Wright v. U.S., 95-1052-CIV-T-23B.

• Decision Date: 28 April 1997
• Docket Number: No. 95-1052-CIV-T-23B.,95-1052-CIV-T-23B.
• Citation: 964 F.Supp. 336
• Parties: Michael D. WRIGHT, Petitioner, v. UNITED STATES of America, Respondent.
• Court: U.S. District Court — Middle District of Florida

Page 336

964 F.Supp. 336

Michael D. WRIGHT, Petitioner, v. UNITED STATES of America, Respondent.

No. 95-1052-CIV-T-23B.

United States District Court, M.D. Florida, Tampa Division.

April 28, 1997.

Montfort S. Ray, Blairsville, GA, for Petitioner.

David N. Geier, U.S. Department of Justice, Tax Division, Washington, DC, for Respondent.

ORDER

MERRYDAY, District Judge.

Before the Court are the petition to quash summonses (Doc. 1) and the respondent's motion to dismiss the petition (Doc. 4). Pursuant to 28 U.S.C. § 636, the magistrate judge considered these matters and filed a report and recommendation (Doc. 21), recommending that the petition be denied and the dismissal motion be granted. The petitioner filed objections to the report and recommendation (Doc. 24). The Court conducted a de novo review.

Upon consideration, the petitioner's objections are OVERRULED and the magistrate judge's report and recommendation is ADOPTED and INCORPORATED in this order. Accordingly, the petition to quash summonses (Doc. 1) is DENIED, and the motion to dismiss the petition (Doc. 4) is GRANTED. The Clerk is directed to close this file.

REPORT AND RECOMMENDATION

THOMAS G. WILSON, United States Magistrate Judge.

This suit was instituted by Michael D. Wright who asks this court to quash Internal' Revenue Service ("IRS") summonses directed to three banks that purportedly possess records of Wright's financial transactions. The United States of America, in response, seeks to enforce those summonses. Because the three legal challenges asserted by Wright do not support quashing the summonses, I recommend that the summonses be enforced.

I.

The IRS is investigating Wright's income for the years 1991 and 1992. In furtherance of that investigation, Revenue Agent Elizabeth Johnson, on June 14, 1995, issued a summons to First Union Bank, to Village Bank of Florida, and to Sun Bank of Tampa, each directing the respondent to appear before her to testify and produce bank records relating to Wright and Northwest Pet Veterinary Hospital.¹ Johnson also issued that same day to Wright, the Veterinary Hospital, and the hospital's agent and manager notices that the summonses had been issued to the banks.

Following receipt of the notices, Wright timely filed his petition in this case, alleging that the summonses were defective on various grounds. He asked, accordingly, that the summonses be quashed.

The United States, in response, filed a motion to dismiss the petition to quash and sought an order enforcing the summonses (Doc. 4). In support of the motion, the Government filed a declaration by Revenue Agent Johnson under penalty of perjury stating that the documents and information are necessary to determine Wright's tax liability for the years 1991 and 1992. The declaration alleges further that the information sought is not already in the possession of the IRS. It also states that all administrative steps required by the IRS for the issuance of a summons have been taken, and that a Justice Department referral is not in effect for the years under investigation.

Subsequently, the matter was referred to me for a report and recommendation. Thereafter, in light of Johnson's sworn declaration, I treated the Government's motion to dismiss as a motion for summary judgment and directed Wright to file any opposing materials if he wished to controvert the declaration (Doc. 15). Wright did not submit any affidavits in response to the order. Wright, however, had previously filed a memorandum in opposition to the Government's motion in which he raised three contentions. Under these circumstances, the matter was scheduled for legal argument on Wright's contentions. At the hearing, the parties agreed that there were no factual disputes that warranted the presentation of evidence.

II.

A. The Supreme Court held in United States v. Powell, 379 U.S. 48, 57-58, 85 S.Ct. 248, 255, 13 L.Ed.2d 112 (1964), that a summons is to be enforced upon a showing "that the investigation will be conducted pursuant to a legitimate purpose, that the inquiry may be relevant to the purpose, that the information sought is not already within the [IRS's] possession, and that the administrative steps required by the Code have been followed." The Government ordinarily can make such a showing through the petition and the verified declaration. See United States v. Southeast First National Bank of Miami Springs, 655 F.2d 661, 664 (5th Cir.1981). In this case, the Government has presented such a declaration. Wright, despite having been afforded the opportunity to do so, presented no evidence in opposition to the declaration. Consequently, unless Wright can prevail on one of his three legal arguments, the Government is entitled to have the summonses enforced.

