Opposition Brief — United States v. Zolin

Iw THE

Supreme Court of the Anited

Ocroser Team, 1988

Unrrep States or America,

v.

Fraaykx S. Zoumw, Cavren or Screwtoiocy

or Catsaronwim and Mary Sve Hussarp,

Respondents.

ON PETITION FOR WRIT OF CERTIORARI TO THE UNITED STATES

COURT OF APPEALS FOR THE NINTH CIRCUIT

RESPONDENTS’ SUGGESTION OF MOOTNESS AND

BRIEF IN OPPOSITION TO PETITION FOR

WRIT OF CERTIORARI

—Iaa=S=Sa=EaaSaEaEaSeaeaeaeaea=ammmnuuuuquwuuu eww”

Exarc M. Liseeaman

Counsel of Record

Epwarp CoreLanp

Rastnowrrz, Bovory, Stanparp,

Kaiwsxy & Loeeeamay, P.C.

740 Broadway—Fifth Floor

New York, New York 10003-9518

(212) 254-1111

Micnas. Lee Herrzsero

275 Madison Avenue

New York, New York 10016

(212) 679-1167

Counsel for Respondents

Church of Scientology of

California and Mary Sue Hubbard

Dated: September 26, 1988

Petitioner,

Parties to the Proceedings Below

and Rule 28.1 List

The parties to the proceedings below are set forth in

the caption.

Respondent Church of Scientology of California has no

parent companies, subsidiaries or affiliates to list pursnant

to Rule 28.1.

PAGE

Table of Authorities a

Statement of the Case 1

Suggestion of Mootness s

Reasons Way Tue Perrrex Suouwe Be Dexuxw 10

1. The Order Restricting Dissemination Of The

Contents Of The Documents Ordered Pro-

duced To The IRS Was Consistent With De-

cisions Of This Court Recognizing The District

Court's Diseretion Power Te Protect

Potential

10

17

ill

TaBLe or AUTHORITIES

,

Cases: PAGE

American Friends Service Committee vy. Webster, 720

F.2d 29 (D.C. Cir. 1983 ) 15

Black v. United States, 534 F.2d 524 (2d Cir. 1976) 16

Bob Jones University v. Simon, 416 US. 725 (1974) 17

Bourjaily v. United States, —~ U.S. ~~, 107 S.Ct.

2775 (1987) 26, 27

Chamberlain v. Kurtz, 589 F.2d 827 (Sth Cir.). cert.

denied, 444 U.S. 842 (1979) 15

Church of Scientology of California vy. Armstrong,

(No, (420153. Cal. Sup., L.A. Cty) 2

Clark vy, United States, 289 U.S. 1 (1933) 21, 25

De Funis vy. Odeqoard, 416 U.S. 312 (1974) 10

Enochs v. Williams Packing Co., 370 U.S.1 (1962) 17

Fisher v. United States, 425 U.S. 391 (1976) 20

Gluck v, United States, 771 F.2d 750 (3d Cir. 1985) 11

Ciumbel v. Pitkin, 124 U.S. 131 (1888) 11

Halkin v. Helms, 598 F.2d 1 (DC. Cir. 1978) 26

Hunt v. Blackburn, 128 U.S. 464 | 188s ) 20

In Re Antitrust Grand Jury, 805 F.2d 155 (6th Cir.

1986) 23, 24

In Re Berkeley & Co., luc., 629 F 2d 54S (Sth Cir. 1980) 23

lu ve Grand Jury Procecdinas (FMC Corp.), HO4 F.2d

798 (Sd Cir. 1979) a4

In Re Grand Jury Procecdinas United Stlaules vo Law-

von |, GOO F.2d 215 (9th Cir. 1979) 21

iv

PAGE

In re John Doe Corp., 675 F.2d 482 (2d Cir. 1982) a4

In Re Sealed Case, 676 F.2d 793 (D.C. Cir. 1982) 23

In re Special September 1978 Grand Jury 11, 640 F.2d

49 (7th Cir. 1980) a4

Kerr vy. United States District Court, 426 U.S. 294

(1974) : 25

Lowrie +. United States, 824 F.2d 827 (10th Cir. 1987) 1h

S.E.Ce v ESM Government Securities, lnc. 645 F.2d

310 (Sth Cir. 1981) 11

Tierney v. Schweiker, 718 F.2d 449 (DC.Cir, 1983) 16

Union Camp. Corp. v. Lewis, 385 F.2d 143 (4th Cir.

1967) a4

United States v. Arthur Young & Co., 465 U.S. 805

(1984) 11

United States v. Author Services, Inc.. 304 F.2d 1520

(9th Cir. 1986), amended, S11 F.2d 1264 (9th Cir.

1987) 6,9

lnited States v. Barrett, 804 F.2d 1376 (Sth Cir. 1986).

vacated, 812 F.2d 936 (3th Cir. 1987) 14

United States v. Barrett, 837 F.2d 1341 (3th Cir. 1988),

petition for cert. pending, No. 87-1705 14,15

United States v. Bob, 106 F.2d 37 (2nd Cir. 1989), cert

denied, 308 US, 589 (1939) 21

lwited States v. Columbia Broadcasting System, In:

666 F.2d 364 (9th Cir.), cert. denied, 457 U.S. 1118

(1982) lz

United States v. First Family Mortaaae ¢ orp., 739 F,

2d 1275 (7th Cir. 1984) 14)

PAGE

t wate d States v. bre dman, Wy. F.2d Us (3d Cir 1976) 12

l wate dl State s Vv, Frwy dni fa, 445 F.2d 1076 (9th Cir.),

cert, dented, 404 LS. G58 (1971) 7

lnited States vy. Hodac and Zu 1g, OAS F2d 1347 (9th

Cir. 1977) 20, 25

l wited States v. Aina. eb F.Supp. 293 (aD), (‘al, 1982) 2.)

United States v. LaSalle National Bank, 437 U.S. 298

(1977) 10, 11, 12, 15

lnited States v. Niron, 418 U.S, 683. 712-14 (1974) 25

United States v. Powell, 379 U.S. 48 (1964) 10,12

United States v. Shewfelt, 455 F.2d 836 (9th Cir. 1972),

cert, denied, 406 Us, 944 (1972) 6,7,19, 25

Upjohn v. United States, 449 U.S. 383 (1981) 20

Constitution, Statutes, Rules and Ri qulations:

Federal Statutes

26 UUS« H103 14, 15, 16

26 U.S.C. © 61038(a) 15

26 U.S.C. © 7402 1]

26 US i421 a) 6, 16.17

26 U.S 7HO04( a) 12

26 C.F.LR. 601.1054) 4

Federal Rule of Evidence s01(d)(2)( KE Jn

Federal Rule of Evidence 104(.) 6, 27

Local Rule 7.16 of the United States District Co

the Central District of California o, 1S

(ithe

=>, 22

Va

Jo

Rev

Author

Itzbure & A

/ th)

The 1

) S-12

No ss 40)

IN Chit

Supreme Court of the United States

(horoner Term, 1088

Uxrrep Srares of America,

Petitioner

Prank S. Zomx, Cueten or Scre~totoes

Yr Catrrornta and Mary Sve Hueerarp.

