Time: Tue Nov 26 18:50:21 1996
Date: Tue, 26 Nov 1996 18:39:09 -0800
To: lcouncil@maui.net
From: Paul Andrew Mitchell [address in tool bar]
Subject: LLAW: Re: U.S. v. Troescher

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LIBERTY LAW - CROSS THE BAR & MAKE YOUR PLEA - FIRST VIRTUAL COURT, USA
Presiding JOP: Tom Clark, Constable: Robert Happy, Clerk: Kerry Rushing
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Thanks very much.
I am printing it now,
and I will read it at dinner.
Catch me later, okay?

/s/ Paul Mitchell

P.S.  pronounced "TROH - sure"?



At 02:00 PM 11/26/96 -1000, you wrote:
>Paul,
>
>OK, here it is: I'd be interested in hearing what you think of it.
>
>FOR PUBLICATION
>
>UNITED STATES COURT OF APPEALS FOR THE NINTH CIRCUIT
>
>UNITED STATES OF AMERICA,
>
>Petitioner-Appellee,
>
>v.
>
>LOREN C. TROESCHER,
>
>Respondent-Appellant.
>
>No. 95-55609
>
>D.C. No. CV 93-5736 SVW
>
>OPINION
>
>Appeal from the United States District Court for the Central
>District of California
>
>Stephen V. Wilson, District Judge, Presiding
>
>Argued and Submitted August 7, 1996 -- Pasadena, California
>
>Filed November 7, 1996
>
>Before: Stephen Reinhardt, Cynthia Holcomb Hall, and Edward
>Leavy, Circuit Judges.
>
>Opinion by Judge Reinhardt
>
>OPINION
>
>REINHARDT, Circuit Judge:
>
>Loren C. Troescher appeals an order of the district court
>compelling him to appear before the Internal Revenue Service to answer
>questions and produce documents.*fn1 The IRS issued the summons after
>Troescher apparently failed to file income tax returns for several
>years. Troescher argues that the district court erred in rejecting his
>assertion of the Fifth Amendment's privilege against self-incrimination.
>We agree, and therefore vacate the order and remand to the district
>court for reconsideration in light of this opinion.*fn2
>
>I.
>
>The general standard for a valid assertion of the Fifth
>Amendment privilege against self-incrimination is well established. In
>order properly to assert the privilege,"respondents must show that their
>testimony would `support a conviction under a federal criminal statute'
>or `furnish a link in the chain of evidence needed to prosecute the
>claimant for a federal crime.' " United States v. Rendahl, 746 F.2d 553,
>555 (9th Cir. 1984) (quoting Hoffman v. United States, 341 U.S. 479, 486
>(1951). Indeed, it is enough if the responses would "merely `provide a
>lead or clue' to evidence having a tendency to incriminate." United
>States v. Neff, 615 F.2d 1235, 1239 (9th Cir.)(quoting Hashagen v.
>United States, 283 F.2d 345, 348 (9th Cir. 1960)), cert. denied, 447
>U.S. 925 (1980). The privilege is validly invoked "only where there are
>`substantial hazards of self-incrimination' that are`real and
>appreciable,' not merely `imaginary and unsubstantial.' " Rendahl, 746
>F.2d at 555 (quoting Neff, 615 F.2d at 1239). Finally, "the existence of
>such a hazard is generally determined from `examination of the
>questions, their setting, and the peculiarities of the case.' " Id.
>(quoting Neff, 615 F.2d at 1240).
>
>The district court in this case initially analyzed Troescher's
>privilege claims properly, under the standard set forth above. The court
>ordered Troescher to file a statement under seal to determine whether he
>was justified in refusing to answer each question posed by the IRS and
>in refusing to produce each document requested under the subject
>summons. The court then held a hearing and conducted an in camera review
>of Troescher's statement and the IRS information requests, concluding in
>the end that "respondent is faced with substantial hazards of
>self-incrimination that are real and appreciable not merely imaginary
>and unsubstantial."
>
>Despite that finding, however, the court "reluctantly" issued
>its order compelling Troescher to answer the questions and produce the
>documents demanded in the IRS summons. In the face of appellant's
>otherwise valid claims of privilege, the court was persuaded by the
>government's argument that binding Ninth Circuit precedent created a
>"Tax-Crime Exception" to the Fifth Amendment. It found that under Fuller
>v. United States, 786 F.2d 1437 (9th Cir. 1986), and Brooks v. Hilton
>Casinos, Inc., 959 F.2d 757 (9th Cir.), cert. denied, 506 U.S. 906
>(1992), "the Fifth Amendment just does not apply when the taxpayer fears
>prosecution for a tax crime." Because Troescher demonstrated a real and
>appreciable fear of prosecution for tax crimes only, and could make no
>showing regarding non-tax crime prosecution, the court rejected his
>Fifth Amendment claims. The court felt bound by decisions it concluded
>were unjustifiable and "simply wrong," and asked that we correct what he
>rightly viewed to be in error.
