Strong v. U.S.

• Decision Date: 22 June 1999
• Docket Number: No. C-98-3656 CW.,C-98-3656 CW.
• Citation: 57 F.Supp.2d 908
• Court: U.S. District Court — Northern District of California
• Parties: Jeanette A. STRONG, et al., Petitioners, v. UNITED STATES of America, Respondent.

57 F.Supp.2d 908

Jeanette A. STRONG, et al., Petitioners, v. UNITED STATES of America, Respondent.

No. C-98-3656 CW.

United States District Court, N.D. California.

June 22, 1999.

ORDER ADOPTING MAGISTRATE JUDGE'S REPORT AND RECOMMENDATION

WILKEN, District Judge.

The Court has received Magistrate Judge Laporte's Report and Recommendation filed May 13, 1999. No objections to the report were filed. The Court has reviewed the Report and Recommendation de novo and finds the Report correct, well-reasoned and thorough, and adopts it in every respect. Accordingly,

IT IS HEREBY ORDERED that Respondent's Motion to Dismiss for Lack of Subject Matter Jurisdiction is Granted. The above-captioned action is DISMISSED WITH PREJUDICE.

REPORT AND RECOMMENDATION

LAPORTE, United States Magistrate Judge.

FACTUAL AND PROCEDURAL BACKGROUND

On September 23, 1998, Petitioners Robert and Jeanette Strong filed a "complaint," or petition to quash the Internal Revenue Service (IRS) summonses issued directly to them. (Docket # 1, hereinafter "petition to quash"). The case was originally assigned to Magistrate Judge Phyllis J. Hamilton. Respondent United States refused to consent to the jurisdiction of a magistrate judge, however, and the case was reassigned to District Judge Claudia Wilken on November 4, 1998. On December 2, 1998, Judge Wilken referred the petition to quash to a magistrate judge pursuant to Civil Local Rule 72-1, which authorizes magistrate judges to exercise the full extent of the powers conferred upon them by 28 U.S.C. § 636. See Order of Referral to Magistrate Judge (Docket # 7).

On December 17, 1998, Petitioners filed a composite pleading consisting of three separate petitions to quash third-party summonses issued by the IRS to U.S. Bank, American Express and Citibank. (Docket # 10) On December 22, 1998, Respondent United States moved to dismiss the original petition to quash for lack of subject matter jurisdiction. (Docket # 9) In its motion to dismiss, Respondent also argued in a footnote that the three petitions to quash the third-party summonses were not properly before the Court. On January 28, 1999, Respondent wrote to Petitioners reiterating its argument that the petitions to quash third-party summonses "should have been filed separately, not as additional pleadings" and explaining in detail the steps that Petitioners needed to take with respect to those pleadings. See Respondent's Supplemental Statement and exhibits thereto (Docket # 16).

On January 26, 1999, Judge Wilken referred the United States' motion to dismiss for lack of subject matter jurisdiction to the undersigned, directing this Court to "determine whether [its] decision must be in the form of proposed findings of fact and recommendation for disposition." See Order of Referral (Docket # 13). Finally, although the District Court did not expressly refer the three petitions to quash the third-party summonses (which were not docketed separately because they were filed as one document), this Court has undertaken to review those petitions as they are inextricably intertwined with the original petition to quash and the motion to dismiss.

The petition to quash and motion to dismiss were set for hearing on February 2, 1999. As Petitioners filed an ex parte request for a continuance because Mr. Strong had suffered a stroke, this Court continued the hearing until April 20, 1999. Nonetheless, Petitioners failed to appear or request a further continuance. Thomas F. Carlucci represented Respondent. After hearing on this matter, the Court ordered Respondent to submit a supplemental brief. Upon consideration of the argument of counsel, the papers filed in support of and in opposition to the petitions to quash and motion to dismiss and the entire record in this case, the Court enters the following report and recommendation.

ANALYSIS

I. Magistrate Judge's Jurisdiction to Determine Administrative Enforcement Proceedings

The petition to quash and the motion to dismiss are inextricably interrelated. Therefore, this Court will determine the scope of its own jurisdiction to conduct all enforcement proceedings, including the petitions to quash and the motion to dismiss, absent consent.

The Federal Magistrates Act, 28 U.S.C. § 631 et seq. (the "Magistrates Act"), establishes the scope of a magistrate judge's authority. Under § 636 of the Magistrates Act, the District Court may refer three types of matters to a magistrate judge without the consent of the parties. First, the court may refer "any pretrial matter," except for eight enumerated dispositive motions, for final determination. See 28 U.S.C. § 636(b)(1)(A).¹ Second, the court may refer any of the excepted dispositive motions enumerated in subparagraph (A), as well as certain applications for post-trial relief, for evidentiary hearings and/or report and recommendation. See 28 U.S.C. § 636(b)(1)(B). Third, the court may "assign additional duties not inconsistent with the Constitution and laws of the United States." See 28 U.S.C. § 636(b)(3).

