U.S. v. Porter

• Decision Date: 06 July 1983
• Docket Number: No. 83-1278,83-1278
• Citation: 711 F.2d 1397
• Parties: 83-2 USTC P 9457, 13 Fed. R. Evid. Serv. 1266 UNITED STATES of America and Gerald T. Padar, Special Agent, Internal Revenue Service, Petitioners-Appellees, v. Helen V. PORTER and Nickolaus Beligratis, Respondents-Appellants.
• Court: U.S. Court of Appeals — Seventh Circuit

Page 1397

711 F.2d 1397

83-2 USTC P 9457, 13 Fed. R. Evid. Serv. 1266

UNITED STATES of America and Gerald T. Padar, Special Agent, Internal Revenue Service, Petitioners-Appellees, v. Helen V. PORTER and Nickolaus Beligratis, Respondents-Appellants.

No. 83-1278.

United States Court of Appeals, Seventh Circuit.

Argued April 1, 1983.

Decided July 6, 1983.

Robert G. Nath, Asst. Atty. Gen., Tax Division, Dept. of Justice, Washington, D.C., for petitioners-appellees.

Lewis M. Porter, Jr., Boodell, Sears, Sugure, Giambalvo & Crowley, Chicago, Ill., for respondents-appellants.

Before WOOD, ESCHBACH and COFFEY, Circuit Judges.

HARLINGTON WOOD, Jr., Circuit Judge.

Respondents-Appellants taxpayer, a sole proprietor, and his attorney appeal from the district court's order, 557 F.Supp. 703, commanding their compliance with three Internal Revenue Service summonses requiring production of the taxpayer's business records, including cancelled checks, bank deposit slips, various ledgers and journals and payroll and sales tax records, arguing that such forced disclosures would violate the taxpayer's right against self-incrimination as set forth in Fisher v. United States, 425 U.S. 391, 96 S.Ct. 1569, 48 L.Ed.2d 39 (1976). We hold that this claim is moot with respect to items which have been already surrendered to the IRS pursuant to the district court's order, but that with respect to the remaining items--the cancelled checks and deposit slips--Fisher provides certain limited Fifth Amendment protection. However, we also remand to the district court to permit the government to offer the respondent taxpayer statutory use immunity with respect to the protected aspects of the documents' production and to permit the court to fashion a protective order sufficient to allow use of the contents of the documents while guarding against a violation of taxpayer's Fifth Amendment rights.

I.

The facts are not in dispute. During 1976-78, the taxpayer, Beligratis, operated two hairdressing salons in the Chicago area as a sole proprietor. During this time, Beligratis employed an accounting firm to prepare his income statements, balance sheets, profit and loss statements, federal payroll tax returns, personal income tax returns, W-2 forms and federal unemployment tax returns; these reports were generated through Beligratis' submission of carbon copies of checks written by him, records of his cash disbursements, bank account statements with cancelled checks, and a sheet recording the monthly sales of each salon. The Chicago District of the IRS began an examination of Beligratis' federal income tax returns for 1976-78, and a revenue agent reviewed the records of the two sole proprietorships with the result that the case was referred to the IRS Criminal Investigative Division.

Special Agent Gerald Padar of that Division was assigned to the case and in early April, 1980 requested the taxpayer's records concerning his personal finances and business transactions during the investigated period. However, shortly thereafter, Beligratis transferred the requested records, which were in his accounting firm's possession, to his lawyer, respondent Porter. In August, 1980, Special Agent Padar issued an IRS summons to Porter requiring that she produce records relating to the taxpayer's personal checking and savings accounts and his business checking accounts, including bank statements, cancelled checks, deposit slips, statements of interest earned, statements of interest paid on personal and business loans, cash receipts journals, cash disbursement journals, appointment books or records of services provided, tax withholding forms, and other tax-related records. Respondent Porter appeared before Padar and refused to comply with the summons, claiming that the government already possessed some of these items and that the others were protected by the attorney-client privilege because these items would have enjoyed Fifth Amendment protection in Beligratis' hands. In September In February, 1983, the district court ordered respondents to surrender the summoned materials (except for the appointment books) ¹ to Padar. In its previous findings, the district court assumed, and it is not disputed here, that the requested materials were turned over to Porter to facilitate legal advice rather than simply to evade the summons, and thus measured the scope of the attorney-client privilege by the Fifth Amendment privilege attaching to the documents had they been in Beligratis' possession, the procedure mandated in Fisher v. United States, 425 U.S. 391, 96 S.Ct. 1569, 48 L.Ed.2d 39 (1976). The district court then undertook the Fifth Amendment analysis mandated under Fisher --that is, whether the act of producing the summoned records would itself involve testimonial self-incrimination. Fisher, 425 U.S. at 410-11, 96 S.Ct. at 1580-81. The court found, as did the Supreme Court in Fisher, 425 U.S. at 409-13, 96 S.Ct. at 1580-82, that the self-incriminatory and testimonial aspects of the act of complying with the summonses were insufficient to justify Fifth Amendment protection with respect to documents not prepared by Beligratis himself (e.g., the ledgers and payroll records which were prepared by the accounting firm).