; 'y LETIORARI TO THE UNITED STATES

APPEALS POR THE NINTH CIRCTTT

RESPONDENTS’ SUGGESTION OF MOOTNESS AND

BRIEF IN OPPOSITION TO PETITION FOR

WRIT OF CERTIORARI

‘

R srw? lents Chure! oft Seient Now of (‘a rornia al

\f te ~ iM HT ihhard ry epectfulls recuse “ thy it this i ourt

, +} | | ror 1 ’ of rt) ' - k r lew of

le ; ; XY bb ‘ } < R @ .

, ; = vy +) } } }< ~ \\ )

Statement of the Case

I I 7 } Int il R

“~ ' ; ; ‘ ;

le = : ' ol ’ ‘ ’ ~

5 i ‘ ey } | "

9

2.

Church representatives and legal counsel, on the ground

that the meetings are protected from disclosure by the

attorney-client privilege. The courts below enforced the

summons with respect to five documents, but ordered that

these five documents “shall not be delivered to any other

government agency by the IRS unless criminal tax prose-

cution is sought or an Order of Court is obtained.” (Pet.

App. 29a.)

1. In July 1984, the Criminal Investigation Division of

the Los Angeles District Director's Office of the IRS com-

menced a tax investigation of L. Ron Hubbard. On October

24, 1984, the TRS served an administrative summons upon

the County Clerk for Los Angeles County, who also serves

as Clerk for the California Superior Court for Los An-

geles, seeking production of numerous exhibits which were

contained in the record of a pending Superior Court action

entitled Church of Scientology of California v. Armstrong

(No. €420153) and which remained under seal in the ens-

tody of the Clerk. The summons was captioned as relating

to the investigation of Mr. Hubbard for the vears 1979

through 1983. The Clerk agreed to produce seme of the

documents, but refused to allow the TRS te inspect and

copy thirteen documents which had been sealed on various

grounds, including attornev-client privilege, marital privi-

lege and privacy, by the Superior Court.

On January 18, 1985, the government commenced this

proceeding by filing a petition to enforce the summons,

naming the County Clerk for Los Angeles County as the

sole defendant. Thereafier, the Charch and Mrs. Tubhard

intervened in the district court te oppose enforcement of

the summons. To the extent relevant here, the respon.

dents opposed enforcement on two grounds: (1) with re-

spect to the MCCS tapes, that they are protected by the

attorney-client privilege; and (2) generally, that the <am-

mons had heen issned for collateral purposes, i... cather-

ing information for use by other gevernment agencies,

3

2. With respect to the MCCS tapes, the Church sub-

mitted affidavits demonstrating that the prerequi:‘tes for

the assertion of the attorney-client privilege were present,

t.e., the tapes recorded communications between client and

attorneys acting in their professional capacity, the com-

munications were related to legal matters, and the com-

munications were confidential. The government, while

disputing the presence of various elements of the priv-

ilege, relied in large part on its assertion that the erime-

fraud exception to the privilege stripped the tapes of their

protection from disclosure. In support of its assertion,

the government initially submitted a declaration of Spe-

cial Agent Petersell based upon conversations he had had

with a former Church staff member, and excerpts from

the tapes set forth in the declaration of Gerald Armstreng,

a former Church employee. The government requeste]

the district court to review the tapes themselves te deter-

mine whether the crime-fraud exception was made out.

The Church responded that the court could not review

the actual communications—whether in the form of tran-

scripts, excerpts or the tapes themselves—to determine the

application of the erime-frand exception to the privilege,

but rather must rely initially upon evidence independent

of the communications in issue. The distriet court reserved

judgement on this issue as well as whether the government

had provided sufficient facts for the court te look further.

Four days later, and before any ruling from the district

court on the propriety of its review of the contents of the

communications in issue, the vovernment filed vet another

declaration of Agent Petersell, which had attached to it

seventeen single spaced pages of a transcript of the tapes."

‘The source of the transeript has never been revealed The

the rovernment has stated that the souree ic net relevant te the

ssnes of waiver which had heen raised in the courts below. The

(fantnat: continwd an fallew “) page )

Thereafter, on April 30, 1985, the district court ruled

that it would consider the portions of the communications

themselves to determine whether the crime-fraud exception

applied to the tapes. During the hearing, the district court

stated that it had reviewed all of the government's submis-

sions, including the Petersel! declaration with the seventeen

pages of single spaced transcript of the tapes, and that it

was inclined to rule that the exception to the privilege

had not been made out. The district court specifically

asked government counsel to “point out where T went

wrong” (April 30, 1985 Transcript of Proceedings at 73)

whereupon government counsel identified particular por-

tions of the declarations and record. The colloquy ended

with the district court asking if there was “anything else

you [government counsel] want to point to” and eovern-

ment counsel replying negatively. At no point during this

argument did the government request or suggest that the

court should or was required to review the entire tapes

themselves. Thereupon, the district court ruled that the

erime-fraud exception did not apply.

The government moved for reconsideration, asserting

that the district court should have reviewed the entire two

hours of tapes. In doing so, the government sought to rely

upon a declaration of Agent Phillip Xanthos which it filed

under seal for ex parte in camera inspection by the dis-

trict court without furnishing a copy to any other party.

The district court denied the motion for reconsideration

on two grounds. First, it ruled that althoueh a review of

the tapes themselves had heen discussed at one point,

(footnote continued from previous page)

tranmseripts were placed under seal by the distriet court on motion

of the Charch, and remained under seal in the Ninth Cireuit.

which also forbade counsel from quoting from them in the eourse

of oral argument, 7

~The government never identified any basis for filing the deela-

ration on an er porte basis. The Church first received a eopy of

it during the proceedings in the Ninth Circuit. The declaration

remains under seal,

a i ee

!

“thereafter Mr. Petersell’s declaration [with the seven-

teen-page single-spaced transcript] was submitted, and no

one suggested that this was an inadequate basis on which

to determine the attorney-client privilege question”. (Pet.

App. 26a.) Indeed, during argument on the motion for

reconsideration, the district court explained its view that

the government had waived its belated attempt to require

the district court to listen to the complete two hours of

tape when it had abandoned the argument after some dis-

cussion, submitted the seventeen page transcript and

argued the case on the basis of those materials.’ Second,

the court ruled that “no reason is suggested as to why

it [Mr. Xanthos’ declaration] could not have been sub-

mitted as a part of the materials considered in the April

hearings.” (Pet. App. 26a.) According to local rule 7.16,

a motion for reconsideration must rely upon facts or

evidence which were not available at the time of initial

consideration.

