CHURCH OF SCIENTOLOGY OF CALIFORNIA, Petitioner,
v.
UNITED STATES and Frank S. Zolin.
No. 91-946.
Supreme Court of the United States
Argued Oct. 6, 1992.
Decided Nov. 16, 1992.
Church appealed from order of the United States District Court for the Central
District of California, requiring state court clerk to comply with Internal
Revenue Service (IRS) summons. The Court of Appeals for the Ninth Circuit
ruled that clerk's compliance with order rendered appeal moot, and church
petitioned for certiorari. The Supreme Court, Justice Stevens, held that
clerk's compliance summons for production of tapes in clerk's custody recording
conversations between church officials and their attorneys did not render
church's appeal from order moot.
Vacated and remanded.
[1] FEDERAL COURTS
Federal court has no authority to give opinions upon moot questions or abstract
propositions, or to declare principles or rules of law which cannot affect
matter in issue in case before it.
[2] FEDERAL COURTS
If event occurs while case is pending on appeal that makes it impossible for
court to grant any effectual relief whatever to prevailing party, appeal must
be dismissed.
[3] FEDERAL COURTS
State court clerk's compliance with Internal Revenue Service (IRS) summons for
production of tapes in clerk's custody recording conversations between church
officials and their attorneys did not render church's appeal from order moot;
court had power to order IRS to return or destroy any copies of tapes that it
may have had in its possession, so that effectual relief was not impossible.
26 U.S.C.A. ss 7402(b), 7602(a), 7604(a).
[4] INTERNAL REVENUE
Statutes governing Internal Revenue Service (IRS) summons enforcement
proceedings did not preclude appellate review of district court's enforcement
orders. 26 U.S.C.A. ss 7402(b), 7604(a).
[5] FEDERAL COURTS
Generally, district court's order enforcing discovery request is not "final
order" subject to appellate review.
See publication Words and Phrases for other judicial constructions and
definitions.
[6] FEDERAL COURTS
Party that seeks to present objection to discovery order immediately to Court
of Appeals must refuse compliance, be held in contempt, and then appeal
contempt order.
[7] FEDERAL COURTS
Under "Perlman doctrine," discovery order directed at disinterested third
party is treated as immediately appealable final order because third party
presumably lacks sufficient stake in proceeding to risk contempt by refusing
compliance.
See publication Words and Phrases for other judicial constructions and
definitions.
[8] INTERNAL REVENUE
District court order enforcing Internal Revenue Service (IRS) summons is an
appealable final order.
**447 *9 Syllabus [FN*]
FN* The syllabus constitutes no part of the opinion of the Court but has
been prepared by the Reporter of Decisions for the convenience of the
reader. See United States v. Detroit Lumber Co., 200 U.S. 321, 337, 26
S.Ct. 282, 287, 50 L.Ed. 499.
Pursuant to its jurisdiction under 26 U.S.C. ss 7402(b) and
7604(a), the District Court ordered a state-court Clerk to comply with a
summons issued by the Internal Revenue Service (IRS) for the production
**448 of, inter alia, two tapes in the Clerk's custody recording
conversations between officials of petitioner Church of Scientology (Church)
and their attorneys. Although the Church filed a timely notice of appeal, its
request for a stay of the summons enforcement order was unsuccessful, and
copies of the tapes were delivered to the IRS while the appeal was pending.
The Court of Appeals dismissed the appeal as moot, ruling that no controversy
existed because the tapes had already been turned over to the IRS.
Held: Compliance with the summons enforcement order did not moot the Church's
appeal. Delivery of the tapes to the IRS did not mandate dismissal by making
it impossible for the Court of Appeals to grant the Church "any effectual
relief." See Mills v. Green, 159 U.S. 651, 653, 16 S.Ct. 132, 133, 40 L.Ed.
