# Petition — American Law Ass'n v. Merkel

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## Record

- **Collection:** Supreme Court brief
- **Document type:** Petition
- **Published:** January 1, 1981
- **Citation:** 454 U.S. 829

## Text

Office-Supreme Court, U.S.
* i } Mi )

80-2032 | Mays 1981

CLERA

IN THE SUPREME COURT OF THE UNITED STATES
OCTOBER TERM, 1980

AMERICAN LAW ASSOCIATION,
an unincorporated association,

PETITIONER,
vs.

JOHN MERKEL, in his capacity as United States Attorney
for the Western District of Washington, BENJAMIN CIVILETTI,
in his capacity as Attorney General of the United States;
DAVID BEITZ, in his capacity as Assistant US. Attorney;
JEROME KURTZ, in his capacity as Commissioner of the
Internal Revenue Service; ARTURO JACOBS, in his capacity as
Seattle District Director of the Internal Revenue Service;
DANIEL C. BROWN, DONALD JENSEN, RONALD F. PERRON,
RON LANG, REGINALD NORBERG, in their capacity as Special
Agents for the Internal Revenue Service, and the
UNITED STATES of AMERICA.

RESPONDENTS.

PETITION FOR A WRIT OF CERTIORARI TO THE
UNITED STATES COURT OF APPEALS FOR
THE NINTH CIRCUIT

J. Jeffrey Dudley
Cartano Botzer Larson & Birkholz
Attorney for Petitioner
1300 IBM Building
Seattle, Washington 98101
(203) 623-6700

Ap

QUESTIONS PRESENTED FOR REVIEW

1. Whether the denial of a motion to quash
subpoenas is dismissable as moot on appeal where the
grand jury investigation is ongoing and the material
subpoenaed would disclose confidential membership
lists and financial information of an association in
violation of its First Amendment Rights.

2. Whether the allegation of a government
prosecutor that certain officers of an association
"may" have committed tax crimes is sufficient to
require production by grand jury subpoenas of confi-
dential membership lists and financial information of
the association held by third party banks.

i.

TABLE OF CONTENTS

Page
QUESTIONS PRESENTED i.
OPINIONS BELOW 2
JURISDICTION . 2
CONSTITUTIONAL PROVISIONS INVOLVED 2

STATEMENT OF THE CASE.

w

REASONS FOR GRANTING WRTT ..

1. THE DECISION BELOW CONFLICTS
WITH THE DECSION OF OTHER
COURTS OF APPEALS AS TO THE
PROPER INTERPRETATION OF THE
"CAPABLE OF REPETITION YET
EVADING REVIEW" EXCEPTION TO
THE MOOTNESS DOCTRINE APPLI-
CABLE IN THIS MATTER. . 9

2. THE DECISION BELOW ERREDIN
DECIDING A SIGNIFICANT CONSTITU-
TIONAL QUESTION IN HOLDING THAT
THE GOVE RN MENT SUBPOENAS IN
THIS MATTER DEMANDING CONFIDEN-
TIAL ASSOCIATION MEMBERSHIP AND
FINANCIAL INFORMATION DID NOT
VIOLATE PETITIONER'S FIRST AMEND-

MENT RIGHTS . 16
CONCLUSION . 24
APPENDIX A. 1A

APPENDIX B 1B

ii.

TABLE OF AUTHORITIES

Page
CASES:
Branzburg v. Hayes, 408 U.S. 665 (1972). 18

Bursey v. United States, 466 F.2d 1059
(9th Cir. 1972) 19, 20, 21, 23
— v. Littlejohn, 569 F. 2d 219 (5th Cir.
1 20
Gibson v. Florida 559 1 85 Investigative
Comm., . 1963) .cccccccccccccccee 16,20

266% % 10, 11,12, 1 3, 14

NAACP vy. Alabama, 357 U.S. 449 (1958) 17,18
NAACP v. Button, 371 US. 415 (1963) ... 16

Pollard v. Roberts 283 F.Supp. 248 (E.D.
Ark. 1 7 per curiam, 393 U.S. 14 (1968) 18,20

Securities & Exch Com'n v. Laird, 598
F.2d 1162 (9th Cr 1979) 10,12

Southern Pacific Terminal Co. v. ICC, 219
U.S. 498 (1911) 10
United States v. Arthur Andersen & Con 623
5 (ist . 198 coun 13

United States v. Citizens State Bank, 612 F.2d
1091 7 21,22

United States v. Deak-Perera Internatio

ng orp., 10 * E * 1 q eee 15
United States v. Silva and Silva Accountancy
Corp., 4 1-1 9th * No.
80-5497, Merch 20, 1981) ° 15

Weinstein v. Bradford, 423 U.S. 147 (1975) ... 10,11

NO.

IN THE SUPREME COURT OF THE UNITED STATES
OCTOBER TERM, 1980

AMERICAN LAW ASSOCIATION,
an unincorporated association,

PETITIONER,
VS.

JOHN MERKEL, in his capacity as
United States Attorney for the
Western District of Washington, et al,

RESPONDENTS.

