Elvis E. JOHNSON v. Robert C. SAWYER, et al.
No. 96-20667
United States Court of Appeals, Fifth Circuit.
Aug. 21, 1997.
120 F.3d 1307
For the reasons stated in this opinion, we affirm the district court‘s grant of defendants’ motion for judgment as a matter of law with respect to Robinson‘s claims under
so the report in no way put the City on notice that Dickerson was harassing Robinson.
Thomas J. Clark, Jonathan S. Cohen, U.S. Department of Justice, Tax Division, Appellate Section, Washington, DC, for Defendants-Appellants.
Before SMITH, BARKSDALE and BENAVIDES, Circuit Judges.
RHESA HAWKINS BARKSDALE, Circuit Judge:
Of the numerous issues raised in this appeal, two are critical to our disposition: whether tax return information, once disclosed in open court, loses its confidentiality such that its subsequent publication by a federal employee does not violate
For the second time, our court reviews a judgment in favor of Elvis E. Johnson for the claimed wrongful disclosure of tax return information in two 1981 press releases issued by the Internal Revenue Service following his guilty plea to, and conviction for, income tax evasion. In 1995, our en banc court reversed Johnson‘s $10 million Federal Tort Claims Act judgment against the United States and remanded for dismissal of that claim. Johnson v. Sawyer, 47 F.3d 716, 737-38 (5th Cir.1995) (en banc). Johnson then proceeded against IRS officers (Appellants) responsible for the releases. Based partly on an instruction that the releases wrongfully disclosed tax return information, the jury awarded Johnson $9 million. Because that instruction was erroneous in part and affected the outcome of this case, we VACATE and REMAND for a new trial. And, to
I.
In 1981, Johnson was an executive with American National Insurance Company (ANICO) and was employed at its headquarters in Galveston, Texas. Johnson began in 1951 with ANICO as an agent in Springfield, Missouri. Because of his success, he was transferred to Galveston in 1971. By 1976, he had become executive vice-president and a member of the board of directors. He and Orson Clay, ANICO‘s president, reported directly to the board. In an intra-company circular, Clay described Johnson as “the most successful field man and home office executive in [ANICO‘s] history“.
In 1976, the IRS began auditing ANICO and its key executives, including Johnson and his wife. Upon discovering discrepancies, the examining agent referred the matter to the IRS Criminal Investigation Division (CID), which assigned the case to appellant Robert G. Stone, a Special Agent with the CID.
Following an investigation, the CID referred the case to the Department of Justice to prosecute Johnson and his wife for tax evasion for the years 1974 and 1975. The case was assigned to Assistant United States Attorney James L. Powers. In February 1981, Powers advised Johnson‘s attorney, Robert I. White, that he planned to seek an indictment of both Johnson and his wife; but, if Johnson pled guilty to a one-count criminal information that he underpaid his 1975 taxes (by approximately $3,500), the Government would not prosecute his wife for either 1974 or 1975, would not prosecute Johnson for 1974, and would recommend a probated sentence.
According to Johnson, he kept ANICO‘s executive committee, president (Clay), and counsel fully apprised of the situation. Evidently, White and Johnson were reassured that, even if Johnson pled guilty to a crime, as long as there was no publicity that would embarrass ANICO, Johnson could continue with ANICO as executive vice-president. White therefore determined to ensure that Johnson‘s identity would never be disclosed--that if someone looked at the district court file, he could not associate Johnson with ANICO.
White notified Powers that publicity of a conviction would be extremely damaging, and Powers evidently agreed, as he had with White on other occasions for other defendants, to preserve Johnson‘s relative anonymity. Powers agreed to let White seek the district court‘s authorization to have the presentence investigation performed before charges were filed. The completed presentence investigation report was delivered to the court on 2 April 1981. Johnson‘s case was to be heard on Friday, 10 April, at 4:00 p.m. in the Galveston courthouse. White requested that the criminal information be filed at the time of the hearing, along with Johnson‘s waiver of indictment and the plea bargain agreement; and that the “Defendant‘s Information” sheet give White‘s office address for Johnson‘s address. Powers agreed to these precautions and agreed that no press release would be issued concerning Johnson. But, Powers did not advise the IRS of this “no publicity” agreement.
At approximately 4:00 p.m. on 10 April, proceedings on the record commenced. White had ensured that the district judge (Judge Gibson) had no other business that Friday afternoon, and Powers had agreed to that time to minimize the risk of publicity. White and Johnson searched the Galveston courthouse for members of the press and found none, so the only people present for the hearing were Johnson, White, Powers, the district judge, and court personnel. Johnson signed and filed a waiver of indictment.
The “Defendant‘s Information” sheet, identifying Johnson as “Elvis Johnson” of “1100 Milam St., 28th Floor, Houston, Texas 77002“, was also filed. In fact, although Johnson‘s full name is Elvis E. Johnson, he was known as “Johnny” Johnson by friends, ANICO executives and employees, and business acquaintances; he signed all correspondence as “Johnny“. In addition, Johnson‘s home address was 25 Adler Circle, in Galveston.
According to Johnson, when returning from court on 10 April, he notified ANICO‘s president (Clay) about what transpired, and Clay responded favorably that the IRS matter was over and that he (Johnson) should move forward because he was important to ANICO. By the end of business on Tuesday, 14 April, Johnson informed other members of ANICO‘s executive committee that he had pled guilty to a tax crime and put the matter behind him. Johnson testified that he was not asked to resign; instead, he was told the “best interest of the company is served by keeping you exactly where you are“.
The day before, however, Monday, 13 April, appellant Sally Sassen, an IRS Public Affairs Officer, had prepared the following press release about Johnson‘s conviction, entitled “Insurance Executive Pleads Guilty in Tax Case“:
GALVESTON, TEXAS-In U.S. District Court here, Apr. 10, Elvis E. Johnson, 59, plead [sic] guilty to a charge of federal tax evasion. Judge Hugh Gibson sentenced Johnson, of 25 Adler Circle, to a six-month suspended prison term and one year supervised probation.
Johnson, an executive vice-president for the American National Insurance Corporation, was charged in a criminal information with claiming false business deductions and altering documents involving his 1974 and 1975 income tax returns.
In addition to the sentence, Johnson will be required to pay back taxes, plus penalties and interest.
Sassen had prepared the release with the help of Special Agent Stone, relying, with one exception (the paragraph regarding back taxes, penalties and interest), solely on information she received from him. She testified that she did not ask Stone about the source of that information, although she knew Stone had not been in the courtroom for Johnson‘s hearing on 10 April. As noted, the last paragraph of the release (penalty portion) was not based on information received from Stone. It was boilerplate language in the form Sassen used.
According to Stone, he learned of the conviction from Powers on either Friday, 10 April, or Monday, 13 April. Stone testified that, based on that conversation, he prepared on Monday, 13 April, the following internal “Report of Legal Action“:
On [10 April 1981] AUSA JIM POWERS filed a criminal information charging JOHNSON with tax evasion under
26 USC 7201 for the years 1974 and 1975. JOHNSON plead [sic] guilty on the same day to one count of 7201 for 1975 and the 1974 count was dismissed. Judge GIBSON sentenced JOHNSON to 6 months to serve with this 6 months being suspended and placed him on 1 years supervised preparation [sic]. No fine was assessed and no appeal is expected. This legal action occurred in Galveston.
In addition to not attending Johnson‘s hearing, neither Sassen nor Stone had any of the court documents. Stone, who was in Houston, was not advised by Powers about either the plea agreement or hearing in Galveston until approximately two hours before the hearing, when Powers was leaving his Houston office to travel to Galveston for the hearing. Because of such short notice, another matter prevented Stone from attending the hearing. Stone, however, did not check the public record before giving the information to Sassen.
Sassen prepared the release in conformance with a District Director‘s Memorandum (DDM), directing her, following guilty pleas, to prepare press releases based on informa-
After preparing a draft of the release, Sassen telephoned Stone and read it to him (this was pre-FAX). Stone testified that he copied it verbatim. According to Stone, he telephoned Powers and read the release to him; but, Powers testified that he remembered neither this telephone call nor basically anything else about the case. Stone then contacted Sassen and told her that Powers had approved the release.
