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From http://www.usdoj.gov/osg/briefs/1988/sg880473.txt


No. 88-40

In The Supreme Court Of The United States

October Term, 1988

The Solicitor General, on behalf of the United States of America,
petitions for a writ of certiorari to review the judgment of the
United States Court of Appeals for the Ninth Circuit in this case.

Petition For A Writ Of Certiorari To The United States Court Of
Appeals For The Ninth Circuit


In addition to the parties named in the caption, Mary Sue Hubbard
and the Church of Scientology of California intervened in the district
court and are respondents here.

Questions Presented
Parties to the proceeding
Opinions below
Statutory provisions involved
Reasons for granting the petition


The order of the en banc court vacating the order granting
rehearing (App., infra, 1a-9a) is reported at 842 F.2d 1135. The
earlier order of the en banc court granting rehearing (App., infra,
10a) is reported at 832 F.2d 127. The opinion of the panel (App.,
infra, 11a-24a) is reported at 809 F.2d 1411. The March 12, 1985,
interim order of the district court (App., infra, 30a-32a), the April
30, 1985, order of the district court (App., infra, 27a-29a), and the
June 10, 1985, order of the district court denying reconsideration
(App., infra, 25a-26a) are unreported.


The judgment of the court of appeals was entered on February 9,
1987. A petition for rehearing was granted on November 6, 1987 (App.,
infra, 10a), and that order was vacated as improvidently granted on
March 28, 1988 (App., infra, 2a). On June 20, 1988, Justice O'Connor
extended the time to petition for a writ of certiorari to and
including July 8, 1988. The jurisdiction of this Court is invoked
under 28 U.S.C. 1254(1).


Section 7602 of the Internal Revenue Code of 1954 (26 U.S.C.)
provides in pertinent part:


(a) AUTHORITY TO SUMMON, ETC. -- For the purpose of
ascertaining the correctness of any return, making a return
where none has been made, determining the liability of any
person for any internal revenue tax or the liability at law or
in equity of any transferee or fiduciary of any person in
respect to any internal revenue tax, or collecting any such
liability, the Secretary is authorized --

(1) To examine any books, papers, records, or other data
which may be relevant or material to such inquiry;

(2) To summon the person liable for tax or required to
perform the act, or any officer or employee of such person, or
any person having possession, custody, or care of books of
account containing entries relating to the business of the
person liable for tax or required to perform the act, or any
other person the Secretary may deem proper, to appear before the
Secretary at a time and place named in the summons and to
produce such books, papers, records, or other data, and to give
such testimony, under oath, as may be relevant or material to
such inquiry; and

(3) To take such testimony of the person concerned, under
oath, as may be relevant or material to such inquiry.

* * * * *

Section 7604(a) of the Internal Revenue Code of 1954 (26 U.S.C.)
provides in pertinent part:


summoned under the internal revenue laws to appear, to testify,
or to produce books, papers, records, or other data, the United
States district court for the district in which such person
resides or is found shall have jurisdiction by appropriate
process to compel such attendance, testimony, or production of
books, papers, records, or other data.

* * * * *

Section 7421(a) of the Internal Revenue Code of 1954 (26 U.S.C.)
provides in pertinent part:


(a) TAX -- Except as provided in sections 6212(a) and (c),
6213(a), 6672(b), 6694(c), and 7426(a) and (b)(1), and 7429(b),
no suit for the purpose of restraining the assessment or
collection of any tax shall be maintained in any court by any
person, whether or not such person is the person against whom
such tax was assessed.

* * * * *


1. Whether, in the course of an action brought by the Internal
Revenue Service to enforce a summons, the court may place restrictions
on the disclosure of the summoned information.

2. Whether a prima facie case for the invocation of the crime-fraud
exception to the attorney-client privilege must be established by
independent evidence, or, alternatively, whether the applicability of
that exception can be resolved by an in camera inspection of the
allegedly privileged material.


1. In July 1984, the Criminal Investigative Division of the
Internal Revenue Service (IRS) began investigating the tax returns of
L. Ron Hubbard and others for tax years 1979-1983. Prior to the
commencement of the investigation, Los Angeles newspapers had reported
that former officials of the Church of Scientology had testified in
Church of Scientology v. Gerald Armstrong, No. C 420 153 (Cal. Super.
Ct.), that various Church of Scientology entities had transferred
millions of dollars to Hubbard in the late 1970s and early 1980s. In
October 1984, the IRS served an administrative summons on the Clerk of
the California Superior Court, an office now occupied by respondent
Zolin, seeking a number of documents contained in the record of the
Armstrong case. The Clerk's office produced some of the documents,
but it refused to produce 13 documents that had been ordered sealed by
the Superior Court. The government then initiated this proceeding in
the United States District Court for the Central District of
California to enforce the summons. App., infra, 12a.

