Opinion ID: 3002805
Heading Depth: 2
Heading Rank: 3

Heading: Customer List

Text: The government contends that the district court should have required Benson to provide the government with a list of names and identifying information of persons who purchased the Reliance Defense Package or the 16th Amendment Reliance Package from Benson. Benson argues that the district court acted properly because requiring him to turn over his customer list is not authorized by any statute and would violate the First and Fifth Amend- 3 Because we find that the injunction properly enjoins Benson from engaging in false or misleading commercial speech, we do not need to consider the alternate theory of whether the injunction is proper because it prohibits commercial “speech proposing an illegal transaction, which a government may regulate or ban entirely.” Village of Hoffman Estates v. Flipside, Hoffman Estates, Inc., 455 U.S. 489, 496 (1982) (citations omitted); Buttorff, 761 F.2d at 1066 (“Appellant’s promotion of his trust does advocate the attempt to take tax benefits repeatedly declared invalid by the courts.”). Nos. 08-1312 and 08-1586 17 ments. We review a district court’s decision to grant or deny an injunction for an abuse of discretion. Kaun, 827 F.2d at 1148. However, “[a] district court by definition abuses its discretion when it makes an error of law.” Koon v. United States, 518 U.S. 81, 100 (1996). The district court denied the requested customer list order because it determined the order was not related to preventing future misconduct by Benson and was beyond the scope of Benson’s wrongdoing. Whether true or not, the district court’s observations are not relevant under the applicable law. District courts possess jurisdiction under 26 U.S.C. § 7402(a) to “issue . . . writs and orders of injunction . . . and such other orders . . . as may be necessary or appropriate for the enforcement of the internal revenue laws.” 4 The government has identified seven individuals who have received Benson’s materials and have failed to file income tax returns. Reliance on Benson’s materials has and will continue to irreparably harm Benson’s customers, who have exposed themselves to increased tax and criminal liability, and the government, which is “not receiving required tax payments and [is] forced to expend resources to [identify and] collect the unpaid taxes.” United States 4 Section 7402(a) makes clear that the remedies it provides “are in addition to and not exclusive of any and all other remedies of the United States in such courts or otherwise to enforce” the tax laws. The government was not required to seek the customer list through an administrative process as Benson argues. 18 Nos. 08-1312 and 08-1586 v. Schulz, 517 F.3d 606, 607-08 (2d Cir. 2008). Without a customer list, it is unlikely that the government will identify each of Benson’s customers who followed his advice before the statute of limitations has run. Benson will not be harmed by identifying his customers and it will serve the public interest for the government to receive a full list of Benson’s customers, both to warn them of the falsity and ineffectiveness of Benson’s claims, and to enforce the income tax laws. Production of Benson’s customer list is also proper to monitor compliance with the injunction’s requirement that Benson “mail . . . a copy of the injunction order to every person and entity to whom he sold or furnished the [Packages].” See id. We note that this is not the first time a promoter of false tax schemes has been required to divulge his customer list. E.g. United States v. Bell, 414 F.3d 474, 485 (3d Cir. 2005); Schulz, 517 F.3d at 607-08; United States v. Kotmair, Civ. No. WMN-05-1297, 2006 WL 4846388 at -8 (D. Md. Nov. 29, 2006), aff’d, 234 Fed. Appx. 65, 65-66 (4th Cir. 2007); United States v. Harkins, 355 F. Supp. 2d 1175, 1182 (D. Or. 2004); United States v. Stephenson, 313 F. Supp. 2d 1054, 1061 (W.D. Wash. 2004). Such an order will not infringe on the First Amendment rights of Benson’s customers. Benson’s attempt to analogize this case to NAACP v. Alabama ex rel. Patterson, 357 U.S. 449 (1958) is misplaced. Benson operated an Internet marketing scheme, not a membership organization. As in Bell, 414 F.3d at 485, Benson’s “operation was primarily a commercial enterprise, not a political group. Producing a customer list does not offend the First Amendment because commercial transactions do not entail the Nos. 08-1312 and 08-1586 19 same rights of association as political meetings.” Benson’s claim that divulging his customer list will violate his customers’ right to receive and read what they choose also falls short. The government acknowledges that Benson’s customers are free to receive, possess, read, and speak about materials from Benson and others challenging the validity of the Sixteenth Amendment or protesting the federal tax system. Additionally, as the government suggests, we expect the district court to enter an appropriate protective order to prevent public disclosure of the customers’ identities. Finally, Benson’s Fifth Amendment claim need not delay us because the government asked the district court to issue an order of immunity in connection with Benson’s compelled act of producing his customer list. The government’s brief indicates that it remains open to this solution and we expect the district court to issue such an order upon remand, thereby eliminating Benson’s Fifth Amendment claim.