UNITED STATES OF AMERICA AND ALBERT RODRIGUEZ, JR., INTERNAL REVENUE SERVICE AGENT, PETITIONERS v. GEORGE W. MEEKS, AS PRESIDENT, ST. GEORGE COMPANY No. 81-1063 In the Supreme Court of the United States October Term, 1981 The Solicitor General, on behalf of the United States of America and Albert Rodriguez, Jr., Internal Revenue Service Agent, petitions for a writ of certiorari to review the judgment of the United States Court of Appeals for the Fifth Circuit in this case. Petition for a Writ of Certiorari to the United States Court of appeals for the Fifth Circuit TABLE OF CONTENTS Opinions below Jurisdiction Constitutional and statutory provisions involved Statement Reasons for granting the petition Conclusion Appendix A Appendix B Appendix C Appendix D Appendix E Appendix F Appendix G Appendix H Appendix I OPINIONS BELOW The opinion of the court of appeals (App. B, infra, 3a-28a) is reported at 642 F.2d 733. The order of the district court holding respondent in contempt (App. D, infra, 31a-32a) and the district court's findings of fact and conclusions of law (App. E, infra, 33a-37a) are not reported. Prior orders of the district court (Apps. F, G, H, infra, 38a-43a) are not reported. JURISDICTION The judgment of the court of appeals (App. A, infra, 1a-2a) was entered on February 10, 1981 and explanatory opinions were issued on April 17, 1981 (App. B, infra, 3a-28a). A petition for rehearing was denied on July 10, 1981 (App. C, infra, 29a-30a). On September 24, 1981, Justice Powell extended the time within which to file a petition for a writ of certiorari to and including December 7, 1981. The jurisdiction of this Court is invoked under 28 U.S.C. 1254(1). CONSTITUTIONAL AND STATUTORY PROVISIONS INVOLVED The Fifth Amendment to the Constitution provides in pertinent part: No person shall be * * * compelled in any criminal case to be a witness against himself * * * . 26 U.S.C. 7402(b) provides: If any person is summoned under the internal revenue laws to appear, to testify, or to produce books, papers, or other data, the district court of the United States for the district in which such person resides or may be found shall have jurisdiction by appropriate process to compel such attendance, testimony, or production of books, papers, or other data. 26 U.S.C. 7604(a) provides: If any person is summoned under the internal revenue laws to appear, to testify, or to produce books, papers, records or other data, the United States district court for the district in which such person resides or is found shall have jurisdiction by appropriate process to compel such attendance, testimony, or production of books, papers, records, or other data. QUESTION PRESENTED Whether the court of appeals erred in holding that a respondent in a civil contempt proceeding, who has failed to obey a final order of the court directing him to comply with an Internal Revenue Service summons, may sustain his burden of establishing an inability to comply by submitting an uncross-examined statement that he does not have the summoned documents and asserting his Fifth Amendment privilege against self-incrimination. STATEMENT On June 12, 1979, in connection with a civil investigation of the federal income tax liabilities of the St. George Company for the years 1977 and 1978, a summons was issued to respondent, George Meeks, as president of the company. /1/ That summons called for respondent to testify and to produce corporate records and books (see App. D, infra, 31a-32a). Respondent failed to comply; instead, he brought several corporate documents to a meeting with Internal Revenue Service agents but refused to disclose them -- or any of the "boxes and boxes" of documents he stated were in his office -- unless he was granted personal transactional immunity (Oct. 30, 1979 Tr. 8, 15, 27; see App. B, infra, 4a, 11a-14a). Immunity was not granted and the petitioners commenced an action in the United States District Court for the Western District of Texas to enforce the summons pursuant to 26 U.S.C. 7402(b) and 7604(a). On August 21, 1979, the district court entered an enforcement order and directed respondent to appear before the IRS to testify about the corporation's tax liability and to produce the corporate records (Apps. F, G, infra, 38a-41a; App. B, infra, 4a, 14a). In response, Meeks appeared and produced approximately 20 pages of documents, including Employer's Quarterly Federal Tax Returns, copies of which were already in the possession of the IRS (Oct. 30, 1979 Tr. 44-48; see App. B, infra, 4a, 14a). He claimed that some documents could be obtained or reconstructed, but that other documents were not in his possession (Oct. 30, 1979 Tr 87-88; Sept. 13, 1979 Tr. 13-15, 17-24, 31-32, 35-37; see App. B, infra, 4a, 14a-17a). Further, he asserted his Fifth Amendment privilege against self-incrimination to inquiries concerning the whereabouts of the documents (Sept. 13, 1979 Tr. 9, 11-12; Oct. 30, 1979 Tr. 89-91; see App. B, infra, 14a). /2/ On October 30, 1979, the district court conducted a hearing to permit respondent to show cause why he should not comply with the enforcement order (see Oct. 30, 1979 Tr. 1-133). At the conclusion of the hearing -- at which respondent appeared but offered no evidence -- the court ordered production of the requested records (App. H, infra, 42a-43a). Respondent filed a notice of appeal from that order. On March 11, 1980, the court of appeals dismissed the appeal for lack of prosecution (see App. B, infra, 5a, 18a). 