Application of JW Schonfeld, Ltd.

• Decision Date: 18 August 1978
• Docket Number: Civ. A. No. 78-184-N.
• Parties: Application of Dr. J. W. SCHONFELD, LTD. and Jerome W. Schonfeld for the Return of Seized Property.
• Court: U.S. District Court — Eastern District of Virginia

460 F. Supp. 332

Application of Dr. J. W. SCHONFELD, LTD. and Jerome W. Schonfeld for the Return of Seized Property.

Civ. A. No. 78-184-N.

United States District Court, E. D. Virginia, Norfolk Division.

August 18, 1978.

COPYRIGHT MATERIAL OMITTED

Clark, Hofheimer & Stant, Virginia Beach, Va., for petitioner.

J. Brian Ferrel, Trial Atty., Tax Div., U. S. Dept. of Justice, Washington, D. C., William B. Cummings, U. S. Atty., E. D. Va., Alexandria, Va., for defendant.

OPINION AND ORDER

CLARKE, District Judge.

This matter comes before the Court on a motion of petitioners, Dr. J. W. Schonfeld, Ltd. and Jerome W. Schonfeld, to strike an Insufficient Defense pursuant to Rule 12(f) of the Federal Rules of Civil Procedure. Petitioners move to strike the Government's First Defense, which asserts that this Court lacks jurisdiction over the subject matter and the United States by virtue of, but not limited to, the doctrine of sovereign immunity and the provisions of 26 U.S.C. § 7421 and 28 U.S.C. § 2201.

Petitioners instituted this proceeding on April 7, 1978, by filing a Petition for the Return of Property pursuant to Rule 41(e) of the Federal Rules of Criminal Procedure.¹ On February 22, 1978, a warrant was issued for the search of petitioners' dental offices and for the seizure of certain specified books, records, and documents in those offices as evidence of violations of 26 U.S.C. §§ 7201 and 7206(1). Agents commenced the search and seizure pursuant to that warrant at 5:45 P.M. on February 23rd and continued until approximately 4:30 A.M. on February 24, 1978, the following day. Petitioners contend that the Fourth Amendment was violated because: (1) the agents seized considerable property beyond the scope of the property described in the search warrant; (2) the warrant was "fatally general;" and (3) the search was conducted at night, without authorization. To date, neither an indictment nor an information has been issued against petitioners.

Although petitioners have brought their action under Rule 41(e) of the Federal Rules of Criminal Procedure, the Court finds that a Motion to Strike an Insufficient Defense may be brought in this case. As stated supra, petitioners have not been indicted or informed against. No criminal proceeding was pending against them at the time of filing. This proceeding is, in effect, a civil action to recover personal property. Dibella v. United States, 369 U.S. 121, 131-32, 82 S.Ct. 654, 7 L.Ed.2d 614 (1962); Smith v. Katzenbach, 122 U.S.App. D.C. 113, 351 F.2d 810, 814 (1965); Weldon v. United States, 196 F.2d 874, 875 (9th Cir. 1952); Lord v. Kelley, 223 F.Supp. 684, 688 (D.Mass.1963), appeal dismissed, 334 F.2d 742 (1st Cir. 1964), cert. denied, 379 U.S. 961, 85 S.Ct. 650, 13 L.Ed.2d 556 (1965). The Federal Rules of Civil Procedure are, therefore, fully applicable here. Fed.R. Civ.P. 1.²

It is true that the motion to strike is not a favored motion, at least in part because it is a drastic remedy. See, e. g., Lunsford v. United States, 570 F.2d 221, 229 (8th Cir. 1977). Generally courts will deny a motion to strike a defense that is sufficient as a matter of law or fairly presents a question of law or fact that a court ought to hear. See 2A Moore's Federal Practice ¶ 12.21, at 2437 (1975). In this proceeding, however, the First Defense of the United States is totally without merit. Consequently, the Motion to Strike will be GRANTED.

Sovereign Immunity

The First Defense of the United States asserted that the Court lacked jurisdiction over the subject matter and the United States by virtue of, but not limited to, the doctrine of sovereign immunity and the provisions of 26 U.S.C. § 7421(a) and 28 U.S.C. § 2201. The United States did not discuss the sovereign immunity defense in its memorandum in response to the Motion to Strike. However, because the doctrine was part of the First Defense in the response to the Petition for the Return of Seized Property, the Court will consider the issue.

The United States apparently contends that it is immune from suits for the recovery of illegally seized property. But clearly this proceeding is not barred by the doctrine of sovereign immunity. If petitioners' allegations are true, certain agents of the Federal Government have violated the terms of the search warrant and, thereby, the Fourth Amendment. When an officer exceeds the powers granted him by the sovereign, his actions beyond those limitations are considered individual and not sovereign actions. Larson v. Domestic & Foreign Corp., 337 U.S. 682, 689, 69 S.Ct. 1457, 93 L.Ed. 1628 (1949). Even if the actions of the agents were considered those of the sovereign, federal rules and statutes allow a civil proceeding for the return of illegally seized property. Federal Rule of Criminal Procedure 41(e) allows a person "aggrieved by an unlawful search and seizure" to move the Court for the return of illegally seized property. Moreover, Congress only recently abolished the defense of sovereign immunity and requirements of jurisdictional amounts in any action seeking relief other than money damages from the United States and stating a claim based on the assertion of unlawful official action by an agency or by its officers or employees. 5 U.S.C. § 702; 28 U.S.C. § 1331.³ The message of the case law, the statutes, and the Federal Rules is obvious: the United States cannot assert sovereign immunity as a defense to a petition for the return of illegally seized property.