Here, the Court is presented with petitions to quash IRS summonses issued to taxpayers and to third parties as well as a motion to dismiss for lack of jurisdiction. Although the District Court did not expressly state upon which subsection(s) of the Magistrates Act the referrals were based, this Court assumes that the District Court referred these matters pursuant to the "additional duties" provision of § 636(b)(3). While the Ninth Circuit has not directly addressed the issue, several circuits have held that regardless of whether enforcement proceedings are referred under § 636(b)(1)(B) (specifying a report and recommendation) or § 636(b)(3) (authorizing referral of "additional duties"), the parties are entitled to de novo review by the district court.

For example, in United States v. Mueller, 930 F.2d 10 (8th Cir.1991), the Eighth Circuit addressed the issue when the IRS filed a petition to enforce a taxpayer summons issued pursuant to § 7602 of the Internal Revenue Code. See 26 U.S.C. § 7602. The district court issued a show cause order and then referred the matter to a magistrate judge pursuant to § 636(b), without specifying any subsection. See id. at 11. The magistrate judge conducted an evidentiary hearing and issued an order enforcing the summons. See id. The taxpayer filed objections with the district court. See id. The district court treated the magistrate judge's order as a proposed order, reviewed it de novo, and granted the petition for enforcement. See id. at 11-12.

On appeal, the Eighth Circuit determined that the magistrate judge should have issued a report and recommendation. See id. at 12. The appellate court affirmed the district court, however, because the magistrate judge's order, which was reviewed de novo, was the "functional equivalent" of a report and recommendation. See id. at 12 (citing United States v. First Nat'l. Bank, 628 F.2d 871, 873 (5th Cir. 1980)); see also Aluminum Co. of America v. United States Envtl. Protection Agency, 663 F.2d 499, 501-02 (4th Cir.1981) (where record was devoid of authority relied on by district court in referral and parties did not consent, "the judge had to refer the motion [to quash administrative search warrant] under § 636(b)(1)(B) or § 636(b)(3)" because it was a dispositive matter setting forth all relief requested, not a pretrial matter).

The Tenth Circuit addressed the correct standard of review for enforcement proceedings that are referred under § 636(b)(3), the "additional duties" clause of the Magistrates Act. In United States v. Jones, 581 F.2d 816 (10th Cir.1978), the district court referred an IRS petition for enforcement of a third-party summons to a magistrate judge under § 636(b)(3) to conduct further proceedings that were authorized by the local rules. See Jones, 581 F.2d at 817. One local rule specifically authorized magistrate judges to enforce IRS summonses, citing § 7604(b) of the Internal Revenue Code, which refers to the authority of a magistrate judge to enter certain orders in enforcement proceedings. See id.; see also infra n. 2. The magistrate judge ordered the third party to comply with the summons. See Jones, 581 F.2d at 817. The district court did not take any action nor did the taxpayer seek review in the district court, although the local rules provided for such review. See id. at 818. Rather, the taxpayer appealed directly to the court of appeals. See id. at 817.

The Tenth Circuit Court of Appeals dismissed the appeal because the district court did not review the magistrate judge's order and did not enter a final judgment. See id. at 818. The appellate court explained that "[t]he Supreme Court has made it clear that a magistrate judge exercising `additional duties' jurisdiction is continually subject to the inherent supervisory power of the district judge and that the judge retains the `... ultimate responsibility for decision making in every instance. ...'" See id. at 817-18 (citing Mathews v. Weber, 423 U.S. 261, 270, 96 S.Ct. 549, 46 L.Ed.2d 483 (1976)). "Even under the most expansive reading, the judge's order and the local rules cited therein will not support a claim that the district court's Article III decisional power had been delegated to the magistrate." Id. at 818; see also United States v. Cline, 566 F.2d 1220 (5th Cir.1978) (court lacks jurisdiction to hear appeal from decision of magistrate judge enforcing IRS summons); Aluminum Co., 663 F.2d at 502 n. 8 (where dispositive matter such as petition to quash administrative search warrant is referred under § 636(b)(3), de novo review required).²

Regardless of the specific subsection under which matters are referred, a magistrate judge's jurisdiction to render a final decision ultimately depends on whether the proceedings are characterized as nondispositive pretrial matters or dispositive matters. The Ninth Circuit addressed whether an order denying a petition to quash is a final appealable decision in D.I....