NInth Circuit Holds that Government Established Foregone Conclusion as to Documents to Override the Act of Production Privilege (1/9/13)

United States v. Sideman & Bancroft, LLP, 704 F.3d 1197 (9th Cir. 2013), here, the Ninth Circuit yesterday affirmed the district court's finding that the "foregone conclusion" doctrine applied to override the target's Fifth Amendment Act of Production privilege.  I previously blogged on the district court's opinion, Summons Production Ordered from Law Firm for Client Documents in Its Possession (Federal Tax Crimes Blogs 4/14/11), here.

Key steps in the holding, whether articulated this way or not are:

1.  There is no Fifth Amendment for the contents of documents.

2.  Notwithstanding, there is a Fifth Amendment privilege for any testimony inherent in the act of responding to compulsory process by producing the documents.  This is commonly referred to as the "Act of Production" doctrine.

3.  Still, notwithstanding the Act of Production doctrine, it will not apply where the Government can independently show that, at the time of the compulsory process, it had sufficient information to show certain key elements as "foregone conclusions."  Best to now let the Court of Appeals speak

"The authenticity prong of the foregone conclusion doctrine requires the government to establish that it can independently verify that the compelled documents 'are in fact what they purport to be.'" Id. at 912 (quoting United States v. Stone, 976 F.2d 909, 911 (4th Cir. 1992)). We have explained that not only must the Government show that it can independently establish that the summonsed documents are what they purport to be, it must demonstrate that it is not "compelling the [taxpayer] to use his discretion in selecting and assembling the responsive documents, and thereby tacitly providing identifying information that is necessary to the government's authentication of the subpoenaed documents." Id.

We therefore now turn to whether the Government has met its burden of demonstrating that it can independently verify that the summonsed tax documents "are what they purport to be" thanks to Fouts's familiarity with those documents. During her interview with IRS agents, Fouts "gave them a detailed description of the 2007-2008 documents that [she] had in [her] possession." It is apparent from Fouts's declaration submitted to the district court that she was very familiar with Nolan's tax records. Fouts described key details about the records, including that Nolan ran her business as a sole proprietorship; that Nolan's law practice grossed consistent income from month to month; that Nolan paid her individual and business expenses with hand-written checks she signed herself; that Nolan classified those working for her as independent contractors rather than employees; that Nolan recorded her billable time in a "dayplanner" appointment book and used QuickBooks to create a bill for each client; and that Nolan owned several rental properties in addition to her residence. Fouts also described the containers in which those documents were stored: four large banker boxes and three large accordion folders. 

Sideman contends that Fouts could not have sufficiently familiarized herself with the sixty-six inch stack of documents that comprise Nolan's 2007 and 2008 tax records because, Sideman asserts, Fouts spent only forty-five minutes reviewing those documents. We are not persuaded by this argument for two reasons: First, our review of the record reveals that Fouts spent more than forty-five minutes reviewing the summonsed records. The statement of account Fouts sent to Nolan, which itemizes the time Fouts spent reviewing Nolan's tax records, does state that on October 1, 2010, Fouts spent 0.75 hours reviewing Nolan's 2007 and 2008 tax records. But the statement of account also contains an October 4, 2010 entry of 1.75 hours indicating that in addition to performing other tasks, Fouts continued her review of the prior years tax documents on that day. Fouts also declared that from October 4 to October 12, 2010, she prepared Nolan's 2009 tax return. As part of that process, Fouts compared the 2009 tax records to Nolan's 2008 and 2007 tax records to check for consistency. Thus, although the precise amount of time Fouts spent reviewing the 2007 and 2008 tax records is not clear, she did spend more time reviewing the summonsed documents than the forty-five minutes Sideman alleges. 

Second, as pointed out above, Fouts can provide numerous details about Nolan's tax records. Indeed, due to her extensive knowledge of Nolan's tax records as described in her declaration, there is a foundation for Fouts's statement that she is "confident that if [she] saw Nolan's 2007-2008 documents again, [she] could identify and authenticate them, based on the personal knowledge [she] gained from reviewing and working with them and based on their distinctive characteristics and contents." In addition, for many of the items, the Government does not need to rely solely on Fouts's ability to authenticate the documents. Indeed, Nolan's billing and payment records could be verified by comparing those records and Nolan's bank records. See Bright, 596 F.3d at 693; United States v. Schlansky, 709 F.2d 1079, 1083 (6th Cir. 1983). Thus, regardless of the exact amount of time Fouts spent reviewing the summonsed documents, the Government has established that it is able to independently authenticate the summonsed records. 

* * * * 

Finally, the Government has met its burden of demonstrating that it "can authenticate the documents . . . described in the [summons] without the identifying information that [Nolan] would provide by using h[er] knowledge and judgment to sift through, select, assemble, and produce the documents." In re Grand Jury Subpoena, Dated Apr. 18, 2003, 383 F.3d at 913. Sideman argues that the district court's order would require Nolan to review the summons and numerous documents in Sideman's possession and then produce only the documents specifically listed in the summons. The district court limited the scope of the summons to include only those items identified in the summons. Thus, Nolan will not have to look at any document not found in the identified bankers boxes and accordion folders. Moreover, Sideman's argument that Nolan will have to sort through the documents in the bankers boxes and accordion folders is moot because the Government agreed in open court that the delivery of the four bankers boxes and three large accordion folders identified in the summons, with their contents as delivered to Sideman, will adequately comply with the summons. As a result, prior to Sideman's production of the documents, Nolan will not have to "discriminate among documents, thereby identifying information relevant to the authenticity of the documents." Id. (quoting In re Grand Jury Proceedings: Subpoena for Documents, 41 F.3d 377, 380 (8th Cir. 1994)). 

Accordingly, we conclude that the district court's finding that the IRS could independently authenticate Nolan's 2007 and 2008 tax records contained in the identified collection of boxes and folders currently held by Sideman was not clearly erroneous. 

Based on the  facts found, which we hold were not clearly erroneous, we conclude that the district court did not err in applying the foregone conclusion exception when enforcing Sideman's compliance with the summons.

The Briefs in the Court of Appeals are available here in zip format (must be unpacked).

I also provide the discussion of the foregone conclusion doctrine from the latest draft of my Federal Tax Crimes book, here.  I have not yet added this new Sideman decision because I am not yet convinced that it adds any learning to the foregone conclusion issue.