REISMAN v. CAPLIN

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Argument of Warren E. Magee

Chief Justice Earl Warren: Number 119 Samuel Reisman et al., Petitioners, versus Honorable Mortimer M. Caplin et al.

Mr. Magee.

Mr. Warren E. Magee: Mr. Chief Justice and Mr. Associate Justices, Your Honor I represent the petitioners in this particular case who are practitioners of law. Mr. Reisman is an attorney practicing law in Los Angeles, California.

The other plaintiffs in the suit below who are petitioners here are attorneys practicing in the District of Columbia and who specialize in the income tax and other tax fields and have practices outside of the District of Columbia.

The situation involved in this case rose in this fashion.

Two taxpayers by the name of Bromley were having tax problems with the Bureau.

As a result of certain negotiations and actions, deficiency assessments in the sum of several million dollars had been issued by the Bureau.

Ultimately, these assessments ended up in four cases to be adjudicated in the Tax Court.

At or about the time these cases were pending in the Tax Court, the firm in California Los Angeles retained the Washington firm to assist them in the defense of these tax cases and for any possible criminal litigation, if that ever arouse out of the so called tax delinquencies.

Justice Potter Stewart: The taxpayers are Californians, are they?

Mr. Warren E. Magee: The taxpayers at that time are residents of Honolulu Your Honor and had as the subpoena show, had activities which extended throughout the world, according to the face of the subpoenas.

Justice William O. Douglas: What has happened to the tax litigation of which this suit rose?

Mr. Warren E. Magee: It has been tried and we so stated in our brief Your Honor and it is now under consideration by the Tax Court, but the decision has not yet been rendered in any of the four cases.

Justice William O. Douglas: Is the, is the issue we decide today, we hear today relevant to anything that Tax Court (Inaudible)

Mr. Warren E. Magee: Yes sir but not to the Tax Court, because those cases had been tried, but it is relevant because the commissioner has stated he is going ahead with these subpoenas anyway because there is a pending criminal investigation open in these cases, that's why it is not moot Your Honor, this is the dangerous aspect of it.

Now, here is what happened in this case.

The taxpayers endeavored to work out a settlement with the representatives of the respondent.

Tentative arrangements were made under which Peat, Marwick, and Mitchell, a vast accounting firm with offices throughout the world and throughout the United States were retained by Trammell, Rand, and Nathan, and by Reisman to aid them in preparing the defenses to the tax cases at any possible criminal implications that might be involved.

Discussions were entered into with the bureau and it was tentatively agreed that the various documents and papers which Trammell, Rand, and Reisman firm returned over to Peat, Marwick, and Mitchell for accounting purposes would be a sample, worksheets would be prepared and a certain disclosure would be made for settlement purposes with the bureau.

Only assurance that there was no criminal investigation pending.

Negotiations to this end went on and at a late conference just before Counsel were about to turn over their work products to the bureau, the bureau then notified that there was an open criminal case after the so called bailment had been made between Counsel and their accountants.

You must always bear in mind Your Honor that these accountants never worked for the taxpayers.

They were retained by counsel just as they retained anyone else to work in their office, such a law clerk, a bookkeeper, or any other person and the arrangement which is alleged in the compliant is that it was agreed that every piece of paper that went to Peat, Marwick, and Mitchell was to be isolated in a file and designated as the property of the plaintiff attorneys and not the property of the accountants.

Justice Arthur J. Goldberg: (Inaudible)

Mr. Warren E. Magee: No he is not in the suit Your Honor.

Taxpayers are not parties to this litigation.

Their rights have been asserted through their counsel, Mr. Goldberg.

Justice Arthur J. Goldberg: (Inaudible)

Mr. Warren E. Magee: Yes sir, yes sir.

I shall be delighted to.

I would like to get this factual background clear, so Your Honors will know about what we are discussing today.

When this conference in the bureau indicated to counsel for the Bromley's that there was a possible criminal investigation, Bromley himself went with his counsel to the bureau and then the bureau told him that that they wanted these papers, but that they were going to use them against him possibly in the civil and possibly in the criminal cases.

And based on that situation Mr. Bromley stood on his Constitutional rights and refused to deliver the papers to the bureau of taking the ground that that would be violation of his rights against self incrimination when they were threatening criminal prosecution.

He is perfectly willing to have them, have the papers that all they wanted them for was to use to settle the tax cases which were pending in the Tax Court.

So he had refused to waive his rights.

The tax cases were then set down for trial and were pinned all four of them.

At or about that time, the respondent Caplin issued on the 7604 a series of subpoenas addressed to Peat, Marwick, and Mitchell which are partnership by the way and not a corporation in their New York, Chicago and Los Angeles offices, asking for a whole, all of the papers which counsel had turned over to their accountants for use in defending the tax cases and for use in protecting them against criminal charges.

Peat, Marwick, and Mitchell advised the, being a firm with vast operations didn't want to risk contempt because what we face under these subpoenas if you don't comply.

They said they were going to comply and were going to turn our papers over to the bureau.

That left us but one recourse which we promptly took.

We went to the jurisdiction were the commissioner was located and where there was also an office of Peat, Marwick, and Mitchell in Washington DC.

We filed a civil action against the commissioner to join the enforcement of these subpoenas and we alleged that these subpoenas were not being used for the limited purposes set forth in 7602 and 4, which is for the purpose basically of determining the correctness of a tax repayment, not for prosecution.

And we further allege that these were the work products of counsel, they belong to counsel, they did not belong to Peat, Marwick, and Mitchell and this was an unConstitutional search and seizure contrary to the Fourth, Fifth, and Sixth Amendments to the Constitution.

There was no answer ever filed controverting the allegations of unConstitutional acts and the allegations of exceeding his statutory authority under these very limited statutes.

That was never denied and of course hasn't been denied to this attorney.

The complaint where the motion was sworn to, a motion for a temporary restraining order, and a preliminary injunction, were filed with a supporting affidavit of Mr. Nathan, which supported these allegations of the complaint, pointing out there would be a turning over of these papers which of course would destroy the trail preparation of the parties by the voluntary act of Peat, Marwick, and Mitchell.

The matter came on for ex parte hearing before Judge Curran in our District Court he granted, yes sir --

Justice Arthur J. Goldberg: (Inaudible)

Mr. Warren E. Magee: Yes sir.

Justice Arthur J. Goldberg: (Inaudible)

Mr. Warren E. Magee: They – we don't -- we don't quite read it that way and neither of the Courts below have read it that way.

The Court below read that quite different from that and so did the government.

They took the position, now the Court in its opinion which appears in the record, may it please the Court, just one moment is this and I read from page 157 of the record Your Honors from the Court of Appeals' opinion.

The essence of the complaint is that the summons called for the production of privilege matter including the work product of the counsel and were not issued for the purpose of assessing taxes or of ascertaining the correctness of any return, but to obtain evidence for use in pending tax cases or to prosecute taxpayers criminally.

The defendants, reading now from 158 Your Honors of the record, the second sentence in that top paragraph, the defendants Harney and MacClure as representatives of the accounting firm answered, admitting the essential allegations of the complaint and joined in its prayers for relief which included a prayer that some of it be quashed.

We have always read this answer and the court below has always read it as an admission of all the material facts in the complaint, and the case has been argued on that basis, and of course that supplies all the parties involved in this litigation and places them before the jurisdiction of the district court assuming our position that the plaintiffs as petitioners, as counsel for the taxpayers got to assert their Constitutional rights.

Justice Arthur J. Goldberg: (Inaudible)

Mr. Warren E. Magee: Yes sir.

Justice Arthur J. Goldberg: (Inaudible)

Mr. Warren E. Magee: Precisely.

That wasn't saying they still wouldn't apply.

They wanted themselves enjoined, that's what they really wanted so they wouldn't have to turn our papers over to the department.

