Pierre v. US, Civ. A. No. J91-0241(W).
| Decision Date | 02 July 1992 |
| Docket Number | Civ. A. No. J91-0241(W). |
| Citation | 800 F. Supp. 446 |
| Parties | Joseph PIERRE, M.D., Petitioner, v. UNITED STATES of America, Respondent. |
| Court | U.S. District Court — Southern District of Mississippi |
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Harris H. Barnes, III, Jackson, Miss., for petitioner.
Steven Shapiro, William D. Holmes, Dept. of Justice, Washington, D.C., for respondent.
This action was filed by the taxpayer, Joseph M. Pierre, M.D., hereinafter Pierre against the respondent, United States of America, pursuant to 26 U.S.C. § 7609(h)1 of the Internal Revenue Code, to quash an Internal Revenue summons for certain tax documents of the taxpayer's in the possession of Al Roberts/Custom Accounting Systems, Inc., of Mississippi,2 which is a "third-party recordkeeper" as defined in section 7609(a)(3)3 of the Internal Revenue Code of 1986 (26 U.S.C.). Pursuant to Rule 12(b)(6)4 of the Federal Rules of Civil Procedure, the respondent, United States of America, moved to dismiss the petition to quash on the grounds that the petition fails to state a claim upon which relief may be granted. Additionally, the respondent moved the court for an order enforcing the summons pursuant to 26 U.S.C. § 7609(b)(2)(A),5 Internal Revenue Code. Petitioner opposed the motion. Pursuant to the respondent's motion, the parties submitted memoranda, exhibits, affidavits and other documents in support of their claims before this court.
Upon reviewing the papers of the parties, the court concluded that a hearing on the factual issues was required since the papers of the parties presented factual disagreements which needed resolution at a full hearing on the merits. So, on or about February 18, 1992, this court held a full hearing on the merits of this matter wherein the parties argued their respective positions and presented evidence. See United States v. Southeast First National Bank of Miami Springs, 655 F.2d 661, 665-66 (5th Cir.1981) (). After having reviewed the briefs of the parties, heard oral arguments of counsel, and having received evidence in this cause, the court is persuaded to find for the respondent United States. Pursuant to Rule 52(a)6 of the Federal Rules of Civil Procedure, the court now announces its findings of fact and conclusions of law.
As indicated by Special Agent Nicholas M. Montgomery of the Internal Revenue Service hereinafter IRS in his testimony at the hearing and by his filed declaration which is attached to the respondent's motion to dismiss as exhibit A, he is investigating the federal income tax liability, if any, of Joseph M. Pierre, M.D., for the years 1987 and 1988 and seeking to determine whether Joseph M. Pierre has violated any of the Internal Revenue laws for the years under investigation. As part of his investigation, on April 26, 1991, Special Agent Montgomery issued an Internal Revenue Service summons (Form 2039) to Al Roberts/Custom Accounting Systems, Inc., of Mississippi. The summons requested Al Roberts/Custom Accounting Systems, Inc., of Mississippi to appear before Special Agent Montgomery on May 28, 1991, at 11:00 a.m., to give testimony and to produce certain books, records, correspondence, workpapers and other data pertaining to the tax liability of Joseph M. Pierre, M.D., for the years 1987 and 1988. The summons specifically directed the accountant and the accounting firm to present documents in their possession for the periods of January 1, 1985, through April 30, 1990, pertaining to the following individuals and entities: Joseph M. Pierre, M.D.; Suzie M. David, a/k/a Suzie Pierre; Marie D. Pierre/Marie Dalberg LaFontant Pierre; and Pierre and Pierre, P.A./Pierre Chiropractic Clinic, P.A. On April 26, 1991, a copy of the summons was served on Al Roberts/Custom Accounting Systems, Inc., of Mississippi, and, on that same date, notice of service of the summons was given to the taxpayer.
On May 15, 1991, Joseph M. Pierre, M.D., filed the above-styled action seeking to quash the summons issued to Al Roberts/Custom Accounting Systems, Inc., of Mississippi. Subsequently, on May 28, 1991, Al Roberts/Custom Accounting Systems, Inc., of Mississippi failed to appear before Special Agent Montgomery to give testimony and produce certain books, records, correspondence, workpapers and other data as requested by the summons.
Sections 7602 through 7609 of the Internal Revenue Code of 1986 govern the procedures applicable to issuance, compliance, enforcement, and challenges pertaining to an Internal Revenue Service summons. Section 7602, entitled "Examination of Books and Witnesses," grants general and expansive powers to the Secretary of the Treasury to examine records and to summon persons and documents for testimony. Specifically, section 7602 authorizes the Secretary of Treasury to issue a summons for:
... The purpose of ascertaining the correctness of any return ..., determining the liability of any person for any internal revenue tax ..., or collecting any such liability ... to summon ... any person having possession, custody or care of books of account containing entries relating to the business of the person liable for tax ..., to produce such books, papers, records, or other data, and to give such testimony, under oath, as may be relevant or material to such inquiry. ...
