*1 Son, Inc., S. C. Johnson &
(5th 1977); Cir. Edwards v. Kaiser Alumi Sales, Inc.,
num & Chem. 515 F.2d 1975). (5th Kephart
1200 n. 8 also Cir. See Technology,
v. Institute Gas 581 F.2d 1978); Bonham v. Industries, Inc.,
Dresser
(3rd Cir.),
(1978). Templeton slept
district court dismissed his suit for comply 180-day
failure to with the notice
provision 626(d)(1). of 29 U.S.C. Our dis §
position of this issue obviates need to whether, Templeton’s
decide action was
properly dismissed for his failure to file his
notice of intent to sue Secretary with the days prior
Labor at filing least 60 suit.
AFFIRMED. America,
UNITED STATES of
Plaintiff-Appellee,
Dorothy GARBER, R.
Defendant-Appellant.
No. 78-5024. Appeals, States Court of
Fifth Circuit.
Nov.
Ross, Justice, Div., Attys., Dept, of Tax D.C., Washington, plaintiff-appellee. for BROWN, Judge, and Chief COLE Before GOLDBERG, AINSWORTH, MAN, GOD- CLARK, RONEY, GEE, BOLD, CHARLES RUBIN, HILL, FAY, TJOFLAT, VANCE KRAVITCH, Judges.* and Circuit CLARK, Judge: Circuit CHARLES was Dorothy Clark Garber indicted knowingly willfully attempting and liability her income tax evade a portion 1970, 1971, by filing for the years and a false income tax return on and fraudulent behalf and husband. A of herself her charges found her innocent of the for 1970 under 26 and 1971 but convicted her U.S. misstating her knowingly C.A. 7201 for § income her 1972 return. She was imprisonment 18 months sentenced to —all suspended— days but 60 of which was months, placed probation for 21 $5,000 fined civil tax exclusive of liabil ity. taxability of received legal question. by presents unique a Garber deprived Because trial errors which de the element of fendant of her defense on willfulness, the conviction. we reverse 1960’s after Some time in the late child, Dorothy birth of third Garber was her a told her blood contained rare anti- body production useful blood Reagents, group typing serum. Dade Inc. (Dade Reagents), diag- manufacturer reagents nostic used in clinical laboratories banks, discovery had and blood made enter and in induced her to into a plasma. blood contract for the sale of her Forman, Fla., Hollywood, Law- Samuel S. plasmapheresis, By technique pint called Metsch, Miami, Stanley Beiley, rence R. A. arm, of whole was from her blood extracted (co-counsel), defendant-appellant. Fla. plasma centrifugally separated, and the Atty., body. Marsha Lyons, L. Asst. U. S. Mi- red to her cells were returned ami, Fla., Brookhart, process repeated. E. The two Charles Daniel F. then bleeds Jr., Garza, * Judges Johnson, of or in this The case Frank M. Hender decision case. was taken son, Anderson, Politz, Hatchett, Reavley, Ran under submission en banc on June the court dall, Tate, Sam D. Johnson and Thomas A. Clark, participate did not in the consideration produced divorced), per from since week pint pints one two declared $200 blood, total of from income, took a one and a the taxes All paid due. half to two and a half hours. from Biomedical and payments, other both Associated, paid directly been had
Plasmapheresis preceded often No income taxes were check. whereby stimulation of the donor the titre *3 companies; or she antibody concentration of desired in withheld received no artifically the blood increased injec- an forms, no taxes on paid W-2 and tion of incompatible type. blood Both did, however, file a received. Biomedical plasmapheresis stimulation and are accom- Return with the Form 1099 Information panied by pain discomfort and carry and portion of Garber’s IRS which showed hepatitis risks of and blood clotting. subject withholding. Gar- donor fees not
In exchange plasma, copy Garber’s blood of each provided for ber was Reagents agreed pay Dade her for each plainly only for information states that dependent sliding bleed on a scale on the and is not to be attached income tax strength plasma titre or of obtained. return. had never before received In- She Reagents Dade then marketed the sub- and, Returns, she formation while was re- stance production group for the of blood ceiving both checks from Biomedical and typing serum. Associated, only provided Biomedical this Because blood is so rare —she is information.
one of three only persons two or known in prosecution felony
the world In this for the antibody ap- with this —she proached by other laboratories govern which lured willful evasion of income taxes the away her Reagents by from Dade offering proving every ment had the burden ele an increasingly price plas- attractive for her ment beyond of the crime a reasonable 1970, 1971, By ma. and the three States, doubt. Holland United v. U.S. years indictment, covered in the she was (1954); L.Ed. 150 Unit receiving substantial sums of money in ex- (7th ed States England, v. F.2d 425 Cir. change for her For plasma.1 two of those 1965). proof of a required This tax defi years selling she was her blood sepa- under ciency, an act constituting affirmative eva rate Biologicals, contract to Associated Inc. due, sion attempted of the tax evasion (Associated) Industries, and to Biomedical v. willfulness. United Sansone (Biomedical), Inc. both receiving in cases in L.Ed.2d 882 exchange money dependent a sum of on the (1965); Callahan, United 588 F.2d States antibody strength of in each unit sold. (5th 1979); Cir. States v. Buck addition, In Biomedical weekly offered a ley, 1978). The ele $200, salary of provided a leased automo- lacking ment we find here was willfulness. bile, $25,000 and in 1972 added a bonus. In trial, presence At jury, outside the year last sold plasma Garber her government exclusively, proffered producing Biomedical the covet- Bierman, ed body Jacquin professor fluid as as six times often a month. law and practicing City of New attorney involved, For years all three Biomedical York, opinion that who stated his Garber had treated regular weekly pay- $200 bodily had made her available functions or subject ments as a salary withholding products for a consideration which consti- provided taxes and Garber with a yearly tuted His gross taxable income. conclusion W-2 noting form taxes withheld. Ev- 61(a) based on section the Internal ery year, Garber attached those W-2 forms (which (Code) gross to her Revenue Code which defines income tax return was filed jointly with whom her husband she has income as $80,200 allegedly $87,200 brought 1970, $71,400
1. Sale of her her represented derived, policy ceeds the insurance income whatever source all from to) including (but the follow- which the not limited loss capital conversion of the ing items: Nall men- injured taxpayer had suffered. services,
(1) finding settlements Compensation opinions includ- tioned similar commissions, ing fees, similar not taxable in- personal injury received for items; was amended Eventually come. the Code covering provision specific
to include a inju- consequences compensation dealings in (3) Gains derived Nevertheless, ries or Nall ex- sickness.2 property; plained, theory reappeared in situa- has admitting 61(a). 26 U.S.C.A. While § something exchange involving tions kind, case is first of its Bierman personal susceptible so value opined exchanges were con- if the transactions— to measurement. these product, sidered the of a there would sale *4 in as settlements divorce ac- property such original cost for be no tax basis or the of damage tions or awards alienation sold, price sales product and the entire of affection or for defamation character— subject to tax gain would constitute under equal to the the value received deemed 61(a)(3). Alternatively, he section con- resulting categorizing given, gain. the in no taxable sidered transactions the value service, of in case he part rendition a which was plasma, blood a compared Nall opinion price the the entire sales of that value, and body which no one can concluded similarly fully would be taxable under sec- that it must be worth its market value. too 61(a)(1). tion exchange He that therefore reasoned gain.
