U.S. v. Citizens State Bank

• Decision Date: 16 January 1980
• Docket Number: No. 79-1768,79-1768
• Citation: 612 F.2d 1091
• Parties: 80-1 USTC P 9153 UNITED STATES of America and Jon P. Heydt, Special Agent, Appellees, v. CITIZENS STATE BANK, United States Taxpayers Union and Armin Moths, Appellants.
• Court: U.S. Court of Appeals — Eighth Circuit

Page 1091

612 F.2d 1091

80-1 USTC P 9153

UNITED STATES of America and Jon P. Heydt, Special Agent, Appellees, v. CITIZENS STATE BANK, United States Taxpayers Union and Armin Moths, Appellants.

No. 79-1768.

United States Court of Appeals Eighth Circuit.

Submitted Oct. 8, 1979.

Decided Jan. 16, 1980.

Gregory G. Petersen, Timothy J. Sullivan, San Diego, Cal., for appellants.

Ronald A. Dweck, Atty., Tax Division, Dept. of Justice, Washington, D. C., argued, M. Carr Ferguson, Asst. Atty. Gen., Gilbert E. Andrews, Charles E. Brookhart, and Ronald A. Dweck, Attys., Tax Division, Dept. of Justice, Washington, D. C., and James R. Britton, U. S. Atty., and Lynn E. Crooks, Asst. U. S. Atty., Fargo, N. D., on brief, for appellees.

Before LAY, ^* Chief Judge, and HEANEY and HENLEY, Circuit Judges.

HEANEY, Circuit Judge.

Appellants Armin Moths and the United States Taxpayers Union (USTU) appeal from an order of the district court enforcing an Internal Revenue Service administrative summons. This case requires this Court to determine whether a claim of infringement of First Amendment rights may be used to limit the subpoena power of the Internal Revenue Service.

The pertinent facts are not in dispute. Armin Moths is a member and officer of the USTU, a voluntary association of citizens who are opposed to the current operation of the IRS and who make efforts to bring about changes in the United States' taxation system. In late 1978 or early 1979, IRS Special Agent Jack Dunlap saw a newspaper article listing Moths as a spokesperson for the "Liberty Amendment" ¹ and recognized Moths as a "tax protestor." As a result, Dunlap caused Moths' filing record to be checked and discovered that Moths had not filed a complete federal income tax return since 1968. On the basis of that information, Dunlap was assigned to investigate Moths' potential tax liability for the years 1974-1978. When bank accounts in Moths' name and in the name of USTU over which Moths had signature authority were discovered in Lankin, North Dakota, IRS Special Agent Jon P. Heydt ² issued a summons, pursuant to 26 U.S.C. § 7602, directing Citizens State Bank to appear before Heydt and produce All bank records relating to the accounts of Moths and the USTU. ³ When the bank did not appear as ordered in the summons, Heydt brought this action to enforce the summons pursuant to 26 U.S.C. §§ 7402(b), 7604(a). Moths and the USTU intervened, claiming that the release of the documents would violate their First Amendment right to free association. Following a show-cause hearing, the district court ordered that the summons be enforced, finding it to have been issued in good faith and for a proper purpose. That order has been stayed pending this appeal.

The appellants' basic claim is that deposit slips, signature cards and other documents contained in the bank records identify the members of and contributors to the USTU, and if the IRS were allowed access to this information, some of those who would otherwise join or contribute to the USTU would be discouraged from doing so out of fear of retaliation by the IRS. This discouragement, appellants assert, would constitute an infringement of their First Amendment right of freedom of association and is, therefore, impermissible.

The government, by contrast, contends that the summons is enforceable so long as it was issued for a proper purpose, in good faith and in accordance with statutory procedures, regardless of any possible First Amendment violation. The district court apparently agreed with this position since at the show-cause hearing it sustained, on grounds of relevancy, the government's objection to testimony concerning the negative effect on appellants' First Amendment rights. Furthermore, the district court made no mention of the appellants' First Amendment claim in its enforcement order.

We believe the district court erred in refusing to consider appellants' First Amendment claim. In NAACP v. Alabama, 357 U.S. 449, 78 S.Ct. 1163, 2 L.Ed.2d 1488 (1958), the Supreme Court recognized the important place that freedom of association holds in this country's constitutional system:

Effective advocacy of both public and private points of view, particularly controversial ones, is undeniably enhanced by group association * * *. It is beyond debate that freedom to engage in association for the advancement of beliefs and ideas is an inseparable aspect of the "liberty" assured by the Due Process Clause of the Fourteenth Amendment, which embraces freedom of speech.

Id. at 460, 78 S.Ct. at 1171.

The Court went on to state, moreover, that maintaining the privacy of one's associations may be necessary to guarantee freedom of association:

This Court has recognized the vital relationship between freedom to associate and privacy in one's associations. * * * Inviolability of privacy in group association may in many circumstances be indispensable to preservation of freedom of association, particularly where a group espouses dissident beliefs.

Id. at 462, 78 S.Ct. at 1171-1172.

In this case, appellants submitted to the district court three declarations by USTU members, detailing the adverse effects of the summons on USTU's...