293. Although it is now too late to prevent, or to provide a fully
satisfactory remedy for, the invasion of privacy that occurred when the IRS
obtained the information on the tapes, the Court of Appeals does have power to
effectuate a partial remedy by ordering the Government to return or destroy any
copies of the tapes that it may possess. Even if the Government is right that
under ss 7402(b) and 7604(a) the jurisdiction of the district court is
limited to those matters directly related to whether or not the summons should
be enforced, the question presented here is whether there was jurisdiction in
the appellate court to review the allegedly unlawful summons enforcement
order. There is nothing in the Internal Revenue Code to suggest that Congress
sought to preclude such review, and, indeed, this Court has expressly held that
IRS summons enforcement orders are subject to appellate review. See Reisman
v. Caplin, 375 U.S. 440, 449, 84 S.Ct. 508, 513-514, 11 L.Ed.2d 459. Although
several Courts of Appeals have accepted the Government's argument in IRS
enforcement proceedings, the force of that line of authority is matched by a
similar array of decisions reaching a contrary conclusion in proceedings
enforcing Federal Trade Commission discovery requests. There is no significant
difference between the governing statutes that can explain the *10 divergent
interpretations, nor any reason to conclude that production of records relevant
to a tax investigation should have mootness consequences that production of
other business records does not have. Pp. 449-453.
Vacated and remanded.
STEVENS, J., delivered the opinion for a unanimous Court.
Eric M. Lieberman, New York City, for petitioner.
Lawrence G. Wallace, Washington, D.C., for respondents.
For Transcript of Oral Argument See:
1992 WL 687914 (U.S.Oral.Arg.)
Justice STEVENS delivered the opinion of the Court.
Two tapes recording conversations between officials of the Church of
Scientology (Church) and their attorneys in July 1980 have been the principal
bone of contention in this, and two earlier, legal proceedings.
In an action filed in the Los Angeles County Superior Court, [FN1] the Church
contended that the defendant had unlawfully acquired possession of the tapes.
Pending resolution of that action, the state court ordered its Clerk to take
custody of the tapes and certain other documents.
FN1. Church of Scientology of California v. Armstrong, No. C420 153.
In 1984, in connection with an investigation of the tax returns of L.
Ron Hubbard, founder of the Church of Scientology, the Internal Revenue
Service (IRS) sought access to the Church documents in the state-court Clerk's
possession. [FN2] *11 After the Clerk **449 was served with an IRS
summons, he permitted IRS agents to examine and make copies of the tapes.
Thereafter, in a federal action initiated by the Church in the Central District
of California, the District Court entered a temporary restraining order
directing the IRS to file its copies of the tapes, and all related notes, with
the federal court. [FN3] Those copies were subsequently returned to the Clerk
of the state court.
FN2. The Commissioner of Internal Revenue, as the delegate of the
Secretary of the Treasury, has broad authority to examine the accuracy of
federal tax returns. See generally Donaldson v. United States, 400 U.S.
517, 523-525, 91 S.Ct. 534, 538-540, 27 L.Ed.2d 580 (1971). Section
7602(a) of the Internal Revenue Code authorizes the Secretary to summon any
person to provide documents relevant to such an examination:
"For the purpose of ascertaining the correctness of any return, making a
return where none has been made, determining the liability of any person
for any internal revenue tax or the liability at law or in equity of any
transferee or fiduciary of any person in respect of any internal revenue
tax, or collecting any such liability, the Secretary is authorized--
"(1) To examine any books, papers, records, or other data which may be
relevant or material to such inquiry." 26 U.S.C. s 7602(a).
FN3. Church of Scientology v. Armstrong, No. CV 84-9003-HLH (CD Cal.,
Nov. 27, 1984).
On January 18, 1985, the IRS commenced this proceeding by filing a petition to
enforce the summons that had previously been served on the state-court Clerk.
[FN4] The Church intervened and opposed production of the tapes on the ground
that they were protected by the attorney-client privilege. After protracted
proceedings, including review in this Court, see United States v. Zolin, 491
U.S. 554, 109 S.Ct. 2619, 105 L.Ed.2d 469 (1989), on April 15, 1991, the
District Court entered an order enforcing compliance with the summons. The
Church filed a timely notice of appeal and unsuccessfully sought a stay of that
order. While the appeal was pending, copies of the tapes were delivered to the
IRS. Thereafter, the Court of Appeals ordered the Church to show cause why its
appeal *12 should not be dismissed as moot. After briefing on the mootness
issue, the court dismissed the appeal. It explained:
FN4. Sections 7402(b) and 7604(a) confer jurisdiction on the federal
district courts to enforce a summons issued by the IRS. Title 26
U.S.C. s 7402(b) provides:
"If any person is summoned under the internal revenue laws to appear, to
testify, or to produce books, papers, or other data, the district court of
the United States for the district in which such person resides or may be
found shall have jurisdiction by appropriate process to compel such
attendance, testimony, or production of books, papers, or other data."