PETITION FOR A WRIT OF CERTIORARI
TO THE UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT

The Petitioner, AMERCIAN LAW ASSOCIA-
TION, respectfully prays the court issue a writ of
certiorari to review the order of the United States
Court of Appeals for the Ninth Circuit entered in this
proceeding on February 4, 1981.

21

OPINIONS BELOW
The Order of the United States Court of
Appeals for the Ninth Circuit dismissing the appeal
as being moot is unreported, but is set forth in
Appendix A herein.
The Order of the United States District Court
for the Western District of Washington is unreported,

but is set forth in Appendix B herein.

JURISDICTION
The Order of the United States Court of
Appeals for the Ninth Circuit was entered on Feb-
ruary 4, 1981, and this petition for certiorari is filed
within 90 days of that date. The jurisdiction of this
court is invoked under 28 U.S.C. 8 1254(1).

CONSTITUTIONAL PROVISIONS INVOLVED
First Amendment of the United States Consti-
tution:

"Congress shall make no law... abridging
the freedom of speech, or of the press; or
the right of the people peaceably to
assemble, and to petition the Government
for a redress of grievances."

STATEMENT OF THE CASE

1. DISTRICT COURT JURISDICTION.

District Court jurisdiction was invoked by vir-
tue of 28 U.S.C. § 1331(a), as a federal question arose
under the First Amendment of the United States
Constitution and involved the United States and its
officers in their official capacities.

2. STATEMENT OF FACTS.

The Petitioner, the American Law Association
(hereinafter the "ALA" or the Association“) is an
unincorporated association with headquarters in
Bryan, Texas. The purpose of the ALA is to dissemi-
nate information to private citizens regarding their
rights under the laws of the United States, particu-
larly the Internal Revenue Code and Tax Treaties as
they pertain to individual income taxation. (CR 2a)".

tan record references refer to the Clerk's Record
(CR) as docketed by the United States District Court
for the Western District of Washington. Relevant
portions of this record were before the Court of
Appeals by Appellant's Excerpt of Record and as
attachments to Appellant's Memorandum in Opposi-
tion to Appellees' Motion to Dismiss Appeal. The
official trial court record was never transmitted to
the Court of Appeals due to the dismissal on the
grounds of mootness.

o 3-

The ALA has several hundred members, all
US. citizens who have joined together to exchange
information on these subjects. (CR 2a). The ALA
holds membership meeetings, annual conventions, and
publishes a monthly newsletter. (CR 2a). Member-
ship lists, minutes of meetings, and other information
disseminated by the ALA as well as its financial
status and funding sources are confidential as the
ALA and its individual members have long feared
interference and harassment by the Internal Revenue
Service owing to the nature and purpose of the
organization. (CR 2a).

This fear is actual and not imagined. Members
of the ALA have been harassed and audited by the
IRS apparently based solely on their affiliation with
the ALA. (CR 2e, 2d, 2e and 2f). This government
harassment, prompted by the refusal of ALA mem-
bers to answer questions about the ALA or to disclose
the names of other ALA members, is documented in
uncontraverted affidavits. (CR 2c, 2d, 2e and 2f).

In early March, 1980, a federal grand jury
convened in the Western District of Washington sub-

a

poenaed bank records concerning the ALA requesting
"signature cards" and "statements of account". The
district court denied Petitioner's request to enjoin
these subpoenas in holding that no information con-
cerning membership of the ALA would be disclosed.
(CR 8). The hearing on Petitioner's request was held
before a Magistrate whose Report and Recommen-
dation was adopted by the court without further
hearing. (CR 6).

Emboldened by this decision, the government
served new subpoenas returnable May 6, 1980 on the
same banks seeking "cancelled checks, deposit slips
and items of deposit" for accounts held by certain
principals in the ALA. (CR 11). It is uncontraverted
that the subpoenaed material would reveal member-
ship and confidential financial information of the
ALA. (CR 2a, 11, 17). It is also uncontraverted that
disclosure of the membership lists of the ALA would
cause irreparable harm to the ALA and chill its First
Amendment rights. (CR 2a, 11, 17).

The Petitioner again objected to this second

string of subpoenas. It requested the district court

= §-

quash any subpoenas revealing membership and con-
fidential financial information concerning the ALA.
By agreement of government counsel, the return date
of the challenged subpoenas was delayed to June 3,
1980 to allow time for hearing and decision by the
district court.

In support of its need for this information, the
government presented one affidavit of a government
attorney. (CR 20). In this affidavit, the government
averred that the grand jury investigation was focused
on certain ALA principals and alleged that these
principals may have committed specifie crimes."
(CR 20, Par. 2). The government opined that the
subpoenaed material was "necessary for the grand
jury to determine whether there is evidence that
subjects of the investigation may have committed
crimes." (CR 20, Par. 3).

Hearing was again held before a magistrate on
May 16, 1980. Petitioner's request for a hearing
before the judge was denied. The district court
adopted the Magistrate's Report and Recommenda-

tion denying the motion to quash on May 29, 1980.

(CR 33). Government attorneys refused to further
extend the return date of the subpoenas to allow
review of the district court's decision.

