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noting that in a motion to enforce an IRS summons the "`[a]uthority of the court [is] sought to buttress the procedure for collection of taxes and not in "vindication of the public justice," as in criminal cases.'" (quoting McCrone v. United States, 307 U.S. 61, 64-65 (1939))
Summary of this case from U.S. v. ShadleyOpinion
No. CIV 06-2055 PHX RCB.
November 3, 2006
ORDER
This matter arises out of an IRS summons enforcement action against Respondent Lance C. Standifird. Mot. (doc. # 1). On October 23, 2006, the Court held a hearing on the Government's motion (doc. # 16) for order to show cause why Respondent should not be held in contempt for failure to comply with the Court's January 23, 2006 order (doc. # 13) granting the Government's petition to enforce the IRS summons. Minute Entry (doc. # 23). At the hearing, the Court denied Respondent's written motion to stay the proceedings (doc. # 27), and found Respondent in civil contempt for failure to produce the documents and testimony sought by the IRS summons issued on February 15, 2005. Id. Currently before the Court are Respondent's notice of appeal (doc. # 30) and motion for reconsideration of the Court's order denying his motion to stay (doc. # 33). Having carefully considered the arguments raised, the Court now rules.
I. BACKGROUND
On November 4, 2005, the Government filed a petition to enforce an IRS summons issued to Respondent on February 15, 2005. Mot. (doc. # 1). After granting Respondent an extension of time within which to respond to the Government's petition, see Order (doc. # 9), the Court held a hearing on January 23, 2006 at which it denied Respondent's motion to dismiss for lack of subject matter jurisdiction (doc. # 10) and granted the Government's petition to enforce the IRS summons (doc. # 1). Minute Entry (doc. # 13);see also Order (doc. # 15). No appeal was taken from that final order.
On March 9, 2006, Respondent appeared before the IRS, but refused to produce the documents or testimony sought by the summons, asserting claims of Fifth Amendment privilege. See Mot. (doc. # 16), Ex. 1 at 8-90.
Thereafter, on August 28, 2006, the Court held a hearing on the Government's motion (doc. # 16) for order to show cause why Respondent should not be held in contempt for failure to comply with the Court's January 23, 2006 order (doc. # 13) granting the Government's petition to enforce the IRS summons. Minute Entry (doc. # 23). At that hearing, Respondent orally moved for court-appointed counsel. Id. The Court denied that request at that time on the basis that Respondent had not made any showing of his financial eligibility for court-appointed counsel. Tr. of Aug. 28, 2006 Hearing (doc. # 23) at 2:14:32-2:17:33 p.m. Nevertheless, in light of Respondent's claim that he had not received a copy of the Government's motion (doc. # 16), the Court directed that an additional copy be served upon him and reset the hearing on the Government's motion for October 23, 2006. Minute Entry (doc. # 23). The Court also allowed Respondent to file a supplemental response under seal to articulate his Fifth Amendment objections by showing how his production of the summoned records or testimony "would `support a conviction under a federal criminal statute' or `furnish a link in the chain of evidence needed to prosecute [him] for a federal crime,'" see Rendahl, 746 F.2d at 555 (quoting Hoffman v. United States, 341 U.S. 479, 486 (1951)).
The Court also expressed its reservation as to whether he was entitled to appointed counsel in the context of civil contempt proceedings related to the enforcement of an IRS summons. Tr. of Aug. 28, 2006 Hearing (doc. # 23) at 2:14:32-2:17:33 p.m. In the instant case, the Government's motion seeking adjudication of Respondent in contempt for his refusal to comply with an IRS tax inquiry is in the nature of civil contempt. The Supreme Court has held that "[w]hile particular acts do not always readily lend themselves to classification as civil or criminal contempts, a contempt is considered civil when the punishment is wholly remedial, serves only the purposes of the complainant, and is not intended as a deterrent to offenses against the public." McCrone v. United States, 307, U.S. 61, 64 (1939). Thus, a motion invoking judicial assistance to obtain testimony in a tax inquiry is in the nature of civil contempt, because the "[a]uthority of the court [is] sought to buttress the procedure for collection of taxes and not in `vindication of the public justice,' as in criminal cases." Id. at 64-65.