Respondents Mary Sue Hubbard and Church of Scientology intervened
to oppose enforcement of the summons. They contend, inter alia, that
the summons had been issued for the improper purpose of gathering
information for use by other government agencies. After an
evidentiary hearing, the district court rejected this contention. The
court stated that the "Church has failed to raise any doubt of the
good faith of the Internal Revenue Service in pursuing this summons
enforcement proceeding" (App., infra, 27a). The court explained that
the summons was validly issued pursuant to a bona fide criminal tax
investigation of L. Ron Hubbard and that "the agent issuing the
summons was in good faith in doing so, and did not do so for an
improper purpose, or to harass the taxpayer, or for a collateral
purpose" (ibid.). The court therefore enforced the summons in part,
ordering production of the five disputed documents that it found to be
relevant and not privileged (id. at 28a).

The court's order further provided that the documents produced
"shall not be delivered to any other government agency by the IRS
unless criminal tax prosecution is sought or an Order of Court is
obtained" (App., infra, 29a). In denying the government's subsequent
motion for reconsideration, the court explained this restriction as
follows (id. at 26a): "Since the entire basis of the summons
proceeding was to obtain material for a tax investigation, the court
thinks it reasonable to restrict the use of the material for that
purpose, unless a criminal prosecution is instituted. If exigencies
of other litigation make it necessary, the IRS is free to make its
case for an exception to this court."

The court also denied enforcement of the summons in part, ruling
that eight of the documents were either irrelevant or privileged. In
particular, the court ruled that Exhibit 5C, tape recordings of two
meetings between various attorneys and representatives of L. Ron
Hubbard and the Church of Scientology that are known as the "MCCS
tapes," was protected by the attorney-client privilege. The
government argued that the "crime-fraud" exception to the
attorney-client privilege was applicable, /1/ relying on affidavits
from a special agent that contained partial transcripts of the tapes
and that stated that the excerpts and his discussions with former
Church employees had given the agent reason to believe that the
meetings were part of a criminal conspiracy to defraud the United
States (see App., infra, 23a-24a, 28a). /2/ The court found that the
government had not demonstrated the applicability of the crime-fraud
exception, stating that "(t)he quoted excerpts tend to show or admit
past fraud but there is no clear indication that future fraud or crime
is being planned" (id. at 28a). The government sought reconsideration
on the ground that the court should not have rejected the
applicability of the exception without an in camera inspection of the
complete tapes. The court denied the motion (App., infra, 25a-26a).

2. A panel of the court of appeals affirmed (App., infra, 11a-24a).
The court rejected the government's contention that the district
court had exceeded its authority in a summons enforcement proceeding
by imposing limitations on the IRS regarding disclosure of the
summoned information (id. at 18a-19a). Relying on its prior decision
in United States v. Author Services, Inc., 804 F.2d 1520, 1525 (9th
Cir. 1986), which in turn had relied upon United States v. Texas Heart
Inst., 755 F.2d 469, 481 (5th Cir. 1985), the court concluded that
"(a) district court may, when appropriate, condition enforcement of a
summons on the IRS's agreeing to abide by disclosure restrictions"
(App., infra, 19a).

The panel also affirmed that trial court's ruling that the
crime-fraud exception was not applicable to the MCCS tapes (App.,
infra, 21a-24a). Citing United States v. Shewfelt, 455 F.2d 836 (9th
Cir.), cert. denied, 406 U.S. 944 (1972), the panel explained that
circuit precedent had established the rule that the crime-fraud
exception could be invoked to justify disclosure of otherwise
privileged communications only where the government establishes "'a
prima facie case of fraud independently of said communications'"
(App., infra, 21a, quoting 455 F.2d at 840 (emphasis in original)).
While noting that "Shewfelt's independent evidence requirement ha(d)
been strongly criticized" and rejected by other courts, and that
another Ninth Circuit decision, United States v. Friedman, 445 F.2d
1076, cert. denied, 404 U.S. 958 (1971), had "implicitly recognized
that a district court may examine the disputed communications
themselves in order to determine the applicability of the
'crime-fraud' exception," the panel concluded that it was bound to
follow the independent evidence rule of Shewfelt unless that case was
overruled en banc (App., infra, 22a-23a). Applying that rule, the
panel concluded that the independent evidence in this case, consisting
of the special agent's declarations describing his conversations with
certain former Church employees (but not the partial transcripts of
the tapes), "while not altogether insubstantial, (was) not sufficient
to make out the requisite prima facie showing of intended illegality"
(id. at 23a-24a).