3. The district court did hold that five of the thirteen

documents sought by the government were relevant to the

tax vears under investigation and that any privileges which

could be raised had been waived. Prior to enforcing the

summons as to the five documents, however, the district

court held an evidentiary hearing on the good faith of

the government. The hearine showed that the TRS agents

responsible for issuing the administrative summons had

communicated and partially coordinated their investiga-

tion with Justice Department attornevs representing other

TRS agents who were defendants in a civil action brought

by the Church alleging government misconduct.

Although the district court found that the record did

not rise to the level necessary to deny enforcement of the

*When the district court asked “what's there to do now by

hindsight” the government quite honestly responded “Nothing,

Your Honor”. Government counse!| then tried to assert that they

had not waived the argument, to which the district court observed

they “lejertainly” had. (June 10, 1985 Transeript of Proceedings

ato.)

6

summons, it considered the case svi generis because of the

many non-tax related civil litigations between the govern-

ment and the Church ana because of coneern that “infor-

mation acquired for one purpose may be in effect used

for civil discovery in the other.” (June 10, 1985 R.T. at

9.) Accordingly, the district court ordered that the five

documents “shall not be delivered to any other govern-

ment agency by the IRS unless criminal tax prosecution

is sought or an Order of Court is obtained.” (Pet. App.

29a.) The district court emphasized that as lone as the

intended disclosure was authorized by 26 U.S.C. § 6103,

it would allow the disclosure,

4. A panel of the United States Court of Appeals for

the Ninth Circuit affirmed the district court’s judgment.

(Pet. App. 1la-24a.) The panel held that the district court

order requiring that the five documents not be delivered

to any other government agency by the IRS unless erimi-

nal tax prosecution is sought or a court order is obtained

was an appropriate and wise exercise of the district court's

discretion. The panel reasoned that since the eovernment

had invoked the court’s process to enforce the summons,

the court had the power and authority to prevent its

process from being abused. The panel rejected the gov-

ernment’s argument that the order ran afoul of the Anti-

Injunction Act, 26 U.S.C. § 7421(a), relying on the deci-

sion in United States vy. Author Services, TInc., 804 F.2d

1520, 1526 (9th Cir. 1986), where the court reasoned that

“restricting disclosure of summoned information to other

agencies only to the extent that a court order is neces-

sary, does not restrain the assessment or collection of tax

liability.”

The panel affirmed the rulings of the distriet court with

respect to the MCCS tapes. The panel applied the holding

of United States vy. Shewfelt, 455 F.2d 836, 840 (9th Cir.),

cert. denied, 406 U.S. 944 (1972), that before the privi-

leged status of the communications is lifted on the basis

\

of the crime-fraud exception, the government must first

make a prima facie showing independently of the com-

munications that the communications were in furtherance

of an intended or present illegality. The panel then re-

viewed the government’s evidence and held that it was

not sufficient to make the requisite prima facie showing.

Thereafter, the government petitioned for rehearing and

suggested rehearing en banc on both the order limiting

disclosure to other agencies and the independent evidence

rule, asserting an intra-circuit conflict on the latter ques-

tion between United States yv. Friedman, 445 F.2d 1076

(9th Cir.), cert. denied, 404 U.S. 958 (1971), and United

States v. Shewfelt, 455 F.2d 836 (9th Cir. 1972). On No-

vember 6, 1987, the petition for rehearing en banc was

granted. (Pet. App. 10a.)

On March 28, 1988, the en bane Court filed an order

vacating the November 6, 1987 order granting en bane

review as improvidently granted. (Pet. App. la-2a.) The

en banc court explained that review had been eranted on

the mistaken assumption that there was a conflict between

the panel decisions in Shewfelt and Friedman. The en

banc court ordered that a portion of the panel opinion be

withdrawn and, in all other respects, the panel opinion

remained intact.

Three members of the en banc court dissented from the

order vacating the November 6, 1987 order. but stated

that they nevertheless would affirm the district court. (Pet.

App. 2a-9a.) The dissenters wrote that the proper rule

would “make in camera review discretionary for the dis-

trict court to reject the crime-fraud exception, mandatory

for the district court to allow the exeeption and order

disclosure.” (Pet. App. 9a.) The dissenters explained

that under such a rule, the district court decision must

be affirmed. This was so because when the district court

initially ruled on the application of the exception, the gov-

ernment had submitted the transeripts submitted with the

Se

Petersell declaration and it did not argue that the partial

transcripts were an inadequate basis on which to decide

the issue. Thus, when the government asked for recon-

sideration and attempted to submit the declaration of Mr.

Xanthos purportedly discussing other portions of the

tapes, the government never explained why it had failed

to include this material in its prior submissions. In the

dissenters’ view, the issue was reduced to whether the dis-

trict court acted within its discretion in considering only

the transcripts initially submitted by the government and

in not considering the material submitted for the first time

on reconsideration. The dissenters would have held. that

there was no abuse of discretion. (Pet. App. 9a.)

In a separate concurrence (App. infra, la-2a) one mem-

ber of the en banc court expressed the view that it was

procedurally unclear whether the en banc order was a

disposition on the merits and opined that if so, it is in-

ternally inconsistent because the ex bane court cannot

both decide a case on the merits and vacate its order

granting en banc review. Nonetheless, the concurrence

agreed that the independent evidence rule should be the

law. m

Suggestion of Mootness

‘The Internal Revenue Service Criminal Investigation

Division summons which was the subject of the litigation

below was dated October 24, 1984. The summons is cap-

tioned “In the Matter of Lafayette R. Hubbard” and con-

cerns the tax years 1979-1983. Mr. Hubbard died on

January 24, 1986, thus foreclosing any curther criminal

investigation of him. Subsequent to the filing of the gov-

ernment’s petition herein, we have been informed by tax

counsel for Mr. Hubbard’s estate that the IRS civil andit

of Mr. Hubbard’s returns for the years 1979-1983 was

terminated as a “closed case” as that term is defined in

Rev. Proe. 85-13, See. 3.0101): 1985-1 C.B. 514. We were

i)

further informed that the requisite IRS Forms 870 for those

years have been signed. As set forth in 26 CFR 601.105

(4), the signing of such forms “[a]s a matter of practice

. ordinarily result[s] in the closing of a case insofar

as the Government is concerned.” Therefore, there would

appear to be no remaining IRS proceedings, either criminal

or civil, which could justify enforcement of the underlying

summons, and all legal issues raised with respect to the

summons are moot.

