United States v. Particle Data, Inc., No. 85 C 10428.

CourtUnited States District Courts. 7th Circuit. United States District Court (Northern District of Illinois)
Writing for the CourtAndrew B. Spiegel, Chicago, Ill., for respondents
Citation634 F. Supp. 272
Decision Date02 May 1986
Docket NumberNo. 85 C 10428.
PartiesUNITED STATES of America, and Gordon D. Meyer, Petitioners, v. PARTICLE DATA, INC. and Particle Data Laboratories, Ltd., Respondents.

634 F. Supp. 272

UNITED STATES of America, and Gordon D. Meyer, Petitioners,
v.
PARTICLE DATA, INC. and Particle Data Laboratories, Ltd., Respondents.

No. 85 C 10428.

United States District Court, N.D. Illinois, E.D.

May 2, 1986.


634 F. Supp. 273

Anton R. Valukas, U.S. Atty., Eileen Marutzky, Asst. U.S. Atty., Chicago, Ill., Gerald C. Miller, Tax Div., Dept. of Justice, Washington, D.C., for petitioners.

Andrew B. Spiegel, Chicago, Ill., for respondents.

634 F. Supp. 274

MEMORANDUM OPINION AND ORDER

SHADUR, District Judge.

On December 17, 1985 the United States and Internal Revenue Service ("IRS") Special Agent Gordon Meyer ("Meyer")1 filed a petition for enforcement of two June 27, 1984 IRS summonses (the "Summonses"). Both Summonses seek information from Particle Data, Inc. and Particle Data Laboratories, Ltd. (collectively "Particle Data," treated as a singular noun) concerning the potential tax liability of Robert Berg ("Berg"), president of both Particle Data companies. On December 27 this Court ordered Particle Data to show cause why it should not be compelled to obey the Summonses. Both sides have now briefed their respective positions, and this Court orders enforcement of the Summonses.

Facts

Meyer was initially assigned to investigate Berg's federal tax liability for 1980-82. That investigation has been expanded to include 1983 and 1984 (Meyer Decl. ¶¶ 1-2). According to id. ¶ 3:

The purposes of the investigation are, for the five years under investigation, to determine the taxpayer's correct tax liabilities, to prepare federal income tax returns for the taxpayer for those years, if the filings of such returns were required by law, and to ascertain whether the taxpayer has committed any offense connected with the administration or enforcement of the internal revenue laws.

Having determined Berg was president of Particle Data, Meyer issued the two Summonses (Pl.Ex. 1-2, each on IRS Form 2039) whose enforcement is now sought, calling for Particle Data to appear and produce "any and all records, books, documents, correspondence and things" pertaining to Particle Data's taxable income and financial transactions for the period December 1, 1978 to January 31, 1984. Each Summons said the records demanded "included but were not limited to" specific types of documents and records listed in the Summons (id.). That same day Meyer also caused summonses to be issued to ten banking and commercial institutions thought to have information about Berg's finances (Particle Data Mem. 3 and Exs. 2-3).2

Particle Data did not respond to the Summonses. Instead Berg petitioned this District Court to quash all 12 summonses. That petition was summarily denied by Judge Charles Kocoras (Berg v. United States, No. 84 C 6068 (N.D.Ill. Jan. 22, 1985)). Particle Data nevertheless continues its nonresponsive posture as to the Summonses,3 and this petition ensued.

Particle Data's Contentions

Particle Data's response to this Court's show-cause order advances several arguments in defense of its noncompliance:

1. Form 2039 does not carry an Office of Management and Budget ("OMB") control number and thus may be ignored pursuant to the Paperwork Reduction Act ("PRA"), 44 U.S.C. §§ 3507(f) and 3512.4
2. IRS cannot use its summons power as a criminal discovery device because:
(a) Congress has not authorized such use and
(b) if Congress has authorized such use, that authorization is unconstitutional.
On those predicates Particle Data is entitled (1) to have the Summonses quashed or (2) in the alternative to obtain discovery as to whether IRS has abandoned any civil purpose in its Berg investigation.
634 F. Supp. 275
3. IRS' use of its summons power to obtain information already in its possession demonstrates bad faith, and its petition is therefore an abuse of process.

