Haber v. United States, 15–2078–cv.

• Decision Date: 20 May 2016
• Docket Number: No. 15–2078–cv.,15–2078–cv.
• Citation: 823 F.3d 746
• Parties: James HABER, Petitioner–Appellant, v. UNITED STATES of America, Signature Bank Corporation, Respondents–Appellees.
• Court: U.S. Court of Appeals — Second Circuit

823 F.3d 746

James HABER, Petitioner–Appellant

v.UNITED STATES of America, Signature Bank Corporation, Respondents–Appellees.^*

No. 15–2078–cv.

United States Court of Appeals, Second Circuit.

Argued: Jan. 29, 2016.

Decided: May 20, 2016.

Jasper G. Taylor III (Richard L. Hunn, Katherine D. Mackillop, Felice B. Galant, on the brief), Norton Rose Fulbright U.S. LLP, Houston, TX and New York, NY, for Petitioner–Appellant.

Dominika Tarczynska (Benjamin H. Torrance, on the brief), for Preet Bharara, United States Attorney for the Southern District of New York, New York, NY, for Respondent–Appellee United States of America.

Before: CALABRESI, LYNCH, and LOHIER, Circuit Judges.

GERARD E. LYNCH

, Circuit Judge:

In this case, we consider a number of challenges raised by the petitioner-appellant, James Haber, to an administrative summons issued by the Internal Revenue Service (“IRS”). The district court (Laura Taylor Swain, Judge ) granted the government's motion to dismiss Haber's petition for lack of subject matter jurisdiction pursuant to Federal Rule of Civil Procedure 12(b)(1)

, and denied Haber's request for jurisdictional discovery. For the reasons set forth below, we AFFIRM the decision of the district court.

BACKGROUND

The IRS issued an approximately $25 million penalty against Haber and his company, The Diversified Group Incorporated (“DGI”), pursuant to 26 U.S.C. § 6707

,¹ in connection with their alleged failure to register tax shelters in violation of 26 U.S.C. § 6111.² Haber and DGI paid $18,370 and $15,500, respectively, toward that assessment, and concurrently filed refund claims with the IRS. The IRS denied their refund claims and filed a federal tax lien against Haber for the unpaid balance of the penalty. In response, Haber contested the penalty by requesting a Collection Due Process (“CDP”) hearing pursuant to 26 U.S.C. § 6320, which has been stayed pending Haber's ongoing litigation.

Haber and DGI then filed suit in the Court of Federal Claims, arguing that the penalty was erroneously assessed, seeking injunctive relief against the IRS's collection efforts, and requesting a refund of the partial payment. The court dismissed the suit for lack of subject matter jurisdiction because Haber and DGI had failed to pay the full penalty before commencing the suit and did not fall into any of the exceptions to the full payment rule. Diversified Grp., Inc. v. United States, 123 Fed.Cl. 442 (2015)

. An appeal of that decision is pending before the United States Court of Appeals for the Federal Circuit. Diversified Grp., Inc. v. United States, No. 16–1014 (Fed.Cir. Oct. 6, 2015).

Concurrently with that ongoing litigation, an IRS Revenue Officer began conducting an investigation to locate assets to satisfy the unpaid penalty. According to the Revenue Officer, her investigation “suggest[ed] that [Haber] may have access to, and use of, a bank account or bank accounts held in the name of Jill Haber [Haber's wife] at Signature Bank, and that such account or accounts may be held in the name of Jill Haber to shield them from the IRS.” J.A. 33 ¶ 6. She further asserted that assets held by Jill Haber “as the nominee or alter-ego or transferee of [Haber]” may be used “to satisfy the 26 U.S.C. § 6707

penalty liability of [Haber].” J.A. 34 ¶ 7. The Revenue Officer confirmed with the IRS Criminal Investigation Division that it had closed its investigation of Haber and that there were no other pending criminal investigations of Haber, and informed Haber's representative of this information.

The Revenue Officer then served the administrative summons at issue in this case on Signature Bank Corporation. That summons was captioned “[i]n the matter of James Haber,” and sought testimony and documents “for any and all accounts that Jill Haber ha[d] signatory [authority] for” from January 1, 2013 to the date of the summons. J.A. 23. No penalties had been assessed against Jill Haber. The summons stated that the IRS sought “data relating to the tax liability or the collection of the tax liability or for the purpose of inquiring into any offense connected with the administration or enforcement of the internal revenue laws concerning [James Haber].” J.A. 23.

