UNITED STATES OF AMERICA, PETITIONER V. JAMES E. BAGGOT No. 81-1938 In the Supreme Court of the United States October Term, 1981 The Solicitor General, on behalf of the United States, petitions for a writ of certiorari to review the judgment of the United States Court of Appeals for the Seventh Circuit in this case. Petition for a Writ of Certiorari to the United States Court of Appeals for the Seventh Circuit TABLE OF CONTENTS Opinions below Jurisdiction Federal rules involved Statement Reasons for granting the petition Conclusion Appendix A Appendix B Appendix C Appendix D OPINIONS BELOW The opinion of the court of appeals (App. A, infra, 1a-26a) is reported at 662 F.2d 1232 and the supplemental opinion of the court of appeals upon rehearing (App. B, infra, 28a-32a) is reported at 662 F.2d 1243. The memorandum opinion and order of the district court (App. C, infra, 33a-48a) is not reported. JURISDICTION The judgment of the court of appeals (App. D, infra, 49a-50a) was entered on June 25, 1981, and a petition for rehearing was denied on November 20, 1981 (App. B, infra, 27a-28a). On February 10, 1982, Justice Stevens extended the time in which to file a petition for a writ of certiorari until April 19, 1982. The jurisdiction of this Court is invoked under 28 U.S.C. 1254(1). FEDERAL RULES INVOLVED Federal Rule of Criminal Procedure 6(e) provides in pertinent part: Recording and Disclosure of Proceedings. * * * * * (2) General Rule of Secrecy. -- A grand juror, an interpreter, a stenographer, an operator of a recording device, a typist who transcribes recorded testimony, an attorney for the government, or any person to whom disclosure is made under paragraph (3)(A)(ii) of this subdivision shall not disclose matters occurring before the grand jury, except as otherwise provided for in these rules. No obligation of secrecy may be imposed on any person except in accordance with this rule. A knowing violation of Rule 6 may be punished as a contempt of court. (3) Exceptions. (A) Disclosure otherwise prohibited by this rule of matters occurring before the grand jury, other than its deliberations and the vote of any grand juror, may be made to -- (i) an attorney for the government for use in the performance of such attorney's duty; and (ii) such government personnel as are deemed necessary by an attorney for the government to assist an attorney for the government in the performance of such attorney's duty to enforce federal criminal law. (B) Any person to whom matters are disclosed under subparagraph (A)(ii) of this paragraph shall not utilize that grand jury material for any purpose other than assisting the attorney for the government in the performance of such attorney's duty to enforce federal criminal law. An attorney for the government shall promptly provide the district court, before which was impaneled the grand jury whose material has been so disclosed, with the names of the persons to whom such disclosure has been made. (C) Disclosure otherwise prohibited by this rule of matters occurring before the grand jury may also be made -- (i) when so directed by a court preliminarily to or in connection with a judicial proceeding; or (ii) when permitted by a court at the request of the defendant, upon a showing that grounds may exist for a motion to dismiss the indictment because of matters occurring before the grand jury. If the court orders disclosure of matters occurring before the grand jury, the disclosure shall be made in such manner, at such time, and under such conditions as the court may direct. * * * * * QUESTION PRESENTED Whether disclosure of matters occurring before a grand jury to the Internal Revenue Service for its use in conducting a civil tax investigation to determine liability and assess any tax deficiency constitutes disclosure directed "preliminarily to * * * a judicial proceeding" that may be authorized pursuant to Federal Rule of Criminal Procedure 6(e)(3)(C)(i) upon application to the court supervising the grand jury. STATEMENT 1. In May of 1976, a special federal grand jury convened in the Northern District of Illinois began to investigate certain commodity futures trading transactions on the Chicago Board of Trade and related criminal violations of the Commodities Exchange Act and Internal Revenue Code. During the course of that investigation (which was continued by a successor grand jury upon expiration of the term of the first grand jury), respondent, James E. Baggot, became a target of the investigation. He was interviewed by agents of the grand jury at his home and then subpoenaed to appear before the grand jury. When he responded to the subpoena, he consented to being interviewed by two Assistant United States Attorneys in lieu of appearing before the grand jury. During that interview and two subsequent meetings, respondent entered into an agreement to plead guilty to an information charging two misdemeanor violations of the Commodity Exchange Act, 7 U.S.C. 6c(a)(A). In conformity with that agreement, respondent subsequently appeared before the grand jury and read a statement which had been prepared by an Assistant United States Attorney. Thereafter, on June 24, 1977, respondent pled guilty to the information as agreed (App. A, infra, 1a-2a, 5a-6a; App. C, infra, 33a-34a). On March 8, 1978, the United States Attorney filed a motion in the United States District Court for the Northern District of Illinois seeking an order permitting disclosure of documents that had been subpoenaed by the grand jury in its investigation of respondent, as well as grand jury transcripts, to the Internal Revenue Service ("the Service"), for its use in determining respondent's income tax liabilities. On June 4, 1978, the district court denied the government's motion without prejudice on dual grounds. First, the court determined that the government had failed to establish with the requisite particularity the Service's need for these materials. Second, the court held that disclosure to the Service of matters occurring before a grand jury for use in determination of income tax liabilities was not disclosure directed "preliminarily to * * * a judicial proceeding" within the meaning of Fed. R. Crim. P. 6(e)(3)(C)(i), and accordingly could not be justified under that exception to the general rule of secrecy (Fed. R. Crim. P. 6(e)(2)) applicable to grand jury materials (App. C, infra, 35a). On June 22, 1978, the United States Attorney informed the court of his intention to provide the Service with access to certain documentary materials obtained or created during the grand jury investigation, explaining that, under the doctrine associated with United States v. Interstate Dress Carriers, Inc., 280 F.2d 52, 54 (2d Cir. 1960), they were not "matters occurring before the grand jury" and were accordingly outside the scope of Rule 6(e). Specifically, the government urged that respondent's prepared statement, an internal memorandum to files prepared by Assistant United States Attorney Scott Lassar reflecting the substance of his initial interview with respondent, and certain third party documents produced pursuant to grand jury subpoena -- records of a commodity trading firm reflecting activity in accounts in Baggot's name -- did not constitute matters occurring before the grand jury and thus might be turned over without an order under Rule 6(e)(3)(C)(i) (App. C, infra, 35a). /1/ On October 25, 1978, however, the district court concluded that these materials were "matters occurring before a grand jury" and accordingly rejected the government's assertion that the materials sought could be released to the Service without a disclosure order pursuant to Rule 6(e)(3)(C)(i). On December 6, 1978, the district court authorized the United States Attorney to disclose to the Examination Division of IRS certain matters already in the public record: the two-count information charging respondent, and transcripts of his plea and sentencing proceedings. After digesting this material, the Chief of the Examination Division wrote back to the United States Attorney. He stated that the information provided indicated that respondent had probably evaded his tax liabilities, but that additional information would be needed to determine the amount due and to build a case against respondent. /2/ Specifically, the Chief of the Examination Division sought information that would identify those who made unreported cash payments to Baggot (see note 2, infra) and the commodity trading firms involved. Assuming from the materials in the public record that information of this character had been considered by the grand jury, the IRS requested that the United States Attorney seek any order necessary under Fed. R. Crim. P. 6(e) to authorize release of these materials. The Service explained that, because any disputed assessment of taxes due would eventuate in Tax Court proceedings initiated by respondent, disclosure to the Service for use in tax determination would be disclosure directed "preliminary to * * * a judicial proceeding," and could accordingly be approved by the court pursuant to Fed. R. Crim. P. 6(e)(3)(C)(i) (see App. A, infra, 2a-4a n.4). On February 27, 1979, the United States Attorney again sought the district court's leave to release the requested information. /3/ The government did not renew its contention that any of the materials sought were outside the veil of grand jury secrecy, but pressed its original contention that disclosure should be authorized pursuant to Fed. R. Crim. P. 6(e)(3)(C)(i), because antecedent to a judicial proceeding (App. C, infra, 37a). This time the district court granted the disclosure motion, albeit on somewhat unexpected grounds. First, reconsidering sua sponte its earlier ruling, the court concluded that respondent's prepared statement (though not the transcript of its delivery to the grand jury), as well as Assistant United States Attorney Lassar's "memorandum to file," reflected government investigation independent of the grand jury. The court accordingly held, contrary to its earlier rulings, that these two items were not matters occurring before the grand jury, and could be disclosed to the Service even without a court order. The remaining items covered by the government's disclosure motion were found to be covered by the rule of grand jury secrecy (id. at 37a-42a). The district court concluded that the balance of the materials sought by the Service could not be released on the authority of Rule 6(e)(3)(C)(i) (App. C, infra, 42a-47a). The court labeled the Service's contemplated use of the grand jury materials "simply administrative" (id. at 46a-47a), because no judicial proceeding could arise until the Service made a deficiency assessment that was contested by respondent in the Tax Court. The district court nevertheless granted the disclosure motion, invoking (id. at 47a) "my general supervisory powers over the grand jury to order disclosure of all of the materials." The court explained that, because of the plea agreement, disclosure would not prejudice respondent's interest in freedom from further prosecution. Suggesting that exercise of supervisory power was necessary to relieve the United States Attorney of permanent responsibility for custody of the grand jury materials (id. at 47a-48a), the court concluded that disclosure to the Service would be the "only useful disposition" of these materials (id. at 48a). Respondent appealed. A stay of disclosure was granted during the pendency of the appeal. Respondent argued that all of the items at issue were subject to grand jury secrecy constraints; that disclosure to the Service was not disclosure directed "preliminarily to * * * a judicial proceeding"; that the government had, in any event, failed to show a particularized need justifying disclosure; and that the district court's resort to supervisory powers was improper. As appellee the government argued: (1) that none of the items in issue, except for the transcripts of grand jury testimony and portions of Special Agent's Report based thereon, are "matters occurring before the grand jury"; (2) that disclosure should have been authorized under Fed. R. Crim. P. 6(e)(3)(C)(i) because, as a practical matter, tax court proceedings were virtually certain to result from disclosure; (3) that the "particularized need" standard is inapplicable when the government seeks disclosure of grand jury materials; and (4) that the district court properly exercised its supervisory powers because, with the criminal proceeding closed, there was little further need for grand jury secrecy (App. A, infra, 7a-8a). A divided