## Facts

- The IRS conducted an examination of the Massachusetts Institute of Technology (MIT), a § 501(c)(3) organization, to assess continued exempt status and compliance with employment tax and unrelated business income rules.
- The IRS requested law firm billing statements and minutes of MIT’s governing body and related committees.
- MIT produced the materials with redactions, asserting attorney-client privilege and work-product protection.
- The IRS demanded unredacted versions; MIT refused.
- The IRS sought the same materials from the Defense Contract Audit Agency (DCAA), a Department of Defense auditing entity that reviews contractors’ records to prevent overcharging.
- MIT had previously provided the billing statements and at least some committee minutes to DCAA pursuant to Department of Defense contracts.
- After DCAA declined to disclose without MIT’s consent (which MIT withheld), the IRS served an administrative summons on MIT for unredacted billing statements and minutes of nine meetings.
- MIT refused to comply, again asserting privilege and work product.
- The district court enforced the summons for the billing statements and most minutes, but declined enforcement for three sets of minutes, accepting MIT’s claim (without evidentiary support) that those minutes had not been provided to DCAA.
- MIT appealed the waiver ruling; the United States cross-appealed the refusal to enforce the summons as to the three sets of minutes.

## Issues

1. Whether federal common law governs waiver of attorney-client privilege and work-product protection in an IRS summons enforcement proceeding.
2. Whether MIT’s disclosure of documents to DCAA waived any attorney-client privilege and work-product protection as to the disclosed materials.
3. Whether the summons should be enforced for the three sets of committee minutes the district court treated as undisclosed and therefore unwaived.

## Decision

- The First Circuit applied federal common law to waiver questions arising in the federal tax summons proceeding.
- The court held that MIT’s voluntary disclosure of the documents to DCAA forfeited attorney-client privilege and work-product protection as to the disclosed materials.
- The court affirmed enforcement of the IRS summons for the billing statements and the minutes shown to have been disclosed to DCAA.
- The court vacated the district court’s refusal to enforce the summons for the three sets of minutes, holding the record did not support a finding that they were withheld from DCAA.
- The court directed broader enforcement of the IRS summons consistent with its waiver ruling.

## Legal Principles

- In federal tax summons proceedings, privilege and waiver are governed by federal common law under Federal Rule of Evidence 501.
- Attorney-client privilege generally requires confidentiality; disclosure to a third party outside those reasonably necessary to the legal representation ordinarily waives the privilege even if the client subjectively intended confidentiality.
- A government contract auditor charged with protecting the government’s financial interests is not within the privileged relationship merely because access arises from a contractual or regulatory audit regime.
- Work-product protection may likewise be waived by voluntary disclosure to a third party whose interests are not aligned with the disclosing party and who is positioned to transmit the materials to a potential adversary.
- A party resisting an IRS summons on a nonwaiver theory bears the burden of substantiating that allegedly privileged materials were not disclosed in a manner that would forfeit protection.

## Conclusion

The First Circuit held that MIT’s prior disclosure of counsel-related billing records and governance minutes to DCAA waived attorney-client and work-product protections, requiring enforcement of the IRS summons, and it rejected the district court’s refusal to compel production of three sets of minutes unsupported by evidence of nondisclosure.


United States v. Mass. Inst. of Tech., 129 F.3d 681 (1st Cir. 1997)