Jason C. Anderson v. United States ( 2007 )

[DO NOT PUBLISH]
IN THE UNITED STATES COURT OF APPEALS
FOR THE ELEVENTH CIRCUIT FILED
________________________ U.S. COURT OF APPEALS
ELEVENTH CIRCUIT
May 31, 2007
No. 06-15501 THOMAS K. KAHN
Non-Argument Calendar CLERK
________________________
D. C. Docket No. 05-00952-CV-WSD-1
JASON C. ANDERSON,
Plaintiff-Appellant,
versus
UNITED STATES OF AMERICA,
LOCKHEED GEORGIA EMPLOYEE'S FEDERAL CREDIT UNION,
Defendants-Appellees.
________________________
Appeal from the United States District Court
for the Northern District of Georgia
_________________________
(May 31, 2007)
Before BIRCH, BLACK and MARCUS, Circuit Judges.
PER CURIAM:
James C. Anderson, pro se, appeals the district court’s denial of his petition
to quash a summons issued by the Internal Revenue Service (“IRS”) directing a
third-party to produce records related to him and the denial of his motion to stay.
Anderson argues that the government did not follow proper administrative steps for
the issuance of the summons, nor did it prove that he was a taxpayer, or that IRS
agents are vested with the delegated authority to issue this type of summons. We
AFFIRM.
I. BACKGROUND
On 1 February 2005, Anderson, pro se, filed the present petition to quash a
summons issued by the IRS to a third-party “private record[]” keeper, Lockheed
Georgia Employee’s Federal Credit Union (“Credit Union”), pursuant to 26 U.S.C.
§ 7609. Anderson asserted in this petition that the IRS was impermissibly using
the summons as an attempt to gather information against him for criminal
prosecution. Specifically, Anderson charged that the IRS had labeled him a “tax
protester,” had abandoned its civil investigation of him, and had made an “informal
determination” to prosecute him criminally, or, alternatively, had made a “formal
recommendation” to the Department of Justice for criminal prosecution. R1-1 at 2.
Moreover, Anderson claimed that the IRS’s summons was defective because it was
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too broad.1 Therefore, Anderson claimed that the summons was not issued in good
faith, and was violative of controlling law, as well as of “his person, his privacy,
his Constitutional rights, and his natural rights, which would and ought to be
protected by the government.” Id. The summons, which was signed by IRS Agent
Jeffrey Kuebler, sought “monthly statements and deposit details” for the calendar
years 2000 through 2003 for two checking accounts and two savings accounts
opened by Anderson. Id., at Attachment 1.
The government answered the petition to quash and admitted that it was
seeking documents regarding Anderson’s checking and savings accounts with the
Credit Union, as well as any loan applications, for the years 2000 through 2003,
but denied that it had an improper purpose for doing so. The government also
raised several affirmative defenses, including, among others, that the district court
lacked jurisdiction to consider the petition, pursuant to 26 U.S.C. § 7609(b)(2)(A),
because it was filed more than twenty days after the notice of the summons was
sent to Anderson via certified mail on 10 January 2005, and one of the decisions
relied upon by Anderson, United States v. LaSalle National Bank, 437 U.S. 298, 98
S.Ct. 2357 (1978), had been superceded by 26 U.S.C. § 7602.
Anderson traversed the government’s answer and asserted, among other
1
Anderson also alleged that the summons was issued by an “unauthorized person.” R1-1
at 3.
3
things, that the petition was not untimely filed. To the contrary, Anderson claimed
that the IRS’s notice of summons was invalid because it was not sent to his last
known address, and he timely filed the petition to quash within twenty days of the
Credit Union mailing a copy of the notice of summons to his correct address.
Anderson’s reply included correspondence demonstrating that the IRS had
previously sent correspondence to his correct address and, thus, had notice of his
correct mailing address at the time that it attempted to send the notice of summons
to him. Anderson also argued that Congress, in passing 26 U.S.C. § 7602, “did not
and could not overturn” LaSalle. R1-13 at 7.
A magistrate judge held a hearing on the petition to quash in May 2005. As
to timeliness, Anderson again asserted that the IRS knew his correct mailing
address, but nevertheless intentionally sent the notice of summons somewhere else.
Thus, Anderson essentially argued that the time for filing a petition to quash did
not begin to run as of the date of mailing of that notice. Instead, Anderson
contended that the time period began to run as of the date the Credit Union sent a
copy of the notice of summons to his correct address, and so his petition to quash,
which was filed within twenty days of that event, was timely. As to the merits,
Anderson denied being a “tax protester,” and essentially claimed that the third-
party summons to the Credit Union should be quashed, because the government
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did not have a legitimate purpose, and was acting in bad faith, in issuing the third-
party summons.
