertaining to the cashier's check which the intervenor transmitted to the IRS were not "clothed with the attorney-client privilege." Id. 4
This result is supported by subsequent developments in the law. The Bank Secrecy Act of 1970 (Act), 12 U.S.C. § 1829b, 5 requires that all federally insured banks maintain records of bank account transactions. The rationale, as § 1829b(a)(2) expressly recognizes, is the usefulness of such records in "criminal, tax, or regulatory investigations or proceedings."
416 U.S. at 48-49, 94 S.Ct. at 1511.
Last term, the Supreme Court upheld the constitutionality of the disclosure of information recorded by banks under the Act in United States v. Miller, 425 U.S. 435, 96 S.Ct. 1619, 48 L.Ed.2d 71 (1976). Miller urged that he had a Fourth Amendment interest in the records kept by banks, as copies of personal records made available to the banks for a limited purpose. However, the Supreme Court, after considering the standards enunciated in Katz v. United States, 389 U.S. 347, 353, 88 S.Ct. 507, 19 L.Ed.2d 576 (1967), and Couch v. United States, 409 U.S. 322, 335, 93 S.Ct. 611, 34 L.Ed.2d 548 (1973), found no legitimate expectation of privacy in the contents of records maintained by the banks under the mandate of the Act, using this language at 442 of 425 U.S., at 1624 of 96 S.Ct.:
The intervenor, Gannet would distinguish this case on the basis that state law 6 suggests that records in any way derived from an attorney's trust account are protected by the attorney-client privilege. The support for this view is a state requirement that attorneys maintain trust accounts in which to hold separate clients' funds.
However, as Gannet has stated correctly in his brief in United States v. First National State Bank of New Jersey, Herbert M. Gannet, Intervenor-Appellant (No. 76-1261), supra at 8, which he incorporated in his brief filed in these appeals and "made a part hereof by reference" (page 7) 7
The Conference Committee Notes to Federal Rule of Evidence 501 (House Report No. 93-1597 on P.L. 53-595) state:
Since this action is a "nondiversity jurisdiction civil case," we conclude that the New Jersey Supreme Court Rule 1:21-6 is inapplicable. In our estimation, federal law provides no basis for a finding that the attorney-client privilege applies here.
We find further support for our view in the Bank Secrecy Act of 1970, which indicates a strong congressional interest in making records of bank transactions available for use in criminal, tax, and regulatory investigations and proceedings. No mention is made in that statute of any exceptions to either compilation or dissemination of the information recorded and maintained. As noted above, the Supreme Court, in California Bankers Ass'n and Miller held the Act constitutional, finding that information voluntarily disclosed carries no legitimate expectation of privacy. In the instant case, there is no suggestion that the information sought to be protected was disclosed other than voluntarily.
We hold that the attorney-client privilege is not applicable to bank records merely because they derive from transactions involving an attorney's trust account. To hold otherwise would be to deny effect to the congressional purpose in enacting this legislation by allowing attorneys the discretion to insulate certain transactions from investigation by employing their trust accounts. Such a course would contradict both case law and statute.
We have considered the other issue 8 raised by the intervenor-defendant, whether the Internal Revenue Service summons was issued in bad faith and constitutes an...
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