U.S. v. First State Bank, No. 81-1495

CourtUnited States Courts of Appeals. United States Court of Appeals (7th Circuit)
Writing for the CourtBefore SWYGERT, Senior Circuit Judge, ESCHBACH, Circuit Judge, and DOYLE; SWYGERT; JAMES E. DOYLE
Citation691 F.2d 332
Decision Date10 November 1982
Docket NumberNo. 81-1495
Parties82-2 USTC P 9627 UNITED STATES of America and Robert C. Rowe, Special Agent, Internal Revenue Service, Petitioners-Appellees, v. FIRST STATE BANK and Christ Troupis, Respondents, and E. H. Stamberger, Intervenor-Appellant.

Page 332

691 F.2d 332
82-2 USTC P 9627
UNITED STATES of America and Robert C. Rowe, Special Agent,
Internal Revenue Service, Petitioners-Appellees,
v.
FIRST STATE BANK and Christ Troupis, Respondents,
and
E. H. Stamberger, Intervenor-Appellant.
No. 81-1495.
United States Court of Appeals,
Seventh Circuit.
Argued Jan. 20, 1982.
Decided Oct. 12, 1982.
Rehearing and Rehearing En Banc Denied Nov. 10, 1982.

Page 333

Clinton A. Krislov, Chicago, Ill., for intervenor-appellant.

Gayle P. Miller, Tax Div., Dept. of Justice, Washington, D. C., for petitioners-appellees.

Before SWYGERT, Senior Circuit Judge, ESCHBACH, Circuit Judge, and DOYLE, Senior District Judge. *

SWYGERT, Senior Circuit Judge.

The facts pertinent to this appeal may be summarized as follows. In January 1978, the Internal Revenue Service ("IRS") commenced an investigation of E. H. Stamberger's tax liabilities for the years 1975 and 1976. The investigation involved agents of both the Examination Division (civil division) and the Criminal Investigation Division of the IRS. The investigation was assigned to Revenue Agent Terrence Catalina and Special Agent William Bruton. In November 1979 Bruton was replaced by Special Agent Robert Rowe. In March 1980 Catalina was replaced by Revenue Agent Louis Van De Voorde.

Between October 1978 and August 1979 the IRS issued twenty-one summonses to various individuals or institutions regarding Stamberger's tax returns for 1975 and 1976. Stamberger received notice for only six of these summonses. In November 1979 Rowe issued the two summonses involved in this

Page 334

appeal. The first summons was issued to the First State Bank of Mendota, Illinois and its president, R. N. Shaffer, and the second was issued to Christ Troupis, Stamberger's personal attorney. Pursuant to section 7609 of the Internal Revenue Code, Stamberger caused the bank and Troupis to refuse to comply with the summonses.

In May 1980 the IRS instituted proceedings to compel enforcement of the two summonses. Stamberger intervened pursuant to section 7609(b)(1) of the Code. Stamberger's answer opposing enforcement alleged that: (1) the investigation concerning his civil tax liability for 1975 and 1976 had already been completed by the IRS and the summonses had been issued pursuant to an improper criminal investigation purpose; (2) the IRS had already possessed the information from the bank; (3) the documents held by Troupis were personal papers protected by the privilege against self-incrimination (personal papers privilege) and the attorney-client privilege; and (4) the summonses were issued pursuant to a second examination in violation of section 7605(b) of the Code.

In addition to opposing enforcement of the order, Stamberger requested discovery from the IRS. Stamberger served interrogatories upon the IRS and sought production of his entire IRS file. At this point, the case was referred to a United States magistrate. The magistrate ordered the IRS to answer the interrogatories but denied Stamberger's motion to compel production of the IRS file.

