United States v. Sideman & Bancroft, LLP

FOR PUBLICATION
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
UNITED STATES OF AMERICA , No. 11-15930
Plaintiff-Appellee,
D.C. No.
v. 3:11-cv-00736-
WHA
SIDEMAN & BANCROFT , LLP,
Defendant-Appellant. OPINION
Appeal from the United States District Court
for the Northern District of California
William Alsup, District Judge, Presiding
Argued and Submitted
September 13, 2012—San Francisco, California
Filed January 8, 2013
Before: J. Clifford Wallace, Susan P. Graber,
and Marsha S. Berzon, Circuit Judges.
Opinion by Judge Wallace
2 UNITED STATES V . SIDEMAN & BANCROFT , LLP
SUMMARY*
Tax
The panel affirmed the district court’s order enforcing an
Internal Revenue Service administrative summons in
connection with a criminal investigation of an individual
taxpayer.
Certain of taxpayer’s documents had made their way from
her residence to appellant, her counsel for the IRS criminal
investigation. The panel held that the “foregone conclusion”
exception to the Fifth Amendment applied to the documents
because, before the IRS issued the subpoena, it knew with
reasonable particularity of the existence and appellant’s
possession of the documents and could independently
establish their authenticity based on taxpayer’s tax preparer’s
familiarity with them.
COUNSEL
Jay R. Weill (argued), Sideman & Bancroft LLP, San
Francisco, California, for Appellant.
Tamara W. Ashford, Deputy Assistant Attorney General,
Washington, D.C.; Michael J. Haungs (argued) and John A.
Dudeck, Jr., United States Department of Justice, Tax
Division, Washington, D.C., for Appellee.
*
This summary constitutes no part of the opinion of the court. It has
been prepared by court staff for the convenience of the reader.
UNITED STATES V . SIDEMAN & BANCROFT , LLP 3
OPINION
WALLACE, Circuit Judge:
Sideman & Bancroft, LLP (Sideman) appeals from the
district court’s order enforcing an Internal Revenue Service
(IRS) administrative summons. We have jurisdiction under
28 U.S.C. § 1291, and we affirm.
I.
The IRS is currently undertaking a criminal investigation
of Mary Nolan to determine whether she attempted to evade
or defeat her tax liabilities or made a false declaration under
penalty of perjury related to tax years 2005 to 2008. As part
of that investigation, the IRS obtained a search warrant to
locate Nolan’s tax documents for those years. On October 13,
2010, the IRS executed the search warrant, looking for the
documents in Nolan’s residence, business, and car. The IRS
failed to locate the documents it sought while executing the
search warrant but did find references to Nolan’s income tax
preparer, accountant Mary Fouts.
As the next step in the investigation, Special Agent Mark
Pahnke contacted Fouts. Fouts indicated that Nolan had given
her tax documents for the years 2007 and 2008. Fouts
explained that she no longer had the documents as she had
delivered them to Nolan’s civil tax attorney, Richard
Guadagni. Special Agent Pahnke subsequently contacted
Guadagni, who informed him that he had given the
documents he received from Fouts to Jay R. Weill, partner at
Sideman, Nolan’s counsel for the IRS criminal investigation.
4 UNITED STATES V . SIDEMAN & BANCROFT , LLP
Special Agent Pahnke then drafted a summons to obtain
the records from Sideman. Special Agent Pahnke identified
the documents he sought from Sideman in his summons
based on the detailed description of the documents given to
him by Fouts. Fouts confirmed that she had given Special
Agent Pahnke a detailed description of the documents she
turned over to Guadagni.