None of those arguments has any merit.

Form 2039

Concerned that the federal government was overburdening individuals, small businesses and others with paperwork, Congress enacted the 1980 PRA in part to help cut down that burden (PRA § 3501(1)). One means Congress prescribed was review by OMB's Director of all "information collection requests" proposed by federal agencies, to determine whether or not the information sought was both necessary to the proposing agency's functions and not already obtainable from a source within the federal government (PRA §§ 3504(c)(2)-(3) and 3507(a)(1)(A)). Requests satisfying that OMB review receive a control number, which must be displayed on the request (id. § 3504(c)(3)(A)). PRA § 3507(f) provides:

An agency shall not engage in a collection of information without obtaining from the Director a control number to be displayed upon the information collection request.

That provision is not merely precatory. PRA § 3512 says:

Notwithstanding any other provision of law, no person shall be subject to any penalty for failing to maintain or provide any information to any agency if the information collection request involved ... does not display a current control number assigned by the Director or fails to state that such request is not subject to this chapter.

Form 2039 is an "information collection request" within the PRA § 3502(11) definition. Concededly it carries no OMB control number. But Particle Data's counsel chooses to cite only part of the statute, ignoring a flat exclusion from its coverage, and his myopia dooms the Particle Data argument.5

PRA § 3518(c)(1) provides the entire PRA (Chapter 35 of Title 44 of the United States Code) is not applicable to the collection of information:

(A) during the conduct of a Federal criminal investigation or prosecution, or during the disposition of a particular criminal matter; or
(B) during the conduct of (i) a civil action to which the United States or any official or agency thereof is a party or (ii) an administrative action or investigation involving an agency against specific individuals or entities....

IRS issued the Summonses pursuant to its investigation of Berg, a "specific individual." No OMB control number was required. See Cameron v. IRS, 593 F.Supp. 1540, 1556 (N.D.Ind.1984), aff'd, 773 F.2d 126 (7th Cir.1985) (process of assessment and collection of taxes falls under PRA § 3518(c)(1)(B)(ii) exception to OMB control number requirement); Snyder v. IRS, 596 F.Supp. 240, 250 (N.D.Ind.1984) (reaffirming Cameron).6

Particle Data presses the further argument that even if Form 2039 is not required to carry an OMB control number, PRA § 3512 requires it so to state. That is an equally warped statutory reading. As the preceding paragraph reflects, all of PRA— and that includes PRA § 3512—simply

634 F. Supp. 276
"does not apply to the collection of information" described in PRA § 3518(c)(1). And that is made crystal clear not only by the plain statutory language but by the relevant PRA legislative history Particle Data (with typical selectivity) does not cite. See S.Rep. No. 930, 96th Cong., 2d Sess. 52, reprinted in 1980 U.S.Code Cong. & Ad. News 6241, 6292
The only collections of information by a Federal agency which are exempted, and for which a person or persons could not claim protection under section 3512, are collections of information which this chapter does not apply to and which are exempted by section 3518....

In short, Particle Data's challenge to Form 2039 is without merit. While it may be every taxpayer's privilege to hold the government to the precise statutory language governing...

