United States v. Roundtree

• Decision Date: 20 April 1970
• Docket Number: No. 26986.,26986.
• Citation: 420 F.2d 845
• Parties: UNITED STATES of America and William L. Hall, Agent of Internal Revenue Service, Petitioners-Appellees, v. William H. ROUNDTREE, Respondent-Appellant, and Wanda L. Roundtree, Intervenor-Respondent-Appellant.
• Court: U.S. Court of Appeals — Fifth Circuit

420 F.2d 845 (1969)

UNITED STATES of America and William L. Hall, Agent of Internal Revenue Service, Petitioners-Appellees, v. William H. ROUNDTREE, Respondent-Appellant, and Wanda L. Roundtree, Intervenor-Respondent-Appellant.

No. 26986.

United States Court of Appeals Fifth Circuit.

November 20, 1969.

Rehearing Denied and Opinion Clarified April 20, 1970.

William H. Roundtree, Cocoa, Fla., for appellant.

Edward F. Boardman, U. S. Atty., Tampa, Fla., Mitchell Rogovin, Asst. Atty. Gen., Johnnie M. Walters, Lee A. Jackson, John P. Burke, Joseph M. Howard, Attys., U. S. Dept. of Justice, Tax Division, Washington, D. C., Virginia Q. Beverly, Jacksonville, Fla., for appellees.

Before WISDOM and CARSWELL, Circuit Judges, and ROBERTS, District Judge.

WISDOM, Circuit Judge:

This appeal canvasses often-discussed issues concerning a summons of the Internal Revenue Service: What showing must the IRS make to enforce a summons against a taxpayer? How may the taxpayer attack the summons? Is a judgment of contempt for failure to obey the summons a final order? We hold that the Commissioner need make no particularized showing in order to summon a taxpayer and his records, but that if the purpose of the summons is to harass the taxpayer or solely to build a criminal prosecution, the courts will not enforce the summons. Moreover, a taxpayer is entitled to appropriate discovery procedures under the Federal Rules of Civil Procedure to prove this purpose. He must raise defenses of self-incrimination with regard to individual questions or specific records. Finally, when compliance with a district court's order that is later vacated would require surrender of the individual's defenses, and when the individual has effectively appealed that order before failing to comply, his failure to secure a stay will not, in the absence of willfulness, justify a contempt conviction.

I.

In September of 1966, an IRS agent served a summons upon the taxpayer, William H. Roundtree. The Summons directed him to appear at the Eau Gallie, Florida, office of the IRS, there to produce books and records bearing on his and his wife's income tax liability for the years 1963, 1964, and 1965, and to testify in that regard. Roundtree appeared, but refused either to produce his records or to testify.

In December 1966 the Government petitioned under sections 7402(b)¹ and 7604² of the Internal Revenue Code of 1954 for a court order to enforce the summons. Roundtree filed an answer and counterclaimed for injunctive relief against further IRS proceedings. When the Government failed to answer this counterclaim within sixty days, the Clerk of the district court entered a default against the Government. But after a previously scheduled hearing held in September 1967, the district court set aside the default and granted the Government's motion to dismiss the counterclaim. The court also denied Roundtree's request for a jury trial, his motion for a writ of prohibition against the Tax Court in a deficiency proceeding relating to the year 1963,³ and various requests for admissions and interrogatories he had propounded to the IRS.⁴ The district court, however, granted the motion of Mrs. Roundtree to intervene, and allowed both taxpayers to file amended answers and counterclaims. The court subsequently quashed the Roundtrees' Notice of Taking Deposition of the IRS agent in charge of this case.

In October 1967 the Roundtrees filed an amended answer and counterclaim alleging that IRS agents had systematically harassed them; that enforcement of the summons would violate the fourth amendment and would be "in violation of the due process of law because of the Fifth Amendment of the Constitution"; that the material sought was "for the improper purpose of obtaining evidence for use in a criminal prosecution against the Respondents" — indeed, that this was its "sole objective"; that enforcement would violate the attorney-client privilege existing between Roundtree as attorney and his wife as client; and that the IRS was "abusing legal process unconstitutionally by filing the petition in this cause in this court". They demanded that the IRS be enjoined from any further proceedings until it could show "good cause for lawful and reasonable administrative procedure and/or legal action". The Government answered and moved to dismiss.

