Appeal from the United States District Court for the Northern District of Illinois, Eastern Division. No. 83 C 5945 -- Susan Getzendanner, Judge.
Before CUMMINGS, Chief Judge, and BAUER, and POSNER, Circuit Judges.
CUMMINGS, Chief Judge. The government appeals from the district court's discharge of its rule to show cause against Dr. Anun Seetapun and his wife Marcia Seetapun and its denial of an order for contempt against the corporation Anun Seetapun, M.D., S.C. We reverse and remand.
The litigation now before us began when the Internal Revenue Service ("IRS") issued an administrative summons to Anun Seetapun, M.D., S.C. (the "Corporation") on February 15, 1983. The Corporation is a medical service corporation through which Dr. Seetapun ("Anun") engages in the practice of plastic surgery. The IRS summons requested business and financial records, including records containing patients' names, treatment records, and other information. The Corporation refused to give the IRS those documents, asserting they were protected by the physician-patient privilege.
On August 26, 1983 the IRS instituted proceedings in the district court to enforce the summons.*fn1 The Corporation responded to this petition on October 14th, declining to produce documents pertaining to receipts, patient statements and public aid statements, again on the ground of the physician-patient privilege. A hearing was held on November 4th to evaluate this claim, at which time the district court directed the parties to confer and try to reach an agreement.
No agreement was forthcoming, and the government renewed its petition to enforce on December 12th. A pre-trial conference was held on December 20th, and the following day Judge Getzendanner issued an order directing the Corporation to produce all books, records, and papers requested by the summons by 4:30 p.m. on January 3, 1984 for her in camera review. The order stated that the Corporation "shall raise such further objections to compliance with the summons as it may have" at a status hearing on January 4th. (U.S. App. 1a-2a.)
On January 3rd Anun filed an affidavit stating he did not have possession of the documents, did not know where they were, and had made an unsuccessful demand for them from his wife Marcia Seetapun ("Marcia"), who did have custody of the records (id. 3a-4a). Following the status hearing the next day, the district court ordered Marcia to bring the requested documents to court on January 6th, and issued an order to show cause why Anun and Marcia should not be held in contempt of court (id. 5a).
At the evidentiary hearing on January 6th, the court heard the testimony of Anun and the arguments of Marcia's lawyer that the district court lacked jurisdiction over her. At the conclusion of the hearing the district court (1) discharged its order to show cause against Anun, (2) vacated it as to Marcia for lack of jurisdiction and (3) refused to hold the Corporation in contempt of its order. The court did issue a preliminary injunction ordering the Corporation to refrain from destroying any documents called for by the subpoena. This order was made binding upon the Corporation, its agents, employees, officers, servants and attorneys, and upon those persons in active concert or participation with those who receive actual notice of the order. (Id. 6a.) As such, the order would forbid the custodian Marcia to destroy any corporate records in her possession. While the issuance of the preliminary injunction is not contested on appeal, the government does dispute the district court's decision on the aforesaid three matters.*fn2
The threshold issue presented is whether this Court has jurisdiction over the appeal. As a general rule, an order must be final in order to be appealable. That determination depends in this case on the characterization of the January 6th hearing. The district court stated in its February 29 Memorandum Opinion and Order concerning its January 6th order that "the enforcement proceedings against the corporation continue to be outstanding" (id., 11a). The district judge also stated that should Marcia return the documents to the Corporation, it would then "be in a position to respond to the outstanding subpoena" (id). Clearly the lower court was convinced that it had not yet taken final action on the government's request for enforcement of its summons, a conclusion buttressed by several remarks of the district judge at the January 6th hearing. The court below stated that the case "was not over" and that it would wait for "the government to bring something to my attention" should it wish to proceed (Anun App. 48). The district judge believed that the service by the government of a summons upon Marcia directly would solve the problems presented, since any court proceeding to determine Marcia's defenses to that summons would obviate the need for further proceedings with reference to the Corporation (id. 48-49).
Resolution of the finality issue by the court below is troubling in light of the conflicting statements made by the court and the assumptions underlying the court's conclusion. Although asserting that the case was not over, the judge also stated that it was a "closed case" (id. at 49), and that there was nothing more for the court (id. at 48). More importantly, the district judge's statement that the enforcement proceedings were continuing is bottomed on the belief that the service of a summons on Marcia, which would start an independent proceeding, would render the instant case moot (id. at 51-52). While that assumption may be correct, it does not answer the question whether the January 6th proceeding resulted in a final, appealable order. Nor does it suggest what purpose would be served by keeping the case open. The district judge unequivocally stated that the Corporation would be in a position to comply with the summons only if Marcia turned the requested documents over to the Corporation. But Marcia would assert her defenses in the independent proceeding relating to the summons served specifically on her. Consequently the documents will most likely be surrendered, if at all, not to the Corporation but to the government through the independent proceeding. On analysis, as far as the Corporation is concerned, the proceedings in the district court have terminated. Thus we see no bar to treating the action taken by the trial court as final.
Nonetheless we do not accept the government's contention that its summons had been enforced in December and that the January 6th hearing was an IRS contempt proceeding within the meaning of 26 U.S.C. § 7604(b). Not only did the district court on January 6th state that the hearing was to determine whether to issue a contempt citation for failure to comply with the court's January 4th order, "something totally different from any IRS contempt proceeding" (Anun App. 33), but the court had informed the Corporation in December that it could raise any further defenses it wished at the January 4th status hearing. If that status hearing indeed had been part of an IRS contempt proceeding, then allowing the Corporation to raise new defenses not asserted previously would be contrary to the Supreme Court's decision in United States v. Rylander, 460 U.S. 752, 75 L. Ed. 2d 521, 103 S. Ct. 1548 (party cannot raise at contempt proceedings defenses that could and should have been raised in enforcement proceedings). We decline to interpret the district court's actions in a way contrary to a clear Supreme Court mandate. In addition to the district court's comments previously mentioned, the court below also stated, in response to the government's request that it find the Corporation in contempt on January 6th, that "I might do that, but I am not going to do it this afternoon [January 6]. It's a new idea and I think I'd have to give counsel an opportunity to respond to that." (Anun App. 46.)
No harm accrues to the Corporation from our treatment of the district court's rulings of January 6th and February 29th as a denial of the government's enforcement request. The Corporation had ample opportunity to present all its available defenses, having been warned by the district judge on December 21st that it should do so on January 4th (U.S. App 1a). The Corporation may not now argue that it was prejudiced or denied due process of law. Accordingly, we will treat the court's February 29th order, in the light of its January 6th order, as denying the government's request for an enforcement order against the Corporation and hence as a final appealable order.*fn3 ...