United States of America and Richard Daguanno, Special Agent, Internal Revenue Service v. Michigan Bell Telephone Company

415 F.2d 1284

6th Cir.

1969

Check Treatment

UNITED STATES of America and Richard Daguanno, Special Agent, Internal Revenue Service, Petitioners-Appellants, v. MICHIGAN BELL TELEPHONE COMPANY, Respondent-Appellee.

No. 19073.

United States Court of Appeals Sixth Circuit.

Sept. 11, 1969.

of other Congressional legislation, such as the Federal Trade Commission Act. (Footnote omitted.)

87 F.Supp. at 222.

Further support for the view that the Act does not embrace misrepresentations about a competitor‘s product but only false or deceitful representations which the manufacturer or merchant makes about his own goods or services is contained in

L‘Aiglon Apparel v. Lana Lobell, Inc., 214 F.2d 649 (3d Cir. 1954), and .

For the foregoing reason, the district court erred in holding that Bernard established a cause of action under the Lanham Act. Additionally, it should be noted that there was no evidence that plaintiff lost any specific sales by reason of the publication and dissemination of the comparison sheet or that its loss of business was attributable to the defendant‘s conduct.

III. The Claim under Section 2 of the Sherman Act

The district court concluded that the defendant violated Section 2 of the Sherman Act, 15 U.S.C. § 2, in that it had attempted to monopolize sales in “similar products” manufactured by the plaintiff and the defendant, and that the defendant had “attempted to accomplish a temporary monopoly” over such sales.

Section 2 of the Sherman Act proscribes an attempt “to monopolize any part of the trade or commerce among the several States.” Judge Learned Hand succinctly stated the elements of a Section 2 violation: “In order to fall within § 2, the monopolist must have both the power to monopolize, and the intent to monopolize.”

United States v. Aluminum Co. of America, 148 F.2d 416 (2d Cir. 1945). There is no evidence whatever to indicate that the defendant‘s conduct in publishing the comparison sheet manifested an intent to monopolize. Absent also is any evidentiary basis for holding that the defendant possessed the power to monopolize. Moreover, there is no proof of what constituted the relevant market. Without such a determination, the question of a monopoly or an attempt to accomplish such a goal could in no manner be meaningfully answered. A definition of the relevant market is an essential element of a violation under Section 2 of the Sherman Act. .

The judgment of the district court is reversed.

John P. Burke, Atty., Dept. of Justice, Washington, D. C., for appellants; Mitchell Rogovin, Asst. Atty. Gen., Lee A. Jackson, Joseph M. Howard, Attys., Dept. of Justice, Washington, D. C., on brief; Robert J. Grace, U. S. Atty., Detroit, Mich., of counsel.

Alan R. Waterstone, Detroit, Mich., for appellee.

Before PHILLIPS and CELEBREZZE, Circuit Judges, and McALLISTER, Senior Circuit Judge.

PHILLIPS, Circuit Judge.

The United States and Special Agent Richard Daguanno appeal from the District Court‘s denial of enforcement of an Internal Revenue summons issued under authority of 26 U.S.C. § 7602. Jurisdiction in the District Court was based on 26 U.S.C. § 7604(a). The District Court denied enforcement on the ground that the summons overstepped the power given to the Commissioner of Internal Revenue.

The sole question before this Court is whether the summons was valid under 26 U.S.C. § 7602. We hold that it was.

The case was tried on stipulated facts. The District Court held that the summons “was not issued for the purpose of determining the tax liability alone, but was primarily intended as a criminal investigative tool.” The parties had stipulated that Daguanno was a Special Agent assigned to investigate the tax liability of a named taxpayer for the years 1961 through 1966 and that it was necessary to his investigation to examine the telephone company toll records showing long distance calls to and from the taxpayer‘s telephone. The toll records were records which the company maintains in the ordinary course of its business. Daguanno had the authority to issue summonses under 26 U.S.C. § 7602 and purported to issue the summons to the telephone company under that authority. The final stipulation was:

“6. That the Michigan Bell Telephone Company refused to appear and produce the required records and has continued to refuse to produce the required records for the sole and only reason that the United States of America and Special Agent Richard Daguanno have declined to assure Michigan Bell Telephone Company that the records demanded are unconnected with any criminal investigation.”

Clearly the telephone company has standing in this proceeding to challenge the lawfulness of the summons.

Reisman v. Caplin, 375 U.S. 440, 445, 84 S.Ct. 508, 11 L.Ed.2d 459. However, it bears noting in this case that officers of the government are presumed to act lawfully. . When a citizen is called upon through the medium of an Internal Revenue summons to provide information from his records, the citizen has a right to assume that the officer is acting properly and within his lawful authority. See .

