Opinion
CIVIL ACTION NO. 99-10268-DPW
August 6, 2003
MEMORANDUM AND ORDER
In the Procedural Order I entered August 27, 2002, contemporaneously with a Memorandum and Order (the "Summary Judgment Memorandum") disposing of most — but not quite all — of plaintiffs' claims in this action by means of summary judgment against them, I sought the parties' assistance in framing the case for a final judgment without "further investment of extensive resources at the trial court level." The defendants, without waiving or admitting any underlying facts or waiving or compromising any rights of appeal, have responded through a "Motion for Entry of Judgment or in the Alternative for Summary Judgment as to Damages" in effect acquiescing to entry of judgment against them — in the maximum amount I have found available to plaintiff Walter F. Sorenson, Jr. — on the remaining unresolved claims. The plaintiffs, by contrast, have moved for reconsideration of the Summary Judgment Memorandum. I do not find reconsideration merited and I will direct the Clerk to enter final judgment reflecting the damage award defendants are prepared to acquiesce in.
I. Motion for Reconsideration
The plaintiffs' motion for reconsideration is in two parts. The first reargues the determination I made and adds nothing new to the issues. The second seeks to expand the record by presenting the expert opinion of Leslie S. Shapiro, a former Director of Practice for the Treasury Department and a distinguished accounting professional, regarding the obligations of tax preparers. I decline to reopen the summary judgment record. I observe further that even if I were to do so, the purported opinion testimony — assuming, as is not readily apparent, that such opinion testimony consisting ultimately of legal conclusions is admissible, see generally, United States v. Prigmore, 243 F.3d 1, 19, n. 3 (1st Cir. 2001); Nieves-Villanueva v. Soto-Rivera, 133 F.3d 92, 99 (1st Cir. 1997); Burkhart v. Washington Metro. Area Transit. Auth., 112 F.3d 1207, 1212-13 (D.C. Cir. 1997); Snap-Drape, Inc. v. Comm'r, 98 F.3d 194, 198 (5th Cir. 1996); United States v. Buchanan, 964 F. Supp. 533, 537 (D.Mass. 1997) — would not affect the result reached in the Summary Judgment Memorandum.
In rearguing the issues, the plaintiffs contend that the protocols developed by the defendant Block with the IRS for reporting suspected fraud may have led the IRS to facilitate a refund anticipation loan program by Block for its clients. From this contention, they argue that the instance of reporting potential fraud by plaintiff Walter F. Sorenson established a benefit sufficient to create an ad hoc fiduciary relationship. I remain of the view that any benefit to Block is far too abstract and diffuse a foundation upon which to erect an enforceable common law fiduciary obligation of non-disclosure.
Moreover, I am of the view that the creation of such a common law obligation, in the face of competing public policy concerns about developing mechanisms for minimizing tax fraud, goes well beyond the writ of the courts. If such an obligation is to be created, it must be the result not of case-by-case adjudication between specific parties but rather as an undertaking in which all potential interests have an opportunity to be heard and to participate in the legislative rule making activity.
Such an undertaking was made by Congress in its enactment of 26 U.S.C. § 7525 which extends something akin to the attorney client privilege to federally authorized tax preparers. This extension of the privilege however is limited to non-criminal tax matters before the Internal Revenue Service. Id. at § 7525(a)(2) and thus would presumably not extend to the disclosures here relating to a potential criminal tax fraud referral. In any event, § 7525 is not applicable in this case, "because it is applicable only to communications made on or after July 22, 1998, the date the statute was enacted." United States v. Frederick, 182 F.3d 496, 502 (7th Cir. 1999).
