United States v. Richey
2011 U.S. App. LEXIS 1170
| 9th Cir. | 2011Background
- IRS sought enforcement of a summons to compel Mark Richey to testify and produce an appraisal work file related to the Peskys’ conservation easement deductions.
- Peskys, with FAWPEAS interests, hired Thornton Byron LLP for legal advice and engaged Richey to appraise the easement value.
- Richey prepared an appraisal and work file; the appraisal supported a large charitable deduction claimed on 2002 tax returns.
- The appraisal was attached to the Peskys’ 2002 return; the work file stated that supporting data and analyses were retained in the file.
- Thornton directed Richey to resist the summons on attorney-client and work-product grounds; the district court quashed the summons.
- The Ninth Circuit held the summons was issued in good faith and that parts of the work file are not wholly protected, reversing and remanding for in camera review.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Was the summons issued in good faith? | United States argued prima facie case established under Powell. | Richey and Peskys contended loss of good faith after agreement to deficiency. | Summons issued in good faith; service defect harmless; enforcement proper. |
| Does subsequent agreement to pay deficiency destroy the summons’ enforceability? | Continued enforcement remains proper where liability not finally determined. | Final agreement shows bad faith and case should be closed. | Continued enforcement proper; no final, irrevocable liability determination. |
| Does the entire appraisal work file fall within attorney-client privilege? | Some communications within file are privileged as to legal advice. | Entire file protected; all contents are privileged. | Entire file is not privileged; non-privileged documents may be disclosed. |
| Does the work-product doctrine protect the appraisal work file? | Work file may be shielded as prepared for litigation. | File was not prepared primarily for litigation; not protected. | Work-product protection does not shelter the entire file; not prepared solely because of litigation. |
| What is the scope of in camera review to determine privilege? | District court should determine what data is privileged. | Court should defer, as privilege issue is clear. | Remand for in camera examination to identify privileged versus non-privileged materials. |
Key Cases Cited
- United States v. Powell, 379 U.S. 48 (1964) ( Powell requirements for summons enforcement)
- United States v. Dynavac, Inc., 6 F.3d 1407 (9th Cir. 1993) (sufficient prima facie case by agent declaration)
- Fortney v. United States, 59 F.3d 117 (9th Cir. 1995) (heavy burden to show bad faith in enforcement)
- United States v. Graf, 610 F.3d 1148 (9th Cir. 2010) (mixed questions of law and fact on privilege and work-product)
- United States v. Ruehle, 583 F.3d 600 (9th Cir. 2009) (scope of attorney-client privilege determinations)
- Mimick v. United States, 952 F.2d 230 (8th Cir. 1991) (evaluation of good faith and seriousness of violations)
- PAA Mgmt., Ltd. v. United States, 962 F.2d 212 (2d Cir. 1992) (IRS enforcement until final taxpayer liability determination)
- Gimbel v. United States, 782 F.2d 89 (7th Cir. 1986) (enforcement when final liability determination pending)
- Tor f Torf Envtl. Mgmt. (In re Grand Jury Subpoena, Torf), 357 F.3d 900 (9th Cir. 2004) (because of test for work-product when dual-use documents)
- Upjohn Co. v. United States, 449 U.S. 383 (1981) (attorney-client privilege for corporate communications)
- Smith v. McCormick, 914 F.2d 1153 (9th Cir. 1990) (scope of privilege when involving third-party consultant)