United States v. Fridman
15-3969-cv
| 2d Cir. | Dec 13, 2016Background
- The IRS issued two identical summonses seeking records of Natalio Fridman’s foreign financial accounts as part of its investigation into his 2008 tax liability; one served on him individually and one served on him as trustee of the David Marcelo Trust.
- The IRS petitioned the District Court under 26 U.S.C. §§ 7602 and 7604(a) to enforce the summonses; the District Court granted enforcement on November 25, 2015.
- Fridman asserted the Fifth Amendment "act of production" privilege to avoid producing documents and to resist appearing for an IRS interview about trust-related documents.
- The District Court found the Government met the low Powell relevance burden and characterized Fridman’s invocation of the privilege as a blanket refusal; it concluded exceptions (foregone conclusion, required records, collective entity) applied and ordered enforcement.
- On appeal, the Second Circuit affirmed relevance but vacated and remanded because the record was insufficient to review whether Fridman validly invoked the privilege and which exceptions applied to which documents/time periods.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the summonses seek relevant documents under Powell/Clarke | IRS: agent affidavit shows documents may be relevant to 2008 tax investigation | Fridman: relevance contested implicitly by privilege invocation | Held: Government met the low relevance burden; affidavit adequate |
| Whether Fridman validly invoked the Fifth Amendment act-of-production privilege | Government: invocation was blanket and insufficient | Fridman: properly invoked privilege to avoid self-incrimination | Held: Record inadequate to review whether invocation was proper; remand for fuller record |
| Whether exceptions (foregone conclusion, required records, collective entity) strip the privilege for requested documents | Government: exceptions apply so production is not testimonial | Fridman: exceptions do not apply or not shown for specific documents/timeframes | Held: District Court failed to identify which exception applied to which requests or time periods; remand to specify/apply exceptions (in camera review if needed) |
| Whether Fridman must appear for IRS interview as trustee about documents produced in representative capacity | Government: trustee must testify about trust documents | Fridman: appearance would implicate Fifth Amendment | Held: District Court must reconsider in light of clarified privilege invocation and identified exceptions on remand |
Key Cases Cited
- United States v. Powell, 379 U.S. 48 (describing the minimal relevance burden for IRS summons enforcement)
- United States v. Clarke, 134 S. Ct. 2361 (Government may satisfy relevance burden with a simple agent affidavit)
- Adamowicz v. United States, 531 F.3d 151 (2d Cir.) (Powell relevance standard described as very low)
- United States v. White, 853 F.2d 107 (2d Cir.) (Government’s burden in summons enforcement is minimal)
- In re Grand Jury Subpoena Dated Feb. 2, 2012, 741 F.3d 339 (2d Cir.) (application of required-records doctrine with attention to retention periods)
- United States v. Greenfield, 831 F.3d 106 (2d Cir.) (relevant recent guidance on the foregone conclusion doctrine)