In the related case of United States v. Author Services,

Inc., 804 F.2d 1520 (9th Cir. 1986), amended, 811 F.2d 1264

(9th Cir. 1987) the court of appeals considered whether

Mr. Hubbard’s death rendered moot the enforcement of a

similar IRS Criminal Investigation Division summons is-

sued to another entity for other records regarding the

identical investigation of Mr. Hubbard. The court of ap-

peals concluded that the matter was not moot at that time

because the records sought by the summons might still be

relevant to a civil review of Mr. Hubbard’s returns for the

years at issue:

During the pendency of this appeal, L. Ron Hubbard

died, and ASI argues that the cause is now moot be-

cause the IRS summons was issued in furtherance of

an exclusively criminal investigation. We are per-

suaded that the investigation of Mr. Hubbard, although

primarily criminal in nature, entails essential civil

elements as well, which survive his death. The sum-

mons seeks documents relating to the financial affairs

of L. Ron Hubbard as they pertain to his tax liability

or to any offenses connected with internal revenve

laws. Therefore, this appeal is not moot.

804 F.2d at 1522 n.1.

In the instant case, the original panel of the court of

appeals rejected a mootness suggestion “for the reason

stated” in the Author Services case. S04 F.2d at 1414.

10

Now, however, no civil component to the summons can

even arguably remain as the IRS has coneluded its audit

of Mr. Hubbard’s returns for the years 1979-1983. Thus

any further resolution of the legal issues posed by the

government’s petition would be purely hypothetical and

abstract as there is no remaining ease or controversy.

De Funis vy. Odeqaard, 416 U.S. 312, 317 (1974).

REASONS WHY THE PETITION

SHOULD BE DENIED

1. The Order Restricting Dissemination Of The Contents Of

The Documents Ordered Produced To The IRS Was Con-

sistent With Decisions Of This Court Recognizing The

District Court’s Discretion And Power To Protect Against

Potential Abuses Of Its Process In Enforcing IRS Admin-

istrative Summonses, And Is Not In Conflict With The

Holding Of The Fifth Circuit In Barrett.

a. In United States y. Powell, 379 U.S. 48 (1964), this

Court unambiguously affirmed in the context of an IRS

summons enforcement proceeding that the district court’s

role in an IRS summons enforcement proceeding is more

than perfunctory. “It is the court’s process which is in-

voked to enforce the administrative summons and a court

may not permit its process to be abused.” 379 U.S. at 58.

(emphasis added.) Although over the vears the courts

have been careful to leave the substantial burden of show-

ing such an abuse on the taxpayer, and the procedures

employed by the courts have assured that only assertions

of abuses with a foundation in fact are subject to judicial

inquiry, this Court has adhered to the fundamental tenet

that the court’s authority and process may not be abused.

In United States v. LaSalle National Baul, 427 U.S. 298

(1977), this Court had occasion to consider the contours

ef a district court’s authority to prevent abuses of its

process. The Court specifically recognized that the “good

1]

faith standard will not permit the IRS to become an in-

formation-gathering agency for other departments, includ-

ing the Department of Justice, regardless of the status

of criminal cases.” 437 U.S. at 317 (footnote omitted). As

the Court observed, the IRS’ authority to summon private

papers is not inherent; it has only such authority as Con-

gress bestowed upon it. 437 U.S. at 317 n.18. Thus, while

recognizing a core set of requirements for enforcement

of the summons, this Court wrote that “[t]hese reqnire-

ments are not intended to be exclusive. Future cases may

well reveal the need to prevent other forms of agency

abuse of congressional authority and judicial process.”

437 U.S. at 318, n.20.‘

Just as the TRS does not have inherent authority to

summon private papers, it has no inherent authority to

compel compliance with a summons. Under 26 U.S.C.

§7402, if the IRS desires to compel compliance with a sum-

mons, it must invoke the power and process of 2 district

court. Once their process is invoked, the district courts

necessarily have broad and inherent power “over their own

process, to prevent abuses, oppression and injustice .. .”

Gumbel vy. Pitkin, 124 U.S. 131, 144 (1888). See also S.EC.

v. ESM Government Securities, Inc., 645 F.2d 310, 316-17

(5th Cir. 1981); Gluck v. United States, 771 F.2d 750, 758

n.8 (3d Cir. 1985) (abuse of process rule in TRS summons

eases has “clear judicial integrity overtones” and “de-

terrence of governmental misconduct is an important .. .

consideration”). The placement of the power to enforce

the summons in the judiciary was deliberate and did not

“in any way purport[] to limit the power of the judiciary

to choose an appropriate rule of decision in an enforee-

‘Nothing in United States vo Arthur Young & Co.. 465 US.

805 (1984) restricts a district court’s power or authority to pre-

vent its process from being abused. The authority to prevent

such an abuse is fundamentally different from the court's anthority

to create a work product immunity for an anditer’s tax acerual

work papers,

12

ment proceeding.” United States v. Friedman, 532 F.2d

928, 937 (3rd Cir. 1976). Indeed, “the very fact” that en-

forcement of a summons is “entrusted to the judiciary”

leads to the conclusion that the “court has the power to

fashion appropriate rules as to the fairness of the en-

forcement order.” Id. See United States vy. Columbia

Broadcasting System, Inc., 666 F.2d 364, 368 (9th Cir.),

cert, denied, 457 U.S. 1118 (1982) (relying upon analogy

between enforcement of IRS summons and enforcement of

third party subpoena in civil litigation.)°

The district court’s order in this case is well within the

authority recognized in Powell and LaSalle. The order

merely provides that “[t]he documents delivered here-

under 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.” (Pet. App. 29a.)

The order affects only disclosures to other government

agencies, and is carefully tailored to the unique cireum-

stances presented to the courts below. The purpose of

the district court’s erder was to assure that the TRS not

act as an information gathering agency for other branches

of the federal government involved in unrelated civil liti-

gation with the Church. That concern arose out of sub-

stantial evidence that government attorneys in unrelated

civil litigation were seeking the very documents songht by

* Tn these respects, proceedings to enforce an TRS summons are

little different than any other civil proceeding in the district court.

Although there are many aspects peculiar to summons enforee-

ment proceedings, there is nothing in Section 7604(a) which de-

prives the district court of its full panoply of power and authority

to control the proceeding and its process. For example, both the

district and appellate court here ordered a number of pleadings

filed and kept under seal. Nothing in the statute mentions any

authority to do so but no one could doubt the authority of the

courts to issue such orders. Similarly, the district court ordered

the IRS to explain to it the source of the transcripts of the tapes

which the TRS submitted. No one could doubt the authority of

the court to require the govermment to do so.