In October 1980 an evidentiary hearing was held before the magistrate. Rowe and Van De Voorde testified for the IRS. In addition to testifying on his own behalf, Stamberger called Troupis and Bruton. During the hearing, Stamberger attempted to introduce evidence showing that the documents held by Troupis were protected by the attorney-client and personal papers privileges. The magistrate refused to allow this testimony. The magistrate also refused to allow Stamberger to question the IRS agents concerning the twenty-one summonses which were issued between October 1978 and August 1979.

Following the hearing, the magistrate issued his findings of fact and recommendations. The magistrate specifically found that the investigation had not been completed, that there were both civil and criminal reasons for the issuance of the summonses, and that the summonses were properly issued in all other respects. He accordingly recommended that the summonses be enforced.

Upon de novo review, the district court adopted the magistrate's recommendations. Stamberger appeals from the final order of the district court. He has raised five issues on appeal:

(1) Stamberger was erroneously denied the right to prove at the enforcement hearing that the documents held by Troupis were protected by privilege;

(2) Stamberger was erroneously denied the opportunity at the enforcement hearing to inquire into the twenty-one summonses issued between October 1978 and August 1979;

(3) Based on the evidence produced at the enforcement hearing, the district court should have refused enforcement or, alternatively, permitted additional discovery by Stamberger;

(4) The district court erred in failing to award Stamberger the costs of subpoenaing Special Agent Bruton to testify at the enforcement hearing; and

(5) The district court erred in failing to award Stamberger the costs of contesting the Government's motion to disqualify Stamberger's counsel.

Only Stamberger's first argument has precedential value and will be discussed in this opinion. The other four issues fall squarely into previous holdings of this court and will be disposed of by unpublished order issued this date.

A summons may be challenged at an enforcement hearing on any appropriate ground, United States v. Powell, 379 U.S. 48, 58, 85 S.Ct. 248, 255, 13 L.Ed.2d 112 (1964), including a claim of privilege. Indeed, the enforcement hearing is the most

Page 335

appropriate opportunity to challenge a summons. Subsequent challenges can only be undertaken by refusing to comply with an enforcement order and running the risk of contempt proceedings. Allowing the introduction of evidence at the enforcement hearing is therefore in the interest of judicial economy and fairness to the taxpayer. The right to introduce evidence, however, is not unlimited. We held in United States v. Kis, 658 F.2d 526, 539 (7th Cir. 1981), that once the IRS establishes a prima facie case in favor of enforcing a summons, a taxpayer must "... answer the Government's case through responsive pleadings, supported by affidavits, that allege specific facts in rebuttal." (Emphasis in text.) Legal conclusions or memoranda of law will not suffice.

The requirement that a taxpayer allege specific facts is an important one. It not only allows the district court to determine whether a hearing is necessary, 1 but it serves to sharpen the focus of inquiry where a hearing is mandated. A precise answer containing specific facts also assists the trier of fact in making evidentiary rulings, such as relevancy, during the course of the hearing. This too is in the interest of judicial economy (summons enforcement proceedings were intended to be summary in nature and concluded without undue delay). In the instant case, Stamberger failed as a threshold matter to place the question of privilege at issue. 2

Stamberger did not allege specific facts in his answer which would establish the existence of a privilege. Stamberger simply stated that the documents sought were protected by privilege. 3 A blanket privilege claim of this type is not allowed by Kis. See also United States v. Davis, 636 F.2d 1028, 1044 n.20 (5th Cir. 1981). The "specific facts" requirement of Kis mandates that the privilege must be asserted on a document-by-document basis. A taxpayer need not reveal so many facts that the privilege becomes worthless but he must at least identify the...

