FI LED U. S . COURT OF AP PE ALS E L E V E N T H C IR C U IT June 26, 2008 T HOM AS K. KAHN CL E RK [ DO NO T P UB L I S H] I N THE UN I TE D STATE S C OU RT OF APPE ALS F O R T H E E L E V E N T H C IR C U IT

________________________ N o. 07- 16008 N on -A rgum entC al endar

________________________ U . S . T a x C our tN o. 4133- 007L G A R Y L . S A N F O R D , P e titio n e r , v ersu s C O M M I S S I O N E R O F I R S , R e s p o n d e n t.

________________________ P e t i t i on f orR e vi e w of

aD e c i s i on of

the U ni t ed S t at es T ax C ou rt

_________________________ ( Ju n e 26, 2008) B efo re B IR C H , D U B IN A an d K R A V IT C H , C i rcu i tJu d g es. P E R C U R I A M: P et i t i on erG ary S anford appeal s the sum m ary j ud gm entrul i ng of the U ni t ed S t a t e s T a x C ourti n f

a vorof the C om m i s s i one rof

I nt e rna l R e ve nue ( “ I R S ” ) a ndThe re cord also shows that Sanford failed to file tax returns or pay taxes for the 1998, 1 19 99 , 2 00 0, 20 01 , 2 00 4, and 20 05 taxab leye ars . H is tax lia bil ity fo r 2 00 2, ho wever, is t

heonly issuebe fo reusin t

hisa pp e al. 2 th e im p o s itio n o f

ap e n a lty f

o rin s titu tin g a n d m a in ta in in g p r o c e e d in g s p r im a r ily to de l a y pa y m e ntof

t a xe s . F orthe r e a s ons s t a t e d be l ow , w e a f f i rm the rul i ngs of

the T a x C o u rt. B AC KG RO UN D S a nf or d f a i l e d t o f i l e af e de r a l i nc om e t a x r e turn orpa y t a xe s f orthe 2002 t a xabl e y e a r . O n O c t obe r5, 2004, the I R S pr e pa r e d as ubs t i tut e r e turn a nd s e nt

1 S a n f o r d aN o tic e o f

D e f ic ie n c y in f

o rm in g S a n f

o r d th a t h e o w e d $ 4 ,1 7 7 .0 0 in unpa i d t a xe s , pl us i nt e r e s ta nd pe na l t i e s . S a nf or d di d notr e s pond t o the N ot i c e of D efi ci en cy n o r d i d h e p ay h i s t ax es. O n M a r c h 11, 2006, the I R S i s s ue d S a nf or d aN ot i c e of

I nt e ntt o L e vy a nd N ot i c e of

R i ghtt o aH e a r i ng. S a nf or d r e s ponde d w i th ar e que s tf oraC ol l e c t i on D ue P roce ss H eari ng . S anford argued thathe had n evergi ven h i s c on se ntfor a subst i tut e r eturn t o b e pre pare d and thatthe IR S ’ autho ri ty t o execut e at ax re turn d o e s n o te x t e n d t o i n d i v i d u a l t a x r e tu rn s . A d d i t i o n a l l y , Sa n f o r d s t a t e d th a tth e I RS h a d n o e v i d e n c e th a taN o t i c e o f D e f i c i e n c y h a d b e e n s e n tt o h i m. O n A u g u st4 , 2 0 0 6 , th e IR S n o t i fi ed S an fo rd th ata C o l l ect i o n D u e P ro cess H e a r i ng by t e l e phone w a s s c he dul e d f orS e pt e m be r12, 2006. T he not i f i c a t i on l e tt e rpr ovi de d aphone num be rf orS a nf or d t o c a l l a t9: 00 a m on tha tda y f orthe3

he a r i ng. T he l e tt e ri nf

orm e d S a nf

or d tha the w oul d be unabl e t o c ha l l e nge the a m ountore xi s t e nc e of

the t a x l i abi l i ty be c aus e he ha d f a i l e d t o r e s pond t o the N ot i c e of

