Rodgers v. Hyatt, 81-1283

Decision Date10 January 1983
Docket NumberNo. 81-1283,81-1283
Parties83-1 USTC P 9139 Jimmie D. and Cheryl RODGERS, Plaintiffs, Jim's Water Service, Inc., Plaintiff-Appellee, v. Larry R. HYATT, in his personal capacity and as Chief, Criminal Investigation Division, Office of the District Director, Colorado District, Internal Revenue Service, Department of the Treasury, Defendant-Appellant.
CourtU.S. Court of Appeals — Tenth Circuit

Joseph H. Thibodeau, Denver, Colo., for plaintiffs.

Gayle P. Miller, Atty., Tax Div., Dept. of Justice, Washington, D.C. (John F. Murray, Acting Asst. Atty. Gen., Glenn L. Archer, Jr., Asst. Atty. Gen., Michael L. Paup and Richard W. Perkins, Attys., Tax Div., Dept. of Justice, Washington, D.C., and Joseph F. Dolan, U.S. Atty., Denver, Colo., with her on the briefs), for defendant-appellant.

Before BARRETT, DOYLE and LOGAN, Circuit Judges.

BARRETT, Circuit Judge.

Larry R. Hyatt, defendant below, appeals from a judgment awarding plaintiff-appellee, Jim's Water Service, Inc., whose stock is entirely owned by Jimmie D. Rodgers, $1,000.00 in damages following a jury verdict. Suit was brought by Jim's Water Service, hereafter referred to as Taxpayer, pursuant to I.R.C. Sec. 7217 (West Supp.1981), 1 alleging that Hyatt, an Internal Revenue Service official, made disclosure of Taxpayer's federal tax "return information" in violation of I.R.C. Sec. 6103 (West 1980). 2 A brief recital of the facts will facilitate our review.

On February 5, 1979, a hearing was held in the United States District Court for the District of Wyoming on a petition filed by the United States to enforce an Internal Revenue Service (IRS) summons issued to the First National Bank of Gillette, Wyoming, in connection with income tax liabilities of Jimmie D. Rodgers and Cheryl Rodgers, husband and wife. Hyatt, then serving as Chief, Criminal Investigation Division, Office of the District Director, Colorado District of IRS, was subpoenaed as a witness by Rodgers. Counsel for Rodgers elicited from Hyatt that: IRS was investigating the correctness of income tax due and owing to the United States by the Rodgers for certain years; the IRS suspected that the Rodgers' returns were not correct based upon certain allegations that all of the income received by them had not been reported and tax paid thereon; and that there were allegations, based upon information from the Sheriff's Department in Gillette and the FBI, that Jimmie Rodgers was dealing in stolen oil and was not reporting all income received from the sale of that oil. This testimony was elicited, we repeat, by counsel for Taxpayer. The district court ordered enforcement of the summons. The bank appealed to this court. We affirmed and observed that the IRS investigation of the Rodgers' income tax returns for the years 1975, 1976 and 1977 was instituted in April of 1978 "following receipt of information from the Campbell County, Wyoming Sheriff's Office and the FBI that the taxpayers were allegedly receiving and selling stolen oil and that there was a possibility of unreported income in these activities." United States v. MacKay, 608 F.2d 830, 832 (10th Cir.1979).

The genesis of this lawsuit involves a meeting held on April 5, 1979, in the offices of Amax Coal Company in Gillette, Wyoming, involving Messrs. Jack Lautenschlager and Robert Brackett of Amax, Hyatt and Special IRS Agent Betty Lou Moses. In the course of that meeting Hyatt made reference to the allegations that Jim's Water Service, Inc. was rumored to be involved in stealing oil. Taxpayer alleged that Hyatt had violated the confidentiality provisions of Sec. 6103, supra, by disclosing this "return information". Hyatt admitted that he did make reference to the "rumors and allegations" during the aforesaid meeting, but asserted that such disclosure was properly made pursuant to an IRS investigation of Taxpayer then being conducted.

This action was originally tried to a jury, Honorable Fred M. Winner presiding, in March, 1980. The jury returned a verdict in favor of Hyatt. However, Rodgers' motion for new trial, based upon misconduct of Government (Hyatt's) counsel, was granted. Judge Winner recused upon retrial.

The case was retried before a jury, Honorable Jim R. Carrigan presiding, in January, 1981. It is the jury verdict and judgment of $1,000.00 awarded Jim's Water Service, Inc. against Hyatt and the denial of Hyatt's motion for judgment notwithstanding the verdict upon retrial which is the subject of this appeal.

On appeal, Hyatt contends that the trial court erred in (1) granting Taxpayer's motion for new trial on the ground of misconduct on the part of counsel for Hyatt (at first trial), and (2) refusing to grant judgment for Hyatt, as a matter of law, on the ground that the prior "in court" disclosure of the return information removed the statements made by Hyatt from the confidentiality requirements of Sec. 6103, supra.

