COURT GRANTS ENFORCEMENT OF THIRD PARTY SUMMONSES.

Jeremy Nolan Hendon

JONES, Judge:

[1] Magistrate Judge Dennis James Hubel filed Findings and Recommendation (#14) on July 24, 2002, in the above-entitled case. The matter is now before me pursuant to 28 U.S.C. § 636(b)(1)(B) and Fed. R. Civ. P. 72(b). No objections have been timely filed. This relieves me of my obligation to give the factual findings de novo review. Britt v. Simi Valley Unified School Dist., 708 F.2d 452, 454 (9th Cir. 1983). Having reviewed the legal principles de novo, I find no error.

[2] Accordingly, I ADOPT Magistrate Judge Hubel's Findings and Recommendation (#14) dated July 24, 2002, in its entirety. The respondent's motion (#10) to dismiss the amended petition in regard to the summonses issued to the Trust Company, Janus, and Franklin Templeton Trust, is granted. The respondent's motion (#10) for summary enforcement of the summonses issued to West Coast Bank, Greenpoint, and Washington Mutual Bank is also granted. Additionally, the amended petition (#10) is denied as to the summons issued to Countrywide Home Loans.

[3] IT IS SO ORDERED.

[4] DATED this 16th day of September, 2002.

Michael W. Mosman

HUBEL, Magistrate Judge:

[5] Petitioner Carl Duane Oldham, appearing pro se, seeks to quash eight summonses issued by the United States Internal Revenue Service (IRS) to various third-party record keepers pursuant to 26 U.S.C. § 7602. This court has jurisdiction under 26 U.S.C. § 7604(a) and 7609(h)(1).

[6] Respondent moves for partial dismissal of petitioner's Amended Petition to Quash² and for summary enforcement of some of the summonses. For the reasons explained below, I recommend that respondent's motions for partial dismissal and for summary enforcement be granted.

(1) On November 13, 2001, IRS Revenue Agent Michele McGeachy issued an IRS Form 2039 summons to West Coast Bank at 11675 S.W. Pacific Highway, Tigard, Oregon 97223-8672. Id. at ¶ 45. The summons was sent by certified mail. Id. at ¶ 44. Notice of the summons was sent to petitioner on November 13, 2001, via certified mail. id. at ¶ 45.

(2) On December 19, 2001, IRS Revenue Agent Michele McGeachy reissued an IRS Form 2039 summons, previously issued on December 5, 2001, to Washington Mutual Bank, at 9401 Oakdale Avenue, Chatsforth, California, 91311. id. at ¶¶ 4, 5. The summons was served by certified mail. Id. at ¶ 5 Notice of the summons was sent to petitioner on December 19, 2001, via certified mail. Id. at ¶ 6

(3) On December 19, 2001, McGeachy reissued an IRS Form 2039 summons, previously issued on December 5, 2001, to West Coast Bank at 11675 SW Pacific Highway, Tigard, Oregon 97223-8672. Id. at ¶¶ 8, 9.³ The summons was served by certified mail. Id. at ¶ 9. Notice of the summons was sent to petitioner on December 19, 2001, via certified mail. Id. at ¶ 10.

(4) On December 19, 2001, McGeachy reissued an IRS Form 2039 summons, previously issued December 5, 2001, to Greenpoint Mortgage Funding, Inc., at 2300 Brookstone Centre Parkway, Columbus, Georgia, 31904-4500. Id. at ¶¶ 12, 13. The summons was served by certified mail. Id. at ¶ 13. Notice of the summons was sent to petitioner on December 19, 2001, via certified mail. Id. at ¶ 14.

(5) On December 19, 2001, McGeachy reissued an IRS Form 2039 summons, previously issued on December 5 and 11, 2001, to Trust Company of America at 7103 South Revere Parkway, Englewood, Colorado, 80112,3936. Id. at ¶ 16. The summons was served by certified mail. Id. at ¶ 17. Notice of the summons was sent to petitioner on December 19, 2001, via certified mail. Id. at ¶ 18.

(6) On December 19, 2001, McGeachy reissued an IRS Form 2039 summons, previously issued on December 5, 2001, to Franklin Templeton Trust Company at P.O. Box 7777, San Mateo, California, 94403-7777. Id. at ¶ 20. The summons was served by certified mail. Id. at ¶ 21. Notice of the summons was sent to petitioner on December 19, 2001, via certified mail. Id. at ¶ 22.

