U.S. v. Osborn

• Decision Date: 30 September 1977
• Docket Number: 76-1764,Nos. 76-1705,s. 76-1705
• Citation: 561 F.2d 1334
• Parties: 77-2 USTC P 9733 United States of America and Russell K. Ward, Special Agent, Internal Revenue Service, Petitioners-Appellants, Cross-Appellees v. Harvey J. Osborn, Respondent-Appellee Cross-Appellant, Ben Johnson, Sam Linder and National Inventory Control Systems, Intervenors-Appellees, Cross-Appellants
• Court: U.S. Court of Appeals — Ninth Circuit

Page 1334

561 F.2d 1334

77-2 USTC P 9733

United States of America and Russell K. Ward, Special Agent, Internal Revenue Service, Petitioners-Appellants, Cross-Appellees v. Harvey J. Osborn, Respondent-Appellee Cross-Appellant, Ben

Johnson, Sam Linder and National Inventory Control

Systems, Intervenors-Appellees, Cross-Appellants.

Nos. 76-1705, 76-1764.

United States Court of Appeals

Ninth Circuit

September 30, 1977.

Sidney I. Lezak, U. S. Atty., Portland, Or., M. Carr Ferguson, Asst. Atty. Gen., Tax Division, Dept. of Justice, Appellate Section, Washington, D. C., for petitioners- appellants cross-appellees.

Norman Sepenuk, Portland, Or., Clyde R. Maxwell, Newport Beach, Cal., for repondent-appellee cross-appellant.

Appeal from the United States District Court for the District of Oregon.

Before HUFSTEDLER and TRASK, Circuit Judges, and SWEIGERT ^* District Judge.

SWEIGERT, District Judge

In this case the United States and Russell K. Ward, an Internal Revenue Service (IRS) Special Agent, petitioners below, appeal from portions of a district court order denying, upon Fifth Amendment grounds, enforcement of three IRS administrative summonses served on one Harvey J. Osborn, respondent below, an attorney who had formerly represented Ben Johnson, Sam Linder, and National Inventory Control Systems (NICS), intervenors below (hereinafter referred to as 'clients'), in regard to certain documents.

Osborn and the clients cross-appeal from portions of the same order, granting enforcement of the three summonses in regard to certain documents and testimony, contending that the testimony and documents demanded and ordered to be produced by the district court are protected by the clients' attorney-client privilege.

The Facts

In 1974 the IRS commenced an investigation into income tax liabilities of the clients ¹ for the years 1969 through 1973. As part of the investigation Ward served three IRS administrative summonses on Osborn. The summonses demanded that Osborn give testimony regarding the tax liabilities of the clients and produce various papers, books, and records of the clients in his possession. Osborn appeared pursuant to the summonses, but refused to testify as to certain matters or to produce certain documents on the grounds that he had been instructed by his clients to assert their attorney-client privilege and also their Fifth Amendment privilege against self-incrimination ² as to those subjects and documents.

Thereafter proceedings were commenced in district court, pursuant to 26 U. S. C. Sec. 7402(b) and Sec. 7604(a), to enforce compliance with the summonses. In those proceedings Osborn again asserted his clients' attorney-client and Fifth Amendment privileges. The clients were permitted to intervene and personally asserted their attorney-client and Fifth Amendment privileges as to certain of the testimony and documents demanded by the summonses. At a hearing it was established that Osborn and his clients were asserting the clients' attorney-client and Fifth Amendment privileges in regard to only eleven categories of items required by the summonses. ³

At the completion of the hearing, the district court concluded that it would undertake an in camera examination of all the materials in Osborn's files as to which either privilege was being asserted. Following this in camera examination, the district court filed an opinion, 409 F. Supp. 406 (D. Or. 1975), in which it found (1) that Osborn had no files relating to item 4, but would have to testify regarding preparation of a will for Mrs. Johnson, the deceased wife of client Ben Johnson, since matters pertaining to the will were no longer protected by the attorney-client privilege, (2) that none of the documents relating to item 5 were protected by the attorney-client privilege, but some were protected by the Fifth Amendment privilege, (3) that some of the documents relating to item 6 were not protected by the attorney-client privilege, but some were protected by the Fifth Amendment privilege, and (4) that most of the documents relating to item 7 were not protected by the attorney-client privilege.

The district court ordered Osborn to testify regarding preparation of a will for Mrs. Johnson (item 4), and to produce certain documents. ⁴

The Government Appeal

We take up first the government appeal from that portion of the district court's order denying enforcement of the summonses in regard to certain documents in Osborn's files found to be protected by his clients' Fifth Amendment privilege.