13

the IRS in these enforcement proceedings, that the IRS

special agents seeking the documents here had ongoing

discussions with the government attorneys in the unrelated

civil litigation concerning these very documents, and that

witnesses summoned by the IRS special agents were inter-

viewed first by the special agents and then by the govern-

ment attorneys in the unrelated civil litigation under the

false impression that the administrative summons applied

to the unrelated civil litigation. Transcript of hearing of

April 29-30, 1985, passtm and at 87.

The order does not interfere in the least with the IRS’

mission either by threatening any delays or by holding out

the prospect of “constant scrutiny and attack by the sum-

moned party.” (Pet. 14.) The order does not itself impair

the IRS’ ability to conduct tax investigations (Pet. App.

14) because such investigations are not dependent upon

disclosures to other government agencies. Indeed, in

opposing the order in the district court, the specifie exam-

ples of concern articulated by the government principally

centered upon requests for information from other federal

agencies for the purposes of enforcing non-tax related

federal laws.’ Moreover, as the district court assured the

government, if a disclosure were sought for the purpose

of furthering the IRS investigation, the court would allow

it expeditiously.’ In such an event, any hypothetical delay

would be non-existent or minimal. The decision below does

not require that the application to the district court be on

notice to any other party. In fact, the district court specif-

ically left the question of notice to be addressed if such

® The order itself allows for disclosure if a criminal tax investi-

vation is sought.

*To the extent there might be a need to seek to disclose the

documents to another government agency for a purpose not. re-

lating to enforcement of the tax laws, any such delay is minimal

und by definition does not affect the tax haows.,

14

an application were ever made by the government. Tran-

script of hearing of June 10, 1985, pp. 11-12.

The government’s argument would require that a dis-

trict court is limited either to enforcing a summons with-

out any restriction, or denying it in its entirety. Such an

“all or nothing” approach is simply inconsistent with the

inherent power of a district court over its own process.

It reduces a district court to a ministerial role, forced to

stand by silently even if its process is misused. It is par-

ticularly peculiar because the effect of an “all or nothing”

rule will certainly be “nothing” in at least some cases.

Such a rule, which would in fact provide the TRS with

less information, is contrary to logic.

b. The government relies heavily upon the decision in

United States y. Barrett, 837 F.2d 1341 (Sth Cir. 1988),

petition for cert. pending, No. 87-1705, without acknowledg-

ing the critical differences between the two cases. Barrett

involved a restriction on the means by which the IRS

could investigate the tax liability of the taxpayer, and not

merely, as here, a restriction upon the IRS’ disclosure to

other government agencies of the contents of the very

documents subject to the administrative summons. In Bar-

rett, the taxpayer sought an order prohibiting the IRS

from continuing to send letters to Dr. Barrett’s patients

advising them that Dr. Barrett was being investigated by

the Criminal Investigative Division of the IRS and re-

questing documentation of fees paid to Dr. Barrett. 837

F.2d at 1343. See also, Barrett v. United States, 804 F.2d

1376, 1379 (5th Cir. 1986), vacated, 812 F.2d 936 (Sth Cir.

1987). Barrett contended that these disclosures violated

26 U.S.C. 66103. The issue was whether Barrett was en-

titled to a hearing on whether there had been a disclosure

of “return information” in violation of Section 6103, and,

if so, whether enforcement of the TRS summons should

he conditioned in order to protect Barrett against unneces-

sary disclosure of the fact that he was under criminal

investigation. See, e.g., 887 F.2d at 1348 (per curiam)

1D

and 1356 (Brown, J., concurring and dissenting). The re-

striction sought in Barrett thus was not limited to the

IRS’ dissemination of the contents of the documents sought

in the summons, but rather would have applied to the

methods the IRS could employ in its investigation. The

order here affects only the very documents which the IRS

will obtain as a result of the court’s enforcement order,

and only to the highly limited extent that it temporarily

bars disclosure of their contents to other government agen-

cies. It thus extends no further than to control the use

of the district court’s process itself, and is intended to

prevent the IRS from functioning as an_ information-

gathering agency for other federal agencies involved in

civil litigation with the Church, under the special cireum-

stances of this case. Barrett, on the other hand, presents

a much more serious question concerning the power of a

district court to withhold enforcement of a summons unless

the IRS complies with restrictions on its tax investiea-

tion methods hevond use of the contents of the documents

directly summoned.

ce. Nothine in Section 6103 indicates that the statute

was intended to displace the district court’s authority to

prevent abuse of its process or to allow the IRS to use

its summons power to gather information for other federal

agencies. See United States y. LaSalle National Bank.

supra, 437 U.S, at 317-318. Section 6103 was enacted pri-

marily to regulate and restrict access to tax returns and

return information by the many governmental hodies and

agencies that routinely had access to such information

under the prior practice. Subsection 6103(a) states the

veneral rule that “returns and return information shall

he confidential” and shall not he disclosed exeept as an-

thorized hy Section 6103. American Friends Service Com-

mittee v. Webster, 720 F.2d 29, 70 (D.C. Cir. 1983): Cham-

berlain v. Kurtz, 589 F.2d 827, 835-36 (Sth Cir), cert,

denied, 444 U.S. 842 (1979). Consistent with this poliey,

the district court included an appropriate provision to as

Se ee a ee a TE Se

16

sure that the IRS did not function as an information-

gathering agency for the other federal agencies in un-

related litigation with the Church. At the same time, the

district court assured the government that any disclosure

to another governmental agency which is provided for by

Section 6103 would be permitted.’ Only if the district court

refused to allow disclosure which Section 6108 permitted

could it be said that the district court was acting incon.

sistently with Section 6103.

d. The government asserts that the Anti-Injunction

Act, 26 U.S.C. § 7421(a), prohibits the district court’s

order. Section 7421(a) by its terms is not applicable here

in that no suit was brought to enjoin “the assessment or

collection of any tax,” 26 U.S.C. § 7421(a), but rather the

purpose of the Internal Revenue Service investigation was

contested in a summons enforcement proceeding.” More

‘The government's insistence (Pet, 17-18) that a civil damage

action after an improper disclosure is the proper remedy ignores

the obvious: a “damage remedy after the information is released

fails to protect [the] right to confidentiality.” Tierney v.

Schweiker, 718 F.2d 449, 457 (D.C. Cir. 1983) (emphasis in orig-

inal).

*In United States v. First Family Mortgage Corp., 739 F.2d

1275 (7th Cir. 1984), relied upon by the government (Pet. 18),

the summons enforcement action was voluntarily dismissed after

the government obtained the documents but before the taxpayer

intervened. The court held that the action was moot because the

IRS had already obtained the summoned documents. Based on

that finding, the court was of the view that the Anti-Injunction

Act barred the taxpayer's attempt to stop the IRS from using

the documents it had previously obtained; the taxpayer was, in

fact. maintaining a suit. In Black v. United States, 534 F.2d 524

(2d Cir. 1976), the Anti-Injunction Act barred the snit because

the lawsuit was in fact an independent suit to enjoin the TRS

from continuing its investigation. Lowri v. United States, 824

F.2d 827 (10th Cir. 1987), also relied upon by the vovernment

(Pet. 18). is equally unhelpful to the government. There the

tuxpaver, filed a lawsuit the purpose of which was not merely to

obtain return of documents from the TRS, but rather was “to head

off action against him, of whatever nature by the TRS.” 824 F.2d

at &31 (footnote omitted). Here in contrast there is no purpose

to “head off” IRS action: the TRS is free to pursue its investiga

tion using the documents.