D e f i c i e nc y s e nti n O c t obe r2004, a nd the t i m e ha d pa s s e d t o do s o. T he l e tt e ra l s o r e que s t e d tha tS a nf or d f i l e t a x r e turns f

or2004 a nd 2005, a s f

a i l i ng t o be cu rren to n th o se retu rn s w o u l d m ean th atth ey w o u l d b e u n ab l e t o d i scu ss c o lle c tio n a lte rn a tiv e s a t th e h e a r in g . T h e I R S le tte ra ls o in f o rm e d S a n f

o r d th a t if he w i shed t o chang e the dat e of the heari ng , he w ou l d n ee d t o con t ac tthe nam ed IR S S ett l em entO ff

i ce r w i thi n 1 4 d ay s of the dat e of the IR S l ett er . S anford res po nd ed w i th a l ett erdat ed S ept em ber 5, 20 06 re qu es t i ng a f ac et o- f a c e he a r i ng i n J a c ks onvi l l e , F l or i da , r a the rtha n the s c he dul e d t e l e phone he a r i ng. S a nf

or d di d noti de nt i f

y s pe c i f i c i s s ue s tha the w oul d l i ke t o di s c us s , but i n st ead rei t erat ed th e l i sto f t o p i cs th atm ay b e rai sed ata C o l l ect i o n D u e P ro cess H e a r i ng unde rthe s t a tut e , I . R . C . § 6330. S a nf or d di d notc a l l i n f

orhi s he a r i ng on S e pt e m be r12. B e c aus e S a nf

or d m i s s e d the t e l e phone he a r i ng a nd di d notr e que s tac ha nge i n da t e oraf

a c e - t o- f a c e he a r i ng w i thi n 14 da y s of the A ugus t4 l e tt e r , the I R S s e nt S anford a “ l as tchance l ett er ” on S ept em ber 19, 20 06 . T he l ett erre qu es t ed that S anford st at e hi s non -f

ri vo l ou s r ea sons for afa ce -t o-fa ce hear i ng . T he l ett er w arned S anford thathe coul d b e s ubj ec tt o sanct i on s i f he i nst i tut ed court pr oc e e di ngs t o pe t i t i on f orr e vi e w of

the not i c e of

de t e rm i na t i on pr i m a r i l y f or4

d e la y o rr a is e d o n ly f

r iv o lo u s o rg r o u n d le s s a r g u m e n ts . S a nf or d r e s ponde d i n al e tt e rda t e d O c t obe r2, 2006 r a i s i ng thr e e i s s ue s : “ ( 1) Pr o c e d u r a l Err o r s [ , ] ( 2 ) Co l l e c t i o n A l t e rn a t i v e s , O I C, p a y me n ts c h e d u l e s , CN C, e t c . [ , ] ( 3) P r oof

tha t[ he ] r e c e i ve d a[ N ot i c e of D e f i c i e nc y ] . ” S a nf

or d di d not prov i de any a dd i t i on al det ai l s a s t o w hatprocedural errors he bel i eved had occurre d o r any spec i fi cs on the other tw o i ss ues. S anford agai n request ed a f ac et o- f a c e he a r i ng, thi s t i m e i n D a y t onaB e a c h, F l or i da . S a nf or d a l s o de m a nde d 60- da y s a dva nc e not i c e of

a ny he a r i ng. In D ec em ber, the IR S i ss ued a l ett ert o S anford i nform i ng hi m thatthe i ss ues he ra i se d i n h i s O ct ob erl ett erw er e f ri vo l ou s. T he l ett eral so st at ed, as had p r e v io u s c o m m u n ic a tio n s , th a t th e I R S h a d is s u e d th e N o tic e o f D e f ic ie n c y in O ct o b er 2 0 0 4 an d sen ti tt o h i s h o m e ad d ress o f reco rd w h i ch w as th e sam e ad d ress S a nf or d ha d us e d f

r om 1996 thr ough the c urr e ntda t e . O n J a nua ry 23, 2007, the IR S i ss ued a N ot i ce of D et erm i nat i on thatthe l evy a ct i on w as approp ri at e. S anford the n pe t i t i one d the T a x C ourtf orr e - de t e rm i na t i on of