>
>[1] On appeal, the government appears to have discovered that
>the district judge's instincts were correct. It now confesses error and
>argues that "[t]he self-incrimination clause of the Fifth Amendment
>applies in all instances where a taxpayer has reasonable cause to
>apprehend criminal prosecution, whether tax related or not." We agree.
>There is no general "Tax-Crime Exception" to the Fifth Amendment, and
>Troescher's Fifth Amendment claims were not defeated here simply because
>he feared prosecution for tax crimes.*fn3
>
>It is easy to understand why the district judge was misled by
>some of our cases. Our opinions in Fuller and Brooks do contain language
>that suggests a distinction between tax crimes and non-tax crimes under
>Fifth Amendment analysis. In Fuller we stated, "The fifth amendment's
>self-incrimination clause provides no right to taxpayers to refuse to
>provide the IRS with financial information unless they make some showing
>that there is an appreciable possibility of prosecution for a non-tax
>crime." 786 F.2d at 1439. The actual holding in Fuller, however, and in
>every case it cites for support of that holding, is merely that the
>privilege is not validly invoked by asserting only vague, blanket, or
>generalized claims of self-incrimination. In Fuller and the cases it
>cites, we rejected Fifth Amendment claims where the taxpayer did not
>make any showing of an "appreciable possibility of prosecution," as
>required by traditional self-incrimination analysis. Id. Specifically in
>Fuller, we upheld a penalty assessed against three taxpayers for filing
>frivolous returns within the meaning of 26 U.S.C. S 6702, where each
>raised only "spurious" Fifth Amendment objections on their return forms.
>Any language suggesting a broad exemption from the Fifth Amendment in
>tax cases or that there is a constitutional distinction between tax and
>non-tax crimes is merely dictum.
>
>The unfortunate dictum in Fuller was repeated in Brooks, where
>on the basis of Fuller we volunteered that "the fifth amendment's
>self-incrimination clause does not give taxpayers a right to withhold
>financial information from the IRS unless they can show an appreciable
>possibility of prosecution for a non-tax crime." 959 F.2d at 767
>(emphasis in the original). Once again, however, the sweeping language
>suggesting a constitutional distinction between tax and non-tax crimes
>is simply dictum. In Brooks, discovery sanctions were imposed against a
>plaintiff who sued his employer and then attempted to avoid discovery by
>relying on the Fifth Amendment. We upheld the sanctions stating that
>"Plaintiffs who voluntarily come into court and seek economic damages
>must be prepared to prove their economic loss: `The scales of justice
>would hardly remain equal . . . if a party can assert a claim against
>another and then be able to block all discovery attempts against him by
>asserting a Fifth Amendment privilege to any interrogation whatsoever
>upon his claim.' " 959 F.2d at 768 (quoting Lyons v. Johnson, 415 F.2d
>540, 542 (9th Cir. 1969), cert. denied, 397 U.S. 1027 (1970)). Thus, the
>unnecessarily broad language of Brooks regarding a taxpayer's right to
>withhold financial information from the IRS is clearly dictum and, like
>in Fuller, involves a question not before the court.
>
>[2] To read the Fuller and Brooks dicta as creating a general
>"Tax-Crime Exception" to the Fifth Amendment would render the cases
>inconsistent with the opinions of this court that have actually
>considered the issue before us. The caselaw in this circuit is clear
>that the Fifth Amendment may be validly invoked when the taxpayer fears
>prosecution for tax crimes. See, e.g., United States v. Bodwell, 66 F.3d
>1000, 1001 (9th Cir. 1995) (holding that "[a] reasonable belief that
>information concerning income or assets, such as that sought in the
>summons here, might be used to establish criminal failure to file a tax
>return can support a claim of Fifth Amendment privilege."); Rendahl, 746
>F.2d at 555-56 (failure to file tax return); see also United States v.
