Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-azd-2_06-cv-02719/USCOURTS-azd-2_06-cv-02719-0/pdf.json

Nature of Suit Code: 871
Nature of Suit: IRS 3rd Party Suits 26 USC 7609 (U.S. plaintiff)
Cause of Action: 26:7609 IRS: Petition to Quash IRS Summons

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WO

IN THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF ARIZONA

Patrick M. Phillips, et. al., 

Plaintiff, 

vs.

Internal Revenue Service, et. al.,

Defendant. _________________________________

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No. CIV 06-2719-PHX-SMM

ORDER

Pending before the Court is a Motion for Summary Denial of Patrick M. Phillips and

Linda J. Phillips' ("Plaintiffs") Petition to Quash Third Party Summons filed by Defendants

Internal Revenue Service (the "IRS"), United States of America (the "United States"), Wells

Fargo Bank ("Wells Fargo") and Internal Revenue Agent Cathy B. Street ("Agent Street")

(together, "Defendants"). (Dkt.# 6) The United States moves for denial, with prejudice, of

Plaintiffs' motion upon the ground that Plaintiffs have failed to state a claim upon which

relief can be granted. 

BACKGROUND

On August 9, 2006, Plaintiffs received a letter from the IRS notifying them that the

IRS would be conducting an examination of their federal tax liability. (Dkt. 8-2, 1). As a

part of that examination, the letter referred to an attached publication of the IRS which

explains that third parties may be contacted as a part of the investigation. (Dkt. 8-2, 5). 

On October 26, 2006, Agent Street served a summons on Wells Fargo for certain

financial information of Plaintiffs. On November 14, 2006, Plaintiffs petitioned this

Case 2:06-cv-02719-SMM Document 17 Filed 06/26/07 Page 1 of 4
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The United States also asserts that this Court should dismiss Agent Street and the IRS

from this case as improper defendants because the suit is essentially one against the United

States. (Dkt. 6, 1-2)

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Court to quash the summons. (Dkt. 1, 1). On December 13, 2006, the United States filed

a motion for summary denial of Plaintiff's petition1

 (Dkt. 6) and on January 3, 2007

Plaintiffs responded (Dkt. 10). On January 8, 2007 the United States replied to Plaintiffs'

response. The matter is now fully briefed and ready for disposition by the court.

STANDARD OF REVIEW

The standard in an action to quash a summons is the same as the standard in an

action to enforce a summons, and the burden remains on the Government to show that it

has met all the requirements of United States v. Powell, 379 U.S. 48, 57-58 (1964). S.

Rep. No. 97-494, at 283 (1982), reprinted in 1982 U.S.C.C.A.N. 1029. "To obtain

enforcement of a summons, "the IRS must first establish its 'good faith' by showing that

the summons: (1) is issued for a legitimate purpose; (2) seeks information relevant to that

purpose; (3) seeks information that is not already within the IRS' possession; and (4)

satisfies all administrative steps required by the United States Code." Fortney v. United

States, 59 F.3d 117, 119 (9th Cir. 1995) (citing Powell, 379 U.S. at 57-58). 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, 59 F.3d at 120 (citing United States v. Dynavac,

Inc., 6 F.3d 1407, 1414 (9th Cir. 1993). Once the Government has made a prima facie

case, the burden shifts to the taxpayer, who faces a "heavy burden," and must "allege

specific facts and evidence to support his allegations" of abuse of process or the lack of

institutional good faith. Id. Also, as a defense to the enforcement of the summons, a

taxpayer "may show that the taxpayer's case has been referred to the Department of

Justice." 1982 U.S.C.C.A.N. 1029.

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DISCUSSION

The United States has submitted a sworn Declaration of Agent Street (the "Street

Declaration") stating that: (1) the summons was issued for the legitimate purpose of

furthering an examination of Defendants' tax liabilities for the tax years 2000 through

2005; (2) the information is "relevant to, and is designed to shed light upon," said

examination; (3) the materials sought by the summons were not already in the possession

of the IRS at the time the summons was issued; and (4) all administrative steps required

by the United States Code were taken. (Dkt. 8, 1-2). The Street Declaration also states

that the case has not been referred to the Department of Justice. (Dkt. 8, 2). Attached to

the Street Declaration is a copy of the summons served upon Wells Fargo, signed by

Agent Street and her "Approving Officer." (Dkt. 8-3, 1). Thus the United States has made

its prima facie case that it has met all the factors required by Powell, supra.

Plaintiffs claim that “Defendants have failed to establish the subject matter and in

personam jurisdiction of this Court.” (Dkt. 10 at 14). This Court has subject matter

jurisdiction over this case under 28 U.S.C. § 1331, which states that “district courts shall

have original jurisdiction of all civil actions arising under the Constitution, laws, or

treaties of the United States.” Since the issue at hand is a summons issued pursuant to 26

U.S.C. § 7602, a federal law, this Court has jurisdiction. Plaintiffs established this

Court’s personal jurisdiction over them when they filed suit. 

Next, Plaintiffs challenge whether Agent Street has the authority to issue a

summons, and even whether the authorizing statute has been enacted. (Dkt. 10 at 2-5). In

order to determine “the liability of any person for any internal revenue tax,” the Secretary

of the Treasury is authorized to summon “any person having possession, custody, or care

of books of account containing entries relating to the business of the person liable for tax .

. . to appear before the Secretary at a time and place named in the summons and to

produce such books, papers, records, or other data, and to give such testimony, under

oath, as may be relevant or material to such inquiry.” 26 U.S.C. § 7602 (emphasis

added). Summons authority is granted to the Commissioner of Internal Revenue and to

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 The Court notes that it has intentionally not discussed every argument raised by the

parties and that those arguments not discussed are considered by the Court to be

unpersuasive, cumulative, not relevant, or otherwise not necessary to the resolution of the

case at hand.

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officers and employees of the IRS designated by the Commissioner by 26 C.F.R. §

301.7602-1. The Commissioner has designated that a Revenue Agent, with the

authorization of that agent’s Group Manager, may issue a summons to a third party. 

Deleg. Order No. 4 (Rev. 20), 1990-1 C.B. 294. All of these laws and regulations have

been duly enacted and published, and are available to Plaintiffs at many law libraries

open to the public, including the Dee J. Kelly Law Library at the Texas Wesleyan

University School of Law, located at 1515 Commerce Street in Fort Worth, Texas.

Finally, in response to the United States' evidence, Plaintiffs have neither alleged

specific facts nor presented evidence to support their allegations abuse of process, or the

lack of institutional bad faith.2

CONCLUSION

Accordingly,

IT IS ORDERED that Defendants' Motion for Summary Denial of Plaintiffs'

Petition to Quash Third Party Summons (Dkt. 6) is GRANTED. 

IT IS FURTHER ORDERED that Plaintiffs’ Petition to Quash Third Party

Summons (Dkt. 1) is DENIED WITH PREJUDICE.

IT IS FURTHER ORDERED that the Clerk of Court shall enter judgment

accordingly. 

DATED this 21st day of June, 2007.

Case 2:06-cv-02719-SMM Document 17 Filed 06/26/07 Page 4 of 4