17

importantly, the order does not in any way restrain the

assessment or collection of any tax. The IRS is free to

pursue any legitimate investigation and certainly free to

assess or collect any and all taxes it deems are due which

in fact it has now done. “The manifest purpose of § 7421

(a) is to permit the United States to assess and collect

taxes alleged to be due without judicial intervention, and

to require that the legal right to the disputed sums be

determined in a suit for refund.” Enochs v. Williams

Packing Co., 370 U.S. 1, 7 (1962). See also Bob Jones

University vy. Simon, 416 U.S. 725, 736-37 (1974). The

only purpose and effect of the order is to prevent the TRS

from abusing the court’s power to enforce the summons.

The Anti-Injunction Act has no hearing whatsoever on the

propriety of the order.

2. The Independent Evidence Issue Which The Petition Seeks

To Raise Is Not Squarely Presented By The Record Before

The District Court. Which Did Not Apply An Independent

Evidence Rule.

The petition with respect to the crime-fraud issue de-

votes itself exclusively to an abstract discussion of law

which is not squarely presented by the record in this case.

Whatever the outcome of the debate, its resolution will

have no effect on this case.

The district court held that it had the authority to re-

view the contents of the privileged communications to de-

termine the application of the crime-fraud exception. Fol-

lowing that ruling, the district court in fact reviewed the

communications in detail with government counsel at the

April 30, 1985 hearing. After hearing everv argument

the government chose to make, and after engaging in an

extended colloquy with government counsel as to the merits

of those arguments, the district court held the communica-

tions to be privileged. Not once during that argument on

the merits did the government ureve that the distriet court

erred in the manner in whieh it addressed the is-ne, Not

1s

once during that argument did the government make the

simple statement that it thought the district court should

review the complete communications rather than rely upon

the portions highlighted and brought to the district court’s

attention by the government.

The government’s quarrel is not with the district court’s

procedure, but rather with the tectical choice it made in

the district court to submit to the court the transcripts of

the tapes and to highlight only certain portions of what it

believed to be evidence of crime or fraud on the tapes.

This dissatisfaction with its tactical choice first became

evident when the government moved for reconsideration in

the district court. The district court clearly and cogently

denied reconsideration, refused to listen to the rest of the

communication and refused to consider a proffered decla-

ration, not because it believed it was barred by law from

doing so, but because it found that the government had

chosen to submit the transcripts and other materials and

to proceed on that basis. The district court, in exercising

its authority to control the proceedings before it and pur-

suant to Rule 7.16 of the Local Rules of the United States

District Court for the Central District of California, found

that because no reason was given why the argument and

the materials were not included in the earlier arguments,

it would deny reconsideration.

The government quite properly does not seek certiorari

as to the district court’s denial of reconsideration. Quite

aside from the merits of the second issue presented by

the petition, the reason the district court did not review

the entire communication was simplv because of a delib-

erate tactical choice made by the government in the dis-

trict court. However much the government might reeret

that choice, its consequence hardly merits review by this

Court.

For these reasons, the dissenters from the Mareh 28.

1988 order vacating the erant of rehearing ew bane would

19

have affirmed the district court judgment, notwithstanding

their disagreement with the en banc court’s disposition. As

even the dissenters recognized, the dispositive issues in

this case are: (1) whether the district court abused its

discretion in finding that it was entitled to rely upon the

government to highlight and focus the court’s attention

upon the critical portions of the two hours of tape; and

(2) whether the district court abused its discretion in re-

fusing to consider the belated declaration submitted for

the first time on reconsideration where there was no ex-

planation as to why the material could not have been sub-

mitted earlier and it clearly was available at the time of

the April 30, 1985 decision,

Those two issues are both necessary and preliminary

to any consideration of the question the government seeks

to have this court review. Equally, the two questions are

merely questions involving the routine application of es-

tablished principles to the particular facts of this case.

In short, the two questions hardly merit this Court’s re-

view.

3. The Independent Evidence Rule Is Necessary And Appro-

priate, And Is Consistent With Prior Decisions Of This

And Other Courts.

Notwithstanding the circumstances presented here, the

government urges review of the rule enunciated in United

States v. Shewfelt, 455 F.2d 836 (9th Cir.), cert. denied, 406

U.S. 944 (1972). Under Shewfelt, once the claimant of the

attorney-client privilege as to a particular communication

has established all the required elements of the privilege,

the party seeking to strip the privilege has the burden of

making a prima facie showing that the particular com-

munication was in furtherance of an intended or ongoing

illegality and must do so, if at all, by evidence independent

of the communication itself. This initial requirement that

the government make the showing by evidence other than

20

the privileged document is supported by logic and the

societal interests supporting the attorney-client privilege.

The attorney-client privilege protects “[¢]onfidential dis-

closures by a client to an attorney made in order to obtain

legal assistance... .” Fisher v. United States, 425 U.S.

391, 403- (1976). The attorney-client privilege serves im-

portant and vital interests in our society. The privilege

exists because of “the necessity, in the interest and admin-

istration of justice, of the aid of persons having knowledge

of the law and skilled in its practice, which assistanee can

only be safely and readily availed of when free from the

consequences or the apprehension of disclosure.” Upjohn

Co. v. United States, 449 U.S. 383, 389 (1981), quoting

Hunt vy. Blackburn, 128 U.S. 464, 470 (1888). The purpose

of the privilege is “to encourage full and frank communi-

cation between attorneys and their clients” to serve the

broader public interests in the observance of law and the

administration of justice. 7d.

The privilege encourages clients not only to discuss their

past acts but to seek advice concerning their future con-

duct. As the Ninth Cireuit has noted, “the attorney-client

privilege is central to the legal system and the adversary

proeess. For these reasons, the privilege may deserve

unique protection in the courts.” United States v. Hodge

and Zweig, 548 F.2d 1347, 1355 (9th Cir. 1977). The priv-

ilege, unlike many evidentiary rules, is not a response to

concerns about the reliability of the evidence, but is de-

signed to foster values our society deems important by

safeguarding the confidentiality of the attorney-client rela-

tionship.

