Smith v. Katzenbach

Decision Date27 August 1965
Docket NumberNo. 19230.,19230.
Citation351 F.2d 810,122 US App. DC 113
PartiesJohn SMITH, Jr., et al., Appellants, v. Nicholas deB. KATZENBACH et al., Appellees.
CourtU.S. Court of Appeals — District of Columbia Circuit

Mr. Paul R. Connolly, Washington, D. C., with whom Messrs. Seymour S. Mintz and Robert H. Kapp, Washington, D. C., were on the brief, for appellants.

Mr. Richard B. Buhrman, Atty., Dept. of Justice, with whom Messrs. David C. Acheson, U. S. Atty., John B. Jones, Jr., Lee A. Jackson and Joseph M. Howard, Attys., Dept. of Justice, were on the brief, for appellees. Louis F. Oberdorfer, Asst. Atty. Gen., and Mr. Frank Q. Nebeker, Asst. U. S. Atty., also entered appearances for appellees.

Before FAHY, BURGER and LEVENTHAL, Circuit Judges.

Petition for Rehearing En Banc Denied October 26, 1965.

LEVENTHAL, Circuit Judge.

This is an appeal by taxpayers charging that agents of the Internal Revenue Service used unconstitutional means to obtain information and seeking equitable relief to prohibit the retention or use of such information by Government officials determining whether his case should be presented to a grand jury. The District Court dismissed for lack of jurisdiction, on the ground that the action is an unconsented suit against the United States, and alternatively for want of equity. The facts are taken as presented in the complaint, amplified by the affidavit attached thereto.

It appears that during a period of about ten weeks, beginning September 17, 1962, books and records of appellants, Smith, a resident of Leaksville, North Carolina, and his wholly-owned company, John Smith & Sons, Inc., also located there, were examined by Revenue Agent Carter, accompanied at times by an associate, in the course of an audit. Shortly before February 5, 1963, Carter made an appointment to resume the examination at Smith's office, but on the appointed date he was accompanied by Special Agents Walker and Brown. Although the special agents were apparently identified as such,1 Smith was unaware that they had responsibilities different from those of ordinary revenue agents, i. e., that they had responsibility "for the development of evidence for recommendations pertaining to the criminal features of the case." Smith was interviewed alone in his relatively small office. Special Agent Walker, a skilled interrogator in the field of criminal tax evasion, did most of the questioning. No stenographer was present at the interview, but Brown took notes, not now being made available to appellants.

After the interrogation had been under way for some time, and appellant Smith had supplied full information to the questions asked, including the amount of cash on hand at various times and the fact that he had a locked box in his office and a safety deposit box in the bank,2 Special Agent Walker said in substance: "You know what your rights are, don't you?" Smith replied, "No, I don't. What do you mean?" Walker responded, "Oh, you know you don't have to answer those questions." Smith said, "No, I didn't know that. I may have already answered some questions I didn't want to answer." Walker continued without interruption to interrogate Smith. At about this time Smith asked Carter, "What is this all about?" Carter replied, "Oh, these men are just here to get information about your tax situation." The investigation continued and Smith continued to cooperate.

In fact, states the complaint, Smith did not know his rights and Walker said nothing more to enlighten him. Specifically, Smith did not know he and his company were undergoing a criminal tax fraud investigation, that anything he stated and data made available might be used against appellants, or that they were entitled to counsel.

Following the questioning, appellant Smith permitted the revenue agents to inspect and inventory both the contents of the small metal box he kept in his office and the contents of his safety deposit box at the bank. The inspection and inventory were concluded at 2:00 p. m. Smith was furnished with a copy of each inventory. No original papers appear to have been taken from either of the boxes at that time.

Information gleaned from these sources and answers to questions propounded on that date are alleged to be damaging to appellants, particularly in that they may assist the Government in its proof in a criminal prosecution based on the net worth method.

Appellant Smith allowed further examination of books and records during later visits between February 6 and 19. On request he allowed the agents to take to their office on February 6 and 19, many books and records, some belonging to Smith and others to his company, for which they gave a receipt. On February 21, 1963, Smith retained counsel in connection with this matter. Thereafter, on March 18 and 20, the agents returned and were given additional books and records against receipt. By letter dated April 23, 1963, W. J. Bookholt, Regional Commissioner, requested another appointment for re-examination of Smith's books and papers "in order to properly verify your return."