Petitioner immediately appealed the district
court's decision to the Ninth Circuit Court of Appeals
with a simultaneous motion to the district court to
enjoin enforcement of the subpoenas pending appeal.
(CR 36,37, 38,39). The motion was denied by the
district court on que 2, 1980.

A similar motion thereafter presented to a
single judge of the Ninth Court sitting in Seattle was
also denied on June 2, 1980. When Petitioner dis-
covered one bank in Texas had not timely complied
with its subpoena, an Emergency Motion for Recon-
sideration was thereafter presented to a three judge
panel of the Ninth Circuit in San Francisco and was
denied on June 12, 1980.

The banks to whom the subpoenas were issued
were compelled to produce the information
requested, including that information disclosing
membership and confidential financial records of the
ALA. °

Meanwhile, the grand jury investigation con-
tinued (and it is Petitioner's belief it continues
today). In its response to the Association's request
for stay pending appeal at the district court, the
Government stated its investigation "will be a long
and complicated one, and it is only the beginning."
(CR 34). The Government has continued in its
attempts to discover information about the ALA. In
May 1980, the Government requested all information
in an accountant's possession relating to "any other
member of the American Law Asociation for whom
you have performed accounting or tax services."
(Exhibit 1 to hearing before Magistrate Sweigert, May
16, 1980). In subpoenas to other individuals, the
Government requested "all documents and records
relating to the American Law Association..." (Sub-
poena to Robert A. Austin, Exhibit 2 at hearing
before Magistrate Sweigert, May 16, 1980). In July,
1980, the Government filed a "Status Report Regar d-
ing Subpoenas" and an "A mended Status Report
Regarding Subpoenas" with the district court. (CR
50, 51). Each disclosed that as of July, subpoenas

- §-

were outstanding and additionally, other subpoenas to
other banks had not been satisfied at that time. The
above facts were presented to the Ninth Circuit in
Petitioner's Memorandum in Opposition to Appellees’
Motion to Dismiss.
After Petitioner's brief on the First Amend
ment issue was filed with the Ninth Circuit, the
Government, without filing its Appellees’ brief,
moved to dismiss the appeal as moot. The Ninth
Circuit granted the Government's motion without
hearing and without opinion on February 4, 1980.
(Appendix A).
REASONS FOR GRANTING THE WRIT
i. THE DECISION BELOW CONFLICTS
WITH THE DECISIONS OF OTHER
COURTS OF APPEALS AS TO THE
PROPER INTERPRETATION OF THE
"CAPABLE OF REPETITION YET
EVADING REVIEW" EXCEPTION TO
THE MOOTNESS DOCTRINE.

This court has refused to dismiss as moot,

cases in which the controversy is one "capable of

repitition, yet evading review". Southern Pacific
Terminal Co. v. ICC, 219 US. 498, (1911). This
principle was further clarified in Weinstein v. Brad-
ford, 423 US. 147, (1975), as precluding a dismissal
for mootness when "(1) the challenged action was in
its duration too short to be fully litigated prior to its
cessation or expiration, and (2) there was a reason-
able expectation that the same complaining party
would be subjected to the same action again."

The Ninth Circuit Order dismissing the appeal
was fiied without opinion. (Appendix A). The Order
cites, without further explanation, Securities &
Exchange Comm'n x. Laird, 598 F.2d 1162 (9th Cir.

1979). Because Petitioner argued the actions of the
Government were "capable of repitition, yet evading
review", it can only surmise the court rejected this
exception to the law of mootness as applied to the
facts of the case.

In so holding, the Ninth Circuit's implicit
rejection directly conflicts with the Seventh Circuit's
interpretation of this principle in In Re Special April
1977 Grand Jury, (Scott), 581 F.2d 589 (7th Cir. 1978)

which involved facts identical to those herein.

In Scott, Federal Grand Jury subpoenas were
served on staff members of the Attorney General for
Illinois, William Scott. The District Court denied
Scott's motion to quash the subpoenas and denied any
Stay pending appeal, as did the Seventh Circuit and
this Court. Subsequently, the staff members com-
plied with the subpoenas. On appeal, the Seventh
Circuit denied government claims that the issues
raised were moot because of compliance. It held that
the case was justiciable because the controversy was
"capable of repetition yet evading review." Both
elements of the Weinstein standard were met in that:
(1) the dates imposed for subpoena compliance were
too short to allow their litigation fully prior to
compliance; and (2) there was a reasonable expecta-
tion that the same complaining party would be sub-
jected to the same action again because the sub-
poenas were part of a continuing investigation, and
future subpoenas, subject to the same objection
(mootness), were likely. 581 F.2d at 591. The
Seventh Circuit further opined that this Court has

-ll-

not required parties to refuse subpoena compliance
and appeal "a subsequent finding of contempt." Id.,
at 591.

The facts and procedural posture of the
instant case are virtually identical to those found
determinative in Scott. (1) The dates required for
compliance with the subpoenas served on the banks
demanding confidential association records were too
short to allow their litigation fully prior to compli-
ance. (2) There is a reasonable expectation that the
Association will be subjected to the same action
again because, as in Scott, the subpoenas are part of
an admittedly long-term investigation with the
expectancy of additional subpoenas.