the N ot i c e of

D e t e rm i na t i on. S a nf or d c onc e de s tha thi s or i gi na l pe t i t i on c ont a i ne d “ ve ry l i tt l e of the spec i fi cs and p art i cul ar s of hi s c as e. ” H e tri ed, ho w ever , t o fi l e asupp l em ent al pe t i t i on, butthe T a x C ourtde ni e d hi s m ot i on t o do s o. T he s uppl e m e nt a l pe t i t i on s t i l l di d nots pe c i f

y a ny a r gum e nt s ore rr or s i n the I R S ’ N ot i c e of D e f i c i e nc y . T he supp l em entm er el y r ei t er at ed thatS anford fel the w as ent i t l ed t o a fa ce -t o-fa ce5

hear i ng and that , i f gra nt ed such a hear i ng , he w ou l d rai se no n-fr i vo l ou s i ss ues a t th att i m e; th e su p p l em en td i d n o t , h o w ev er, d i scu ss sp eci fi cal l y an y i ssu es, fr i vo l ou s or otherw i se , thathe w ou l d rai se . T he T ax C ou rtst at ed thatthe am ended pet i t i on “ advanced no thi ng of subst ance i n the ca se and o nl y f urther e vi denced P e titio n e r ’s a tte m p t to d e la y th e u ltim a te r e s o lu tio n o f th is c a s e .” O n O c t obe r18, 2007, the T a x C our tgr a nt e d s um m a ry j udgm e ntf orthe C om m i ss i on erof Int ernal R evenue. T he courtconcl ud ed thatthe C om m i ss i on er c o u ld p r o c e e d w ith c o lle c tio n o f S a n f o r d ’s 2 0 0 2 ta x liab ility in a c c o r d a n c e w ith the N ot i c e of

D e t e rm i na t i on. T he T a x C our ta l s o i m pos e d a$2, 500 pe na l ty upon S a n f o r d u n d e rth e p r o v is io n s o f I .R .C . § 6 6 7 3 ( a ) . S a n f o r d f ile d th is tim e ly ap p e a l. STA N D A R D O F R EVI EW W e r e v ie w d e n o v o th e T a x C o u r t’s g r a n t o f s u m m a ry ju d g m e n t a n d ap p ly the s a m e l e ga l s t a nda r ds a s the T a x C our t . B apt i s t e v. C . I . R . , 29 F . 3d 1533, 1537 ( 1 1 th C ir . 1 9 9 4 ) . S u m m a ry ju d g m e n t is p r o p e r“if th e p le a d in g s , a n s w e r s to i n t erro g at o ri es, d ep o si t i o n s, ad m i ssi o n s, an d an y o th er accep t ab l e m at eri al s, t oge the rw i th the a f

f i da vi t s , i f

a ny , s how tha tthe r e i s no ge nui ne i s s ue a s t o a ny ma t e r i a l f

a c ta n d th a tad e c i s i o n ma y b e r e n d e r e d a s ama tt e ro f l a w . ” Ta x Ct . R. 1 2 1 ( b ) . W e v ie w th e f

a c ts in th e lig h t m o s t f

a v o r ab le to th e n o n m o v in g p a r ty . B apt i s t e , 29 F . 3d a t1533. W e r e vi e w the T a x C ourt ’ s i m pos i t i on of s a nc t i ons f

orabus e of

di s c r e t i on.6

R o b e rts v . C .I .R ., 3 2 9 F .3 d 1 2 2 4 , 1 2 2 7 ( 1 1 th C ir . 2 0 0 3 ) . DI S CUS S I ON W as Appe l lant