The court proffered produces defense to the the no Nall, testimony of Daniel a Certified Public testimony The district court heard the agent, Accountant and former revenue who to ei- experts these but refused admit two money concluded that received Gar- which to opinion ther in the went evidence not ber was within the definition of jury question it considered because 61(a) income in that she section had taxability to be of law for the court one participated therefore in tax-free ex- However, jury and not the to decide. changes. reasoning patterned He his on government to intro- permit court did early resting Doyle case law on v. Mitchell testimony by an Revenue duce Internal Ser- Brothers, expert agent qualified vice as an who (1918), L.Ed. held that funds accounting This field of and taxation. capital obtained the conversion of assets opinion that agent his additional offered only which represented the actual value reported but not in taxable income was due of such not income. assets was taxable Ac- years question. in His Nall, cording Attorney to General in a objection that it was received over defense opinion considered the human body a the compensa- based on his conclusion that capital kind of Following asset. the reason- tion and taxable. received income ing Doyle, opinion in held examination, During the witness con- proceeds of cross policy an accident insurance pro- money were not subject because ceded that the received Code, resulting payments from the settlement § Section 104 of the 26 U.S.C.A. CIR, expressly prosecution now excludes from taxable income of a tort claim. Knuckles v. CIR, proceeds 1965); (10th certain insurance Cir. Starrels v. F.2d 610 CIR, 1962); Agar Cir. F.2d 574 (2) any damages the amount of received 1961). only (2d evidence (whether by agreement) suit or on account of possibly support a the record which could sickness; personal injuries or payments were in claim that to Garber 104(a)(2). 26 U.S.C.A. § liability tort were medical re- settlement of a alternatively argued The defendant has liability signed. express forms We lease of she payments here fall within this opinion no on the ultimate merits this con- exclusion from taxable income. Section 104(a)(2) consistently only applied tention. has been giving body a up relating one’s is a factual evidence to Garber’s actual unique and undecided in tax law. intent.3 agreed He also received as a evidence, all the the court hearing After capital product subject return moneys of law ruled as matter Yet, tax. he based his calculations on his plasma, blood Garber received for her blood donations personal service or a whether considered personal were here taxable services. His product, subject to in- were income federal was, turn, solely view based on a Reve- ruling come taxation. Consistent Ruling nue which declared donations of jury the funds Gar- was instructed that purposes whole blood to be a service for determining deductibility charita- ber of her blood received from sale ble contribution. The court sustained ob- plasma were taxable income. The court jections to relevancy further inquiry good extensively also instructed the regarding plas- the nature or value of blood faith and willfulness but refused the in- ma. requested structions defense to ef- argued defense to the court that the misunderstanding as defend- fect that a expert testimony of Daniel Nall should be liability ant’s for the tax is a valid defense presented govern- to the to rebut evasion, charge saying: of income tax ment’s agent, IRS show that again over I have said and over [to doubt existed as to whether a tax was due jury] willfully, that she must act know- incapable of being computed, because was willfully, ingly and in an effort to evade *5 vagueness and to demonstrate the return, by filing and defeat a tax a false preclude which would a willful intent tells it all as far as I am con- and recognized to violate it. The court cerned. This business about doubt and theory judi- Nall’s could be relevant to its I things all these debatable have listened cial resolution of the conflict. It ruled days, to for and I’m around here several however that since had Nall never discussed going charge jury way, not to so the defendant, his of the law with the as to confuse them. I think that would no relevancy had to fact the issue of Gar- do good, more harm than and I think it ber’s intent. The never heard the tes- did, however, timony. It hear considerable be would error. prove
3. To that Garber had to been actu- defense offered affirmative The evidence to ally liability, government aware of her willfully tax show that Garber did not misstate her employee offered prepared from of Dade An income. all accountant had three Reagents, joint contradicted supplied defendant’s own returns Mr. from information statements, early dealings Garber, indicted, that in Garber’s with consult- who not without company only not Furthermore, had she ing been advised of with undis- defendant. it was payments the taxable element of her but puted payments that all to were defendant company opened savings had also a by check, payable her, account in deposited made and regularly deposited portion her name and a Payments in her bank account. were never earnings allegedly purposes. her for income tax cash; duplicative made there was no book- agent investigated The IRS who first the Gar- keeping dealings or other clandestine financial that, bers took stand and testified in his attempt earnings. indicative of an to secrete initial interview both Mr. and Mrs. Garber years Her returns for the disclosed concerning return, joint their 1971 defendant addition, Biomedical as a source of income. In any having denied received income other than produced copy a Garber of her 1969 return tax reported per salary $200 week from she which declared no taxable income but However, Biomedical. that same afternoon fol- my “I have W-2 as noted no forms income was lowing interview, called the up entirely donating plasma made blood agent, explained that she and her husband were from various blood banks.” The defendant divorced, arranged about to be and a second thought, speak- after herself testified that she plasma interview in which she discussed her donors, ing with that because she other blood donations and disclosed all monies received. selling body part re- a of her agent coopera- admitted that Garber was ceived was not taxable. husband; produc- tive the absence of her she including ed all relevant records the 1099 forms received from Biomedical. costing the and portrait by canvas artist’s combined effect of hold that the We rulings excluding any original cost No evidence evidentiary paints. trial court’s expert testimony and proffered case unusual natu- of Garber’s defendant’s exists charge prejudicially de- requested jury its body ral fluid. theory a valid
prived the defendant of
a
such
situation it
well be
In
yet
has
No court
determined
her defense.
