Opposition — Arthur Andersen & Co. v. United States

Supreme Court, U. S.

FILED

No. 80-311 n@M 7 «1980

WRERREL RODAK, JR., CLERK

eae

In the Supreme Court of the United States

OCTOBER TERM, 1980

ARTHUR ANDERSEN & CO., PETITIONER

Vv.

UNITED STATES OF AMERICA, &T AL.

ON PETITION FOR A WRIT OF CERTIORARI TO

THE UNITED STATES COURT OF APPEALS FOR

THE FIRST CIRCUIT

MEMORANDUM FOR THE RESPONDENTS

IN OPPOSITION

WADE H. McCreg, JR.

Solicitor General

Department of Justice

Washington, D.C. 20530

(202) 633-2217

————

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TABLE OF AUTHORITIES

Page

Cases:

American Book Co. v. Fansas, 193 U.S. 49 ...... 3

Attorney General of United States, In re,

596 F. 2d 58, cert. denied, 444 U.S. 903 ..........

Brownlow v. Schwartz, 261 U.S. 216 .......... 3, 4

Cobbledick v. United States, 309 U.S. 323 ......... +

Couch v. United States, 409 U.S. 322. wcccccccceee 5

DeFunis v. Odegaard, 416 U.S. 312 wccccccccccccceeees 4

Dees, Bee See UE. .170 cincanistaienn 3

First National Bank of Boston v. Bellotti,

BBD UB. FOR vexingsccsssssvetaveesscceneceimansienssinnunaanie 6

Grand Jury Subpoena, May, 1978 at Baltimore,

in 7é@, 396 F. 26 G30 ..cciccsciscccerceverevenvevetreseeeee 4

Great Western Sugar Co. v. Nelson, 442 U.S.

DED: ssinadhonanindusin valk agedoshnsieusscubarisniapnpeisamimmaneiietaanate

Hickman Vv. Taylor, 329 U.S. 495 ..ccccccccccccscssccees 5

Kurshan Vv. Riley, 484 F.2d 952 ...ccccscocccscssssescees 2

Nebraska Press Ass'n v. Stuart, 427 U.S. 539...3, 6

North Carolina v. Rice, 404 U.S. 244 vce 2

Perlman v. United States, 247 U.S. 7 c.cccccccccceeees 7

Protaer ¥. Nawhink 422 US; S06 cccesesvssesscvstrnes 2

BOG ©. TR, GED VE 288 révccnnsescsecnnssunevignoeamnes 3

SEC v.. LO, SOO FP. BO GORE. cccsenspeniccnnsan 3

Southern Pac. Terminal Co. v. ICC, 219 U.S.

GUI Acecsainssdnenunaehnixesiicnecascnmanananienaiamimemmatitdis 3

il

Page

Cases—Continued:

Special April 1977 Jury, In re, 581 F. 2d

soos sian caveanedsedeccssenesenssents 6

United States v. Coopers & Lybrand, 550 F. 2d

arias sis csccnoncnsdaobasbscoccvescoescosssenescnses 6

United States vy. Deak-Perera Banking Corp.,

i a ccacsscasabseasbeessestso 2

United States v. Friedman, 532 F. 2d 928 .......... 3

United States v. Frumento, 552 F. 2d 534 ......... 3

United States v. Hankins, 565 F. 2d 1344 .......... 2

United States v. New York Telephone Co.,

a cc ncnaksatnactoanabeuesseancees 3

United States v. Nixon, 418 U.S. 683 .....ccccceceee 4

United States v. Cson, 604 F. 2d 29 wrceccccccceeees 3

United States Parole Commission v. Geraghty,

Be TE CONE, BB, FBOR) ccccccscccccsssscccsecccccecs 3

United States v. Patmon, No. 75-2246 (6th Cir.