On October 27, 2010, the IRS issued a summons to
Sideman seeking the 2007 and 2008 tax documents turned
over by Fouts via Guadagni. The summons specifically
required Sideman to produce the following documents:
FOR THE YEARS: 2007–2008
Documents in your custody or control relative
to the financial transaction of:
MARY NOLAN
THE LAW OFFICE OF MARY NOLAN
MARY NOLAN TRUST
Including but not limited to the following:
Check Carbons (duplicates)
Client Receipts
File Folders of Expenses
Payment Receipts
QuickBooks Printouts
Client Billing Records
Rental Property Records
Tax Returns and Supporting Schedules
Monthly Client Billings
Check Ledgers
UNITED STATES V . SIDEMAN & BANCROFT , LLP 5
Copies of Bills
Daytime Planners
Credit Card Statements
Personal Tax Related Expenses (ie: medical &
dental)
Included in the following containers:
4 large banker boxes
3 large accordion folders
Sideman refused to produce these documents—which
measure sixty-six inches if stacked on top of one another,
according to Sideman—because, Sideman alleges, production
would violate Nolan’s Fifth Amendment rights. In response,
the IRS filed a petition in the Northern District of California
seeking enforcement of the summons.
In support of its petition to enforce the summons, the IRS
offered a declaration from Fouts regarding her work on behalf
of Nolan. In her declaration, Fouts stated that she took
possession of Nolan’s 2007 and 2008 tax records on
September 14, 2010. Guadagni delivered additional records
to her a few days later. Fouts began reviewing Nolan’s 2007
and 2008 tax records on October 1. On October 4, Fouts spent
additional time reviewing the tax records. From October 4 to
October 12, Fouts completed her review of Nolan’s 2009 tax
records and finished the return for that same year. In
finalizing Nolan’s 2009 return, Fouts also reviewed Nolan’s
2008 tax records to “make sure that certain information from
2008 was carried over properly to 2009, and [she also]
reviewed the 2007 records for consistency.”
6 UNITED STATES V . SIDEMAN & BANCROFT , LLP
Through this review process, Fouts became very familiar
with Nolan’s tax documents. In her declaration submitted to
the district court, Fouts stated that Nolan’s tax records were
distinct for a number of reasons. First, the records reflected
that Nolan did not operate her law practice as a corporation,
which was unusual to Fouts because most practitioners with
a similar level of income operate their practices that way.
Second, Fouts identified the amount of monthly income for
Nolan’s law practice during the years 2008 to 2009,
observing that it was “fairly consistent” month to month.
Fouts also recalled and stated the law practice’s income for
the year 2007. Third, Fouts stated that Nolan paid all of her
individual and business expenses with checks that she wrote
and signed by hand. Fouts also explained that Nolan
maintained handwritten check registers and checkbooks that
produced carbon copies. Fourth, Fouts reported that Nolan
treated her workers as independent contractors rather than
employees. Fifth, Fouts stated that Nolan and her paralegals
kept track of their billable time via handwritten notations in
appointment books. Nolan’s staff would then convert the
handwritten notes to client bills using a QuickBooks software
program. A paper copy of each bill would be placed in a
folder kept for each client. Lastly, Fouts reported that Nolan
had numerous residential properties, including rentals, and a
vacation home.
Fouts also confirmed in her declaration that she had given
Nolan’s tax records to Guadagni after becoming concerned
that they were covered by the IRS summons, which Nolan
had told her about. She further declared that she learned that
Guadagni did not give the documents to the IRS as she had
thought he would but instead gave them to Sideman. Fouts
also described how she gave a “detailed description” of the
2007 and 2008 documents to Special Agent Pahnke. She also
UNITED STATES V . SIDEMAN & BANCROFT , LLP 7
confirmed that the summons, reproduced above, conforms to
the description she gave to Special Agent Pahnke and
“accurately summarizes the documents [she reviewed] in the
course of [her] work for Nolan, down to the type of boxes and
folders the documents were contained in on October 13, 2010
when [she] saw them last.” Fouts explained that she “is
confident that if [she] saw Nolan’s 2007–2008 documents
again, [she] could identify and authenticate them, based on
the personal knowledge [she] gained from reviewing and
working with them and based on their distinctive
characteristics and contents.”
The district court granted the IRS’s petition to enforce,
finding that the summonsed documents fell within the
“foregone conclusion” exception to the Fifth Amendment.
The district court limited the scope of the summons, however,
by striking the language “including but not limited to the
following” from the summons and replacing it with
“specifically the following.” Sideman now appeals.
II.
“We review de novo a district court’s application of the
Fifth Amendment privilege against self-incrimination.”
United States v. Bright, 596 F.3d 683, 690 (9th Cir. 2010).