equal
be deemed
to the
its value should
by a donor of
payments
whether
received
willing
price
buyer
pay willing
a
a
are
as
components
or blood
taxable
blood
contends,
If,
open
on the
market.
seller
See
government
income.
Davis,
plasmapheresis
to the
States v.
370 U.S.
subjecting herself
service,
(1962);
Ranch,
her
L
process
performed
has
Bar
Inc. v.
Garber
L.Ed.2d
taxable under sec-
compensation
(5th
1970);
would be
Cir.
Ray
Phinney,
sufficient. Holland v. United
348
had no
as to what the law re-
121,
127,
(1954);
quired.
75
L.Ed. 50
U.S.
S.Ct.
99
Murdock,
389,
290
United States v.
54
U.S.
(emphasis added).
99
CIR,
parties
414
law. The
this
gate
presented
willful intent.4 Kahr
case
1969);
taxa-
(2d
divergent opinions
621
United States v. Daw
to the ultimate
Cir.
as
1968);
bility by
legitimate
son,
(2d
analogy
194
de
to two
theories
400 F.2d
Cir.
cert.
in tax law. The
court
nied,
632,
trial
should not
393
89
21
U.S.
S.Ct.
L.Ed.2d
fact,
powerful impact
withheld this
States,
(1969);
Nordstrom
v. United
willfulness,
issue
on the
from
Garber’s
(8th
1966),
F.2d 734
Cir.
States,
jury.
Morissette v. United
U.S.
17 L.Ed.2d
(1952);
U.S.
S.Ct.
AINSWORTH, with whom Judge, Circuit GODBOLD, liability. quarter B. RU- and ALVIN her income tax One TJOFLAT BIN, dissenting: Judges, join, money paid deposited for the bleeds was Circuit by savings account in Dade into Gar- opinion is This dissent to appellant from Dade to ber’s name. Checks issues principal two made on the basis of taxes,” bore the notation “less accrual The trial in district court. involved in the is, placed savings the amount first of these follows. Appellant pay did not those account. ruling, a 1) in judge Did the trial err taxes, funds, accrued for Govern- derived that the income matter of ment, personal for her but withdrew them was taxable? by defendant Garber Later, employed use. while another the facts is majority’s statement of company, appellant weekly received a sala- re- additional fairly complete, but a brief ry which was declared her as income. light in of the taken view of the evidence Appellant performed no services for the Plasma- is warranted. jury’s guilty verdict plasma company beyond that as a donor. appellant in which process pheresis, testified in her own de- Defendant Garber donor, involved as a blood Garber that she did not think the funds fense were permanent in but does not result painful by giving they taxable since were obtained body regenerates the re- injury, since the However, up something body. from her Further, plasma. undisputed it is moved appellant by any official of the was not told appellant large received amounts of Internal Revenue Service that funds plasma during for her the taxable taxable, were not nor did she seek IRS years in and that she did not re- Moreover, regard. appellant advice port these amounts as income. The record sought any professional never advice from a continuing a escalation in demonstrates taxability on the lawyer or an accountant by appellant amount for her received the income.1 bleed, Originally paid per ap- bleeds. $200 $1,600 per figure pellant increased not resolve majority opinion does weekly plus fringe benefits and bleed issue whether defendant Garber’s income salary of $200. seemingly taxable but as blood donor was regard. a clear decision in this It is avoids her intent bearing The evidence true that considerable doubt cast In her first evade taxes is substantial. If, Inc., opinion on the of the income. engagement Reagents, ap- with Dade however, view that majority’s it is the real pellant by company was advised officials on taxable, the income was not it seems the consequences receipts. the tax of her advice, say so and dismiss the indict- savings accordance with that should However, in appellant’s account was established name ment. the conviction is reversed panel opinion: pay money we As said in the account to the Govern- gradually variety ment but withdrew it for a Potts, Joseph superin- N. a former Dade personal Appellant uses. at trial testified tendent, that, appellant testified at trial when any- telling her that she did not recall Potts thing Dade, began selling plasma first wanted her taxability blood he and, although she remem- about taxes concerning informed account, savings bered she stated that payments made to her. A was for she did not that the account recall dealing pre- memorandum with taxation was taxes or that marked Garber, the statements were pared for and Potts discussed the “less accrual for taxes.” She also testified matter with her in his office. At Dade’s year that she filed a return for the 1969 tax opened suggestion savings account was W-2 on which she had written: “I have no deposit in which Dade was to Garber’s name a entirely my up income was made forms as portion payments there to her so donating blood from various pay funds available to income tax- would be employee An of the IRS Dis- deposits blood banks.” es. Dade made in this account from however, Office, earnings later testified trict Director’s 1967 to 1969 and the statements accompanying IRS had no record of a return for that the the checks issued to Garber having during period been filed. the notation “less bore not, however, at 845-46. accrual for taxes.” She did *10 102 retrial, taxpayers complete
and the case remanded for
a
a con-
dominion.”