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9 practice notes
  • Lonsdale v. U.S., No. 90-2113
    • United States
    • United States Courts of Appeals. United States Court of Appeals (10th Circuit)
    • November 20, 1990
    ...WL 21279, 1990 U.S.Dist. LEXIS 2843 (D.Colo.1990), aff'd 1990 U.S.App. LEXIS 14191 (10th Cir.); United States v. Particle Data, Inc., 634 F.Supp. 272, 275-76 (N.D.Ill.1986); Snyder v. Internal Revenue Service, 596 F.Supp. 240, 250 (N.D.Ind.1984); Cameron v. Internal Revenue Service, 593 F.S......
  • U.S. v. Michaud, Nos. 89-1684
    • United States
    • United States Courts of Appeals. United States Court of Appeals (7th Circuit)
    • July 24, 1990
    ...because the case arose under the pre-amendment version of Sec. 7602. Id. at 1276-77. See also United States v. Particle Data, Inc., 634 F.Supp. 272, 276-77 For the reasons discussed below, however, we need not, and do not, resolve this debate here. 1 If, as the dissent asserts, section 7602......
  • Dennis v. US, No. 85-3286.
    • United States
    • United States District Courts. 7th Circuit. United States District Courts. 7th Circuit. Central District of Illinois
    • May 22, 1987
    ...States v. LaSalle Nat'l Bank, 437 U.S. 298, 308, 98 S.Ct. 2357, 2363, 57 L.Ed.2d 221 (1978); United States v. Particle Data, Inc., 634 F.Supp. 272, 276-77 In seeking to quash the summonses in question, Dennis attempts to take advantage of § 7609(b)(2)(A), a provision which expressly waives ......
  • U.S. v. Smith, Nos. 87-3020
    • United States
    • United States Courts of Appeals. United States Court of Appeals (9th Circuit)
    • November 2, 1987
    ...any and all arguments based on the regulations for purposes of these prosecutions. 8 Such cases as United States v. Particle Data, Inc., 634 F.Supp. 272 (N.D.Ill.1986), Snyder v. IRS, 596 F.Supp. 240 (N.D.Ind.1984), and Cameron v. IRS, 593 F.Supp. 1540 (N.D.Ind.1984), aff'd 773 F.2d 126 (7t......
  • Request a trial to view additional results
9 cases
  • Lonsdale v. U.S., No. 90-2113
    • United States
    • United States Courts of Appeals. United States Court of Appeals (10th Circuit)
    • November 20, 1990
    ...WL 21279, 1990 U.S.Dist. LEXIS 2843 (D.Colo.1990), aff'd 1990 U.S.App. LEXIS 14191 (10th Cir.); United States v. Particle Data, Inc., 634 F.Supp. 272, 275-76 (N.D.Ill.1986); Snyder v. Internal Revenue Service, 596 F.Supp. 240, 250 (N.D.Ind.1984); Cameron v. Internal Revenue Service, 593 F.S......
  • U.S. v. Michaud, Nos. 89-1684
    • United States
    • United States Courts of Appeals. United States Court of Appeals (7th Circuit)
    • July 24, 1990
    ...because the case arose under the pre-amendment version of Sec. 7602. Id. at 1276-77. See also United States v. Particle Data, Inc., 634 F.Supp. 272, 276-77 For the reasons discussed below, however, we need not, and do not, resolve this debate here. 1 If, as the dissent asserts, section 7602......
  • Dennis v. US, No. 85-3286.
    • United States
    • United States District Courts. 7th Circuit. United States District Courts. 7th Circuit. Central District of Illinois
    • May 22, 1987
    ...States v. LaSalle Nat'l Bank, 437 U.S. 298, 308, 98 S.Ct. 2357, 2363, 57 L.Ed.2d 221 (1978); United States v. Particle Data, Inc., 634 F.Supp. 272, 276-77 In seeking to quash the summonses in question, Dennis attempts to take advantage of § 7609(b)(2)(A), a provision which expressly waives ......
  • U.S. v. Smith, Nos. 87-3020
    • United States
    • United States Courts of Appeals. United States Court of Appeals (9th Circuit)
    • November 2, 1987
    ...any and all arguments based on the regulations for purposes of these prosecutions. 8 Such cases as United States v. Particle Data, Inc., 634 F.Supp. 272 (N.D.Ill.1986), Snyder v. IRS, 596 F.Supp. 240 (N.D.Ind.1984), and Cameron v. IRS, 593 F.Supp. 1540 (N.D.Ind.1984), aff'd 773 F.2d 126 (7t......
  • Request a trial to view additional results

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