They could see that that wasn't correct and they admitted in their answer that the papers belonged to us, the attorneys.

So we have no issue on ownership.

Now the government instead of answering, may it please the Court, filed a motion to dismiss and their motion didn't raise this question which is now one of the questions which is now before this Court of sovereign immunity at all.

They filed a motion to dismiss on very limited grounds that the plaintiffs did not have status to sue and that the complaint failed to state a cause of action this is what they urged to the district court and their motion appears, I just can't put the finger on it, but I'll find it for Your Honor and instead of --

Unknown Speaker: (Inaudible)

Mr. Warren E. Magee: That's on Page 71 of the record.

I have -- yes I have it here.

You see they state these.

Now these are the grounds.

The plaintiffs have no standing to sue.

The court has no jurisdiction to enjoin the assessment of collection of a federal tax.

That declaratory relief with respect of federal taxes is specifically prohibited by 28 U.S.C. Section 2201.

The complaint fails to state a cause of action.

Then in order that there be no misunderstanding of the positions which they took in the trial court, we have printed those points and authorities in support of this motion and nowhere in there is this so called offence that this is a suit against the United States without its consent raised at the trial level.

Unknown Speaker: (Inaudible)

Mr. Warren E. Magee: Well, I think if may I give you an honest answer to that?

Solicitor General takes the position of this case, that's a very difficult question.

He doesn't think he is supported in his opposition and shouldn't be decided by this Court.

It should be decided on some other ground.

So I respectively submit they did not think at the trial level there was enough merit to that contention to present it because it was never presented or argued, motioned, any point in authorities or in the oral argument which is also reported here.

I just bring that up because this came up only in the Court of Appeals, this question of the lack of consent to sue the United States in this particular case.

The motion to dismiss was heard by another judge. There was no answer, or any affidavits contraverting these factual allegations which I have detailed to Your Honors which were covered by the complaint.

The case was heard on motion before Judge Heart.

Now Judge Heart didn't agree with this any theory that the court didn't have jurisdiction.

As he ruled at Page 141, where there is an allegation and a complaint of unConstitutional action, which this complaint alleged, he is going off on another point Your Honor can see.

Judge Heart said this, “On the other hand of course the Federal Court always has jurisdiction to restrain an unConstitutional exercise of power,” that is the position which he took, but he took the position which I submit Your Honors is wholly unsupported by the record because he found contrary to the sworn allegations of the complaint that these papers were the papers of Peat, Marwick and Mitchell.

And if they hadn't initiated this action, even though they were before the court we had no status to maintain as attorneys to the taxpayer, that's what the judge ruled at the trial level and that was the basis of his decision so on that basis he dismissed the complaint.

We then went to the Court of Appeals and the case was argued before the Court of Appeals.

The Court of Appeals became concerned over what's going to happen if somebody doesn't answer and respond to one of these complaints.

Can they just be taken in ex parte and held and judged in contempt and asked that be briefed?

And of course our is a case that holds that you can do precisely that just take the recalcitrant witness, ex parte into court and it can be immediately sentenced for contempt for failure to answer such a subpoena.

But and the case was argued at length and brief and re-briefed before the Court of Appeals and then the Court of Appeals on February 7th entered its opinion.

Now the Court of Appeals states the facts just as I have given them to Your Honors here in the first two pages of its opinion and boils down the real allegations which are admitted in this complaint, in this language at 157 I mentioned this to you before, the essence of the complaint is that the summons called for the production of privilege matter, including the work product of counsel and were not issued for the purpose of assessing taxes or ascertaining the correctness of any return, but to obtain evidence for use in pending facts cases or to prosecute the taxpayers criminally.

Then the court says that the district court had denied -- granted a motion to dismiss and entered findings, which I have described to Your Honor, but Judge Fahy of the Court of Appeals disregards those findings and says that that court is going to decide this case on an entirely different ground and here is what Judge Fahy said, “We think the complaint was properly dismissed, but for a different reason namely, that it is not within the court's jurisdiction because it is in substance a suit against the United States to which it has not consented.”

And as a basis for this contention and finding the court cites Larson, Malone, United States versus Lee, the Dollar case, Larson again and the Wells, and the Louisiana cases.

So this is the basis on which the Court of Appeals decided, which is completely different from the court below, but we now have a situation where it is admitted, that you would have two things.

You have property of attorneys which is their work product and which we contend is privileged, being sought by revenue subpoena while still in the constructive possession of the attorneys because their accountants just like their law clerks are maintaining these papers for them and working over them in file preparations, in defense of civil and criminal cases too.

We have respondent Caplin using a revenue subpoena and if Your Honors read the section you'll find it's only for the purpose of ascertaining the correctness of taxes and collecting them.

Just bear in mind that Mr. Caplin has two sections in his department.

He has got a police section which is run by the special agents and he has got a tax collection section which is run by the tax collectors.

And I respectively submit that Congress never intended to turn 7604 over to the police section or the treasury department to obtain evidence to be used in either a civil tax case or in criminal prosecutions.

There is nothing in the history that shows that was ever intended.

This is a section dealing only with determining the correctness of taxes and collecting them and so with -- and further that when he does this and uses the guides of subpoena to take from attorneys or accountants and from the constructive possession of the taxpayers through his lawyers, this is an unConstitutional act on his part and if you use the procedures and the statute would be unConstitutional because he can just do it.

There is no requirement of any showing.

For example one of the greatest rights, we have in this land, came from the Magna Carta and it was against unreasonable searches and seizures.

When that charter was written at Runnymede, you couldn't even get a search warrant on the affidavit of the officer no matter how strong it was.

You had to have a second person to swear to it.

Now we have put that in our Constitution so that when any person is to be searched or his property is to be seized or his papers taken, it can only be done on a showing of reasonable cause and Your Honors in writing the new Federal criminal rules have spelled that out very clearly and you have required this to be done by affidavit and that you must show facts not conclusions, that the crime has been committed and you must connect the person up with the crime against whom you are going to make the search, none of this in this particular section.

So it's perfectly obvious, that to use this for police purposes is certainly a direct violation of Constitutional rights, what else did it do?

It would absolutely destroy the effective assistance of counsel in every tax case.

If you can permit the tax collecting side to use these subpoenas to get evidence to turn over to their police, the special agents as they are called, to turn over to grand juries to indict the citizen.

Now Congress never intended in this statute to give Mr. Caplin such power, but he proposes and in his brief he say he intends, then he thinks he is right that he can take these subpoenas, he can gather this material from the taxpayers, not the taxpayers, but the attorney's accountants and he can use it in both, civil tax cases against the taxpayer and in criminal proceedings and he even told Your Honors in his opposition to our petition, that in opposition when we requested a stay in this case, says he opposed a stay because the statute of limitation was getting very close to running on the criminal prosecution involved and in the tax court he asked the tax court to continue the tax cases until he got the evidence under these subpoenas because it would help him in the trial of those cases.

Justice Arthur J. Goldberg: (Inaudible)

Mr. Warren E. Magee: Here is your problem, enforcement is at three places.

You've got 30 days to move in.

You've got taxpayers saying they are going to give it over, this is our problem.

If we waited, these are ex parte.

We are not parties to these enforcement proceedings.

They would take someone from the office in Chicago, someone in Los Angeles, someone in New York, bring them before the hearing officer who is a special agent not a tax collector.

They gave us the paper and he doesn't give them, they walk in next door to the district court in an ex parte hearing as for a contempt citation, he can be cited for contempt or he can voluntarily give the papers.

Justice Arthur J. Goldberg: (Inaudible)

Mr. Warren E. Magee: The Ex parte yes, all you do is to hear the subpoena, the witness has an answer, he asks for an ex parte attachment and the judge could hold him in contempt forthwith ex parte, it has been done.

Justice Arthur J. Goldberg: (Inaudible)

Mr. Warren E. Magee: Just one case they've cited here where that has been done, which I can give you Your Honor in a moment.

