Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-5_16-cv-01996/USCOURTS-cand-5_16-cv-01996-2/pdf.json

Nature of Suit Code: 870
Nature of Suit: Tax Suits
Cause of Action: 26:7402 IRS: Petition to Enforce IRS Summons

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Case No.: 5:16-cv-01996-EJD

ORDER GRANTING VERIFIED PETITION TO ENFORCE IRS SUMMONS

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United States District Court

Northern District of California

UNITED STATES DISTRICT COURT

NORTHERN DISTRICT OF CALIFORNIA

SAN JOSE DIVISION

UNITED STATES OF AMERICA,

Petitioner,

v.

CADE CORPORATION,

Respondent.

Case No. 5:16-cv-01996-EJD 

ORDER GRANTING VERIFIED 

PETITION TO ENFORCE INTERNAL 

REVENUE SERVICE SUMMONS

Re: Dkt. No. 1

This summons enforcement matter arises from an underlying investigation by the Internal 

Revenue Service (“IRS”) into the tax liabilities of taxpayer Rozann M. Stenshoel-Sousa for unpaid 

taxes for the 2000, 2001, 2002 and 2003 tax years. Petitioner the United States of America (“the 

Government”) has filed, and is presently seeking to enforce, an IRS Summons against 

Respondent, Cade Corporation (“Cade”), Ms. Stenshoel-Sousa’s employer. See Verified Pet. to 

Enforce Internal Revenue Service Summons (“Pet.”), Dkt. No. 1. The IRS submits that the 

information sought by the Summons is relevant to assessing and determining Ms. StenshoelSousa’s assets, tax debts, and taxable income, among other things, in conjunction with its ongoing 

investigation. See Pet. ¶¶ 5, 7.

On November 23, 2015, Revenue Officer Smith served an IRS Summons on Cade at its 

place of business. Pet. ¶ 6, 10; Resp’t’s Resp. to the Verified Pet. (“Resp.”), ¶ 6, Dkt. No 10. The 

Summons required Cade’s corporate officers to appear on January 13, 2016 “to give testimony and 

to bring for examination certain documents and records.” See Pet., Ex. A, Dkt. No. 1-1. On 

January 8, 2016, Ms. Stenshoel-Sousa filed a Petition to Quash IRS Summons, which was 

dismissed with prejudice on May 20, 2016. Pet.’s Reply in Support of Verified Pet. (“Reply”) at 

Exs, C, D, Dkt. Nos. 11-2, 11-3. Despite the dismissal of the Petition to Quash, Cade has thus far 

Case 5:16-cv-01996-EJD Document 13 Filed 08/26/16 Page 1 of 5
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Case No.: 5:16-cv-01996-EJD

ORDER GRANTING VERIFIED PETITION TO ENFORCE IRS SUMMONS

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United States District Court

Northern District of California

failed to comply with the Summons regarding Ms. Stenshoel-Sousa’s financial information. As a 

result, the Government filed the instant Petition to Enforce the Summons. 

On May 24, 2016, this Court issued an Order to Show Cause why the Summons should not 

be enforced, and on August 25, 2016, the parties appeared before Judge Edward J. Davila for a 

hearing on the matter. Dkt. Nos. 3, 12. Cade requests that the Court deny the Petition, or, 

alternatively, be given discovery and/or an evidentiary hearing. Resp. at 3. The Government 

opposes the request for discovery or an evidentiary hearing, and argues that Respondent “fail[ed] 

to raise any facts or evidence of bad faith to rebut Petitioner’s prima facie case” such that it would 

be entitled to discovery or a hearing. Reply at 3.