Despite the symmetry with Scott, the Ninth
Circuit, without explanatory opinion, dismissed the
Petitioner's appeal as citing Laird. This reliance is
open to serious question.

In Laird, a corporation and certain individuals
resisted government subpoenas. While, on appeal, all
requested documents and testimony were voluntarily

given the Government by the parties challenging the

-12-

Subpoenas. The court, without addressing the "cap-
able of repetition" exception to the mootness doc-
trine, properly held the case moot. Id, at 1163.

Laird is factually inapposite to the instant
case. In Laird, the subpoenaed parties both moved to
quash and voluntarily relinquished the challenged
material. Here the information subpoenaed was in
the hands of third party banks; neutral parties and
heavily regulated by the government. As such the
banks had no interest in the matter and could not be
expected to refuse compliance.

This distinction between voluntary compliance
of the party challenging the subpoenas and a third
party with no interest was considered determinative
in United States v. Arthur Andersen & Co., 623 F.2d
725 (1st Cir. 1980). In that case, an Internal Revenue
Service summons was served on an accounting firm
requiring production of workpapers of a client under-
going a tax investigation. Arthur Andersen, and not
the taxpayer, challenged the summons. As in Scott
and the instant case, the accounting firm's request
for a stay pending appeal was denied by both the

-13-

district and appeals court. The accounting firm
subsequently complied with the summons pending

appeal.
On appeal, the First Circuit equated a civil

summons to a subpoena and expressly distinguished
Scott holding the controversy was moot and not
"capable of repetition yet evading review". The
court stated:

n... the case [Scott] is distinguishable in
one important aspect. The grand jury
subpoenas at issue were directed at mem-
bers of the appellant's staff, not the
appellant himself. It would be unreason-
able to expect individuals with no strong
interest in resisting the subpoenas to
expose themselves to contempt by refus-
ing to comply. Cf. Periman v. United
States, 247 US. 7 (1918) (interlocutory
appeal from discovery order permitted
when order directed to person other than
appellant who has insufficient incentive
te risk contempt.)" At 723.

Thus, in a controversy involving nearly identi-
cal facts to Scott, the Ninth Circuit has reached an
opposite result. Indeed, after Petitioner argued to
the Ninth Circuit that the Scott case precludes
dismissal due to mootness, the Government replied,
"We submit that Scott was incorrectly decided and

-14-

should not be applied by this Court" (Appellees'
Response to Appellant's Opposition to Motion to
Dismiss Appeal).

Petitioners could find only two other cases
involving mootness when a third party complied with
an IRS summons. In United States v. Deak-Perera
International Banking Corp., 610 F.2d 89 (2d. Cir.
1979) the court dismissed as moot an appeal when the
third party voluntarily complied with a summons.
There was no mention of an ongoing investigation.
The Ninth Circuit has apparently reconfirmed its
position in United States v. Silva and Silva Account-
ancy Corp., 47 AFTR 2d 81-1270 (9th Cir. Cause No.
80-5497, March 20, 1981). In a two paragraph
opinion, the Ninth Circuit dismissed as moot a chal-
lenge to a summons when the third party accountant
voluntarily relinquished the taxpayer's records.
There was again no mention of an ongoing investiga-
tion.

In conclusion, the dismissal by the Ninth Cir-
cuit erystalizes a conflict between the circuits on
this point: The Ninth and Seventh have taken oppos-

-15-

ite positions, the First apparently supports the
Seventh, and the Second apparently supports the
Ninth.
2. THE DECISION BELOW ERRED

IN DECIDING A SIGNIFICANT

CONSTITUTIONAL QUESTION

BY HOLDING THAT THE

GOVERN MENT SUBPOENAS IN

THIS MATTER DEMANDING

CONFIDENTIAL ASSOCIATION

ME MBERSHIP AND FINANCIAL

INFORMATION DID NOT VIO-

LATE PETITIONER'S FIRST

AMENDMENT RIGHTS.

Petitioner's submit that the question of moot-
ness cannot be isolated from the nature of the
challenge to the grand jury subpoenas. The subpoenas
are not challenged on merely technical grounds as
relevancy or undue burden. The are challenged
because they violate the Association's First Amend
ment rights.

This Court has recognized these freedoms are
"delicate and vulnerable, as well as supremely pre-
cious" in NAACP v. Button, 371 U.S. 415 (1963). In
Gibson x. Florida Legislative Investigation Comm.,

372 U.S. 539 (1963), a case dealing with l.gislative

subpoenas issued to compel membership lists of the

-16-

NAACP in Florida, this Court recognized that com-
pulsory process must be subordinated to the require-
ments of the First Amendment.

"To permit legislative inquiry to proceed

on less than an adequate foundation would

be to sanction unjustified and unwar-

ranted intrusions into the very heart of

the constitutional privilege to be secure

in associations in legitimate organizations

engaged in the exercise of First and F our-

teenth Amendment rights; to impose a

lesser standard than we here do would be

inconsistent with the maintenance of

those essential conditions basic to the

preservation of our democracy." 372 US.

at 558.