So we were up against this.

We couldn't have protected the rights of our clients if that had happened, they would had the papers let's be honest.

They would have had all of our work papers, our work sheets, the private papers of the client. They would have had them, and they would have photostated them, made copies of them, would we be protecting our clients in a situation like that if we didn't act as we did, I respectfully submit not and we don't have to wait.

The case is our legion that you don't have to wait for enforcement proceedings.

The cases arise when the taxpayers goes in court, a witness goes in court, they file a motion, they file a complaint.

They file an end reaction to have this subpoena measured as to validity in a District Court.

And the courts have said they will take jurisdiction over these matters and they have, on a multi -- in various ways, so I respectfully submit Mr. Justice Goldberg that we would have been lax if we had waited and let them go through enforcement to take the papers, copy them, use them in that manner.

Why can't it be settled in the District Court, all the parties are there, Caplin is there, his agency here, we have the accountants who've joined and you have the attorneys for the taxpayers to assert their rights.

Now let's turn to the question which the Court of Appeals -- Mr. Justice Goldberg the case is Sale versus the United States, the decision of the Eight Circuit 228 F.2d 682, 21 of the brief.

Now let us first turn to the basis upon which the Court of Appeals decided this case, that in effect this was a suit against the United States and let's analyze that.

The Court of Appeals cites and this 32 -- commencing on page 9 of our brief, the Court of Appeals cites the decisions of this Court in Larson versus Domestic and Foreign Commerce Corporation and Malone versus Baldwin and states however that these two cases relied on concerns suits over property.

But then the race, the distinction between those well defined categories of cases which are very carefully listed in Larson, so much so that Mr. Justice Frankfurter in his dissent complied an appendix, in these four categories and showed the full lines of cases within which the citizen can act against representatives of the government and where this defense of immunity from suit does not apply.

Mr. Justice Frankfurter lists these cases in this fashion; cases in which the plaintiff seeks an interest in property, which concededly even under the allegation of the compliant belongs to the government or calls for assertion of what is unquestionably official authority.

Now this is where you have a suit in which you cannot maintain your action; cases in which the action to the action to the legal detriment of plaintiff is taken by an official justifying his action under an unConstitutional statute.

Now in those cases Your Honors have held that suits can be maintained.

The next category is cases where the plaintiff suffers a legal detriment through action of an officer who has exceeded his statutory authority and four cases where an officer seeks shelter behind statutory authority or some sovereign command for the commission of a common law tort.

Now --

Unknown Speaker: (Inaudible)

Mr. Warren E. Magee: We submit Your Honor that if we are to follow the decision of the Court of Appeals, that this suit was involves practically each one of these things, you have tortuous action, you have unConstitutional action, you have an officer exceeding his authority in attempting to justify an invasion of property rights and the privileges and Constitutional privileges of a citizen, his attorney are all involved in his action.

It meets all four of the requirements, they are all present here and --

Justice Hugo L. Black: From what case you were reading?

Mr. Warren E. Magee: From the Larson case Your Honor and I'm quoting in the footnote on page ten of my brief, which is taken from the dissenting opinion of Mr. Justice Frankfurter where he lists these categories and then he lists all the cases that were decided under them.

We say this, that if in order to sustain the decision of the Court of Appeals on the admitted facts here, Your Honors are going to have to overrule the cases which we cite on page 11 of our brief, which commenced with the Lee case and end up with the Larson case, because Larson didn't hold you couldn't sue where there's an invasion of property rights.

The Larson case says you can sue where you have an access of statutory authority or where you have unConstitutional actions by a government officer and there is nothing to the contrary in Malone versus Baldwin which merely followed.

These cases turn on property rights where an officer within his authority takes property under the authority of the United States, as just compensation is paid for these properties in these situations, you have a legal taking and the person goes to the Court of Claims or into some court to get his just compensation.

Your Honors have said in those cases where the taking is under the statute where you have a formal to get just compensation, then the proceedings are not illegal and you cannot restraint the person who acts, but just go back to Lee, which is typical example and let's look at these cases of what they really are.

Here is the family General Lee.

They have the -- a plot of ground opposite the end of the Arlington Memorial Bridge, the Lee Mansion and his home site.

The Lee went with the south, his property was seized by officer of the United States.

It was then held by then under the guise that the Lees hadn't paid the taxes.

The Lees, of course it was impossible for them to pay the taxes, but they had a friend who offered to pay the taxes, and ultimately when the war was over the Lee family sued to get back their property.

This Court held that that was, did not vest title, that action by the officer hiding behind the refusal to take this tax bill and then contending that United States had titled because the taxes hadn't been paid, could not to be maintained as a matter of fact.

Therefore, the officer was acting without any authority and the property belonged to the Lee family.

As a result of this opinion, the Lee's got $3000 for the property we now have the Arlington Cemetery there and Lee's Mansion as a national memorial.

Then you can run through all of the rest of these cases.

If the officer has authority and he acts and he takes, this Court will not enjoin him, because he can get just compensation for the property that is taken.

However, if you have a, an extension or exercise beyond the statutory authority and an invasion of rights, just as we have here, this Court has never hesitated to step into to protect the rights of citizens and their rights.

And it should always protect against this sort of action.

Now the government argues that we are stopping the tax proceedings in their tracks.

We know that is true, the cases have been tried, they weren't going to use this and they couldn't have used this on tax code anyway, we know the tax court will probably not receive this because it wasn't obtained under the procedures authorized by that court.

So nothing has been delayed.

We had -- we stopped them certainly and then still an injunction against them, right to this very day for McLee which has been agreed upon throughout the court of appeals restraining them from enforcing these proceeding, because they said they are going ahead with it for criminal purposes.

So when you analyze this business of consent, it's not involved in this case at all, because Caplin is exceeding his statutory authority.

Where does he get authority to subpoena counsel's records to use in a criminal case, to turn him over to the grand jury?

He certainly doesn't get it under this section and that is a collection section, not a police operated section.

I am sure Mr. Justice Goldberg with his experience knows exactly how that bureau furnishes over there and if this is the way it operates.

And bear in mind, these subpoenas all were directed to be returned before the police and not before the tax collector.

They were all to be returned before the special agent and not the tax collector.

Then let us, the distinction between Larson may it please the Court, and the line of cases upon which the petitioner relies was clearly expressed by the Court of Appeals for the district of Columbia in the West Coast Exploration Company versus Mckay case.

This is on page 13 of our brief and here is what the Court below in another case said in dealing with this principal of consent.

In brief reaction or inaction question in the Larson case was that of war assets in the exercise of its authority in disposing a surplus property of the government and in negotiating and performing contracts for such disposal.

It was not charged in the complaint that war assets had acted beyond that authority or unConstitutionally.

So how that case helps the Court below, I cannot see, because that Court admitted in its findings and its opinion that the complaint alleges just that and yet it says, Larson has authority for holding that this is a suit against the government that is there, has not consented therefore it cannot be sued.

Now what did Larson say on this matter.

Everyone relies very heavily on the Larson case and here is what Your Honors said and this is quoted on page 15 of the brief.

Where the officer's powers are limited by statute, his actions beyond those limitations are considered individual and not sovereign actions.

The officer is not doing the business would sovereign as empowered him to do or is he doing it in a way or is doing it in way which the sovereign has forbidden.

His actions are ultra vires his authority and therefore maybe made the object of specific relief.

It is important to note that in such case the relief can be granted without impleading the sovereign only because of the officer's lack of delegated power and to the same effect is a latter case of Joint Anti-Fascist Refugee Committee versus McGrath in 341 US.

We cite this on page 41, what did Your Honor say there.

Where an act of an official plainly falls outside the scope of his authority he does not make that act legal by doing it and then invoking the doctrine of administration construction to cover it.