court of appeals reversed. Initially, the court condemned the district court's resort to extra-statutory supervisory powers (App. A, infra, 9a-12a). /4/ The court acknowledged that there may be situations in which the need for disclosure in the interests of justice may overcome the policy of grand jury secrecy, justifying relaxation of the strictures of Rule 6(e). The court concluded, however, that, at least on the record of this case, the Service's responsibility fro determination of tax liabilities and collection of taxes does not meet that standard. The court of appeals also concluded that the rule of secrecy embodied in Fed. R. Crim. P. 6(e)(2) is applicable to essentially all of the materials in issue (App. A, infra, 12a-15a). /5/The court thus rejected the district court's characterization of the Lassar memorandum and respondent's prepared statement, reasoning that they are too closely linked to the grand jury process to escape the veil of secrecy. Finally, the court of appeals agreed (App. A, infra, 15a-19a) with the district court that disclosure of grand jury material to the Service for tax determination would not be disclosure directed "preliminarily to * * * a judicial proceeding" and accordingly could not be authorized under Fed. R. Crim. P. 6(e)(3)(C)(i). The court of appeals explained (App. A, infra, 16a) that "the present Internal Revenue Service civil investigation of Baggot's possible additional tax liabilities is too embryonic, speculative and uncertain to firmly say that it is 'preliminarily to' a judicial proceeding." /6/ In dissent, Judge Pell reasoned (App. A, infra, 21a-22a) that litigation in the Tax Court was so probable a consequence of the requested disclosure of documents, that their disclosure would be directed "preliminarily to * * * a judicial proceeding" within the meaning of Rule 6(e)(3)(C)(i). Judge Pell rejected the majority's premise that judicial proceedings must be a virtual certainty before disclosure may be secured under the Rule. But even applying that standard, he concluded that disclosure to the Service was authorized (App. A, infra, 21a-22a): It is true, of course, as the majority states, that the option of litigation rests with the taxpayer who may wish to pay any deficiency assessed if one is even assessed. From the vigorous manner in which the present litigation is being pursued, I would find more certainty in the likelihood of ultimate judicial proceedings than does the majority. In any event, the actual beginning of litigation is always an uncertain matter which may be deferred or even never begun for any of several reasons. If we read into the rule that the disclosure preliminarily to a judicial proceeding must be preliminarily to a judicial proceeding bound to happen, we substantially are curtailing the plain language of the rule in a situation such as the present where there has been a guilty plea to an information charging an understatement of taxable income of approximately $60,000. It would not seem to characterize correctly the likelihood of ultimate vigorous pursuit of civil liability by the Internal Revenue Service as being "embryonic, speculative and uncertain," In sum, on this point, it appears to me from the facts of this case that there is reasonable certainty that a judicial proceeding will follow but that even if this was not a practical certainty under the plain wording of the rule of disclosure the Internal Revenue Service was entitled to disclosure of the items it sought. Judge Pell also dissented on the independent ground that, under United States v. Interstate Dress Carriers, supra, and the Seventh Circuit's own decision in United States v. Stanford, 589 F.2d 285 (1978), cert. denied, 440 U.S. 983 (1979), the Lassar memorandum and the commodity trading company records showing fraudulent transactions, were not matters occurring before the grand jury subject to grand jury secrecy constraints (App. A, infra, 20a, 22a-25a). The government sought rehearing, suggesting en banc review. The petition was denied (App. B, infra, 27a-28a), with two judges voting for en banc review. Both the panel majority and Judge Pell, however, issued supplemental opinions upon the denial of rehearing (App. B, infra, 28a-32a), each addressing only the Interstate Dress Carriers issue. The majority denied that it had established any firm rule that "all third party documents subpoenaed by a grand jury thereby forever after acquire immunity from any other use" (id. at 30a), stating that (ibid.): (o)nly those subpoenaed documents should be subject to Rule 6(e) which when reasonably considered in the context of the particular grand jury investigation are determined by the trial court to reveal some secret aspect of the investigation. However, rather than explain why this standard required denial of disclosure in this case, the court of appeals simply observed that the district court had examined the documents in camera and added (id. at 29a): As he was thoroughly familiar with the grand jury proceedings, we see no justification for disputing his view of those documents. Judge Pell adhered to and restated his grounds for dissent (id. at 31a-32a). REASONS FOR GRANTING THE PETITION This case presents an important question concerning Rule 6(e) of the Federal Rules of Criminal Procedure, which governs disclosure of matters occurring before a grand jury. /7/ The court of appeals has held that grand jury material may not be released to the Internal Revenue Service for civil tax investigation and enforcement pursuant to Rule 6(e)(3)(C)(i), which permits the disclosure of "matters occurring before the grand jury * * * when so directed by the court preliminary to * * * a judicial proceeding." This decision conflicts with a recent decision of another court of appeals and, unless overturned, will substantially and adversely affect the Internal Revenue Service's ability to fulfill its statutory mandate to investigate, determine tax liabilities, and collect taxes determined to be owing. /8/ 1. Rule 6(e) of the Federal Rules of Criminal Procedure codifies the traditional rule that grand jury proceedings should be kept secret. The rule prohibits disclosure of "matters occurring before the grand jury" by anyone (other than a witness) having access to the grand jury proceedings, including