1985 U.S. Tax Ct. LEXIS 9">*9 Ps seek to seal records up to the time of trial to prevent annoyance, embarrassment, and oppression.
85 T.C. 914">*914 OPINION
These cases are before the Court on petitioners' motions to seal filed in each case on May 16, 1985. 1 They were called for hearing at Washington, D.C. on June 5, 1985, at which time counsel for the parties appeared 85 T.C. 914">*915 and presented argument. At the conclusion of the hearing, the Court took the motions under advisement.
Respondent, in his notice of deficiency issued on October 15, 1984 to Willie Nelson Music Company, petitioner in docket number 1174-85, determined the following deficiencies and additions to tax: 1985 U.S. Tax Ct. LEXIS 9">*12
Additions to tax, I.R.C. 1954 | ||||||
Personal | ||||||
Income | holding | |||||
Year | tax | company tax | Total | Sec. 6651(a) 2 | Sec. 6653(b) | Sec. 6654 |
1972 | $ 1,288 | $ 3,198 | $ 4,486 | $ 1,122 | 0 | $ 130 |
1973 | 5,333 | 13,234 | 18,567 | 4,642 | 0 | 537 |
1974 | 7,610 | 15,250 | 22,860 | 5,715 | 0 | 661 |
1975 | 6,387 | 17,443 | 23,830 | 0 | $ 11,915 | 0 |
1976 | 16,589 | 32,268 | 48,857 | 0 | 24,429 | 0 |
1977 | 20,145 | 34,964 | 55,109 | 0 | 27,555 | 0 |
1978 | 58,396 | 63,972 | 122,368 | 0 | 61,184 | 0 |
$ 115,748 | 180,329 | 296,077 | 11,479 | 125,083 | 1,328 |
Willie Nelson Music Co., a Tennessee corporation, had its principal office in Danbury, Connecticut, on the date its petition was filed.
Respondent, in his notice of deficiency issued on October 15, 1984, to petitioners Willie H. Nelson 3 and Connie Nelson, petitioners in docket number 1193-85, determined the following deficiencies and additions to tax:
Additions to tax, I.R.C. 1954 | |||
Years | Income tax | Sec. 6653(b) | Sec. 6653(a) |
1975 | $ 259,775 | $ 141,995 | 0 |
1976 | 405,180 | 283,312 | 0 |
1977 | 384,389 | 305,290 | 0 |
1978 | 465,408 | 0 | $ 23,270.40 |
1,514,752 | 730,597 | 23,270.40 |
Petitioners in docket number 1193-85 were residents of Austin, Texas, at the time they filed their petition.
On January 15, 1985, petitions in both dockets were filed. 4 On March 15, 1985, respondent filed a motion to extend the time within which to answer. Respondent's motion was granted on March 20, 1985 extending his answer due dates to 85 T.C. 914">*916 May 20, 1985. On May 16, 1985, petitioners filed identical motions to seal pursuant to
1985 U.S. Tax Ct. LEXIS 9">*14 In their motions to seal, petitioners seek a protective order sealing the entire record of both cases (including but not limited to all pleadings, depositions, exhibits, papers, and filings) to be opened only by order of the Court and directing that the parties and their counsel in these cases be prohibited from disclosing to the media or public the contents of the sealed records. At the hearing, petitioners' counsel modified his motions in requesting that the records be sealed only up to the time of trial. 6
In support of their motions, petitioners argue that Willie H. and Connie Nelson as nationally known personalities are subject to "intense and continual" scrutiny by the media. The Willie Nelson Music Co. (hereinafter referred to as the company) is wholly owned and controlled by Willie H. and Connie Nelson, and, as a result, the company is also subject to "intense and continual" scrutiny by the media. Petitioners contend that the media coverage1985 U.S. Tax Ct. LEXIS 9">*15 has attached undue credibility to respondent's allegations and has resulted in wide publicity and sensationalization. Thus, petitioners assert that they have been seriously and irreparably damaged by the public's impressions. Petitioners maintain that the damage is caused in part by newspaper headlines which indicate that petitioners are subject to criminal prosecution, 7 thus causing petitioners undue embarrassment and considerable emotional distress. Additionally, petitioners urge that, as a result of the publicity, they have been financially injured in that now they are unable to negotiate large up front payments in long-term endorsement contracts.
Respondent opposes petitioners' motions and argues that common law, statutory law, and the Constitution require that the motions be denied.