The Anti-Injunction Statute

The United States asserts that the Anti-Injunction Act, 26 U.S.C. § 7421, bars this proceeding. The Act provides, in pertinent part:

(a) Tax. — Except as provided in sections 6212(a) and (c), 6213(a), 7426(a) and (b)(1), and 7429(b), no suit for the purpose of restraining the assessment or collection of any tax shall be maintained in any court by any person, whether or not such person is the person against whom such tax was assessed. (Emphasis added).

Congress, therefore, has foreclosed the possibility of obtaining injunctions while allowing taxpayers to challenge a determination of deficiency in the Tax Court (26 U.S.C. §§ 6212(a) and (c) and 6213(a)), and to challenge a jeopardy assessment or a levy made on property in federal district court (26 U.S.C. §§ 7426(a) and (b)(1), and 7429(b)). As the Supreme Court has observed:

The Anti-Injunction Act apparently has no recorded legislative history, but its language could scarcely be more explicit . . . The Court has interpreted the principal purpose of this language to be the protection of the Government's need to assess and collect taxes as expeditiously as possible with a minimum of preenforcement judicial interference, "and to require that the legal right to the disputed sums be determined in a suit for refund." Enochs v. Williams Packing & Navigation Co., 370 U.S. 1, 7, 82 S.Ct. 1125, 1129, 8 L.Ed.2d 292 (1962).

Bob Jones University v. Simon, 416 U.S. 725, 736-37, 94 S.Ct. 2038, 2046, 40 L.Ed.2d 496 (1974).

Courts have construed the Anti-Injunction Act as prohibiting them from considering requests for an injunction that would have the effect of immunizing the taxpayer from liability. Thus, taxpayers may not bring suit to obtain injunctions preventing the revocation of tax-exempt status,⁴ prohibiting the Internal Revenue Service from taking further action in the collection of taxes or penalties,⁵ invalidating provisions of the Internal Revenue Code,⁶ removing tax liens,⁷ or declaring unlawful the methods used by the Internal Revenue Service to compute deficiencies.⁸

Requests for the suppression or return of illegally seized evidence have been denied when alternative avenues of relief exist. For example, if an assessment has been made, the taxpayer can move for suppression and return in a suit for a refund. See, e. g., Patrick v. United States, 524 F.2d 1109, 1120 (7th Cir. 1975); Brittingham v. United States Commissioner of Internal Revenue, 451 F.2d 315, 316-17 (5th Cir. 1971); Hamilton v. United States, 309 F.Supp. 468 (S.D.N.Y.1969), aff'd per curiam, 429 F.2d 427 (2d Cir. 1970), cert. denied, 401 U.S. 913, 91 S.Ct. 881, 27 L.Ed.2d 812 (1971). And a taxpayer who has been indicted and arraigned under criminal tax statutes may request the return of illegally seized evidence in the subsequent criminal proceeding. Chester v. Ross, 231 F.Supp. 23, 26-27 (N.D.Ga.1964), aff'd, 351 F.2d 949 (5th Cir. 1965).

Petitioners here have not brought their action "for the purpose of restraining the assessment or collection of any tax." They seek only the return of that property which was seized in violation of the Fourth Amendment. Only the validity of the seizure, not the petitioners' tax liability, is at issue here. Even if petitioners prevail, the Government may be able to retain as evidence for further investigations or proceedings a considerable number of Petitioners' books, records, and documents.⁹ The tax liability of petitioners will remain unresolved regardless of the outcome of this proceeding.

The Government, moreover, can scarcely complain that the return of illegally seized property is "judicial interference." Any evidence obtained by searches and seizures in violation of the Constitution is inadmissible in a federal criminal trial. Elkins v. United States, 364 U.S. 206, 80 S.Ct. 1437, 4 L.Ed.2d 1669 (1960); Weeks v. United States, 232 U.S. 383, 34 S.Ct. 341, 58 L.Ed. 652 (1914). The exclusionary rule would also appear applicable in civil investigations as well. See, e. g., Marshall v. Barlow's, Inc., 436 U.S. 307, 312, 98 S.Ct. 1816, 56 L.Ed.2d 305 (1978); See v. City of Seattle, 387 U.S. 541, 543, 87 S.Ct. 1737, 18 L.Ed.2d 943 (1967).

Recognizing those facts, Rule 41(e) provides a remedy for those taxpayers who, like petitioners here, allege that their property has been seized in violation of the Fourth Amendment. Had Congress desired to exempt tax cases from the scope of Rule 41(e), it could have and would have so stated. Since it did not, a...