At a hearing on October 10, 1968, Roundtree stated that the "gist" of his defense was that the Government must show probable cause before the district court could enforce its summons. The district court dismissed the amended counterclaim, granted the Government's objections to further interrogatories, and ordered enforcement of the summons against Roundtree as to the years 1964 and 1965.⁵ Roundtree and his wife appealed this order, but failed to seek a stay of its enforcement from the district court. Instead, Roundtree appeared at IRS offices on the appointed dates and refused to testify or produce his records, asserting that he was exercising his fourth and fifth amendment rights. At the hearing of an order to show cause why he should not be held in contempt of court, Roundtree again asserted his fifth amendment rights. The Government maintained that he had never before raised the privilege against self-incrimination. The district court adjudged Roundtree in contempt on November 8, and fined him $500, but did not enter a written order. Roundtree appealed. The district court entered a written order of contempt on November 19, and once more ordered Roundtree to produce his books and records. He again appealed and this time moved for a stay of execution of the order and any further proceedings. The district court denied Roundtree's motion for a stay; this Court granted it pending his appeal. The taxpayer appeals from the three district court orders of October 10 (judgment enforcing the summons), November 8 (oral judgment of contempt), and November 19, 1968 (written judgment of contempt).

II.

United States v. Powell, 1964, 379 U. S. 48, 85 S.Ct. 248, 13 L.Ed.2d 112, dealt explicitly with the statutorily imposed standards that the Commissioner must meet in order to enforce his summons. Section 7605(b)⁶ of the Code prohibits "unnecessary examination or investigations". In Powell, the running of the statute of limitations precluded any civil liability. Yet, the Supreme Court held that the Commissioner could secure judicial enforcement of his summons consistently with § 7605(b) even though he had no probable cause to suspect fraud. The opinion states that "the Commissioner need not meet any standard of probable cause to obtain enforcement of his summons, either before or after the three-year statute of limitations on ordinary tax liabilities has expired". The statutory scheme requires only that he show that "the investigation will be conducted pursuant to a legitimate purpose, that the inquiry may be relevant to the purpose", that he did not already have the information he sought, and that he had followed the Code's administrative steps. 379 U.S. at 57-58, 85 S.Ct. at 255. The Court, importantly, went on to admonish that

it is the court\'s process which is invoked to enforce the administrative summons and a court may not permit its process to be abused. Such an abuse would take place if the summons had been issued for an improper purpose, such as to harass the taxpayer or to put pressure on him to settle a collateral dispute, or for any other purpose reflecting on the good faith of the particular investigation. 379 U.S. at 58, 85 S.Ct. at 255.

Powell did not explicitly consider constitutional limitations on the Commissioner's power. But in our view, Camara v. Municipal Court, 1967, 387 U.S. 523, 87 S.Ct. 1727, 18 L.Ed.2d 930, and See v. City of Seattle, 1967, 387 U.S. 541, 87 S.Ct. 1737, 18 L.Ed.2d 943, two recent fourth amendment decisions, compel no different result. In those two cases the Court set out to "reexamine whether administrative inspection programs, as presently authorized and conducted, violate Fourth Amendment rights". 387 U.S. at 525, 87 S.Ct. at 1729.⁷ The Supreme Court in Camara found that the fourth amendment's basic purpose is "to safeguard the privacy and security of individuals against arbitrary invasions by governmental officials". 387 U.S. at 528, 87 S.Ct. at 1730. The use of a search warrant is necessary, the Court ruled, even in a case where the state court had found that the search was "`part of a regulatory scheme which is essentially civil rather than criminal in nature, * * * and the right of inspection * * * is limited in scope and may not be exercised under unreasonable conditions'". 387 U.S. at 528, 87 S.Ct. at 1730.

In terms of protection to the individual, a summons submitted to a court for enforcement is at least equivalent to a search warrant.⁸ Our task is to apply to the process the analysis of interests that Camara considered requisite to the issuance of a search warrant.⁹

The Camara Court spoke in terms of "balancing the need to search against the invasion which the search entails". 387 U.S. at 537, 87 S.Ct. at 1735. It weighed the history of judicial and public acceptance of a search, the significance of the public interest demanding satisfaction and the probable unavailability of alternative means to satisfy it, and the extent of the invasion of privacy. In tax investigations, courts have certainly long been enforcing the Commissioner's summons, and have considered it an acceptable way of ensuring compliance with the revenue laws. See Sale v. United States, 8 Cir.1956, 228 F. 2d 682, 684, cert. denied, 1956, 350 U.S. 1006, 76 S.Ct. 650, 100 L.Ed. 868. See generally Powell.

The individual taxpayer on whom an audit has focussed is no doubt reluctant to see his records disclosed to the taxing authorities, but we are unable to say that the public has exhibited a strong animosity toward this method of securing proper compliance with the revenue laws. The significance of the public interest, governmental...