Petitioners urge this Court to decide the con-
stitutional issue now. There is no benefit to remand-
ing the case to the Court of Appeals as the entire
record consists of affidavits; one by a government
attorney, several by Association members. The con-
stitutional conclusion must flow from these and, the
correctness of the district court decision is open to
serious doubt.

An association posseses standing to assert the
First Amendment rights of its members. NAACP v.
Alabama, 357 US. 449 (1958). The ALA has standing

to quash a subpoena issued to a third party financial

-17-

institution which would reveal membership lists and
financial records of the Association. Pollard v.
Roberts, 283 F.Supp. 248 (E.D. Ark. 1968), aff'd per
curiam, 393 US. 14 (1968). It is settled that mem-
bership lists of organizations are protected from
compulsory disclosure by the First Amendment right
of association when the membership list itself is not
relevant to the purpose of the investigation. NAACP
v. Alabama.

Even Grand Juries must bow to the First
Amendment. In Branzburg v. Hayes, 408 US. 665

(1972), this Court dealt with the claimed First
Amendment freedom of reporters to protect sources.
In its opinion, the Court stated:

"Grand Juries are subject to judicial con-

trol and subpoenas to motion to quash.

We do not expect courts will forget that

Grand Juries must operate within the

limits of the First Amendment..." Ig. at

708.

An asserted First Amendment claim does not
in itself put information beyond the reach of the
government. Instead a balance must be struck. When

grand jury investigations collide with First Amend-

ment rights, the burden shifts to the government to
establish its interests are legitimate and compelling
and that the incidental infringement upon First
Amendment rights are not greater than is essential to
vindicate its subordinating interests. Bursey v. United
States, 466 F.2d 1059 (9th Cir. 1972). As stated in
Bursey, when grand jury subpoenas infringe on First
Amendment rights, the government must show that
"there is a substantial possibility that the information
sought will expose criminal activity within the com-
pelling subject matter of the investigation." Id. at
1083. The government must also demonstrate that
the "means of obtaining the information is not more
drastic than necessary to forward the asserted
governmental interest." Id.

In the case before the court, it is uncontra-
verted that the subpoenaed material will reveal
membership lists of the American Law Association.
It is uncontraverted that the members of the Amer-
ican Law Association have been harassed by agents of
the Internal Revenue Service. The only justification

provided by the government to secure this informa-

-19-

tion is that the material might show that certain
officers of the American Law Association "may" have
committed certain crimes. This justification is
inadequate when compared to other decisions balanc-
ing First Amendment rights against the government's
need to know. See Bursey, supra, Pollard, supra,
Gibson, supra, and Ealy v. Littlejohn, 569 F.2d 219
(5th Cir. 1978). In the above cases, in balancing the
need to know against the First Amendment,.a more
cogent showing for the production of the records was
demonstrated than by the government here, yet the
records were ordered not to be produced.

It is not contended that a First Amendment
claim is an absolute bar. But when the First Amend-
ment is raised, the government must demonstrate
that there is a "substantial possibility that the infor-
mation sought will expose criminal activity." Parti-
cularly in the instant case, because the government
already has obtained blind records (signature cards
and statements of account) from each bank subpoen-
aed, the government must demonstrate that the com-

prehensive subpoenas which will disclose membership

lists will expose criminal activity.

In the proceeding below, the government
failed to address the further Bursey requirement that
the government demonstrate the information sought
could not be obtained by less burdensome means.

The proper approach to acquire the informa-
tion sought by the government is outlined in United
States v. Citizens State Bank, 612 F.2d 1091 (8th Cir.
1980). A civil summons was issued by the Internal
Revenue Service to a bank requesting all records of
an officer of the United States Taxpayer Union. The
information requested was virtually identical to that
requested by the subpoenas challenged herein. The
United States Taxpayer Union intervened in the
administrative summons and moved it be quashed
under the First Améndment because the bank records
would reveal membership lists of the Union. The
government resisted asserting that its summons was
issued in good faith for a proper purpose. The Eighth
Circuit, in reversing the trial court, decided the
government failed to meet the burden of showing a
need for the material.

-21-

Despite the failure, the court suggested how
the government might proceed. It proposed a "step
by step" approach whereby the government would
first seek bank statements and other "blind" records
indicating the status of the United States Taxpayers
Union account. It suggested, if more information was
needed to obtain a true picture of the taxpayers'
finances, subsequent summons could be issued each
seeking increasingly detailed information. The court
opined that if discrepancies were discovered, the
government might be able to make the "cogent and
compelling" showing needed to obtain the entire set
of bank records, including the documents identifying
USTU members.

In view of Citizens State Bank, the govern-

ment's omission is significant here. It had in its
possession at the time it issued the second set of
subpoenas, statements of account which are the blind
records mentioned by the Eighth Circuit. However,
even with these blind records in its possession, the
government made no showing other than the unsup-
ported allegation that the officers "may" have com-

-22-

mitted crimes.