Having reviewed the relevant pleadings and considered the arguments of counsel presented 

at the hearing, the court finds, concludes, and orders as follows: 

1. The summons power is an investigative tool provided by Congress to enable the 

IRS to determine and assess all taxes due. 26 U.S.C. § 6201. The IRS is afforded significant 

authority to summons information necessary for investigative purposes. 26 U.S.C. § 7602; see

United States v. Jose, 131 F.3d 1325, 1327 (9th Cir. 1997) (en banc). Specifically, the IRS is 

authorized to summon “any person having possession, custody, or care of books of account” 

relating to a taxpayer, or to summon “any other person” the IRS deems proper to produce 

information relevant to an inquiry. 26 U.S.C. § 7602(a)(2); see, e.g., Chen Chi Wang v. United 

States, 757 F.2d 1000, 1002 (9th Cir. 1985) (explaining that the IRS is invested with “broad 

powers to summon information relevant to determining the liability of any taxpayer.”). If the 

summoned party refuses to produce the requested information, the government may seek judicial 

enforcement of the summons in the district court. 26 U.S.C. § 7604. “The sole purpose of the 

enforcement proceeding is to ensure that the IRS has issued the summons for proper purpose and 

in good faith.” Jose, 131 F.3d at 1329 (citing United States v. Powell, 379 U.S. 48, 57–58 (1964)).

2. The IRS bears the initial burden of establishing a “good faith” basis for the 

summons by showing that the summons: (1) is issued for a legitimate purpose; (2) seeks 

information relevant to the purpose; (3) seeks information not already within the IRS’s possession; 

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Case No.: 5:16-cv-01996-EJD

ORDER GRANTING VERIFIED PETITION TO ENFORCE IRS SUMMONS

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and (4) satisfies all of the administrative steps required by the Internal Revenue Code. Powell,

379 U.S. at 57–58; Jose, 131 F.3d at 1327; United States v. Dynavac, Inc., 6 F.3d 1407, 1414 (9th 

Cir. 1993). The government’s burden in this regard is minimal, and generally may be satisfied by 

a declaration or affidavit from the investigating agent that the Powell requirements have been met. 

United States v. Cathcart, 409 F. App’x 74, 75 (9th Cir. 2010); see also United States v. Bell, 57 F. 

Supp. 2d 898, 906 (N.D. Cal. 1999). However, “[t]he government’s burden, while not great, is 

also not non-existent,” and if a summons is challenged, “it must be scrutinized by a court to 

determine whether it seeks information relevant to a legitimate investigative purpose.” United 

States v. Goldman, 637 F.2d 664, 667-68 (9th Cir.1980).

3. The party opposing enforcement of a summons may do so “on any appropriate 

grounds,” including failure to satisfy the Powell requirements. Reisman v. Caplin, 375 U.S. 440, 

449 (1964). However, once the government establishes a prima facie case, a “heavy” burden then 

falls upon those opposing enforcement to show either an abuse of process or a lack of good faith. 

United States v. LaSalle Nat’l Bank, 437 U.S. 298, 316 (1978); Jose, 131 F.3d at 1328. “The 

[party opposing enforcement] must allege specific facts and evidence to support [its] allegations” 

of bad faith or improper purpose. Jose, 131 F.3d at 1328; (quoting Liberty Fin. Servs. v. United 

States, 778 F.2d 1390, 1392 (9th Cir. 1985)). 

4. As part of a summons enforcement proceeding, the district court also has great 

discretion to limit or deny requests for discovery and evidentiary hearings. United States v. 

Stuckey, 646 F.2d 1369, 1373 (9th Cir. 1981); United States v. Church of Scientology of 

California, 520 F.2d 818, 821 (9th Cir. 1975). Discovery in a summons enforcement proceeding 

is the exception rather than the rule. Stuckey, 646 F.2d at 1374. While some circuits regularly 

allow pre-hearing discovery, the Ninth Circuit permits “limited discovery only if the [requesting 

party] can make a substantial preliminary showing of abuse or wrongdoing.” Id. (quoting Church 

of Scientology, 520 F.2d at 824). If the allegations by the party opposing enforcement of the 

summons are sufficient, a limited evidentiary hearing may be conducted. However, the party must 

be able to provide at least “a minimal amount of evidence” in order to justify an evidentiary 

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Case No.: 5:16-cv-01996-EJD

ORDER GRANTING VERIFIED PETITION TO ENFORCE IRS SUMMONS

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hearing. Id. at 1372; see e.g., United States v. Popkin, 623 F.2d 108, 109 (9th Cir. 1980). The 

court may then decide if discovery is warranted. Stuckey, 646 F.2d at 1374. 