Sassen also called appellant Michael Orth, a CID supervisory employee, and read the release to him. IRS procedures then in effect (1981) required that such releases be cleared at the supervisory level. After Orth approved the release, Sassen mailed it on 13 April to 21 media outlets in the Galveston area.
On 15 April, a Galveston journalist telephoned ANICO to inquire about Johnson‘s conviction. Johnson learned of the press release and contacted White, who immediately contacted Powers. In a telephone conversation surreptitiously recorded by White, Powers denied any knowledge of the release and assumed the IRS was responsible. Powers told White, “If they damaged your client in some way, sue the hell out of them as far as I‘m concerned“.
White also telephoned and wrote to the IRS about the release. Among others, he spoke with appellant Dale V. Braun, who was Acting District Director of the IRS Austin, Texas, District on that day (15 April). It was then that the IRS realized that the release contained erroneous information: that Johnson had been charged only for 1975; and that the criminal information did not charge him with claiming false business deductions or altering documents.
Braun contacted appellant Robert C. Sawyer, the Chief of the CID in the Austin District, and Harold Friedman, the IRS Austin District Counsel, and all agreed to withdraw the release. Sassen informed the media outlets that the release might contain errors and asked that it not be publicized.
The IRS then obtained a copy of the criminal information to which Johnson had pled guilty and, following discussion on 16 April among Sawyer, Sassen, Orth, Braun, and other IRS personnel, decided to issue a revised release. IRS Counsel Friedman strongly advised against issuing a second release because it would only compound their potential liability. The revised release was identical to the 13 April release, except for the following italicized portion of the second (middle) paragraph:
Johnson, an executive vice-president for the American National Insurance Corporation, was charged in a criminal information with willful evasion of federal tax by filing a false and fraudulent tax return for 1975.
(Emphasis added.)
Powers evidently participated in the process resulting in this second release. An IRS special agent testified that, on 16 April, as instructed by Orth, he took a copy of the proposed revised release to Powers, who was participating in a trial; that, during a recess, he gave it to Powers for his review and approval; and that Powers approved it. Consistent with his other testimony, Powers did not recall the incident; he only recalled discussing this issue with some lawyer some years ago about a correction of the press release. I don‘t remember a second press release. Maybe there was one.
The IRS special agent then gave the proposed release to a secretary with the comment that “Powers said this was okay“; the secretary relayed that information to the Austin office. This second release was issued on 17 April to the 21 media outlets that received the first.
According to Johnson, he informed ANICO president Clay and two executive committee
On the one hand, Clay testified that he was unaware of the press release when he asked Johnson for his resignation. According to Clay, the ANICO board decided that someone with a felony conviction could not hold a high position within the corporation. But, Johnson presented evidence that the “real problem” was the publicity surrounding his conviction, not the fact of the conviction. (Obviously, the jury accepted Johnson‘s version.) Johnson resigned on 20 April 1981.
Johnson was reassigned to ANICO‘s office in Springfield, Missouri (where he began in 1951), as an associate regional director. He served there at considerably diminished compensation until 1986, when he reached the mandatory retirement age (65). He then worked for ANICO as an agent, his starting position with it.
In 1983, Johnson filed this action against Sawyer, Braun, Sassen, and other IRS employees for wrongful disclosure of tax return information, in violation of
(a) General Rule.---Returns and return information shall be confidential, and except as authorized by this title-
(1) no officer or employee of the United States,
...
shall disclose any return or return information obtained by him in any manner in connection with his service as such an officer or an employee or otherwise or under the provisions of this section....
(b) Definitions.---For purposes of this section-
...
(2) Return information.---The term “return information” means-
(A) a taxpayer‘s identity, the nature, source, or amount of his income, payments, receipts, deductions, exemptions, credits, assets, liabilities, net worth, tax liability, tax withheld, deficiencies, over-assessments, or tax payments, whether the taxpayer‘s return was, is being, or will be examined or subject to other investigation or processing, or any other data, received by, recorded by, prepared by, furnished to, or collected by the Secretary with respect to a return or with respect to the determination of the existence, or possible existence, of liability (or the amount thereof) of any person under this title for any tax, penalty, interest, fine, forfeiture, or other imposition, or offense....
Johnson sought recovery under
Pursuant to
Initially, Johnson claimed wrongful disclosure for four items of tax return information: age; home address; that he was charged with false business deductions and altering documents on his 1974 and 1975 returns; and that he would be required to pay back taxes, plus penalties and interest.
Johnson amended his complaint later in 1983, adding a claim against the United States under the Federal Tort Claims Act,
Johnson filed a second amended complaint in 1984, adding Stone and Orth as defendants. He also claimed that a fifth item of tax return information had been disclosed in the releases: that he was executive vice-president of ANICO. The defendants again moved to dismiss or for summary judgment on a variety of grounds, including that, as a matter of law, none of the information contained in the releases had been disclosed in violation of
In 1986, the district court (Chief Judge Singleton) ruled on the cross-motions, concluding that, as a matter of law, “issuing the [releases] violated § 6103“. Johnson v. Sawyer, 640 F.Supp. 1126, 1133 (S.D.Tex.1986). The court determined that the releases “disclosed” tax return information within the meaning of
Along a similar line, the Appellants had urged the court to create a judicial exception for disclosure of material in which Johnson “had no reasonable expectation of privacy... because those items were incidental to information already in the public record“. Id. at 1132. The court rejected that suggestion, explaining that “Congress made the language of § 6103 quite clear: any disclosure of return information is illegal ‘except as authorized by this title‘“. Id. (quoting
Consequently, Johnson‘s motion for partial summary judgment was granted on that issue. Id. at 1139. The court also denied Appellants’ motion for summary judgment on the following issues: that no individual Appellant other than Sassen could be held liable under
The claims against the individual defendants were severed, and a bench trial was held on the FTCA claim in 1990. Johnson was awarded approximately $10 million. Johnson v. Sawyer, 760 F.Supp. 1216, 1233 (S.D.Tex.1991). Initially, our court affirmed the judgment, Johnson v. Sawyer, 980 F.2d 1490 (5th Cir.1992) and 4 F.3d 369 (5th Cir. 1993), but our en banc court reversed and remanded with directions to dismiss the FTCA claim. Johnson, 47 F.3d at 738.
While the case was on appeal, Chief Judge Singleton retired. The case was reassigned to Judge Hoyt. On remand, Johnson filed a third amended complaint, discarding the FTCA claim and adding a claim that “identifying” him constituted a sixth item of wrongful disclosure.
A hotly, if not bitterly, contested jury trial was held in 1996. The jury found for Johnson, awarding $6 million in actual, and $3 million in punitive, damages. The court awarded pre-judgment interest at 6% per annum on $6 million commencing 4 August 1986, post-judgment interest on all sums awarded at 5.6% per annum, attorneys’ fees of $1.2 million (20% of $6 million), and costs of approximately $54,000.
II.
Appellants present a number of issues: that several jury instructions are erroneous, including not instructing (1) that the portions of the releases concerning the charges and penalties were not tax return information and (2) that only Sassen can be liable under
As is often the case, what is not in issue is as important, if not more so, than what is. For example, Appellants do not challenge the sufficiency of the evidence either (1) as to causation for liability under
A.
We rule on only two of the six challenged instructions. The issues concerning the balance are reserved for the district court on remand. Our standard of review for such claims is well-settled:
First, the challenger must demonstrate that the charge as a whole creates “substantial and ineradicable doubt whether the jury has been properly guided in its deliberations.” [Bender v. Brumley, 1 F.3d 271, 276 (5th Cir.1993).] Second, even if the jury instructions were erroneous, we will not reverse if we determine, based upon the entire record, that the challenged instruction could not have affected the outcome of the case. [Id. at 276-77.]
FDIC v. Mijalis, 15 F.3d 1314, 1318 (5th Cir.1994); see also Davis v. Ector County, Tex., 40 F.3d 777, 786 (5th Cir.1994). In addition, to the extent there is claimed error in refusing to give an instruction, the challenger must show “[a]s a threshold matter ... that [his] proposed instruction correctly states the law“. FDIC v. Henderson, 61 F.3d 421, 425 (5th Cir.1995).
1.