And the Court of Appeals following the decisions what this Court has issued in the Dollar case over the years was ultimately resulted in contempt citations against various members of the Department of Commerce and the Department of Justice for failure to deliver the Dollar stock in compliance with the orders of this Court and the Court of Appeals below.

Now Court of Appeals said this, in Dollar versus Land 154 FED 2nd 307, since the Court must determine at the offset its jurisdiction to proceed, it is compelled to make a preliminary decision for jurisdictional purposes on the ultimate question in the suit and is notwithstanding the fact that when the merits are heard it maybe compelled to reach an opposition conclusion.

The Courts -- Yes sir.

Justice John M. Harlan: No go ahead I -- finish it.

Mr. Warren E. Magee: Yes sir, the Courts saw this problem by accepting at their face value for jurisdictional purposes the assertions of complainant of one of power in the officer unless such assertions are so unsubstantial and frivolous as to afford no basis for jurisdiction.

Yes sir.

Justice John M. Harlan: The question I was going to ask you is this something your premises as to the invalidity of the subpoenas?

Is this a question of Federal officer acting outside the scope or his authority or it's simply mistaking his authority?

Mr. Warren E. Magee: I'd say it's in the former category clearly, it could be --

Justice John M. Harlan: Why is it?

Mr. Warren E. Magee: Because he has been given authority and he knows exactly what it's for, the statute fails it up, quite verbal.

Justice John M. Harlan: The statute gives an authority to issue the subpoena.

Mr. Warren E. Magee: For the -- for the purpose of determining the correctness of a tax and filing returns when no returns are made, this is what it's for.

But when he admittedly Your Honor, is going to say, I am going to use that subpoena not for this purpose but to obtain evidence to use it on criminal case, that's what he is saying.

It's not the sacrum it's in the first category.

He doesn't have any authority, the Congress never gave it to him and he is clearly outside the scope of his authority and he cannot hide behind the doctrine of sovereign immunity when he does this.

Your Honors' decisions are very clear on this.

It's not just a mistake on his part. He is acting clearly (Inaudible) you see here is problem you have, we had alleged it flatly.

He's never come in and said, given any answer for what he is going to do or what's he intends to do except as we know it from the police he's filed and the actions he has taken officially upon the public record, but we know now what he intended to --

Justice John M. Harlan: But on the surface of things at the time he issued these summons, he was acting, it would seem to me within the scope of statutes that gave him that power.

Now he may have said that, he made this to abuse his authority by doing something else, but as far as sovereign immunity is concerned it seems to be difficult to say that he wasn't acting originally within his scope of his power?

Mr. Warren E. Magee: Well Mr. Justice I must beg to differ to with you.

As I understand the cases as laid down by this Court, this is not a mistake.

We know the complaint alleged these unConstitutional acts.

We alleged the purposes for which these were going to be used and they were not to be used in accordance with the statute.

We allege this invasion of Constitutional rights, we allege the privileges that are involved here.

Justice Arthur J. Goldberg: (Inaudible)

Mr. Warren E. Magee: That starts out, it goes, here is what it says, for the purpose of ascertaining the correctness of any (Inaudible) making a return, where none has been made determining the liability of any person for internal revenue tax although liability at law or equity were not involved in the risk, because they go over to transferees and other persons.

This is the sole function that he has, is to determine the correctness of the tax.

Now he is not using it for this purpose sir if he is going to take and give it to a Grand Jury.

Justice Arthur J. Goldberg: (Inaudible)

Mr. Warren E. Magee: I am arguing yes, but it's the other way around may it please Mr. Justice Goldberg.

These were not used to determine the correctness of any tax and litigation even.

Justice Arthur J. Goldberg: (Inaudible)

Mr. Warren E. Magee: And he was using it according to his own admissions now which we charged in the complaint, bear in mind these are all charges, he has admitted that he is using it for the purpose of obtaining evidence to submit before grand jury and Congress didn't give him that authority and if they did this is an unConstitutional statute because it wouldn't operate -- if you operate that way it's unConstitutional sir.

Justice Arthur J. Goldberg: (Inaudible)

Mr. Warren E. Magee: Well I say this again, that he is using that statue for an unauthorized purpose, Mr. Justice Goldberg, Congress didn't give him power to go out subpoena matters for presentation to grand jury by this statute, it never intended that at all and bear in mind when you get into --

Justice Arthur J. Goldberg: (Inaudible)

Mr. Warren E. Magee: That's not what he is given by this statute, no sir.This is a collection statute only because you get into very serious Constitutional questions if you are going to try to do that with it Mr. Justice Goldberg, because here is your problem.

That's discovery in a criminal case, that's all it is.

It's a search and seizure that's what it becomes and it's subject to the Constitutional limitations on searches and seizures.

Justice Arthur J. Goldberg: That is a different question.

Mr. Warren E. Magee: Well that question is right here, that's what he is doing it for --

Justice Arthur J. Goldberg: (Inaudible)

Mr. Warren E. Magee: Yes sir.

Justice Arthur J. Goldberg: (Inaudible)

Mr. Warren E. Magee: I say precisely that, because you have a very -- if Congress is going to do this, it's got to be spelled out in a statute with all the safeguards that the Constitution requires and give them that authority.

If Congress want into to use this method to get evidence for grand juries Mr. Justice Goldberg they could say so, in very unmistaken terms and they could put in that statute those requirements which would be necessary to make it Constitutional, but to just say if an issue was subpoena –

Justice Arthur J. Goldberg: (Inaudible)

Mr. Warren E. Magee: Fraud section yeah.

Justice Arthur J. Goldberg: (Inaudible)

Mr. Warren E. Magee: Well, I'm saying that if that section uses this revenue subpoenas for police purposes to get evidence to use in a criminal case yes sir, it's unConstitutional because it is --

Justice Arthur J. Goldberg: (Inaudible)

Mr. Warren E. Magee: I don't say that.

I say that this, that if they going to turn this evidence over which is gotten for one purpose and use it in a criminal case, that is not authorized by the statute and it's unConstitutional to do it.

Justice Arthur J. Goldberg: (Inaudible)

Mr. Warren E. Magee: It cannot in the absence of a waiver and you go in your office and they ask you these things and make you sign a waiver so you can use it and if you don't sign a waiver and they attempt to use it in this fashion, it's a violation of your Constitutional right that's why we have waivers, that's exactly the way the department handles it.

The FBI handles it that way when they go to interview a witness, to gather up information.

Absent the Constitutional waiver, they have no right to seize it and this is the problem, because in our case it would have already gone into their possession long before we as the attorneys could ever got to litigating that question, if we didn't take this direct approach to raise it at the first instance where all the parties are before the court.

Now Your Honors note from your own experience many of us have been in justice and the other departments, this is a way you handle it.

When you bring a citizen in and you say you are going to take a statement from him and then you are going to hand it to the grand jury well you better get a waiver on it before you do it, because it's not going to be admissible before it goes before the grand jury it may vitiate the whole proceeding if a courts look at it.

Justice John M. Harlan: (Inaudible)

Mr. Warren E. Magee: Well, it maybe but then the trouble with it is this, and our courts have held that if you take evidence illegally and if the government, you can't use it for any purpose this is the problem.

Thus for example when you have an illegal search warrant what happens to evidence it goes back to the person from whom the evidence was taken and it can never be used in any case after that.

This is your basic problem you have and this is why you have safeguard, why do we have a Constitution?

Why do we have the tort Fifth and Sixth Amendments if this sort of thing is going to be tolerated, where you can take the work papers bear this in mind, these are not the taxpayer's papers these are work products, the privilege material which are in the hands of the attorneys.

Unknown Speaker: (Inaudible)

Mr. Warren E. Magee: I am going getting to this because this is what involves in this case.

Unknown Speaker: (Inaudible)

Mr. Warren E. Magee: Yes sir, I know that's a different problem all together because see they haven't gotten these papers yet, so they can't use them.