The government's showing falls short of the
required justification for producing material pro-
tected by the First Amendment.

Should the government's contentions be
accepted as sufficient by this Court, any prosecutor,
state or federal, could make this allegation, I have
reasons to believe that Mr. X, with signatural powers
over an organization's bank account may have com-
mitted a tax crime” and obtain membership lists and
financial information of the organization. Peti-
tioners believe the First Amendment means more
than this.

And, las dy, disclosing financial information of
the Association is as much a violation of the Peti-
tioner's First Amendment rights as is disclosure of
the Associations membership lists. As the court
stated in Bursey:

"(t]o require a member of an association,

especially a dissident political party, to

reveal the details of its funding is as
effective a chilling device as is compul-

sory disclosure of its membership lists."
466 F.2d at 1088.

-23-

It is uncontraverted that the subpoenas herein
would garner confidential financial information of
the Association. The government has made no cogent
showing herein as to its need for this information.
The district court's conclusion that no First Amend
ment rights are violated is not justified.

CONCLUSION
For the foregoing reasons, Petitioner,

American Law Association, respectfully urges that
this Petition for Writ of Certiorari to the United
States Court of Appeals for the Ninth Circuit be
granted to resolve the conflict which has arisen
among the Circuits. It furthermore requests the
Court to resolve the issue of the violation of Peti-
tioner's First Amendment rights.

Respectfully submitted,

(s) J. Jeffrey Dudley
CARTANO BOTZER LARSON & BIRKHOLZ
1300 IBM Building
Seattle, Washington 98101

(206) 623-6700
Dated: May 4, 1981

APPENDIX

_ APPENDIX A
UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

AMERICAN LAW ASSOCIATION, an)
unincorporated association, ) NO. 80-3185

) CV 80-329 WTM
Plaintiff-Appellant,

*

— — — — —-—T — — ee ee —

JOHN MERKEL, in his capacity as ORDER
United States Attorney for the

Western District of Washington,
Defendant-Appellee.

Filed: February 4, 1981
Before: TANG and CANBY, Circuit Judges

Upon due consideration, the court issues the fol-
low ing order:

1. Appellant's motion for an extension of time
to respond to appellee's motion to dismiss is granted,
and the opposition, heretofore received, is ordered
filed;

2. Appellee's motion to dismiss this appeal as
moot is granted, and the appeal is hereby dismissed, see

Securities & Exchange Comm'n v. Laird, 598 F.2d 1162
(9th Cir, 1979); and

1A

3. Appellee's motion for an extension of time
to file its answering brief in this appeal is denied as

moot.

2A

APPENDIX B

UNITED STATES DISTRICT COURT
WESTERN DISTRICT OF WASHINGTON

AT SEATTLE
AMERICAN LAW ASSOCIATION,
Plaintiff,

JOHN C. MERKEL, et al.,

)
)
)
)
v. )
)
Defendants. ;

SOCIETY, et al.,
Plaintiffs,

)

)

)

)

v. )
INTERNAL REVENUE SERVICE, )
et al.,
Defendants. )

POENA DUCES TECUM AD- )
DRESSED TO RAINIER NATIONAL )
BANK AND SEATTLE TRUST AND )
SAVINGS BANK SEEKING PRO-_)
DUCTION OF BANKING RECORDS )
OF THE AMERICAN LAW EDUCA- )
TIONAL SOCIETY MASTER-PLAN )
TRUST, N. W. DIAMOND FINAN- +)
CIAL SERVICES AND R. BRUCE _ )
RIPLEY )

C80-329M

C80-445M

MS80-101

REPORT AND RE-
COMMENDATION

INTRODUCTION AND SUMMARY OF CONCLUSION
The Federal Grand Jury in this district issued sub-

poenas duces tecum ordering several banks to produce

financial records of certain customer accounts. All of

1B

the subpoenas were served by special agents of the
Internal Revenue Service and provide that the banks will
be considered to have complied with the subpoenas by
their delivering the requested documents to the special
agent serving the subpoena, or by mailing them to the
"United States Attorney, Attn: David H. Beitz.“

Plaintiffs, American Law Association ("ALA"),
American Law Education Society ("ALES"), and R. Bruce
Ripley and Doris Ripley moved to quash the subpoenas
and/or for injunctive relief, to prevent the financial
records requested from being turned over either to the
grand jury or to the government officials identified in
the subpoenas. Their primary claim is that production of
the financial records will disclose the identity of the
membership of the associations in violation of their First
Amendment rights of association. They also argue,
however, that even if the documents may be required by
the grand jury, the particular subpoenas involved here
violate the Right to Financial Privacy Act, 12 USC
83420, because they permit the banks to deliver the
documents in a manner other than directly to the grand
jury.

In C80-329M, ALA moved to quash subpoenas issued

to the First Bank of Snook, Snook, Texas, to Seattle
Trust and Savings Bank, Redmond, Washington, and to
Rainier National Bank, Midlakes Office, Bellevue, Wash-
ington.

