members of the Andersen firm during a period when that firm was
employed directly by the taxpayer, Mr. Coleman. Both appear to
reflect conversations in which members of the Marshall Bratter
Intervenor urges upon this court the reasoning in Ceco Steel
Products Corp. v. H.K. Porter Co., 31 F.R.D. 142 (N.D.Ill. 1962)
by arguing that the notes and memoranda made by a taxpayer's
accountant which include the substance of statements made by the
taxpayer's attorney is conceptually indistinguishable from notes
and memoranda prepared by the attorney himself or presumably by
an accountant-agent of the attorney.
However, there is no evidence that these notes and memorandum
were made at the request of the attorney, nor did the attorney
even see the documents at issue here prior to the issuance of the
summons. With regard to both Documents No. 4 and No. 8, the
accountant, Andersen, was not employed by the attorney in any
sense. As to Document No. 8, the attorney did not initially
request the presence or assistance of the taxpayer's accountant
at the conference. While the conversations of Mr. Brown and Mr.
Ruther which formed the basis for Document No. 4 prepared by Mr.
Ruther, did include conversations with the taxpayer's attorney
they also included conversations with the taxpayer and his agent.
These documents have only a superficial and tenuous
relationship to the work product characteristics which concerned
the Supreme Court in Hickman. To uphold the protection of the
work product doctrine as to these documents would be to undermine
the purpose of open discovery, hamper unnecessarily the
investigative efforts of the IRS, and create by indirection an
accountant work product privilege for all documents prepared
pursuant to the accountant-taxpayer relationship which have any
modicum of association to the taxpayer's attorneys.
Documents Nos. 4 and 8 do not constitute the work product of an
attorney or his agent, but rather the work product of taxpayer's
accountants which is not privileged under the work product
doctrine. The documents should be produced pursuant to the
Document No. 7.
Document No. 7 is not included within the scope of the work
While Document No. 7 includes conclusions of an attorney, it is
clear from the first paragraph of the document that it was not
prepared in anticipation of litigation but in anticipation of
particular investigations by certain state and federal agencies.
Therefore, intervenor has failed to show a necessary element of a
work product defense. While it is clear that the test whether the
work product privilege applies is not whether the litigation has
actually begun but whether the documents may be fairly said to
have been prepared or obtained in anticipation of litigation, the
scope of application of the work product doctrine must be
carefully tailored to the circumstances of the particular case
and with due consideration for the fundamental purposes of the
policies involved. Hickman, supra, 329 U.S. 511, 512, 67 S.Ct.
385, 91 L.Ed. 451. See Arney v. George A. Hormel and Co., 53
F.R.D. 179, 181 (D.Minn. 1971) and cases cited therein.
To adopt the intervenor's interpretation of the Hickman phrase
"eye toward litigation" would be to expand the scope of the work
product doctrine to include as prepared in anticipation of
litigation every scrap of paper related to a matter with which a
tax attorney is concerned. Such a step would ignore both the
carefully tailored concern of the Supreme Court in formulating
the work product doctrine in the context of civil litigation and
the specific circumstances surrounding an IRS investigation.
Document No. 7, unlike those considered in Natta v. Zletz,
418 F.2d 633, 637-638 (7th Cir. 1969), is a memorandum which was not
limited to intraoffice circulation. Copies of Document No. 7 were
sent to another attorney
whose relationship to the Marshall Bratter firm is unexplained,
and to the taxpayer's accountant, Arthur Andersen. Further, it
appears that this was not a summary of a conference called by Mr.
Seiden, the taxpayer's aide, to which Mr. Hurwitz and Mr. Ruther
of Andersen were invited. This court need not reach the issue of
waiver since this document falls initially outside the work
product doctrine. Waiver of privilege is not involved with regard
to Document No. 7, but if it were so involved, the standard for
waiver here should reflect the unique circumstances of an IRS
investigation. Intervenor argues that the disclosure of Document
No. 7 to another attorney and to the taxpayer's accountants
should not be considered a waiver of the work product privilege
in that these disclosures are not inconsistent with maintaining
secrecy from possible adversaries, citing Stix Products, Inc. v.
United Merchants and Manufacturers, Inc., 47 F.R.D. 334 (S.D.N Y
1969). However, the facts surrounding this dicta in Stix Products
are altogether different from those presented here. Further the
policy judgment there expressed, even if worthy of some
consideration in the context of civil litigation, should not be
considered heavily in the context of an IRS investigation where
there is a specific statutory mandate as expressed in 26 U.S.C. § 7601
and 7602. Donaldson v. United States, 400 U.S. 517, 524,
525, 91 S.Ct. 534, 27 L.Ed.2d 580 (1970); Reisman v. Caplin,
supra, 375 U.S. 445, 84 S.Ct. 508, 11 L.Ed.2d 459.