Co.,
thereby
348
impliedly
clusion which
decides that Commissioner v. Glenshaw Glass
473,
426, 431,
477,
Code, Congress
use
intended “to
the full
transparent
crystal,
A word is not a
taxing
measure of
power.”
Helvering
unchanged;
v.
it
the skin
Clifford,
331, 334,
554, 556,
309
living thought
may vary
U.S.
60
greatly
(1940);
L.Ed. 788
according
Blassie
color and
the cir-
v. Commission-
content
er, Cir., 1968,
cumstances and
time in which
Accordingly,
628.
“Congress applied
used.
no limitations as to the
source of
receipts,
taxable
nor
Supreme
restrictive
Court
.
[T]he
labels as to their
expressed]
nature
...
.
at-
.
.
the flexible
[has
all gains except
specifically
those
titude that
the term “income” is to be
exempt-
meaning.
Kowalski,
given
ed.”
broad
Commissioner v.
434 U.S.
77, 82, 83,
315, 319,
98 S.Ct.
mine if
receipts
certain
constitute income is
principle governing
meaning
whether there exist “undeniable accessions
as used in
61 is thus well
income
section
wealth,
realized,
clearly
and over which
established.
61(a)
pertinent
(1) Compensation
services,
part,
including
§
reads:
U.S.C.
items;
fees, commissions, and similar
Except
provided in
as otherwise
this subti-
business;
(2) Gross income derived from
tle, gross
means all
income from
income
(3)
proper-
dealings
Gains derived
derived,
including (but
whatever
source
ty:
to)
following
limited
items:
provide ample support
accordingly
The above cases
lant’s economic benefit and
con-
*11
upholding Judge
for
Fulton’s decision that
provi-
under
stituted taxable
income
appellant’s receipt money
payment
in
sions of section 61.
plasma
her
income under sec-
taxable
majority suggests
The
that considerable
addressing
precise
tion 61. While not
consequences
the tax
doubt exists about
here,
presented
they
fact situation
establish
money
the income because the
could be
working
a
definition of income that
is both
having
considered as
been received in re-
Nevertheless,
comprehensive
and broad.
“[Bjlood
product.
turn for the sale of a
majority
reasoning
concludes that
plasma,
eggs,
sheep’s
like a chicken’s
supports
which
of the income
wool,
any
or like
of the human
salable
precedential
support
is “without clear
body,
tangible
is a
which in
property
law.” The definition of taxable income is
established,
selling price
well
dependent
and the income in this case
case commanded a
falls within the confines of the income defi-
on its
her
value.”
The majority suggests
appellant
This case contains none of the character-
equal
had a basis
re
cases cited
istics
Davis or the other
ceived for
plasma.
But
none
majority.5
only explanation
proposition
cases
point.
cited for this
are
majority’s allegiance
them is a misunder-
Davis,
For example, in United States v.
concepts
standing
of value and
between the
(1962),
ping
Commissioner, Cir.,
Co. v.
2
371 F.2d
government
prove
burden
defendant’s
528,
denied,
943,
2076,
cert.
387 U.S.
denied,
goods sold),
cost
in the
18
basis
cert.
(1967). However,
L.Ed.2d 1330
the value
911,
289,
of
equal
here is
348
75
99
to the
S.Ct.
L.Ed. 714
paid for it
appellant.
(1955);
Hornstein, Cir.,
v.
States
7
Yet, appellant
living
inability
ess.
taxpayer
chose to earn
to ascertain whatever
process,
this
fashion
goodwill
and consented to the
thus
basis
in the
existed
lost.
restricting
application
generally
Cir.,
104.
Commissioner,
section
Cf.
See
Messer v.
3
Commissioner,
supra,
1971,
Starrels v.
F.2d
304
at
quoted
438 F.2d
780. The dicta
Thus,
576.
the funds were not excludable un-
majority, given
holding
the funds
Judge
der section 104.
taxable,
Clark conceded as
totally
were
thus occurred in a
dissimi-
original panel
much in his dissent
to the
deci-
pattern involving
dynamics
factual
lar
sion. See 589
at 849.
F.2d
Here,
process.
the settlement
there is no doubt
concerning the source
funds or the rea-
majority’s
Raytheon
The
reliance on
Produc
why appellant
sons
received them. On the
Corp.
Commissioner,
Cir.,
tion
v.
1
144 F.2d
hand, Raytheon
other
involved a situation
323 U.S.
S.Ct.
origin
receipts
pri-
where
was the
(1944),
especially misplaced.
L.Ed. 622
At
Thus,
mary
in the case.
the situations
Raytheon
money paid
issue in
was whether the
similar,
majority’s
at
are not
all
and the
use
represented
for settlement of an antitrust
suit
fathom,
Raytheon
except
is difficult
compensation
profits
capital,
lost
or for lost
dicta,
loosely
language,
contains
albeit
e., Raytheon’s goodwill
injured
i.
busi
speaks
question presented
to the
here in a most
ness. The First Circuit held
entire
imprecise
indirect and
manner.
recovery
despite
in the case was taxable
(same).
lessly
preeminent
Burnet
divert the jury
See
from their
Houston,
223, 227-28,
v.
guilt.
duty
assessing appellant’s
413, 415,
Indeed,
107
argue
on the
was
good
involved a
of law
unable to
that he had a
judge.
reserved for the
casings
faith belief that
were aban
By the same experts,
by
defendants of- doned
the Government and the
prove
opinion,
fered to
that in their
based of intent was taken away
jury.