E nt i t le d to a Fac e - to- Fac e H e ar i ng? S anford argues thatthe IR S ’ re fusa l t o p rovi de hi m w i th a fa ce -t o-fa ce hear i ng i nst ea d o f the t el epho ne heari ng vi ol at ed hi s due proces s r i gh t s. H e argues th a t, a f te rh is S e p te m b e r5 , 2 0 0 6 le tte r( w h e r e in h e o f f e r e d to w ith d r a w a ll p rev i o u sl y o ffered fri v o l o u s arg u m en t s), h e rai sed n o n -fri v o l o u s arg u m en t s an d so w a s e nt i t l e d t o af

a c e - t o- f a c e he a r i ng. T he s t a tut e pr ovi de s tha ti f a“ pe r s on r e que s t s ahe a r i ng i n w r i t i ng . . . a nd s t a t e s the gr ounds f

orthe r e que s t e d he a r i ng, s uc h he a r i ng s ha l l be he l d by the I n te rn a l R e v e n u e S e rv ic e O f f ic e o f A p p e a ls .” I .R .C . § 6 3 3 0 ( b ) ( 1 ) . T h e s ta tu te d o e s n o t s p e c if

y th a t th e h e a r in g w ill ta k e p la c e in p e r s o n , o rth a t ata x p a y e ris gua r a nt e e d ar i ghtt o af a c e - t o- f a c e he a r i ng. N orha s S a nf or d s t a t e d a ny r e a s ons w hy at e l e phone c onf

e r e nc e w oul d ha ve be e n i ns uf f i c i e ntt o e xpl or e a ny obj e c t i ons to th e p r o p o s e d le v y . O th e rc o u rts to a d d r e s s th is is s u e h a v e s im ila r ly f o u n d th a t a f a c e - t o- f a c e he a r i ng i s unne c e s s a ry . S e e e . g. , O ’ M e a r av. W a t e r s , 464 F . S upp. 2d 4 7 4 , 4 7 9 - 4 8 0 ( D . M d . 2 0 0 6 ) . A d d itio n a lly , th e ap p lic ab le r e g u la tio n s s p e c if ic a lly s ta te th a t th e s e h e a r in g s a r e “in f o rm a l in n a tu r e a n d d o n o t r e q u ir e . . . a fa ce -t o-fa ce m ee t i ng . A C D P hear i ng m ay , bu ti s notre qu i re d t o, consi stof a f a c e - to - f a c e h e a r in g .” 2 6 C .F .R . § 3 0 1 .6 3 3 0 - 1 ( d ) ( 2 ) Q & A - D 6 ( 2 0 0 6 ) . W e7

the r e f or e c onc l ude tha tS a nf

or d’ s due pr oc e s s r i ght s w e r e notvi ol a t e d w he n the I R S of f e r e d hi m at e l e phone he a r i ng onl y , r a the rtha n af a c e - t o- f a c e he a r i ng. W as the T ax C ou rt ’s sum m ary j ud gm ent order def

ec t i ve ? S a nf or d a r gue s tha tthe T a x C our t ’ s s um m a ry j udgm e ntor de rw a s de f e c t i ve for f ai l i ng t o i ncl ud e det ai l ed concl usi on s of l aw and fact s. S anford al so di sput es th e T ax C o u rt ’ s co n cl u si o n th ath e rai sed o n l y fri v o l o u s arg u m en t s. A l though S a nf

or d va gue l y r e f

e r s t o “ thr e e othe rs i m i l a rde c i s i ons ” w hi c h he f e e l s e s t abl i s h tha tthe T a x C ourt ’ s de c i s i on w a s unl a w f ul , S a nf or d doe s not pr ovi de the na m e s orc i t a t i ons of the s e de c i s i ons . S a nf

or d a l s o f

a i l s t o pr ovi de a ny author i ty f

orhi s pos i t i on tha tthe T a x C our tm us ti nc l ude de t a i l e d c onc l us i ons of l a w a nd f a c t s . I n ouropi ni on, the T a x C our t ’ s or de rw a s s uf f i c i e nt l y c l e a ra nd c om pl e t e . T he c ourtc l e a r l y s t a t e d tha tS a nf or d ha d r a i s e d onl y f

