Guenther v. C.I.R.
| Decision Date | 23 July 1991 |
| Docket Number | No. 88-7244,88-7244 |
| Citation | 939 F.2d 758 |
| Parties | -5252, 91-2 USTC P 50,369 Kenneth W. GUENTHER and Marva Guenther, Petitioners-Appellants, v. COMMISSIONER OF INTERNAL REVENUE, Respondent-Appellee. |
| Court | U.S. Court of Appeals — Ninth Circuit |
Glenn R. Kuykendall, Hanna, Murphy, Jensen & Holloway, Portland, Or., for petitioners-appellants.
Patricia M. Bowen, Tax Div., U.S. Dept. of Justice, Washington, D.C., for respondent-appellee.
Appeal from the United States Tax Court.
Before ALARCON, BRUNETTI and O'SCANNLAIN, Circuit Judges.
We must decide whether ex parte submission of a memorandum by Commissioner's counsel prior to trial in the tax court sufficiently prejudiced the trial judge's disposition of the case to entitle taxpayers to a new trial before a different judge.
Taxpayers Kenneth and Marva Guenther, then married, filed joint federal income tax returns for 1978 and 1979. The Internal Revenue Service audited the returns, uncovered alleged errors, and issued a notice of deficiency. The Guenthers filed a petition with the United States Tax Court seeking redetermination. Their matter was scheduled for trial in Portland on the week of June 10, 1986, before (now Chief) Judge Arthur L. Nims III.
On March 13, 1986, the tax court's clerk issued a letter to the parties for the June 10 Portland trial session which included the following instructions:
(4) If oral testimony is to be presented by either party, a Trial Memorandum is to be mailed or delivered to Judge Nims ... by each party in sufficient time to reach him at least 10 days before the call of the Calendar and, except for good cause shown, exchanged by the parties. This Trial Memorandum should concisely state:
(a) the issues to be submitted to the Court;
(b) the name of each witness and a summary of his expected testimony;
(c) a brief synopsis of the applicable legal principles and principal authorities relied on; and
(d) the nature of any significant evidence problem on which a ruling will be required.
Pursuant to this letter, each party prepared a trial memorandum and mailed it to Judge Nims on May 30, 1986. Only the Guenthers, however, forwarded a copy of their memorandum to opposing counsel. The Commissioner did not provide the Guenthers with its memorandum, apparently for two reasons:
(1) Commissioner's counsel understood the tax court's practice and procedure not to require the exchange of trial memoranda prior to trial in civil fraud cases, and (2) that the "good cause" referenced in the clerk's letter existed here because of the possibility that the disclosure of the government's tactics and strategy might permit the Guenthers to change their story or otherwise manipulate the situation.
The Guenthers moved for disclosure of the Commissioner's Trial Memorandum on June 6, 1986. Immediately before the two-day trial began on June 12, 1986, the motion was denied.
On July 29, 1986, long after trial, the Commissioner's attorney provided the Guenthers with a copy of the Trial Memorandum. The Guenthers thereafter filed a motion for an evidentiary hearing on the Commissioner's ex parte allegations of fact and for sanctions if the Commissioner could not prove those allegations. The motion was denied on September 2, 1986.
Shortly before denying the motion, Judge Nims issued a decision on the merits in favor of the Commissioner. The findings of deficiency and civil fraud penalties imposed by the Internal Revenue Service were sustained. The thirty-eight page decision, dated August 31, 1986, did not mention the ex parte Trial Memorandum.
The Guenthers appealed to this court, both on the merits and with regard to the ex parte communication. Expressing concerns about the due process implications of the ex parte contact, we remanded the matter to the tax court with instructions to hold an evidentiary hearing and to make written findings concerning the content and purpose of the ex parte memorandum. See Guenther v. Commissioner, 889 F.2d 882 (9th Cir.1989) (ordering temporary remand).
In response to our order of remand, Judge Nims held an evidentiary hearing and forwarded findings with respect to the issues delineated in our remand order, see id. at 885. 1 Our task now is to discern whether the Guenthers were unfairly prejudiced by Judge Nims's receipt and review of the ex parte communication from the Commissioner. See id. at 884-85.