from the
upon the decisions of the Revenue De-
conviction,
reversing
Supreme
partment
they
and of the courts as
under- Court held that the matter of intent was a
them,
proper
stood
it was
for defendants
question of fact which must be submitted to
report profits
upon
not to
realized
usuri-
the jury. Similarly, in Mann v. United
ous loans until
themselves
the loans
had
States, Cir., 1963,
319 F.2d
cert. de
repaid.
properly
been
This also was
ex-
nied,
L.Ed.2d
propose
cluded. The witnesses did not
(1964),
judge
the trial
instructed the
testify
they
advised defendants not
jury
the natural and
that an actor intends
report
profits,
these
nor did defendants
probable consequences of his acts. The
testify
they
upon
relied
court held that the result of this instruction
experts
failing
report
jury
essentially
was that
told that
required
reported
same. What was
to be
presume
it could
intent from the mere fact
as income was a
law
matter of
to be
that an incorrect tax return had been filed.
court,
charge
covered
We
give charge
held that it was “error to
experts.
nature,
in a criminal case of this
the overall
Thus,
existing prece-
F.2d at 851.
under
place
upon
effect of which is to
a burden
dents it is clear that the inherent confusion
produce
the defendant to
evidence to over
which would
receipt
result from
presumption
guilt.”
come a
319 F.2d at
testimony on the
precludes
state of the law
States, Cir.,
410. See Wardlaw v. United
such testimony where the defendant’s actu-
(instruction permit
al reliance on
expert opinion
is not
ting presumption of intent held erroneous
involved.7
since
impress
effect was “to
point
We next
majority’s
out that
good
the belief that
there was no
faith
view concerning
supposed
impropriety
defense”).
Tadio,
Cf. United
States
judge’s
instruction on willfulness is
Cir., 223
(asserting
F.2d 759
it was
similarly mistaken. An examination of the
error for trial court to instruct
authority
upon
relevant
relied
the ma-
particular accounting technique
unjust
jority demonstrates that those cases are not
*15
ified,
upholding
but
conviction since the
applicable in the circumstances here. Mor-
clearly
overall instruction on intent
indi
States,
issette v. United
U.S.
duty
cated that it was the
Government’s
(1952),
S.Ct.
Whether and in- ject to federal income taxation. tentionally attempted to evade and de- feat her income tax is a fact jury was direct and His statement jury. which must be determined gratuitous devoid of excess or remarks person guilt
You are if a or misbehav- implied instructed that in which good appellant. only faith believes that she has filed a ior on the return, guilty correct tax she cannot be from the instruction interpretation possible *16 law; legal of criminal intent to evade the tax been debate over a was there had person any ground judge but if a without resolved in favor of acts issue which the lawful, jury for belief that conduct is it is that the her the Government. It is clear jury for the to whether she the existence of independently decide acted was to assess good wilfully faith or whether she Certainly, willfulness. this situation unique intended to evade her tax. This issue of in tax evasion cases. Without taxa- income, attempt- prosecution. whether the be no wilfully defendant ble there would much; Thus, majority’s point proves ed to evade her tax too is one which the involve a situation necessarily must determine from all of the evidence most cases upon taxability in the case which the funds is “clear” bears defend- where the ques- by ant’s state of mind at the time in so the court and stated to be primary being tion. with the issue whether every and pos- impeachment rehabilitation of received those funds and present testimony. such requisite summary, intent. allowed to sessed the My is first to demonstrate that judge’s instructions stated the law intention the trial majority’s springs new rule from the properly gave appellant every right to this straightforwardly to confront cer- failure good faith defense. legal that this court has the questions tain opinion in original panel We believe the and second to responsibility to resolve this case which affirmed defendant Gar- exactly why majority’s I think the define ber’s conviction was correct and for the pernicious effect. holding will have such a expanded expressed reasons there here. change to No valid reason has been shown The case before us involves three distinct that result. every tax evasion present issues that are issue is whether prosecution. The threshold TJOFLAT, Judge, with whom Circuit subject to feder- the “income” in RUBIN, and ALVIN B. Cir- AINSWORTH is tax- al income taxation. If the “income” Judges, join, dissenting: cuit able, determine the trial court next must obligation pay civil taxes whether the I would affirm the conviction of defend- sufficiently support a criminal clear to essentially ant the reasons stat- Garber Finally there prosecution for tax evasion. majority opin- by Judge ed Ainsworth. the factual issue whether the defend- arises analysis ion disturbs me more its than ant with the willfulness that is an result, acted majority says however. The majori- essential element of the crime. prose- should never have Government view, my ty’s analysis goes astray, in cuted Garber for tax evasion. The criminal taxability confusing issues of proceedings “inappropriate,” were the ma- sufficiency of notice with the factual issue intimates, jority open ques- because it is an dispose For court to of this of intent. proceeds plas- tion whether the her blood appeal properly, it is essential these ma constituted taxable income and because out and considered taxable, three issues be sorted if they even were the doubt sur- individually. rounding suggests issue Garber could not have had the willfulness that is an of the crime essential element I majori- Notwithstanding tax evasion. Dorothy charged Garber was under sec ty’s prosecution belief that the was a mis- Revenue Code tion 7201 of Internal
take, apparently trapped by it an as- feels to evade her obli willfully attempting sumption that the entitled to Government “income” she re gation pay taxes on prosecute majority’s response Garber. The allega This plasma. ceived for her blood is to manufacture a rule of evidence that premised that Garber tion is on the notion might permit to extricate herself. Garber course, actually obligation. Of had such an any duty create
The new rule of evidence embraces
section 7201 does not itself
taxes;
charged
merely
sets out criminal
pay
case where someone is
with an to
liability im
involving
offense
willfulness.