(7) On December 19, 2001, McGeachy reissued an IRS Form 2039 summons, previously issued on December 5, 2001, to Janus at 100 Filmore Street, Denver, Colorado, 80206-4928. Id. at ¶ 24. The summons was served by certified mail. Id. at ¶ 25. Notice of the summons was sent to petitioner on December 19, 2001, via certified mail. Id. at ¶ 26.

(8) On December 19, 2001, McGeachy reissued an IRS Form 2039 summons, previously issued on December 5, 2001, to Countrywide Home Loans at 2500 Park Grenada, Calabasas, California, 92302-1663. Id. at ¶ 28. The summons was served via certified mail. Id. at ¶ 29. Notice of the summons was sent to petitioner on December 19, 2001, via certified mail. Id. at ¶ 30.

Each summons directed the third-party record keeper to produce certain financial records pertaining to petitioner, for some or all of the relevant years. Id. at ¶¶ 4, 8, 12, 16, 20, 24, 28, 45; Exhs. A, D, G, J, M, P, S, AA to McGeachy Declr.

[8] McGeachy originally issued all but the November 13, 2001 summons to West Coast Bank, on December 5, 2001, but copies were not sent at that time to all parties who were entitled to receive notice. Id. at ¶ 32. The summons to the Trust Company was returned as undeliverable and McGeachy reissued that summons on December 11, 2001. Id. at ¶ 33. Because copies of these seven summonses were not originally sent to all parties entitled to receive notice, McGeachy reissued all seven summonses on December 19, 2001. Id. at ¶ 32.

[9] Pursuant to Federal Rule of Civil Procedure 12(b)(1), respondent moves to dismiss that part of the Amended Petition that seeks to quash the summonses issued to Trust Company, Janus, and Franklin Templeton Trust. Respondent asserts that the court lacks subject matter jurisdiction to adjudicate petitioner's challenges to these three summonses. Respondent also moves for summary enforcement of the summonses issued to Greenpoint Mortgage, West Coast Bank, and Washington Mutual Bank. Respondent does not seek summary enforcement of the summons issued to Countrywide Home Loans because, respondent concedes, service of that summons was improper. Resp's Opp. to Am. Pet., Mtn to Dismiss, and for Sum. Enf cmt. at p 2. n.2. Respondent indicates that it still "opposes" the Amended Petition with respect to that summons.

I. Motion to Dismiss for Lack of Subject Matter Jurisdiction

A. Standards

[10] Subject matter jurisdiction over a petition to quash an IRS summons lies 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(h)(1) Petitioner has the burden of establishing that this court possesses the necessary subject matter jurisdiction. Association of Am. Med. Colls. v. United states, 217 F.3d 770, 778 (9th Cir. 2000).

When deciding a motion to dismiss for lack of subject matter jurisdiction under Rule 12(b)(1), the court may consider affidavits and other evidence supporting or attacking a petitioner's jurisdictional allegations. See St. Clair v. City of Chico, 880 F.2d 199, 201 (9th Cir. 1989).

B. Discussion

[11] As noted above, subject matter jurisdiction over petitioner's effort to quash the summonses is governed by 26 U.S.C. § 7609(h) (1) of the Internal Revenue Code. The Fifth Circuit has interpreted section 7609(h)(1) as limiting jurisdiction to the district where the summons is to be answered. Masat v. United States, 745 F.2d 985, 987 (5th Cir. 1984) . This Court has adopted the Masat analysis in recent cases. Terrie Oldham v. United States, No. CV01-1410-HA, Opinion and Order at pp. 3-6 (D. Or. Mar. 21, 2002); Daniel Oldham v. United States, No. CV-01-952-HU, Findings & Recommendation at pp. 4-6 (D. Or. Feb. 28, 2002), adopted by Order of Judge Jones (D. Or. Apr. 1, 2002); Cook v. United States, No. CV-01-951-BR, Opinion and Order at pp. 5-6 (D. Or. Jan. 9, 2002).

