491 U.S. 554 (1989)
This case arises out of the efforts of the Criminal Investigation Division of the Internal Revenue Service to investigate the tax returns of L. Ron Hubbard, founder of the Church of Scientology, for the calendar years 1979 through 1983.1
In the course of its investigation, the IRS sought access to 51 documents that had been filed with the Clerk of the Los Angeles County Superior Court in connection with a case entitled Church of Scientology of California v. Armstrong.2 The Armstrong litigation involved a charge by the Church that one of its former member, Gerald Armstrong, had obtained by unlawful means documentary materials relating to Church activities, including two tapes.3 Some of the documents sought by the IRS had been filed under seal.4
On October 24, 1984, IRS Special Agent Steven Petersell served a summons upon the Clerk pursuant to 26 U.S.C. §7603 demanding that he produce the 51 documents.5 On November 21, IRS agents were permitted to inspect and copy some of the summoned materials, including the tapes.6 On November 27, the Church and Mary Sue Hubbard, who had intervened in Armstrong, secured a temporary restraining order from the United States District Court for the Central District of California requiring the IRS to file with the District Court all materials acquired on November 21 and all reproductions and notes related thereto.7
By order dated December 10, the District Court returned to the IRS all materials except the tapes and the IRS' notes reflecting their contents.8 On January 18, 1985, the IRS filed in the District Court a petition to enforce its summons seeking the tapes and 12 sealed documents the Clerk had refused to produce.9 The Church and Mary Sue Hubbard intervened to oppose production, claiming the IRS was not seeking the documents in good faith and objecting on grounds of lack of relevance and attorney-client privilege.10
Respondents asserted the privilege as a bar to disclosure of the tapes.11 The IRS submitted two declarations by Agent Petersell.12 The second offered a description of the tapes' contents based on interviews.13 It appended partial transcripts of the tapes that the IRS had lawfully obtained from a confidential source.14
After oral argument and an evidentiary hearing, the District Court rejected respondents' claim of bad faith.15 The court ordered production of 5 of the 12 documents with a restriction that they not be delivered to any other government agency unless criminal tax prosecution is sought or a court order is obtained.16 The court ruled that the crime-fraud exception did not apply because the quoted excerpts tended to show or admit past fraud but gave no clear indication that future fraud or crime was being planned.17
Respondents appealed to the Court of Appeals for the Ninth Circuit and the IRS cross-appealed.18 The panel held that the Government's evidence of crime or fraud must come from sources independent of the attorney-client communications recorded on the tapes.19 It reviewed only the independent evidence and affirmed the District Court's determination that the IRS had failed to establish the applicability of the crime-fraud exception.20 The full Court of Appeals vacated the panel opinion for en banc review on the basis of a perceived conflict between precedents.21 A majority of the limited en banc court determined that the intracircuit conflict was illusory and reinstated the panel opinion in relevant part.22
Whether, when a district court enforces an IRS summons, the court may condition its enforcement order by placing restrictions on the disclosure of the summoned information?23
A district court may condition enforcement of an IRS summons on the IRS agreeing to abide by disclosure restrictions when appropriate.24
Yes. The District Court ordered production of five of the twelve documents.25
It imposed the restriction that they not be delivered to any other government agency by the IRS unless criminal tax prosecution is sought or a court order is obtained.26
The Court of Appeals upheld the conditional enforcement order.27
It held that a district court may condition enforcement of a summons on the IRS agreeing to abide by disclosure restrictions.28
The Supreme Court affirms the judgment of the Court of Appeals on this issue by an equally divided Court.29
The district court may condition its enforcement order by placing restrictions on the disclosure of the summoned information.30
Whether the applicability of the crime-fraud exception to the attorney-client privilege must be established by independent evidence or can be resolved by an in camera inspection of the allegedly privileged material?31
The applicability of the crime-fraud exception can be determined by in camera review of the communications if the party opposing the privilege makes a threshold showing of a factual basis adequate to support a good faith belief by a reasonable person that in camera review may reveal evidence to establish the exception.32 The threshold showing may be made using any relevant nonprivileged evidence lawfully obtained.33
No. The Court of Appeals reviewed only the Government’s independent evidence and affirmed the District Court’s determination that the IRS had failed to establish the applicability of the crime-fraud exception.34
The Supreme Court rejects the independent evidence approach as inconsistent with reason and experience under Federal Rule of Evidence 501.35
The Court holds that in camera review may be used to determine whether allegedly privileged attorney-client communications fall within the crime-fraud exception.36
This is permitted provided the party opposing the privilege presents evidence sufficient to support a reasonable belief that in camera review may yield evidence that establishes the exception’s applicability.37
The threshold showing may be met by using any relevant evidence, lawfully obtained, that has not been adjudicated to be privileged, such as the partial transcripts the IRS possessed.38
The applicability of the crime-fraud exception can be resolved by an in camera inspection of the allegedly privileged material upon a proper threshold showing using any relevant nonprivileged evidence.39