If the de-
that enforce the tax
sanctions
Internal Rev
requirements
posed by
fendant avers that the
other sections of the
notice,
actually
vague
give adequate
law were too
enue Code. Whether Garber
permit
parties
the trial court must
for taxes on the sums
liable
“experts”
give
call to the
sums are a
depends
stand
their
on whether those
opinions
meaning
“gross
about the state of the law. I have of her
income” within
61(a)
no
proce-
doubt that this innovation in trial
of the Internal Revenue
of section
*17
dure,
meaning
by allowing
question
to consider mat-
of the
of
Code. This
issues,
one,
legal
a mat
spawn “gross
purely
ters irrelevant to
will
factual
income” is
See,
g.,
acquittals.
unfair convictions
In addi-
e.
statutory
and
ter of
construction.
tion,
(7th
At the outset of the Fulton issue. whether the endeavored determine de- ly proceeds are taxa assumes that the sales challenge fense intended to indictment ble that the indictment is suffi income and by contending proceeds that the from the cient, an opinion hinges on eviden for the Record, were not “income.” sales that would otherwise never tiary question 2, vol. at 2-12. If the monies were not really believes that the arise. If the court he “income” would have had no choice but taxable, it is unfortunate monies are not to dismiss the under Fed.R. indictment an unnec that it does so hold and avoid not 12(b)(2) charge Crim.P. an failure essary retrial. Strangely, offense. attor- the defendant’s ney ignored opportunity to move for a II dismissal; rather, he expressed the view issue, taxability ruling on the After proceeds that taxability of the sale was district court was confronted with a second not question of law the court but a whether, question the time of law: at factual issue for the jury. implied Counsel evasions, taxability alleged proof he would introduce that in the mind, to make it defendant’s monies was so uncertain as proceeds were not Judge responded: prosecute taxable. Fulton unfair to fundamentally Garber. process requires language Due that the of a Well, talking we are about two different “sufficiently defi- things. convey I think criminal statute your posi- I understand nite conduct Certainly your warning proscribed tion. client can as to the contend in you argue, understanding this case and if the when can facts measured common argument, justify support practices.” George, Jordan v. De 708, your requisite 223, 231-32, client did not have the 95 L.Ed. intent . . . but I trial, think wheth- At commencement question income or er it is not is a of law attorney argued to the court that for the Court. the taxability of the monies is “so uncer- guilty tain” that “defendant cannot Record, Although vol. at 11. counsel willfully evading defeating taxes on question declined address the Record, income.” argu- vol. at 16. This charged offense, whether the indictment ment clearly trial court contained the essential elements of could dismissed the indictment sua sponte. vagueness challenge, although States Purvis, 1978), put not squarely in those or in the terms Judge colloquy Id., Fulton indicated in at the the be income. Since the of law for the court. at 3. vol. beginning prosecutor proffered testimony the trial he considered Bierman, monies in expert, Government’s ante judgment made defense no 94-95, solely motion for precautionary at as a meas- acquittal at the conclusion of Government’s proffer, ure. At the close of Bierman’s case-in-chief, upon he was to rule not called prosecutor told the court: Government “[T]he at issue that time. It not until the request . would this witness proffered defense of Nall that the testify Jury plans unless the Court disposed issue was ord, of as a matter of law. Rec- testify allowing expert for the De- witnesses to vol. at 431. Record, fense on the law.” at 332. vol. agreed Judge Fulton Government that the of the monies is a
Ill
income,
taxability
form of a motion to
the indictment.2
income taxes
dismiss
vagueness
Here the
issue is whether the
which is so uncertain that even co-ordi-
obligation to pay taxes on monies received
nate branches of
the United States
plasmapheresis
was too uncertain to
plausibly
directly op-
reach
Government
give
taxpayer
willfully
law,
notice that a
who
posing
As a matter
conclusions.
subject
pros-
evaded such taxes would be
to evade and defeat
requisite
intent
ecution
question
under section 7201. The
missing.
income taxes is
narrows to the consideration whether it was
added).
(emphasis
As under the conven-
Id.
reasonably
should
been
clear to
inquiry
“vagueness” analysis,
tional
fo-
part
Garber that those monies were a
of her
certainty
obligation
of the
cuses on
“gross income”
meaning
within the
of sec-
return
pay taxes at the time the tax
was
61(a). Although
tion
“common under-
approach,
either
filed.
Id. at 1164. Under
standing
practices”
are the standards
unclear,
obligation
if the
the defendant
by
adequacy
given
which the
of the notice
law,
guilty
matter of
so the
cannot be
as a
measured,
a criminal statute is to be
it is
indictment should be dismissed for failure
question
vagueness
settled that the
is for
charge
an offense.
the court rather than the jury.
ques-
Critzer,
discussing
Just after
separate
tion is
from the court’s threshold
opinion says:
inquiry whether the monies are taxable at
The tax
earnings
treatment of
from the
all. The court might well have held that
sale of
parts
blood
or other
although
taxable,
the monies are
their taxa-
body
human
is an unchartered area in tax
bility was so uncertain at the times when
parties
presented
law. The
in this case
Garber filed her returns
she
did not
divergent opinions as to the ultimate tax-
have constitutionally sufficient notice of
ability by analogy
legitimate
to two
theo-
proscribed
the conduct
by section 7201. If
ries in tax law. The trial court should
conclusion,
this had been the court’s
fact,
pow-
not have
this
and its
withheld
proper disposition
would,
again,
case
impact
erful
on the issue of Garber’s will-
have been to have dismissed the indictment
fulness,
jury.
from the
12(b)(2).
under
rule
Whereas
trial
judge
specifically
did not rule
agree
the obli- Ante at 99. While I
that Critzer
gation to pay taxes was not
says
clarity
unconstitution-
the law has an
ally vague,
rejected
he effectively
any
willfulness,
impact on Garber’s
Critzer does
vagueness challenge when he sent the case
support
suggestion
that confusion in
jury.
to the
the tax laws is a
that should be
“defense”
jury.
considered
The Critzer court
Critzer,
United States v.
