La Mura v. U.S., s. 83-5678

• Decision Date: 25 June 1985
• Docket Number: 83-5722,Nos. 83-5678,s. 83-5678
• Citation: 765 F.2d 974
• Parties: -5449, 85-2 USTC P 9548 Wayne R. LA MURA, Plaintiff-Appellee, v. UNITED STATES of America, Defendant-Appellant.
• Court: U.S. Court of Appeals — Eleventh Circuit

Page 974

765 F.2d 974

56 A.F.T.R.2d 85-5449, 85-2 USTC P 9548

Wayne R. LA MURA, Plaintiff-Appellee, v. UNITED STATES of America, Defendant-Appellant.

Nos. 83-5678, 83-5722.

United States Court of Appeals, Eleventh Circuit.

June 25, 1985.

Glenn L. Archer, Michael L. Paup, Chief Appellate Section, Charles E. Brookhart, Jr., Libero Marinelli, Jr., Asst. Attys. Gen., Patricia Willing, Atty., Dept. of Justice Tax Div., Washington, D.C., for defendant-appellant.

Michael S. Feinman, Sunrise, Fla., for plaintiff-appellee.

Appeals from the United States District Court for the Southern District of Florida.

Before TJOFLAT and FAY, Circuit Judges, and ALLGOOD ^*, District Judge.

TJOFLAT, Circuit Judge:

The United States appeals two district court orders granting a taxpayer's petitions to quash Internal Revenue Service (IRS) summonses. The district court gave the taxpayer such relief because it concluded that the summonses were issued for an improper purpose and were overbroad. We reverse.

I.

In the spring of 1983, Special Agent Bradford C. Vale of the Criminal Investigation Division of the Internal Revenue Service was assigned to investigate the income tax returns of Wayne R. La Mura for the years 1980 and 1981, as part of an investigation focused on uncovering bogus charitable contributions by tax protesters. On April 4, 1983, Agent Vale notified La Mura by letter that he was investigating La Mura to determine whether he had committed possible criminal violations of the Internal Revenue Code with respect to those tax years. "Specifically," Vale wrote, "the Internal Revenue Service (Criminal Investigation Division) is questioning certain charitable contributions you claimed as deductions on your income tax returns for the years" 1980 and 1981. La Mura, an airline pilot with a gross income of approximately $100,000 per annum, had taken deductions of $22,000 in 1980 and $28,500 in 1981 for contributions he allegedly made to the Universal Life Church.

On the same day Agent Vale notified La Mura of the investigation he issued summonses to the Landmark Bank and the Southern Bell Telephone Company, both located in Fort Lauderdale, Florida. The summons to the bank requested the records of any checking, savings, security or loan accounts La Mura and his wife maintained at the bank and any other business they transacted there from January 1, 1977 through February 1, 1983. The summons to the telephone company requested all records relating to telephone service provided the La Muras from January 1, 1979 through December 1, 1982. Agent Vale notified Mr. La Mura of the issuance of the summonses, in accordance with 26 U.S.C.A. Sec. 7609(a) (West Supp.1985). ¹ In response, La Mura petitioned the district court to quash the summons, as provided for in 26 U.S.C.A. Sec. 7609(b)(2) (West Supp.1985), ² and presented his own affidavit in support of his petition.

In his petition, La Mura stated that the summonses should be quashed because they had been issued for an improper purpose, to coerce him to settle a "collateral matter," ³ and because the summonses were overreaching in that they sought information "not in any way relevant to the taxable years under investigation ... or to the subject of the investigation," his contributions to the Universal Life Church. In his affidavit, La Mura stated that he was a minister of the Universal Life Church, that he was aware that other members of that church were being investigated for criminal violations of the income tax laws, and that, as a result, he was "fearful of claiming further charitable contributions" to the Universal Life Church.

The court heard argument on La Mura's petition to quash on May 27, 1983. The discussion at the hearing was limited to whether the summoned records were relevant to the IRS' investigation. La Mura argued that the records contained no information that would shed any light on the genuineness of the challenged contributions and that he could produce cancelled checks verifying that these contributions had in fact been made. The court then called upon the government to establish the relevance of the summoned records.