2. Following dismissal of the appeal, the district court again ordered respondent to produce the records and, in the event he failed to comply, to appear and show cause why he should not be held in contempt. (see App. E, infra, 34a-35a). Rather than comply, respondent filed a written "declaration" in which he denied possession or control of the documents and asserted a claim of privilege under the Fifth Amendment against providing any further information about the records. /3/ At the contempt hearing, the revenue agent who had issued the summons testified and was cross-examined by respondent. His testimony demonstrated that the summons had been served on respondent as president of St. George Company, and that he had failed to comply despite several court orders directing him to do so (Nov. 10, 1980 Tr. 29-33). Respondent was provided several opportunities to testify or to adduce other evidence at the hearing. He refused (Nov. 10, 1980 Tr. 9-13; Nov. 25, 1980 Tr. 15-16). At the conclusion of the hearing the district court found (1) that the records sought by the summons "exist or were in existence prior to June 12, 1979, the day the Internal Revenue Service summons was issued," and (2) that respondent "failed to submit acceptable proof of his claimed inability to comply" (App. E, infra, 35a, 37a). Accordingly, respondent was found to be in civil contempt and ordered to be confirmed until he purged himself of the contempt by producing the requested records (App. D, infra, 31a). 3. On February 10, 1981, a divided panel of the court of appeals vacated the order of contempt, and on April 17, 1981, issued opinions explaining the rationale for its decision. The majority concluded that respondent had been placed in "an untenable position" in which "(t)he only way he can (purge himself of contempt) would be for him to yield his constitutional privilege against self-incrimination" (App. B, infra, 9a). Since, in the majority's view, Meeks "could not comply with the court order without sacrificing his properly asserted constitutional right," (App. B, infra, 10a), the contempt order was vacated. The only apparent basis for this conclusion is the majority's assumption that Meeks, in fact, could not comply by producing the records. The assumption was based on respondent's written "declaration" -- which the district court excluded in light of Meeks' refusal to submit to cross-examination -- and statements he made to IRS agents concerning a purported lack of possession or control of the documents. Judge Reavley dissented, disagreeing with the majority's assumptions of fact and construction of the contempt order. He noted that the uncross-examined "declaration" was not evidence, and that there was no evidence in the record establishing that respondent was unable to comply (App. B, infra, 24a). The dissent also noted that the district court had not held respondent in contempt for refusing to testify, as the majority apparently assumed, but rather had grounded the contempt solely on Meeks' refusal to produce records. Moreover, unlike the majority, the dissent found this case indistinguishable from the Fifth Circuit decision in United States v. Hankins, 565 F.2d 1344, rehearing denied and opinion clarified, 581 F.2d 431 (5th Cir. 1978), cert. denied, 440 U.S. 909 (1979) (see App. B, infra, 27a-28a). The dissent concluded (id. at 25a): If the majority's decision is left to stand, it will enable any individual to defy a court order enforcing an IRS summons to produce documents, so long as he or she claims (by "declaration") a lack of possession or their present nonexistence and then asserts his or her privilege against self-incrimination. REASONS FOR GRANTING THE PETITION This case presents important questions concerning the assertion of the Fifth Amendment privilege against self-incrimination in civil contempt proceedings. The court of appeals has incorrectly decided these questions in a manner that cannot be reconciled with established law governing IRS enforcement proceedings and the availability of contempt sanctions. Accordingly, unless it is reversed, the decision below, along with the similar decision of the Ninth Circuit in United States v. Rylander, 656 F.2d 1313 (1981), /4/ will provide a roadmap for future evasion of lawful process. The adverse consequences of these decisions will not be limited to tax cases; they are virtual checklists for disobedience of any administrative or judicial order to produce unprivileged records. Moreover, the court of appeals' holding that mere assertion of the Fifth Amendment privilege is a sufficient defense in a contempt proceeding effectively removes from district courts the power to enforce compliance with their valid orders by imposing civil contempt sanctions. The decision of the court of appeals will greatly hamper the IRS's ability to fulfill its statutory mandate of assessing proper tax liabilities. If investigations are foreclosed by a simple assertion of the Fifth Amendment privilege in the absence of any evidence that the recipient of a summons is unable to comply, the government will be deprived of information essential to a proper review of tax returns. This Court should grant review in this case to correct the manifestly erroneous decision of the court of appeals, which conflicts with prior decisions of this Court and other courts of appeals. 