High Court Case Doesn't Change Summons Enforcement, First Circuit Says

Robert W. Metzler, Attorney, Tax Division, Department of Justice, with whom Caroline D. Ciraolo, Acting Assistant Attorney General, John Schumann, Attorney, Tax Division, Department of Justice, and Carmen M. Ortiz, United States Attorney, were on brief, for appellee.

The district court did not abuse its discretion in determining that it could equitably apply its pre-Clarke order in a post-Clarke world. See United States v. Kayser-Roth Corp., 272 F.3d 89, 100 (1st Cir. 2001) (Rule 60(b)(5) denials are reviewed for abuse of discretion). For purposes of Gangi's case, Clarke did not materially change the law applied here. Clarke explained that a taxpayer has a right to examine IRS agents about the reasons for issuing a summons only when "he points to specific facts or circumstances plausibly raising an [implication] of bad faith," 134 S. Ct. at 2365; that is, only when he "offer[s] some credible evidence supporting his charge," id. at 2367. This is substantially consistent with the standard set forth in Sugarloaf, that the taxpayer "must allege specific facts and evidence to support" an allegation that the summons was issued in bad faith. See 584 F.3d at 346 (quoting Sterling Trading, LLC v. United States, 553 F. Supp. 2d 1152, 1156 (C.D. Cal. 2008)). Sugarloaf's specific evidence tending to rebut good faith is the practical equivalent of Clarke's specific facts and circumstances plausibly suggesting bad faith. And while Clarke was explicit that an offer of circumstantial evidence could suffice, nothing in Sugarloaf so much as hinted otherwise. There is consequently no reason to doubt the equity of applying the district court's original order based on Sugarloaf together with the finding that Gangi had failed to refer to any specific available evidence tending to rebut the IRS's prima facie showing of proper purpose.

The denial of Gangi's Rule 60(b)(5) motion is AFFIRMED.