Pursuant to the 1986 summary judgment ruling, the district court instructed the jury that, “as a matter of law the April, 1981 news releases ... did disclose tax return information in violation of the law“. Appellants claim reversible error: that the 13 April release contained, at most, only three items of confidential return information (Johnson‘s age, his address, and the word “vice-president“); and that, therefore, the jury should have been asked to decide “whether disclosure of these altogether routine items caused Johnson to lose his job“. Appellants maintain that, as a matter of law, those items could not. They ask us to reverse and render or, in the alternative, remand and reassign the case for a new trial.
a.
Although we ultimately conclude that the district court did reversibly err in giving this part of the instruction, we must first explain why the procedural posture of this case makes it impossible to render judgment for Appellants.
Appellants assert that “their summary judgment motion should have been granted in 1986“. Their request that we review and reverse the 1986 order is buried in their brief in the last paragraph of the section discussing the liability instruction, without supporting argument, authority, or citations to the record. We have held repeatedly that we will not consider issues not briefed by the parties. See Webb v. Investacorp, Inc., 89 F.3d 252, 257 n. 2 (5th Cir.1996) (“An appellant abandons all issues not raised and argued in its initial brief on appeal.“) (quoting Cinel v. Connick, 15 F.3d 1338, 1345 (5th Cir.1994)); McKethan v. Texas Farm Bureau, 996 F.2d 734, 739 n. 9 (5th Cir.1993)
In any event, even if this issue had been properly presented, Appellants would face other problems. They contend that the district court erred in denying their summary judgment motion in 1986. Appellants advance this contention despite the fact that the instruction in issue was based on the 1986 grant of Johnson‘s motion for partial summary judgment. We have held repeatedly that orders denying summary judgment are not reviewable on appeal where final judgment adverse to the movant is rendered on the basis of a subsequent full trial on the merits. See Black v. J.I. Case Co., 22 F.3d 568, 570-72 (5th Cir.1994); Wells v. Hico ISD, 736 F.2d 243, 251 n. 9 (5th Cir.1984). Because Appellants lost at trial, we cannot review the denial of their summary judgment motion.
On the other hand, when, by summary judgment or some other ruling, an issue is removed from those to be tried, that ruling can be contested on appeal, assuming it was otherwise properly preserved in the district court, including possibly being presented again during trial. E.g., United States v. Graves, 5 F.3d 1546, 1551 (5th Cir.1993) (requiring party who unsuccessfully opposed motion in limine to lodge contemporaneous objection at trial to preserve issue for appeal); United States v. Estes, 994 F.2d 147, 149 (5th Cir.1993) (per curiam) (same). But, again, Appellants challenge the denial of their motion, not the grant of Johnson‘s. This is not a distinction without a difference. Obvious evidentiary considerations come into play, that we need not elaborate on for purposes of this opinion.
More importantly, even if Appellants could raise this issue, their position on appeal is different from the one they took in 1986. They contend now that the three items of return information they now concede were disclosed in violation of
Although we can affirm a summary judgment on grounds not relied on by the district court, those grounds must at least have been proposed or asserted in that court by the movant. See Missouri Pac. R.R. v. Harbison-Fischer Mfg. Co., 26 F.3d 531, 538 (5th Cir.1994) (“[W]e can affirm the district court on the alternate grounds asserted below.“) (emphasis added); FDIC v. Laguarta, 939 F.2d 1231, 1240 (5th Cir.1991) (refusing to affirm summary judgment on grounds “neither raised below ... nor even raised sua sponte by the district court“); Frank C. Bailey Enter., Inc. v. Cargill, Inc., 582 F.2d 333, 334 (5th Cir.1978). More importantly, we have held that, on appeal, we will not consider a new ground in opposition to, or in defense of, summary judgment. See Laguarta, 939 F.2d at 1240. Thus, even were we to actually review the denial of Appellants’ motion, lack of causation would be a new ground on appeal, one not raised in district court (in 1986).
Of course, we could address the causation issue in the context of a sufficiency challenge; but, as noted, it has not been presented to us. Appellants did make Rule 50 motions at the appropriate times during the trial on several grounds, including lack of causation. However, they do not ask us to review the denial of those motions or conduct a sufficiency review of the evidence. Once again, Appellants’ failure to raise this issue constitutes waiver and abandonment on appeal. See Webb, 89 F.3d at 257 n. 2; McKethan, 996 F.2d at 739 n. 9.
b.
Because Appellants contend that the challenged instruction failed to distinguish between information in the releases that was wrongfully disclosed and information that was not wrongfully disclosed, we must first determine the
i.
One exception, however, authorizes disclosure of tax return information in a judicial proceeding to determine a taxpayer‘s civil or criminal tax liability.
Lampert involved press releases issued by the United States Attorney‘s office and the IRS that summarized tax evasion charges against three individuals. Lampert, 854 F.2d at 336. The Ninth Circuit began its analysis by explaining that the releases disclosed “return information” as defined by
The Ninth Circuit reaffirmed Lampert in Schrambling Accountancy Corp. v. United States, 937 F.2d 1485, 1489-90 (9th Cir.1991), when it held that tax return information included in notices of federal tax liens and a bankruptcy petition lost their confidentiality and “[could] be disclosed again without regard to section 6103“. As the court explained, “The relevant inquiry should focus on whether the prior authorized disclosure ... destroys the confidential nature of the information.” Id. at 1488-89. Because tax liens are filed in the county recorder‘s office and are open for public inspection, the information in them is exposed to even greater publicity than in a judicial proceeding. Id. at 1489.
In Rowley v. United States, 76 F.3d 796 (6th Cir.1996), the Sixth Circuit recently adopted the Ninth Circuit‘s approach. Rowley involved IRS disclosure of information (via newspaper ad) that, like the information in Schrambling, had previously been disclosed in a publicly recorded tax lien. Id. at 798. The Sixth Circuit concluded that the prior, authorized, disclosure placed the information in the public domain, stripping it of its confidentiality. Id. at 801. The court did make an effort to distinguish cases where the prior disclosure occurred in a judicial proceeding, explaining that “the recording of a federal tax lien ... is designed to provide public notice and is thus qualitatively different from disclosures made in judicial proceedings, which are only incidentally made public“. Id.
In Mallas v. United States, the Fourth Circuit followed the Tenth Circuit. There, the IRS issued a series of revenue agent reports to investors in a tax shelter, describing the convictions (later reversed) and “financing scheme” of the two individuals who set up the shelter. Mallas, 993 F.2d at 1114-15. Noting that
The Seventh Circuit took a slightly different approach to
Instead, in ruling for the Government, the Seventh Circuit reasoned: “The information disclosed in the press release did not come from [the taxpayer‘s] tax return-not directly, at any rate. It came from the Tax Court‘s opinion.” Id. at 20. For that reason, the Government was not disclosing tax return information within the meaning of
Consistent with the district court‘s summary judgment in 1986, we decline to follow the Ninth and Sixth Circuits and judicially create an exception to
As the Supreme Court stated, “When we find the terms of a statute unambiguous, judicial inquiry is complete except in rare and exceptional circumstances ... [such as] where the application of the statute as written will produce a result ‘demonstrably at odds with the intentions of its drafters.‘” Demarest v. Manspeaker, 498 U.S. 184, 190 (1991) (quoting Griffin v. Oceanic Contractors, Inc., 458 U.S. 564, 571 (1982)) (citations omitted); Consumer Prod. Safety Comm‘n v. GTE Sylvania, Inc., 447 U.S. 102, 108 (1980) (“[T]he starting point for interpreting a statute is the language of the statute itself. Absent a clearly expressed legislative intention to the contrary, that language must ordinarily be regarded as conclusive.“); United States v. Rodriguez-Rios, 14 F.3d 1040, 1044 (5th Cir.1994) (en banc).
Restated, we follow the plain meaning of a statute unless it would lead to a result “so bizarre that Congress ‘could not have intended’ it“. Demarest, 498 U.S. at 191 (quoting Griffin, 458 U.S. at 575); see United States v. Turkette, 452 U.S. 576, 580 (1981) (“absurd results are to be avoided“); see also Rodriguez-Rios, 14 F.3d at 1044 (“We are authorized to deviate from the literal language of a statute only if the plain language would lead to absurd results, or if such an interpretation would defeat the intent of Congress.“); Almendarez v. Barrett-Fisher Co., 762 F.2d 1275, 1278 (5th Cir.1985) (“Literal application of statutory language is ... inappropriate if it would lead to ... unreasonable results.“).