In C80-445M, subpoenas issued to Seattle Trust and
to Rainier National Banks are also involved, but in that
case ALES and Bruce Ripley and Doris Ripley seek a
temporary restraining order against the Internal Revenue
Service ("IRS") and Special Agents Jensen and Brown to
restrain them "from proceeding with" the subpoenas.
These same plaintiffs also filed MS80-101 alternatively
seeking to quash the subpoenas.

All of the subpoenas were originally returnable on
May 6, 1980, but the parties stipulated to continue the
return dates to May 20, 1980, in order to permit the
cases to be adequately briefed and argued. Because the
three cases involve identical issues, a consolidated hear-
ing was held on May 6, 1980, at which the court
considered the memoranda and affidavits submitted and
heard oral argument.

For the reasons set forth hereinafter, I recommend

that the motions be denied in all respects.

3B

DISCUSSION AND ANALYSIS OF AUTHORITIES

On January 28, 1980, a grand jury investigation of
Karl L. Dahlstrom, R. Bruce Ripley, Hiram E. Conley,
Gaze Durst, and David J. Morris, was commenced in this
district. Counsel for the government in these cases,
David H. Beitz, is the attorney conducting the grand jury
proceedings. He advises that the agents who served the
subpoenas were acting as agents of the grand jury.

The investigation seeks to explore possible viola-
tions of 26 USC §7201 (attempt to evade taxes), 26 USC
§7206(1) (subscribing returns known to be false), 26 USC
§7206(2) (aiding and assisting others in preparing false
tax returns), and 18 USC §371 (conspiracy to unlawfully
impede and impair the lawful functions of the Internal
Revenue Service ("IRS").

IRS suspects that those who are the focus of the
investigation are engaged in a promotional scheme involv-
ing ALA and ALES in which individuals pay for tax
advice involving the establishment of overlapping and
interlocking foreign trusts through which American tax-
payers attempt to transfer income in a manner which
appears to return it in tax free transactions but which
the government suspects are "sham tax dodges."

4B

The subpoena to First Bank of Snook, Snook, Texas,
seeks all financial records for accounts in the name of
"Trust Publications,“ "Karl L. Dahlstrom, Trust Publi-
cations," and any other accounts involving Dahlstrom or
his dba's, during certain specific time periods.

The subpoena to Seattle Trust seeks all financial
records for the account of ALES from September 14,
1977 to December 31, 1979.

The subpoena to Rainier National Bank seeks finan-
cial records for a "Masterplan Trust" account, an ALES
account, a N. W. Diamond Financial Service" account
and any other accounts in which R. Bruce Ripley was a
signatory authority all for certain specific time periods.

Messrs. Dahlstrom, Conley, and Ripley have sub-
mitted affidavits which essentially state that the ALA
and ALES are unincarporated membership associations
interested in tax change, that they and other members of
these associations have been harassed by IRS, and that
disclosure of the records of the various accounts would,
in essence identify most of the members of these asso-
ciations - that such identification would, because of past
harassment, have a "chilling effect" on the membership.

(1) First Amendment Claims.

The First Amendment right of free association
reaches within the closed doors of the grand jury, and
when such right is validly asserted, the burden shifts to
the government to demonstrate a "compelling interest"
sufficient to outweigh the possibility of infringement.
Bursey v. United States, 466 F.2d 1059 (9th Cir. 1972).

Assuming the ALA and ALES have sufficiently estab-
lished that compliance with the subpoenas would burden
the right of association because disclosure of the records
sought would reveal most of their membership, and that
they have further established adverse consequences to
members because of a potential for harassment, see
Buckley v. Valeo, 424 U.S. 1 (1976), I believe that the

government has met its burden of establishing that it has
an immediate and compelling interest in the subject of
the investigation and that there is a substantial connec-
tion between the financial records sought and the crimes
under investigation.

The grand jury investigation into violations of the
tax laws of the United States is focused on several
named individuals and in order to determine whether

illegal tax evasion schemes are being promoted and
carried out by them, a complete and full picture of their

financial dealings will be required. Under the circum-
stances, the incidental effect on membership must give
way.

Plaintiffs argue that the government has not met its
burden and rely primarily on Bursey v. United States,
supra.

However the facts in Bursey are clearly distin-
guishable. In Bursey, the grand jury was investigating
threats against the President of the United States al-
leged to have been made by members of the Black
Panther Party. The court held that the government had
failed to show any connection between the questions put
to members of the staff of the party newspaper and any
possible crime under investigation and therefore struck
the balance in favor of First Amendment rights. Here,
specific individuals who at various times have had signa-
tory control over ALA and ALES accounts are being
investigated for possible tax law violations arising out of
financial transactions allegedly involving ALA and ALES.
The government need not establish that crimes have
been committed to justify the investigation, all it need
establish is a substantial possibility that the records
sought may establish such crimes Bursey v. United

7B

States, supra.
In sum, there is no showing that the grand jury is

seeking to expose for the sake of exposure, as in NAACP
v. Alabama, 357 U.S. 449 (1957). Instead, the record
reflects an investigation of specific individuals suspected
of criminal tax violations and the financial records re-
quested are clearly necessary to that investigation.