Haber petitioned the district court to quash the summons, arguing among other things that the IRS was precluded from issuing the summons by an outstanding criminal referral in his case. The government moved to dismiss the petition for lack of subject matter jurisdiction on the ground that this summons falls into a category for which the United States has not waived its sovereign immunity, specifically, a summons “issued in aid of the collection of ... an assessment.” 26 U.S.C. § 7609(c)(2)(D)

. In a declaration attached to the government's motion to dismiss, the Revenue Officer declared that the summons was to “aid in the collection of [Haber's] ... liability for a penalty” and that “[t]he IRS has already made an assessment against [Haber] for this liability, which currently is approximately $25,000,000.” J.A. 32–33 ¶ 3. Further, the Revenue Officer attested that “[t]he sole purpose of [her] investigation is to locate assets to satisfy [Haber's] existing assessed federal tax liability, and not to determine additional federal tax liabilities of [Haber] or any other person or entity.” J.A. 33 ¶ 4.

Haber sought jurisdictional discovery to establish that the summons did not fall within the exception to the United States's waiver of sovereign immunity for proceedings to quash third-party summonses. 26 U.S.C. § 7609(b)

, (c)(2). Haber served the government with a request for production of documents and noticed the deposition of the Revenue Officer who was conducting the investigation into Haber's assets and who had served the summons.

In response to Haber's petition, the government produced three documents regarding the termination of the IRS's criminal referral of Haber to the Department of Justice (“DOJ”): a supplemental declaration from the Revenue Officer explaining the steps she took to confirm that there were no pending criminal investigations of Haber, a letter from the DOJ, and a letter from the U.S. Attorney. The first letter, sent in 2009 by the Acting Assistant Attorney General of the Tax Division of DOJ to the Special Agent in Charge of the IRS Criminal Investigation Division, states that: “The referral of this matter is terminated as to James Haber as to all matters except the Form 1099 issue, within the meaning of Section 7602(d) of the Internal Revenue Code

.” J.A. 41. The second letter, sent in 2011 by the United States Attorney for the Southern District of New York to Haber's lawyer, William B. Wachtell, states:

the United States Attorney's Office for the Southern District of New York and the Internal Revenue Service's New York Field Office have closed their respective criminal investigations of Mr. Haber and his companies [including the 1099 issue].... In addition, based on my discussions with representatives of the Department of Justice's Tax Division ..., there are no other criminal investigations pending with respect to Mr. Haber.

J.A. 45. After providing those documents, the government moved for a protective order with respect to Haber's discovery requests.

The district court granted the government's motions to dismiss Haber's petition to quash the IRS summons for lack of subject matter jurisdiction and for a protective order barring jurisdictional discovery. This appeal followed.

DISCUSSION

We agree with the district court that it lacked jurisdiction because the United States has not waived sovereign immunity to allow suits to quash summonses that are “issued in aid of the collection of ... an assessment,” 26 U.S.C. § 7609(c)(2)(D)

, and that the challenged summons was issued in aid of collection. Moreover, the IRS had authority to issue the summons, as there was not an outstanding criminal referral at the time the summons was issued. We also hold that the district court did not abuse its discretion in denying jurisdictional discovery because Haber did not meet his burden of showing that the requested discovery is likely to produce the facts needed to establish jurisdiction.

I. Subject Matter Jurisdiction

Generally a person identified as the target of an IRS summons served on a third party, like a bank, is entitled to notice of the summons. The United States has waived its sovereign immunity to allow a person “entitled to notice” to bring suit against it to quash a summons. Id. § 7609(a)

, (b)(2)(A). But the right to notice and to bring a proceeding to quash, “shall not apply to any summons ... issued in aid of the collection of ... an assessment made ... against the person with respect to whose liability the summons is issued.” Id. § 7609(c)(2).³ Therefore, if a summons is “issued in aid of the collection” of a taxpayer's liability, the United States has not waived its sovereign immunity.

We review a district court's dismissal for lack of subject matter jurisdiction de novo. Upton v. I.R.S., 104 F.3d 543, 545 (2d Cir.1997)

. A plaintiff bears the burden on demonstrating that sovereign immunity has been waived. Makarova v. United States, 201 F.3d 110, 113 (2d Cir.2000). We conclude that the challenged summons was issued in aid of collection of an assessment. Accordingly, the United States has not waived its sovereign immunity, and the district court lacked jurisdiction over the motion to quash.

To determine whether the United States has waived sovereign immunity, we engage in a preliminary review of the IRS's contention that it issued the challenged summons in aid of collection. Cf. Upton, 104 F.3d at 547

(holding that the United States had not waived sovereign immunity after a preliminary assessment of the summons); United States v. Clarke, –––U.S. ––––, 134 S.Ct. 2361, 2367, 189 L.Ed.2d 330 (2014) (explaining that Congress's recognition that “power vested in tax collectors may be abused” led it to make “enforcement of an IRS summons contingent on a court's approval” (internal quotation...