3. The court of appeals ordered the case reheard en banc (App.,
infra, 10a). Following supplemental briefing and oral argument,
however, the en banc court entered an order vacating "as improvidently
granted" the previous order granting rehearing en banc (id. at 1a-2a).
The order explained that there was no conflict between United States
v. Shewfelt, supra, and United States v. Friedman, supra, because
Friedman did not discuss whether there was an independent evidence
requirement. The en banc court confirmed that Shewfelt was the law of
the circuit on this point, holding that "the government must make a
prima facie showing, independent of the communications involved, that
the attorney-client communications were in furtherance of an intended
or present illegality" (App., infra, 2a). The en banc court also
ordered withdrawn the six paragraphs in the panel opinion that had
noted and discussed the criticisms of Shewfelt (see App., infra,
21a-23a). Id. at 2a.

Three judges dissented from the en banc court's order, arguing that
rehearing en banc had not been improvidently granted and that the en
banc court should overrule Shewfelt (App., infra, 2a-9a). The
dissenters criticized the majority for "perpetuat(ing) a maverick
version of the attorney-client privilege" that "clashes with that of a
majority of other circuits," noting that "the attorney-client
privilege, as a rule of evidence for the federal courts, has an
overriding need for national uniformity" (id. at 3a). The dissenters
noted that "(e)very circuit to face the situation this case presents
has allowed in camera inspection," citing cases from six different
courts of appeals (id. at 4a). The dissenters then discussed the
merits of the independent evidence rule (id. at 4a-8a) and concluded
that they "would overrule Shewfelt, eliminate the independent evidence
requirement, and allow in camera inspection of suspect communications"
(id. at 8a).


This case presents two distinct questions that are of considerable
importance to the exercise of the IRS's summons authority and on each
of which there exists a direct conflict in the circuits. First, the
court of appeals' holding that it is appropriate in a summons
enforcement proceeding for a district court to impose limitations on
the dissemination by the IRS of the summoned information poses a
serious threat to the expeditious enforcement of summonses. This
Court has recognized that summons enforcement proceedings should be
summary in nature and limited to the determination of the IRS's right
to obtain needed information. See Donaldson v. United States, 400
U.S. 517, 529 (1971); United States v. Powell, 379 U.S. 48, 57-58
(1964). The expansion of the scope of summons enforcement proceedings
sanctioned by the court of appeals here substantially departs from
that model by prolonging the proceedings and by interjecting into them
extraneous and difficult issues concerning the allowable scope of IRS
disclosures of tax return information.

Second, the court of appeals' "maverick" (App., infra, 3a) approach
to the crime-fraud exception poses a serious practical obstacle to the
invocation of that exception because independent evidence that an
attorney-client communication involves a crime or a fraud often will
not be available. The result is that communications that, upon
examination, would reveal themselves to be clearly outside the scope
of the attorney-client privilege nevertheless will be withheld from
government legislators.

Thus, two separate aspects of the decision below threaten to create
severe obstacles for the IRS in conducting its tax investigations.
Because each of these important holdings directly conflicts with
decisions of other courts of appeals, this Court should grant
certiorari to resolve the conflicts.

1. a. The decision below, and the Ninth Circuit's prior decision in
United States v. Author Services, Inc., 804 F.2d 1520, 1525-1526
(1986), on which the court below relied, directly conflict with the
rule adopted by the Fifth Circuit en banc in United States v. Barrett,
837 F.2d 1341 (1988), petition for cert. pending, No. 87-1705. Author
Services involved another IRS summons issued in the course of the same
tax investigation involved in the present case. The court enforced
the summons, but it also upheld the portion of the district court's
order that prohibited the IRS from delivering the summoned documents
to any agency or individual without a court order, unless a criminal
tax prosecution was being sought. The court of appeals found that
this condition was justified because the many levels of ongoing
litigation between the Church of Scientology and the government had
given the district court the "fear 'that information acquired for one
purpose may be in effect used for civil discovery in the other'" (804
F.2d at 1526). The court of appeals concluded that the imposition of
conditions upon disclosure of summoned information is justified by the
court's "broad authority, under 26 U.S.C. Section 7402(a) (1982), to
issue any orders or decrees 'as may be necessary or appropriate for
the enforcement of the internal revenue laws'" (804 F.2d at 1525); on
the facts there, the court concluded that the condition imposed by the
district court was "a wise exercise of control, serving the interests
of judicial economy" (id. at 1526). Here, the court of appeals simply
followed Author Services in upholding the same condition upon the
disclosure of information obtained pursuant to another summons issued
in the course of the same investigation of the Church of Scientology
(App., infra, 19a).