The ex parte communication in this case, as it turns out, was a thirty-two page document setting forth the Commissioner's entire view of the case. Fully twelve "issues" are listed, ranging from such minor items as whether the Guenthers failed to report $110 in 1979 interest income to such weighty questions as whether miscellaneous deductions from one year should be reduced by $51,493 and whether the Guenthers are subject to the civil fraud addition to their taxes, see I.R.C. Sec. 6653(b).
Some of the matters discussed in the Trial Memorandum are purely procedural, such as which party should present its evidence first, or whether non-party witnesses should be excluded from the courtroom. Other topics are clearly substantive. Throughout the discussion are allegations of misconduct by the Guenthers in the course of discovery, criticisms of anticipated testimony by the Guenthers, and requests that the trial memoranda not be exchanged and that the record be left open for thirty days (ironically, because "traditional notions of fair play and substantial justice apply equally to both parties"). The "facts" of the case are set out in an exquisitely intricate and partisan manner. Finally, there is a discussion of the legal consequences flowing from the asserted facts, including the Guenthers' liability for civil fraud. 2
When the Guenthers appeared for trial before Judge Nims on June 12, 1986, they had not seen nor (obviously) had the opportunity to respond to a number of allegations made against them ex parte, including that they might present fabricated evidence at trial and would change their story, that they had withheld evidence from the Commissioner and had not complied with discovery rules, and that their daughter (a material witness) would not honor a subpoena and would not be moved by a contempt citation. Although long after trial (and shortly before the court issued its decision) they were able to obtain a copy of the Trial Memorandum and then filed affidavits rebutting some of these charges, it cannot be seriously averred that they had an adequate opportunity to respond to the allegations.
In Guenther, we explained that the due process clause of the fifth amendment mandated neutrality in civil proceedings, both in reality and in appearance. See 889 F.2d at 884. If the Guenthers were unfairly prejudiced, these rights were infringed. See id. Only in light of a "compelling justification" would ex parte communications be tolerated. See id. (citing United States v. Thompson, 827 F.2d 1254, 1258-59 (9th Cir.1987)).
Before the remand, we were unable to assess any prejudice to the Guenthers, largely because we had not been provided with a copy of the ex parte communication. See id. We noted that the Commissioner's Trial Memorandum had been depicted as describing substantive, as opposed to procedural, areas of the case, which would increase the likelihood of prejudice. Id. at 884-85 (distinguishing United States v. Skulsky, 786 F.2d 558 (3d Cir.1986)).
We now conclude that the Guenthers were indeed prejudiced by the communication. The allegations raised were serious, going both to the merits of the case and to the Guenthers' character generally. And, as we have just indicated, ...
To continue reading
Request your trial
-
Haleakala v. Bd. of Land
...and the hearing reopened to allow the opposing party to respond to the contents of the ex parte communications); Guenther v. Comm'r., 939 F.2d 758, 760–61 (9th Cir. 1991) (reasoning that due process under the Fifth Amendment is violated when ex parte communications result in unfair prejudic......
-
U.S. v. Alisal Water Corp.
...or marginalized in this process. Accordingly, we do not see how the Appellants' due process rights were denied. See Guenther v. Comm'r, 939 F.2d 758, 760 (9th Cir.1991) (explaining that a party's due process rights would be infringed if they were "unfairly prejudiced" by ex parte Although t......
-
U.S. v. Alisal Water Corp.
...or marginalized in this process. Accordingly, we do not see how the Appellants' due process rights were denied. See Guenther v. Comm'r, 939 F.2d 758, 760 (9th Cir.1991) (explaining that a party's due process rights would be infringed if they were "unfairly prejudiced" by ex parte Although t......
-
Alexander Shokai, Inc. v. C.I.R.
...(1992). We have held that ex parte communications will be tolerated only in light of a "compelling justification." Guenther v. Commissioner, 939 F.2d 758, 760 (9th Cir.1991). To determine whether Taxpayers' due process rights were violated, we must determine whether Taxpayers were "unfairly......
-
Watching the Hen House: Judicial Rulemaking and Judicial Review
...to present their objections." Mullane v. Cent. Hanover Bank and Trust Co., 339 U.S. 306, 314 (1950). 183. Cf.Guenther v. Comm'r, 939 F.2d 758, 760 (9th Cir. 1991) (explaining that a party's due process rights would be infringed if they were "unfairly prejudiced" by ex parte 184. The core fu......