United States v. Zolin

Syllabus The Internal Revenue Service (IRS), as part of its investigation of the tax returns of L. Ron Hubbard, founder of the Church of Scientology (the Church), filed in the Federal District Court a petition to enforce a summons it had served upon the Clerk of the Los Angeles County Superior Court demanding that he produce documents, including two tapes, in his possession in conjunction with a pending suit. The Church and Mary Sue Hubbard, intervenors in the state-court action and respondents here, intervened to oppose production of the materials. They claimed, inter alia, that the IRS was not seeking the materials in good faith and that the attorney-client privilege barred the tapes' disclosure. The IRS argued, among other things, that the tapes fell within the exception to the attorney-client privilege for communications in furtherance of future illegal conduct-the so-called "crime-fraud" exception-and urged the District Court to listen to the tapes in making its privilege determination. In addition, the IRS submitted a declaration by a special agent which had included partial tape transcripts the IRS lawfully had obtained. The court rejected respondents' bad-faith claim and ordered production of five of the requested documents, but it conditioned its enforcement order by placing restrictions upon IRS dissemination of the documents. The court also ruled that the tapes need not be produced since they contained privileged attorney-client communications to which, the quoted excerpts revealed, the crime-fraud exception did not apply. The court rejected the request that it listen to the tapes, on the ground that that request had been abandoned in favor of using the agent's declaration as the basis for determining the privilege question. The Court of Appeals affirmed the conditional-enforcement order. As to the privilege issue, it agreed with respondents that the District Court would have been without power to grant the IRS' demand for in camera review of the tapes, because the Government's evidence of crime or fraud must come from sources independent of the attorney-client communications on the tapes. Reviewing the independent evidence (a review that excluded the partial transcripts), the court affirmed the District Court's determination as to the inapplicability of the crime-fraud exception.

Held: 1. Insofar as it upheld the District Court's conditional-enforcement order, the Court of Appeals' judgment is affirmed by an equally divided Court. P. 561. 2. In appropriate circumstances, in camera review of allegedly privileged attorney-client communications may be used to determine whether the communications fall within the crime-fraud exception. Pp. 562-575. (a) Federal Rule of Evidence 104(a), which provides that a court is bound by the rules of evidence with respect to privileges when determining the existence of a privilege, does not prohibit the use of in camera review. Pp. 565-570. (b) However, before a district court may engage in in camera review at the request of the party opposing the privilege, that party must present evidence sufficient to support a reasonable belief that such review may reveal evidence that establishes the exception's applicability. Once this threshold showing is made, the decision whether to engage in in camera review rests in the sound discretion of the court. Pp. 570-572. (c) The party opposing the privilege may use any relevant nonprivileged evidence, lawfully obtained, to meet the threshold showing, even if its evidence is not "independent" of the contested communications as the Court of Appeals uses that term. Pp. 573-574. (d) On remand, the Court of Appeals should consider whether the District Court's refusal to listen to the tapes in toto was justified by the manner in which the IRS presented and preserved its in camera review request. If its demand was properly preserved, that court, or the District Court on remand, should determine whether the IRS has presented a sufficient evidentiary basis for in camera review and whether it is appropriate for the District Court, in its discretion, to grant the request. Pp. 574-575. 809 F.2d 1411 (CA9 1987), 842 F.2d 1135, and 850 F.2d 610 (CA9 1988), affirmed in part, vacated in part, and remanded. BLACKMUN, J., delivered the opinion of the Court, in which all other Members joined, except BRENNAN, J., who took no part in the consideration or decision of the case. Alan I. Horowitz, Washington, D.C., for petitioner. Michael Lee Hertzberg, New York City, for respondents. Justice BLACKMUN delivered the opinion of the Court.