The importance of IRS investigations to the integrity and
equity of the system of taxation in this country, and the
importance of access to the documents of taxpayers should also be
given consideration by a court in considering the proper
privilege defenses raised in an enforcement proceeding pursuant
to 26 U.S.C. § 7402(b). Even if, arguendo, intervenor did claim a
valid work product privilege with regard to Document No. 7, the
government has met its burden of "good cause" in the context of
an IRS investigation. As discussed above, the government is in a
position so as to be unable to rebut effectively the arguments of
privilege or to assert effectively the "good cause" required in
civil litigation for a party to overturn an otherwise valid claim
of privilege based on this doctrine. While it appears that the
Supreme Court would consider that the work product doctrine is
applicable to a proceeding to enforce an Internal Revenue
Summons, this does not mean that the IRS should be bound by the
same "good cause" requirement applied in civil litigation as
indicated in Hickman, supra, 329 U.S. 511, 67 S.Ct. 385, 91 L.Ed.
451; Republic Gear Co. v. Borg-Warner Corp., 381 F.2d 551, 557,
558 (2nd Cir. 1967); Arney, supra, 53 F.R.D. 181; Federal Rules
of Civil Procedure, Rule 26(b)(3). Sufficient "good cause" in the
context of an IRS investigation would be a good faith belief that
the documents are necessary to the determination of a taxpayer's
correct tax liabilities and that the information contained
therein cannot be obtained from any other source. The taxpayer
would then have the opportunity to show the court that the
contents of the documents at issue were not related to or
necessary to the determination of a taxpayer's correct tax
liabilities or that such information included therein which was
so related or necessary could be obtained from other sources
without undue hardship. This modified standard of "good cause" to
overcome a claim of privilege based upon the work product
doctrine reflects the importance of IRS investigations, the
intent of Congress in 26 U.S.C. § 7601 and 7602, the purposes of
open discovery generally in our legal system, the unique burdens
upon the government in rebutting a claim of privilege in this IRS
investigation context, and the legitimate purposes underlying the
qualified privilege based upon the work product doctrine.
Therefore, in summary, this document falls outside the scope of
protection of the work product doctrine as formulated in Hickman
and as applied in Natta. If, however, arguendo, this document
were considered as falling within the doctrine, the court holds
that the doctrine is waived by its disclosure to accountants for
the taxpayer and expressly declines to apply the dicta in Stix.
Further, if this document is within the work product doctrine and
the privilege is not waived, this court holds that under the
standard of "good cause" appropriate to IRS enforcement
proceedings, the government has met its burden of good cause and
defeats the claimed privilege. This document should be produced
pursuant to the summons.
Document No. 10.
This document was prepared by Mr. Hurwitz of Marshall Bratter
at the request of Mr. Ruther of Andersen to assist Mr. Ruther in
the preparation of Mr. Coleman's 1969 federal income tax and gift
Pursuant to the letter of June 10, 1970 by which the Marshall
Bratter firm retained the services of Andersen, Andersen was to
perform necessary accounting services in order that Marshall
Bratter could properly advise Mr. Coleman in connection with the
preparation of his tax returns for the 1969 taxable year.
However, it appears here, as may be the broader general practice
between tax attorneys and taxpayer's accountants, that the
purpose of the change in a formal employment relationship from
one between taxpayer and accountant is to indirectly expand the
scope of protection provided by the attorney-client and work
product privileges in any subsequent IRS investigation. Such
bootstrap protection must be carefully scrutinized by a court in
an enforcement proceeding pursuant to 26 U.S.C. § 7402(b).
At the hearing, the purpose of Document No. 10 was set forth:
(By Mr. Miller)
Q And can you tell us what the purpose of that
document No. 10 was?
A (By Mr. Hurwitz) Yes. Mr. Ruther requested the
document from me to assist him in the preparation
of Mr. Coleman's 1969 tax return. (Transcript p.
It appears clear that Andersen as taxpayer's accountant was
preparing the income tax return, and sought the opinion of the
taxpayer's attorney, despite the formal employment relationship
of Andersen by Marshall Bratter. A fortuitous and formalistic
employment relationship should not in itself expand the scope of
a work product privilege which would not otherwise be the case.
Natta, supra, 418 F.2d 637.