The problem -- I beg Your Honor's pardon.

Unknown Speaker: (Inaudible)

Mr. Warren E. Magee: Oh no, no the courts go beyond that, the Constitutional argument the courts have held and we have cited them in our brief that an accountant can raise it, the attorney can raise it, the witness can rise it.

There are cases though, they go both ways in this field we've got them all lined up in our brief for Your Honors on these points.

Justice Tom C. Clark: (Inaudible)

Mr. Warren E. Magee: Yes sir, but protecting his right, yes sir and that's where we are in the picture as the attorney and we say Mr. Justice Clark that the accountants are in our office, just as secretary and their work is covered by this attorney privilege and work product rule.

Justice Tom C. Clark: (Inaudible)

Mr. Warren E. Magee: Yes sir, we have had even more -- I think it has more problems than that Mr. Justice Clark.

It has privilege, it has the work paper principle, you must bear in mind that if he is going to use this in a criminal case, it's a discovery proceeding, that Congress has been very --

Justice Hugo L. Black: Under the discovery against somebody other than the defendants.

Mr. Warren E. Magee: Well it could be against -- yes it's a discovery.

Justice Hugo L. Black: (Inaudible) to use the Fifth Amendment, the Amendment says no questions you will be compelled be a witness against himself.

Mr. Warren E. Magee: Yes sir.

Justice Hugo L. Black: Would the lawyers to take advantage of that have to show that they were about to prosecute might terminate them?

Mr. Warren E. Magee: No sir, we say in this position Your Honor these papers or the lawyer's papers given them to in this private capacity from the client.

Justice Hugo L. Black: Well, that's a --

Mr. Warren E. Magee: That's another Constitution --

Justice Hugo L. Black: (Inaudible) privilege, that's not a Constitutional privilege.

Mr. Warren E. Magee: Well, again we say that the effective assistance of counsel protects that attorney client privilege otherwise the cases hold that you have no counsel at all.

Justice Hugo L. Black: And that wouldn't be under the self incrimination amendment.

You say that --

Mr. Warren E. Magee: This is the effective assistance of counsel, yes sir.

This is under another section of the Constitution.

Justice Hugo L. Black: That's your argument.

Mr. Warren E. Magee: Yes sir because the section here is the situation.

Justice Arthur J. Goldberg: (Inaudible)

Mr. Warren E. Magee: Yes we rely on the Fourth, Fifth and Sixth as being violated here.

Justice Arthur J. Goldberg: (Inaudible)

Mr. Warren E. Magee: It's called the confidential relationship between the attorney and client which the courts will protect in order that he have effective assistance to counsel.

Well let's carry it to its logical conclusion.

Sure it's the clients right, but that effective assistance of counsel is another guaranteed right by the Constitution, yes sir, yes sir and it's the duty of the lawyer to render it and to protect his client's rights in these fields as the counsel protecting his Constitutional rights.

Justice Arthur J. Goldberg: (Inaudible)

Mr. Warren E. Magee: Yes sir, we are going to, we get to that.

Justice Arthur J. Goldberg: (Inaudible)

Mr. Warren E. Magee: Well, I am sure they could see, when you read this brief.

Justice Arthur J. Goldberg: (Inaudible)

Mr. Warren E. Magee: No actually what the government is saying is this, I think they are going to, well, I don't know how to characterize it, they don't belabor this consent, that this is an action without the consent of the government, they don't belabor that point very much.

Justice Arthur J. Goldberg: (Inaudible)

Mr. Warren E. Magee: Yeah, they say this, because under enforcement your Constitutional rights can be protected.

This is what they say, when you get a problem like this and here is another thing they say which shows what's wrong with this lawsuit. Solicitor General now says, you had a right to sue people at Peat, Marwick, and Mitchell, you had a right and we did just that here, but they got the court to dismiss it not only as to them but as to Peat, Marwick, and Mitchell.

So that where do we stand, if this is supposed to be they say that's the way to work to enforce that.

Now here is what -- I don't understand frankly in the Solicitor's position and they just as well discuss it now Your Honors.

He says that this section of the code furnishes a complete method of protection to all parties.

It doesn't do anything of the kind, all it does, it says first the District Courts in the area where the subpoena was issued shall have jurisdiction and then when you go down it has exactly what it says in enforcement.

Now this is enforcement given to Mr. Caplin, nobody else.

No procedures are provided, but what the clients could do, what anyone should do and the only thing if he follows this statute correctly, the only way and he's never followed it in this fashion except once, the only way you could function under this statute is to ask for an attachment for content, that's all the statute authorizes, it doesn't actually authorize enforcement, it doesn't authorize anything else.

This is, this is a way to enforce it, take a witness before Judge, get an attachment for contempt and there it stops.

That's the only procedure stated in the statute.

Then the government argues that when Congress did this, it took away all other procedures, the Federal procedure act, the Declaratory Judgment Act, the general jurisdiction of the Court to protect against unconstitutional are all out the window and this is your only method and you may not even be there when this happens, because these are witness who has your papers as Peat, Marwick, and Mitchell, you know nothing about it, he subpoenaed, let's assume we are not even notified.

They take him before as in this case an internal revenue agent, special agent, say I want the papers and they see, says well I can't give them to you, it don't belong to me, I think they are privileged, he walks across the street to a district Judge and won a attachment for contempt, holding in contempt and deliver the papers, now that's what this provides, that's all it provides.

Justice Hugo L. Black: I gather that Judge Steve didn't think the proceeding would be that summary, he thought they would have to have a hearing, have to have a chance to separate beside what was privileged and what was not.

Mr. Warren E. Magee: Well, that's true because the cases don't support the commissioner's contention in this regard Mr. Justice.

What the cases hold is, that the taxpayer can come in, if some third person is coming in to testify there is something concerning him and raise a Constitutional point, the witness can go in court in his own enforcement proceeding, you can do it in Re, you can sue the agent, you can file a motion, and raise these issues in Court.

And there as a contrary we decided the case and the government's got many of them in there, in which this is done.

He had all these procedures but not one of them fall within the scope of the statute.

They had a relation to it.

If you read the enforcement provisions of the statute you will see this.

Now, I want to just discuss briefly and I know I am taking a little more of my original allotted time, we of course contend Your Honors that there is an attorney client privilege covering these documents.

We think it, in a modern age where you got cases, which involve matters spread let's say all over the country or all over the world, no lawyer has particularly in tax cases can function without accounting services, and when they as distinguish from the taxpayer have in their office or go out and hire accountants just as you would hire an interpreter to interpret private documents of the client in your office, hire an expert in an medical practice case, hire an architect in a case involving architectural problem after the litigation arises, these are all matters which come out of the attorney client relationship and the products become the work products of counsel.

Congress has never authorized them to be seized at all.

Your Honors made that very clear in Hickman versus Taylor because there you had the broadest type of discovery authorized under Rule 26 of the Rule of the Civil Procedure, but you held very flatly you are not going to permit that rule to be used for this purpose, because it would, what it does, it destroys the office of an advocate, that what's it would do.

It means you got carry everything, he has to do it all along and to permit this work product that they reached in this manner wouldn't even be permissible under Rule 26.

Now, let's look at the criminal rules, where in the criminal rules did the government do this, but Your Honors promulgated under the Constitution, you don't authorize discovery by the United States to take a client by the (Inaudible), it's not authorized.

And we say the Congress never intended to here and therefore this is an invasion of the client, attorney client privilege.

Your Honor instead of arguing this commencing on page 26 of the brief where this case is on standing in which the Court have permitted accountants, lawyers, persons other than the taxpayer to move into these type of proceedings and assert the rights of the parties involved.

We have analyzed the situation and it's our contention that the finding below is clearly erroneous.

