U.S. v. Bell, C-99-0023 CW.

• Decision Date: 22 June 1999
• Docket Number: No. C-99-0023 CW.,C-99-0023 CW.
• Citation: 57 F.Supp.2d 898
• Parties: UNITED STATES of America, Petitioner, v. Rita Ann BELL, Respondent.
• Court: U.S. District Court — Northern District of California

57 F.Supp.2d 898

UNITED STATES of America, Petitioner, v. Rita Ann BELL, Respondent.

No. C-99-0023 CW.

United States District Court, N.D. California.

June 22, 1999.

COPYRIGHT MATERIAL OMITTED

Jay R. Weill, Thomas F. Carlucci, U.S. Atty's Office, Tax Division, San Francisco, CA, for petitioner.

Rita A. Bell, Daly City, CA, pro se.

ORDER ADOPTING MAGISTRATE JUDGE'S REPORT AND RECOMMENDATION RE: ORDER TO SHOW CAUSE WHY IRS SUMMONS SHOULD NOT BE ENFORCED

WILKEN, District Judge.

The Court has received Magistrate Judge Laporte's Report and Recommendation Re: Order to Show Cause Why IRS Summons should not be Enforced. 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 the summons be enforced and that Rita Ann Bell appear for examination forthwith and to testify and produce the requested books and records.

REPORT AND RECOMMENDATION RE: ORDER TO SHOW CAUSE WHY IRS SUMMONS SHOULD NOT BE ENFORCED

LAPORTE, United States Magistrate Judge.

Factual and Procedural Background

This matter is before the Court on an Order to Show Cause why Respondent Rita Ann Bell should not be required to appear for examination before the Internal Revenue Service (IRS) in compliance with an IRS summons. On June 10, 1998, Petitioner United States of America, through IRS agent Corwin Fong, served a summons on Respondent to appear on June 25, 1998 to testify and to produce books and records from January 1, 1998 through May 31, 1998 in connection with the IRS' efforts to collect Respondent's tax liabilities for the years 1990 through 1992. See Verified Petition to Enforce Internal Revenue Service Summons at ¶¶ 3, 7 & Ex. A. On June 23, 1998, Respondent wrote to the IRS explaining that she was unavailable on June 25, 1998 because she would be out of town. See id. at ¶ 10 & Ex. B. The IRS wrote to Bell on August 10, 1998 and reset the examination for September 3, 1998. See id. at ¶ 12. Respondent failed to appear on September 3, 1998. See id. at ¶ 13.

On January 6, 1999, Petitioner filed a verified petition to enforce an IRS summons against Respondent. On February 8, 1999, this Court issued an order to show cause why the summons should not be enforced and set the matter for hearing on March 30, 1999. At the hearing, Thomas F. Carlucci appeared for Petitioner. Rita Ann Bell appeared pro se. Upon consideration of the verified petition, argument of counsel and the relevant authorities, the Court enters the following report and recommendation.

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

While the United States consented to the jurisdiction of the magistrate judge, Respondent Rita Ann Bell declined to consent. Therefore, as an initial matter, this Court must ascertain the basis and scope of its jurisdiction to determine administrative enforcement proceedings 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 the § 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" for final determination except for eight enumerated dispositive motions. 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).

A. Magistrate Judge's Authority

Here, the Court is presented with a petition to enforce an IRS summons. Although the district court did not expressly state upon which subsection(s) of the Magistrates Act the referral was based, this Court assumes that the district court referred this matter 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 were 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 Court of Appeals addressed the issue when the IRS filed a petition to enforce a taxpayer summons issued pursuant to § 7602 of the Internal Revenue Code, 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, 501-502 (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 id. 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).

B. Does Section 7604(b) of the Internal Revenue Code Confer Jurisdiction on a Magistrate Judge?

None of the foregoing cases addressed § 7604(b) of the Internal Revenue Code, which initially appears to confer jurisdiction on magistrate judges to decide quasi-contempt proceedings brought by the United States in IRS enforcement actions. See 26 U.S.C. § 7604(b).² Section 7604(b) provides in part that the government "may apply to the judge of the district court or to a United States commissioner for the district within which the person summoned resides or is found for an attachment against him as for a contempt." 26 U.S.C. § 7604(b).

In Reisman v. Caplin, 375 U.S. 440, 84 S.Ct. 508, 11 L.Ed.2d 459 (1964), however, the Supreme Court explained that if the IRS seeks to enforce a summons, "[it] must proceed under § 7402(b) which grants the district courts jurisdiction `by appropriate process to compel such attendance, testimony, or production of books, papers or other data.'" See id. at 445-46, 84 S.Ct. 508. By contrast, § 7604(b), which allows the government to apply to a magistrate judge for certain relief in enforcement proceedings, provides an additional remedy for "an attachment ... as for a contempt." See id. at 446, n. 4, 84 S.Ct. 508; 26 U.S.C. § 7604(b). The Court further explained:

As we read the legislative history, § 7604(b) remains in this comprehensive procedure provided by Congress to cover only a default or contumacious refusal to honor a summons before a hearing officer. Id. at 448-49, 84 S.Ct. 508. A magistrate judge may conduct such proceedings and may "make such order as he shall deem...