The Ninth Circuit's decisions allowing the conditional enforcement
of summonses cannot be reconciled with the rule established in the
Fifth Circuit. The latter court originally reached the same
conclusion as the Ninth Circuit on this issue in United States v.
Texas Heart Inst., 755 F.2d 469 (5th Cir. 1985), and, indeed, that
decision was cited by the Ninth Circuit both in Author Services (804
F.2d at 1525) and in the present case (App., infra, 19a). In Texas
Heart, pursuant to a criminal tax investigation of Dr. Bernard
Barrett, the IRS had issued summonses to several hospitals seeking
lists of Dr. Barrett's patients. All but four of the hospitals
complied with the summonses. The IRS then sent form letters to each
of the patients stating that Dr. Barrett was under investigation by
the IRS and requesting information about the fees paid to him. In an
action brought by the IRS to enforce the summonses issued to the four
hospitals that had not complied, the district court refused to enforce
the summonses, objecting in part to the form letters that were being
sent to the patients whose identities were divulged by the hospitals.
The court of appeals reversed and ordered the summonses enforced,
holding, inter alia, that Barrett's assertion that the IRS had
violated 26 U.S.C. 6103 in disclosing to his patients that he was
under investigation provided no basis for doubting the IRS's good
faith in issuing the summonses and therefore no basis for not
enforcing them. /4/ The court added, however, that if the district
court determined that improper disclosures had been made to the
patients, the "enforcement of the summonses may be conditioned on an
IRS agreement to cease such improper disclosures" (755 F.2d at 481).

The Fifth Circuit, however, has specifically overruled Texas Heart,
and its rule is now in direct conflict with that of the Ninth Circuit.
United States v. Barrett, 804 F.2d 1376 (1986), rev'd en banc, 837
F.2d 1341 (1988), petition for cert. pending, No. 87-1705, involved
another summons in the same investigation, which was addressed to
Barrett's professional corporation. The panel, concluding that it was
bound by Texas Heart, ordered the district court to consider whether
the summons should be conditionally enforced. The full court granted
the government's petition for rehearing en banc, however, and affirmed
the district court's decision to enforce the summons unconditionally.
The en banc court held that a district court lacks the power to impose
conditions upon the enforcement of a summons, and it explicitly
overruled both Texas Heart (837 F.2d at 1351) and an earlier decision,
Dunn v. Ross, 356 F.2d 664 95th Cir. 1966), to the extent that it
could be read "to endorse the district court's ability to
conditionally enforce a summons" (837 F.2d at 1350).

The conflict between the Fifth and Ninth Circuits on this issue
could not be clearer. /5/ In Author Services, the Ninth Circuit
rejected the government's contention that "the court is limited to
either enforcing a summons or denying enforcement," stating that
"(c)learly this is not the case" (804 F.2d at 1525). By contrast, the
en banc court in Barrett explicitly held that, "(i)n a summons
enforcement proceeding, the district court's only task is to determine
whether the summons should or should not be enforced" (837 F.2d at
1350). And the court of appeals here expressly held that, in the
Ninth Circuit, "(a) district court may, when appropriate, condition
enforcement of a summons on the IRS' agreeing to abide by disclosure
restrictions" (App., infra, 19a). The Barrett court held, to the
direct contrary, that "(t)he district court does not have the power to
conditionally enforce the summons" (837 F.2d at 1350).

b. Because the question of the power of a district court to place
conditions on the enforcement of a summons has a substantial effect on
the IRS's ability to conduct its investigation, it is important that
the conflict in the circuits on this point be resolved. It is well
established that summons enforcement proceedings are designed to be
"summary" in nature. Donaldson v. United States, 400 U.S. at 529;
see also, e.g., United States v. Rylander, 460 U.S. 752, 756 (1983);
United States v. Kis, 658 F.2d 526, 535-536 (7th Cir. 1981); United
States v. Davis, 636 F.2d 1028, 1038 (8th Cir.), cert. denied, 454
U.S. 862 (1981); M. Saltzman, IRS Practice and Procedure Paragraph
13.04, at 13-25 to 13-27 (1981). An expeditious mechanism for
enforcement is essential because delay can seriously interfere with
the IRS's exercise of its investigative authority. Thus, this Court
has limited the right of taxpayers to intervene in summons enforcement
proceedings (Donaldson v. United States, supra), "apparently out of
concern for the ability of a taxpayer to delay the investigative
process by forcing protracted enforcement proceedings" (M. Saltzman,
supra, at 13-25). And the Court has rejected the introduction into
summons enforcement proceedings of issues going beyond the traditional
inquiry into "institutional good faith," noting that the additional
inquiries would cause "undesirable" delays. United States v. LaSalle
Nat'l Bank, 437 U.S. 298, 316 (1978). Congressional enactments
stimulated by those decisions have been responsive to the same
concerns. See 26 U.S.C. 7602(c), 7609(c); S. Rep. 97-494, 97th
Cong., 2d Sess. 285 (1982); H.R. Rep. 94-658, 94th Cong., 2d Sess.
309 (1976).

