U.S. v. Wilson, 88-1157

• Decision Date: 08 February 1989
• Docket Number: No. 88-1157,88-1157
• Citation: 864 F.2d 1219
• Parties: UNITED STATES of America and Robert W. Wallace, Plaintiffs-Appellees, v. Claude R. WILSON, Jr., and Modes, Inc., Defendants-Appellants.
• Court: U.S. Court of Appeals — Fifth Circuit

Page 1219

864 F.2d 1219

UNITED STATES of America and Robert W. Wallace, Plaintiffs-Appellees, v. Claude R. WILSON, Jr., and Modes, Inc., Defendants-Appellants.

No. 88-1157.

United States Court of Appeals, Fifth Circuit.

Feb. 8, 1989.

Rehearing Denied March 7, 1989.

Claude R. Wilson, Dallas, Tex., pro se.

Alan J. Hostetter, Jr., Golden, Potts, Boeckman & Wilson, Dallas, Tex., for defendants-appellants.

Chris Ludke, Atty., Office of Regional Counsel, U.S. Customs Service, Houston, Tex., Mary Ann Moore, Asst. U.S. Atty., Marvin Collins, U.S. Atty., Dallas, Tex., for plaintiffs-appellees.

Appeal from the United States District Court for the Northern District of Texas.

Before REAVLEY, HIGGINBOTHAM and SMITH, Circuit Judges.

PER CURIAM:

I. Factual and Procedural Background.

The defendants-appellants in this case are Modes, Inc. ("Modes"), a business engaged in importing jewelry from abroad, and Claude R. Wilson, Jr., its attorney. Modes and Wilson had been served with administrative summonses, pursuant to 19 U.S.C. Sec. 1509(b), by appellee Robert W. Wallace, a Senior Special Agent with the United States Customs Service ("Customs"). Wallace sought production of certain records required to be kept by Modes under 19 U.S.C. Sec. 1508, in order to ensure compliance with the Customs laws. The records were needed for a proper determination of the possible civil and criminal liability of Modes. Appellants obtained an extension of time to comply with the summonses so that Wilson and Tim Millis, his investigator, could travel to the Far East to secure evidence from business associates.

Upon returning from abroad to Dallas/Fort Worth International Airport, Millis was carrying in his briefcase Wilson's legal files pertaining to Customs's investigation of Modes. When Millis passed through Customs's checkpoint, an agent searched the briefcase containing the files and took them, refusing to return them to Millis or Wilson despite their protests. No reason was given for the seizure. The files were returned by Customs two days later, but because Millis had not been allowed to make an inventory prior to their being taken, he was unable to determine whether any of the documents had been removed and of course had no way of knowing whether they had been photocopied.

Subsequently, Wallace issued and served two new summonses on Modes and Wilson, identical to the first two except that the time period for the records sought differed somewhat, i.e., 10/83--1/85 rather than 1/83--1/85. Appellants met with Wallace as required by the later summonses but, based upon the attorney-client privilege and the fifth amendment right against self-incrimination, refused to produce documents.

Wallace and the government filed in district court a petition to enforce the summonses, pursuant to 19 U.S.C. Sec. 1510. That court, pursuant to 28 U.S.C. Sec. 636(b)(1), referred the petition to a magistrate "for disposition." After a hearing, the magistrate issued findings and recommendations, concluding that the summonses should be enforced. The district court entered an order adopting the magistrate's findings and recommendations after considering Modes and Wilson's objections. That order was stayed pending this appeal.

II. Standard of Review Applied by District Court.

Under the plain language of 28 U.S.C. Sec. 636(b)(1), Fed.R.Civ.P. 72(b), and all of the relevant cases, a district court must engage in de novo review where a party has objected to a magistrate's decision. However, the district judge in this case announced that he was applying the "clearly erroneous, abuse of discretion and contrary to law" standard of review, which is appropriate only where there has been no objection to the magistrate's ruling. The only dispute is whether the district judge actually engaged in de novo review despite announcing an improper standard. If he did not, we must remand.

The government cites authorities to the effect that a court may be found to have reviewed a magistrate's decision de novo even if it uses pro forma language indicative of a different standard. "[I]n providing for a 'de novo determination,' rather than de novo hearing, Congress intended to permit whatever reliance a district judge, in the exercise of sound judicial discretion, chose to place on a magistrate's proposed findings and recommendations." United States v. Raddatz, 447 U.S. 667, 676, 100 S.Ct. 2406, 2412, 65 L.Ed.2d424 (1980). Accord, Aluminum Co. of Am. v. E.P.A., 663 F.2d 499, 502 (4th Cir.1981) (use of "clearly erroneous" in district court's opinion does not preclude possibility that de novo review occurred).

The government's reliance upon these cases is misplaced. Raddatz 's distinction between a de novo hearing and de novo review does not really help the government, as Modes does not argue that a hearing should have occurred but only that the district court obviously did not engage in de novo review. Furthermore, the language concerning the "clearly erroneous" term in Aluminum Co. is dictum: The Fourth Circuit proceeded to find that de novo review had not occurred in that case, even though the district court patently had engaged in more extensive review than occurred here. Thus, that court, although de-emphasizing the significance of labels, ultimately held that "the district judge did not clearly indicate that he afforded the parties a de novo determination. In order to satisfy the Act, he must do so." Id. at 502.

Even if we were to adopt Aluminum Co. and fashion its dictum into a test for determining whether de novo review has occurred, the judge in this case still has not given sufficient indication that he made his own determination based upon the record and unrestrained by the findings and conclusions of the magistrate. The few passages from the district court's order cited by the government as revealing de novo review are inadequate. We therefore remand and instruct the district court to review the magistrate's ruling on the subpoena de novo. Moreover, because of the apparent confusion revealed in the record, we think it appropriate to outline briefly the law that should be applied on remand.

III. Government's Burden in Getting Subpoena: Abuse of

Process.

The general test for enforcement of an administrative subpoena is enunciated in United States v. Powell, 379 U.S. 48, 85 S.Ct. 248, 13 L.Ed.2d112 (1964), involving an IRS investigation. This test applies in the customs context as well. United States v. Frowein, 727 F.2d 227, 230 (2d Cir.1984) (acquiescing in a district court's application of Powell to a customs case). Under Powell, the government must establish four elements: (1) There must be a legitimate purpose of the investigation; (2) the specific inquiry must be relevant to that purpose; (3) the information sought must not already be in the government's possession; and (4) all internal administrative procedures must have been followed. 379 U.S. at 57-58, 85 S.Ct. at 254-55.

Once the government has met its burden on each of the four elements, the burden shifts to the defendant to challenge the summons on any appropriate ground--here, to show that enforcement would represent an abuse of the summons process. See United...