26 U.S.C. § 7602(a)(1)-(2).
This section grants the Internal Revenue Service powers analogous to that of a grand jury which can investigate "merely on suspicion that the law is being violated or even just because it wants assurance that it is not." United States v. Powell, 379 U.S. 48, 57, 85 S.Ct. 248, 255, 13 L.Ed.2d 112 (1964). The power granted by this enactment has been characterized as inquisitional, rather than accusatorial. La Mura v. United States, 765 F.2d 974, 979 (11th Cir.1985); United States v. Wyatt, 637 F.2d 293, 299 (5th Cir.1981). Further, section 7602 incorporates section 7609. United States v. Euge, 444 U.S. 707, 709-12, 100 S.Ct. 874, 877-78, 63 L.Ed.2d 141 (1980).
Section 7609, entitled "Special Procedures for Third-Party Summonses," applies only to a special category of summonses. Godwin v. United States, 564 F.Supp. 1209, 1211 (D.Del.1983). The "special category" of summonses as defined in section 7609 are described as third-party recordkeeper summonses, a category covering a variety of institutions — typically financial institutions — which keep relevant records of client or customer transactions, or any attorney, or any accountant.
Prior to the Tax Equity and Fiscal Responsibility Act of 1982, taxpayers could "stay" compliance with a summons by refusing to comply with the dictates of the summons, while notifying the Internal Revenue Service of the recalcitrance. Thereafter, in order to enforce the summons, the United States was obligated to file a lawsuit. Convinced that this procedure was fraught with delay, Congress adopted the "proceeding to quash" procedure, which avoided delays by taxpayers and still safeguarded the rights of taxpayers. See Tax Equity and Fiscal Responsibility Act of 1982, Pub.L. No. 97-248, S.Rep. No. 97-494 1982 U.S.C.C.A.N. 781, 1027-30. See generally Godwin v. United States, 564 F.Supp. 1209 (D.Del.1983) ().
The standards for enforcement of an Internal Revenue Service summons, or for determining the validity of same in a proceeding to quash, are well established. The United States need only show: (1) that the summons was issued for a legitimate purpose; (2) that the summoned data may be relevant to that purpose; (3) that the data are not already in the government's possession; and (4) that the administrative steps required by the Internal Revenue Code for issuance and service have been followed. United States v. LaSalle National Bank, 437 U.S. 298, 313-15, 98 S.Ct. 2357, 2366, 57 L.Ed.2d 221 (1978); United States v. Powell, 379 U.S. 48, 57-59, 85 S.Ct. 248, 255, 13 L.Ed.2d 112 (1964); United States v. Davis, 636 F.2d 1028, 1034 (5th Cir.1981), reh. denied, 645 F.2d 71 (5th Cir.1981), cert. denied, 454 U.S. 862, 102 S.Ct. 320, 70 L.Ed.2d 162 (1981). The requisite showing is generally made by the declaration of the agent who is seeking enforcement of the summons. Matter of Newton, 718 F.2d 1015, 1019 (11th Cir. 1983), cert. denied, 466 U.S. 904, 104 S.Ct. 1678, 80 L.Ed.2d 153 (1984); Davis, 636 F.2d at 1034. Indeed, "no more than a declaration is necessary to make the prima facie case." Matter of Newton, 718 F.2d at 1019; Davis, 636 F.2d at 1034. However, when convinced that a factual dispute is apparent, the court may order a full evidentiary hearing in the matter. United States v. Southeast First National Bank of Miami Springs, 655 F.2d 661, 665-66 (5th Cir.1981).
Seeking to quash the summons served on the accounting firm, the petitioner asserts the following three separate arguments: (1) that the Internal Revenue Service failed to give adequate notice to the corporation Pierre and Pierre, P.A./Pierre Chiropractic Clinic, P.A., of the summons served on the accounting firm pursuant to 26 U.S.C. § 7609(a);7 (2) that the respondent has failed to make a prima facie case for the enforcement of the summons; and (3) the production of the requested records and documents under the summons would violate petitioner's Fifth Amendment8 rights under the United States Constitution. Each of petitioner's grounds will be considered in turn.
Pierre argues that the IRS did not give adequate notice to the Pierre Corporation. The petitioner notes that 26 U.S.C. § 7609(a)(1) provides that notice of the summons on the third-party recordkeeper must be given to any person identified in the description of the records contained in the summons. (Emphasis added). For notice to be sufficient, it must be served either...
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