Our research has failed to disclose any reported Tax Court case where the fraud additions to tax have been determined 85 T.C. 914">*917 and the record was sealed, 1985 U.S. Tax Ct. LEXIS 9">*16 nor has any such case been advanced by the parties. Since
(a) Authorized Orders:
* * * *
(6) That a deposition
(7) That a trade secret
(8) That the parties simultaneously file specified documents or information enclosed in sealed envelopes to be opened as directed by the Court.
[Emphasis added.]
As a general rule, common law, statutory law, and the U.S. Constitution support the proposition that official records of all courts, including this Court, shall be open and available to the public for inspection and copying.
1985 U.S. Tax Ct. LEXIS 9">*20 It is beyond question, and petitioners agree, that this Court has broad discretionary power to control and seal, if necessary, records and files in its possession, and the standard for review thereof is for abuse of discretion.
In these cases, members of the public have an interest in free access to the facts and in understanding disputes that are presented1985 U.S. Tax Ct. LEXIS 9">*22 to this forum for resolution. They also have an interest in assuring that courts are fairly run and judges are honest. 15
For example, where a motion to seal encompasses documents governed by the attorney work-product privilege or the contents of communications subject to the attorney-client1985 U.S. Tax Ct. LEXIS 9">*23 privilege, the public interest in protecting those privileges would take precedence over the interest to inspect and copy court records.
Public interests are weighed against those advanced by the party seeking the protective order, and, in its discretion, a court may seal the record or portions thereof where justice so requires and the party seeking such relief
A party must come forth with appropriate testimony and factual data to support claims of harm that would occur as a consequence of disclosure.
85 T.C. 914">*921 Historically, good cause has been demonstrated and records sealed where patents, trade secrets, or confidential information are involved. 20 However, a showing that the information would harm a party's reputation is generally not sufficient to overcome the strong common1985 U.S. Tax Ct. LEXIS 9">*27 law presumption in favor of access to court records. "Indeed, common sense tells us that the greater the motivation a corporation has to shield its operations the greater the public's need to know."
In
Courts also acknowledge that confidential business information (e.g., pricing information, customer lists, sales volume) requires protection. The rationale in granting protective orders where documents contain this type of information is that if these facts were disclosed, the moving party would suffer great competitive disadvantage and irreparable harm.
Courts have not only accorded business entities' "confidential" information protection but have also issued protective orders to protect an individual's confidentiality and right to privacy.
In
1985 U.S. Tax Ct. LEXIS 9">*32 The court in
Following several months of adverse publicity, Smith filed motions in both the above-mentioned criminal cases asking the District Courts to either strike any mention of his name from the resumes and records or to seal the record. These motions were denied. Shortly after these rulings, Mr. Smith notified the personnel division of his intention to retire. Upon retirement, 85 T.C. 914">*924 Smith was to receive his normal retirement pay commensurate with his employment grade plus an additional retirement annuity because of his participation in the executive management program (EMP). Approval for his retirement was soon acknowledged. Smith's attorney then filed a petition in the Circuit Court of Appeals for the Fifth Circuit seeking a writ of mandamus to compel the District Court to grant the relief requested in the motions. On the same day the writ of mandamus was filed, the Commander of AAFES issued notice to Smith that he was being suspended from the EMP. The only reasons given for1985 U.S. Tax Ct. LEXIS 9">*34 the suspension were that Smith had been accused of wrongdoing in the two factual resumes previously discussed. After several months of AAFES administrative actions, amended and additional motions, and several orders entered by the administrative panel of the Circuit Court, the status of Smith remained essentially as it was on the day he retired, he had been retired with his regular retirement but his EMP benefits were being held in abeyance pending further AAFES proceedings. Thus, Smith showed that he suffered actual financial injury. The Court of Appeals granted the petition for writ of mandamus and noted at page 1107 --
The presumption of innocence, to which every criminal defendant is entitled, was forgotten by the Assistant United States Attorney in drafting and reading aloud in open court the factual resumes which implicated [Smith] in criminal conduct without affording him a forum for vindication.
Accordingly, we find the inclusion of Mr. Smith's name in the factual resumes were [sic] a violation of his liberty and property rights guaranteed by the Constitution and hold that [Smith's] motions to strike and seal should have been granted in the proceedings below.