We now, because it has a charge of an unlawful exercise of power, excess of statutory power on behalf of the commissioner, the invasion of the attorney client privilege, the destruction of the effective assistant to counsel guaranteed and also be an attempt to procure by discovery the work product of counsel.

Therefore, under our contention we had standing to sue.

All parties were before the Court and the temporary restraining order which we requested at the trail level should have been granted just as Judge Curran granted the first preliminary injunction and temporary restarting order.

And we submit that the basis urged by the court below is unsound because this complaint meets all of standards which Your Honors have setup as justifying the suit against an officer in the Larson and the cases following it.

Unknown Speaker: (Inaudible)

Mr. Warren E. Magee: There never had been any enforcement procedure.

Justice John M. Harlan: Although I thought they were discharged.

Mr. Warren E. Magee: No sir, they never had it.

I'd say we had, they had been enjoined from the time we filed our original compliant enforcing the subpoenas because they have always asserted they would and they were going to use in criminal proceedings.

Mr. Robert said that the department was kind enough to agree that this should stay in effect until the appeal is disposed off, we had a stipulation to that effect and that's the way it's been handled Your Honor.

Chief Justice Earl Warren: Oberdorfer.

Argument of Louis F. Oberdorfer

Mr. Louis F. Oberdorfer: Mr. Chief Justice may it please the Court.

Let me just say at the outset that we don't have here any issue of standing.

We don't have any issue here in view of the very careful professional arrangements that were made between the attorney or the attorneys and the accountants as to whether or not the accountants or the attorneys in this situation have a property interest sufficient to enable them to bring this action.

We also have tried to make it clear in our brief that any of these constitutional issues about self incrimination, and any of the other issues of whether the constitutional or ethical otherwise pertaining to intrusion on the attorney client privilege or intrusion on the attorney work product are assumed to be debatable in a subsequent enforcement proceeding.

Our position is first of all, that this action, against the Commissioner of Internal Revenue on account the summons filed by a revenue agent subordinate of the commissioner is a suit against the United States to which it has not consented.

And in the alternative or in addition we show in our brief and argue here that there is no basis for this proceeding, because there is a complete inadequate remedy provided by Congress, a forum, opportunity for hearing on all of these objections should the subpoena documents be presented and an enforcement offers or order them sought with respect to.

The context of a case like -- getting down to close quarters in a case like this sometimes causes you to loose perspective of the function of the whole tax system.

We sometimes forget when we get down to close litigation on issues like this that our tax system is a self assessment system.

It assumes that taxpayers voluntarily file full and complete returns and 60 million do every year.

It also assumes in order to function that those returns are subject to audit.

This is the way the system works.

When somebody sits down and prepares his return, he knows or should know that he is going to be asked or maybe asked by revenue agent about the accuracy of what he says and maybe required to substantiate what is on the return and the internal revenue service in fact audits 3.5 million returns a year.

This law assumes that there must be a procedure for enforcing that law for enquiring closely to make sure that honest taxpayer isn't demoralized by the prospect or this will not beyond.

And the Congress has had for long time statutory procedures whereby revenue agents can if a taxpayer is not or somebody who has had dealings with a taxpayer is not willing voluntarily to make his books and records available to have an administrative subpoena issued for the production of those books.

The statute 7602 quoted on page 56 of our brief has been quoted before but we should use it as a point of departure, says that for the purpose of ascertaining the correctness of any return, it's one of the things, the secretary is delegate and in this the revenue agent in Honolulu especially agent Honolulu is authorized to examine books, to summon a person to bring books, papers, records, and other data.

Now, we should look closely at the summons issued in this case.

It appears there are several of them that were attached to the complaint, samples appear on pages 19 through 23.

The summons in this case was issued, or the summons were issued with respect to tax liability of the taxpayer Bromley but notice that the summons on page 19 refers to the years 1957, 1958, and 1959.

These summons called for the books, documents, and records in the custody of the accountant which pertained to corporations listed below and all of their subsidiaries and on page 21 has set out the gamut of corporations through which it was suspected or believed that this taxpayer was operating through out the world, a very complex situation.

The subpoena further called, these reminds Your Honors on pages 20, these are books and records of corporations, no individual name there, the taxpayer himself was not named.

Then at the bottom of the page it called for audit reports, work papers and correspondence and this also related to the years 1957 through 1959, but it called for, in addition to some trade names, these are individuals and partnerships and included there for the years 1957 through 1959, audit reports, work papers, and correspondence in the custody of the accountants which pertained in those individuals.

Justice Arthur J. Goldberg: (Inaudible)

Mr. Louis F. Oberdorfer: Yes, sir, Martin J. Brown.

The Tax Court proceedings about which counsel has spoken and about -- which are referred to in the litigation in the papers, where with respect to the tax years 1953 through 1956, so that these two subpoenas didn't -- this particular subpoena did not call for anything that referred to the years in the Tax Court that he -- and I cite --

Chief Justice Earl Warren: Was referred to what, that referred to what Mr. Oberdorfer?

Mr. Louis F. Oberdorfer: Any years that were involved in the Tax Court litigation.

Now there are – there's another set of subpoenas, a sample of which appears on Page 23, which is limited to books, documents and records of corporations.

This does involve the years 1953 through 1959, which includes the years involved in the Tax Court proceeding.

And it does, it is however limited to corporations and does not call for any records of the taxpayer.

I cite this among other things Your Honors as an indication that the special agent in framing these subpoenas gave some thought, maybe he made a mistake in some respect but he did not write a rough shot or intended to write rough shot over the rights of the taxpayer as respect -- his privilege against self-incrimination.

There maybe issues involved.

It may be that this subpoena called for things, some things with respect to which when the whole pile of books and papers call for were set down on a table and there was a colloquy about them there may have been found in a hearing before the special agent that some things were privileged or that some -- in the Constitutional sense or that some things called, some of the subpoena some of the things called for in the subpoena would not be proper for production because it intruded on the attorney-client privilege or because it involved bona fide work papers.

But to say that it's because they may have been produced in response to the summons, some things which were privileged is not say that the summons is therefore void as either exceeding the statutory authority of the commissioner or his agent or void in the sense that it intrudes on the constitutional rights of the taxpayer, who is – whose rights are to the matter of concern here and not so rather than the rights really of the attorney or the rights of the accountant.

Justice Potter Stewart: Do you agree Mr. Oberdorfer or not that it would be a preparation of this statute to use it to collect evidence for criminal prosecution and that this hearing the – these lawyers or accountants rather could resist turning it over on that ground?

Mr. Louis F. Oberdorfer: It would not -- it is the practice to use administrative subpoenas in investigations which involve -- which end up either in recommendations of criminal prosecution or decisions not to prosecute.

It's a – once you are given the authority to determine the -- if the commissioner is given the authority of the statute to determine the correctness of the return, just first dealing with the statuary question before we get to some possible constitutional questions.

So far as the statute is concerned it would be very hard to start out determining the correctness of a return and then somehow switch off when it appeared for the first time that there was the possibility that there would be a criminal prosecution.

In determining the correctness of the return the fact is that maybe the public doesn't believe it, but the fact is that many returns are examined and found to be correct and that's the end of it.

If a return is found to be incorrect or if there is a reason to believe that the return is incorrect and one of two things happen; either the investigation is completed without any suspicion or determination of fraud and deficiency is asserted and either the tax is then paid administratively or the taxpayer uses his civil remedies in the tax court or by paying his tax and suing in various place for a refund and that process goes on quite by flow.

And the commissioner and his representative may also determine that by -- he may suspect that income has been omitted or that there he see -- what appears to be a forged document or other evidences of fraud, in that event he is still determining the correctness of the return and he pursues his investigation.

He may having investigated by use of summons or otherwise determine that there wasn't any fraud.

The return is not correct, but there is no fraud that's it's resolved on a civil basis or if this revenue service and there are several echelons of procedure here, if the whole process of the revenue service determines that in their opinion the return is not only not correct, but that a violation of criminal statute has occurred they don't send the material to a grand jury.

