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July 24, 1979

MANCHEL, LUNDY AND LESSIN, Defendant and LOUIS KURLAND, Applicant for Intervention

The opinion of the court was delivered by: DITTER



 The government filed a summons enforcement proceeding against Manchel, Lundy and Lessin, a law firm, seeking the records of a certain taxpayer, Louis Kurland, Esq. In my opinion and order of June 21, 1979, I denied Mr. Kurland's application for intervention pursuant to Fed. R. Civ. P. 24 and 26 U.S.C. ยง 7609 and enforced the summons. Taxpayer, Kurland, filed a notice of appeal from my order together with an appeal bond. Taxpayer now seeks a stay of the enforcement summons against his former employer until the Court of Appeals decides whether I acted properly in denying taxpayer's intervention motion.

 Initially, I agree that my denying taxpayer leave to intervene is an appealable, final order, Commonwealth v. Rizzo, 530 F.2d 501, 504 (3rd Cir. 1976); Philadelphia Electric Co. v. Westinghouse Electric Corp., 308 F.2d 856, 859 (3rd Cir. 1962).Although not so labeled, the government's summons enforcement proceeding is in the nature of an injunction -- it prays for an order requiring the taxpayer's former employer to produce certain records. A final or interlocutory judgment in an action for an injunction shall not be stayed as of right during an appeal, but rather is a matter within the court's discretion. Fed. R. Civ. P. 62(a) and (c).

 Discretion to grant a stay in an injunction case is governed by four factors: (a) the applicant for the stay must "make a strong showing that he is likely to succeed on the merits of the appeal, (b) the applicant [must] establish that unless a stay is granted he will suffer irreparable injury, (c) no substantial harm will come to other interested parties, and (d) a stay would do no harm to the public interest." Bauer v. McLaren, 332 F.Supp. 723, 729 (S.D. Iowa 1971), cited with approval in Evans v. Buchanan, 424 F.Supp. 875, 879 (D. Del. 1976).

 Applying these principles to the instant case, it is apparent that the taxpayer has not met the requirements for a stay. The appeal's likelihood of success on the merits is slim in view of the heavy burden on the taxpayer "to disprove the actual existence of a valid civil tax determination or collection purpose by the Service" United States v. LaSalle, 437 U.S. 298, 316, 98 S. Ct. 2357, 2367 (1978); United States v. Genser, Nos. 76-2623 and 76-2624 (3rd Cir., filed July 16, 1979).

 Furthermore, no injury, much less irreparable injury, to the taxpayer by virtue of a denial of the stay has been shown. If the records produced are prejudicial to the taxpayer, the proper place to raise abuse of process is at trial. Donaldson v. United States, 400 U.S. 517, 530-31, 91 S. Ct. 534, 542, 27 L. Ed. 2d 580 (1970). Since there is presently no recommendation for criminal prosecution of the taxpayer, his claims of prejudice are mere speculation.

 Substantial harm will come to other parties and the public interest from the grant of the stay. The government's investigation of the taxpayer will be seriously impeded. One of the reasons for not allowing the taxpayer to intervene at the summons enforcement stage was to prevent undue hindering of the IRS investigation. To delay that process while my denial of intervention is appealed flies in the face of the policies announced by the Supreme Court in Donaldson, supra, and my opinion. In Bauer v. McLaren, supra, at 729-30, the district court refused to stay enforcement of a judgment pending appeal since a stay would disrupt the crucial investigatory activities of the grand jury.

 The taxpayer has not persuaded me to exercise my discretion to grant a stay, thus the enforcement of the summons against the law firm should proceed. If a criminal action is brought against the taxpayer, he can challenge the introduction of these records at that time.


 AND NOW, this 24th day of July, 1979, the motion of the applicant for intervention for a stay of any proceedings to enforce my order of June 21, 1979 in favor of the government pending appeal is hereby refused for the reasons set forth in the accompanying memorandum.


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