At first--even second, third, or fourth--glance, it appears that, to find a violation of
At issue in Demarest was whether
The Court looked to two other provisions in the statute, including a section providing for payment of a subsistence allowance (in
GTE Sylvania involved § 6(b)(1) of the Consumer Product Safety Act (CPSA), which regulates the “public disclosure” of information collected by the Consumer Product Safety Commission (CPSC) regarding consumer products. GTE Sylvania, 447 U.S. at 104-05. Under § 6(b)(1), a product manufacturer must be notified 30 days before public disclosure of information and given the opportunity to submit comments about the information to be disclosed. Id. at 105. In this case, the CPSC had received accident reports from manufacturers. Id. at 106. After receiving Freedom of Information Act (FOIA) requests from two consumer groups, the CPSC decided to release these reports without complying with § 6(b)(1)‘s notice/comment requirements. Id.
Section 6(b)(2) of the CPSA contains specific exceptions to the notification requirements of § 6(b)(1), none of which include disclosure in response to a FOIA request. Id. at 109. Nevertheless, the CPSC took the position that § 6(b)(1) applied only when it made affirmative disclosures and not when it simply responded to FOIA requests. Id. at 107-08. The Court rejected that position: “The fact that Congress was aware of the relationship between § 6 and the FOIA when it enacted the CPSA is exhibited by the fact that the Congress in [a different part of § 6] specifically incorporated by reference the nine exemptions of the FOIA“. Id. at 109. In addition, another section of the CPSA made disclosure of certain information subject to § 6(b)(1), whether the disclosure was an affirmative act by the CPSC or a response to a FOIA request. Id. at 110. Thus, the Court could not conclude that the failure to include FOIA requests within the exceptions to § 6(b)(1) was unintentional. Id.
In addition to looking to other parts of the statute, the Court looked to the legislative history of the CPSA. Upon examining that history, the Court concluded that “for purposes of § 6(b)(1)“, no distinction was made between information “affirmatively disclosed” and information released pursuant to FOIA. Id. at 111-16. The restrictions of § 6(b)(1) were meant to govern the CPSC‘s disclosure of information in all circumstances, not only when the disclosure was pursuant to the CPSC‘s initiative. Id. at 112-13.
Turning to
For example, if the IRS discloses tax return information to the Department of Commerce (DOC) for statistical use, id.
More generally,
Furthermore, as in GTE Sylvania, the legislative history supports the conclusion that Congress considered the relationship between
In addition, Congress considered a taxpayer‘s privacy interest in tax return information when enumerating the exceptions to
In judicially creating that exception, the Sixth Circuit explained: “[T]he approach we adopt today strikes the proper balance between a taxpayer‘s reasonable expectation of privacy and the government‘s legitimate interest in disclosing tax return information to the extent necessary for tax administration functions.” Rowley, 76 F.3d at 802. We, however, agree with the Fourth Circuit: “It is for Congress ... to ‘strike a balance’ between these interests [and it] has done so in section 6103, without articulating [this] exception.” Mallas, 993 F.2d at 1121. We are a federal appellate court, not a super-legislature; we are not vested with plenary authority to re-evaluate the policy choices made by our elected representatives. See THE FEDERALIST NO. 78 (Alexander Hamilton) (“The courts must declare the sense of the law; and if they should be disposed to exercise WILL instead of JUDGMENT, the consequence would equally be the substitution of their pleasure for that of the legislative body.“)
But, again, this flies in the face of
We recognized in our en banc opinion that
[S]ection 6103 is a regulation of the conduct of those who in the course of their duties as government employees or contractors glean information from tax returns. The regulation is prophylactic, proscribing disclosure by such an individual of any such information so obtained by him. Plainly, Congress was not determining that all the information on a tax return would always be truly private and intimate or embarrassing. Rather, it was simply determining that since much of the information on tax returns does fall within that category, it was better to proscribe disclosure of all return information, rather than rely on ad hoc determinations by those with official access to returns as to whether particular items were or were not private, intimate or embarrassing. Because such determinations would inevitably sometimes err, ultimately a broad prophylactic proscription would result in less disclosure by return handlers of such sensitive matters than would a more precisely tailored enactment.
Johnson, 47 F.3d at 735 (footnote omitted). As an explicit construction of
Thus,
That interest is furthered by a construction of
Unlike section 6103(a), the Texas tort is not concerned with the identity of the party making the disclosure, or his sources, but merely with whether the information disclosed is both private and intimate or embarrassing, and also not of public concern, none of which factors are relevant under the terms of section 6103(a). The Texas tort and section 6103(a) address totally distinct subject matters and impose distinctly different duties: the latter, applicable only to certain individuals who in connection with their government-related duties obtain tax return information, enjoins them not to disclose any of it so obtained, even though it is not private and not intimate or embarrassing and is of public concern....
Johnson, 47 F.3d at 735-36. Therefore, if tax return information is the immediate source for the information claimed to be wrongfully disclosed, it makes no difference that the information is neither “private” nor “confidential“.
For this reason, we find unpersuasive Appellants’ contention that this construction of
More importantly, a closer inspection of Cox Broadcasting reveals that there are no First Amendment implications to our decision here. Cox Broadcasting involved a civil action brought under a Georgia statute that made it a misdemeanor to publicize or broadcast a rape victim‘s name. Cox Broadcasting, 420 U.S. at 471-72. A reporter, present in court when several rape defendants pled guilty, learned the victim‘s name from examining the indictments, which were available for his inspection in the courtroom. Id. at 472-73. He later broadcast a news report about the court proceedings, and the report named the victim. Id. at 473-74. The Court concluded that Georgia could not “impose sanctions on the publication of truthful information contained in official court records“. Id. at 495.
The Court stressed the importance of having a free press to report on the operation and administration of our government, especially judicial proceedings like criminal prosecutions, which are events of legitimate concern to the public. Id. at 491-92, 495, 1046 (“[A] public benefit is performed by the reporting of the true contents of [public] records by the media. The freedom of the press to publish that information appears to us to be of critical importance to our type of government ....“) (emphasis added). But Government employees-e.g., IRS agents are not members of the media and therefore have no First Amendment responsibility to report on criminal proceedings or other government operations. Moreover, the media‘s source in Cox Broadcasting was court documents, not information protected by a non-disclosure statute, such as
In addition, the Court noted that accurate reports of judicial proceedings have special protection under the First Amendment. Id. at 492. But, as noted above, that protection arises only when the source of those reports is public records or personal observation of the events in court: “What transpires in the court room is public property.... Those who see and hear what transpired can report it with impunity.” Id. at 492 (quoting Craig v. Harney, 331 U.S. 367, 374 (1947)) (emphasis added); id. at 491 (framing issue in case as “whether the State may impose sanctions on the accurate publication of the name of a rape victim obtained from public records-more specifically, from judicial records which are maintained in connection with a public prosecution and which themselves are open to public inspection“) (emphasis added); id. at 495 (“Public records by their very nature are of interest to those concerned with the administration of government, and a public benefit is performed by the reporting of the true contents of the records by the media.“) (emphasis added).
That the Court did not address the issue present in our case is evident from the following disclaimer in the opinion:
Appellants have contended that whether they derived the information in question from public records or instead through their own investigation, the First and Fourteenth Amendments bar any sanctions from being imposed by the State because of the publication. Because appellants have prevailed on more limited grounds, we need not address this broader challenge....
Id. at 497 n. 27. In other words, Cox Broadcasting‘s holding is limited to its factual context. Because under our analysis,
ii.
Given this interpretation of
But, our en banc opinion had already concluded that the statements about altering documents (charge portion) and about the penalties for Johnson‘s conviction (penalty portion) were not “return information” within the meaning of
In addition, Appellants have conceded in this appeal-for the first time during this case-that Johnson‘s age, home address, and the word “vice-president” were wrongfully disclosed.6 Appellants maintain that the district judge who sentenced Johnson in 1981 (Judge Gibson) referred to him as an “executive with American National Insurance Company“; therefore, they could disclose Johnson‘s affiliation with ANICO to that extent. Under their view, because Johnson‘s specific job title, vice-president, was not mentioned in open court, it could not be disclosed.