Courts quite properly have not permitted that expecta-

tion of confidentiality to extend to communications with

attorneys designed to perpetrate present or future crime,

For this reason, communications otherwise within the at-

torney-client privilege can he stripped of their privileged

status upon a prima facie showing by the Opponent of the

21

privilege that the otherwise privileged communications

were in furtherance of a prospective or on-going crime or

fraud. See, e.g., Clark v. United States, 289 U.S. 1, 15

(1933); In Re Grand Jury Proceedings [United States v.

Lawson), 600 F.2d 215, 218 (9th Cir. 1979).

Once this rule is recognized, it inexorably follows that

the initial showing must be made by evidence other than

the privileged communication itself. Without such a re-

quirement, any opponent of the privilege would by the

mere invocation of the exception, force a detailed serutiny

of each and every attorney-client communication. The re-

quirement serves as a necessary mechanism to separate

those cases where there is truly reason to suspect that the

attorney-client relationship has been misused from those

cases where there is no such basis. Thus, the classie ver-

sion of the independent evidence rule embodied in the

common-law requires that “the Trial Judge must first de-

termine that the government has made a prima facie case

that the privilege does not apply because the communiea-

tion was in furtherance of a crime or fraud. Only then

should the Trial Judge look at the documents”. S. Saltz-

burg & K. Redden, Federal Rules of Evidence Manual, at

399 (4th ed. 1986). See also Jones, The Law of Evidence,

21:18, pp. 795-96 (“There should be some independent

proof of wrongful purpose; the mere suggestion of fraud

does not afford sufficient ground for setting aside the gen-

eral rule.”); United States v. Bob, 106 F.2d 37, 40 (2nd

Cir. 1939), cert. denied, 308 U.S. 589 (1939). As this Court

stated in applying the independent evidence rule in an

analogous context, “[w]hen that [independent] evidence is

supplied, the seal of secreey is broken.” Clark v. United

States, 289 U.S. 1, 15 (1933)."°

"Clark itself concerned the traditional privilege attaching to

jury proceedings and the court considered the attorney-client

privilege as an analogy. After finding that a similar erime-fraud

exception applied to the juror’s privilewe. the court held the ex-

(footnote continued on following page)

The independent evidence rule is essential to prevent the

attorney-client privilege from being eviscerated by the

erime-fraud exception and to protect the judicial system

from being overburdened by claims that the exception

should be applied. A contrary rule which would require

the federal courts, at both the trial and appellate levels,

to engage in in camera review of any and all attorney-

client communications upon the mere allegation of a party

opposing the privilege of the exception’s application, would

ve unjust and invite gross abuses. A party could require

its opponent to open for court inspection its entire file of

attorney-client discussions and frustrate the very purpose

of the privilege. It would become a common litigation

tactic for parties to seek massive discovery of attorney-

client files, in the hope that the fear of disclosure of even

innocent communications would provide a litigation advan-

tage, perhaps in the form of inducement to abandon or

settle litigation on unfavorable or unjust terms.

The onerous and negative effects of such a rule are re-

flected in the government’s failure to clearly enunciate the

rule of law which it would substitute for the independent

evidence rule. If, as implicitly seems to be the case, the

government’s position is simply that the district and ap-

pellate courts must in every case review the entire com-

munication, the consequences are clearly unacceptable

from the perspective of the burden on judicial adminis-

tration and preserving the core values underlying the

privilege.”

(footnote continucd from previous page)

ception applied because the “evidence of guilt is ample, without

the happening in the jury room, to break down the claim of

privilege, and thus let in the light.” 289 ULS. at 18. In other

words, Clark itself applied the independent evidence rule,

"The government is forced to adopt this extreme position be-

eause under any other rule it: cannot prevail in this case. Nee

Section 2. ante.

23

No doubt for these reasons, the government has pointed

to no court which has endorsed an absolute requirement

of review of the communications themselves. Rather, only

a single court of appeals has specifically rejected the in-

dependent evidence rule and even that court does not re-

quire the district court to review the communications in

each ease. In In Re Berkley & Co., Inc., 629 F.2d 548, 553

n.9 (Sth Cir. 1960), the court approved of the in camera

review of the disputed documents, as well as several hun-

dred others, but did not establish a rule that either it or

the district court is required to review the communications.

The other decisions relied upon by the government to

show a purported division of view amongst the courts of

appeals are no more helpful to its position. In Jn Re Anti-

trust Grand Jury, 805 F.2d 155 (6th Cir. 1986) the initial

showing of a crime or fraud was made by evidence other

than the communication sought. 805 F.2d at 168. The

court, however, was of the view that before the communi-

cations were to be produced the district court must review

them im camera to assure that each particular document

fell within the exception. Jd. Thus, in holding that the

im camera review was mandated to determine the scope of

the disclosure, the court observed that the review at that

point “could have” assisted in determining whether a prima

facie violation had been made. /d.

The other decisions cited by the government (Pet. 19-20),

except one,'* simply do not discuss the independent evi-

dence rule. Thus, although it appears that the privileged

documents were available for reyiew by either the district

' As the government correctly notes, one member of the Court

of Appeals for the District of Columbia Cireuit bas expressed

the view that “{i]m appropriate cases the subpoenaed material

itself may provide prima facie evidence of a violation.” In Re

Nealed Case, 676 F.2d 793, 815 (D.C. Cir, 1982). Neo In Re Sealed

Case, 754 F.2d at 403 (Mikva, J. concurring) pointing out that

the discussion in Jn Re Scaled Case, 676 Fd at 819-16. expressed

only the views of the author of the opinion

24

or appellate courts, and were reviewed in some of the

cases, the courts did not address the questions of whether

a showing by independent evidence was made initially and /

or whether such an independent showing 1s required. In

at least two of the cases, the issue before the court con-

cerning in camera review was the propriety of im camera

submission of grand jury materials to the court rather

than the propriety of reviewing the communications them-

selves. E.q. In re John Doe Corp., 679 F.2d 482, 490 (2d

Cir. 1982); Ju re Special September 1978 Grand Jury 11,

640 F.2d 49, 56-57 (7th Cir. 1980).

In sum, the decisions do not reflect that the various

courts have considered-the independent evidence rule and

‘ts merits. All courts agree that there must be a prima

facie showing. The Ninth Cireuit requires that at least the

initial showing that the communications were in further-

ance of an illegal end be by evidence other than the suspect

communication itself. No court has held that a court is

required to initially review the communication itself.

The disparity, to the extent there is one, is minor and

hardly of great consequence. This is particularly so be-

cause an opponent of the privilege ean hardly complain

with credibility of a misapplication of the exeeption to the

privilege where they have been unable to produce even

prima facie evidence. The requirement hardly imposes a

very stringent burden to overcome. See, e.g., In re Anti-

trust Grand Jury, 805 F.2d at 165-166. In the absence of

such a showing, an opponent of the privilege cannot

credibly claim any injustice in upholding the privilege

since it can hardly assert that it pressed the exception

based on much more than idle suspicion.

