United States v. Long, 70 C 639(1).

• Decision Date: 17 June 1971
• Docket Number: No. 70 C 639(1).,70 C 639(1).
• Parties: UNITED STATES of America and Leo J. Hanley, Special Agent, Internal Revenue Service, Petitioners, v. Edward V. LONG, Respondent.
• Court: U.S. District Court — Eastern District of Missouri

328 F. Supp. 233

UNITED STATES of America and Leo J. Hanley, Special Agent, Internal Revenue Service, Petitioners, v. Edward V. LONG, Respondent.

No. 70 C 639(1).

United States District Court, E. D. Missouri, E. D.

June 17, 1971.

Daniel Bartlett, Jr., U. S. Atty., St. Louis, Mo., Jeffrey D. Snow, John M. Dowd, Attys., Tax Div., Dept. of Justice, Washington, D. C., for petitioners.

H. G. Stein and C. A. Seigel, St. Louis, Mo., for respondent.

MEMORANDUM

MEREDITH, Chief Judge.

This is an action to enforce an Internal Revenue Service summons which was issued to and served upon the respondent, Edward V. Long, by the petitioner, Leo J. Hanley. This summons sought the testimony of respondent regarding the nature of certain services which he testified were rendered from the year 1964 to and including 1968 to certain clients he testified he had in common with Morris Shenker, the taxpayer under examination. Respondent received a total sum of One Hundred Forty-eight Thousand Dollars ($148,000.00) from Morris Shenker for services respondent stated were rendered to these clients.

The Government contends that the testimony of the respondent is necessary to enable Special Agent Leo J. Hanley of the Intelligence Division and Revenue Agent Edwin Reising to determine the correctness of Shenker's tax return. The determination to be made is whether or not the fees paid to respondent were legitimate business expenses of Morris Shenker, who has deducted them on his tax returns.

The question before this Court is whether or not the respondent should be required to answer questions about the nature of legal services rendered to his clients or whether the nature of the services is privileged under the attorney-client doctrine.

At some time prior to February 10, 1970, the Internal Revenue Service began an investigation into the tax liabilities of Morris Shenker. On February 10, 1970, the Revenue Service served a summons upon Edward V. Long, an attorney, directing him to appear in Hannibal, Missouri, before Special Agent Leo J. Hanley on March 20, 1970, to give testimony relating to the tax liability of Shenker for the periods designated, under the provisions of 26 U.S.C. § 7602 of the Internal Revenue Code of 1954.

Although the summons was for March 20, 1970, by mutual agreement the taking of testimony was postponed to April 17, 1970. Upon administering the oath to respondent on April 17th, Special Agent Hanley made the following statement:

"In accordance with the conversation we had with Mr. McIlroy, your attorney, I would like to have the record show that this testimony is being taken under oath and will be in the form of a question and answer statement; that at the completion of the testimony, it will be reduced to writing, that the transcribed testimony or a copy thereof will be furnished to you, Senator, for your examination, at which time you will be permitted to make such corrections, additions or deletions as you feel are necessary to reflect the proper answers to the questions that I ask and to be sure that the answers were responsive to the questions that I asked. After these corrections, additions or deletions are made, if any, you will then be expected to sign the statement."

At the conclusion of the interview, Special Agent Hanley stated: "We will conclude the interview." Neither of the agents or anyone from the Internal Revenue Service ever communicated with respondent between the termination of the April 17, 1970, interview and the time this proceeding was instituted. Respondent was not furnished a copy of the transcript prior to the time this proceeding was instituted. Suit was filed on December 15, 1970. Thereafter, a copy of the transcript was sent to respondent on January 3, 1971, after he had requested it. This conduct of the petitioners is not condoned by the Court, nevertheless, it does not change the basic issue before the Court.

Respondent testified before this Court and at the April 17, 1970, examination that the late Thelma Manne, Max Lubin, Banner Industries, R. L. Warren and Company, and Associated Life Insurance Company were his clients. On April 17, 1970, upon being asked the type of legal services he performed for these clients, respondent answered that the nature of the work was "general representation." Respondent stated that to pinpoint the kind of representation he had done or work that he had performed would violate the privilege which attaches to the attorney-client relationship.