Anderson called IRS Agent Kuebler to testify as an adverse witness. Agent
Kuebler testified that his duty as a revenue agent was to determine whether
taxpayers reported their tax liability correctly. Agent Kuebler testified that if he
uncovered “badges of fraud” during his investigation, he referred the matter to a
fraud coordinator, who, in turn, could refer it for criminal investigation. R2 at 51.
Agent Kuebler explained that after he was assigned to Anderson’s case, he
determined that Anderson had not filed a tax return since approximately 1996, but
Anderson had been paying interest on a mortgage. Agent Kuebler testified that he
was still trying to gather documents to determine Anderson’s income, if any.
Agent Kuebler further testified that he had not yet reviewed any documents
submitted by the Credit Union. On cross-examination, Agent Kuebler noted that
Anderson’s case had not been submitted to the Department of Justice for a criminal
investigation.
After Anderson rested, the government called him as its first witness.
Anderson was questioned regarding whether his petition was timely filed. With
regard to timeliness, Anderson testified that the copy of the notice that was sent to
him was sent to an incorrect post office box, and so he did not personally receive
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the IRS’s notice of summons until 27 January 2005. Nevertheless, Anderson
admitted that he had executed a power of attorney naming John Turner, an ex-IRS
employee, as his designated “representative” regarding the IRS’s civil investigation
into his federal tax liability, and Turner had served in this capacity since February
or March 2004. The government introduced a certified letter that the IRS sent to
Turner on 10 January 2005, and confirmation that the letter had been delivered.
Anderson further testified that the Credit Union sent him a notice of summons on
12 January 2005, which he received the following day. The government never
raised a jurisdictional argument or requested that the petition to quash be dismissed
as untimely because it was not filed within twenty days of Anderson’s attorney-in-
fact receiving the notice of summons, however. Moreover, the government did not
introduce any evidence that the Secretary of the IRS received notice under 26
U.S.C. § 6903 that Turner was acting for Anderson in a fiduciary capacity. As to
the merits of the petition to quash, Anderson admitted not filing a federal income
tax return from 2000 through 2003. The government next called Agent Kuebler in
rebuttal, and he confirmed that Anderson’s case had not been referred for criminal
investigation.
In October 2005, approximately eight months after the petition to quash was
filed and five months after the hearing on the matter was held before the magistrate
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judge, Anderson moved to amend his petition to quash. Conceding that the
petition could not be amended as of right, Anderson argued that he was entitled to
leniency as a pro se litigant and should be permitted to amend his petition. The
government opposed Anderson’s motion to amend. While acknowledging that the
district court had broad discretion under Federal Rule of Civil Procedure 15(a), the
government asserted that Anderson’s new claims were meritless and untimely.
Anderson next moved to stay the proceedings, and asserted, among other things,
that he wanted an opportunity to exhaust unspecified administrative remedies, and
he never “knowingly or un-wittingly waived such rights to remedy available.” R1-
32 at 1.
The magistrate judge issued a report and recommended that Anderson’s
petition to quash be denied on the merits, and his motions to amend and to stay be
denied also. The magistrate judge found that the IRS met its burden of proof,
because it established that Anderson had not paid federal income taxes from 2000
through 2003, and, with respect to these years, it was seeking as part of its civil
investigation records from the Credit Union. By contrast, the magistrate judge
found that Anderson failed to meet his burden, since the “IRS had a basis to
assume that [he] was liable to pay taxes” because he failed “to file income tax
returns for at least four years . . . .” R1-33 at 8.
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As to the motion to amend, the magistrate judge found that the new claims
were frivolous for the reasons articulated by the government, or, alternatively, the
motion was untimely and justice did not require the grant of the motion. The
magistrate judge denied the motion to stay, concluding that there were no
administrative remedies available for Anderson to exhaust.
Anderson objected to the report and alleged that the magistrate judge
assumed facts not in the record, but Anderson did not identify which facts were
improperly assumed, or explicitly object to any particular factual finding. As to
the motion to stay, Anderson contended that the magistrate judge violated his due
process rights by ignoring his citations to numerous rulings where other courts
have enforced the doctrine of exhaustion of administrative remedy, thus denying
him the opportunity to so exhaust.
Ultimately, the district court adopted the magistrate judge’s report, and
denied, among others, Anderson’s petition to quash and his motions to amend and
to stay. The court noted that Anderson did not object to the magistrate judge’s
recommended findings. With respect to the petition to quash, the court found that
the undisputed evidence demonstrated that Anderson had not filed tax returns for
the years 2000 through 2003, the IRS issued a summons in connection with its civil
investigation of tax liability for those years, and the IRS was obligated “to conduct
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the sort of inquiry for which the summons was issued” pursuant to 26 U.S.C.