The decision of the court of appeals ignores this clearly
established statutory policy to avoid delay, and it therefore poses a
serious threat to the IRS's ability to conduct efficient tax
investigations. As the court of appeals frankly acknowledged (App.,
infra, 19a), "(t)he district court's order in this case created a
mechanism whereby the district court could monitor the IRS' use of the
summoned documents." Thus, far from the "summary" enforcement
proceeding, the court of appeals has sanctioned a procedure under
which the IRS's investigation will be subject to constant scrutiny and
attack by the summoned party. In the context of a criminal
investigation, litigation over IRS summonses typically is a struggle
between the government's efforts to obtain information in a timely
fashion and the taxpayer's attempts to delay the investigation.
Allowing taxpayers to litigate hypothetical or anticipatory disclosure
questions in summons enforcement proceedings would lead to the courts'
repeated involvement at each new step of the investigation, which has
the potential to cause significant delays while the courts supervise
the government's use of the summoned material. /6/ Thus, if permitted
to stand, the court of appeals' decision would have deleterious
effects on the enforcement of the tax laws because it would
"'stultify' and unduly delay the investigation sought by the IRS" into
violations of those laws. United States v. Ernst & Whinney, 750 F.2d
516, 520 (6th Cir. 1984) (quoting Donaldson v. United States, 400 U.S.
at 531).

c. The decision below is erroneous. This Court has repeatedly
emphasized that the role of the judiciary in a summons enforcement
action is a limited one -- to guard against abuses of the power to
summon documents or testimony. See, e.g., United States v. Bisceglia,
420 U.S. 141, 150 (1975); United States v. Powell, 379 U.S. at 57-58.
That role plainly does not encompass supervising the investigation
and the manner in which the IRS uses the summoned material. The
summons power, of course, is not absolute; as this Court made clear
in Powell, the court may refuse to enforce the summons if it finds
that it was not issued in good faith -- i.e., if the summons is not
relevant to an investigation conducted pursuant to a legitimate
purpose. Id at 58. If a summons meets that good faith threshold,
however, the Court has consistently held that restrictions on the
IRS's summons authority should not be imposed "'absent unambiguous
directions from Congress.'" United States v. Arthur Young & Co., 465
U.S. 805, 816 (1984) (quoting United States v. Bisceglia, 420 U.S. at

Here, both courts below agreed that the summons met the Powell
standards and should be enforced. And the courts did not suggest that
any future disclosures by the IRS would create any question about the
good faith of the investigation; despite the Church's allegations
that other government agencies were concerned with its operations, the
district court found that the Church had "failed to raise any doubt of
the good faith of the Internal Revenue Service in pursuing this
summons enforcement proceeding" (App., infra, 27a). This conclusion
was clearly correct because the question of good faith in issuing a
summons (i.e., whether it is issued in aid of an investigation
conducted pursuant to a legitimate purpose) is wholly independent of
the question whether the IRS has made disclosures that violate Section
6103. As one court of appeals has stated in rejecting a similar
objection to enforcement of a summons on the ground that there had
been Section 6103 violations, evidence of unlawful disclosures "does
not reflect on the good faith of the investigation itself" (United
States v. Balanced Fin. Mgmt., Inc., 769 F.2d 1440, 1448 (10th Cir.
1985)). See also United States v. Chemical Bank, 593 F.2d 451, 456
(2d Cir. 1979). /7/

The Fifth Circuit correctly stated in Barrett that the court's role
in a summons enforcement proceeding is limited to determining whether
the summons was issued in good faith and "(t)here is no statutory
authority, nor congressional indication that existing statutes supply
the authority, nor Supreme Court authority, to allow the district
court to make any consideration except whether to enforce or not to
enforce the summons" (837 F.2d at 1350). The apparent purpose of the
conditions on disclosure imposed by the district court here was to
ensure that the IRS would not violate the confidentiality protections
of Section 6103 in its future use of the summoned material; in the
words of the court of appeals, the enforcement order established "a
mechanism whereby the district court could monitor the IRS's use of
the summoned documents" (App., infra, 19a). But Congress established
a remedial framework for enforcing Seciton 6103, and there is no
reason to conclude that those remedies are inadequate when the
documents in question have been obtained by means of a summons.
Therefore, the court below erred in interfering with the established,
summary nature of summons enforcement proceedings in an effort to
augment judicially the statutory framework for enforcing Section 6103.

Congress created both a civil damage remedy for violations of
Section 6103 (see 26 U.S.C. 7431) and criminal sanctions against
federal employees who make unlawful disclosures (see 26 U.S.C.
7213(a)). But Congress did not provide a means for an individual to
seek injunctive relief against possible future violations of Section
6103. /8/ Thus, if a person believes that the IRS is planning to make
an unlawful disclosure of confidential tax return information that he
supplied to the agency, he cannot bring suit to enjoin or prevent that
disclosure; rather, he is limited to the remedy provided by Congress
of seeking damages, if, in fact, such a disclosure actually occurs.
There is no reason why a different rule should obtain where the
confidential information was obtained by means of a summons. If the
summons meets the traditional criteria for enforcement, then the
district court is obliged to enforce it and order the material turned
over to the IRS. The investigation should not be delayed while the
court embarks on a course of litigation (and presumably appellate
litigation) about whether certain conditions should or should not be
included in the particular enforcement order. Nor is the court
empowered to monitor the IRS's investigation to prevent the disclosure
of that material in violation of Section 6103; rather, if such a
disclosure occurs, the aggrieved person may invoke the remedies
provided by Congress.