grand jurors, transcribers and reporters, attorneys for the government and agents of the grand jury. Fed. R. Crim P. 6(e)(2). The rule permits disclosure of "matters occurring before the grand jury," inter alia, "when so directed by a court preliminarily to or in connection with a judicial proceeding." Fed. R. Crim. P. 6(e)(3)(C)(i). /9/ The decision of the court of appeals that release of grand jury material to the IRS Examination Division for a determination of respondent's tax liability and collection of a deficiency would not be disclosure directed "preliminarily to * * * a judicial proceeding" is squarely contrary to a subsequent decision of the United States Court of Appeals for the Eighth Circuit, In re Judge Elmo B. Hunter's Special Grand Jury, 667 F.2d 724 (1981). Although aware of the Seventh Circuit's decision in this case, the Eighth Circuit found Judge Pell's reasoning in dissent more persuasive, relying upon it and quoting from it extensively. Id. at 727. /10/ This acknowledged conflict of appellate decisions clearly warrants this Court's review because of the importance of maintaining uniform procedures nationwide in the administration of the internal revenue laws. /11/ 2. The Eighth Circuit's decision is correct. The contrary decision of the court below is based upon an unreasonably narrow reading of the language of Rule 6(e)(3)(C)(i) and is contrary to the legislative history underlying the Rule. a. As Judge Pell observed in his dissent (App. A, infra, 21a), the decision below "fails to give any real recognition to the word 'preliminarily' in the rule of disclosure." Rule 6(e)(3)(C)(i) permits disclosure of grand jury material when directed by a court in either of two situations: "in connection with a judicial proceeding" or "preliminarily to * * * a judicial proceeding." If, as the court of appeals assumed, the "preliminarily to" branch of the rule applies only to situations in which litigation is essentially certain to occur it is mere surplusage. First, disclosure in such situations could be directed by the court as disclosure "in connection with a judicial proceeding," for that branch of the rule does not require that the judicial proceeding be already pending. Second, there are always contingencies -- both foreseeable and unforeseeable -- that may intervene to avert litigation whenever disclosure of grand jury material is sought as an antecedent to contemplated litigation. As Judge Pell emphasized (App. A, infra, 21a), "the actual beginning of litigation is always an uncertain matter * * * ." Thus, if virtual certainty of litigation is the test, the "preliminarily to" branch of Rule 6(e)(3)(C)(i) would have no practical application. The court of appeals' conclusion that the possibility of litigation here is "too embryonic, speculative and uncertain to firmly say that (disclosure would be directed) 'preliminarily to' a judicial proceeding" (App. A, infra, 16a), rests upon the observations that the Service has yet to assess any deficiency against respondent, and that, when such a deficiency is assessed, respondent may choose to pay it rather than contest it by litigation in the Tax Court (id. at 15a). But these factors do not distinguish the Service's proposed tax investigation of respondent from other situations in which disclosure has been authorized preliminarily to a judicial proceeding. As the Eighth Circuit observed in In re Judge Elmo B. Hunter's Special Grand Jury, supra, 667 F.2d at 728, the courts of appeals have generally approved the disclosure of grand jury materials to attorney disciplinary bodies, judicial conduct commissions, and police boards of inquirey, "on the theory that the scheme under which such (investigatory) action is taken is designed to culminate in, or clearly contemplates a judicial proceeding" or makes provision for judicial review. See, e.g., United States v. Sobotka, 623 F.2d 764, 766 (2d Cir. 1980); In re Disclosure of Testimony Before the Grand Jury (Troia), 580 F.2d 281, 285-286 (8th Cir. 1978) (hereinafter "Troia"); In re Special February 1971 Grand Jury v. Conlisk, 490 F.2d 894, 896-897 (7th Cir. 1973) (hereinafter "Conlisk"); Doe v. Rosenberry, 255 F.2d 118, 119-120 (2d Cir. 1958). As the Eighth Circuit observed (In re Judge Elmo B. Hunter's Special Grand Jury, supra, 667 F.2d at 728): In none of these cases can it be said with any certainty that a judicial proceeding will occur. The investigating authority may conclude there has been no wrongdoing, or the subject of the investigation may not contest the adverse action. * * * (T)here is no substantial difference from the IRS civil assessment situation. /12/ The statutory scheme designed by Congress for the ascertainment, assessment and collection of taxes is designed to culminate in judicial proceedings whenever necessary to resolve civil tax disputes. The Internal Revenue Code provides that when the Service determines a deficiency in tax, the proceedings to settle that deficiency are begun by giving the taxpayer notice of that deficiency. 26 U.S.C. 6212. Upon receipt of such a notice, the taxpayer's options are to accede to the alleged deficiency either affirmatively (by payment) or by inaction (which enables the government to take judicial action to enforce the deficiency as though it were a default judgment), to negotiate a settlement, or, if no settlement can be reached, to initiate judicial proceedings to resolve the dispute either in the United States Tax Court or (if payment of a deficiency is first made) in the United States District Court or the Court of Claims (26 U.S.C. 6213, 7422). In any judicial proceedings, the dispute in its entirety is "determinable by a court." Doe v. Rosenberry, supra, 255 F.2d at 120. These judicial proceedings are plenary, and are in no respect limited by the prior administrative proceedings. Accordingly, disclosure of grand jury materials to the IRS in the circumstances of the case is authorized by Rule 6(e)(3)(C)(i). /13/ The court of appeals' interpretation of Rule 6(e)(3)(C)(i) would strip it of all utility in the area of tax enforcement, for the Service cannot make a determination of any tax deficiency (thereby prompting the initation of litigation) without pertinent information necessary to establish the amount of, and show the existence