SI MUD. scabicnsdesneseseccssnndsccccccocoscscocsoncccsese 3

United States v. Ryan, 402 U.S. 530 ........0008 4, 5

United States, In re, 610 F. 2d L148 cccceeceeeeeeees 3

United States, In re, 616 F. 2d 1122 circceccccceeceees 3

eM OY, Be EDO sicciscscccssnscnccccccevese 4

Weinstein v. Bradford, 423 U.S. 147 ciccccccccsseeseees 3

In the Supreme Court of the Hnited States

OCTOBER TERM, 1980

No. 80-311

ARTHUR ANDERSEN & CO., PETITIONER

V.

UNITED STATES OF AMERICA, ET AL,

ON PETITION FOR A WRIT OF CERTIORARI TO

THE UNITED STATES COURT OF APPEALS FOR

THE FIRST CIRCUIT

MEMORANDUM FOR THE RESPONDENTS

IN OPPOSITION

Petitioner seeks review of the court of appeals’

dismissal of its appeal from an order of the district court

enforcing an Internal Revenue summons on the ground

that the case became moot upon petitioner’s compliance

with the summons.

The pertinent facts may be summarized as follows: On

November 14, 1977, a special agent of the Internal

Revenue Service issued a summons to petitioner re-

questing production of records pertaining to the tax

liabilities of Good Hope Industries, Inc. Petitioner refused

to produce certain documents referred tocollectively as the

“tax accrual work papers” (Pet. App. A-10 to A-12, A-18).

[hese documents were prepared by petitioner to evaluate

Good Hope’s reserve for taxes, and contingent liability

account shown on its balance sheet (Pet. App. A-3). The

2

district court ordered the summons enforced! and refused

to stay its order pending appeal (Pet. App. A-28, A-42).

Both petitioner and Good Hope filed notices of appeal

and moved to stay the order pending appeal. The court of

appeals denied a request for a stay (Pet. App. A-43 to A-

44). Subsequently, Mr. Justice Brennan likewise denied

Good Hope’s motion for a stay (Pet. App. A-46).

Petitioner thereupon complied with the summons at issue

by producing the requested documents. The Service made

copies and returned the originals to petitioner (Pet. App.

A-3). In light of petitioner's compliance with the

summons, the court of appeals dismissed petitioner’s

appeal upon the ground that the case was moot (Pet.

App. A-8 to A-9).

1. Petitioner contends (Pet. 7-9) that the court of

appeals erred in dismissing its appeal as moot even

though it removed the only issue in the case by complying

with the summons. But as this Court recently observed, “a

federal court has neither the power to render advisory

opinions nor ‘to decide questions that cannot affect the

rights of litigants in the case before them.’” Preiser v.

Newkirk, 422 U.S. 395, 402 (1975), quoting North Caro-

lina v. Rice, 404 U.S. 244, 246 (1971). Here, the petition

to enforce the summons sought petitioner’s production of

certain documents. Pursuant to the order of the district

court, those documents have been produced. Accordingly,

the court below correctly held that there is no longer a

live dispute between petitioner and the government and

that the case is moot. United States v. Deak- Perera

Banking Corp., 610 F. 2d 89 (2d Cir. 1979); Kurshan v.

Riley, 484 F, 2d 952 (4th Cir. 1973); United States v.

Hankins, 565 F. 2d 1344 (Sth Cir. 1978); United States v.

‘The taxpayer, Good Hope Industries, Inc., was permitted to

intervene in the summons enforcement proceedings.

3

Patmon, No. 75-2246 (6th Cir. Sept. 16, 1980); United

States v. Olson, 604 F. 2d 29 (8th Cir. 1979); SEC v.

Laird, 598 F. 2d 1162 (9th Cir. 1979).

Petitioner seeks to avoid the consequence of its com-

pliance with the summons by contending (Pet. 9) that

the issue in this case is “capable of repetition, yet evading

review.” It therefore urges that its compliance did not

render this case moot. But the line of cases relied upon by

petitioner, and the amicus American Institute of Certified

Public Accountants? turns on the fact that “the challenged

action was in its duration too short to be fully litigated

prior to its cessation or expiration.” Weinstein v.

Bradford, 423 U.S. 147, 149 (1975). Here, petitioner had

the power to keep the dispute alive simply by not

producing the documents. However, once it produced the

documents, there was no longer any dispute between the

parties. The case is therefore controlled by Brownlow v.