Respondent did not file any supplemental response or appear at the hearing on October 23, 2006. Instead, he appealed the Court's order denying his request for court-appointed counsel, Notice (doc. # 24), and filed a motion to stay the proceedings pending appeal, Mot. (doc. # 27). The Court denied the motion to stay, and, in view of Respondent's failure to produce the documents and testimony sought by the IRS summons or explain to the Court the basis for his asserted Fifth Amendment privilege, found him in civil contempt for the remedial purpose of obtaining his compliance. Order (doc. # 29). The Court provided Respondent until November 2, 2006 to purge himself of the contempt. Id.
On October 27, 2006, Respondent filed a notice of appeal (doc. # 30) with respect to the Court's finding of contempt, and, on October 30, 2006, filed a motion for reconsideration of the Court's order denying his motion to stay the proceedings (doc. # 33).
II. DISCUSSION
The decision to grant or deny a motion for reconsideration is left to the sound discretion of the trial court. See Sch. Dist. No. 1J, Multnomah County v. ACandS, Inc., 5 F.3d 1255, 1263 (9th Cir. 1993). Such motions are disfavored and, absent exceptional circumstances, are generally only appropriate "if the district court (1) is presented with newly discovered evidence; (2) committed clear error or the initial decision was manifestly unjust; or (3) if there is an intervening change in controlling law." Id.
Respondent's motion is not premised on newly discovered evidence or an intervening change in controlling law. See Mot. (doc. # 33). Rather, as the sole basis for reconsideration, Respondent contends that the Court committed clear error in denying his motion to stay (doc. # 27). Id. In order to prove that the Court committed clear error, Respondent must demonstrate that the Court's action fell clearly outside the bounds of its authority. See McDowell v. Calerdon, 197 F.3d 1253, 1256 (9th Cir. 1999). If the propriety of the Court's judgment is a debatable question, there is no clear error and the motion to reconsider is properly denied. Id.
Respondent argues (1) that a finding of civil contempt in an IRS summons enforcement action constitutes a final appealable order, and (2) that he had a right to court-appointed counsel and that the Court should not have entered its order of incarceration in the absence of Respondent's express waiver of that right. Mot. (doc. # 33) at 1-2. The Court addresses both arguments in turn.
A. Appealability of Civil Contempt Order
In his first argument, Respondent states that he was "baffled by the Court's citation to a non-summons case when [his] prior paperwork cited several more recent cases which have clearly recognized the finality and ability to appeal a contempt order in these exact circumstances." Mot. (doc. # 33) at 1. Respondent is presumably referring to that portion of the Court's October 24, 2006 order citing Taylor v. Bowles, 152 F.2d 311, 312 (9th Cir. 1945), in which the Ninth Circuit held that "[a] remedial or civil contempt order directed against a party litigant is deemed interlocutory and not a final order, and is reviewable only on appeal from the final decree in the main action." See Order (doc. # 29) at 2. Notwithstanding Respondent's professed bewilderment at the Court's reference to Taylor in dictum, his argument does not warrant reconsideration of the Court's order (doc. # 29) denying his motion to stay (doc. # 27), because that motion did not rely on the appealability of a hypothetical contempt order that had not yet been entered. See Mot. (doc. # 27). Rather, Respondent's request for a stay was based on the pendency of his appeal from the Court's August 28, 2006 order (doc. # 23) denying his request for court-appointed counsel, which was the only appeal he had taken at that time. See id. In denying Respondent's motion to stay (doc. # 27), the Court noted the interlocutory character of the August 28, 2006 order. Order (doc. # 29) at 2. Respondent has not challenged the Court's conclusion in that regard, and, therefore, reconsideration on the basis of clear error is not warranted.
As the Court explained in its September 21, 2006 order, the denial of Respondent's request for court-appointed counsel was not immediately appealable, as the denial did not constitute a final decision on that issue. Order (doc. # 26) at 2-3.