“Whether the existence of documents is a foregone
conclusion is a question of fact, which we review for clear
error.” Id. We also review for clear error a finding as to
whether the authenticity of documents is a foregone
conclusion. United States v. Doe, 465 U.S. 605, 613–14
(1984).
“The Fifth Amendment grants persons the privilege not to
provide the State with [self-incriminatory] evidence of a
8 UNITED STATES V . SIDEMAN & BANCROFT , LLP
testimonial or communicative nature.” Id. at 692 (alteration
in original) (internal quotation marks omitted). This
protection extends not only to oral questioning but also
applies to prevent an individual from having to produce
documents for investigative bodies if the act of production
itself would be testimonial. Id. at 691. This protection also
extends to prevent an individual’s attorney from being
compelled to produce documents if that production would
violate the individual’s Fifth Amendment rights. In Fisher v.
United States, 425 U.S. 391 (1976), the Supreme Court
explained that where an individual transfers documents to his
or her attorneys to obtain legal assistance in tax
investigations, those documents, “if unobtainable by
summons from the client, are unobtainable by summons
directed to the attorney by reason of the attorney-client
privilege.” Id. at 405. Accordingly, Sideman does not have to
produce the tax records if doing so violates Nolan’s Fifth
Amendment rights.
Sideman contends that, here, the act of producing Nolan’s
2007 and 2008 tax documents would be testimonial in
violation of Nolan’s Fifth Amendment rights. Production of
documents may be testimonial because
[t]he act of producing evidence in response to
a subpoena . . . has communicative aspects of
its own, wholly aside from the contents of the
papers produced. Compliance with the
subpoena tacitly concedes the existence of the
papers demanded and their possession or
control by the taxpayer. It also would indicate
the taxpayer’s belief that the papers are those
described in the subpoena.
UNITED STATES V . SIDEMAN & BANCROFT , LLP 9
Id. at 410. Nevertheless, “where ‘[t]he existence and location
of the papers are a foregone conclusion and the taxpayer adds
little or nothing to the sum total of the Government’s
information by conceding that he in fact has the papers[,] . . .
enforcement of the summons’ does not touch upon
constitutional rights.” Bright, 596 F.3d at 692 (quoting
Fisher, 425 U.S. at 411). For the “foregone conclusion
exception to apply, the government must establish its
independent knowledge of three elements: the documents’
existence, the documents’ authenticity and respondent’s
possession or control of the documents.” Id.
We now consider whether the district court clearly erred
in determining that the foregone exception applies here. We
look first at the existence and possession elements and then
address authenticity.
A.
The Government “‘bears the burdens of production and
proof on the questions of . . . possession[ ] and existence of
the summoned documents.’” In re Grand Jury Subpoena,
Dated Apr. 18, 2003, 383 F.3d 905, 910 (9th Cir. 2004)
(quoting In re Grand Jury Proceedings, Subpoenas for
Documents, 41 F.3d 377, 380 (8th Cir. 1994)). This is a
highly fact-intensive inquiry that looks at the “‘quantum of
information possessed by the government before it issued the
relevant subpoena.’” Id. (quoting United States v. Hubbell,
167 F.3d 552, 569 (D.C. Cir. 1999), aff’d, 530 U.S. 27
(2000)).
Here, the “quantum of information” possessed by the IRS
prior to its issuance of the summons as to the existence and
possession of the summonsed document is substantial. The
10 UNITED STATES V . SIDEMAN & BANCROFT , LLP
IRS learned that Fouts had been retained to prepare Nolan’s
amended income tax returns for the years 2007 and 2008.
Fouts identified for the IRS the documents that Nolan had
given her to prepare the 2007 and 2008 amended returns. The
documents Fouts identified became the list of documents
Special Agent Pahnke identified in the summons. Further,
Fouts told the IRS that these documents were contained in
four bankers boxes and three accordion folders.
