United States v. Davis
636 F.2d 1028 (1981)
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Rule of Law:
The attorney-client privilege does not protect communications made to an attorney acting in a non-legal capacity, such as an accountant preparing tax returns. For pre-existing documents transferred from a client to an attorney, the privilege applies only if the transfer was for the purpose of obtaining legal advice and the documents were privileged in the client's hands under the Fifth Amendment.
Facts:
- The IRS began an investigation of Robert M. Howard for potential tax liability related to suspected income from narcotics trafficking.
- IRS Special Agent Edmond Martin learned from a state official that Howard was implicated in marijuana smuggling and controlled a corporation owning a yacht, despite reporting very little income on his tax returns.
- The IRS issued a summons to Craig Davis, an attorney and certified public accountant who prepared Howard's tax returns, demanding Howard's financial records and the workpapers Davis created for the returns.
- At Howard's direction, Davis refused to comply with the summons, asserting the attorney-client privilege.
- The IRS then issued a second summons to Stephen Orr, another of Howard's attorneys, seeking records of financial transactions involving Howard that were handled by Orr's law firm, as well as Howard's business records in Orr's possession.
- Orr also refused to comply with the summons, making a blanket assertion of privilege.
Procedural Posture:
- The Internal Revenue Service (IRS) issued a civil investigative summons to Craig Davis, an attorney.
- When Davis refused to comply, the United States government filed a petition in U.S. District Court to enforce the summons.
- Following a hearing, the district court granted the government's petition and ordered the summons enforced in full.
- The IRS issued a separate summons to Stephen Orr, another attorney for the same client, who also refused to comply.
- The government filed a second petition in U.S. District Court for enforcement against Orr.
- After a hearing, the district court ordered the summons against Orr enforced in full.
- Davis and Orr each obtained a stay of the orders and filed separate appeals to the U.S. Court of Appeals for the Fifth Circuit, which consolidated the cases.
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Issue:
Does the attorney-client privilege protect documents held by an attorney from an IRS summons when those documents include the attorney's tax preparation workpapers, the client's pre-existing business records, and records of financial transactions between the attorney and client?
Opinions:
Majority - Wisdom, J.
No. The attorney-client privilege does not broadly protect these documents from an IRS summons because the privilege does not cover communications for non-legal services like tax preparation, records of financial transactions between attorney and client, or pre-existing documents unless those documents would have been protected by the client's Fifth Amendment privilege in the client's own hands. The court first determined that the summonses met the four-part test from United States v. Powell, as they were issued for a legitimate civil tax collection purpose. The court rejected the attorneys' vicarious assertion of their client's Fifth Amendment privilege, citing Couch v. United States for the principle that the privilege is personal and does not apply to documents held by a third party. The work product doctrine was also found inapplicable because the tax workpapers were not prepared in anticipation of litigation. The court's central analysis applied the test from Fisher v. United States, distinguishing between communications created for legal advice and pre-existing documents transferred to an attorney. It held that Davis's tax preparation workpapers were not privileged because preparing tax returns is an accounting service, not a legal one. Similarly, records of financial transactions where Orr acted as a business agent for Howard were not for legal advice and thus not privileged. However, the court found that Howard's pre-existing business records transferred to Orr could potentially be privileged if the transfer was for legal advice and the documents themselves were protected in Howard's hands under the Fifth Amendment's 'zone of privacy' doctrine from Boyd v. United States. The case was therefore remanded for the district court to make this specific determination for those documents.
Analysis:
This decision significantly clarifies the scope of the attorney-client privilege in the context of IRS investigations, particularly when attorneys perform dual roles. It establishes a clear precedent that non-legal services, such as tax preparation, are not shielded by the privilege even when performed by a lawyer, preventing the privilege from being used to immunize what is essentially accounting work. By carefully applying and refining the Fisher test, the ruling distinguishes between different types of documents, limiting the ability of individuals to shield incriminating financial records from the IRS simply by transferring them to an attorney. This forces a document-by-document analysis and reinforces that the purpose of the communication—seeking legal advice—is the touchstone of the privilege.
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