Schwartz, 261 U.S. 216 (1923), where the Court held an

appeal to be moot because the appellant had complied

with the lower court order. See also American Book Co.

v. Kansas, 193 U.S. 49, 52 (1904).

2Southern Pac. Terminal Co. v. ICC, 219 U.S. 498 (1911);

Nebraska Press Ass'n v. Stuart, 427 U.S. 539 (1976); United States v.

New York Telephone Co., 434 U.S. 159 (1977); In re United States,

616 F. 2d 1122 (9th Cir. 1980); /n re United States, 610 F. 2d 1148 (3d

Cir. 1979); Roe v. Wade, 410 U.S. 113, 125 (1973); Doe v. Bolton,

410 U.S. 179 (173); United States v. Frumento, 552 F. 2d 534, 536-

541 (3d Cir. 1977) (en banc).

United States Parole Commission v, Geraghty, No. 78-572 (Mar.

19, 1980), upon which petitioner relies (Pet. 12), is likewise dis-

tinguishable. There, an attack upon the Commissioner's parole

guidelines was not rendered moot by the plaintiff's release from

confinement (an event over which he had no control) because the suit

was a class action.

3Compare, however, United States v. kriedman, 532 F. 2d 928 (3d

Cir. 1976). [here, the court concluded that a summons enforcement

4

2. Petitioner further contends (Pet. {3) that this case

is still a live controversy because it was compelled by

court order to comply with the summons. As petitioner

sees the matter, it should not be placed in the position of

defying the district court and risking contempt in order to

obtain review. But this Court rejected much the same

argument in Brownlow v. Schwartz, supra, 261 U.S. at

218, observing that “[t]he motive of the [complying]

officer * * * is quite immaterial. We are interested only in

the indisputable fact that his action * * * has left nothing

to litigate. The case being moot, further proceeding upon

the merits can neither be had here nor in the court of first

instance.” Compare DeFunis v. Odegaard, 416 U.S. 312,

316-317 (1974).

Moreover, despite petitioner’s argument to the contrary

(Pet. 13-15), the requirement that a party risk contempt to

insure that the issue does not become moot 1s well

established. See Cobbledick v. United States, 309 U.S.

323 (1940); United States v. Ryan, 402 U.S. 530 (1971); in

re Grand Jury Subpoena, May 1978 at Baltimore, 596 F.

2d 630 (4th Cir. 1979). Indeed, in /n re Attorney General

of United States, 596 F. 2d 58, 62 (2d Cir.), cert. denied,

proceeding did not become moot even after compliance because a

ruling by the court of appeals that the summonses were unenforceable

on the ground that they were issued solely for a criminal prosecution

could affect the possible use of the summoned material in any

subsequent criminal or civil proceeding. While we believe that such

contentions are more properly presented in whatever criminal or civil

case may subsequently ensue rather than in the summons enforce-

ment proceeding, the fact that there was “incomplete compliance with

the court’s order” (532 F. 2d at 931) with respect to some of the

summoned evidence at issue in Friedman serves to distinguish that

case (ibid.). See also Vesco v. SEC, 462 F. 2d 1350 (3d Cir, 1972), in

which the Third Circuit dismissed as moot an appeal seeking to

enjoin the enforcement of an SEC subpoena with which the appellant

tully complied.

5

444 U.S. 903 (1979), the court rejected the government’s

argument that it would be unseemly to require the

Attorney General to be bound by the traditional

requirement of standing in contempt to obtain review of a

court order to produce documents in his possession.

There is accordingly no reason to relieve petitioner, a

private accounting firm, of the traditional prerequisite for

obtaining appellate review of a court order to produce

accountant’s workpapers which are not subject to any

evidentiary privilege.* See Couch vy. United States, 409

U.S. 322, 335 (1973).