The gravamen of the complaint is that the three revenue agents, and unknown others working in participation with them, by the acts set forth and by recommending prosecution of appellants, have violated the constitutional rights of both appellants to counsel under the Sixth Amendment and appellant Smith's right to refrain from incriminating himself under the Fifth Amendment. The recommendations of the Internal Revenue Service that appellants be prosecuted under Section 7201 of the Internal Revenue Code of 1954, and perhaps other sections, are under consideration in the Department of Justice, and appellees, defendants below, are the cognizant officials in the Department.3 Appellees do not recognize appellants' claims of unconstitutionality. The action seeks to prevent appellees from making any use of the evidence acquired in violation of constitutional rights4 — either by considering such evidence as the basis for a criminal prosecution of appellants; permitting such evidence to be presented to any court or grand jury; disclosing such evidence to others or using such evidence to guide any further investigation.

The contention that the court lacks jurisdiction because this is an action brought against the United States without its consent invokes the doctrine of sovereign immunity and the sub-doctrine prohibiting the maintenance of actions whose essential nature and effect are such as to make plain that the judgment sought would "interfere with the public administration." Land v. Dollar, 330 U.S. 731, 738, 67 S.Ct. 1009, 91 L.Ed. 1209 (1947). Restraining the Attorney General from enforcing the criminal laws, a duty with which he is expressly charged, see 28 U.S.C. § 507, is said to be a manifest interference with public administration, cf. Kennedy v. Rabinowitz, 115 U.S.App.D.C. 210, 212, 318 F.2d 181, 183 (1963).

There are some gasps of vitality left in this fading doctrine of sovereign immunity — notably in cases involving Government property. Malone v. Bowdoin, 369 U.S. 643, 82 S.Ct. 980, 8 L.Ed. 2d 168 (1962). But it is lifeless when offered as a defense barring examination of a plea that action threatened by an executive official transcends constitutional limitations. It is the American doctrine that a suit against an official threatening to act unconstitutionally stands in theory as a suit against him personally and individually even though the action he takes or threatens is of the kind which only a Government official can take. His action is deemed the action of the Government in form, but not in substance. Larson v. Domestic & Foreign Commerce Corp., 337 U.S. 682, 690, 702, 69 S.Ct. 1457, 93 L.Ed. 1628 (1949). This approach sustaining jurisdiction is applicable to a suit brought against an attorney-general, and is available not only in the familiar situation of threatened enforcement of an unconstitutional statute, but also where an individual action is challenged on constitutional grounds. Joint Anti-Fascist Refugee Committee v. McGrath, 341 U.S. 123, 71 S.Ct. 624, 95 L.Ed. 817 (1951).

The Government's invocation of sovereign immunity, notwithstanding the intrenched exception for constitutional cases, rests on the argument that appellants' constitutional contentions are frivolous. The doctrine whereby a court denies jurisdiction to entertain a suit upon the basis of a consideration of its merits seems to be an accepted feature of this field of law, Larson v. Domestic & Foreign Commerce Corp., supra, 337 U.S. at 690, 69 S.Ct. 1457, though one rooted in paradox, see Bell v. Hood, 327 U.S. 678, 682-683, 66 S.Ct. 773, 90 L.Ed. 939 (1946).

We find it unnecessary, however, to discuss the merits of appellants' contentions, even for the limited purpose of deciding whether those contentions are substantial enough to support jurisdiction in the District Court, for assuming that they are we are of the view that the complaint should be dismissed, without determination of the merits, for lack of equity jurisdiction.

Want of equity jurisdiction, while not jurisdictional in the sense of the power of the court to decide the case, is a principle of sufficient moment that it is properly raised even on the court's own motion, and has particular importance when the court is being asked in effect to take action in anticipation of a criminal proceeding in another forum. Douglas v. City of Jeannette, 319 U.S. 157, 162, 63 S.Ct. 877, 87 L.Ed. 1324 (1943).

The District Court's perspective was unduly foreshortened by its focussing on the issue whether appellants have an adequate remedy at law by motion under Rule 41(e) of the Federal Rules of Criminal Procedure in the United States District Court for the Middle District of North Carolina.

Appellants challenge the adequacy of that remedy, saying that there is uncertainty...

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