r i vol ous ar gu m ent s c hal l engi ng the C om m i ss i on er ’ s autho ri ty t o ass es s and col l ec tthe t ax h e o w e d . T h e r e c o r d s u p p o rts th is c o n c lu s io n . T he st atut e provi des thatata C ol l ec t i on D ue P roce ss H eari ng the t axpaye r m ay rai se “ an y rel ev an ti ssu e rel at i n g t o th e u n p ai d t ax o r th e p ro p o sed l ev y, i nc l udi ng ( i ) appr opr i a t e s pous a l de f e ns e s ; ( i i ) c ha l l e nge s t o the appr opr i a t e ne s s of c o l l e c t i o n a c t i o n s ; a n d ( i i i ) o f f e r s o f c o l l e c t i o n a l t e rn a t i v e s . ” I . R. C. § 6330( c ) ( 2) ( A ) . A ddi t i ona l l y , the t a xpa y e rm a y c ha l l e nge the e xi s t e nc e or a m o u n t o f

th e u n d e r ly in g ta x liab ility , b u t o n ly i f the t axpaye r di d n otre ce i ve a8

N ot i ce of D ef

i ci ency . I. R . C . § 6 33 0(c) (2)( B ). S anford never adequat el y r ai se d a n y o f th e s e is s u e s , n o ra n y o th e rn o n - f r iv o lo u s , n o n - g r o u n d le s s e rr o rth a t w o u ld e s tab lis h h is e n title m e n t to ah e a r in g . S a nf or d r e pe a t e dl y de m a nde d pr oof f r om the I R S tha ti tha d s e ntaN ot i c e of D e f ic ie n c y , b u t in h is m a n y le tte r s , p le a d in g s to th e T a x C o u r t, o rh is b r ie f s to th is c ourt , S a nf

or d ne ve ra l l e ge d tha the ha d notr e c e i ve d the not i c e . N ow he r e doe s the s ta tu te s ta te th a t th e I R S m u s t p r o d u c e p r o o f th a t aN o tic e o f

D e f ic ie n c y w a s s e n t. B ec ause he never ar gu ed thathe di d n otre ce i ve the N ot i ce of D ef i ci ency , S anford c o u l d n o th a v e c h a l l e n g e d th e e x i s t e n c e o ra mo u n to f th e t a x l i ab i l i ty . I . R. C. § 6 3 3 0 (c)(2 )(B ). In h i s O ct o b er 2 0 0 6 l ett er, S an fo rd st at ed th ath e w o u l d rai se

“ procedural errors ” butnever s peci fi ed w hatthese errors w er e. U nd erthe st atut e, the t axpaye r m ustst at e the grou nd s f or the re qu es t ed heari ng . I. R . C . § 6 33 0(b)(1). T hus , the a l l e ge d “ pr oc e dur a l e rr or s ” di d notc ons t i tut e anon- f r i vol ous i s s ue e n titlin g S a n f

o r d to af a c e - to - f a c e h e a r in g . I n th e s a m e le tte r , S a n f o r d b r ie f ly m e nt i one d tha the w oul d di s c us s c ol l e c t i on a l t e rna t i ve s . T he I R S ha s a l r e a dy i nform ed hi m thati tw ou l d n otdi sc uss c ol l ec t i on al t ernat i ves unl es s he f i l ed hi s t ax r e turns f orthe 2004 a nd 2005 t a xabl e y e a r s . S a nf or d doe s notdi s put e tha the f a i l e d t o do s o. S a nf

or d ne ve rs ugge s t e d tha the w oul d r a i s e s pous a l de f e ns e s or tha tac ol l e c t i on a c t i on w oul d be i nappr opr i a t e . T hus , S a nf or d r a i s e d no r e l e va nt non- f r i vol ous i s s ue s . S e e I . R . C . § 6330( c ) ( 4) ( i i ) ( B ) ( s t a t i ng tha ta n i s s ue m a y not9

be r a i s e d a taC ol l e c t i on D ue P r oc e s s H e a r i ng i f i ti s ba s e d on af

r i vol ous pos i t i on o rr e f le c ts ad e s ir e to d e la y o rim p e d e th e a d m in is tr a tio n o f F e d e r a l ta x la w s ) . S a nf or d ha s f a i l e d t o i de nt i f

y a r gum e nt s tha ta r e non- f r i vol ous . I ns t e a d, he has onl y vaguel y a ss ert ed thathe w ou l d h ave r ai se d n on -f ri vo l ou s argum ent s had he be e n gr a nt e d af