They send it to the -- they send the file to the Department of Justice and we make a determination as to whether we think the case should be prosecuted.

Now when they send the field they send everything they've collected by the civil process and by the criminal -- the intelligence investigation using summon.

Justice John M. Harlan: Putting aside your unconsented suit position for the moment --

Mr. Louis F. Oberdorfer: I beg your pardon sir.

Justice John M. Harlan: Putting aside your unconsented suit point for a moment what do you say in Mr. Magee's argument that in this proceeding which you recognize is proper as far as standing is concerned, this whole thing can be thrashed out in a single proceeding whereas if you go to enforcement rule, he will at least, his client, the lawyers and presumably the client will be disadvantaged in the sense that they may not have an opportunity to get into such proceedings which I understand are going forward or would go forward in different parts of the country.

Mr. Louis F. Oberdorfer: Your Honor I would -- I am not prepared - I don't know why in this case three subpoenas were served on three branches of Peat, Marwick. Without casting any aspersions I have the impression that the Internal Revenue Service had sufficient experience with this situation to feel that it had to use possibly an abundance of caution in making sure that papers didn't disappear or if that there was -- they weren't victims of some shell game where they had service subpoena here and it turned that the papers were over there.

Justice John M. Harlan: Yeah, that's quite probably.

Mr. Louis F. Oberdorfer: I don't think that the -- at the Supreme Court level the equities ought to be balanced in terms of whether it would be more convenient to have one lawsuit in the District of Columbia or three lawsuits.

We're sufficiently in control of our litigating arrangements so that I'm sure that we could stipulate if it's a matter of convenience, we could stipulate it and I would offer to stipulate here that we would hold in abeyance enforcement in two districts while the matter was litigated in the most -- in the district most convenient to the taxpayer or his representative in an enforcement proceeding.

I think that's a red herring, Your Honor really.

Justice John M. Harlan: Well.

Mr. Louis F. Oberdorfer: That is the convenience of litigation.

Justice Arthur J. Goldberg: (Inaudible)

Mr. Louis F. Oberdorfer: Well I -- it may be that some of the taxpayer might have this problem some other place, but I offer that the record evidence of the agreements that have been made and the discipline with which these accountants and lawyers have marched all the way through this litigation minimize the prospect that Peat, Marwick would do anything in violation of the explicit and implicit arrangements between them.

But if there is any such risk --

Justice John M. Harlan: They could sue.

Mr. Louis F. Oberdorfer: I would think then that either this action is perhaps not -- maybe not be the proper forum for them to enjoin Peat, Marwick, but I would think wherever Peat, Marwick's principal place of business maybe, if they filed an action there, they could get a restraining order and I think we have shown in our relationship while this matter is pending that we're not going to stampede Peat, Marwick into doing something that they would prefer not to do.

That is if Peat, Marwick came in with these papers, just to take it another point, because when you stop to think about all of the many ways in which this calamity has been charged here can be avoided, it makes this case seem rather thin.

Peat, Marwick had come in, in response to the subpoena.

It is inconceivable to me that Peat, Marwick, would not tell their employer, which is the relationship that's been alleged, that they've been subpoenaed and that at a certain time they are going or that they would fail to invite their employer to go with them, their employer being their attorney.

Justice Arthur J. Goldberg: (Inaudible)

Mr. Louis F. Oberdorfer: Well, I'd say there's a short answer I'm sorry to have wandered, the short answer is let them be enjoined if the remedy is to enjoin Peat, Marwick not stop the administration of the Internal Revenue Service.

Justice Arthur J. Goldberg: (Inaudible)

Mr. Louis F. Oberdorfer: We didn't represent Peat, Marwick in that and I could imagine -- I should imagine they could have considered to an injunction and we couldn't have done a thing about it.

Justice John M. Harlan: How is the administration of the tax laws which of course were scope of it, impeded by having this thrashed out in the single proceeding as against the enforcement rule?

Mr. Louis F. Oberdorfer: Well Your Honor --

Justice John M. Harlan: Assuming now that, that -- the alternatives are open and then you argue as a matter of -- in your brief at least apart of the un-consented suit there -- this is an exclusive produce, the enforcement procedure is intended an exclusive procedure by Congress, is that your argument?

Mr. Louis F. Oberdorfer: That is our position.

Justice John M. Harlan: Well assuming that argument wasn't accepted, and this proceeding is open, how is the administration of the tax laws affected adversely by following this rule rather than the enforcement rule?

Mr. Louis F. Oberdorfer: Your Honor, the -- two worries, one is delay which speaks for itself.

If after this proceeding there are still some matters that need -- that are not covered by this injunction, there may still -- we may serve the subpoena with respect to what's left of it and have to litigate the enforcement proceeding.

You create a new -- a whole new layer of litigation if every taxpayer can enjoin the commissioner.

Let's say for example that's it's decided that if anybody believes that the -- that response to an administrative summons involves a threat to his Constitutional right against self incrimination, he can bring an injunction proceeding.

You have a very -- you have a new --

Justice John M. Harlan: (Inaudible) enforcement proceeding.

Mr. Louis F. Oberdorfer: That's correct.

But the -- having raised that question here in a limited injunction proceeding he still has all the other things that have to be worked out in an enforcement proceeding.

Justice John M. Harlan: What issues are there that would be covered in this proceeding?

Mr. Louis F. Oberdorfer: In this case there is the attorney client privilege and the privilege -- the work product problem.

There could be the question of whether he actually -- whether he had procession of particular books and papers, whether he had disposed of possession in an effect to frustrate the subpoena and in fraud of it.

Our point is, the other side -- apart from the delay and the delay is illustrated by what has happened in reported cases in the Colton case and in the Magnus case, these things have gone up and down and finally enforcement has begun or the summons has finally been responded to, but the other thing, the other point that affects the administration of the tax law, as the administration of the justice which we think is quite serious, the -- there is a sort of an exhaustion of remedies, the exhaustion of the administrative remedy aspect here.

The, I started it just sort of describe how a proceeding would go.

There would be a response to the subpoena.

The accountant in this case would come in with the books.

There would be an inventory of the books.

We would, before the agent there would be, it would determined whether there was anything in there that really belonged to the taxpayer himself as a person and presumably agent would say take that back and the whole issue could be narrowed in a hearing before the special agent before we ever get to court and then if there is a specific documents that or refused production we know what those documents are, if there are specific questions which are refused to answer we know what those questions are and then we go to court and the court has, has a case or controversy.

It's got -- it's got something to work with.

It's got facts, it's got a context, it's got particular document and we just think that Congress planned it that way and it -- this is a better, more business like way to proceed and that it is not unfair, it doesn't jeopardize any Constitutional rights of anybody.

It protects any other objection anybody can have and this is our argument for -- our policy argument for opposing the position urged by petitioner.

The -- we don't concede that it would be possible for someone to be forced to comply with the subpoena without hearing.

We know of no such case.

There is a procedure for the attachment, a body attachment, but that is where -- there are some rough characters in the world and sometime to get people in court you have to go get them and bring them.

And -- but when he gets into court he is entailed to a hearing on question of whether or not he should be -- and they be required to produce and (Inaudible) should be required to be produce? And if there are -- if there haven't been -- if there have been cases where a hearing has been denied, I would assume that what this Court says about this case would preclude that in the future.

Chief Justice Earl Warren: Is there any phase that the dispute could not be settled in -- from the hearing of that as far as go Mr. Oberdofer?

Mr. Louis F. Oberdorfer: Not that I have been able to think of Your Honor.

Justice Hugo L. Black: Does the federal -- do the statutes authorizing administrative subpoenas provide for immunity from punishment for a taxpayer who claims that it would incriminate him?