[12] The undisputed evidence in this case is that Trust Company has no physical office in Oregon and its involvement with its Oregon customers is limited to the telephone. McGeachy Declr. at ¶ 41. Janus has no physical office in Oregon. Id. at ¶ 40. Franklin Templeton Trust also has no physical office in Oregon and does not directly sell securities in Oregon. Id. at ¶ 42. Given the undisputed evidence, none of these three companies can be considered to "reside in" or be "found" in Oregon within the meaning of section 7609(h)(1). Other judges in this district have reached the same conclusion in regard to these three companies. See Terrie Oldham, No. CV-01-1410-HA, at pp. 2-6; Carl Oldham v. United States, No. CV-01-1225-ST, Findings & Recommendation at pp. 5-6 (D. Or. Nov. 27, 2001), adopted by order of Judge Haggerty (D. Or. Mar. 21, 2002).

[13] I recommend that respondent's motion to dismiss the Amended Petition in regard to the summonses issued to the Trust Company, Janus, and Franklin Templeton Trust, be granted.

II. Motion for Summary Enforcement

A. Standards and Burden of Proof

[14] The Internal Revenue Code allows the IRS to issue a summons for production of information relevant to "determining the liability of any person for internal revenue tax." 26 U.S.C. § 7602(a). The taxpayer has the right to attempt to quash any such summons. 26 U.S.C. § 7609(b) . The government, however, is entitled to enforcement of an IRS summons when it has established a prima facie case for enforcement and the taxpayer fails to show sufficient facts that indicate the existence of a defense to enforcement. United States v. Powell, 379 U.S. 48, 58 (1964).

[15] To obtain judicial enforcement of a summons issued pursuant to section 7602, the IRS need show only that (1) the investigation will be conducted for a legitimate purpose; (2) the information sought is relevant to that purpose; (3) the information sought is not already in the government's possession; and (4) the administrative steps required by the Internal Revenue Code have been followed. Lidas, Inc. v. United States, 238 F.3d 1076, 108-182 (9th Cir.) (citing Powell, 379 U.S. at 57-58), cert. denied, 121 S. Ct. 2245 (2001).

[16] "The government's burden is a slight one and typically is satisfied by the introduction of the sworn declaration of the revenue agent who issued the summons that the Powell requirements have been met." Fortney v. United States, 59 F.3d 117, 120 (9th Cir. 1995) (internal quotation omitted). In an enforcement proceeding, after the government establishes a prima facie case, the burden shifts to the petitioner to show sufficient facts to establish a defense to the summons. See, e.g., Lidas, 238 F.3d at 1081-82.

B. Discussion

[17] As noted above, the motion for summary enforcement is made in regard to both summonses issued to West Coast Bank, and the summonses issued to Greenpoint Mortgage, and Washington Mutual Bank. The summons issued to Countrywide Home Loans is discussed below.

1. Prima Facie Case -- Powell Factors

[18] McGeachy's declaration establishes respondent's prima facie case. First, the summonses were issued for a legitimate purpose under sections 7602(a) and 7602(b) of the Internal Revenue Code. See McGeachy Declr. at ¶ 3 (IRS is examining petitioner's federal tax liabilities for 1998-2000).

[19] Second, the information sought is relevant. To assist in the determination of petitioner's tax liability, McGeachy sought information and documents about petitioner's banking and investment accounts, including deposits and withdrawals, various loans and loan applications, and trust and trust instruments. Exhs. A, D, G, J, M, P, S, AA to McGeachy Declr. The IRS can use these documents to determine the correct amount of petitioner's income and federal tax liabilities for the tax years 1998-2000. McGeachy Declr. at ¶ 35. The relevancy requirement is met. See United States v. Arthur Young & Co., 465 U.S. 805, 814 (1984) (relevancy requirement is met when information "might have thrown light upon the correctness of the return." (internal quotation omitted)).

[20] Third, McGeachy states that the IRS does not yet have the information and documents sought by the summonses. McGeachy Declr. at ¶ 36. Fourth, respondent has complied with the administrative steps required by the Internal Revenue Code. See McGeachy Declr. at ¶¶ 5,6, 9, 10, 13, 14, 17, 18, 21, 22, 25, 26, 29, 30, 44, 45 (indicating that copies of summonses were served on the third-party record keepers and notices of the summonses were sent to petitioner); see also McGeachy Declr. at ¶ 39 (stating that all administrative procedures required by the Internal Revenue Code for issuance of the summonses have been followed).