I.

Hyatt contends that the trial court (Honorable Fred M. Winner, presiding judge at first trial) abused his discretion in granting Taxpayer's motion for new trial.

In Allied Chemical Corp. v. Daiflon, Inc., 449 U.S. 33, 101 S.Ct. 188, 66 L.Ed.2d 193 (1980) the Supreme Court, speaking of a trial court's authority to grant a new trial pursuant to Fed.R.Civ.P. 59 said, inter alia:

A litigant is free to seek review of the propriety of such an order [grant of new trial] on direct appeal after a final judgment has been entered. Consequently, it cannot be said that the litigant "has no other adequate means to seek the relief he desires." The authority to grant a new trial, moreover, is confided almost entirely to the exercise of discretion on the part of the trial court. Where a matter is committed to discretion, it cannot be said that a litigant's right to a particular result is "clear and indisputable." Will v. Calvert Fire Ins. Co., 437 U.S. 655, 666 [98 S.Ct. 2552, 2559, 57 L.Ed.2d 504] (1978) (plurality opinion).

449 U.S. at p. 36, 101 S.Ct. at p. 191. [Emphasis supplied]. Accord: Thompson v. Kerr-McGee Refining Corp., 660 F.2d 1380 (10th Cir.1981), cert. denied, --- U.S. ----, 102 S.Ct. 1716, 72 L.Ed.2d 137 (1982); Frank v. Bloom, 634 F.2d 1245 (10th Cir.1980); Holmes v. Wack, 464 F.2d 86, 89 (10th Cir.1972) (trial court decision will not be reversed absent a gross abuse of discretion); 11 Wright & Miller, Federal Practice and Procedure: Civil Secs. 2803, 2809 (1973).

The plaintiffs, Rodgers and Jim's Water Service, Inc., filed a motion for judgment notwithstanding the verdict, or, in the alternative, new trial on April 3, 1980, setting forth in detail multiple allegations of prejudice allegedly practiced upon them by counsel for Hyatt, noted by the trial court and repeated following trial court admonitions, i.e., opening statement remarks and trial comments alluding to FBI involvement in supplying information that plaintiffs had allegedly stolen oil, which was not established at trial; that the stolen oil "rumors" reported by Hyatt on April 5, 1979, had been heard by "others" who were not identified and who did not testify; the repeated suggestion or inference that plaintiffs were being investigated for or had been charged with stealing oil, which was not established; persistent conveyance to jury of irrelevant and prejudicial matters drawn from the IRS's criminal investigation file; abuse of pretrial discovery in face of trial court's express orders to provide such material, specifically Secs. 6103 and 7217 material; failure of Hyatt's counsel to submit a pretrial statement as ordered by the trial court. [R., Vol. II, pp. 171-173]. The trial court granted the motion for new trial by order of May 29, 1980, which reads in part The motion asserts many grounds, and I think that several of the assigned reasons have merit. If Department of Justice and Internal Revenue Service lawyers want me to air more of the story as to misconduct, I can and will do so. However, at this time I do not elect to sully the record with details, and suffice it to say that the conduct of government agents and counsel in this case does no credit to the legal profession and it does no credit to some government agents and lawyers involved. There has been obfuscation, delay, defiance of court orders and disregard for canons of professional responsibility.

* * *

* * *

... I think that justice demands a new trial, but I fear that with this expression of displeasure with government counsel, if I try the case again it could create an atmostphere [sic] of prejudice. Therefore, I grant the motion for new trial and I recuse myself.

[R., Vol. II, p. 174].

We have reviewed the trial record. We hold that the trial court did not err in granting plaintiffs' motion for new trial. The record is replete with admonishments by the trial court directed to counsel for Hyatt, many of them repeated, which, in a cumulative perspective, constitute prejudicial trial conduct. Under no circumstance could it be held that the trial court's grant of the new trial was a gross abuse of discretion.

II.

Hyatt contends that the judgment following the jury verdict upon retrial (Honorable Jim R. Carrigan presiding) is erroneous and that the trial court erred by refusing to grant judgment for Hyatt as a matter of law. This contention is advanced on the ground that the prior "in court" [Wyoming enforcement summons proceeding action] disclosure of the "return information" removed the April 5, 1979, statement made by Hyatt at the Amax Coal offices in Gillette, Wyoming, from the confidentiality requirements of Sec. 6103, supra.

Hyatt's primary reliance on the contention that his remarks at the April 5, 1979, meeting were exempt from the confidentiality requirement of Sec. 6103, supra, rests on a line of cases holding that there can be no reasonable expectation of privacy to matters which are of public record. Hyatt's contention [Opening Brief, pp. 19-23] is:

It is well established under the law dealing with actions for invasion of privacy...

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