of, the deficiency. Thus, to allow disclosure only at the juncture when litigation is a certainty would be a meaningless formality. By that time IRS would either have gained the necessary evidence by some other means, or in some instances, would have had to abandon the effort to assess taxes that are owing. The language of the rule does not require this absurd result. Significantly, in an analogous situation, the government conceded, and this Court agreed, that the work-product doctrine, ordinarily framed in terms of materials prepared by counsel in anticipation of litigation, may be asserted in response to IRS summonses issued pursuant to 26 U.S.C. 7602, even though no litigation is pending and it is not certain that litigation will ensue. Upjohn Co. v. United States, 449 U.S. 383, 397-398 (1981). Just as the policy underlying the work product doctrine required, as a practical matter, that it extend to material sought by IRS summonses, similar practical considerations dictate that the policy underlying Rule 6(e)(3)(C)(i) not be undercut by the fact that under the statutory scheme civil tax litigation ensuing from an IRS investigation is ordinarily initiated by the taxpayer. /14/ We do not suggest that there are no limitis on disclosure preliminary to a judicial proceeding. Whenever disclosure is sought under Rule 6(e)(3)(C)(i), the party requesting disclosure must establish that its need for the information outweighs the public interest in grand jury secrecy. Douglas Oil Co. v. Petrol Stops Northwest, 441 U.S. 211, 223 (1979). This requirement eliminates the possibility that disclosure to the public generally will be permitted under the rule we advocate. /15/ Nor will release to the IRS upon an appropriate showing encourage grand jury abuse, for the government will still be required to show that the grand jury had been utilized in good faith and not simply to gather information for civil purposes. In re December 1974 Term Grand Jury Investigation, 449 F. Supp. 743 (D. Md. 1978). See also In re Grand Jury, Miscellaneous No. 979 (Northern District of Texas), 583 F.2d 128, 131 n.2 (5th Cir. 1978); In re Grand Jury Subpoenas, April, 1978, at Baltimore, 581 F.2d 1103, 1109-1110 (4th Cir. 1978), cert. denied sub nom. Fairchild Industries Inc. v. Harvey, 440 U.S. 971 (1979). /16/ b. The decision below is contrary to legislative history revealing that Congress intended that Rule 6(e)(3)(C)(i) reach not only circumstances in which judicial proceedings are in being or are certain to ensue, but also situations where judicial proceedings are a routine sequel to an administrative process, and are prescribed by the relevant statutory scheme as the means for final determination of rights and liabilities. Specifically, the legislative history underlying 1977 Amendments to Rule 6(e) reflects Congress' understanding that disclosure of grand jury material may be made for use in a civil tax investigation. In 1977, Rule 6(e) was amended to permit government attorneys acting without any court order to disclose grand jury materials to agency personnel, such as Internal Revenue Service agents, who are needed to assist such attorneys in grand jury proceedings and criminal law enforcement. /17/ While the language at issue here was not altered by the 1977 Amendment to the rule, /18/ the Senate Report on the 1977 Amendment, S. Rep. No. 95-354, 95th Cong., 1st Sess. (1977), reflects approval of court-ordered disclosure to agencies outside the Justice Department for civil law enforcement use. The Report explained (id. at 8) that potential misuse of the grand jury would be prevented by requiring that a court order authorizing disclosure be obtained, but emphasized (ibid.): There is, however, no intent to preclude the use of grand jury-developed evidence for civil law enforcement purposes. On the contrary, there is no reason why such use is improper, assuming the grand jury was utilized for the legitimate purposes of a criminal investigation. Accordingly, the Committee believes and intends that the basis for a court's refusal to issue and order under paragraph (C) to enable the government to disclose grand jury information in a non-criminal proceeding should be no more restrictive than is the case today under prevailing court decisions. (Footnote omitted.) In emphasizing its intention that disclosure under Rule 6(e)(3)(C)(i) be permitted at least as liberally as the prevailing court decisions at the time allowed, the Senate Committee cited United States v. Procter & Gamble Co., 356 U.S. 677 (1958), and Robert Hawthorne, Inc. v. Director of Internal Revenue Service, 406 F. Supp. 1098 (E.D. Pa. 1976). S. Rep. No. 95-354, supra, at 8 n.13. The former decision did not present any question concerning disclosure of grand jury materials to federal agency personnel. In Hawthorne, however, the court discussed the issue in the context of approving disclosure to Internal Revenue Service agents whose assistance was required by the United States Attorney in presenting a criminal case to the grand jury. The court's order did not prohibit the Internal Revenue Service agents from "utilizing (the) materials in the course of their official duties, for either criminal or civil purposes," so long as the materials remained under the aegis of the United States Attorney. 406 F. Supp. at 1113. And, although the question was not squarely presented, the court also indicated that once the grand jury proceedings had been concluded, there was no bar to the use of grand jury materials by the Internal Revenue Service, stating that it saw no merit "to plaintiff's contention that no civil use may ever be made of the subpoenaed material," and affirming that, "so long as the government did not act in bad faith (by misusing the grand jury as a subterfuge for a civil investigation), ultimate civil use is proper." Id. at 1119 n.35. The court explicitly recognized that once an agency such as the Internal Revenue Service has terminated its role in a grand jury investigation, it may properly petition a court for disclosure of grand jury materials under Rule 6(e) preliminarily to, or in connection with, a judicial proceeding. 