2. Petitioner's Burden

[21] Once respondent has established its prima facie case for enforcement, a "heavy" burden is placed on the taxpayer to defeat enforcement by showing an "abuse of process" or the "lack of institutional good faith." United States v. Dynavac, 6 F.3d 1407, 1414 (9th Cir. 1993); see also Lidas (after government establishes prima facie case, burden shifts to petitioner to show sufficient facts to establish a defense to the summons).

[22] Petitioner raises several frivolous arguments in support of the motion to quash. His primary argument is that the IRS summons authority is limited to activities covered by Title 27 of the United States Code and that the IRS cannot seek information regarding his income tax liability which arises under Title 26 of the United States Code. I, and other judges in this district, have previously rejected this, and all but one of petitioner's arguments. See Terrie Oldham, No. CV-01-1410-HA, Opinion and Order at pp. 6-8; Carl Oldham, No. CV-01-1225-ST, Findings & Recommendation at pp. 9-13; Daniel Oldham, No. CV-01-952-HU, Findings & Recommendation at pp. 8-12; Cook, No. CV-01-951-BR, Opinion and ORDER at pp. 10- 11.

[23] The only argument petitioner raises which appears not to have been previously addressed by this Court is that the IRS failed to notify the third parties from which it seeks documents and information that a Form 2039 is not self- enforcing and requires the IRS to seek enforcement from a federal district court. As with petitioner's other arguments, this argument is also frivolous.

[24] Clearly, Form 2039 summonses are not self-enforcing. If a third-party chooses not to comply with a Form 2039 summons, the IRS may seek an enforcement order from the court. See United States v. Samuel, Kramer & Co., 712 F.2d 1342, 1343 (9th Cir. 1983) ("IRS summonses are not self-enforcing, so the government must seek enforcement from a federal district court if the person on whom a summons has been served refuses to comply."). However, petitioner cites to no provision of the Internal Revenue Code, and I have found none, requiring an affirmative representation from the IRS to third parties that a Form 2039 summons is not self-enforcing. Thus, I reject petitioner's argument.

[25] Petitioner fails to meet his burden in opposition to enforcement. Accordingly, I recommend that respondent's motion for enforcement of the summonses issued to West Coast Bank, Greenpoint Mortgage, and Washington Mutual Bank, be granted.

III. Opposition to Amended Motion to Quash Summons Issued to Countrywide Home Loans

[26] As noted above, while respondent seeks to dismiss, based on a lack of subject matter jurisdiction, the Amended Petition's challenge to three of the summonses, and seeks summary enforcement of four of the summonses, respondent simply seeks a denial of the Amended Petition to Quash the summons issued to Countrywide Home Loans.

[27] Respondent concedes that service on Countrywide was improper. Petitioner, however, has not challenged, and cannot challenge, the validity of service of that summons. See Wright v. United States, 964 F. Supp. 336, 338 (M.D. Fla.) (right to challenge service of IRS summons on third-party record keeper belonged to third-party record keeper, not taxpayer), aff'd, 132 F. 3d 1461 (11th Cir. 1997); King v. United States, 684 F. Supp. 1034 (D. Neb. 1987) (defense that the third- party record keeper was not properly served cannot be raised by petitioner).

[28] As addressed above, the arguments raised by petitioner in the Amended Petition to Quash and the Amended Affidavit in support of the Amended Petition, are unavailing. Petitioner's request to quash the Form 2039 summons issued to Countrywide Home Loans is denied.

[31] If objections are filed, a response to the objections is due August 22, 2002, and the review of the Findings and Recommendation will go under advisement on that date.

[32] Dated this 24th day of July 2002

²Petitioner initially filed his petition on November 29, 2001, seeking to quash one summons issued by respondent. On January 8, 2002, he filed an Amended Petition which challenged seven summonses issued by respondent. On January 28, 2002, I granted petitioner's motion to amend the Amended Petition by interlineation to add the summons challenged in his original Petition but which he inadvertently omitted from the Amended Petition. Thus, reference to the Amended Petition means the Amended Petition, further amended by interlineation, in which petitioner challenges eight summonses.

³This is a separate summons from the one issued November 13, 2001.

END OF FOOTNOTES FINDINGS AND RECOMMENDATION

[34] IT IS ORDERED AND ADJUDGED that this Action is dismissed, with prejudice.

[35] DATED this 18th day of September, 2002.