Section 7604(a) is virtually identical to s 7402(b) except that the
word "records" appears in s 7604(a).
"Because it is undisputed that the tapes have been turned over to the IRS in
compliance with the summons enforcement order, no controversy exists presently
and this appeal is moot." United States v. Zolin, No. 91-55506 (CA9, Sept.
10, 1991).
We granted the Church's petition for certiorari to consider the narrow
question whether the appeal was properly dismissed as moot. 503 U.S. 905,
112 S.Ct. 1261, 117 L.Ed.2d 490 (1992).
I
[1][2][3] It has long been settled that a federal court has no authority "to
give opinions upon moot questions or abstract propositions, or to declare
principles or rules of law which cannot affect the matter in issue in the case
before it." Mills v. Green, 159 U.S. 651, 653, 16 S.Ct. 132, 133, 40 L.Ed.
293 (1895). See also Preiser v. Newkirk, 422 U.S. 395, 401, 95 S.Ct. 2330,
2334, 45 L.Ed.2d 272 (1975); North Carolina v. Rice, 404 U.S. 244, 246, 92
S.Ct. 402, 404, 30 L.Ed.2d 413 (1971). For that reason, if an event occurs
while a case is pending on appeal that makes it impossible for the court to
grant "any effectual relief whatever" to a prevailing party, the appeal must be
dismissed. Mills, 159 U.S., at 653, 16 S.Ct., at 133. In this case, after
the Church took its appeal from the April 15 order, in compliance with that
order copies of the tapes were delivered to the IRS. The Government contends
that it was thereafter impossible for the Court of Appeals to grant the Church
any effectual relief. We disagree.
**450 While a court may not be able to return the parties to the status
quo ante--there is nothing a court can do to withdraw all knowledge or
information that IRS agents may have acquired by examination of the tapes--a
court can fashion some form of meaningful relief in circumstances such as
*13 these. Taxpayers have an obvious possessory interest in their records.
When the Government has obtained such materials as a result of an unlawful
summons, that interest is violated and a court can effectuate relief by
ordering the Government to return the records. Moreover, even if the
Government retains only copies of the disputed materials, a taxpayer still
suffers injury by the Government's continued possession of those materials,
namely, the affront to the taxpayer's privacy. A person's interest in
maintaining the privacy of his "papers and effects" is of sufficient importance
to merit constitutional protection. [FN5] Indeed, that the Church considers
the information contained on the disputed tapes important is demonstrated by
the long, contentious history of this litigation. Even though it is now too
late to prevent, or to provide a fully satisfactory remedy for, the invasion of
privacy that occurred when the IRS obtained the information on the tapes, a
court does have power to effectuate a partial remedy by ordering the Government
to destroy or return any and all copies it may have in its possession. The
availability of this possible remedy is sufficient to prevent this case from
being moot. [FN6]
FN5. The Fourth Amendment provides:
"The right of the people to be secure in their persons, houses, papers, and
effects, against unreasonable searches and seizures, shall not be violated,
and no Warrants shall issue, but upon probable cause, supported by Oath or
affirmation, and particularly describing the place to be searched, and the
persons or things to be seized." U.S. Const., Amdt. 4.
