Pursuant to 5TH CIR. R. 47.5, the court has determined that this opinion should not *

be published and is not precedent except under the limited circumstances set forth in 5TH CIR.

R. 47.5.4.

IN THE UNITED STATES COURT OF APPEALS

FOR THE FIFTH CIRCUIT

No. 08-30894

ZUGERESE TRADING LLC; HARBOR BAY FUND LLC,

Plaintiffs - Appellants,

v.

INTERNAL REVENUE SERVICE, United States of America, Department of

the Treasury,

Defendant - Appellee

Appeal from the United States District Court

for the Eastern District of Louisiana, New Orleans

2:08-CV-936

Before KING, GARWOOD, and DAVIS, Circuit Judges.

PER CURIAM:*

Plaintiffs–appellants Zugerese Trading LLC and Harbor Bay Fund LLC

(collectively, “Petitioners”) appeal the district court’s denial of their petition to

quash an IRS summons—issued pursuant to 26 U.S.C. § 7602—and grant of the

IRS’s motion to enforce the summons. Additionally, Petitioners assert that the

district court erred by refusing to conduct an evidentiary hearing and to permit

discovery before denying the petition to quash. We conclude that the IRS has

United States Court of Appeals

Fifth Circuit

F I L E D

June 18, 2009

Charles R. Fulbruge III

Clerk
No. 08-30894

United States v. Powell, 379 U.S. 48 (1964). 1

2

made a prima facie showing that it has satisfied the Powell factors and that 1

Petitioners have failed to meet their heavy burden of rebutting that showing.

See Mazurek v. United States, 271 F.3d 226, 229–30 (5th Cir. 2001).

Additionally, the district court did not abuse its discretion in foregoing an

evidentiary hearing and preliminary discovery in this case. See id. at 234–35.

Thus, we affirm the rulings of the district court for the following reasons:

1. The IRS succeeded in meeting its minimal burden of making a

prima facie showing of the Powell factors. Despite Petitioners’ contentions

to the contrary, Agent Larry Weinger’s statements were sufficient to make

this showing. See Hintze v. IRS, 879 F.2d 121, 126 (4th Cir. 1989) (“In

order to establish a prima facie case . . ., the IRS need only present an

affidavit of an agent involved in the investigation averring the Powell good

faith elements.” (internal quotation marks omitted)).

2. Petitioners fail to persuade us that the IRS summons is not

relevant to a legitimate purpose. The concept of relevance under § 7602

is broader than that under the Federal Rules of Evidence. See United

States v. Arthur Young & Co., 465 U.S. 805, 813–14 & n.11 (1984); United

States v. Linsteadt, 724 F.2d 480, 482 (5th Cir. 1984). Thus, we find

unavailing Petitioners’ argument that the IRS cannot rely on the 2007

Coordinated Issue Paper because the transaction described there does not

exactly match the transaction in question here. Similarly, we are

unconvinced that the alleged statements of IRS auditors—that the efforts

of the president of Petitioners’ tax matters partner in an earlier, separate

audit were “sincere”—indicate that the IRS has no legitimate basis for its

current investigation. Further, the arguments made in Klamath Strategic

Investment Fund ex rel. St. Croix Ventures v. United States, —F.3d—, No.
No. 08-30894

3

07-40861, 2009 WL 1353118 (5th Cir. May 15, 2009), do not preclude all

of the possible theories under which the IRS seeks to disallow the losses

in this case. Finally, the summons is not overly broad because it describes

the requested material with sufficient particularity to permit the

summoned party to respond adequately. See Linsteadt, 724 F.2d at 483;

see also Adamowicz v. United States, 531 F.3d 151, 157–58 (2d Cir. 2008).

3. Petitioners assert that the IRS already possesses the documents

it seeks in the summons. That is not the case, however; while Petitioners

point to related documents that they claim the IRS has already received,

they do not argue that the IRS possesses the specific documents sought by

the summons. See United States v. Davis, 636 F.2d 1028, 1037 (5th Cir.

Unit A 1981); PAA Mgmt., Ltd. v. United States, No. 91-C-168, 1992 WL

346314, at *5 (N.D. Ill. Nov. 19, 1992).

4. We also find no error in the district court’s conclusion that

enforcement of the summons does not constitute an abuse of the court’s

process. First, Petitioners have not shown that the IRS abandoned the

goal of ascertaining the correct tax liability of Zugerese Trading LLC by

issuing a final partnership administrative adjustment. See PAA Mgmt.,

Ltd. v. United States, 962 F.2d 212, 217–19 (2d Cir. 1992); PAA Mgmt.,

Ltd. v. United States, 817 F. Supp. 425, 426–27 (S.D.N.Y. 1993). Second,

Petitioners’ argument—that the issuance of the summons by the IRS was

somehow improper because it would likely elicit a motion to quash that,

in turn, would toll the limitations period applicable to assessing tax

liability—is unsupported by any authority and fails to take into account

the issuance of the final partnership administrative adjustment (which did

toll the limitations period). And third, the record does not support

Petitioners’ contention that the IRS issued the summons as a form of

harassment by putting pressure on the taxpayer to settle a collateral
No. 08-30894

4

dispute, see United States v. Bisceglia, 420 U.S. 141, 146 (1975), or by

seeking to extort records from Petitioners’ counsel, see United States v.

Equitable Trust Co., 611 F.2d 492, 500 (4th Cir. 1979).

5. We cannot say that the district court abused its discretion by

foregoing an evidentiary hearing and preliminary discovery before denying

the petition to quash and granting the motion to enforce the summons.

Summons proceedings must be summary in nature, see United States v.

Stuart, 489 U.S. 353, 369 (1989), and an evidentiary hearing and discovery

are not required in each and every case, see Mazurek, 271 F.3d at 234;

Harris, 628 F.2d at 879. Petitioners claim that a hearing and discovery

are necessary to support their assertion that the IRS issued the summons

for an improper purpose. See United States v. Se. First Nat’l Bank, 655

F.2d 661, 667–68 (5th Cir. Unit B 1981). However, the information they

propose to find from such proceedings—to the extent they made such a

proffer to the district court—is clearly aimed at arguments underlying the

merits of the tax issue to be litigated in Tax Court and not at the issue

pertinent in these proceedings—the good faith of the IRS in issuing the

summons, cf. Mazurek, 271 F.3d at 235. In other words, Petitioners’

challenges fail to raise in a substantial way the existence of deficiencies

in the summons proceedings. See United States v. Harris, 628 F.2d 875,

879 (5th Cir. 1980); United States v. Newman, 441 F.2d 165, 169 (5th Cir.

1971).

6. Finally, we are unpersuaded by Petitioners’ assertion that the

district court erred by failing to deem certain of their unchallenged

allegations admitted by the IRS. While the Federal Rules of Civil

Procedure apply in summons proceedings, they are not as inflexible as

Petitioners would have them. See Donaldson v. United States, 400 U.S.

517, 528 (1971); see also FED. R. CIV. P. 81(a)(5). The IRS sufficiently
No. 08-30894

5

responded to the petition to quash the summons with a motion to enforce

the summons. See 26 U.S.C. § 7609(b)(2)(A); Good Karma Trading, LLC

v. United States, No. 07-CV-01688, 2008 WL 4879164 (D. Colo. Sept. 29,

2008).

AFFIRMED.