B. Right to Counsel
Respondent's second argument asserts that "th[e] Court's decision to order [him] incarcerated when he had no counsel and never waived counsel raises a serious question." Mot. (doc. # 33) at 2 (citing Lassiter v. Dep't of Soc. Servs., 452 U.S. 18, 25 (1981)). Given that Respondent's first and only request for court-appointed counsel was denied on the basis that he did not make any showing of his financial eligibility, see Tr. of Aug. 28, 2006 Hearing (doc. # 23) at 2:14:32-2:17:33 p.m., Respondent's present motion (doc. # 33) apparently takes the position that he has an unqualified right to court-appointed counsel — a right which he claims he did not waive. The Court has previously expressed its reservation as to whether a civil contemnor in an IRS summons enforcement action has a right to court-appointed counsel. Tr. of Aug. 28, 2006 Hearing (doc. # 23) at 2:14:32-2:17:33 p.m. Given the occasion to do so now, the Court will expand on the reasons for its reservation.
Respondent maintains that "the right to counsel extends to every case in which the litigant may be deprived of his liberty if he loses, regardless of the civil or criminal label." Resp. (doc. # 21) at 3:15-17 (citation and internal quotations omitted); accord Mot. (doc. # 33) at 2. In Lassiter, the principal case on which Respondent relies for this proposition, the Supreme Court ultimately held that a state trial court did not commit reversible error by failing to appoint counsel in a proceeding determining the parental rights of an indigent and incarcerated mother. Lassiter, 452 U.S. at 33. However, more recent and relevant Supreme Court authority declares that civil contempt sanctions require fewer procedural protections, as they are avoidable and not punitive. See Int'l Union, United Mine Workers of Am. v. Bagwell, 512 U.S. 821, 831 (1994). Because the contemnor is able to purge the contempt by compliance in such cases, and thereby obtain his release, it is said that he "carries the keys of his prison in his own pocket." Id., 512 U.S. at 828 (citation and internal quotations omitted). Thus, "civil sanctions may be imposed so long as the court provides adequate notice and an opportunity to be heard." Lasar v. Ford Motor Co., 399 F.3d 1101, 1110 (9th Cir. 2005) (citingBagwell, 512 U.S. at 827).
To that end, the Supreme Court has indicated that the indefinite incarceration of a contemnor for the remedial purpose of obtaining compliance with an affirmative command is "[t]he paradigmatic coercive, civil contempt sanction." Id. at 828. Specifically, a motion invoking judicial assistance to obtain testimony in a tax inquiry has been held to be in the nature of civil contempt, because the "[a]uthority of the court [is] sought to buttress the procedure for collection of taxes and not in `vindication of the public justice,' as in criminal cases."McCrone v. United States, 307 U.S. 61, 64-65 (1939). Thus, in an IRS deficiency action, where a taxpayer appearingpro se was found in contempt and incarcerated, the Fifth Circuit summarily rejected the taxpayer's argument that he was denied his right to counsel. McDougal v. Commissioner, 818 F.2d 453, 454-55 (5th Cir. 1987).
Lest Respondent take issue again with the Court's citation to a "60+ year old appeals court decision," see Mot. (doc. # 33) at 1, the Court will point out that, as recently as 1994, the Supreme Court has cited its McCrone decision as an example of a "paradigmatic coercive, civil contempt sanction" requiring fewer procedural protections for the contemnor. Bagwell, 512 U.S. at 828.
Rejecting the taxpayer's appeal as "totally frivolous" under Fed.R.App.P. 38, the Fifth Circuit went on to impose sanctions on the taxpayer, explaining that "[the taxpayer] seeks only to delay the inevitable, and in so doing, . . . has occasioned the waste of limited governmental and judicial resources, unduly impeding the court's ability to resolve the meritorious claims of other litigants. This abuse of the system and citizenry cannot be tolerated." McDougal, 818 F.2d at 455.