406 F.Supp. at 1129 n.62. Cf. United States v. Kordel, 397 U.S. 1, 11-13 (1970). The Senate Committee's citation of Hawthorne may properly be taken as an indication of the views of Congress as a whole. Prior to Senate action, the House of Representatives had disapproved the amendment to Rule 6(e) formulated by the Advisory Committee on Criminal Rules of the Judicial Conference, without adopting any substitute. H.R. Rep. No. 95-195, 95th Cong., 1st Sess. 3-5 (1977), accompanying H.R. 5864, 95th Cong., 1st Sess. (1977). The Senate, however, reformulated the Rule into its present form. After receiving a complete explanation of the effect of the Senate provisions the House acquiesced in the Senate amendment to the bill. 123 Cong. Rec. 25193-25196 (1977). In his explanation, Representative Wiggins of the House Judiciary Committee specifically noted the issues raised by the use of IRS agents as agents of the grand jury. Id. at 25196. Representative Wiggins affirmed that under the rule as amended this practice would continue to be lawful. Ibid. He added that (ibid.): The practical effect of the Senate amendment to rule 6(e) is that a Government agent receiving grand jury information from an attorney for the Government becomes, to that extent, an employee of the grand jury. He is not free to share such information within the agency which directly employs him, even though it might be useful and relevant to the mission of that agency. Materials produced before a grand jury must be held secret by that grand jury and, must remain within the control of the Attorney General or his assistants, or the U.S. attorney or his assistants, to be used by them in the performance of their duties. In closing, however, Representative Wiggins made it clear that these constraints were inapplicable so long as leave of court for disclosure was sought (ibid.; emphasis added): There will come a time when a grand jury uncovers violations of civil laws, or State or local laws. It then becomes the duty of the attorney for the Government, if he or some other attorney for the Government cannot act on that information, to turn it over to the appropriate governmental agency so that such agency can do its duty. However, the attorney for the Government may do this only after successfully seeking an order of the court. In light of this clear legislative history, including explicit mention of the role of IRS agents, the court of appeals seriously erred in characterizing (App. A, infra, 18a) this legislative history as irrelevant to the issue presented here. 3. Thus the 95th Congress clearly intended that disclosure pursuant to Rule 6(e)(3)(C)(i) be available in the circumstances of this case. The contrary decision of the court below has substantial potential for impeding the enforcement of the federal tax laws. As the Court recognized in United States v. LaSalle National Bank, 437 U.S. 298, 311-312 (1978), "the Government does not sacrifice its interest in unpaid taxes just because a criminal prosecution begins." Yet, under the decision below, instances may well arise in which the Service is generally aware of the existence of a tax delinquency, but is unable to recoup the deficiency because information needed to establish and prove the liability cannot be disclosed to the Internal Revenue Service, the agency charged by Congress with the duty of enforcing the federal tax laws, and is, as a practical matter, otherwise unavailable. Rule 6(e)(3)(C)(i) does not command any such anomalous result. CONCLUSION The petition for a writ of certiorari should be granted. Respectfully submitted. REX E. LEE Solicitor General GLENN L. ARCHER, JR. Assistant Attorney General LAWRENCE G. WALLACE Deputy Solicitor General JOSHUA I. SCHWARTZ Assistant to the Solicitor GENERAL ROBERT E. LINDSAY WILLIAM A. WHITLEDGE Attorneys APRIL 1982 /1/ The district court's opinion states (App. C, infra, 35a), incorrectly we believe, that at this juncture the Dress Carriers exception was cited as the basis for disclosure of only the first two items. The discrepancy has no bearing on the issues in this case. /2/ The transcript of the plea proceedings revelaed the government's charge that respondent had participated in rigged commodity trades designed to produce substantial paper losses, which he deducted in preparing his tax returns, while recovering a substantial portion of the artificial "losses" in unreported cash kickbacks from his trading partners. /3/ In addition to t;e items covered by the government's June 22, 1978, application (see page 5, supra), the United States Attorney sought leave to disclose: a letter to respondent from the Pacific Trading Company showing his net profit for 1975, records of all 1975 commodity transactions for the accounts of three other individuals with a second commodity trading firm, transcripts of the grand jury testimony of four individuals (including those whose commodity accounts records were subpoenaed), and a report prepared at the close of the grand jury investigation by an IRS special agent, detailed to assist the grand jury in its probe of respondent, that summarized the investigation and the evidence (App. A, infra, 6a; App. C, infra, 36a). /4/ Judge Pell, who dissented from the judgment in substantial part (App. A, infra, 20a-26a), concurred in this aspect of the majority opinion (id. at 20a). /5/ 1lthough the majority made no specific mention of the statements reflecting commodity transactions or the letter to respondent (see page 5 & note 3, supra), which, the government had argued, were not matters occurring before the grand jury at all, these were clearly covered by its ruling. The court of appeals did concede that upon remand portions of the special agent's summary report (see note 3, supra) sought by the IRS might be disclosed, insofar as they were demonstrated to rest on sources outside the grand jury investigation. /6/ Because of this disposition, the court of appeals did not address the standard to be applied to government disclos re requests under Rule 6(e)(3)(C)(i) -- a question that is presented by our pending petition in United States v. Sells Engineering, Inc., No. 81-1032. (filed Dec. 2, 1981). (See note 7, infra.) /7/ We note the pendency before the Court of two other cases presenting significant issues pertaining to grand jury secrecy. State of Illinois v. Abbott & Associates, Inc., cert. granted, No. 81-1114 (Mar. 22, 1982), presents, inter alia, the question