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13 practice notes
  • Baylson v. Disciplinary Bd. of Supreme Court of Pa., Civ. A. No. 89-5264.
    • United States
    • United States District Courts. 3th Circuit. United States District Court (Eastern District of Pennsylvania)
    • 22 Abril 1991
    ...Hastings v. Godbold, 477 U.S. 904, 106 S.Ct. 3273, 91 L.Ed.2d 563 (1986); Klein, 776 F.2d at 634-35; United States v. First State Bank, 691 F.2d 332, 335 (7th Cir.1982). "Otherwise, a court would be forced to attempt to determine the existence, application, and scope of an asserted privileg......
  • U.S. v. Bernhoft, Case No. 08-C-0515.
    • United States
    • United States District Courts. 7th Circuit. United States District Court of Eastern District of Wisconsin
    • 28 Octubre 2009
    ...v. White, 950 F.2d 426, 430 (7th Cir.1991); United States v. Lawless, 709 F.2d 485, 487 (7th Cir.1983); United States v. First State Bank, 691 F.2d 332, 335 (7th A taxpayer does not need to reveal too many details regarding each document so as to render the privilege moot. First State Bank,......
  • U.S. v. Rockwell Intern., No. 88-3852
    • United States
    • U.S. Court of Appeals — Third Circuit
    • 12 Marzo 1990
    ...privilege must be asserted document by document, rather than as a single, blanket assertion. See United States v. First State Bank, 691 F.2d 332, 335 (7th Cir.1982); El Paso, 682 F.2d at 541. It is clear that Rockwell did not do this in the district court. However, it may well be that the h......
  • Hanse v. United States, Case No. 17-cv-4573
    • United States
    • United States District Courts. 7th Circuit. United States District Court (Northern District of Illinois)
    • 5 Marzo 2018
    ...assertion of privilege is insufficient to challenge the validity of the IRS summons to Sherman. See United States v. First State Bank, 691 F.2d 332, 335 (7th Cir. 1982) (rejecting blanket privilege challenge to IRS summons); see also In re Grand Jury Proceedings, 220 F.3d 568, 571 (7th Cir.......
  • Request a trial to view additional results
13 cases
  • Baylson v. Disciplinary Bd. of Supreme Court of Pa., Civ. A. No. 89-5264.
    • United States
    • United States District Courts. 3th Circuit. United States District Court (Eastern District of Pennsylvania)
    • 22 Abril 1991
    ...Hastings v. Godbold, 477 U.S. 904, 106 S.Ct. 3273, 91 L.Ed.2d 563 (1986); Klein, 776 F.2d at 634-35; United States v. First State Bank, 691 F.2d 332, 335 (7th Cir.1982). "Otherwise, a court would be forced to attempt to determine the existence, application, and scope of an asserted privileg......
  • U.S. v. Bernhoft, Case No. 08-C-0515.
    • United States
    • United States District Courts. 7th Circuit. United States District Court of Eastern District of Wisconsin
    • 28 Octubre 2009
    ...v. White, 950 F.2d 426, 430 (7th Cir.1991); United States v. Lawless, 709 F.2d 485, 487 (7th Cir.1983); United States v. First State Bank, 691 F.2d 332, 335 (7th A taxpayer does not need to reveal too many details regarding each document so as to render the privilege moot. First State Bank,......
  • U.S. v. Rockwell Intern., No. 88-3852
    • United States
    • U.S. Court of Appeals — Third Circuit
    • 12 Marzo 1990
    ...privilege must be asserted document by document, rather than as a single, blanket assertion. See United States v. First State Bank, 691 F.2d 332, 335 (7th Cir.1982); El Paso, 682 F.2d at 541. It is clear that Rockwell did not do this in the district court. However, it may well be that the h......
  • Hanse v. United States, Case No. 17-cv-4573
    • United States
    • United States District Courts. 7th Circuit. United States District Court (Northern District of Illinois)
    • 5 Marzo 2018
    ...assertion of privilege is insufficient to challenge the validity of the IRS summons to Sherman. See United States v. First State Bank, 691 F.2d 332, 335 (7th Cir. 1982) (rejecting blanket privilege challenge to IRS summons); see also In re Grand Jury Proceedings, 220 F.3d 568, 571 (7th Cir.......
  • Request a trial to view additional results

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