This court would avoid the difficult task of determining
whether any particular services rendered are essentially those of
an accountant or an attorney for purposes of deciding whether the
protection of the work product privilege should be extended to
certain documents. In the past these slippery distinctions have
failed to produce useful standards, in the effort to apply the
attorney-client privilege. In re Fisher, 51 F.2d 424 (S.D.N Y
1931); Olender v. United States, 210 F.2d 795 (9th Cir. 1954);
Colton v. United States, 306 F.2d 633 (2nd Cir. 1962) cert.
denied, 371 U.S. 951, 83 S.Ct. 505, 9 L.Ed.2d 499 (1963); United
States v. Threlkeld, 241 F. Supp. 324 (W.D.Tenn. 1965); Canaday v.
United States, 354 F.2d 849 (8th Cir. 1966); See Peterson, supra,
91-97. In analyzing this particular factual situation with a view
to determining the applicability of the work product privilege,
it is unnecessary to focus on the nature of the relationship
between attorney and client, or the services being rendered. The
question to be asked is whether written material was prepared by
an attorney in anticipation of litigation and if it was so
prepared, has the government met its burden of good cause to
justify the refusal to apply the work product privilege.
Here the evidence indicates that this document was prepared by
Mr. Hurwitz, taxpayer's attorney to assist taxpayer's accountants
in the preparation of tax returns. The document itself closes
with the offer of further such assistance. The document itself
to a request for the attorney's views on the proper treatment of
certain transactions in connection with the preparation of the
taxpayer's 1969 tax return. The evidence does not indicate that
this document was prepared in anticipation of litigation. This
could only be inferred in a general sense which would apply to
every document prepared by or collected by an attorney retained
by a taxpayer. The court finds that Document No. 10 was not
prepared in anticipation of litigation and therefore the
protection of the work product doctrine does not apply to this
document. Document No. 10 should be produced pursuant to the
If, arguendo, this document could be considered within the
protection of the work product doctrine, following the analysis
set forth with regard to Document No. 7 above, the government has
shown sufficient "good cause" in its good faith belief that the
documents are necessary to the determination of the taxpayer's
correct tax liabilities and that the information contained
therein could not to their knowledge be obtained from any other
Document No. 11.
Document No. 11 consists of 121 pages of miscellaneous
documents gathered by Andersen after their formal employment by
A review of the documents contained in Document No. 11
indicates nothing which was gathered in anticipation of
litigation. It appears that these documents were gathered by
Andersen in the course of preparing various tax returns for the
taxpayer for the year of 1969. The testimony of Mr. Ruther
(By Mr. Miller)
Q . . . Are those documents (Documents No. 10 and No.
11) which you or others at Arthur Andersen prepared
in connection with Mr. Coleman's 1969 income tax
(By Mr. Ruther)
A Exhibit 11 is, yes. (Transcript, p. 102).
The evidence introduced at the hearing indicates that there is
presently tax court litigation with respect to Mr. Coleman for
the 1967 taxable year, and with respect to Enness Realty
Corporation for the year 1968. There was no testimony that the
documents included in Document No. 11 were gathered in
anticipation of this litigation relating to 1967 and 1968 because
those documents made reference only to 1969 tax return. There was
no testimony that Mr. Hurwitz anticipated litigation with regard
to 1969 except in the general sense that a tax attorney
anticipates litigation with reference to any matter which he
handles. Such general anticipations are not coincident with the
limited scope of the work product privilege set forth in Hickman
or with the special requirements of IRS investigations. If
adopted by the courts, such a theory as to the scope of the work
product doctrine would have the effect of protecting any
materials of a tax attorney, and by artful and early employment
of taxpayer's accountant would have the effect of creating an
accountant work product privilege. The court finds that there has
been no showing that Document No. 11 was prepared in anticipation
of litigation within the meaning of Hickman.
Even assuming, arguendo, that Document No. 11 could be
considered as being prepared in anticipation of litigation within
the meaning of Hickman, and that the gathering of these materials
by the accountant could on these facts be treated as the work
product of the attorney, it is evident that the government has
met its burden of "good cause" to rebut the qualified privilege
established by Hickman. These documents are clearly the working
files of the accountant in preparing the tax returns. The
balancing of the evidence introduced by the Intervenor, and the
"good cause" shown by the government as discussed with reference
to Document No. 7, in the context of the court's in
camera review of the documents is resolved in favor of the
Document No. 11 should be produced pursuant to the summons.
Documents Nos. 4, 7, 8, 10 and 11 are not protected by either
the attorney-client privilege or by the work product doctrine,
and must be produced pursuant to the summons.
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