Neither Stone nor Sassen, however, attended the court proceedings at which Johnson pled guilty. Nor, prior to the release, did they examine the official transcript. Moreover, they could not have seen the transcript; it did not exist when the releases were issued. (The court reporter did not transcribe his notes and file the transcript until July 1981, over three months after the releases were issued.)
In fact, Stone admitted that all of the identifying information given to Sassen that is at issue in this case-age, middle initial, home address, and occupation (executive vice president of ANICO)-came either from Johnson‘s return file or from information “in his [Stone‘s] head” (that is, information that Stone had gathered during the course of investigating Johnson). Stone testified that all information gathered about a taxpayer, including data learned in the course of an investigation that is not actually present in a return or the return file, is protected by
As for Johnson‘s middle initial (E), there is a dispute, outside this record, over whether it was previously disclosed in public on the docket sheet for the 1981 criminal proceeding.7 However, because a
In sum, four items in the releases were wrongfully disclosed: Johnson‘s middle initial (E), his age (59), his home address (25 Adler Circle), and his occupation (executive vice-president for the American National Insurance Corporation). The rest of the information in the releases was not wrongfully disclosed; this includes the two statements (charge and penalty portions) that our en banc court previously held were not
With the offending, identifying, information removed, the first release would have read as follows:
GALVESTON, TEXAS-In U.S. District Court here, Apr. 10, Elvis Johnson pled guilty to a charge of federal tax evasion. Judge Hugh Gibson sentenced Johnson to a six-month suspended prison term and one year supervised probation.
Johnson was charged in a criminal information with claiming false business deductions and altering documents involving his 1974 and 1975 income tax returns.
In addition to the sentence, Johnson will be required to pay back taxes, plus penalties and interest.
c.
Johnson concedes on appeal that the charge and penalty portions did not constitute disclosure of tax return information. Again, the charge portion (most of the second paragraph) concerns crimes with which Johnson had been charged, including the erroneous information in the first release; the penalty portion (third paragraph), his being “required to pay back taxes, plus penalties and interest“. Unfortunately, the jury was instructed otherwise. It was instructed that,
as a matter of law, the April 1981 news releases at issue in this case did disclose tax return information in violation of the law. You have to decide whether one or more of the Defendants negligently or knowingly disclosed or permitted disclosure of this tax return information.
(Emphasis added.)
Appellants maintain that this instruction caused the jury to understand that all of the information in the releases was wrongfully disclosed; and that this affected the outcome of the case, mandating reversal and remand for a new trial. Johnson counters that there was no error because he
did not contend at trial that those [charge and penalty] portions of the press release were tax return information or that they caused Johnson damages. Johnson argued only that inclusion of these statements in the press release was relevant to Appellants’ negligent and knowing conduct.
Our standard of review bears repeating. Appellants “must demonstrate that the charge as a whole creates substantial and ineradicable doubt whether the jury has been properly guided in its deliberations“; and, even then, “we will not reverse if we determine, based upon the entire record, that the challenged instruction could not have affected the outcome of the case.” Mijalis, 15 F.3d at 1318 (internal quotations omitted).
There is no dispute that the Appellants timely and properly objected to the given instruction. Concomitantly, their written proposed instructions stated that the charge and penalty portions were not return information. Accordingly, their proposed instruction correctly stated the law.
Along this same line, at the charge conference, the court worked from the proposed instructions submitted by Johnson. As noted, it rejected Appellants’ instructions, including those concerning the charge and penalty portions not constituting return information. It did so without explaining why. (Pursuant to comments the court made to Appellants’ counsel during a bench conference, it appears that the court may have felt that the penalty portion was an improper disclosure, notwithstanding our en banc ruling to the contrary.)
As required, we have considered the charge as a whole. We conclude that the “substantial and ineradicable doubt whether the jury has been properly guided” prong is met.
Moving to the “affected the outcome” prong, we review the entire record in making that call. We complied with that duty, and then some. This record has been examined, and re-examined; it has been dissected in minute detail.
Obviously, in determining whether the erroneous instruction “affected the outcome“, an important aspect is the positions, or bases for liability, advanced by counsel at trial, as well as the evidence adduced. Such bases and evidence are the soil in which the instructions are planted; they bear on the jury‘s application of the law (instructions) to the evidence.
Despite his claim here that he “did not contend at trial that [the charge and penalty] portions of the press release were tax return information or that they caused [him] damages“, Johnson repeatedly did just the opposite at trial, either expressly or by implication. This had an effect on the district judge‘s evidentiary rulings, which of course, bore on the evidence to which the instruction was applied. Likewise, this affected the jury‘s application of the instructions to the evidence. As hereinafter described, different counsel for Johnson took different lines of attack. They were out of step not only as to whether the charge and penalty portions were improper disclosures of tax return information but also as to how Johnson‘s conviction should be utilized or presented. Both aspects were elements in the instructions affecting the outcome.
Concerning the charge and penalty portions, Johnson‘s amended complaint claimed that they were tax return information. He made this a contested issue of law in the pretrial order.
Along that line, in addressing at the start of trial what issues remained for the jury, in the light of Chief Judge Singleton‘s 1986 and 1991 rulings and our en banc opinion, Appellants noted that the latter held that the charge and penalty portions did not constitute tax return information. In response, Johnson urged that the summary judgment granted him in 1986 had not been overturned, and stated: “There are comments made by the Fifth Circuit in their [en banc] opinion that certain things did not constitute tax return information, but ... [the court] did not overrule the finding by Chief Judge Singleton that tax information” had been disclosed. A lengthy colloquy ensued between the court and counsel as to the effect of our en banc opinion. Unfortunately, how to deal with what was not tax return information—the charge and penalty portions—got lost in the shuffle. Even more unfortunate, it remained lost throughout the balance of the trial.
There is no dispute that Johnson‘s conviction could be revealed in a press release. And, again, it is undisputed that the charge and penalty portions were not tax return information; therefore, the information contained in these portions was not improperly
The error in the instruction was assisted in its “effect on the outcome” metamorphosis by the actions of Johnson‘s counsel throughout the trial. For example, in his voir dire, Johnson‘s counsel stated: “The IRS publicized [Johnson‘s conviction], and as a result of publicizing that, he lost his career, plain and simple. That is what this case is about.” But, again, that is not what the case is about. Later in voir dire, Johnson‘s counsel stated that it “was a violation of law to issue that press release“. Now, reading between the lines, perhaps Johnson‘s counsel meant that it was a violation of law to disclose part of the information in the release. That, however, is not what was said to the jury. The foregoing statements are fairly typical of overstatements made by Johnson‘s counsel throughout trial, including in questioning witnesses.
The tactic employed in voir dire was utilized in Johnson‘s opening statement. The press releases, rather than the portions that constituted an improper disclosure of tax return information, were attacked, as was Johnson‘s conviction.
Johnson‘s counsel often questioned witnesses about the specific improperly disclosed tax return information; but, they kept undoing that by attacking the press releases in toto, confusing the issue. It may well be that, as claimed by Johnson, such attacks were relevant; that the mistakes or errors relating to the charge and penalty portions supported finding negligent or knowing disclosure of the four items of tax return information. In any event, care should have been taken in adducing such proof. It was not.
For example, in questioning Johnson‘s own expert, Johnson‘s counsel asked him to agree that, in issuing a press release, the “need for speed, to get it out now, should not be allowed to overcome a need to make sure it is right“. But, again, the issue at trial was not whether the press release was “right“; it was whether the release contained improperly disclosed tax return information. Perhaps, that is what counsel meant through the use of the word “right“. And, several questions leading up to that question had been along that line. But, again, Johnson‘s counsel kept undoing his case through use of such overbroad questions.
These questions focus the jury, somewhat ambiguously, on the errors in the first release (which are not return information) and suggest that those errors are what caused Johnson‘s dismissal. Again, negligence in drafting the charge and penalty portions of the release may support an inference of knowing or negligent disclosure of the four items of tax return information (because the release was written all at once, not piecemeal), but this distinction must be made clear to the jury. It was not.