a c e - t o- f a c e he a r i ng. B e c aus e he ha s noti de nt i f i e d a ny l egi t i m at e argum ent s r el at i ng t o the N ot i ce of D et erm i nat i on , w e a ff i rm the T ax C ou rt ’ s s um m ary j ud gm entorder. Should the T

ax C our t H av e G r ante d Sanf

ord’s Mot i on to Supple m e nt His P e t i t i on? W e a gr e e w i th the T a x C our ttha tS a nf or d’ s s uppl e m e ntpe t i t i on r a i s e d no new ar gu m ent s and thatal l ow i ng the pet i t i on t o b e f i l ed there fore w ou l d h ave been f ut i l e . H i s s uppl e m e nt a l pe t i t i on di d di s c us s s pe c i f i c f a c t s , butf

a i l e d t o r a i s e a ny n e w a r g u m e n ts c h a lle n g in g th e N o tic e o f D e te rm in a tio n . S a n f

o r d m e r e ly re as se rt ed thathe had b ee n u nfai rl y deni ed a f ac e- t o-fa ce hear i ng . A s di sc usse d abov e, S anford w as no tent i t l ed t o a fa ce -t o-fa ce hear i ng . Itw as no t , there fore , e rr o rf o rth e T a x C o u rt to d e n y S a n f o r d ’s m o tio n to s u p p le m e n t h is p e titio n . W as the Im po se d San ct i on App ropri at e? S a nf or d a r gue s onl y br i e f

l y tha tthe s a nc t i on w a s i nappr opr i a t e be c aus e the T a x C o u rt is s u e d ap e n a lty “w ith o u t a n y e x p la n a tio n w h a ts o e v e r .” T he T a x C ourts t a t e d tha ti ti m pos e d a$2, 500 pe na l ty “ unde rthe pr ovi s i ons o f sect i o n 6 6 7 3 (a). S ect i o n 6 6 7 3 (a) st at es th atth e T ax C o u rtm ay i m p o se10

s a nc t i ons on at a xpa y e r , i f he i ns t i tut e s orm a i nt a i ns pr oc e e di ngs pr i m a r i l y f or del ayor i f hi s posi t i on i s f ri vo l ou s or groun dl es s. 26 U . S . C . § 6 67 3(a) (1)( A )- (B ); s e e a l s o R obe rt s , 329 F . 3d a t1229. A s di s c us s e d above , w e a gr e e tha tS a nf or d’ s pos i t i ons w e r e f

r i vol ous a nd g r o u n d le s s . F u rth e rm o r e , an u m b e ro f p o s itio n s ta k e n b y S a n f o r d s u g g e s t th a t h is a c tio n s w e r e m o tiv a te d p r im a r ily to a v o id o rd e la y h is ta x liab ility . I n h is c orr e s ponde nc e w i th the I R S , he de m a nde d s i gni f i c a nta m ount s of

not i c e be f

or e he w oul d a c c e ptas c he dul e d he a r i ng. S a nf or d ne ve rs t a t e d hi s pr e c i s e c om pl a i nt s or a r gum e nt s a ga i ns tthe N ot i c e of D e t e rm i na t i on. S a nf

or d de m a nde d pr oof

tha tthe I R S h a d s e n t aN o tic e o f D e f ic ie n c y , b u t n e v e ra lle g e d th a t h e h a d n o t r e c e iv e d it. S anford di d n otca l l the IR S S ett l em entO ff i ce r a tthe appo i nt ed t i m e on S ept em ber 12, 2006— note ve n t o di s c us s hi s de m a nd f oraf a c e - t o- f a c e he a r i ng. H i s a c t i ons thus s e e m t o c ons i s tm or e of de l a y t a c t i c s tha n a tt e m pt s t o r a i s e a c tua l i s s ue s . T he T a x C o u rt, th e r e f

o r e , d id n o t ab u s e its d is c r e tio n b y im p o s in g s a n c tio n s .

CONCL US I ON F or the foregoi ng re as on s, w e AF F I RM th e d e c is io n o f th e T a x C o u r t.