>Turk, 722 F.2d 1439, 1440 (9th Cir. 1983) (failure to file tax return),
>cert. denied, 469 U.S. 818 (1984); United States v. Tsui, 646 F.2d 365,
>367 (9th Cir. 1981) (income tax evasion), cert. denied, 455 U.S. 991
>(1982); United States v. Helina, 549 F.2d 713, 716 (9th Cir. 1977)
>(income tax evasion and willful filing of a false return); Federal
>Deposit Ins. Co. v. Sovereign State Capital, Inc., 557 F.2d 683, 686
>(9th Cir. 1977) (tax fraud). Further, such a sweeping exception would be
>inconsistent with the law in other circuits. See, e.g., United States v.
>Argomaniz, 925 F.2d 1349, 1353 (11th Cir. 1991); Estate of Fisher v.
>C.I.R., 905 F.2d 645, 648-49 (2nd Cir. 1990); United States v. Clark,
>847 F.2d 1467, 1474 (10th Cir. 1988).
>
>II.
>
>Accordingly, because we conclude -- in light of the law of this
>circuit, and in light of the government's confession of error on appeal
>-- that there is no "Tax-Crime Exception" to the Fifth Amendment, we
>vacate the order of the district court and remand for further
>proceedings so that it may dispose of the matter before it in accordance
>with the law that governs the invocation of the Fifth Amendment.
>
>VACATED and REMANDED
>
>***** BEGIN FOOTNOTE(S) HERE *****
>
>*fn1 The parties disagree as to whether we have jurisdiction to
>hear this appeal. Indeed, the complex problem of jurisdiction presents
>the sole substantial disagreement between Troescher and the government.
>Accordingly, we conclude that this case is appropriate for application
>of the doctrine of hypothetical jurisdiction. See Wong v. Ilchert, 998
>F.2d 661, 662 (9th Cir. 1993) (assuming without deciding the existence
>of subject matter jurisdiction where the "difficulty of resolving [the
>jurisdictional question] is far greater than the difficulty of resolving
>[the merits of the appeal].")
>
>Several opinions in this circuit have set out requirements for
>the proper application of the doctrine. See, e.g., In re Grand Jury
>Subpoena Issued to Bailin, 51 F.3d 203, 206 (9th Cir. 1995) (holding
>that the doctrine requires that "(1) the jurisdictional question must be
>difficult; (2) the merits of the appeal must be insubstantial; (3) the
>appeal must be resolved against the party asserting jurisdiction; and
>(4) undertaking a resolution on the merits as opposed to dismissing for
>lack of jurisdiction must not affect the outcome"), cert. denied, 116 S.
>Ct. 472 (1995). The issue here is different from that in our other
>cases, because here the parties do not disagree about the merits.
>Indeed, the reason the case is before us now is that the government
>argued a meritless position before the district court which it now
>confesses was in error. Thus, the resolution of the merits is in
>accordance with the position of both parties, and the third of the usual
>requirements is therefore inapplicable. As to the fourth requirement,
>whether we dismiss for lack of jurisdiction or reverse on the merits,
>the outcome of this case will not change, given the government's
>confession of error. In either event the parties will return to the
>district court and proceed in accordance with traditional Fifth
>Amendment doctrine. The other customary requirements are readily met. We
>should note, incidentally, that the requirements we frequently apply
>when invoking the doctrine are not mandated by historical practice. See
>Philbrook v. Glodgett, 421 U.S. 707, 722 (1975) (resolving the merits in
>favor of the party asserting jurisdiction); Secretary of the Navy v.
>Avrech, 418 U.S. 676, 677-78 (1974) (reversing the decision of the court
>of appeals on the merits without deciding the "difficult jurisdictional
>issue" presented by the case, concluding that "even the most diligent
>and zealous advocate could find his ardor somewhat dampened in arguing a
>jurisdictional issue where the decision on the merits is foreordained").
>Thus, our requirements may in some instances be flexible.
>
>*fn2 The government also argues that Troescher was precluded by
>waiver and res judicata from raising his Fifth Amendment claim with
>respect to the production of documents for the first time in the
>contempt proceeding. Because the facts in United States v. Rendahl, 746
>F.2d 553 (9th Cir. 1984), are indistinguishable from those in the case
>before us, we reject the government's argument, concluding as we did in
>Rendahl, Troescher's "first opportunity to litigate properly [his] Fifth
>Amendment claims was at the contempt hearing." Id. at 555.
>
>*fn3 We need not consider how or in what manner the Fifth
>Amendment may be invoked as a defense to a prosecution for failure to
>file tax returns. See, e.g., United States v. Sullivan, 274 U.S. 259,
>263-64 (1927); Rendahl, 746 F.2d at 556.
>
>***** END FOOTNOTE(S) HERE *****
>
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