As another example, Johnson‘s counsel asked one of the Appellants to agree that he “didn‘t take out any of the identifying information, and you didn‘t tell Ms. Sassen to take out anything about Mr. Johnson owing back taxes, penalties, or interest, did you?” Again, by linking the penalty portion with the identifying information, this question suggests that the penalty portion was
Johnson‘s counsel compounded the error by next asking: “The fact that Mr. Johnson will be required to pay back taxes, penalties and interest, where does that appear in a Court record or other public record?” This question again implies that the penalty portion was improperly taken from Johnson‘s return file (which implies that it was
As reflected in the foregoing examples, we conclude that the erroneous instruction affected the outcome. Based on our reading of the whole record, it is possible that the jury determined that the charge and penalty portions were “return information” and that they damaged Johnson in some way. If that is so, the jury may have found Appellants liable under
As stated, in determining whether the instruction affected the outcome, we obviously did so against the backdrop of the record. Our conclusion that the erroneous instruction did affect the outcome is buttressed by the jury‘s susceptibility to applying the instruction improperly due to appeals to prejudice by Johnson‘s counsel against the IRS and its personnel. Johnson‘s closing argument included an attack on his conviction, as had been done in his opening statement. But, the conviction was not at issue; it was not open to attack. Of course, the conviction tied directly into the charge and penalty portions, which the instruction implied were improperly disclosed.
Johnson‘s conviction was a trigger point for the jury, a point pulled improperly and repeatedly by one of Johnson‘s lawyers. He stated: “So they find what they consider to be a $3,000 discrepancy in his return, $3,500. So they undertake to make a criminal case of it. They spend four years on it.” He later asked the jury: “Who is the next trophy kill? Me? You?“, and then stated:
My CPAs pour over and prepare my tax returns. I guess I am going to have to sit down and read them real close myself and go over everything. I got [sic] a big enough name. Boy, they would love to put it up on the wall.
(Amazingly, Appellants’ counsel did not object to these remarks. We are confident that such appeals to prejudice will not reoccur on remand.)
Each of the jurors had a set of the instructions. Because of the complexity and intricacy of the issues in this case, a correct jury instruction was needed more than ever. The jury did not receive one. Because the instruction both improperly guided the jury and affected the outcome, we must vacate and remand for a new trial.
2.
The court instructed that the Appellants could be liable under
Appellants moved at trial for judgment as a matter of law on this issue and raised timely objections in each instance at the charge conference. On the other hand, they do not challenge the sufficiency of the evidence. Therefore, at issue is only whether, as a matter of law, they could disclose by their own actions, including by permitting another to do so.
We find no error. “Disclosure” is defined by
In Chandler, an IRS teller received a penalty check that failed to contain a taxpayer identification number (TIN). Id. at 1516. The teller accessed the taxpayer account via computer but mistakenly transcribed the number onto the check. Id. Consequently, the taxpayer‘s account was not credited with those funds, and an IRS revenue officer mailed a notice of levy to the taxpayer‘s place of employment to collect the penalty. Id. The taxpayer brought suit against the United States under
Because the Government conceded that the notice of levy disclosed tax return information, 687 F. Supp. at 1516 n.1, the issue was whether the disclosure was the result of negligence (or willfulness). The court concluded that several IRS officers were negligent, including the teller. Id. at 1521. The court reached this conclusion despite the fact that it was the revenue officer who actually mailed the notice of levy and despite the fact that the teller‘s only contribution to that action was in transcribing the TIN incorrectly. Id. Nevertheless, the negligent conduct of the teller was actionable under
We agree with Chandler that
3.
Because resolution of Appellants’ challenge to four more instructions must be left to the district court on remand, based on the record developed on retrial, we do not reach these issues. On the other hand, we discuss them simply to assist the district court on remand in deciding what is, and is not, law of the case.
a.
The district court denied Appellants’ proposed instruction that Securities and Exchange Commission regulations would have required ANICO to file a public report that Johnson had been convicted of tax evasion. In our en banc opinion, we judicially noticed the SEC regulations that would require ANICO to file a report with the SEC that disclosed the fact that a director or executive officer had been involved in a legal proceeding that was “material to an evaluation of the ability or integrity” of that person. Johnson, 47 F.3d at 733-34 & n.36 (quoting
But, no evidence on materiality was presented. Because we remand for a new trial, and because of the possible factual underpinnings for this claim, including the questions of whether the SEC report would be relevant to the causation issue or to mitigation of damages, we decline to address this claim, assuming arguendo it was even properly presented here. Whether this instruction should be given is best left to the district court, when this matter is tried anew.
b.
The jury was instructed with respect to Sassen:
In judging whether defendant Sassen was negligent and/or knowingly violated the law, you should ask yourself, did defendant Sassen coordinate as she was required to do with Branch Chief defendant Orth, and with the prosecuting attorney, U.S. Attorney Powers?
One of Appellants’ own witnesses, the IRS official who signed this DDM, testified that Sassen was required to follow the guidelines in the DDMs in issuing press releases. In other words, there was no dispute that Sassen should have followed the “coordination” directive in issuing the two releases. She testified about her understanding of the term “coordinate” and about her actions in that regard, such as communicating with Stone. But, as discussed, Sassen also admits that she did not communicate with Powers.
Again, because this matter will be tried anew, and because of the factual nature of this issue, we will not address it. It remains for the district court on retrial.
c.
According to Appellants, the court did not explain to the jury which side had the burden of proof on each element of Johnson‘s case. Although Appellants maintain that the court properly instructed the jury that Johnson carried that burden on the element of proximate cause (Question No. 3), they contend that the jury may have been misled into thinking that Appellants bore the burden of disproving that they were negligent (Question No. 1). Once again, this question is best left to the court on remand in framing its instructions.
d.
The district court refused to read to the jury the facts stipulated in the pre-trial order. This is yet another question best left to the court on remand. For example, even if stipulated facts are to be presented to the jury by instruction or otherwise, not all of them necessarily would be. One of the stipulated facts was that the judge who sentenced Johnson referred to him as an “executive for the American National Insurance Company“. This is the stipulation Appellants especially wanted presented. But, as the district court ruled, and as discussed supra and infra, that fact is not legally relevant; therefore, on remand, it should not be presented to the jury, despite being stipulated to factually.
B.
Stone and Orth maintain that they should have been dismissed because Johnson‘s second amended complaint, which added them as defendants, was filed approximately 16 months after the limitations period had run. (Section 7217 has a two year period that runs from the date of the wrongful disclosure.
We have no occasion to re-examine that ruling because Stone and Orth have failed to preserve this issue for review. First, as discussed, we cannot review the 1986 denial of their summary judgment motion; such interlocutory orders are not to be reviewed where final judgment adverse to the movant is rendered on the basis of a subsequent full trial on the merits. See Black, 22 F.3d at 570.
And second, Stone and Orth did not re-urge the limitations issue in their Rule 50 motions at trial. Such motions should include all possible grounds, legal and factual, for judgment as a matter of law. Id. at 571 n. 5 (rejecting dual system for evaluating denials of summary judgment). We decline to exercise our discretion to address this issue on appeal. See, e.g., Highlands Ins. Co. v. National Union Fire Ins. Co., 27 F.3d 1027, 1031-32 (5th Cir. 1994).
C.
Appellants contest several evidentiary rulings. But,
1.
Concerning the transcript of Johnson‘s guilty plea hearing being excluded, Appellants intended to rely on it to show that Johnson‘s affiliation with ANICO was disclosed in court at the plea hearing on 10 April, before the first release. But under our construction of
2.
As was done for most of the challenged instructions, the remaining claims are presented simply to clarify what is, and is not, law of the case.
a.
Appellants contest two of Johnson‘s expert witnesses, James Caldwell and Tim Millis, being allowed to testify. They maintain that both Caldwell and Millis offered opinions on legal questions such as whether Appellants had violated the law and whether their conduct was intentional and reckless. Our standard of review in such instances, however, is very limited: “The decision to admit expert testimony lies within the district court‘s sound discretion and will not be overturned unless manifestly erroneous.” United States v. Willey, 57 F.3d 1374, 1389 (5th Cir. 1995). In any event, this issue remains for the court on remand. Obviously, it will be framed by the issues and evidence presented.
b.