“[a] inappropriate 7201 is an pioneer- vehicle for jury, nar- The factual ing interpretations of tax law.” Ante at stated, had rowly was whether Garber 100. This conclusion makes sense in Crit- had re- money she honest belief zer, present but case it blatantly nontaxable. plasma was ceived for her blood inconsistent with the court’s decision that one. Garber’s subjective inquiry is a there should be a proceed- new “criminal reasona- to have been belief does not have ing” that will allow the to hear evi- ble; been fact, belief had if her asserted concerning dence certainty of the tax reasonable, indictment presumably laws. charge an failure to should be dismissed for opinion obscures the offense.
Ill “The court issue: subjective nature of the that a refusing The court to instruct propriety by need consider the erred tax law on Judge misconception of the Fulton’s refusal to admit the testi- reasonable in- necessary mony Nall, negate expert, only part if we her issues, misleading example, 3. For confusion of the or at the conclusion of the delay, jury, by undue court states tax or considerations “the completely by any clearly time, presentation novel and unsettled or needless waste of precedent” suggests relevant and that the case cumulative evidence. “pioneering interpretations involves the distinc- made at 100. 6. This court has sometimes law.” Ante “legal “logical rel- relevance” tion between Co., 4. Rule 402 states: See, g., Motor v. Ford evance.” e. Rozier admissible, 1978). except All relevant Evidence evidence is by provided “logically as otherwise if it has Constitution relevant” is said to Congress, “legally the United Act of if that probative relevant” value and rules, prescribed by these other rules outweighs probative factors the counter value pursuant statutory Supreme Court au- confusion, repetition. prejudice, In this thority. which is Evidence not relevant adopted McCor- Professor discussion I have not admissible. thinking mick’s view that it makes for clearer altogether relevancy” “legal to discard the term provides that: Rule 403 “relevancy” to what has been and use to refer relevant, Although evidence be ex- McCormick, relevancy.” “logical See called probative substantially cluded if its value is 1972). (2d at 441 ed. Evidence § outweighed by danger prejudice, of unfair me, body, it was added).7 gain, my it was (emphasis Ante at tent.” ., I very element . . By drawing the notion of reasonableness human taxable, definitely was not inquiry, majority improperly felt into the *20 me, said, part of some- relevancy, that it was like I scope causing broadens the thing— appear evidence to admissible al- certain
though it would be excluded if the factual that she had Id. at 370. Garber testified were correctly issue identified. portions that sales discussed this idea inherently nontaxable body the human are Fed.R.Evid. 401 defines relevant evidence husband, with her with fellow donors tendency “having any as evidence to make sought any profes- but that she had never any the existence of fact that of conse- theory. Id. at 370- her sional advice about quence of the determination action 80. probable probable more than it or less Nall, See, like g., testimony, would be without the evidence.” e. proffer of his On Madera, pro- Garber, considered the United States v. 574 F.2d that he stated nontaxable, but (5th 1978). sought plasma Cir. Garber to in- of the sales ceeds similarity between is the extent of testimony troduce taxabili- that his Nall bases proceeds testimony his and Garber’s. ty plasma sales was in reading of the law. solely on his opinion Conceivably, ways doubt. there are two asked, “Sir, he was example, For when such testimony might be relevant. It that, somebody, say if you when would might provide evidence of the defendant’s plasma, his mind, upon you say, based what sold might indirectly state of or it but- no there is there is no income because explanation tress her of her actions. Con- basis?”, respond- he determining the way of cededly, any there was never communica- ed: Record, tion between Garber and Nall. vol.
3, at concept Nall neither influenced Su- particular Since Under this income, the opinion, preme nor learned of her Court definition body part nothing say follows that he have for the could amount received part person if a did sell directly that would bear on Garber’s intent. taxa- no, would not be a proffered body, if their there testimony So Nall’s is relevant all, ble only through at it can be relevant rein- transaction.
forcing credibility explana- add, of Garber’s might I if I . . . “No, said, tion. Opinion 132 the Solicitor’s income reason of things are not these examination, On direct Garber was asked . . . .” the definition of income whether, at the time she entered into the Id. at 425. contracts, any sale she had come to concerning conclusion whether the monies relevancy of this testimo- deciding she was to receive were taxable. re- essence, She have, in judge should ny, the trial plied: juror a reasonable asked himself whether testimony
I my proffered had arrived in own mind that it was could believe that taxable, definitely not probable this was their that Garber actual- makes it more tax, 7. None of the cases to defeat or evade cited of the accused support proposition suggest by independent proved of this evi- which must be reasonableness of the defendant’s belief is ma instruction here dence. . Under the Rather, they involved, terial. make it clear that there is speculate toas is invited to requirement no of reasonableness. For exam person similarly situated what other ple, in Mann v. United knowledge, with like [the defendant] 1963), reasonably expected be the (1964), L.Ed.2d the court held consequences consider- of the conduct under imported erroneous a instruction that The test is ation as shown the evidence. notion reasonableness: wilfully himself at- whether [the defendant] specifically provides tempted [Section 7201] to evade or defeat the tax. omitted). the crime of tax evasion (citation income must be Id. at 409 accompanied by specific intent on the that, Failing the Government would have money. due on the no tax was ly believed McCormick, See, option at each of the seventeen g., Evidence to call § e. people them in order (2d 1972). I am certain that what and to cross-examine ed. expert’s destroy concluded after the foundation of professional accountant make one whit and thus to demonstrate its irrel- studying the law could not value. evancy probative the truth of Garber’s for lack of Cross- probable more or less go could paid had not taxes on examination and rehabilitation explanation that she forever, principal issues in the trial plasmapheresis what she had received be lost in this sea of collateral non- I not feel it was would my because “in heart did Therefore, sense. .” at 361. taxable . . . Id. test, pass the rule 401 proffer does *21 B the be excluded. testimony should relevancy hypothetical if the of this Even possibly could be re- The relevance issue established, testimony the testimony is testimony differently expert’s if the solved into evidence should still not be admitted to the context of the bore some relation danger prejudice the of and confu- because example, For an explanation. defendant’s outweighs manifestly sion the mere scintilla might testify, “I have advised accountant process of probative of value. concerning twenty laypeople the impeachment before and rehabilitation analogous of to the ones in the transactions just wide-ranging as in the jury would be instant case. None of them have communi- fact, hearing relevancy. dire voir Garber, them cated with Mrs. and none of escaped in the problem even if the could be legal training