FN6. Petitioner also argues that a court can effectuate further relief by
ordering the IRS to refrain from any future use of the information that it
has derived from the tapes. Such an order would obviously go further
towards returning the parties to the status quo ante than merely
requiring the IRS to return the tapes and all copies thereof. However, as
there is no guarantee that the IRS will in fact use the information gleaned
from the tapes, it could be argued that such an order would be an
impermissible advisory opinion. Cf. G.M. Leasing Corp. v. United
States, 429 U.S. 338, 359, 97 S.Ct. 619, 632, 50 L.Ed.2d 530
(1977) (suppression of fruits of illegal IRS search "premature" as issue
can be considered "if and when proceedings arise in which the Government
seeks to use the documents or information obtained from them"). But see
FTC v. Gibson Products of San Antonio, Inc., 569 F.2d 900, 903 (CA5
1978) (court can effectuate relief, despite compliance with FTC subpoena,
by requiring FTC to return subpoenaed documents and forbidding FTC from
using materials in adjudicatory hearing). Because we are concerned only
with the question whether any relief can be ordered, we leave the "future
use" question for another day. For now, we need only hold that this case
is not moot because a court has power to order the IRS to return or destroy
any copies of the tapes that it may have in its possession.
*14 The Government argues, however, that these basic principles are
inapplicable in IRS summons enforcement proceedings because of the particular
nature of the statute governing such proceedings. Reasoning from the premise
that federal courts are empowered to consider only those matters within their
jurisdiction, the Government argues that in IRS summons enforcement proceedings
the subject-matter jurisdiction of the District Court is limited to determining
only whether the court should "compel ... production of" the information
requested by the summons. 26 U.S.C. ss 7402(b), 7604(a). See n. 4,
supra. Once the court has answered that question and compliance has occurred,
there is nothing more for the District Court to decide and the jurisdiction of
the District Court evaporates.
[4] We think the Government misconceives the inquiry in this case. The
Government may or may not be right that under ss 7402(b) and 7604(a) the
jurisdiction of the District Court is limited to those matters directly related
to whether or not the summons should be enforced. Indeed, the scope of the
District Court's jurisdiction under those provisions was the issue over which
**451 this Court deadlocked in United States v. Zolin, 491 U.S. 554, 109
S.Ct. 2619, 105 L.Ed.2d 469 (1989). [FN7] The question presented in the
current incarnation of this case is whether there was jurisdiction in
the appellate court to review the allegedly unlawful summons enforcement
order. On that question, the Government's elaborate statutory argument is
largely irrelevant. There is nothing in the statute to suggest that Congress
sought to preclude appellate review of district court enforcement orders. To
the contrary, we have expressly held that IRS summons enforcement orders are
subject to appellate review. See Reisman v. Caplin, 375 U.S. 440, 449, 84
S.Ct. 508, 513-514, 11 L.Ed.2d 459 (1964). Thus, whether or not there is
jurisdiction in the appellate court to review the District Court's order turns
not on the subject matter of Congress' jurisdictional grant to the district
courts, but on traditional principles of justiciability, namely, whether an
intervening event has rendered the controversy moot. And, as we have already
explained, this case is not moot because if the summons were improperly issued
or enforced a court could order that the IRS' copies of the tapes be either
returned or destroyed.
FN7. In Zolin, the District Court enforced the IRS summons, but placed
restrictions on the IRS' ability to disclose the summoned materials to any
other government agency. The Ninth Circuit affirmed, United States v.
Zolin, 809 F.2d 1411, 1416-1417 (1987), and we granted certiorari in part
to consider whether the District Court, in conditioning its enforcement of
the IRS summons, exceeded its jurisdiction under ss 7402(b) and
7604(a). Zolin, 491 U.S., at 556, 109 S.Ct., at 2622-2623. We were
evenly divided on that question and therefore affirmed the Ninth Circuit.
Id., at 561, 109 S.Ct., at 2625. The issue still divides the lower
courts. Compare United States v. Zolin, 809 F.2d, at 1416-1417, and
United States v. Author Services, Inc., 804 F.2d 1520, 1525-1526 (CA9
1986) (district court has "considerable" discretion to set terms of
enforcement order), opinion amended, 811 F.2d 1264 (1987), with
United States v. Barrett, 837 F.2d 1341 (CA5 1988) (en banc) (district
court lacks authority to "conditionally enforce" IRS summons; inquiry
limited to single question of whether summons should be enforced), cert.
denied, 492 U.S. 926, 109 S.Ct. 3264, 106 L.Ed.2d 609 (1989).