Clay, President and CEO of ANICO in 1981, was a key witness because he supported Appellants’ contention that it was the fact of Johnson‘s conviction, not the publicity surrounding it, that cost Johnson his job. Clay testified that he asked Johnson to resign on Thursday, 16 April, before learning of the release and after a conference with two members of the board of directors (Duncan and Randall) and a telephone poll of most of the rest of the board.
The district court did not allow Clay to testify as to what the other directors, particularly Duncan and Randall, had said to him (Clay). In the proffer of that testimony, Clay stated that Duncan and Randall had told him to dismiss Johnson immediately because “they could not have a senior officer of the company, particularly a fiduciary-type company, with a felony conviction being a senior officer“.
Of course, this testimony is hearsay,
c.
Appellants appear to contend that the trial court erred in permitting Irwin Herz, one of ANICO‘s outside counsel in 1981, to give hearsay testimony. He testified, with a limiting instruction from the court, about his discussions with one of ANICO‘s most influential board members regarding Johnson. According to Herz, that board member told him that Johnson had been terminated because of publicity stemming from his guilty plea, not because of the conviction itself. This is another issue, assuming it is presented, for the court at the trial on remand.
d.
As noted, an individual is not liable for an unauthorized disclosure based on “a good
At trial, the DDM requirement that Sassen “coordinate” all press releases with Powers was highly disputed. Johnson maintained that the DDM required Sassen to actually contact Powers; Appellants countered that Sassen could coordinate with Powers indirectly, via Stone. Appellants attempted to present testimony from Robert McKeever, the district director of the Austin District in 1981, and H.C. Longley, the acting district director who signed the DDM, as to the meaning of “coordinate” in the DDM. The court refused to allow that testimony.
Once again, this is an issue that must be decided at the trial on remand.
D.
The final issue is Appellants’ request that, on remand, this case be reassigned because Judge Hoyt did not have the requisite “appearance of impartiality“. A federal appellate court has supervisory powers to do so as part of a remand order. See
Several circuits invoke such powers not just when actual bias or prejudice exists but when the facts “might reasonably cause an objective observer to question [the judge‘s] impartiality“. Microsoft, 56 F.3d at 1463 (quoting Liljeberg v. Health Servs. Acquisition Corp., 486 U.S. 847, 865, 108 S.Ct. 2194, 2205, 100 L.Ed.2d 855 (1988)); see Haines, 975 F.2d at 98 (purpose of reassignment is “to avoid both bias and the appearance of bias“); Torkington, 874 F.2d at 1446 (“Reassignment is appropriate where the trial judge has engaged in conduct that gives rise to the appearance of impropriety or a lack of impartiality in the mind of a reasonable member of the public.“). Other circuits have adopted a more formal test, in which the following three factors are considered:
- whether the original judge would reasonably be expected upon remand to have substantial difficulty in putting out of his or her mind previously-expressed views or findings determined to be erroneous or based on evidence that must be rejected,
- whether reassignment is advisable to preserve the appearance of justice, and
- whether reassignment would entail waste and duplication out of proportion to any gain in preserving the appearance of fairness.
Davis & Cox v. Summa Corp., 751 F.2d 1507, 1523 (9th Cir. 1985) (quoting Robin, 553 F.2d at 10); see Robin, 553 F.2d at 10. We need not decide which test to utilize. We conclude that, under either test, reassignment is required.
In explaining why this case must be reassigned, we view it in the light of its tortured, expansive (and expensive) history. The district judge was given a hotly contested, extremely emotional case that had been pending for more than ten years, one that was the subject of extensive opinions by a different district judge in 1986 and 1991 and by our en banc court in 1995, by which law of the case on some points had been established. And, there was some tension between our en banc and the district court opinions.
Moreover, there was immediate, continuing, and ever-increasing tension between the district judge and one of Appellants’ counsel, who had tried the earlier FTCA claim.
Accordingly, the district judge was justifiably concerned about truthfulness by the witnesses. Although we question the extent, and manner by which, he pressed that concern, as well as the extent and manner of his being at odds with the above-referenced Appellants’ counsel, that, of course, is not why we conclude that this case must be reassigned. The district judge was on the scene; we will not, and cannot, question his decisions in these regards. See Liteky, 510 U.S. at 553, 114 S.Ct. at 1157.
And, we have no doubt that the district judge could put out of his mind, or disregard, his prior conclusions on those matters we have found on this appeal to be erroneous, especially the erroneous jury instruction that compels a new trial. On the other hand, reassignment of this case is required because of the necessity to preserve the appearance of impartiality, fairness, and justice. (The loss of efficiency and economy pales in comparison to this.)
Suffice it to say, few indeed are those who would list the IRS and its personnel as an entity or individuals with which or whom they want to deal. Tax return preparation and tax payment are enjoyed by few, if any. Many transfer this dislike to those who collect those taxes and administer our tax system. This has been true since taxes were first levied and collected. But, no one can dispute that persons in the tax collection business, just like anyone else, are entitled to a fair trial. We know that the district judge agrees.
Likewise, no one can dispute that, generally, the American public is entitled to know about the business of its courts and the proceedings in them. We so noted in our en banc opinion. Johnson, 47 F.3d at 736 n. 41, 737 & n. 45.
Toward that end, press releases are one means to so advise the American public. The need or reason for releases about tax convictions was one of the numerous matters hotly contested at trial. Appellants posit they are needed to help promote or ensure voluntary tax compliance and to let the public know that everyone, no matter his status or station, is treated the same; Johnson counters that the release was to trumpet “bagging a trophy“. But, as stated, the press release qua press release was not at issue; at issue was improper disclosure of tax return information.
Nor was Johnson‘s conviction at issue. In our en banc opinion, we noted that, regarding the FTCA ruling, Chief Judge Singleton “apparently credited all [the Johnsons‘] testimony” concerning the fact that “he was not guilty of tax evasion and that he was wholly unaware that any items claimed as business expenses on his return were factually false or overstated“. Johnson, 47 F.3d at 722. We commented that, “[i]n so doing, the court in effect rejected the government‘s contention that ‘this is a matter of res judicata, it is not open to attack.’ In this respect, the district court clearly erred“. Id. at 722 n. 13. This notwithstanding, Judge Hoyt appeared to, if not expressly, disagree with the very fact of the conviction and of the events leading up to it. For example, in a heated colloquy with Appellants’ counsel outside the presence of the jury, Judge Hoyt stated:
This is no game down here. This is serious, and it is so serious it scares me to death; that I could be prosecuted by somebody who decides that they [sic] are not going to let me pay $3500 in taxes.
Along this line, as discussed infra, the district court‘s post-trial opinion replows the ground of Johnson‘s conviction and again implies that it was improper.
The court‘s tension with, and appearance of bias against, Appellants was immediate. For example, the court asked the following question during voir dire:
Now, how many of you have a bone to pick, other than me, with the Internal Revenue Service? Let us see a show of frank hands....
(Emphasis added.) Such comments might simply have been intended to put the potential jurors at ease. But, it was not an isolated incident; this bias or antagonism, see Liteky, 510 U.S. at 553, 114 S.Ct. at 1157, toward Appellants in particular, and the Internal Revenue Service in general, continued, if not increased, throughout the trial.
In the above-referenced colloquy, in which the court commented about the IRS not allowing payment of “$3,500 in taxes“, the court had earlier commented:
This is not something that is insignificant. All of you probably would be in the penitentiary if they had prosecuted you [under the criminal statute for improper tax information disclosure]. So don‘t make the mistake of lying here, because you open yourself up to prosecution.
During yet another of the many contentious colloquies with Appellants’ counsel, in which the court was expressing dismay because Appellants were testifying that they believed the disclosures had not been improper (which arguably bore on their “good faith, but erroneous, interpretation” of
And yet they would get on the witness stand and testify that they believe that they can release this information this very day.
Is that because they disagree with [the court‘s 1986] ruling or because you [Appellants’ counsel] told them that my ruling isn‘t right?