§ 7601(a). R1-38 at 4. By contrast, the court determined that Anderson did not
proffer evidence demonstrating that the summons was served “for any other or any
improper purpose,” and so there was no basis on which to quash the summons. Id.With respect to the motion to amend, the court found that the new claims
were futile and the motion was untimely filed. With respect to the motion to stay
and to Anderson’s objections to the magistrate judge’s report, the court noted,
among other things, that Anderson had not shown that there were any
administrative remedies that were required to be exhausted before the summons
could be enforced.
Anderson filed a timely motion for reconsideration pursuant to Federal Rule
of Civil Procedure 59. Anderson argued, among other things, that the IRS lacked
standing to bring a cause of action relative to him, and the magistrate judge
violated his due process rights by permitting the introduction of hearsay and
unauthenticated documents pursuant to Federal Rules of Evidence 801 and 901,
respectively. For the first time, Anderson also raised a specific issue as to the
magistrate judge’s findings of fact, arguing that there was no evidence to support a
finding that he was “an employee of a company called Lockheed-Georgia.” R1-40
at 5. The district court entered an order denying Anderson’s motion for
9
reconsideration, and Anderson timely appealed.
II. DISCUSSION
A. Petition to Quash
Anderson essentially argues that the district court erred in dismissing his
petition to quash. Anderson maintains that the government did not satisfy its
burden of proof and, specifically, the government did not follow proper
administrative steps for the issuance of the summons, and so the summons was
illegal. Anderson asserts that the government did not establish that he was a
taxpayer or that Agent Kuebler was vested with the delegated authority to issue the
summons.2 Anderson also contends that the district court’s findings were
unsupported.
We review a district court’s conclusions of law de novo. MiTek Holdings,
Inc. v. Arce Eng’g Co., Inc., 89 F.3d 1548, 1554 (11th Cir. 1996) (citation
omitted). By contrast, because we assume that Anderson’s objections to the
magistrate judge’s report and recommendation preserved this issue on appeal, we
will review the court’s factual-findings for clear error. La Mura v. United States,
2
Although these two claims were not formally raised until the motion to amend the
petition to quash, Anderson did mention these points before the magistrate judge during the
hearing on the petition to quash and the government did not object at that time. Thus, to the
extent that these new claims were raised below, in light of Anderson’s pro se status, we address
them here. See Tannenbaum v. United States, 148 F.3d 1262, 1263 (11th Cir. 2003) (per
curiam) (“Pro se pleadings are held to a less stringent standard than pleadings drafted by
attorneys and will, therefore, be liberally construed.” (citation omitted)).
10
765 F.2d 974, 981, n.10 (11th Cir. 1985) (citations omitted).
“[T]he Secretary of the Treasury, or the IRS as his designee, may ‘examine
any books, papers, records, or other data which may be relevant or material to . . . ’
ascertaining the correctness of any return and may issue summonses to those in
‘possession, custody, or care’ thereof to appear and produce them to the IRS.” La
Mura, 765 F.2d at 978-79 (quoting 26 U.S.C. § 7602). “The IRS’[s] power to
investigate under section 7602 has been described as ‘broad’ and ‘expansive.’” Id.(citations omitted).
The power to investigate is not without limit, however. “To obtain
enforcement of a summons, the IRS must demonstrate (1) that the investigation
will be conducted pursuant to a legitimate purpose, (2) that the inquiry will be
relevant to that purpose, (3) that the information sought is not already in the
IRS’[s] possession and, (4) that it has taken the administrative steps necessary to
the issuance of a summons.” Id. (citing United States v. Powell, 379 U.S. 48,
57-59, 85 S. Ct. 248, 255 (1964)). Once the government satisfies these
requirements, the burden then shifts to the party contesting the summons to
“disprove one of the four elements of the government’s prima facie showing or
convince the court that enforcement of the summons would constitute an abuse of
the court’s process.” Id. at 979-80 (citations omitted). A summons for records or
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documents maintained by a third-party is issued for a legitimate purpose so long as
the IRS is investigating potential criminal violations of the tax code and has not
already referred the matter to the Department of Justice for criminal prosecution.
Id.
The government’s burden of showing relevance is “slight.” Id. at 981.
Information is relevant if it “‘might throw light upon the correctness of the
taxpayer’s return.’” Id. (citation omitted). The government must establish that it
has a “‘realistic expectation rather than an idle hope that something might be
discovered.’” Id. (citation omitted). A “taxpayer” is defined as “any person
subject to any internal revenue tax.” 26 U.S.C. § 7701(a)(14). We have noted that
§ 7601 “gives the Internal Revenue Service a broad mandate to investigate and
audit ‘persons who may be liable’ for taxes.” La Mura, 765 F.2d at 979.