The government stated that the telephone records were necessary to locate persons who might have knowledge of the nature of La Mura's involvement in the Universal Life Church. The bank records would enable it to analyze the La Muras' life style before, during, and after the years in which the contributions were made. If their life style did not change as a result of the contributions, which amounted to nearly one-third of La Mura's annual income, then doubt would be cast, the government argued, on the bona fides of the contributions. The government also reminded the court that the IRS had the right to investigate all aspects of Mr. La Mura's tax liability for the years 1980 and 1981, and thus the court's ruling on relevance should not turn solely on whether the summonses were relevant to the charitable contributions.

The district court's primary concern appears to have been with the government's request for bank records for years not under investigation. Even after the government explained its reason for needing these records, the court again asked the government how "records concerning a return that has not yet been filed" and "records dating back to 1977" had anything to do with an investigation of the taxpayer's liability for the years 1980 and 1981. The government repeated its representation that such records were necessary to analyze the taxpayer's life style during the relevant period. If the La Muras' life style were such that it consumed most of the taxpayer's income, and that life style remained unchanged from 1977 through 1982, it could be inferred, the government contended, (1) that La Mura had not made the contributions from savings accumulated during the earlier years and (2) that La Mura had not made them from the proceeds of loans taken out in 1980 and 1981 and paid back later. The fact that La Mura could produce cancelled checks payable to the Universal Life Church, the government concluded, should not preclude the IRS from examining the records of the La Muras' banking transactions.

The district court was not convinced by the government's argument and announced that it would quash the summonses in their entirety on the ground that they were "overbroad and overreaching"; the court directed La Mura to prepare an order to that effect. On June 3, 1983, the court signed the order La Mura presented, quashing the summonses because they were too broad in scope and because they had been issued for improper purposes.

On June 1, 1983, just prior to the entry of this order, the government moved to supplement the record with the affidavit of Agent Vale. In his affidavit, Vale stated that the summoned records were necessary to ascertain the correct tax liability of the taxpayer for the years 1980 and 1981, that they were relevant to that investigation, that the IRS did not have the information the records would disclose, and that all administrative procedures required of the IRS to be performed before issuing the summonses had been followed. Vale added, with respect to the relevancy issue, that the requested bank records were "necessary to show that the taxpayer's life style and pattern of living expenses remained effectively unchanged before, during and after the time he made certain charitable contributions in the years under investigation." The court granted the government's motion to supplement the record nunc pro tunc on June 9. On June 22, the government, renewing its previous arguments in support of the summonses, moved the court to reconsider its order quashing the summonses. The court denied this motion on August 1.

Shortly after the district court entered its June 3 order quashing the summonses to the Landmark Bank and the Southern Bell Telephone Company, the IRS issued summonses to eight other financial institutions, requesting the same information it had of the Landmark Bank. La Mura petitioned the court to quash these summonses on the ground that the district court's June 3 order "collaterally estopped" the IRS from issuing them. The government responded by moving the court to dismiss his petition to quash for failure to state a claim for relief. Fed.R.Civ.P. 12(b)(6). The government argued that the court should not apply the June 3 order to the eight summonses because that order was based on a faulty premise--that the IRS' investigation of the taxpayer's tax liability was limited to his charitable contributions, as opposed to his overall tax liability, for the years 1980 and 1981--and because the doctrine of collateral estoppel is inapplicable in summons enforcement cases. According to the government, petitions to quash summonses must be disposed of on a case-by-case basis.

Following a hearing on September 3, the court concluded that it was bound by the decision regarding the Landmark Bank and Southern Bell Telephone Company summonses and granted La Mura's petition to quash. The government now appeals the district courts' June 3 and September 3 orders, seeking review of the summonses issued to the Landmark Bank and the eight other financial institutions. ⁴ We have consolidated these appeals ⁵ and, because the issues they present are identical, we treat them as one.

II.

Section 7602 of the Internal Revenue Code, 26 U.S.C. Sec. 7602 (1982), provides that the Secretary of the Treasury, or the IRS as his designee, ⁶ may "examine any books, papers, records, or other data which may be relevant or material to ..." ascertaining the correctness of any return and may issue summonses to those in "possession, custody, or care" thereof to appear and produce them to the IRS. ⁷ The IRS' power to investigate under section 7602 has been described as "broad" and "expansive." United States v. Arthur Young & Co., --- U.S. ----, 104 S.Ct. 1495, 1502, 79 L.Ed.2d 826 (1984); United States v. Euge, 444 U.S. 707, 715 n. 9, 100 S.Ct. 874, 880...