You see, if they had read these opinions, any person with any common sense would not get on the witness stand and say, in the face of the Judge who just told them, there is something wrong with your thinking here; and they get up there and they say, well, you know, I could still do this.
I [as the court] have already ruled as a matter of law they cannot. I [as the court] did that in 1986. I [as the court] did it again in 1991.
If they have not read these opinions, then they should, because there is no basis in common sense, not in law or fact, but no basis in common sense for anybody to get on the witness stand and tell a person to their face, who has the job and responsibility of determining what the rule of law is and how to interpret it: Judge, you did it, but piss on you. I have a different opinion.
(Emphasis added.) In another ruling, the court stated: “It seems to me the problem is one of disingenuousness on the part of witnesses getting up here and saying they don‘t know anything. They‘re lying through their teeth. That‘s all that means.”
Yet another example of this tension, evidencing a “high degree of antagonism“, see Liteky, 510 U.S. at 553, 114 S. Ct at 1157, and the appearance of a lack of impartiality, that we must remove through reassignment, is reflected in a dispute between the court and Appellants’ counsel over the definition of hearsay, during which the court stated: “Oh, excuse the hell out of me. That is what I learned in law school....” And, at the conclusion of the trial, after the verdict was rendered and the jury released, the court stated to counsel:
Let me just make a couple of observations before you leave this afternoon. I have been concerned, as far as the lawyers are concerned, about the conduct of the lawyers in this case. I am also concerned about how we spend our money in this United States of America; and I say that because I don‘t know how in the world you can present a defense, [Appellants’ counsel], by having people say, first of all, they didn‘t do it, then say, I did what I did in good faith, and then say, but I would do it again.
There is no good faith defense to anything of this sort as a matter of law when those kind of options are put to the jury because the answers are internally in conflict with each other.
And now we all know why those folk [sic] are hanging out in Minnesota, because some of us are so arrogant, in the work we do for the people of the United States, that
there are other people who are waiting for the next revolution.
And they are going to bring it about if you and I and others like us don‘t do something now to stop this kind of insanity. This is insane. And the tax payers should not be paying 10–$15 million out because it doesn‘t cost you anything to come down here to try this case.
It is a sad day for the government and for the United States of America.
Good Luck.
The final, and perhaps most illustrative, instances of the appearance of partiality are found in the district court‘s post-trial opinion, referenced earlier. One example suffices. A factual background section entitled “PUBLICIZING THE ‘TROPHY‘” had an explanatory footnote:
In the opening statement, the United States Attorney from the Department of Justice described the Johnson case as a “trophy case.” Apparently, the IRS takes special pride in publicizing prosecuting a person who hold[s] an executive position in a large corporation.
But, the “opening statement” comment attributed to Appellants’ counsel was made instead by Johnson‘s:
I was, frankly, stunned by something I heard yesterday said [during voir dire] by the United States Attorney sent all the way down from Washington, D.C.[,] to defend the IRS agents. He stood before you and he told you what, essentially, their position was. He said, you know, the IRS can choose to prosecute a lot of people, but we engage in selective prosecution. If we can find somebody with a big name, somebody who is an executive in an important company, that‘s who we love to prosecute, because they are a trophy.
Even though it was only $3500, Johnny Johnson got selected because Johnny Johnson was a trophy. Do you remember him telling you that? Now, he didn‘t use all the words I have used, but that‘s what he said.
And they want a trophy because they want publicity, and he told you that; and then he said that we particularly love to get this publicity around April the 15th when people have to file their taxes. Remember those words? His words not mine.
The press release that was issued by the IRS concerning Johnny Johnson was issued on April the 13th, April the 13th. You will get to see the press release with your own eyes, and you will get to see the date.
(Emphasis added.)
What Appellants’ counsel had actually said during voir dire was quite different:
Now, despite the great size of the Internal Revenue Service and what we constantly hear of as the resources of the United States, the Criminal Investigation Division can only investigate and prosecute a small percentage of the cases that come to their attention, so that within the Internal Revenue Service there is a very involved procedure whereby men and women known as revenue agents make referrals from the examination division to the criminal division.
Most of those cases never are taken to a criminal prosecution because along the way the people in the Criminal Investigation Division decide its doesn‘t have prosecution merit, there isn‘t enough money involved, or the person is too old to serve a jail term; and then it has to go through the Department of Justice, because the Internal Revenue Service cannot prosecute a case itself.
Once it goes to the Internal Revenue Service—the Department of Justice, the Department of Justice makes a further cut in those cases and kicks a whole bunch out, so that by the end of the year, of all the thousands and thousands of matters that comes to the attention of the Criminal Investigation Division of the Internal Revenue Service, only a very small number, just over a thousand for this entire country, are prosecuted.
Now, having those limited resources, partly because that‘s all they can get, and partly because we don‘t want to turn this nation into a police state, one of the ways that the Internal Revenue Service had determined to best enforce the laws is a make sure that when someone is prosecut-
ed and punished for a federal tax crime, in this case a felony, that everybody knows about it, and so they have a public affairs office, and the public affairs office makes press releases, and the press releases are intended to tell the people of the United States two things:
No. 1, pay your taxes and be fair with your government, and be fair with your fellow taxpayers, because if you don‘t, we have this elite group of highly skilled agents out there who are going to catch you and they are going to prosecute you.
And No. 2, the message to the vast majority of honest, hard-working tax-paying American citizens is this: We are making sure that other people are like you. We are making sure ... everyone out there is toeing the line like you and paying your taxes and being fair with Uncle Sam and your neighbor; and so, they write press releases, and they send them out to radio station and to newspapers, and they especially do that in the period right before tax day, April 15th of each year.
Now, the Internal Revenue Service has a problem. The local television news likes to do exciting things. They like sound bites. They like to look at things with agents breaking into houses and pulling out drugs and saving children from wells and so on and so on. The fact that somebody has attempted to evade their federal income taxes does not get their attention; and therefore these press releases have to be made and sent to these organizations, and a lot of times they don‘t publish them, but that‘s what they‘re doing.
Now, there is a difference, of course, between street crime that goes on television every night and what we euphemistically call “white collar crime,” which is what tax evasion is.
Is there anybody here who believes that it is unfair to make a press release about somebody who has evaded or attempted to evade their federal incomes taxes?
(No response)
[Appellants’ counsel] Is there anybody who thinks that it should be excused because somebody is high up in the executive suite and they commit a felony, that the public should not know about them; that all the public should know about is the people who are out there dealing drugs or robbing banks; that somehow that is different; that somebody who is high up in an executive suite is entitled to have all of these things squashed quietly, late in the afternoon, far away, using an incorrect address, and in an attempt to use a different name so that nobody can tell that it was really him who was prosecuted.
Anybody believes that? Anybody thinks that would be fair?
This “trophy” saga is a vivid illustration of why this case must be reassigned (and, as discussed supra, bears on why it must be retried).
We know that the district judge agrees that an appearance of partiality or bias must be remedied. And, it goes without saying that this reassignment is most extraordinary and ordered most reluctantly. That notwithstanding, our duty is clear.8
It is past time for this opinion to end. It is far past time for this case to end; indeed, to be put to rest. It has been pending for almost 15 years. We are confident that through insightful case management and procedures, such as a comprehensive pretrial order and in limine and other rulings which otherwise narrow the issues, limiting instructions, and carefully drawn jury instructions, this case can be tried in a manner that is fair to both sides and will result in a correct judgment.
The judgment of the district court is VACATED and this matter is REMANDED for further proceedings consistent with this opinion. On remand, both
VACATED and REMANDED; INSTRUCTIONS ISSUED.
Notes
But an officer on duty knows no one. To be partial is to dishonor both himself and the object of his ill-advised favor. What will be thought of him who winks at and overlooks offenses in one, which he causes to be punished in another; and contrast him with the soldier who does his duty faithfully, notwithstanding that it occasionally wars with his private conduct and feelings. The conduct of one will be emulated and venerated; the other, detested as a satire upon soldiership and honor.General Douglas MacArthur, one of West Point‘s, as well as this Nation‘s, greatest sons, proclaimed, and at the same time cautioned: “There is no substitute for victory“. The same is true of judicial impartiality. Some things never change; nor should they. Again, we know the district judge is of this view.