Opinion ID: 2362254
Heading Depth: 3
Heading Rank: 4

Heading: Administrative Requisites of the Subpoena

Text: The Financial Records Privacy Act contains the requisites of a subpoena in T.C.A. § 45-10-107, having provided for service under T.C.A. § 45-10-106, which requires that service of a subpoena be made upon a financial institution only if (1) a copy has also been served upon the customer (if available for service), as other subpoenas must be served, or if the customer is named as a party in a judicial proceeding, service is in the manner provided by the Tennessee Rules of Civil Procedure, and (2) in the case of a judicial subpoena, the customer has not moved to quash the subpoena within ten days of service upon the customer, or in the case of other subpoenas, the customer has not notified the issuer of the subpoena within ten days of service on the customer that the customer objects to the subpoena. If a customer objects to a subpoena, the issuer must petition an appropriate court and obtain the approval of that court before issuing such subpoena. If T.C.A. § 45-10-106 has not been complied with, the financial institution is not required to produce records. T.C.A. § 45-10-107. Further, T.C.A. § 45-10-107 requires that the subpoena describe with specificity the financial records to be produced, including the name and address of the customer, a description of the records, the time period covered by the requested records, and [a]ny additional information necessary to identify the records... . T.C.A. § 45-10-107 also requires that an institution be allowed no less than 15 days in which to respond, but this section does permit the financial institution to petition a court, after notice to the customer, to extend or shorten the time, but [n]othing herein shall restrict the power of the appropriate court for good cause shown to cause subpoenas to be issued or responses thereto to be made in less than any of the time periods set forth herein, including instanter. T.C.A. § 45-10-107(b) (Supp. 1985). Significantly, the Financial Records Privacy Act contemplates the due process protections that adhere to any administrative subpoena, which have been generally discussed heretofore, although the Act does expressly permit certain unilateral acts of disclosure of records by the financial institution. T.C.A. §§ 45-10-103(7) and (8) permit disclosure if, under subsection (7), the financial institution deems furnishing such information necessary or incidental to the performance of the duties of a ... state or local official or agency placing the discretion over disclosure with the institution, or if, under subsection (8), the information is furnished to a state agency in response to a subpoena lawfully issued by the official or agency. T.C.A. § 45-10-103(8) also provides that [a] financial institution may presume that a subpoena which appears valid on its face has been lawfully issued, but such institution is not required to recognize the validity or propriety of a subpoena under this section. The implication of this permissive language, may presume, is that the financial institution may also contest the subpoena in good faith. Not only does the Financial Records Privacy Act clearly contemplate that due process protections be afforded to financial institutions as well as to their customers, but by explicitly describing the requisites of a valid subpoena, the Act provides both a guide to the financial institution to determine the facial validity of a subpoena under T.C.A. § 45-10-103(8), and grounds for contesting the validity and sufficiency of a subpoena. Whether issued pursuant to T.C.A. §§ 67-1-1301, 67-1-1302, 67-1-1437, or XX-XX-XXX, et seq., [i]f the subpoenaed party is of the opinion the requests contained in the demand are unreasonable, he can refuse to comply with the demand and raise the issue as a defense to any action brought by [the issuer] to enforce compliance, and where contested, the production of documents [pursuant to an administrative subpoena] can not be compelled ... without approval of the Chancellor. State ex rel. Shriver v. Leech, supra, at 459. Whether contested under the Financial Records Privacy Act or in an action to enforce a subpoena issued by the Department of Revenue, when challenged, the party opposing compliance with the Commissioner's subpoena may in good faith attack the validity, sufficiency, or scope of the subpoena on any appropriate grounds. In such a case, the Commissioner must make a prima facie case for compliance, that is, he must show that [1] the investigation will be conducted pursuant to a legitimate purpose, [2] that the inquiry may be relevant to the purpose, [3] that the information sought is not already within the Commissioner's possession, and [4] that the administrative steps required ... have been followed... . United States v. Powell, 379 U.S. 48, 57-58, 85 S.Ct. 248, 255, 13 L.Ed.2d 112 (1964). This standard for a prima facie case for compliance requires that the investigation be initiated in good faith and with some basis in fact, i.e. for a legitimate purpose. A merely exploratory purpose that is unsupported by reasonable grounds is not a sufficient basis for an investigation. See United States v. Bisceglia, 420 U.S. 141, 151, 95 S.Ct. 915, 921, 43 L.Ed.2d 88 (1975) (Blackmun, J., concurring). The tax liability of the subject of the investigation must be a reasonable possibility, rather than a matter of sheer speculation. Id., 420 U.S. at 158, 95 S.Ct. at 925 (Stewart, J., dissenting). See also United States v. LaSalle National Bank, supra, 437 U.S. at 318, 98 S.Ct. at 2368 (Good faith exercise of investigatory powers required). Relevancy is determined at this stage, not by the evidentiary standard, but rather by a broader standard, requiring only a reasonable expectation that the information will shed light on the taxpayer's potential liability. See United States v. Arthur Young & Co., 465 U.S. 805, 104 S.Ct. 1495, 1501, 79 L.Ed.2d 826 (1984). The third element of the showing requires only that the Commissioner demonstrate a need for information not otherwise available. The last part of the prima facie case requires that the applicable statutory requirements have been followed and that no administrative irregularity exists in issuing the subpoena or summons.