1. This Court has recognized that every citizen has a duty to provide all the evidence he can when called to do so by an appropriate authority. United States v. Bryan, 339 U.S. 323, 332 (1950). A subpoena or summons places an individual under a duty to make "in good faith all reasonable efforts to comply." United States v. Ryan, 402 U.S. 530, 534 (1971); United States v. Bryan, supra, 339 U.S. at 332. While an inability to comply, if established by competent evidence, is of course a complete defense to a summons, such a defense must be raised in a timely fashion. McPhaul v. United States, 364 U.S. 372, 380 (1960); United States v. Bryan, supra, 339 U.S. at 332; United States v. Fleischman, 339 U.S. 349, 352 (1950). By raising defenses on a timely basis a witness not only demonstrates a proper respect for the legal process, but also allows those defenses to be addressed at an appropriate time. United States v. Bryan, supra, 339 U.S. at 332-333. See Fisher v. United States, 425 U.S. 391, 395 (1976). If a summoned party does not, however, raise the question of his ability to comply during a summons enforcement proceeding, the court is entitled to presume he can comply and the court's enforcement order conclusively establishes that the witness can produce the records. Maggio v. Zeitz, 333 U.S. 56, 74 (1948). Since enforcement orders are final and appealable, Reisman v. Caplin, 375 U.S. 440 (1964), and "will bind the parties in future litigation," United States v. First National State Bank of New Jersey, 616 F.2d 668, 675 (3d Cir.), cert. denied, 447 U.S. 905 (1980), respondent should have been barred from raising, at the subsequent contempt hearing, the question whether he had possession and control of the corporate records at the time of the enforcement order. Maggio v. Zeitz, supra, 333 U.S. at 75-76. See also United States v. Peter, 479 F.2d 147 (6th Cir. 1973); United States v. Secor, 476 F.2d 766 (2d Cir. 1973). /5/ 2. The enforcement order creates the presumption that summoned records continue to exist and to remain in the witness' possession. That presumption will control subsequent proceedings unless rebutted. As this Court stated in Maggio v. Zeitz, supra, 333 U.S. at 75-76, the presumption of continuing existence and possession can successfully * * * (be overcome) only with a showing of present inability to comply. (The witness) cannot challenge the previous adjudication of possession, but that does not prevent him from establishing lack of present possession. Of course, if he offers no evidence as to his inability to comply with the turnover order, or stands mute, he does not meet the issue. Nor does he do so by evidence or by his own denials which the court finds incredible in context. In accordance with this principle, the district court properly found that respondent's total absence of evidence failed to prove his inability to comply. This conclusion is consistent with prior decisions of this Court and of the courts of appeals which hold that the witness bears the burden in a contempt proceeding of proving his inability to comply. See McPhaul v. United States, supra, 364 U.S. at 376, 379; Nilva v. United States, 352 U.S. 385, 392 (1957); United States v. Bryan, supra, 339 U.S. at 330-331; United States v. Fleischman, supra, 339 U.S. at 363; Oriel v. Russell, 278 U.S. 358, 366 (1929); United States v. Hansen Niederhauser Co., 522 F.2d 1037, 1040 (10th Cir. 1975); NLRB v. Trans Ocean Export Packing, Inc., 473 F.2d 612, 616 (9th Cir. 1973); United States v. Hankins, supra, 565 F.2d at 1351-1352. The decision below has carved out an exception to this rule when the Fifth Amendment privilege is asserted. Neither the Fifth Amendment, however, nor the decisions of this Court support the conclusion that a naked assertion of the privilege against self-incrimination can shift to the government the burden of proving a double negative, i.e., that respondent is not unable to comply. The facts on this issue are of course uniquely within the respondent's knowledge. In McPhaul v. United States, supra, a case in which the Fifth Amendment privilege was the sole justification for refusing to provide information, this Court held that a witness had not carried his burden and had raised no issue regarding the existence of the subpoenaed records or his ability to produce them. Similarly, in United States v. Johnson, 247 F.2d 5 (2d Cir.), cert. denied, 355 U.S. 867 (1957), and Lopiparo v. United States, 216 F.2d 87 (8th Cir. 1954), cert. denied, 348 U.S. 916 (1955), the courts held that respondents could not meet their burden simply by denying possession and asserting the Fifth Amendment privilege. Cf. United States v. Miller, 638 F.2d 39 (8th Cir. 1980). By allowing respondent to avoid contempt merely by asserting the privilege against self-incrimination, the panel majority places respondent in a better position than if he had made a good faith effort to comply with the subpoena and a bona fide, but unsuccessful, effort to prove his inability to comply further. Accordingly, the decision below is in conflict with opinions of the Second and Eighth Circuits /6/ and is directly contrary to this Court's observation in United States v. Bryan, supra, 339 U.S. at 332, that "if * * * a witness seeks to excuse a default on grounds of inability to comply with the subpoena, we think the defense must fail in the absence of even a modicum of good faith in responding to the subpoena." 