5. Here, the Government alleges and submits the following as evidence that the 

Summons satisfies the Powell requirements:

First, the Summons was issued for the legitimate purpose of aiding in the collection of 

unpaid tax liabilities for Ms. Stenshoel-Sousa. See 26 U.S.C. § 7602(a); Pet. ¶¶ 3, 7. 

Second, the Summons seeks information relevant to that purpose because the Government 

believes that Cade is “in possession and control of records, papers and other data regarding income 

and other matters covered by [the Officer’s] inquiry,” and which can “reasonably be expected to 

assist in the ascertainment and/or collection of tax liabilities of Ms. Stenshoel-Sousa.” Pet. ¶¶ 5, 

7. Additionally, Magistrate Judge Beeler’s Report and Recommendation regarding Ms. StenshoelSousa’s Petition to Quash further found: (1) Cade’s information may be relevant to determining

“assets available to satisfy [Ms. Stenshoel-Sousa’s] tax liability because she apparently owns an 

interest in the company;” (2) Cade’s “possible repayment of Ms. Stenshoel-Sousa’s loans or 

mortgage is relevant to an evaluation of her overall level of income,” because “discharge of 

indebtedness is a form of income;” and (3) the information at issue “is relevant to collection now, 

despite the tax liability being assessed for years 2000-03.” Stenshoel-Sousa v. United States, No. 

16-MC-80009-LB, 2016 WL 2962891, at *3 (N.D. Cal. Apr. 7, 2016), report and recommendation 

adopted sub nom. Stenshoel - Sousa v. United States, No. 16-MC-80009-JD, 2016 WL 2939072 

(N.D. Cal. May 20, 2016); see 26 U.S.C. § 61(a)(12). 

Third, the IRS affirmatively asserts that the information sought by the Summons is not 

already within the IRS’s possession or control. Pet. ¶ 5.

And fourth, the IRS states that it has satisfied all of the administrative steps required by the 

Internal Revenue Code. Pet. ¶ 11. Specifically, the IRS asserts that it properly served the 

Summons upon Respondent at its place of business, and Respondent admits it received service. 

Pet. ¶ 6, 10; Resp. ¶ 6.

6. The Court finds that the IRS has set forth a prima facie case satisfying the four 

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Case No.: 5:16-cv-01996-EJD

ORDER GRANTING VERIFIED PETITION TO ENFORCE IRS SUMMONS

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Powell requirements and the burden now shifts to Cade to show an abuse of process or lack of 

good faith. However, Cade’s only argument is that it has “no evidence from which to evaluate the 

IRS’ and/or [Revenue Officer] Joe Smith’s purpose, conduct, administrative steps, and more.” 

Resp. at 2. From this, Cade summarily requests that the Petition be dismissed with prejudice. Id.

at 3. Although counsel for Cade argued at the hearing on this matter that certain actions taken by 

the IRS toward Ms. Stenshoel-Sousa are suggestive of bad faith, Cade offered no specific facts or 

evidence to support such allegations, nor was this argument addressed by Respondent’s pleadings. 

See Liberty, 778 F.2d at 1392. Accordingly, the Court finds that Cade has not presented sufficient 

evidence of bath faith, nor has it offered facts or argument sufficient to rebut the Government’s 

prima facie case. 

7. As to Cade’s request that it be afforded discovery and/or an evidentiary hearing, the 

Court finds that Cade has failed to make a preliminary showing of bad faith or allege that 

enforcement of the summons would likely result in an abuse of the court’s process. See Stuckey, 

646 F.2d at 1374; Resp. at 2-3. Nor does Cade allege what relevant evidence it anticipates 

discovery would be likely to uncover in this case. See Resp. at 2-3.

Based on the forgoing, the Court hereby GRANTS the Government’s Verified Petition to 

Enforce the IRS Summons served on Cade Corporation, and DENIES Respondent’s request for 

discovery and/or an evidentiary hearing. 

It is FURTHER ORDERED that Respondent is directed to obey the summons issued; to 

appear before Special Agent Joe Smith, or any other proper officer of the IRS, at such time and 

place as may hereafter be determined, to give testimony as demanded in the summons.

The Clerk shall close this file. 

IT IS SO ORDERED.

Dated: August 26, 2016

______________________________________

EDWARD J. DAVILA

United States District Judge

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