The IRS had precise knowledge of the location of these
boxes and folders and the documents contained therein. IRS
agents learned from Fouts that she delivered the tax records
to Nolan’s civil attorney, Guadagni. Special Agent Pahnke
contacted Guadagni and learned that Guadagni had given the
documents to Nolan’s criminal attorney at Sideman. Thus,
from its investigation, the IRS knew with “reasonable
particularity” the existence and Sideman’s possession of
Nolan’s 2007 and 2008 tax records prior to issuing the
summons. See In re Grand Jury Subpoena, Dated Apr. 18,
2003, 383 F.3d at 910. The district court’s findings of
existence and possession were not clearly erroneous.
B.
“The authenticity prong of the foregone conclusion
doctrine requires the government to establish that it can
independently verify that the compelled documents ‘are in
fact what they purport to be.’” Id. at 912 (quoting United
States v. Stone, 976 F.2d 909, 911 (4th Cir. 1992)). We have
explained that not only must the Government show that it can
independently establish that the summonsed documents are
what they purport to be, it must demonstrate that it is not
“compelling the [taxpayer] to use his discretion in selecting
and assembling the responsive documents, and thereby tacitly
UNITED STATES V . SIDEMAN & BANCROFT , LLP 11
providing identifying information that is necessary to the
government’s authentication of the subpoenaed documents.”
Id.
We therefore now turn to whether the Government has
met its burden of demonstrating that it can independently
verify that the summonsed tax documents “are what they
purport to be” thanks to Fouts’s familiarity with those
documents. During her interview with IRS agents, Fouts
“gave them a detailed description of the 2007–2008
documents that [she] had in [her] possession.” It is apparent
from Fouts’s declaration submitted to the district court that
she was very familiar with Nolan’s tax records. Fouts
described key details about the records, including that Nolan
ran her business as a sole proprietorship; that Nolan’s law
practice grossed consistent income from month to month; that
Nolan paid her individual and business expenses with hand-
written checks she signed herself; that Nolan classified those
working for her as independent contractors rather than
employees; that Nolan recorded her billable time in a
“dayplanner” appointment book and used QuickBooks to
create a bill for each client; and that Nolan owned several
rental properties in addition to her residence. Fouts also
described the containers in which those documents were
stored: four large banker boxes and three large accordion
folders.
Sideman contends that Fouts could not have sufficiently
familiarized herself with the sixty-six inch stack of
documents that comprise Nolan’s 2007 and 2008 tax records
because, Sideman asserts, Fouts spent only forty-five minutes
reviewing those documents. We are not persuaded by this
argument for two reasons: First, our review of the record
reveals that Fouts spent more than forty-five minutes
12 UNITED STATES V . SIDEMAN & BANCROFT , LLP
reviewing the summonsed records. The statement of account
Fouts sent to Nolan, which itemizes the time Fouts spent
reviewing Nolan’s tax records, does state that on October 1,
2010, Fouts spent 0.75 hours reviewing Nolan’s 2007 and
2008 tax records. But the statement of account also contains
an October 4, 2010 entry of 1.75 hours indicating that in
addition to performing other tasks, Fouts continued her
review of the prior years tax documents on that day. Fouts
also declared that from October 4 to October 12, 2010, she
prepared Nolan’s 2009 tax return. As part of that process,
Fouts compared the 2009 tax records to Nolan’s 2008 and
2007 tax records to check for consistency. Thus, although the
precise amount of time Fouts spent reviewing the 2007 and
2008 tax records is not clear, she did spend more time
reviewing the summonsed documents than the forty-five
minutes Sideman alleges.
Second, as pointed out above, Fouts can provide
numerous details about Nolan’s tax records. Indeed, due to
her extensive knowledge of Nolan’s tax records as described
in her declaration, there is a foundation for Fouts’s statement
that she is “confident that if [she] saw Nolan’s 2007–2008
documents again, [she] could identify and authenticate them,
based on the personal knowledge [she] gained from reviewing
and working with them and based on their distinctive
characteristics and contents.” In addition, for many of the
items, the Government does not need to rely solely on Fouts’s
ability to authenticate the documents. Indeed, Nolan’s billing
and payment records could be verified by comparing those
records and Nolan’s bank records. See Bright, 596 F.3d at
693; United States v. Schlansky, 709 F.2d 1079, 1083 (6th
Cir. 1983). Thus, regardless of the exact amount of time
Fouts spent reviewing the summonsed documents, the
UNITED STATES V . SIDEMAN & BANCROFT , LLP 13
Government has established that it is able to independently
authenticate the summonsed records.