Upon review of the record and the parties’ briefs, we find no reversible error
in the district court’s conclusion that the government properly issued the summons
under Powell, even assuming that Anderson is correct that the court’s factual-
finding as to his place of employment is unsupported by the record. The summons
here was issued for a legitimate reason. An IRS agent testified at a hearing on the
petition to quash that the IRS’s investigation of Anderson was merely civil in
nature at this point, and his file had not been referred to the Department of Justice
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for criminal investigation or prosecution. See id. at 980 n.9 (noting “that the IRS
may not issue a summons if it has referred the case to the Department of Justice for
criminal prosecution”). Moreover, this inquiry was relevant to the IRS’s civil
investigation of potential federal tax liability from 2000 through 2003, given that
Anderson admitted that he had not filed federal tax returns during that time period,
the summons sought monthly statements from those years, and it is undisputed that
the IRS did not possess the information sought in the summons at the time of the
summons’s issuance.
Also, the IRS had taken the administrative steps necessary to the issuance of
a summons. Anderson “may be” liable for taxes, because he admitted to working
in New York and has not filed federal tax returns since 2000. See id. at 979. In
addition, IRS agents are vested with the authority to issue third-party summonses.
The Secretary of Treasury delegated this power to the IRS, see id. at 978-79, and
the IRS, in turn, re-delegated this power to its agents. See 26 C.F.R. §
301.7701-9(c); 26 C.F.R. § 301.7701-9(b); IRS Delegation Order No. 4 Rev. 22,
1997 WL 33479254 (Aug. 18, 1997) (Commissioner of IRS re-delegating authority
to internal revenue agents). Because the government satisfied its prima facie
showing under Powell, and Anderson failed to prove otherwise or to show that the
summons was an abuse of the court’s process, the district court properly denied the
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petition to quash.
B. Motion to Stay
Anderson argues that the district court violated his due process rights “by
refusing to grant [his] motion to stay the judicial proceedings while both sides
continued to exhaust possible administrative remedies, as required by law.” Br. of
Appellant at 19. Anderson maintains that he was required to demand an
administrative hearing to have the IRS explain how he is a taxpayer, as defined by
law, before filing the petition to quash the summons. Anderson also argues that he
was “required to initiate a direct challenge to authority of anyone representing
himself as a government office[r] or agent,” such as Agent Kuebler, “to avoid the
implications of the de facto officer doctrine,” as discussed in Ryder v. United
States, 515 US. 177, 115 S. Ct. 2031 (1995). Id. at 20.
The government responds that Anderson’s “assumption” that administrative
remedies exist is incorrect. In fact, the government asserts that Anderson’s
argument is contrary to the express language of the Internal Revenue Code, which
requires an action to quash a summons to be brought in a federal district court.
The government also argues that the de facto officer doctrine cannot be applicable
here, because Agent Kuebler was vested with the authority to issue the summons.
Anderson replies and argues that his due process rights were violated
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because he “has made the effort to invoke administrative processes for factfinding,
classification, and review by filing his motion to stay but his request fell on deaf
ears.” Reply Br. of Appellant at 8. Anderson also argues that “[i]t is a United
States of America governmental administrative body that has/had the DUTY to
answer Appellant’s questions as to his alleged ‘Taxpayer’ (or not) status and the
district court erred by failing to make sure that the IRS had sufficiently (lawfully)
made such a presumption when it issued its third party summons.” Id. at 9-10.
“The interpretation of a statute by a district court is subject to de novo
review by this Court.” Frio Ice, S.A. v. Sunfruit, Inc., 918 F.2d 154, 157 (11th
Cir. 1990) (citation omitted). 26 U.S.C. § 7609 provides that “any person who is
entitled to notice of a summons . . . shall have the right to begin a proceeding to
quash such summons” in the “United States district court for the district within
which the person to be summoned resides or is found . . . .” 26 U.S.C.
§§ 7609(b)(2), (h)(1). There is no administrative process for challenging a
taxpayer’s status outlined in § 7609. “The de facto officer doctrine confers validity
upon acts performed by a person acting under the color of official title even though
it is later discovered that the legality of that person’s appointment or election to
office is deficient.” Ryder, 515 U.S. at 180, 115 S. Ct. at 2034.
The district court here did not violate Anderson’s due process in denying the
15
motion to stay the petition to quash, because there are no administrative remedies
to exhaust. To the contrary, the IRS may issue a summons to a third-party for
documents regarding an individual who “may be” liable for taxes, see La Mura,
765 F.2d at 979, and that person can then challenge the validity of the summons in
district court, see 26 U.S.C. §§ 7609(b)(2), (h)(1), as Anderson chose to do.
Moreover, as the government pointed out, the “de facto officer” doctrine is
inapplicable, because, as discussed previously, an IRS delegation order actually
authorized Agent Kuebler to issue the summons.
III. CONCLUSION
The district court properly denied Anderson’s petition to quash.
Additionally, the district court did not violate Anderson’s due process rights in
denying his motion to stay because there was no available administrative remedies
to exhaust. Accordingly, we AFFIRM.
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