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UNITED STATES v. CORTESE

April 28, 1978

UNITED STATES OF AMERICA and JOSEPH A. DOLLARD, Special Agent Internal Revenue Service
v.
AMERICO V. CORTESE, Prothonotary Court of Common Pleas Philadelphia, Pennsylvania



The opinion of the court was delivered by: FOGEL

 FOGEL J.

 In this Internal Revenue Service summons enforcement proceeding, the plaintiffs, the United States of America, and Joseph A. Dollard, Special Agent, Internal Revenue Service (IRS), seek certain records filed by nine members of the bar with Americo V. Cortese, Prothonotary of the Philadelphia County Court of Common Pleas. We have granted leave to these nine attorneys to intervene in this proceeding, and they have moved to dismiss the government's complaint and to quash the Internal Revenue Service's summons.

 Intervenor's motion to dismiss will be granted for the following reasons:

 I. PROCEDURAL AND FACTUAL HISTORY OF THE CASE

 Plaintiffs' complaint, filed December 23, 1977, contains the following essential averments: (1) Special Agent Dollard has been assigned to determine the federal tax liabilities of fourteen named attorneys, for the years 1971 through 1975 inclusive; (2) defendant Cortese has books and records relevant to the determination of the tax liabilities of those individuals; (3) defendant failed to appear in response to a series of summons issued by the IRS directed to him; and (4) on May 28, 1976, defendant failed to produce the books and records demanded. The complaint also alleges the following salient matters: (1) the information sought may be relevant to the determination of the tax liabilities of the named individuals; (2) the information is not in the possession of the plaintiffs; (3) the investigation is being conducted for a legitimate purpose; and (4) the plaintiffs have complied with the administrative procedures required by the Internal Revenue Code.

 Copies of the IRS series of summons are attached as exhibits to the complaint. Each such summons required the defendant to appear before Special Agent Dollard, and to produce two categories of records for each of the named attorneys: first, "All contingency fee agreements filed by or for the above-named individual with the Prothonotary's office during the years 1971 through 1975, inclusive;" and second, "All statements of distribution filed by or bearing the name of the above-named individual with the Prothonotary's office during the years 1971 through 1975, inclusive." *fn1"

 As an additional exhibit in support of the allegations of the complaint, plaintiffs also submitted the affidavit of Special Agent Dollard. Upon consideration of the complaint, and its exhibits, we issued an Order to Show Cause, requiring the defendant to appear for a hearing on January 6, 1977. *fn2"

 In response to the plaintiffs' complaint, defendant filed a "Statement of Defendant," representing that the defendant was prepared to produce the documents which were the subject of the various summons issued by the Internal Revenue Service. *fn3" However, defendant did request that we "afford the opportunity to any interested attorney whose records are here sought to present whatever motions or objections he might have to enforcement of the subject summons before this Court." Statement of Defendant at p. 2.

 On January 6, 1977, the date scheduled for the initial hearing, nine of the named attorneys, through their counsel, petitioned for leave to intervene in this proceeding, pursuant to Rule 24 of the Federal Rules of Civil Procedure. Petitioners alleged the following matters: (1) the documents which are the subject of the IRS summons are in fact the property of the petitioners, for whom the defendant was acting as agent and custodian; (2) the defendant was unable to adequately represent the interests and legal rights of the petitioners; and (3) the petitioners desired to challenge the plaintiffs' attempt to enforce the series of summons for the 202 materials. Petitioners also enumerated the legal arguments which they intended to present to the Court, if granted leave to intervene.

 At the January 6, 1977, hearing we heard the arguments of counsel with respect to the issue of intervention. We granted intervenors' motion notwithstanding plaintiffs' opposition. We also ordered intervenors to submit any motions for the Court's consideration by January 26, 1977, and we scheduled an evidentiary hearing for February 3, 1977.

 Subsequent to the hearing of January 6, 1977, and prior to the filing of any appropriate motion by the intervenors, they noticed the depositions of Special Agent Dollard and Walter S. Batty, Jr., Esquire, an Assistant U.S. Attorney. Plaintiffs then moved for a protective order, arguing that discovery in "Summons Enforcement Proceedings" was inappropriate prior to an "Evidentiary Show Cause Hearing." We granted the motion for a protective order and stayed all discovery, pending the outcome of the scheduled evidentiary hearing.

 The nine intervening attorneys then filed a single "Motion to Dismiss Complaint and to Quash Summonses and Grand Jury Subpoena." *fn4" With respect to enforcement of the IRS summons, the intervenors' motion, together with supporting affidavits, subsequently filed, sets forth the following essential allegations:

 
(1) the 202 materials are in fact the property of the named attorneys, not the property of the Prothonotary, and are therefore not properly subject to a summons upon the Prothonotary;
 
(2) the 202 materials contain information which is privileged against disclosure, by virtue of the attorney-client privilege, the Fifth Amendment privilege against self-incrimination, and the right of privacy;
 
(3) enforcement of the summons would constitute a violation of equal protection principles, on the theory that certain attorneys who failed to comply with Local Rule 202 have not been the subject of IRS summons;
 
(4) the IRS summons are being used solely for the purpose of obtaining evidence for criminal proceedings; and that there is no bona fide civil ...

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