The district court held that a client, by assertion of his Fifth Amendment privilege, can prevent disclosure by his attorney of documents in the attorney's possession if the documents had been transferred to the attorney by the client for the purpose of obtaining legal advice, relying on United States v. Judson [63-2 USTC p9658], 322 F. 2d 460 (9th Cir. 1963) and United States v. Kasmir [74-2 USTC p9655], 499 F. 2d 444 (5th Cir. 1974) and rejecting the contrary holding of United States v. Fisher, 500 F. 2d 683 (3d Cir. 1974) (en banc). ⁵

After the district court filed its opinion, the Supreme Court decided Fisher v. United States [76-1 USTC p9353], 425 U. S. 391, 96 S. Ct. 1569, 48 L. Ed. 2d 39 (1976), holding that a client cannot by asserting his Fifth Amendment privilege, prevent disclosure by his attorney of the client's documents in the attorney's possession. Id. at 396-401, 96 S. Ct. 1569. ⁶ The Court noted that the client should have relied not upon his Fifth Amendment privilege but upon the attorney-client privilege, as it applies to pre-existing documents. ⁷ Id. at 402, 96 S. Ct. 1569. The Court held that such documents, transferred by the client to the attorney, are protected by the attorney-client privilege only if such documents (1) could not have been obtained from the client by court process when the documents were still in the client's possession because of some privilege of the client, and (2) had been transferred to the attorney by the client for the purpose of obtaining legal advice. Id. at 403-05, 96 S. Ct. 1569 (citing United States v. Judson, supra, with approval).

Clearly, under Fisher, the clients herein cannot prevent disclosure of their documents in their attorney's possession by assertion of their Fifth Amendment privilege. Whether, under Fisher, the documents are protected by the attorney-client privilege depends upon whether the documents would have been privileged while still in the clients' possession and were transferred by the clients to their attorney for the purpose of obtaining legal advice.

The district court in the present case found that the documents in question had been delivered to the attorney for his use in performing legal services. 409 F. Supp. at 413. That finding has not been challenged. We, therefore, turn to the question whether the documents could not have been obtained from the clients, because of some privilege of the clients, while the documents were still in their possession.

The only privilege asserted by the clients that could bar production of the documents, if still in their possession, was their Fifth Amendment privilege. However, in Fisher, the Court, adopting a new approach to the Fifth Amendment as it applies to the production of the documents, held that to be protected by the Fifth Amendment the documents must be such that their production would involve compulsion of incriminatory evidence of a testimonial nature. Fisher v. United States, 425 U. S. at 405-14, 96 S. Ct. 1569; Id. at 414-30, 96 S. Ct. 1569 (Brennan, J., concurring in the judgment); Id. at 430-34, 96 S. Ct. 1569 (Marshall, J., concurring in the judgment).

The documents herein have been transmitted to this court under seal. ⁸ We have examined them in camera. The documents--corporate financial statements, an agreement for sale, telephone records, billing records, and a few business letters--are business documents analogous to the accountant's workpapers in Fisher. These documents, like those in Fisher, were not prepared by the clients, nor do they contain any testimonial declarations by the clients. So far as the record shows, the documents were voluntarily prepared. See Fisher v. United States, 425 U. S. at 409, 96 S. Ct. 1569. The production of these documents, business documents, involves no testimonial self-incrimination. Any possible tacit concessions made by the act of producing the documents, e. g., that such documents exist and are possessed or controlled by the client and that the client believes they are the documents described by the subpoena, do not rise, under circumstances shown in this record, to the level of 'testimony' within the protection of the Fifth Amendment. Id. at 410-13, 96 S. Ct. 1569; see Matter of Fischel, 557 F. 2d 209 (9th Cir. 1977); Matter of Witness Before the Grand Jury, 546 F. 2d 825 (9th Cir. 1976); Matter of Fred R. Witte Center Glass No. 3 [76-2 USTC p9761], 544 F. 2d 1026 (9th Cir. 1976).

We hold that the documents would not have been protected by the clients' Fifth Amendment privilege when still in their possession, ⁹ and, therefore, that these documents are not protected by the attorney-client privilege.

Accordingly, we reverse that portion of the district court's order finding certain documents to be protected by the clients' Fifth Amendment privilege and denying enforcement of the three summonses concerning those documents.

The Cross-Appeal

A. Production of Documents

We now take up the appeal of the clients and Osborn from that portion of the district court's order rejecting the assertion of the attorney-client privilege and requiring production of certain documents in Osborn's files regarding items 5, 6, ¹⁰ and 7.

Since the effect of the assertion of the attorney-client privilege is to withhold relevant information from the finder of fact, the privilege is to be applied only when necessary to achieve its purpose of encouraging clients to make full disclosure to their attorneys. Fisher...