There is no basis for petitioner’s further contention

(Pet. 17-18) that requiring it to resist compliance with the

district court’s order is an “undesirable procedure” (id. at

17). This case arises out of an investigation by the Internal

Revenue Service of Good Hope Industries. The same

policies calling “for expedition in the administration of

the criminal law” that “justif[y] putting one who seeks to

resist the production of desired information to a choice

between compliance with a trial court’s order to produce

prior to any review of that order, and resistance to that

order with the concomitant possibility of an adjudication

of contempt if his claims are rejected on appeal” ( United

States v. Ryan, supra, 402 U.S. at 533) are equally

applicable here. The evidence sought by the Service may

or may not yield information that will result in the

determination of deficiencies. The production of that

evidence should not be impeded by piecemeal reviews that

serve only to delay the ultimate conclusion of the tax

investigation. As this Court observed in United States v.

Nixon, 418 U.S. 683, 690 (1974), the requirement of

4Contrary to petitioner's argument (Pet. 26), there is no connection

between this case and the work-product issue presented in The

Upjohn Co. v. United States, No. 79-886 (argued Nov. 5, 1980). The

work-product doctrine of Hickman vy. Jaylor, 329 U.S. 495 (1947),

recognized a qualilied privilege tor certain materials prepared by an

attorney acting for his client in anticipation of litigation.

6

submitting to contempt “promotes judicial efficiency and

hastens the ultimate termination of litigation.” The rule

requiring petitioner to risk contempt likewise hastens the

ultimate termination of a tax investigation by discourag-

ing routine protracted challenges to summons enforce-

ment orders and thereby limiting such litigation to cases

where the summoned party believes that the claims are

meritorious. In sum, if petitioner believes that its claim on

the merits will be vindicated, it should be willing to risk

the possibility of contempt to obtain review of those

claims.°

3. Finally, contrary to petitioner’s argument (Pet. 13),

the decision below does not conflict with Jn re

Special April 1977 Grand Jury, 581 F. 2d 589 (7th Cir.

1978). There, the court permitted a post-compliance

appeal from an order enforcing grand jury subpoenas

served on members of the staff of the subject of the

investigation. But as the court of appeals pointed out, that

case is distinguishable because the third parties directed to

comply had “no strong interest in resisting the subpoenas

to expose themselves to contempt by refusing to comply”

(Pet. App. A-6).° In those circumstances, denial of

5Since petitioner’s compliance with the district court’s order

prevented the court of appeals from reaching the merits of its claim

that the tax accrual workpapers were not relevant, there is no basis

for petitioner’s argument (Pet. 28) that the decision below conflicts

with United States v. Coopers & Lybrand, 550 F. 2d 615 (10th Cir.

1977).

The Seventh Circuit in /n re Special April 1977 Grand Jury also

relied upon this Court’s decisions in Nebraska Press Ass'n v. Stuart,

427 U.S. 539 (1976) and First National Bank of Boston v. Bellotti,

435 U.S. 765 (1978), stating that “the Supreme Court has not

required litigants to subject themselves to contempt or criminal

sanction” (581 F. 2d at 591) in order to meet the “evading review”

aspect of the mootness test. But, as the court of appeals correctly

noted (Pet. App. A-6 to A-7), both of those cases involved prior

restraints on arguably protected speech. Here, the imposition of

sanctions on petitioner for refusal to produce the summoned evidence

would involve no such prior restraint upon speech.

7

immediate review would render impossible any review by

the subject of the investigation who would be “powerless

to avert the mischief of the order.” Perlman v. United

States, 247 U.S. 7, 13 (1918). Here, by contrast, the

summons was directed at petitioner itself who has asserted

that its professional functions would be impaired by

disclosure (see Pet. 20). Hence, as the court of appeals

correctly concluded, “to the extent that the issue sought to

be reviewed is of such assertedly vital importance to both

Andersen and the industry, it does not seem too

draconian to insist on resort to contempt in order to

preserve the issue for appeal” (Pet. App. A-8).

It is therefore respectfully submitted that the petition

for a writ of certiorari should be denied.

WADE H. McCreg, JR.

Solicitor General

NOVEMBER 1980

DOJ-1980-11