The opinion of the court was delivered by: FRANKEL
By a summons under 26 U.S.C. § 7602
agents of the Internal Revenue Service called upon respondent, as Secretary of Standard Oil Company of New Jersey, to produce minutes of meetings held in 1962 and 1963 by the boards of directors and executive committees of Jersey itself and 17 affiliated corporations which were included in Jersey's consolidated federal income tax returns for those two years. The respondent, bringing to formal and justiciable issue a dispute that matured some time ago, refused compliance. The government seeks an order of compulsion under 26 U.S.C. § 7604.
In opposition, respondent argues that (1) the minutes sought by the summons are outside the scope of the underlying statute -- i. e., beyond the category of "books, papers, records, or other data which may be relevant or material" to the Service's inquiries and (2) the summons, by making a demand so broad, attempts an "unreasonable search" that offends against the Fourth Amendment. The undisputed facts recounted in the motion papers are as follows:
Standard of New Jersey, which the court could perhaps notice as an enterprise of some size, has interests and operations extending widely across this country and abroad. It files consolidated income tax returns as the common parent of an affiliated group of corporations which, in 1962 and 1963, included about 75 domestic corporations. Examination of such returns by the IRS is a continuous process; four agents from the New York District Director's office are assigned full time to this work, and they are assisted by specialists from the Service in foreign operations, in problems affecting property (valuation, depreciation, etc.) and in employee benefit plans. This work in New York City is supplemented by regular examinations of important Jersey affiliates elsewhere, such as Humble Oil & Refining Company (one of the 17 listed in the summons involved here) at its principal office in Houston, Texas.
Beginning in 1957 the agents conducting these examinations requested minutes for the boards and executive committees of Jersey itself and some of its affiliates. These requests were granted without objection over a period of 10 years or so. In late 1967, however, the company's associate general counsel, who soon rose to be general counsel, took note of this practice and concluded that it was improper. As he describes the next steps in his affidavit here:
"* * * At my instance, after review and consideration by Jersey's management, the Service was advised that it would no longer be permitted unlimited access to all minutes but that Jersey would continue to cooperate in the examination of its consolidated returns, and in particular would make available for inspection all minutes which might have a bearing on the determination of Jersey's income tax liability.
"* * * The decision that the Service would no longer be permitted to examine all corporate minutes was taken because the scope of the Service's authority to examine books, papers, records and like documents is limited to documents which may be relevant or material to the determination of income tax liability. Many of the corporate minutes of Jersey and, I am informed, of its affiliates do not bear on tax liability, and in my experience at Jersey, no other agency or department of the United States has been given the kind of unlimited access to minutes (or other documents) as is requested here by the Service."
Elaborating upon the analogy from practice by other agencies, this affiant goes on to observe:
"* * * It is the practice of other government agencies to particularize the subject matter of a request to Jersey for documents, and the policy and practice of Jersey to produce for examination only such documents, including minutes, as are within a particularized, appropriate request made in the course of a lawful inquiry."
As an alternative to its former policy of simply delivering the requested minutes, the company proposed to the Service in late 1967 an arrangement it sketched in a memorandum entitled "Minute Procedure." As the memorandum proposed it, the procedure contemplated the following:
"All minutes of the Company which are action minutes, e. g., resolutions, approvals, etc., will be digested and lists prepared by the Company. These listings will not include extracts of minutes which are not of the action type; such as, reviews of financial conditions and forecasts, forward planning projects, executive development reviews, or reports on economic conditions, or future energy requirements, and other minutes which do not reflect actual decisions or actions by the Board. The digests of action minutes prepared by our Secretary's Department will be separated into two lists separating those that are relevant to an examination of the Company's tax return and those that are not. Minutes on projects and proposed contracts on which action was taken but which was not consummated will not be listed as relevant. For example, minutes relating to the Tidewater and Potash acquisitions which were never consummated, and Esso International minutes authorizing the quoting of specific prices on sales of crude or products which were not consummated will not be listed. The listing showing relevant action minutes will be made available to the IRS with the understanding that if there is an interest in any specific item a copy of the complete minute will be given to the IRS."
There was some discussion leading to some modification of the proposal, and the parties worked with it on a trial basis for a couple of years. In the summer of 1969, however, the Service informed the company that the arrangement could not continue to be acceptable and that it would insist upon the former practice of seeing the minutes for Jersey and designated affiliates. The resulting impasse has led to the instant proceeding.
To focus on what is in issue under the statute, and to put aside what is not, the controversy centers upon the language in 26 U.S.C. § 7602 authorizing production of records "which may be relevant or material to [the] inquiry * * *." Many of the minutes demanded, the company says, are not "relevant or material * * *." The Service has not "particularized" its request to aim at what "may be relevant or material." And so, the argument concludes, the demand in the summons is excessive, unauthorized and unenforceable.
There is no suggestion that compliance would be burdensome or oppressive in any sense beyond the foregoing claim of statutory excess. There is no appeal on grounds of trouble, expense, disruption or other hurts commonly the subject of quarrels about subpoenas. There is no claim of privilege; despite occasional references in the papers to "confidentiality," ...