B. Wright contends, first, that service of a summons was not properly effected upon First Union Bank.² A summons issued under 26 U.S.C. 7602 for the examination of books and witnesses must be served "by an attested copy delivered in hand to the person to whom it is directed, or left at his last and usual place of abode." 26 U.S.C. 7603. The summons directed to First Union Bank was served by mailing an attested copy by certified mail from St. Petersburg to the attention of a specific individual in the bank's legal department in Jacksonville. The Government did not contend at the hearing that service of the summons in this manner satisfied the requirements of § 7603. Rather, the Government's argument is that First Union has made no complaint about the manner of service, and Wright has no standing to do so.

Wright is proceeding in this matter under 26 U.S.C. 7609. That section, inter alia, gives the right to a taxpayer to move to quash a summons issued, as here, to a "third-party recordkeeper" of information and documents pertaining to the taxpayer. 26 U.S.C. 7609(b)(2). The Government argues that, in such a proceeding, the taxpayer has no standing to assert objections to a summons that are personal to the third-party recordkeeper.

The Government's position is supported by the legislative history of § 7609. That section was added to the Internal Revenue Code in the Tax Reform Act of 1976 in order to establish a procedure by which a taxpayer could seek to forestall the disclosure of sensitive information, since typically the recipient of a third-party summons would have a far less intense interest than the taxpayer in protecting the information. See Sen. Rep. No. 94-938, 94th Cong.2d Sess. (1976), pp. 368-369 (reprinted in 4 U.S.Code Cong. & Adm. News (1976), pp. 3797-3798). The Senate Report explains the extent to which Congress intended that the taxpayer, in third-party recordkeeper situations, could challenge a summons (id. at pp. 370-371 (reprinted at U.S.C.C. & A.N., pp. 3799-3800)):

In addition, the committee intends that the noticee would have standing to raise other issues which could be asserted by the third-party record keeper, such as asserting that the summons is ambiguous, vague or otherwise deficient in describing the material requested, or that the material requested is not relevant to a lawful investigation. In other words, the committee intends that the noticee will be allowed to stand in the shoes of the third-party record keeper and assert certain defenses to enforcement which witnesses are traditionally allowed to claim, but which may not be available to intervenors (under many court decisions) on [the] ground of standing.

At the same time, it should be made clear that the purpose of this procedure is to facilitate the opportunity of the noticee to raise defenses which are already available under the law (either to the noticee or to the third-party witness) and that these provisions are not intended to expand the substantive rights of these parties. Also, of course, the noticee will not be permitted to assert as defenses enforcement issues which only affect the interests of the third-party record keeper, such as the defense that the third-party record keeper was not properly served with the summons (i.e., wrong address) or that it will be unduely [sic] burdensome for the third-party record keeper to comply with the summons.

This passage makes clear that § 7609 was intended to permit the taxpayer to raise issues that relate to an interest in nondisclosure of information, but not to allow the taxpayer to assert issues that are of meaningful concern only to the third-party recordkeeper because they involve its burden to produce information. In this case, for example, it can make no real difference to the taxpayer whether First Union was served by mail or in person. Furthermore, a wide-spread financial institution like First Union may prefer to have a third-party summons mailed to a central location rather than have it personally served at some branch office. Consequently, the right to challenge the method of service should be limited in these situations to third-party recordkeepers. Wright's objection to service by mail should, therefore, be rejected for lack of standing. King v. United States, 684 F.Supp. 1038, 1041 (D.Neb.1987).

C. Wright contends further that the three summonses are unenforceable because the notice served on him did not contain an attested copy of the summonses. While there is, arguably, a split of authority on this issue, the more persuasive decisions reject this contention.

As previously stated, the service of a summons under 26 U.S.C. 7603 requires the delivery of "an attested copy."³ Section 7609 requires that the notice of the summons that must be sent to the taxpayer "shall be accompanied by a copy of the summons which has been served." There is no express requirement in that section (or anywhere else) that the notice to the taxpayer must be accompanied by an "attested" copy of the summons. In my view, that is the extent of the analysis needed on this issue. When Congress wanted an attested copy of the summons served on the respondent pursuant to § 7603, it said so. Since Congress...