Indeed, the condition imposed by the courts in this case on
enforcement of the summons violates the specific restrictions of the
Tax Anti-Injunction Act, 26 U.S.C. 7421(a). That statute generally
withdraws jurisdiction from the courts to hear suits for the "purpose
of restraining the assessment or collection of any tax," and it has
been broadly construed to apply to any IRS activitiy necessary to
determine tax liability, including investigative activity. Thus, the
courts have held that the Act applies to bar "a taxpayer seeking to
enjoin the IRS from acquiring or using the information necessary" to
determine tax liability. United States v. First Family Mortgage
Corp., 739 F.2d 1275, 1278 (7th Cir. 1984). See, e.g., Lowrie v.
United States, 824 F.2d 827, 830-831 (10th Cir. 1987); Black v.
United States, 534 F.2d 524, 526-527 (2d Cir. 1976); see also Bob
Jones Univ. v. Simon, 416 U.S. 725, 738-739 (1974). This case falls
within the proscription of the Anti-Injunction Act. The district
court has restrained the IRS's conduct of its investigation by
enjoining it (pending a further court order) from making full use of
material that is lawfully in it its possession pursuant to a valid

2. a. The court of appeals' restrictive view of the crime-fraud
exception to the attorney-client privilege directly conflicts with the
prevailing rule in the other courts of appeals. The en banc court in
this case stated unequivocally that United States v. Shewfelt, 455
F.2d 836 (9th Cir.), cert. denied, 406 U.S. 944 (1972), remains the
law of the Ninth Circuit. In Shewfelt, the court had stated that
"before the privileged status of (attorney-client) communications can
be lifted, the government must first establish a prima facie case of
fraud independentsly of the said communications" (455 F.2d at 840
(emphasis added)), and the court restated that rule in essentially the
same terms in this case (App., infra, 2a). As the dissenters from the
en banc ruling stated, this independent evidence requirement has never
been adopted by another court of appeals and constitutes "a maverick
version of the attorney-client privilege" that "clashes with that of a
majority of other circuits" (id. at 3a).

The Eighth Circuit explicitly rejected the Shewfelt rule in In re
Berkley & Co., 629 F.2d 548 (1980). The company from which documents
had been subpoenaed by a grand jury in that case had relied on
Shewfelt in arguing that independent evidence of crime or fraud was
necessary to defeat its claim of attorney-client privilege. The
Eighth Circuit flatly rejected that claim, noting that "(t)he cases
relied on in Shewfelt * * * do not support the independent evidence
restriction" (629 F.2d at 553 n.9). Moreover, as the dissenters in
this case stated (App., infra, 4a), several other courts of appeals
have approved in camera inspection of the documents in question in
order to determine the applicability of the crime-fraud exception.
See, e.g., In re Antitrust Grand Jury, 805 F.2d 155, 168-169 (6th Cir.
1986); In re Sealed Case, 754 F.2d 395, 400 (D.C. Cir. 1985); In re
John Doe Corp., 675 F.2d 482, 490 (2d Cir. 1982); In re Special Sept.
1978 Grand Jury II, 640 F.2d 49, 59-61 (7th Cir. 1980); In re Grand
Jury Proceedings (FMC Corp.), 604 F.2d 798, 800 (3d Cir. 1979); Union
Camp Corp. v. Lewis, 385 F.2d 143, 144 (4th Cir. 1967); see also In
re Sealed Case, 676 F.2d 793, 815 (D.C. Cir. 1982) (footnote omitted)
(opinion of Wright, J.) ("the subpoenaed material itself may provide
prima facie evidence of a (crime or fraud)"). The rule reaffirmed by
the Ninth Circuit in this case necessarily rejects the use of in
camera inspection and cannot be squared with these decisions.

b. The Ninth Circuit clearly erred in adopting a rule that prevents
the invocation of the crime-fraud exception unless the government can
produce independent evidence that the communication in question
relates to a crime or a fraud. Analysis of the issue points
inexorably to the conclusion that the applicability of the crime-fraud
exception may be demonstrated by an in camera inspection of the
communication in question. The purpose of the attorney-client
privilege is "to encourage full and frank communication between
attorneys and their clients and thereby promote broader public
interests in the observance of law and administration of justice"
(Upjohn Co. v. United States, 449 U.S. 383, 389 (1981)). The
privilege applies where it is necessary to achieve its purpose, but it
does not absolutely apply to all communications between attorney and
client. See Fisher v. United States, 425 U.S. 391, 403 (1975). In
particular, it does not apply when a client consults an attorney for
advice in carrying on a contemplated or ongoing crime or fraud. See
Clark v. United States, 289 U.S. 1, 15-16 (1933). In such a case, the
communication is not designed to promote "the observance of law and
administration of justice" (Upjohn Co. v. United States, 449 U.s. at
389), but to subvert it; extending a privilege to this type of
communication would not advance any desirable policy and would deny to
the courts what may be highly probative evidence.