Respondent cites another Fifth Circuit case, Ridgeway v. Baker, 720 F.2d 1409, 1413 (5th Cir. 1983), essentially for the notion that the civil-criminal distinction is irrelevant in determining whether a civil contemnor has a right to court-appointed counsel. Mot. (doc. # 33) at 2. To the Court's knowledge, Ridgeway has not been followed by either the Supreme Court or the Ninth Circuit. Indeed, the most recent authority from the Supreme Court and the Ninth Circuit confirms that the civil-criminal distinction is alive and well. See Bagwell, 512 U.S. at 831-34; see also Lasar, 399 F.3d at 1110 (endorsing the distinction between civil and criminal contempts resulting in incarceration) (citing Bagwell, 512 U.S. at 829). Given the choice between following their binding authority or taking the contrary view expressed in a much older Fifth Circuit opinion, the Court chooses the former.
Ridgeway is also factually distinguishable from the present case. In Ridgeway, an allegedly indigent contemnor was jailed for failure to pay child support, raising the question of whether he could ever find sufficient funds to purge the contempt. See Ridgeway, 720 F.2d at 1413-14. That is why the court doubted the applicability of the adage that the contemnor "carrie[d] the keys of his prison in his own pocket." Id. In the present case, however, there is no indication of an impossibility of performance that would bar Respondent from testifying and producing the documents sought by the IRS summons — particularly now as he has declined the opportunity to present the Court with a sealed filing setting forth the factual basis for a meritorious claim of Fifth Amendment privilege.
For the foregoing reasons, it is questionable whether a civil contemnor in an IRS summons enforcement action has a right to court-appointed counsel. The few authorities finding that there may be such a right are manifestly clear that court-appointed counsel is reserved for those litigants who will at least make some showing of their financial eligibility. See 18 U.S.C. § 3006A; Henkel v. Bradshaw, 483 F.2d 1386, 1387-88, 1390 (9th Cir. 1973) (discussing possibility of right to counsel for indigent contemnor); 17 Am. Jur. 2d Contempt § 177 (2006) (same); United States v. Bobart Travel Agency, Inc., 699 F.2d 618, 621 (2d Cir. 1983) (civil contemnor in IRS summons enforcement action entitled to court-appointed counsel only if found indigent). This, Respondent has not done. Although his request for court-appointed was denied without prejudice, see Tr. of Aug. 28, 2006 Hearing (doc. # 23) at 2:14:32-2:17:33 p.m., Respondent has never since made another request supported with the necessary proof of financial eligibility, and the Court cannot simply appoint Respondent an attorney based on his unproven assertion that he "cannot afford" one. See Tr. of Aug. 28, 2006 (doc. # 23) at 2:14:51-2:14:56 p.m.
Of course, the Court has not had to decide that question, nor does it do so now, because Respondent's first and only request for court-appointed counsel was denied on the basis that he did not make any showing of his financial eligibility. Tr. of Aug. 28, 2006 Hearing (doc. # 23) at 2:14:32-2:17:33 p.m.
Moreover, the Court has always proceeded on the basis that Respondent has had a right to have counsel present, see id. at 2:14:31-2:14:51 p.m., and, during the nearly one year of this case's pendency, has granted Respondent extensions of time to respond to the Government's motions, see Orders (doc. ## 9, 23). During this expanse of time, Respondent has consistently decided to appear without counsel. He has never (1) brought a motion for court-appointed counsel, properly documented with proof of his financial eligibility, (2) claimed that he has been unable to locate counsel to represent him, or (3) requested additional time for the purpose of retaining an attorney. Under these circumstances of this case, it is painfully obvious that Respondent's failure to obtain counsel is the product of either his own neglect or his deliberate design to "manipulate his right to counsel to undermine the orderly procedure of the courts [and] subvert the administration of justice." See United States v. Thibodeaux, 758 F.2d 199, 201 (7th Cir. 1985).
In sum, Respondent has not demonstrated any basis for reconsideration of its order (doc. # 29) denying his motion to stay (doc. # 27).
Therefore,
IT IS ORDERED that Respondent's motion for reconsideration (doc. # 33) is DENIED.