II
We recognize that several Courts of Appeals have accepted the Government's
argument in IRS enforcement proceedings, [FN8] but the force of that line of
authority is matched *16 by a similar array of decisions reaching a contrary
conclusion in proceedings enforcing Federal Trade Commission (FTC) dis-covery
requests. [FN9] There is no signifi- **452 cant difference between the
governing statutes that can explain the divergent interpretations. [FN10] Nor
is there any reason to conclude that *17 production of records relevant to a
tax investigation should have mootness consequences that production of other
business records does not have. Moreover, in construing these provisions of
the Internal Revenue Code, the Court has considered it appropriate to rely on
its earlier cases involving other statutes, including the Federal Trade
Commission Act. See United States v. Powell, 379 U.S. 48, 57, 85 S.Ct. 248,
254-255, 13 L.Ed.2d 112 (1964) (citing United States v. Morton Salt Co., 338
U.S. 632, 642-643, 70 S.Ct. 357, 363-364, 94 L.Ed. 401 (1950)).
FN8. United States v. Kersting, 891 F.2d 1407, 1410, n. 8 (CA9 1989),
cert. denied, 498 U.S. 812, 111 S.Ct. 49, 112 L.Ed.2d 25 (1990);
Hintze v. IRS, 879 F.2d 121, 124-125 (CA4 1989); United States v.
Church of World Peace, 878 F.2d 1281 (CA10 1989); United States v.
Sherlock, 756 F.2d 1145, 1146-1147 (CA5 1985); United States v. First
Family Mortgage Corp., 739 F.2d 1275, 1278-1279 (CA7 1984); United
States v. Kis, 658 F.2d 526, 533 (CA7 1981), cert. denied, 455 U.S.
1018, 102 S.Ct. 1712, 72 L.Ed.2d 135 (1982); United States v. Equity
Farmers Elevator, 652 F.2d 752 (CA8 1981); United States v. Silva &
Silva Accountancy Corp., 641 F.2d 710, 711 (CA9 1981); United States v.
Deak-Perera Int'l Banking Corp., 610 F.2d 89 (CA2 1979); Kurshan v.
Riley, 484 F.2d 952 (CA4 1973); United States v. Lyons, 442 F.2d 1144,
1145 (CA1 1971). But see Gluck v. United States, 771 F.2d 750 (CA3
1985).
FN9. See FTC v. Gibson Products of San Antonio, Inc., 569 F.2d, at 903
(compliance with district court order enforcing FTC subpoena does not moot
appeal; court can effectuate relief by requiring FTC to return subpoenaed
documents and forbidding FTC from using materials in adjudicatory
hearing); FTC v. Ernstthal, 197 U.S.App.D.C. 174, 175, 607 F.2d 488,
489 (1979) (compliance with FTC subpoena does not moot appeal where court
can order FTC to return subpoenaed documents); Atlantic Richfield Co.
v. FTC, 546 F.2d 646, 650 (CA5 1977) (same); FTC v. Browning, 140
U.S.App.D.C. 292, 293-294, n. 1, 435 F.2d 96, 97-98, n. 1 (1970) (same).
Cf. FTC v. Invention Submission Corp., 296 U.S.App.D.C. 124, 127, n. 1,
965 F.2d 1086, 1089, n. 1 (1992) (compliance with district court order
enforcing FTC civil investigative demand pursuant to 15 U.S.C. s 57b-
1(e) does not moot appeal as court could order FTC "to return responsive
materials and to destroy any records derived from them"); Casey v. FTC,
578 F.2d 793 (CA9 1978) (action seeking to enjoin FTC investigation
presents live controversy despite parties' compliance with FTC subpoena as
appellate court can order FTC to return wrongfully subpoenaed records).
See also Government of Territory of Guam v. Sea-Land Service, Inc., 294
U.S.App.D.C. 292, 295, 958 F.2d 1150, 1153 (1992) (compliance with district
court order enforcing Federal Maritime Commission discovery order does not
moot appeal where party seeks return of discovered materials).
There is no merit to the Government's contention that the FTC cases are
distinguishable in that they involve adjudicative, as opposed to
investigative, subpoenas. While Gibson Products involved an
adjudicative subpoena, Invention Submission, Casey, and Atlantic
Richfield all involved investigative subpoenas.