Mr. Louis F. Oberdorfer: You mean like the antitrust --

Justice Hugo L. Black: Yeah the provision for immunity --

Mr. Louis F. Oberdorfer: There is no immunity to that.

Justice Hugo L. Black: -- so that he could be compelled to answer, to incriminate him.

Mr. Louis F. Oberdorfer: No sir, I would assume that if a taxpayer is compelled to answer in the take of a valid claim of his privilege that any conviction of him would be reversible in that sense I think it's immune.

Justice Hugo L. Black: That's sort of (Inaudible)

Mr. Louis F. Oberdorfer: Yes sir.

Justice Arthur J. Goldberg: (Inaudible)

Mr. Louis F. Oberdorfer: They never focused on that --

Justice Arthur J. Goldberg: (Inaudible)

Mr. Louis F. Oberdorfer: The -- I hesitate, Your Honor because there is a, there is a criminal sanction.

Justice Arthur J. Goldberg: (Inaudible)

Mr. Louis F. Oberdorfer: -- which is provided by Section 7210. Now we have dealt with that in the brief, that is, that statute on its face makes it a crime to neglect to comply with the subpoena.

Two or three things about that if someone subpoenaed actually brought the books into the special agent and laid them on the table and retained possession of them that certainly would seem us to be compliance whether he then answered questions in the face of plea as -- we would think that's not actionable.

The one case --

Justice Arthur J. Goldberg: (Inaudible)

Mr. Louis F. Oberdorfer: If he brought him in and said -- and say here are my books, but I have -- I am not going to let you look at them because to do so would violate my privilege against self-incrimination or to do so would intrude on privileged communications between myself and my attorney, or would take from me the work product of my attorney.

I would think that a motion to dismiss an indictment brought on that ground if we were foolish enough or someone was foolish enough to bring one with law, I do -- we -- with the one decision that we found on this subject says that this thing is, this crime is permitted only if someone willfully violates it.

We have a case where somebody came in and answered to subpoena and said, I don't have any books and then he later turned up with books, we think that was clearly, that was actionable under a lot of things including this.

So as far as the other provisions namely the violation of -- as to the 7604 sanction and the 7402 sanction as with all of which are in the nature of contempt proceedings we – our view is that those apply, are applicable only for -- those sanctions apply only if the court order has been violated.

Justice Potter Stewart: That would be after the hearings you –

Mr. Louis F. Oberdorfer: That's correct.

Justice Potter Stewart: -- in which any objection the person might have (Inaudible)

Mr. Louis F. Oberdorfer: That is our position.

Justice Potter Stewart: -- in other words were considered a rule of thumb.

Mr. Louis F. Oberdorfer: That is our position.

Justice Byron R. White: So in this view of the case you had made a deal with the sovereign immunity at all, if --

Mr. Louis F. Oberdorfer: Our sovereign immunity is in the alternative in that sense, we are -- we think that we do rest on the sovereign immunity position, we don't think the court had jurisdiction.

Justice Byron R. White: But if we leave – even if we reject it your sovereign immunity claim -- we would have to get to your other position?

Mr. Louis F. Oberdorfer: Yes, now this other position, if I may just take one more minute, this other position relates to the sovereign immunity and only this that it shows what we think that this -- that there is no unconstitutional summons here.

There is -- that the statute on its face and as applied is not an unconstitutional because it does not deprive anyone of the right of the privilege against self-incrimination or the protection against unreasonable search and seizure.

Justice Hugo L. Black: We don't have to decide now whether statute is valid, would authorize an indictment against them for refusing to answer the administrative subpoena, do we, we don't have to decide that.

Mr. Louis F. Oberdorfer: No sir, you don't have to decide --

Justice Hugo L. Black: Well I --

Mr. Louis F. Oberdorfer: -- but you might have to consider it, but you don't -- you have to consider whether the threat of that punishment makes it so severe -- just take it factually, Peat, Marwick would be so intimidated by the threat of that statute that it would sacrifice the taxpayer's privilege against self incrimination and we think on these facts that isn't a -- that isn't a rational concern.

We have stick to -- just for the purpose of this case, we stipulated that we wouldn't prosecute on the basis of what we know.

There is a foot note in the Court of Appeals' opinion that --

Justice Hugo L. Black: So that we don't have to reach that.

The question I am thinking about is this.

Let us say that subpoena is answered, is filed.

The man is pretty sure he would have to incriminate himself if he answers it.

He doesn't -- we don't have to decide if he is compelled to wait.

In fact this case he is compelled to wait he is indicted in order to challenge that, so that if he is indicted, he will know his rights.

It turns out to be wrong then he could be convicted.

His first chance to challenge it under those circumstances would be after he is indicted.

As I understand it, the government has stipulated that it does not intend to prosecute in this case on any such basis.

Mr. Louis F. Oberdorfer: That's correct in this case.

Justice Byron R. White: (Inaudible)

Mr. Louis F. Oberdorfer: Well that -- it's --

Justice Byron R. White: (Inaudible)

Mr. Louis F. Oberdorfer: Well I have a problem with Justice Black's question because like when a client asks you can somebody sue you, well you can be -- somebody can sue you about anything.

But the indictment we think would be susceptible to being dismissed on a demonstration that the answer -- that the refusal was because -- was the invoking of a constitutional privilege.

But in this case we don't --

Justice Hugo L. Black: We don't have to reach it.

Mr. Louis F. Oberdorfer: We have conceded that we would not indict on the facts that appear here.

Justice Hugo L. Black: In this case he doesn't imperil his chance, doesn't get himself in a position where he could be indicted without having a chance to contest the validity of his subpoena.

Mr. Louis F. Oberdorfer: That's correct.

Thank you.

Rebuttal of Warren E. Magee

Mr. Warren E. Magee: I'd like to answer a few of the matters brought --

Chief Justice Earl Warren: I think you only have one minute.

Mr. Warren E. Magee: Oh I'm sorry Your Honor.

Chief Justice Earl Warren: You make take it though.

Mr. Warren E. Magee: Thank you, Your Honor.

First I want to point out that it was stated and you'll find on Page 83 of the tax court that all these subpoenas were being issued for the propose of getting evidence to use in the tax cases.

And in their opposition they've indicated they're going to use them in criminal proceedings and in that regard we have a decision which is very clear on that point, which is United States versus O'Connor, which states the matter much better than I can, it appears on Page 19 of the brief, it says this.

District Court of Massachusetts, “So far as this Court knows Congress has never in criminal matters vested the executive with an unrestricted subpoena power to uncover information which might aid in the enforcement of criminal statues and the preparation of criminal cases,” citing a number of cases, Rule 17 (c) of the Federal Rules of Federal Procedure has only the limited function of procuring production of papers for use in evidence at the trial.

I see my time is up Your Honors, I submit that this case --

Chief Justice Earl Warren: What were you reading from?

Mr. Warren E. Magee: On Page 19 of our -- just a moment.

I'm sorry I was reading from Page 19 of our brief, the decision Your Honor is 118 F. Supp. 248.

Justice Potter Stewart: That's Judge Wyzanski's opinion.

Mr. Warren E. Magee: And he says that the Constitution prohibits this and we have our procedures and his language is much more elegant than any I could say.

Justice Potter Stewart: That was in an enforcement proceeding, wasn't it?

Mr. Warren E. Magee: Let me see how this arose.

Justice Potter Stewart: Take a while.

Mr. Warren E. Magee: Yes.

This was in an enforcement proceeding.

But of course on enforcements Your Honor it is ridiculous to say time is going to be saved by going up through three circuits, because you have to go up to New York, Chicago or Los Angeles.

When we've got it all in one proceeding and this certainly prevents a multitude of suits and gets this train on the track, not often in various fields, where it should be and for that purpose alone the Court should take jurisdiction of this matter.

Now that we see that really sovereign immunity is not the issue because they admit we can at least enjoin the accountants and that would hold up the whole works until it's all over with, thank you Your Honors.