Furthermore, petitioners have not demonstrated any harm (financial or otherwise) that they have suffered or will suffer if their motions are denied; their contentions are wholly unsupported1985 U.S. Tax Ct. LEXIS 9">*36 by the record. Petitioners are correct when they argue that
1985 U.S. Tax Ct. LEXIS 9">*37 We have carefully studied the thirty-seven newspaper articles submitted on petitioners' behalf at the hearing. 261985 U.S. Tax Ct. LEXIS 9">*38 All of them were published in Texas newspapers in February 1985: twelve of the articles were published on February 6, twenty-two on February 7, two on February 8 and one on February 9. 27 None of them, in our opinion, even remotely suggest that petitioners are subject to criminal prosecution, albeit thirty-one of the articles report that Willie Nelson has been accused of
Petitioners further claim that the publications they submitted have caused the public to question Willie Nelson's availability for performances in light of "potential criminal prosecution." Petitioners did not show one instance where this happened. In fact, since the filing of the petitions, Willie Nelson has performed at the Merriweather Post Pavillion in Maryland; appeared in Plains, Georgia, to help former President and Mrs. Carter celebrate Plains' 100th Birthday; performed at his annual July 4 picnic in Austin, Texas; and performed 5 nights at New York City's Radio City Music Hall. On
1985 U.S. Tax Ct. LEXIS 9">*39 We think a few final observations are in order. Attached to each petition is a full copy of the statutory notice of deficiency, which lists all of respondent's determinations. The petitions on file contest all of those determinations and in the appropriate portions thereof "facts" are alleged. 30 Respondent,
On these records, after exhaustive analysis and research, we find and hold that petitioners have demonstrated no probative evidence of good cause sufficient to outweigh the public interests. The possibility that petitioners' status as nationally known entertainers may cause these cases to gain some notoriety is not a compelling enough reason to seal these records up to the time of trial. See
To reflect the foregoing,
1. The cases were assigned pursuant to
2. All section references are to the Internal Revenue Code of 1954 as amended.↩
3. Willie H. Nelson is a nationally known country music star.↩
4. Both petitions were timely mailed by certified mail on Jan. 11, 1985, and, thus, timely filed. See sec. 7502.↩
5. All Rule references are to the Tax Court Rules of Practice and Procedure.↩
6. Indeed, the parties agree that an open trial should be conducted.↩
7. There is no criminal case pending against either of the petitioners.↩
8. See
(c) Protective Orders. Upon motion by a party or by the person from whom discovery is sought,
9. Sec. 7461, appertaining to the publicity of proceedings states, in relevant part --
SEC. 7461(a). General Rule. -- Except as provided in subsection (b), all reports of the Tax Court and all evidence received by the Tax Court and its divisions, including a transcript of the stenographic report of the hearings, shall be public records open to the inspection of the public.
(b) Exceptions. -- (1) Trade secrets or other confidential information. -- The Tax Court may make any provision which is necessary to prevent the disclosure of trade secrets or other confidential information, including a provision that any document or information be placed under seal to be opened only as directed by the court.↩
10. For a general discussion of the public nature of judicial proceedings, see
11. In
12. While acknowledging that the right of access is not absolute, the court in
13. In
14. Sec. 7458, respecting hearings provides in salient part --
Hearings before the Tax Court and its divisions shall be open to the public, and the testimony, and,
15. It is arguable that the right of access to records may be more important than the right to observe the judicial process, because it allows examination of documents, pleadings, and transcripts which portray a more complete picture of the official development and resolution of a case. Wilder, "All Courts Shall Be Open,"
16. After comparing the public's interest in access to the plaintiff's right to privacy, the court in
17. We observe that venue on appeal of docket No. 1193-85, without a stipulation to the contrary (see sec. 7482(b)(2)), lies in the U.S. Court of Appeals for the Fifth Circuit. Sec. 7482(b)(1)(A).↩
18. Wyatt involved an action brought for conspiracy to commit libel and slander, where the court said "Courts do not generally grant protective orders without a strong showing of 'good cause.'"↩
19. See and compare
20. Other areas in which courts have granted protective orders are where documents concern national security, law enforcement, and governmental activities. See
21. See
22. Sec. 6103(h)(4)(A) specifically authorizes the disclosure of return information in judicial tax proceedings.↩
23. See, e.g.,
24. In fact, petitioners have not been subject to adverse publicity and are in an enviable position whereby, they can utilize the media for their benefit by simply issuing a news release or calling a press conference.↩
25. See generally
26. These articles were received in evidence.↩
27. As recited earlier, the petitions were filed on Jan. 15, 1985.↩
28. It appears that the majority of these articles were published
29. Another indication of Willie Nelson's continuing popularity is that from March through June of 1985 he had a song in the top twenty country and western singles based upon sales and broadcasts as reported in Billboard Magazine's publications for those months.↩
30. In our judgment, those "facts" are nothing more than conclusions. See Rule 34(b)(5).↩
31. Hence, petitioners' exhortations that they will be injured on the basis of unproven allegations in the answer are premature.↩
32. We mention this to emphasize that the concern for an "impartial jury" is not a legitimate concern in Tax Court proceedings. Cf.