FN10. In fact, the summons enforcement provisions of the Internal Revenue
Code "closely paralle[l]" the corresponding provisions of the Federal Trade
Commission Act. See Handler, Recent Antitrust Developments--1964, 63
Mich.L.Rev. 59, 90 (1964). Section 9 of the FTC Act provides, in pertinent
part:
"Any of the district courts of the United States ... may, in case of
contumacy or refusal to obey a subpoena issued to any person, partnership,
or corporation issue an order requiring such person, partnership, or
corporation ... to produce documentary evidence if so ordered...." 38
Stat. 722, as amended, 15 U.S.C. s 49.
In the words of Professor Handler:
"Section 7602 of the Internal Revenue Code authorizes the Secretary of
the Treasury or his delegate to summon taxpayers or other witnesses to
testify and to produce relevant and material documents. Section 9 of the
FTC Act grants the same power to the Commission. Should a recipient of a
summons or subpoena refuse to comply, both statutes afford the same
enforcement procedures. In neither case is the administrative subpoena
self-executing: obedience can be obtained only by court order. In
addition, both statutes, which are in pari materia, make it a criminal
offense to 'neglect' to appear or to produce subpoenaed documents." 63
Mich.L.Rev., at 91 (footnotes omitted).
[5][6][7][8] We therefore conclude that the appeal was improperly
dismissed as moot. In so concluding we express no opinion on the merits of the
Church's argument that the Government did not establish an adequate evidentiary
basis to support the District Court's determination that the tapes fell within
the crime-fraud exception to the attorney-client privilege. Nor do we express
any opinion about the res judicata contention advanced in the Government's
brief in opposition to the petition for certiorari. Brief for United States in
Opposition *18 13-14. We simply hold that compliance with the summons
enforcement order did not moot the Church's appeal. [FN11]
FN11. In reaching this conclusion, we reject petitioner's "fall back"
argument that even if compliance with a summons enforcement order by the
subject of the IRS investigation moots an appeal, compliance by a
disinterested third party--here, the Clerk of the Los Angeles Superior
Court--does not. Brief for Petitioner 25-34; Reply Brief for Petitioner
16-18. We agree with the Government that a "difference in the method of
compliance does not create a distinction for the purpose of the
constitutional case or controversy requirement." Brief for United States
30. This case presents a justiciable controversy not because a third party
complied with the summons enforcement order, but because petitioner has a
stake in the outcome of the proceeding and a federal court can effectuate
relief should petitioner prevail on the merits.
There is a distinction in the law between the enforcement of discovery
orders directed at parties and the enforcement of discovery orders directed
at disinterested third parties, but that distinction derives from concerns
regarding finality, not mootness. As a general rule, a district court's
order enforcing a discovery request is not a "final order" subject to
appellate review. A party that seeks to present an objection to a
discovery order immediately to a court of appeals must refuse compliance,
be held in contempt, and then appeal the contempt order. See United
States v. Ryan, 402 U.S. 530, 91 S.Ct. 1580, 29 L.Ed.2d 85 (1971).
However, under the so-called Perlman doctrine, see Perlman v. United
States, 247 U.S. 7, 38 S.Ct. 417, 62 L.Ed. 950 (1918), a discovery order
directed at a disinterested third party is treated as an immediately
appealable final order because the third party presumably lacks a
sufficient stake in the proceeding to risk contempt by refusing
compliance. Ibid. See generally 15B C. Wright, A. Miller, & E. Cooper,
Federal Practice and Procedure s 3914.23, pp. 156-167 (2d ed. 1992). This
distinction has no bearing on this case because a district court order
enforcing an IRS summons is an appealable final order. See Reisman v.
Caplin, 375 U.S. 440, 84 S.Ct. 508, 11 L.Ed.2d 459 (1964). There is no
"third-party exception" because there is no general rule barring immediate
appeal of IRS summons enforcement orders.
**453 The judgment of the Court of Appeals is vacated, and the case is
remanded for further proceedings consistent with this opinion.
It is so ordered.