The belated post-decision submission of an affidavit by Mr. Shapiro is in derogation of the orderly resolution of summary judgment motions. There are no extraordinary circumstances sufficient to justify expanding the record in this fashion and I decline to do so. See generally Christianson v. Colt Indus. Operating Corp., 486 U.S. 800, 817 (1988); Ellis v. United States, 313 F.3d 636, 646 (1st Cir. 2002) (discussing law of the case doctrine and principle "that court ordinarily ought to respect and follow its own rulings, made earlier in the same case"); Davis v. Lehane, 89 F. Supp.2d 142, 149 (D.Mass. 2000). In any event, the affidavit, which is essentially an argument — in the words of plaintiffs' memorandum — that there is something about the "taxpayer-tax preparer relationship [that] carves out an exception to the general public policy which favors the reporting of suspected tax fraud," makes clear, by omitting to identify any relevant citation, that such a "carve out" was not formally recognized by the IRS itself. Indeed, the affidavit acknowledges that the Block fraudulent tax reporting protocol was developed in conjunction with a branch of the IRS.
I do not find the affirmative obligation of a tax practitioner to advise a client of any error or omission in a document required to be submitted to the IRS, 31 C.F.R. § 10.21 (1994), to suggest by negative implication an enforceable obligation not to make disclosure to the IRS itself.
The fact that the legal and accounting professions may "have gone to great lengths in balancing duties to clients with duties to the system" in the tax preparation arena, Shapiro Aff. ¶ 24, does not mean that those without such professional credentials are bound by or may assert a professional privilege of non-disclosure or confidentially. Indeed, I observe that even as to the accounting profession the Supreme Court has twice declined to fashion an accountant-client, or related work product, privilege. Couch v. United States, 409 U.S. 322 (1973); United States v. Arthur Young Co., 465 U.S. 805 (1984); see also Cavallaro v. United States, 284 F.3d 236, 245-46 (1st Cir. 2002); U.S. v. Arthur Andersen Co., 623 F.2d 725, 729 (1st Cir. 1980). Taxpayers dealing with accountants on tax matters, the Court in Couch found, "lack a legitimate expectation of privacy." Id. at 336.
If anything, the contemporary trend appears to be in the direction of narrowing the scope of even recognized privileges or obligations of confidentiality when faced with competing social values, as evidenced by recent initiatives with respect to such traditional areas of confidentiality as attorney reporting responsibilities, Marc I. Steinberg, Lawyer Liability After Sarbanes-Oxley: Has the Landscape Changed?, 3 Wyo. L. Rev. 371, 372-373, 383-84 (2003), and clergy reporting obligations, J. Thomas Kirkman and Elizabeth R. Thompson, God May Know All, But the Rest of Us Don't — Mandated Clergy Reporting of Child Abuse, 87 Mass. L. Rev. 155 (2003). In the current environment, recognition of a new confidentiality obligation or privilege for "tax preparers" not covered by a traditional privilege is plainly a step not to be undertaken without some greater demonstration of a shared and settled understanding that the benefits from this new privilege outweigh the costs to society from silence about potential tax fraud.
I recognize that I have used the terms "privilege" and obligations of "confidentiality" interchangeably in this Memorandum and that the concepts they connote can involve a range of duties enforceable through several different mechanisms. See generally, Edward J. Imwinkelried, The New Wigmore: Evidentiary Privileges, § 1.3 (2002). For present purposes, however, these various dimensions to privilege and obligations of confidentiality need not be distinguished except to note that there has yet to be recognition of a confidentiality obligation enforceable by one who, while engaged in a commercial relationship with a tax preparer, arguably seeks to engage in tax fraud. Suffice to say that this case does not provide a compelling occasion to provide such a recognition.
II. Entry of Final Judgment
The defendants have adduced evidence — which is not contested — regarding the contract damages measure I have identified as applicable in this case. Without conceding liability, the defendants are prepared to have judgment enter on that basis for the total tax preparation fees incurred by the Walter F. Sorenson for tax years 1993, 1994 and 1995 of $430, which constitutes damages for the claim of beach of contract in Count XII. When the fees for 1994 are doubled in conformance with Mass. Gen. Laws ch. 93A, § 9, an additional $200 is added to the damage award. Thus, the plaintiff Walter F. Sorenson, is pursuant to my rulings, entitled to a total damage award of $630.
CONCLUSION
For the reasons set forth more fully above, the plaintiffs' motion for reconsideration is DENIED, the defendants' motion for entry of final judgment is GRANTED, and the Clerk shall enter final judgment in this case including trial judgment for Walter F. Sorenson in the total amount of $630.