3. Aside from respondent's ambiguous and inconsistent statements to IRS agents concerning his inability to produce documents, /7/ the only "evidence" on which the majority below relied was respondent's written "declaration." This document was properly excluded by the district court when respondent refused to testify or be subjected to cross-examination. Although the majority does not find the district court's ruling to be error, it nevertheless refers to the "declaration" as "evidence" of inability to comply. This conclusion is flatly wrong. Either the declaration was properly excluded -- in which case respondent made no showing of inability to comply and failed to carry his burden of proof -- or it should have been admitted into evidence -- in which case respondent should have been found to have waived his Fifth Amendment privilege and compelled to submit to cross-examination on subjects raised in the "declaration." McGautha v. California, 402 U.S. 183, 215 (1971); Brown v. United States, 356 U.S. 148, 154-156 (1958); see Johnson v. United States, 318 U.S. 189, 195-196 (1943); United States v. Beechum, 582 F.2d 898, 907-910 (5th Cir. 1978) (en banc); Hankins v. Civiletti, 614 F.2d 953, 954 (5th Cir. 1980). The majority allows respondent to have it both ways: his uncross-examined statement, coupled with his assertion of the privilege against self-incrimination, has been held to satisfy his burden of proof and to block further inquiry by the government. In effect, the government investigation has been stymied despite respondent's failure to meet the burden which the decisional law clearly places on him. 4. The majority erroneously assumes that the only course available to respondent is to forgo his Fifth Amendment privilege to purge his contempt (App. B, infra, 9a-10a). This is not the case, as the dissent notes (App. B, infra, 20a-21a). /8/ Respondent had at least three alternatives: (1) to produce the documents which the district court found to exist, (2) to prove his inability to comply by adducing credible evidence, or (3) to take the stand and testify concerning the whereabouts of the documents and face cross-examination on that subject. The majority's conclusion is necessarily premised on the assumption that the first alternative -- production of documents -- is impossible. But in the present posture of the case, the opposite assumption must govern: that the documents exist and can be produced, as the district court found. See Maggio v. Zeitz, supra. Moreover, the majority totally ignores the second alternative: that respondent may adduce independent evidence that the documents do not exist or are not in his possession or control (see App. B, infra, 20a & n.13). Having summarily dispatched two of the alternatives available to respondent, the majority concludes that the contempt order compelled Meeks to forgo the Fifth Amendment privilege and punished him for his failure to testify. The majority has thus misinterpreted the district court's order. Meeks was not held in contempt for refusing to testify; rather, his contempt was his failure to comply with a valid order. This distinction is basic to the case. It is precisely this difference that distinguishes this case from Curcio v. United States, 354 U.S. 118 (1957), in which a grand jury witness was held in contempt for refusing to testify concerning the whereabouts of subpoenaed documents. This Court reversed Curcio's conviction for criminal contempt because he could not be punished for invoking his constitutional privilege. In so holding, however, the Court observed that the petitioner in Curcio "might have been proceeded against for his failure to produce the records demanded by the subpoena duces tecum." 354 U.S. at 127 n.7. Although precisely the situation envisioned in Curcio occurred here, the court of appeals has swept away the distinction noted in Curcio and has, accordingly, fashioned a result which is in conflict with prior decisions of this Court and other courts of appeals. 