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.