Sideman also contends that Nolan should be granted “act-
of-production” immunity prior to Sideman’s being compelled
to turn over Nolan’s tax records, some of which were
prepared by Nolan herself. In support of its argument,
Sideman cites to a 2001 under-seal proceeding in the
Northern District of California to which Sideman was a party.
See In re Grand Jury Subpoena to Richard Sideman, Sideman
& Bancroft LLP, Dated June 14, 2001, No. CR-01-219-
MISC-MHP (N.D. Cal. Mar. 3, 2001). In that proceeding, the
district court ruled that Sideman’s production of certain tax
records of its client would “implicitly authenticate” those
records, i.e., act as an admission that the documents were
authentic. Id. at 6. Accordingly, the district court explained
that before it could compel production of the documents, it
had to grant Sideman’s client immunity and agree to a
protective order forbidding the Government from referring to
the production. Id. at 10. Sideman argues that the 2001 case
supports the contention that production of Nolan’s documents
will “constitute an admission that the specific documents
sought in the summons were in Sideman’s possession . . . and
that they therefore exist and are authentic.”
The district court’s decision in the 2001 proceeding rests
on the conclusion that because the accountant could not
independently authenticate certain tax records produced by
the sole proprietorship, the foregone conclusion exception did
not apply to those records. However, merely because Nolan
prepared some of the records personally is not necessarily an
impediment to applying the foregone conclusion exception to
the Fifth Amendment protection against testimonial
production. See Doe, 465 U.S. at 614 n.13 (explaining that, in
14 UNITED STATES V . SIDEMAN & BANCROFT , LLP
the context of subpoenas for documents from sole
proprietorship companies, the Government was not
“foreclosed from . . . producing evidence that possession,
existence, and authentication [of the subpoenaed documents]
were a ‘foregone conclusion’”). Unlike the accountant in the
2001 case Sideman cites, Fouts can independently verify that
the tax documents are what they purport to be: Nolan’s 2007
and 2008 tax records. Nothing further is required to
authenticate the documents and thus, Sideman’s production
is not a necessary link in the chain of evidence for the
documents to be admissible. See, e.g., Fed. R. Evid.
901(b)(1), (4). Accordingly, the district court did not err in
enforcing the summons despite the Government’s failure to
grant Nolan act-of-production immunity.
Finally, the Government has met its burden of
demonstrating that it “can authenticate the documents . . .
described in the [summons] without the identifying
information that [Nolan] would provide by using h[er]
knowledge and judgment to sift through, select, assemble,
and produce the documents.” In re Grand Jury Subpoena,
Dated Apr. 18, 2003, 383 F.3d at 913. Sideman argues that
the district court’s order would require Nolan to review the
summons and numerous documents in Sideman’s possession
and then produce only the documents specifically listed in the
summons. The district court limited the scope of the
summons to include only those items identified in the
summons. Thus, Nolan will not have to look at any
document not found in the identified bankers boxes and
accordion folders. Moreover, Sideman’s argument that Nolan
will have to sort through the documents in the bankers boxes
and accordion folders is moot because the Government
agreed in open court that the delivery of the four bankers
boxes and three large accordion folders identified in the
UNITED STATES V . SIDEMAN & BANCROFT , LLP 15
summons, with their contents as delivered to Sideman, will
adequately comply with the summons. As a result, prior to
Sideman’s production of the documents, Nolan will not have
to “discriminate among documents, thereby identifying
information relevant to the authenticity of the documents.” Id.
(quoting In re Grand Jury Proceedings: Subpoena for
Documents, 41 F.3d 377, 380 (8th Cir. 1994)).
Accordingly, we conclude that the district court’s finding
that the IRS could independently authenticate Nolan’s 2007
and 2008 tax records contained in the identified collection of
boxes and folders currently held by Sideman was not clearly
erroneous.
Based on the facts found, which we hold were not clearly
erroneous, we conclude that the district court did not err in
applying the foregone conclusion exception when enforcing
Sideman’s compliance with the summons.
AFFIRMED.