                1980, Padar issued a second summons to Porter, again ordering production of specified business records;  Porter again invoked the attorney-client privilege with respect to the records demanded.   In December, 1980, Padar issued a third summons, this time against Beligratis, ordering a production of the same documents specified in the previous summonses.   In January, 1981, the taxpayer and Porter met with Padar and refused to comply with the third summons, this time directly asserting Beligratis' Fifth Amendment privilege with respect to these materials
                

The district court expressed greater difficulty, however, in determining whether the cancelled checks, deposit slips and appointment books retained residual Fifth Amendment protection in light of the Supreme Court's explicit reservation in Fisher, 425 U.S. at 414, 96 S.Ct. at 1582, of the question of protection attaching to the taxpayer's "own tax records in his possession" and his "private papers." The district court felt it necessary to take the next step and determine whether the doctrine of Boyd v. United States, 116 U.S. 616, 634, 635, 6 S.Ct. 524, 534, 534, 29 L.Ed. 746 (1911), protecting wholesale the production of "private papers," remained viable in light of Fisher and post-Fisher cases such as Andresen v. Maryland, 427 U.S. 463, 96 S.Ct. 2737, 49 L.Ed.2d 627 (1976). Determining that the Boyd doctrine was indeed alive, the district court nonetheless found only the taxpayer's summoned "appointment books" to be sufficiently "private" to come under it; the checks and deposit slips the court found to be by their nature prepared for disclosure and thus without the requisite halo of privacy, citing United States v. Miller, 425 U.S. 435, 96 S.Ct. 1619, 48 L.Ed.2d 71 (1976), a Fourth Amendment case. Apparently assuming these items were also not protected under Fisher, the district court ordered the checks and deposit slips surrendered along with the other items.

Respondents then moved for a stay pending appeal; the stay was granted only with respect to the checks, deposit slips and appointment books. Following this ruling, all of the summoned items except for the checks, deposit slips and appointment books were surrendered by respondents to the IRS.

II.

We must first address the scope of the present appeal. Respondents claim that, even though they have surrendered each of the summoned items except the checks and deposit slips (and the appointment books whose protection is uncontested by the government), their Fifth Amendment claims with respect to the surrendered items are not moot. This court and other circuits, however, have flatly held that a Respondents, however, argue that we should now fashion a special exception to the mootness doctrine by incorporating into it the doctrine of Perlman v. United States, 247 U.S. 7, 12-13, 38 S.Ct. 417, 419, 62 L.Ed. 950 (1918), which permits special interlocutory review of an order directed against a third party compelling disclosure in connection with a grand jury proceeding on the theory that the party ultimately damaged by the disclosure cannot expect the third party target of the order to risk contempt in order to obtain immediate review of the order. Analogously, respondents argue, since the taxpayer here could not have expected his attorney, respondent Porter, to risk contempt by refusing to disclose the materials which she has now surrendered, he was denied effective review under a theory similar to that of the "capable of repetition, yet evading review" exception to mootness enunciated first in Southern Pacific Terminal Co. v. I.C.C., 219 U.S. 498, 31 S.Ct. 279, 55 L.Ed. 310 (1911).

                taxpayer's submission of material in compliance with an IRS summons renders any constitutional objections to that compelled submission moot.   United States v. Kis, 658 F.2d 526, 532-34 (7th Cir.1981),  cert. denied sub nom.  Salkin v. United States, 455 U.S. 1018, 102 S.Ct. 1712, 72 L.Ed.2d 135 (1982).   Accord, United States v. Trail's End Motel, Inc., 657 F.2d 1169 (10th Cir.1981);   United States v. Equity Farmers Elevator, 652 F.2d 752 (8th Cir.1981);   United States v. First American Bank, 649 F.2d 288 (5th Cir.1981)
                

But application of the Perlman exception here is without any basis, for that is a doctrine of "ripeness," not mootness. It is designed to interpose review to prevent the kind of irrevocable disclosure which has already occurred here. Accordingly, this court has held that the Perlman doctrine itself may not apply where, as here, a substantial disclosure to the government of the information sought to be protected has already occurred. United States v. Calandra, 706 F.2d 225, 227-228 (7th Cir.1983). Although we made a passing reference to the Perlman...