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stating that when the summoned parties "are not located in the district where the petition to quash has been filed the court does not have subject matter jurisdiction over the summonses"
Summary of this case from Cayman National Bank, Ltd. v. U.S.Opinion
Case No. 5:99-Cv-161-Oc-21GRJ
July 5, 2001
ORDER
Pending before the Court is the Petition/Motion To Quash IRS Summons or Alternatively For A Protective Order And Memorandum of Law Incorporated Thereon, filed by Sean L. Wilson, Harris K. Solomon, Milton Friedman, Richard Siegmeister, Robert P. Kelly and Gary J. Rotella. (Doc. 243.) The United States has filed its opposition (Doc. 246) and, accordingly, the matter is ripe for resolution. For the reasons discussed below, the motion to quash or alternatively for a protective order is due to be DENIED.
I. BACKGROUND
The above captioned case involves claims by the United States to reduce assessed tax liabilities to judgment and foreclose federal tax liens on real and personal property. The administrative summonses issued by the IRS — and which are the subject matter of the instant motion to quash — were not issued as part of this case and relate to administrative proceedings concerning the tax liability of Willard M. Arnold and others. The movants are the attorneys for the parties, a C.P.A., presumably for one or more of the parties, and those persons and entities identified on the summonses. Each of the summonses requires that the movants provide to the IRS documents in their possession generally relating to retainers, fees or amounts received by the movants from Willard M. Arnold and the other named taxpayers. The documents to be produced include billing and account records, copies of checks, records identifying the client, correspondence regarding billing, and the identity of bank accounts where the movants deposited any checks or payments received.The movants object to production of the documents on the grounds that production would require disclosure of attorney-client privileged information and on the grounds that the request is burdensome and overly broad.
II. DISCUSSION
A. Motion To Quash
Because the movants have characterized their request as a motion to quash the Court will first address what law and procedures control quashing an IRS administrative summons and the appropriate forum for resolution of disputes relating to the summonses.
An IRS summons, as here, served on a third party recordkeeper, such as an attorney or accountant, concerning the tax liability of another is governed by 26 U.S.C. § 7609. Under this provision the taxpayer is given certain procedural rights to challenge the summons and is entitled to notice of the summons. 26 U.S.C. § 7609(b)(2). The statute contemplates that only the taxpayer whose records have been sought has standing to begin a proceeding to quash a summons. Id. The third party recordkeeper has the right to intervene in such proceeding but does not have an independent right to initiate on its own an action to quash.
26 U.S.C. § 7609(h)(1) provides that only the United States District Court for the district within which the person to be summoned resides or is found shall have jurisdiction to hear and determine a proceeding to quash a third party recordkeeper summons. Where, as here, the third party recordkeepers are not located in the district where the petition to quash has been filed the court does not have subject matter jurisdiction over the summonses. The appropriate forum and the appropriate method for quashing the summonses is through the commencement of an independent action in the Southern District of Florida — where movants reside — initiated by the taxpayers, who are the subject of the summonses. Accordingly, because this Court does not have subject matter jurisdiction over the challenged summonses the Motion To Quash must be DENIED.
Each of the movants are attorneys (or in one case an accountant) who maintain their offices in the Southern District of Florida.
See, Dial v. United States, 599 F. Supp. 475 (S.D.Tex. 1984).
As an additional argument in support of the Government's position that the Court should not quash the summonses, the Government suggests that the summonses involved in this case were issued for the purpose of aiding in the collection of taxes and, as such, are specifically exempted from the statutory provision for commencing an action to quash an IRS summons. Pursuant to 26 U.S.C. § 7609(c)(2) a district court does not have jurisdiction to quash a summons issued for the purpose of aiding in the collection of taxes. The summons attached to the Motion To Quash, as exhibit A, expressly provides that the information requested relates to the collection of the tax liability of the named taxpayers. While the movants did not attach to their motion copies of each of the summonses served on them the Court assumes that the attached summons is identical to the others. Assuming this to be the case, on this additional basis, the Court is without jurisdiction to entertain a request to quash the summonses.
See, Church of Human Potential, Inc. v. Vorsky, 636 F. Supp. 93, 94-95 (D.N.J. 1986); Pflum v. United States, 125 F.3d 862, 1997 WL 606909 (10th Cir. 1997) (unpublished).
B. Motion For Protective Order
Because the movants have also requested the entry of a protective order as an alternative to quashing the summonses, the Court will briefly address the grounds raised by movants.
The primary objection raised by movants is that production of the requested information may violate the attorney client privilege. In the Eleventh Circuit, however, matters involving the receipt of fees from a client are not generally privileged. There is a limited and rarely available exception to this rule known as the "last link doctrine", which applies where the disclosure of fee information would give the identity of a previously undisclosed suspect. That exception is not present here given the fact that the identity of the taxpayers is disclosed in the summonses and the identity of the clients represented by movants in this case is a matter of public record. Thus, there is no chance of the disclosure of information which would lead to the ultimate disclosure of a previously undisclosed client. For this reason compliance with the summonses would not cause the movants to violate the attorney client privilege.
In re Grand Jury Proceedings (Harrison Slaughter), 694 F.2d 1258 (1 1th Cir. 1982).
United States v. Leventhal, 961 F.2d 936, 940 (11th Cir. 1992);United States v. Jones, 517 F.2d 666 (5th Cir. 1975). The continued vitality of this exception is, however, questionable given the expansion of the crime-fraud exception. See, Rabin v. United States, 896 F.2d 1267, 1279 (11th Cir.) (Tjoflat concurring), vacated 896 F.2d 1283, dismissed on other grounds, 904 F.2d 1498 (1990).
Moreover, to the extent that production of billing records or correspondence" relating to billing may contain any reference to privileged advice those portions of the billing data easily could be redacted without effecting the substance of the requested information. Therefore, to the extent that the movants request an order protecting them from producing the requested records on this ground the request is denied.
This option of redacting on the billing records reference to the substance of the work performed is suggested by the Government in their opposition (Doc. 246, at 6) and, accordingly, the Court assumes there is no objection to this procedure by the Government.
Accordingly, for the foregoing reasons, the alternative request for a protective order is due to be DENIED.
IT IS SO ORDERED.