whether Section 4F(b) of the Clayton Act, 15 U.S.C. 15f(b), authorizes disclosure to state attorneys general of grand jury materials relating to antitrust investigations pursuant to Rule 6(e)(3)(C)(i) on less than a showing of particularized and compelling need. United States v. Sells Engineering, Inc., cert. pending, No. 81-1032 (filed Dec. 2, 1981), presents the question whether Rule 6(e)(3)(A)(i) authorizes disclosure of grand jury materials -- without a court order -- to Justice Department attorneys engaged in evaluating or preparing civil False Claims Act litigation. Sells also presents the question whether disclosure to government personnel as to whom leave of court is required must rest upon a showing of particularized and compelling need. (See note 6, supra.) /8/ We do not seek review of the court of appeals' conclusion that the district court's exercise of supervisory power was unwarranted on the facts of this case. Similarly, although there is much force to Judge Pell's contention that certain of the items in dispute are not "matters occurring before the grand jury" within the meaning of Fed. R. Crim. P. 6(e)(2), we are not seeking review of this aspect of the majority's decision. The Dress Carriers issue may well require review in a future case, for, as the court of appeals appears to have recognized (App. A, infra, 29a), it is difficult to reconcile its analysis of that issue with the decisions of other courts of appeals. Compare, e.g., In re Grand Jury Investigation, 630 F.2d 996, 1000-1001 (3d Cir. 1980); SEC v. Dresser Industries, Inc., 628 F.2d 1368, 1382-1383 (D.C. Cir.), cert. denied, 449 U.S. 993 (1980); United States v. Interstate Dress Carriers, Inc., supra, 280 F.2d at 54. We note, however, that the court of appeals disclaimed any intention to establish a general rule barring disclosure of grand jury documents (App. A, infra, 11a; App. B, infra, 30a & n.1). Furthermore, the Judicial Conference's Advisory Committee on the Federal Rules of Criminal Procedure has currently proposed amendments to Rules 6(e)(2) and 6(e)(3)(C) to clarify the status of documents that are subpoenaed by, or submitted to a grand jury. Committee on Rules of Practice and Procedure, Preliminary Draft of Proposed Amendments to the Federal Rules of Criminal Procedure 13-15, 18, 20-22 (Oct. 1981). For convenience we hereafter refer to all of the materials sought by the IRS in this case as "grand jury materials." /9/ The rule also permits disclosure without a court order to an attorney for the government for use in the performance of such attorneys' duties (Rule 6(e)(3)(A)(i)) (see note 7, supra) and to such government personnel as are deemed necessary by an attorney for the government to assist an attorney for the government in the performance of such attorney's duties to enforce federal criminal law (Rule 6(e)(3)(A)(ii)). Disclosure may also be made under the rule when permitted by a court at the request of the defendant, upon a showing that grounds may exist for a motion to dismiss the indictment because of matters occurring before the grand jury (Rule 6(e)(3)(C)(ii)). /10/ The conflict of authority concerns as issue that arises frequently. Consistent with the Eighth Circuit's decision is In re Grand Jury Subpoenas, April, 1978, at Baltimore, 581 F.2d 1103, 1110 (4th Cir. 1978), cert. denied sub nom. Fairchild Industries Inc. v. Harvey, 440 U.S. 971 (1979), citing with approval In re December 1974 Term Grand Jury Investigation, 449 F. Supp. 743 (D. Md. 1978). See also Patrick v. United States, 524 F.2d 1109, 1117 (7th Cir. 1975). On the other hand, two district courts within the Sixth Circuit have reached a contrary result, consistent with the decision below. In re April 1977 Grand Jury Proceedings, 506 F. Supp. 1174 (E.D. Mich. 1981), appeal pending, No. 81-1182 (6th Cir.); In re 1978-1980 Grand Jury Proceedings, 503 F. Supp. 47 (N.D. Ohio 1980). In an unpublished decision the Fifth Circuit has summarily affirmed a sealed district court order that barred release of grand jury material sought by the IRS for use in a civil tax investigation. In re Grand Jury for the Northern District of Alabama (Drummond Coal Company), No. 81-7076 (July 20, 1981). Finally, as is explained in our reply brief in United States v. Sells Engineering, Inc., No. 81-1032 (see note 7, supra), a copy of which has been served upon counsel for respondent, it is possible that this issue will be reached in Sells v. United States, No. 80-5829 (9th Cir., argued Mar. 2, 1982). /11/ Th1s case presents an especially appropriate occasion for the Court to consider the issue presented. The Eight Circuit's decision in In re Judge Elmo B. Hunter's Special Grand Jury, supra, reversed a district court's denial of an ex parte motion for disclosure to the I.R.S. pursuant to Rule 6(e)(3)(C)(i). The legislative history of that Rule reveals Congress' intention that hearing on such disclosure applications be ex parte. S. Rep. No. 95-354, 92d Cong., 1st Sess. 8 (1977). Moreover, the Judicial Conference's Advisory Committee on the Federal Rules of Criminal Procedure has proposed to amend Rule 6(e) to make explicit the requirement that requests for disclosure by the government be made on an ex parte basis. Committee on Rules of Practice and Procedure, Preliminary Draft of Proposed Amendments to the Federal Rules of Criminal Procedure 15, 25 (Oct. 1981). Wherever this practice is followed, only the government is in position to secure appellate review of a lower court decision. There was, for instance, essentially no opportunity to file a petition for a writ of certiorari to review the decision in In re Judge Elmo B. Hunter's Special Grand Jury, supra, and it appears that the time for filing such a petition has expired. On the other hand, a case, such as the instant one, where, for whatever reason, notice was given to respondent of the disclosure application, provides an opportunity for resolution of the important question presented in a fully adversary setting. Cf. Baker v. Carr, 369 U.S. 186, 204 (1962). /12/ The court below sought to distinguish Conlisk, supra; and Troia, supra, but the attempted distinctions do not withstand analysis. The court noted that in Conlisk the statutory procedure provided a policeman charged with an offense by a disciplinary board