The Government may use a § 7602 summons properly when its investigation may have both civil tax liability and criminal ramifications.

DiPiazza v. United States, 415 F.2d 99 (No. 18,593, 6 Cir. 1969); ; see ; . Even assuming that the District Court was correct in its determination that the summons in this case was principally to investigate for criminal liability, the summons was proper since the Court did not exclude the possibility that the summons also was to determine civil tax liability. . The Section 7602 summons is inquisitorial. ; see .

The Commissioner of Internal Revenue is entitled to enforcement of his summons when he shows:

“[T]hat the investigation will be conducted pursuant to a legitimate purpose, that the inquiry may be relevant to the purpose, that the information sought is not already within the Commissioner‘s possession, and that the administrative steps required by the Code have been followed * * *”
United States v. Powell, 379 U.S. 48, 57-58, 85 S.Ct. 248, 255.

However, the summons will not be enforced where to do so would abuse the process of the court.

“Such an abuse would take place if the summons had been issued for an improper purpose, such as to harass the taxpayer or to put pressure on him to settle a collateral dispute, or for any other purpose reflecting on the good faith of the particular investigation. The burden of showing an abuse of the court‘s process is on the taxpayer, and it is not met by a mere showing, as was made in this case, that the statute of limitations for ordinary deficiencies has run or that the records in question have already been once examined.”
Id. at 58, 85 S.Ct. at 255.

We hold that an abuse is not shown by the fact that the government refuses to give up its right to use lawfully acquired evidence in aid of a possible future criminal prosecution.

Because of our disposition of this case we need not deal with the District Court‘s factual conclusion that the investigation was primarily for criminal information. We observe, however, that we find no evidence to support this conclusion. The government‘s refusal to give the assurance demanded by the telephone company will not support the inference of an intent to use the evidence exclusively for purposes of criminal prosecution. The records of both incoming and outgoing calls may be relevant to the question of tax liability.

This Court held in

DiPiazza v. United States, 415 F.2d 99 (No. 18,593, 6 Cir. 1969), that the summons under 26 U.S.C. § 7602 is “other lawful authority” within the meaning of 47 U.S.C. § 605 and that the submission of toll records by the telephone company in response to such a summons does not violate § 605. That case was decided under § 605 as it stood prior to amendment by Title III, § 803, of the Omnibus Crime Control and Safe Streets Act of 1968, P.L. 90-351, which was enacted before the decision of the District Court in the present case. Because the District Court decided this case on the basis of its conclusion that the summons authority itself was abused, it did not reach the issue of whether under the amended § 605 the summons authorized by 26 U.S.C. § 7602 is “other lawful authority.” Since the telephone company elected not to file a brief before this Court, we have neither the benefit of a District Court decision nor of adversary briefing on this issue. In view of its importance we decline to pass on this issue as a basis for possible affirmance of the District Court decision under these circumstances.

The decision of the District Court is vacated and the case is remanded for determination of the question of the effect of the amendment of § 605 and for further proceedings consistent with this opinion.

CELEBREZZE, Circuit Judge (concurring).

I concur for the reason that the District Judge did not find that the sole purpose of Agent Daguanno‘s investigation was to gather evidence for a criminal prosecution. The parties stipulated that agent Daguanno was assigned to investigate one Montgomery‘s income tax liability for the years 1961 through 1966. During the course of his investigation he attempted to summon records of Montgomery‘s long distance telephone calls. Thus, aside from, but not inconsistent with, the District Court‘s finding that agent Daguanno‘s investigation was “primarily” criminal in scope, the record reveals that his investigation was also conducted for a civil purpose, namely, to determine Montgomery‘s liability for federal income taxes for the abovementioned years.

It is well settled that the § 7602 summons may be used where the I.R.S. investigation has civil as well as criminal objectives.

United States v. DeGrosa, 405 F.2d 926 (3rd Cir. 1969); ; see . The United States Supreme Court has held, however, that this summons may not be used where the sole purpose of the I.R.S. investigation is to gather evidence for use in a criminal prosecution, ; see . In my opinion this was the purpose of the investigation conducted in ¹. As I said in my dissenting opinion therein, the record did not disclose that the I.R.S. was conducting an investigation into the Appellants’ civil tax liability. The record in this case, however, does disclose such a purpose. For this reason, the summons against Appellee would have been properly enforceable as “other lawful authority” under § 605 as it stood prior to its amendment by Congress in 1968.

I express no opinion at this time as to the effect of the recent congressional amendments on § 605, preferring to wait until that question is properly before us.

Notes

Decided by this Court today.