have had more than Mrs. certainly hearing, voir it would surface dire me twenty Garber. Seventeen of the told jury. The trial would presence of the they gut feeling that had a the feel- —like on the defendant’s longer no be focused ing she had —that Mrs. Garber testified intent, each of the but on the intent of they monies had received were not taxa- expert’s testimony. people embraced it Putting hearsay problem, ble.” aside the untriable. quickly become The case would appears juror might reasonably that a infer holding so that it people majority’s is broad from this statement that since other had, testimony of says require it the admission the belief that Garber she would of the trial even more destructive slightly likely is more that Garber did in- that is testimony. hand, hypothetical my than process deed have the belief.8 On the other says the trial majority opinion that such an inference would not be reasonable The testify permitted Nall to if should have expert it could be shown: court nature of the “unresolved qualified present prof- simply somehow not as to the law,” fered to the “reasona- testimony; people that the seventeen at or as ante faith; belief, at 99. opinions good did not state their ante bleness” or that the than testimo- truly situations were not analo- less relevant testimony This gous. particular Consequently, referring opinions proffer ny of such it testimony, people because percentage Government would have number or been entitled The testi- to cross-examine the inference. requires an additional jury an effort opinion to exclude unless the can altogether. mony probative his is not Haigler may 8. Cf. There well communicated with Garber. F.2d 986 1949), where a rancher the issue be- defended a have been communication about prosecution Haigler willful evasion of income tax the other tween the argument with the testimony sheepmen, he had acted in accord- could be seen as so the “generally ance with what directly probative understood the defendant’s state among sheepmen.” ap- Id. testimony hypothesize, at 988. The court like that I mind. The parently testimony concerning assumed that pure opinion holds sheepmen the beliefs of the in, other only be goes should come Haigler relevant and admissible. Note that the exculpative expla- credibility of the defendant’s my hypothetical case differs from in that I am nation. assuming people that none of the seventeen be, already the court has suasive Nall there (a) “expert” says since this assume: vagueness issue deciding it is the state of concluded in was doubt as to defending is not people believe likely that a number Nall is the belief by Garber jurors, such as that received who The risk is that reasonable. taxable; have the (b) people since other necessary not to assess training lack the had, it is some- says she belief that Garber accept willingly will the ex- arguments, too had the likely actually that she what more jury to opinion. permit To base pert’s belief. interpretation law its verdict on will with the court’s inevita- that is at odds in- major is that these My concern here injustice. As- bly appearance create the it is reck- questionable are so ferences relevant, testimony is I suming that indulge them. The permit jury less to foolhardy relation- to lead danger will see the believe that it would and Garber’s ship ground between Nall’s when onto such treacherous than it belief as much more substantial possible benefits are so miniscule.9 confusion possibly be. The risk of could unfamiliarity with the as- juror
inherent in
IV
compound-
is here
probabilities
sessment of
state of
Expert testimony about the
intellectual,
abstract character
ed
will,
jury;
only
will
befuddle
law
evidence;
in the factual
*22
place
the
it has no
view, utterly
the usual
my
in
undermine
can draw on
context of the case. Jurors
testimony, creating
expert
on
constraints
most cir-
experience
assessing
in
their own
abuses.
potential
the
for intolerable
Until
will
travel-
They
cumstantial evidence.
be
however,
they
requirement
has been a
that
ing
map,
today,
without a
when
there
impact
opinion testimony
of one
be founded on
attempt
expert
to determine the
legal
probability
theories
that
comprise
man’s
on the
the context of
facts or data
mind,
story about her state of
Fed.R.Evid. 703.
alleged
the
offense. See
monies as
report
when she declined to
the
however,
approach,
majority’s
the
Under
income, is the truth.
expert may ignore the factual context
the
nearly anything he desires about
say
problem
An even more serious
results
Opposing
in the case.
coun-
legal
the
issues
to assess the
jury’s being
from the
asked
to lock him into a
impossible
sel will find it
essence,
merits of
In
opinion.
Nall’s
of the law because
particular interpretation
testimony
Nall’s
is that Garber’s asserted
interpretation
practically
is
range
of his
Presumably,
belief is reasonable.
the more
such freedom on
infinite. The bestowal of
opinion,
greater
meritorious Nall’s
opportunity
expert witnesses creates
people likely
opinion
to share the
number
expert
a well-coached
to “manufacture”
greater
probability
and the
that Garber
stand, shaping
is on the
telling
per-
testimony
the truth. But however
while he
question whether the state of the law was rele
9. Neither
F.2d
Nordstrom v. United
360
denied,
826,
(8th Cir.),
talking
734
intent.
It was
cert.
385 U.S.
87
vant
to the defendant’s
indictment,
(1966),
pure
sufficiency
S.Ct.
the trial has indictment, the Government can have showing clarity
no interest the law presents
unless defense first vague it is or that the defendant’s
misunderstanding the law was reasona-
ble. If the defense introduces such testimo-
ny acquitted, defendant that will example, Co., 422, 431-433, prosecu- Gypsum For in criminal antitrust arising complex 2864, 2876-78, tion from a series of business L.Ed.2d transactions, surely a defendant admit the al- antitrust defendant would welcome leged opportunity put professor but transactions contend he had not law or some unlawfully anticompetitive. testify vague- believed his actions other as to the stand The defense is that the has not acted ness in the law or to the reasonableness required legality mens rea for a criminal con- defendant’s belief in the of his conduct. viction. See United States v. United States