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Gannet v. First National State Bank of New Jersey

argued: October 5, 1976.

HERBERT M. GANNET, APPELLANT,
v.
FIRST NATIONAL STATE BANK OF NEW JERSEY; UNITED STATES OF AMERICA AND CARL E. REICHELT, SPECIAL AGENT OF INTERNAL REVENUE SERVICE, V. FIRST NATIONAL STATE BANK, HERBERT M. GANNET, INTERVENOR IN D.C., APPELLANT



APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF NEW JERSEY (D.C. Civil No. 75-2028) (D.C. Civil No. 76-124).

Biggs, Van Dusen and Rosenn, Circuit Judges.

Author: Van Dusen

VAN DUSEN, Circuit Judge.

This is an appeal by intervenor Herbert M. Gannet from a district court enforcement order*fn1 directing the First National State Bank of New Jersey to comply with an Internal Revenue Service summons requesting the identity of the purchaser of two cashier's checks, and the sources of the funds used to purchase those checks.*fn2 The question presented here is whether the attorney-client privilege protects this information from disclosure, since the cashier's checks were deposited in an attorney's trust account to facilitate anonymous transmission to the IRS in payment of a tax deficiency of an unknown taxpayer. We hold that it does not.

Since the facts of this case have been set forth in detail in United States v. First National State Bank of New Jersey, Herbert M. Gannet, Intervenor-Appellant, 540 F.2d 619, (3d Cir., 1976),*fn3 we need not restate them here, and proceed directly to consideration of the issues raised on this appeal.

I

The instant case is similar to that of Schulze v. Rayunec, 350 F.2d 666 (7th Cir. 1965). There, Boughner, a tax attorney, was retained to represent a taxpayer who wished to remain anonymous, and delivered a cashier's check for $215,499.95 to the Internal Revenue Service without disclosing the taxpayer's identity. As in this case, when the IRS received the check, a special agent attempted to summon from the issuing bank information calculated to reveal the purchaser's identity. Upon the bank's refusal to comply, the IRS petitioned the district court for enforcement of the summons, and the attorney intervened. Boughner sought to invoke the attorney-client privilege, claiming that the bank had acted as his agent, and that he had forwarded the check in the course of offering confidential legal services to a client.

The Seventh Circuit was not persuaded that the privilege applied, and noted that "Boughner personally did not acquire any rights concerning the bank's books and records," 350 F.2d at 668, by purchasing a cashier's check on behalf of an anonymous client. The court added that the bank

". . . was not hired or employed to render any confidential service. The communication, if any, of the client's name was not made in order to enable the bank to aid Boughner in giving any legal advice. In fact, it was not absolutely necessary to disclose the client's name. Boughner could have purchased the cashier's check by currency, although a currency transaction involving $215,000 would, undoubtedly, have been quite unusual."

350 F.2d at 668.

The court held that bank records pertaining to the cashier's check which the intervenor transmitted to the IRS were not "clothed with the attorney-client privilege." Id.*fn4

This result is supported by subsequent developments in the law. The Bank Secrecy Act of 1970 (Act), 12 U.S.C. § 1829b,*fn5 requires that all federally insured banks maintain records of bank account transactions. The rationale, as § 1829b(a)(2) expressly recognizes, is the usefulness of such records in "criminal, tax, or regulatory investigations or proceedings."

The Supreme Court, implicitly following Schulze v. Rayunec, supra, held the record-keeping requirements of this Act constitutional in California Bankers Assn. v. Shultz, 416 U.S. 21, 39 L. Ed. 2d 812, 94 S. Ct. 1494 (1974), noting that

"banks are . . . not . . . neutrals in transactions involving negotiable instruments, but parties to the instruments with a substantial stake in their ...


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