with the right to initiate judicial review (App. A, infra, 16a). But the respondent taxpayer has the right to plenary redetermination of his tax liability in the Tax Court. And in Conlisk the court deemed it immaterial that the burden of initiating litigation was placed upon the individual officer charged (49 F.2d at 897), as it is here, and even that sanctions were made effective prior to judicial review -- an attribute which a tax audit lacks. The court below also noted (App. A, infra, 16a) that the disciplinary proceeding itself in Conlisk had certain quasi-judicial attributes. But, as is explained above, disclosure directed preliminarily to a judicial proceeding necessarily embraces proceedings that are not themselves judicial. The court below distinguished Troia, supra, only by remarking (App. A, infra, 17a): "Obviously, there is some flexibility evident in what may be viewed as qualifying for the exception, but the rule is not so flexible as to cover the present Internal Revenue Service administrative interest in the taxes of Baggot." The court of appeals also relied upon In re J. Ray McDermott & Co., 622 F.2d 166 (5th Cir. 1980) (hereinafter "McDermott"); and In re Grand Jury Investigation of Uranium Industry, (1979-2) Trade Cas. Paragraph 62,798 (D.D.C. 1979) (hereinafter "Uranium Industry"). These cases are distinguishable, but serve to underscore the pervasive confusion surrounding Rule 6(e)(3)(C)(i). In McDermott the court of appeals reversed a district court order directing disclosure of grand jury materials to the Federal Energy Regulatory Commission (FERC). FERC sought disclosure for an administrative investigation of the possibility that interstate natural gas pipeline companies subject to its jurisdiction had exacted overcharges in violation of the Natural Gas Act, 15 U.S.C. 717 et seq. The subject of the grand jury investigation, however, was not pipeline overcharges, but price-fixing in the marine construction industry in violation of the Sherman Act -- which is not subject to FERC jurisdiction. FERC's interest in the grand jury proceedings rested entirely upon the supposition that any overcharges suffered by the pipelines as a result of marine-construction bid-rigging might have been passed on to pipeline customers. 622 F.2d at 168-169. The court rejected FERC's contentions that the requested disclosure was preliminary to court of appeals' review of an administrative determination by FERC (pursuant to 15 U.S.C. 717r) or a district court enforcement action initiated by FERC (pursuant to 15 U.S.C. 717s). The court found the nexus between the administrative proceeding and the judicial proceedings too attenuated to permit disclosure. 622 F2d at 171. Without conceding that McDermott was correctly decided, we deem it significant that the Fifth Circuit relied heavily upon FERC's apparent indisposition to actually initiate a judicial proceeding. See 622 F.2d at 171. Moreover, the relationship between the subject of t,e grand jury proceedings, on the one hand, and the contemplated administrative proceedings and succeeding judicial ones, on the other, in McDermott was rather remote. By contrast, as is explained in the text (pages 20-22, infra), the relationship between the grand jury proceedings, the Service's proposed investigation and the Tax Court proceedings likely to ensue is close and direct. Uranium Industry, supra is readily distinguishable. There disclosure was sought only by a congressional committee for investigatory purposes. The court specifically distinguished disclosure to IRS for civil tax investigations (1979-2) Trade Cas. Paragraph 62,798, at 78,643), stating only that disclosure was to be denied where "the likelihood of a court's involvement is either highly remote or non existent." Like McDermott, supra, other cases in which disclosure has been denied because insufficiently related to a contemplated judicial proceeding are distinguishable, but highlight the need for further review. Bradley v. Fairfax, 634 F2d 1126, 1128-1129 (8th Cir. 1980), treats disclosure of grand jury material to the United States Parole Commission as harmless error. In dictum, or what was at most an alternative holding, the court suggested that judicial review of parole commission determinations was sufficiently limited and independent of the parole commission proceeding to make Rule 6(e)(3)(C)(i) inapplicable, thereby distinguishing the cases cited in the text. 634 F.2d at 1129. The panel aso questioned the decision in Troia, supra, 634 F.2d at 1129 n.6. The subsequent decision in In re Judge Elmo B. Hunter's Special Grand Jury, supra, however, reveals the continuing vitality of Troia. Finally, United States v. Bates, 627 F.2d 349 (D.C. Cir. 1980), may be distinguished in the same fashion as McDermott, supra. In any event, Bates may be read to approve disclosure to the IRS, at least in certain circumstances, or is at the least ambiguous on this point. 627 F.2d at 351 & n.1. /13/ As Judge Pell observed (App. A, infra, 21a-22a; see pages 11-12, supra), the particular facts of this case make it especially clear that the requested disclosure could properly be deemed directed "preliminarily to * * * a judicial proceeding." /14/ Cf. also United States v. New York Telephone Co., 434 U.S. 159, 171-178 (1977); FTC v. Dean Foods Co., 384 U.S. 597 (1966). /15/ We note, as well, that disclosure to the Internal Revenue Service will not result in public dissemination of grand jury material. 26 U.S.C. 6103 prohibits the Internal Revenue Service from disclosing to the public information pertaining to taxpayers. /16/ As noted above (page 13 note 7), the nature of the showing is a question presented by the government's petition for a writ of certiorari in United States v. Sells Engineering, Inc., No. 81-1032. /17/ The 1977 Amendments, inter alia, added the present subsections (e)(3)(A)(ii) and (e)(3)(B) to Rule 6. /18/ The court of appeals erroneously stated that the "preliminarily to" language was added to Rule 6 in 1977 (App. A, infra, 3a-5a). In fact, that language was part of the rule when it was first promulgated in 1946. As respects this language, the 1977 Amendment merly reorganized the text of the Rule, setting out the "preliminarily to" provision as part of a separate subsection of the rule. Appendix Omitted