The respondent's position is two-fold: one, that the summons is functus officio because it became extinguished upon termination of the interview, and, two, the attorney-client privilege applies to the questions propounded to the respondent about the nature of the legal services rendered to his clients. The Government contends that the summons is viable and that the respondent should be required to answer the questions propounded to him by Special Agent Hanley, because the attorney-client privilege does not apply.

The respondent's first contention that the summons is functus officio will be overruled because the summons has not been complied with in full by respondent, so it is the opinion of this Court that the summons is viable.

With respect to the attorney-client privilege, it is the general rule that confidential communications, communicated in the course of professional employment between an attorney and his client, may not, without the consent of the client, be divulged by the attorney. 97 C.J.S. Witnesses § 276 (1957). This is commonly called the attorney-client privilege.

The policy underlying the attorney-client privilege is to promote freedom of consultation of legal advisors by clients, and to remove any apprehension of disclosure by the attorney without the client's consent. Schwimmer v. United States, 232 F.2d 855 (8th Cir. 1956), cert. denied 352 U.S. 833, 77 S.Ct. 48, 1 L.Ed.2d 52 (1956); 8 Wigmore, Evidence 2291 (McNaughton Rev. 1961). Under this policy, a member of the bar is not justified in refusing to testify as to all transactions he may have had with any person whom he chooses to designate as a client. Colton v. United States, 306 F.2d 633 (2nd Cir. 1962).

The privilege applies only if

"(1) the asserted holder of the privilege is or sought to become a client; (2) the person to whom the communication was made (a) is a member of the bar of a court, or his subordinate and (b) in connection with this communication is acting as a lawyer; (3) the communication relates to a fact of which the attorney was informed (a) by his client (b) without the presence of strangers (c) for the purpose of securing primarily either (i) an opinion on law or (ii) legal services or (iii) assistance in some legal proceeding, and not (d) for the purpose of committing a crime or tort; and (4) the privilege has been (a) claimed and (b) not waived by the client." United States v. United Shoe Mach. Corp., 89 F.Supp. 357, 358-359 (D.Mass.1950).

The heart of the attorney-client privilege is the substantive matter that is communicated between the client and his attorney. These matters are protected by the privilege. The Court is of the opinion that the only questions about substantive matters that must be answered are questions about the nature of the legal services rendered. These questions require only a response, such as "litigation", "drafting contracts", "tax advice", or "work on domestic relations problems of client". Specific factual inquiry into the communications between attorney and client beyond this is privileged, such as what was said by the client or lawyer in relation to the problem. Colton v. United States, supra; United States v. Kovel, 296 F.2d 918 (2nd Cir. 1961).

Peripheral matters surrounding the relationship, such as who the client is, when and how the relationship was created, when and where matters were discussed, and what the fee arrangement with the client is, are not protected by the attorney-client privilege and may properly be the subject of an inquiry by the Internal Revenue Service. Colton v. United States, supra.

In the case at bar, the respondent has made a blanket claim of privilege as to all communications with his clients and the nature of the work performed by him for them. This Court is of the opinion that the privilege does not extend as far as the respondent would have it extend. It is the opinion of this Court that the Government has a legitimate interest in determining whether or not the fees paid to respondent by Shenker were correctly deducted as attorney fees by Shenker. The answer heretofore given by respondent "general representation" is insufficient.

The Government has submitted to the Court a list of questions which will be submitted to the respondent, if the Court grants the requested relief. These questions are attached to and made a part of this memorandum and are designated as Exhibits A, B, C, D, E, and F. Exhibit A is a list of questions concerning all the clients mentioned in the interview of April 17, 1970. Each of the five remaining exhibits contain a list of questions about each individual client, respectively.

The Court has carefully considered all of the questions in the light of the foregoing discussion. The Court concludes that respondent shall answer in full all the questions set out in Exhibits A, B, C, D, E, and F, with the following exceptions:

Exhibit A—Questions 1, 6, 8, 10, and 25.

Exhibit B—Questions 8 and 14.

Exhibit C—Question 11.

Exhibit D—Questions 5 and 12.

Exhibit E—Questions 3, 14, and 16.

Exhibit F—Question 6.

As to the excepted questions, to the extent that they seek information about direct communication between the client and respondent, or information about legal services rendered by the respondent, respondent shall answer with a general response, giving the type of law business discussed. In all other respects, the respondent shall answer the excepted questions with particularity. The Court emphasizes that no specific detail...