Thus, when an attorney-client communication is related to criminal
or fraudulent activity, it is not privileged and should not be treated
as if it were. This is equally true whether the relation to crime or
fraud can be demonstrated only be examination of the communication
itself or whether it can also be shown by evidence independent of such
examination. There is no rationale for a rule that would apply the
crime-fraud exception to the privilege only in the latter case, but
not in the former, and the Ninth Circuit makes no attempt either in
this case or in Shewfelt to justify such a rule. The validity of many
kinds of claims of privilege is commonly resolved by means of an in
camera examination, and there is no reason why utilization of that
procedure is any less appropriate when the issue is the applicability
of the crime-fraud exception. See e.g., Kerr v. United States Dist.
Court, 426 U.S. 394, 405-406 (1976); United States v. Nixon, 418 U.S.
683, 713-714 (1974); Halkin v. Helms, 598 F.2d 1, 5-6 (D.C. Cir.

This Court's recent decision in Bourjaily v. United States, No.
85-6725 (June 23, 1987), further undermines any argument for the
independent evidence requirement. There, the Court concluded that a
previously-recognized independent evidence requirement for invocation
of the co-conspirator hearsay exception (Fed. R. Evid. 801(d)(2)(E))
is no longer good law in modern practice under the Federal Rules of
Evidence. The Court explained that there is no reason to exclude any
probative evidence from the determination whether the exception should
apply and that this approach is embodied in the language of the new
Rules (see Rule 104(a)). /9/ The present case is an even stronger one
for rejection of an independent evidence requirement than was
Bourjaily. The independent evidence rule there was supported to some
extent by the fact that the evidence whose admissibility was in doubt
was hearsay and thus presumptively unreliable; it was arguable,
therefore, that hearsay should not be viewed as probative evidence on
the question whether the exception should apply. Here, by contrast,
there is no doubt as to the reliability of the evidence; in camera
examination of the disputed communication is often the most reliable
way of determining whether it is related to a crime or a fraud. See,
e.g., In re Antitrust Grand Jury, 805 F.2d at 168. Moreover, the
independent evidence rule at issue in Bourjaily had been fairly well
established prior to the promulgation of the Rules of Evidence; here,
by contrast, the Ninth Circuit's rule that independent evidence is
required for invocation of the crime-fraud exception is at odds with
prior law and the rule in other circuits.

If permitted to stand, the decision below would significantly
impair IRS investigations (and other law enforcement investigations)
in the Ninth Circuit. The actual contents of an attorney-client
communication will often be the best evidence of whether the
crime-fraud exception is applicable. Thus, permitting in camera
inspecton of such communications is the most precise and efficient way
of determining whether the claim of attorney-client privilege should
be upheld. Moreover, in many cases, the contents of the communication
will be the only evidence of whether it is related to crime or fraud.
Accordingly, as one district court in the Ninth Circuit stated in
declining to follow Shewfelt, the independent evidence rule, "in most
instances, simply serve(s) to insulate dishonest attorneys from
prosecution for obstruction of justice." United States v. King. 536 F.
Supp. 253, 262 (C.D. Cal. 1982). See also App., infra, 5a. Probative
evidence of crimes would be denied to investigators for no reason,
since it is undisputed that protection of an attorney-client
communication that is related to crime or fraud does not advance the
purposes of the privilege. In light of the harmful consequences of
the Ninth Circuit's independent evidence requirement, the fact that
most courts of appeals have concluded that such a requirement is
unnecessary and inappropriate, and the desirability of a uniform rule
on this important evidentiary question of nationwide application, this
Court should resolve the conflict in the circuits and harmonize the
Ninth Circuit's approach to the crime-fraud exception with the rule
prevailing in other courts of appeals.


The petition for a writ of certiorari should be granted.

Respectfully submitted.


Solicitor General


Assistant Attorney General


Deputy Solicitor General


Assistant to the Solicitor General




JULY 1988

/1/ It is well established that the attorney-client privilege does
not protect communications made in furtherance of a crime or fraud.
To invoke this exception, there must be a prima facie showing that the
client was engaged in or planning criminal or fraudulent conduct and
that the attorney's advice was in furtherance of or closely related to
the criminal or fraudulent activity. See e.g., Clark v. United
States, 289 U.S. 1, 15-16 (1933); In re Grand Jury Investigation, 842
F.2d 1223, 1226-1227 (11th Cir. 1987).