(2) Right to Financial Privacy Act.
Section 3414(1) of the Right to Financial Privacy

Act, 12 USC §3401 et seq., provides as follows:

"Nothing in this chapter (except sec-
tions 3415 and 3420 of this title) shall apply
to any subpoena or court order issued in
connection with proceedings before a grand

jury."
Section 3420 provides:

"Financial records about a customer ob-
tained from a financial institution pursuant
to a subpoena issued under the authority of
a Federal grand jury -

"1) shall be returned and actually pre-
sented to the grand jury;

"(2) shall be used only for the purpose
of considering whether to issue an indict-
ment or presentment by the grand jury, or
of prosecuting a crime for which that in-
dictment or presentment is issued, or for a
purpose authorized by rule 6(e) of the Fed-
eral Rules.of Criminal Procedure;

"3) shall be destroyed or returned to
the financial institution if not used for one

gf the purposes specified in paragraph (2);

"(4) shall not be maintained, or a des-
cription of the contents of such records
shall not be maintained by any Government
authority other than in the sealed records of
the grand jury, unless such record has been
used in the prosecution of a crime for which
the grand jury issued an indictment or pre-
sentment or for a purpose authorized by rule
6(e) of the Federal Rules of Criminal Pro-
cedure."

Plaintiffs contend that the subpoenas in the instant
case which allows the banks to comply either by deliver-
ing the records to the IRS agent serving the subpoena or
by mailing the records to the government attorney handl-
ing the grand jury proceeding, violate §3420(1).

Plaintiffs argue that §3420(1) requires bank officers
to appear in person before the grand jury and present the
records. I do not believe the language requires such
conclusion, and the practical problems posed for grand
jury proceedings would suggest such interpretation is too
literal. Although the documents must actually be re-
turned and presented to the grand jury and be maintained
in accordance with §3420 and F. R. Cr. Proc. 6(e), the
language does not necessarily require return and pre-
sentation by the bank. The subpoenas issued under the
authority of the grand jury authorize the agents serving
the subpoenas or the government attorney to receive the

documents for the grand jury. Such agents are subject to

all of the handling requirements provided in §3420 and in
rule 6(e). Delivery of documents to agents of the grand
jury is acceptable grand jury procedure, United States v.
Duncan, 598 F.2d 839 (4th Cir. 1979), and 83420 does not
compel a contrary result.
CONCLUSION
The motions to quash and for injunctive relief should

be denied and the subpoenas enforced without modifi-
cation. The government has agreed to continue the
grand jury proceeding to June 3, 1980. Any objections
to, or memoranda in support of the Report and Recom-
mendation should be filed and served by May 30, 1980. If
the court deems further oral argument is necessary, it
will so advise the parties.

A proposed form of order accompanies this Report
and Recommendation.

DATED this 19th day of May, 1980.

United States Magistrate

10B

UNITED STATES DISTRICT COURT
WESTERN DISTRICT OF WASHINGTON
AT SEATTLE

AMERICAN LAW ASSOCIATION,

Plaintiff, ;

v. )

) C80-329M

JOHN C. MERKEL, et al.,

Defendants.
AMERICAN LAW EDUCATIONAL )
SOCIETY, et al.,
Plaintiffs, )

) C80-445M
v. )

)

)

)

)

)

)

)

INTERNAL REVENUE SERVICE,
et al.,

Defendants.

IN RE THE GRAND JURYSUB-
MS80-101

ORDER

POENA DUCES TECUM AD- )
DRESSED TO RAINIER NATIONAL )
BANK AND SEATTLE TRUST AND )
SAVINGS BANK SEEKING PRO-_ ) DENY-

DUCTION OF BANKING RECORDS ) ING MOTIONS TO
OF THE AMERICAN LAW EDUCA- ) QUASH AND FOR
TIONAL SOCIETY MASTER-PLAN ) TEMPORARY
TRUST, N. W. DIAMOND FINAN- ) RESTRAINING
CIAL SERVICES AND R.BRUCE ) ORDER

RIPLEY )

The court has reviewed the motions to quash grand
jury subpoenas and/or for injunction, the supporting and
opposing affidavits, the memoranda of the parties, the

11B

Report and Recommendation of United States Magis-
trate Philip K. Sweigert, and the balance of the file
herein,

It is hereby ORDERED:

(1) Said Report and Recommendation is hereby
approved and adopted

(2) Plaintiff American Law Association's Motion
to Quash Grand Jury Subpoenas in No. C80-329M is
DENIED;

(3) Plaintiffs American Law Education Society
and R. Bruce Ripley and Doris Ripley's Motion for
Temporary Restraining Order in No. C80-445M and Mo-
tion to Quash Grand Jury Subpoenas in No. MS 80-101
are DENIED;

(4) The Clerk of Court is directed to forward
uncertified copies of this Order to counsel for the
par ties and to United States Magistrate Philip K. Swei-

gert.
DATED this 28th day of May, 1980.

/s/ Walter T. McGovern
CHIEF UNITED STATES DI-
TRICT COURT

12B

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Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385007_2211%3A1. Public record. Not legal advice.