5. The practical effects of the decision below are substantial, and could materially impair the government's ability to secure information essential to a proper assessment of tax liability. Under the court of appeals' reasoning, a recipient of an IRS summons may toy with the government indefinitely, by withholding information -- as respondent here has done for two and one-half years -- in the hope that the investigation will be delayed until the statute of limitations has run. /9/ The decision would thus allow respondent to withhold available defenses -- e.g., inability to comply -- until after an enforcement order has been entered and affirmed on appeal, to raise such defenses belatedly in a contempt hearing, and to satisfy his burden of proof by submitting a self-serving "declaration" and asserting the privilege against self-incrimination. Such a result ill serves the interests of justice or of even-handed law enforcement. CONCLUSION The petition for a writ of certiorari should be granted. The Court may wish to consolidate this case with United States v. Rylander or to hear the cases in tandem. Respectfully submitted. REX E. LEE Solicitor General JOHN F. MURRAY Acting Assistant Attorney General JERROLD J. GANZFRIED Assistant to the Solicitor General CHARLES E. BROOKHART WILLIAM A. WHITLEDGE JO-ANN HORN Attorneys DECEMBER 1981 /1/ For fiscal year 1977, respondent, as president of St. George Company, submitted a corporate tax return which furnished no information; instead, in response to each line item on the form, reference was made to an attachment which stated (Oct. 30, 1979 Tr. 50): I refuse to provide this information on the grounds that this information could be used to incriminate me and subject me to perjury prosecution; said prosecution to be initiated solely as a result of the subjective interpretation by the Internal Revenue Service. This document was sent to the Internal Revenue Service (IRS) along with a check in the amount of $1,187.31 (ibid.). No explanation was provided of how that amount was calculated (id. at 51). The record does not reflect that St. George Company made any submission to the IRS for fiscal year 1978. The civil investigation of the company's tax liabilities commenced in early 1979. The summons was issued after the IRS made several fruitless efforts to secure respondent's voluntary cooperation. Respondent cancelled or postponed all scheduled meetings with the IRS agent (Oct. 30, 1979 Tr. 39-40). ("Oct. 30, 1979 Tr." refers to the transcript of a hearing in the district court on October 30, 1979; "Sept. 13, 1979 Tr." refers to the transcript of respondent's appearance before IRS agents on September 13, 1979; "Nov. 10, 1980 Tr." and "Nov. 25, 1980 Tr." refer to transcripts of the contempt hearing in the district court on November 10, 1980, and November 25, 1980, respectively.) /2/ Respondent's only other attempt to comply occurred one year later, when, at another meeting with IRS agents, he agreed to sign waivers enabling the IRS to request bank records relating to St. George Company. However, even this minimal effort was soon negated. When the waivers were sent to him, respondent altered the beginning and ending dates, rendering the forms unacceptable (Nov. 10, 1980 Tr. 21; see App. B, infra, 19a & n.11). /3/ See Nov. 10, 1980 Tr. 10-13. The declaration stated as follows (App. I, infra, 44a-45a): I have provided the Internal Revenue Service, in the person of Mr. Albert Rodriguez, such records of the St. George Company as are covered in the administrative summons and the ensuing (sic) Court Order as are in my possession. The St. George Company, a corporation under the laws of the state of Texas conducted business from August 1976 through June of 1977 only. There are, therefore, no corporate records for time periods prior to, or subsequent to those dates. I do not have in my possession or control any of the books, records, or papers of the St. George Company which are called for in the summons and court order in question; other than those which have already been submitted to Mr. Rodriguez. Further, I must respectfully decline to answer any further questions concerning these documents, on the advise (sic) of counsel, on the grounds that the answers to such questions may tend to incriminate me and are thus privileged under the Fifth Amendment to the Constitution of the United States. I declare, under penalty of perjury, that the foregoing is true and correct to the best of my knowledge and belief. /4/ The Ninth Circuit decided Rylander on September 4, 1981, and Justice Rehnquist has extended until December 4, 1981, the time within which a petition for a writ of certiorari may be filed. The rationale of the Ninth Circuit differs slightly from that of the Fifth Circuit in Meeks. The variations in the facts and analysis in these cases make it appropriate for this Court to grant both petitions so that the two cases may be considered together and all the ramifications of the decisions below fully explored. /5/ At the enforcement hearing, the government satisfied all the conditions required by United States v. Powell, 379 U.S. 48 (1964), for enforcement of a summons. /6/ See United States v. Johnson, supra; Lopiparo v. United States, supra. /7/ Respondent's few statements that he could not produce any further documents were equivocal and contradicted by his contemporaneous statements that records existed or could be reconstructed. See App. B, infra, 15a-17a. In any event, the issue is one properly entrusted to the finder of fact. Nilva v. United States, supra, 352 U.S. at 395. The district court's finding on this issue is supported by the record and was not found to be clearly erroneous by the court of appeals. /8/ Even assuming respondent was compelled to make that choice, the court of appeals' holding that the Fifth Amendment was thereby violated conflicts with this Court's decision in McGautha v. California, supra, 402 U.S. at 213. /9/ See 26 U.S.C. 6501(a), (c) and 6531. Appendix Omitted