The mere fact that opponents of the privilege have been

able to invoke the exception successfully by independent

. ’ . ni > y< . . ‘ir qn) ) e

13 Bg. In ve John Doe Corp., 675 F.2d 482 (2d ¢ ir I 2):

In ve Grand Jury Proceedings (PMC Corp), HO4 Pod 7S (3d

Cir. 1979): Union Camp. Corp. V. Lewis, 385 F.2d 145 (4th Cor.

1967).

25

evidence puts to rest the government’s argument that the

rule eviscerates the exception. See e.g., Shewfelt, Clark,

Hodge and Zweig. The fact that the government tried but

failed to prove the existence of the exception by indepen-

dent evidence in this case merely reflects the inadequacy

of its evidence, and not a failure of the independent evi-

dence rule.'*

Nor does the independent evidence requirement conflict

with the manner in which the validity of other claims of

privilege are decided, as contended by petitioner. (Pet.

21.) For example, in United States v. Nixon, 418 U.S. 683,

713-14 (1974) relied upon by the government, (Pet. 21)

the claim of privilege by the President was sufficient to

render the materials presumptively privileged. It was

only after the Special Prosecutor made a sufficient pre-

liminary showing to rebut the presumption that an /»

camera examination of the subpoenaed material was ap-

propriate. 418 U.S. at 713-14. The point, of course, of

the court of appeals’ opinion in this case was that the

government did not make its prima facie showing.

Whether the court of appeals would have deemed it ap-

propriate to review the tapes at that juncture was an

issue never considered or raised in the court below.

In Kerr v. United States District Court, 426 U.S. 394,

404-406 (1974), this Court indicated that an in camera

review of certain files would be an appropriate manner

of addressing a claim of governmental privilege because

the nature and weight of the privilege there varied with

the nature of the specific document and because of the

required balancing between claims of irrelevance and priv-

"The government's relianee on Uirled States vo Wing, 536 F.

Supp. 253 (C.D. Cal. 1982) is misplaced. As the decision makes

clear, there was ample independent evidence to apply the excep-

tion there. If anything, King illustrates the likelihood that where

the attorney-client relationship is in facet abused, there will be

ample evidence, other than the commanications themselves, to make

a prima facic showing.

26

ilege and the opponents’ claim of need. Somewhat simi-

larly, in Halkin v. Helms, 598 F.2d 1, 9 (D.C. Cir. 1978),

the court observed that normally an affidavit claiming

state secret claims is sufficient to sustain the claim of priv-

ilege. The in camera exploration was not of the content

of the material sought, but rather of affidavits and testi-

mony demonstrating that the claim of privilege was valid.

Those proceedings, which the appellate court thought

proper, were held only to prove the validity of the claim

because of the showing of necessity for the information.

The government’s attempt to draw support for its posi-

tion from Bourjaily v. United States, US. , 107

S.Ct. 2775 (1987), is equally to no avail. Bourjaily con-

cerned the showing which must be made before a co-con-

spirator’s statement is admitted under Federal Rule of

Evidence 801(d)(2)(E). In holding that the proponent of

such a statement is not limited exclusively to reliance on

independent review, but rather may also rely on the state-

ment itself,® this Court relied on Federal Rule of Evi-

dence 104(a). That rule provides that “[p]reliminary

questions concerning . . . the existence of a privilege, or

the admissibility of evidence shall be determined by the

court. ... In making its determination it is not bound by

the rules of evidence except those with respect to priv-

ileges” (emphasis added). The Court held that Rule 104

(a) thus overrode prior existing non-constitutional eviden-

tiary rule, except those concerning privileges, a point

underscored by this Court. 107 S.Ct. at 2780." Because

18 This Court specifically declined to decide whether the showing

could be made exclusively by reliance on the hearsay statement

itself. 107 S.Ct. at 2781.

'® The concern underlying the attorney-client privilege is quite

different than that underlying the hearsay rules, which derives

from the presumptive unreliability of out of court statements.

Nee Bourjaily, 107 S.Ct. at 2781. The very purpose of the attorney-

client privilege, in contrast, is to ensure the reliability of the

client’s statements to his attorney; the privilege is recownized be-

cause it serves and promotes this important societal value and

interest.

ry |

Rule 104 (a) and Bourjaily, specifically preserve pre-exist-

ing evidentiary rules with respect to the determination

and application of privileges, they support the continued

application of the independent evidence rule in determin-

ing the applicability of the crime-fraud exception,

CONCLUSION

The petition for a writ of certiorari should be denied,

Respectfully submitted,

Kric M. Litperman

Counsel of Record

Kpwarp CopELAND

Rabinowitz, Boupty, STANDARD,

Krinsky & Lirnerman, P.C,

40 Broadway—Fifth Floor

New York, New York 10003-9518

(212) 254-1111

MicuakL Lee Herrzperc

275 Madison Avenue

New York, New York 10016

(212) 679-1167

Counsel for Responds nis

Church of Scientology of

California and Mary Sue Hubbard

Dated: September 26, LOSS

APPENDIX

la

Order of United States Court of Appeals

FOR PUBLICATION

UNITED STATES COURT OF APPEALS

For tue Nintu Crrevir

Nos. 85-6065; 85-6105

D.C. No. CV85-440-HLH

ORDER

Uxrrep States or AMERICA,

Petitioner/Appellee/

Cross-Appellant,

Fraxk S. Zon,

Respondent / Appellee,

and

Cneren or SciENTOLOGY OF CALIFORNIA and

Mary Sce Hvuepparn,

Intervenors/ Appellants /

Cross-Appellees.

Filed July », LOSS

Before: Browning, Tang, Pregerson, Alarcon, Norris,

Reinhardt, Beezer, Brunetti, Thompson and Leavy,

Cireuit Judges.

ORDER

The opinion pratolistied at S42 F.2d 1125 i< amended to

include the following concurrence :

2a

Order ef United States Court of Appeals

CONCURRENCE

Norris, Circuit Judge, concurring in the result:

I write separately to make it clear that I believe the inde-

pendent evidence rule has been and should continue to be

the law of the circuit. See United States v. Shewfelt, 455

F.2d 836 (9th Cir.), cert. denied, 406 U.S. 944 (1972). How-

ever, I cannot join the court’s order because the majority

has failed to make clear whether the order is a disposition

on the merits, i.¢., whether it constitutes en bane authority

that the Shewfelt independent evidence rule is the law of

the circuit. If the order is intended to be a disposition on

the merits, it is internally inconsistent because an en bane

panel cannot both decide a case on the merits and vacate

as improvidently granted the order of the full court au-

thorizing it to decide the case.