/2/ The affidavits alleged that the taped meetings, part of the
MCCS (Mission Corporate Category Sortout) Project, "focused generally
on the intentional violation of the tax laws," specifically, "(i) a
proposed scheme whereby the Church's cash transfers to Hubbard would
be disguised as payments for services rendered (allegedly to insulate
Hubbard from tax liability and to protect the Church's tax-exempt
status), and (ii) a proposed scheme whereby Hubbard would be able to
control royalty income * * * without that control being traceable to
him" (App., infra, 23a-24a).

/3/ The court stated that, "(w)hile * * * at one time (listening to
the tapes in toto was) discussed with counsel, thereafter Mr.
Petersell's declaration was submitted, and no one suggested that this
was an inadequate basis on which to determine the attorney-client
privilege question" (App., infra, 25a-26a). In fact the pleadings
filed with the court together with the Petersell declarations on March
8 and 15, 1985, specifically requested the court to listen to the
tapes themselves if the court concluded that the partial transcripts
and the special agent's declarations did not sufficiently demonstrate
the applicability of the crime-fraud exception. See Mar. 8, 1985
Government's Response to Intervenor's Opposition at 6; Mar. 15, 1985,
Petitioner's Memorandum in Response to Court's Request and for Partial
Reconsideration of Interim Ruling at 11. The court of appeals did not
address the question of the sufficiency of the in camera showing
because it concluded that the contents of the tapes themselves could
not be used to demonstrate the applicability of the crime-fraud
exception (see pages 7-8, infra).

/4/ Section 6103(a) generally prohibits the IRS from disclosing tax
"return information" except in the circumstances specifically
permitted by that section. See generally Church of Scientology v.
IRS, No. 86-472 (Nov. 10, 1987), slip op. 1-3. Section 6103 then sets
forth in considerable detail the circumstances under which such
disclosures are authorized to certain identified parties, including
specified government agencies, congressional committees, and
representatives of a taxpayer. See 26 U.S.C. 6103(c)-(o). The
information that Barrett was under investigation falls within the
definition of "return information" that is protected by Section 6103.
The government's position was that the disclosure in the letters was
authorized by 26 U.S.C. 6103(k)(6), which permits the disclosure of
return information "to the extent * * * necessary in obtaining
information" in connection with an audit or other investigation
related to the enforcement of the revenue laws.

/5/ Indeed, the en banc Fifth Circuit in Barrett expressly
acknowledged (837 F.2d at 1351 n.11) the contrary Ninth Circuit
decisions in Author Services and in the present case.

/6/ The actual litigation that would ensue in the course of this
"monitoring" of the investigation would likely be protracted because
it would often center upon complex and difficult questions of
interpreting 26 U.S.C. 6103, particularly the scope of the subsection
authorizing disclosure when necessary for law enforcement purposes
(Section 6103(k)(6)).

/7/ By the same token, the courts of appeals have held that the
question whether the IRS has complied with the provisions of the
Privacy Act, 5 U.S.C. 552a, is irrelevant to whether a summons should
be enforced. United States v. McAnlis, 721 F.2d 334, 337 (11th Cir.
1983), cert. denied, 467 U.S. 1227 (1984); United States v. Berney,
713 F.2d 568, 572-573 (10th Cir. 1983).

/8/ 26 U.S.C. 6110 authorizes disclosure and public inspection of
certain "written determination(s)," including private letter rulings.
That provision requires the IRS to give pre-disclosure notice to
person to whom the determination pertains, and it gives those persons,
if they object to the IRS's failure to make a deletion in order to
preserve their confidentiality, the right to seek a pre-disclosure
determination in the Tax Court of their right to such a deletion
(Section 6110(f)(3)). There is no analogous right to go to court to
challenge a proposed disclosure under Section 6103.

/9/ The Federal Rules of Evidence do not govern the outcome here
because Congress decided to leave to the common law evidentiary rules
related to privileges, rather than to address them directly in the
Rules. See Fed. R. Evid. 501. It is noteworthy, however, that the
proposed rules that had been drafted to address questions of privilege
clearly demonstrate that the Ninth Circuit's independent evidence rule
is not supported by prior law. Proposed Rule of Evidence 5-03(d) set
forth several exceptions to the attorney-client privilege, including
the crime-fraud exception (Proposed Rule of Evidence 5-03(d)(1)),
which were described by the drafters of the rules as "incorporat(ing)
well established exceptions." 46 F.R.D. 251, 256 (1969). The Advisory
Committee's Note on the crime-fraud exception specifically stated that
"(n)o preliminary finding that sufficient evidence aside from the
communication has been introduced to warrant a finding that the
services were sought to enable the commission of a wrong is required"
(id. at 256). Thus, the Ninth Circuit's independent evidence rule is
at odds with the established common law practice in administering the
crime-fraud exception.




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