Court Opinion

ID: 858406
Source: CourtListenerOpinion
Date Created: 2013-04-18 16:02:35.045725+00
Date Added: 2024-06-11T09:06:39.665244
License: Public Domain

Case: 12-13190        Date Filed: 04/18/2013   Page: 1 of 7

                                                                   [DO NOT PUBLISH]

                  IN THE UNITED STATES COURT OF APPEALS

                             FOR THE ELEVENTH CIRCUIT
                               ________________________

                                      No. 12-13190
                                ________________________

                         D.C. Docket Nos. 9:11-mc-80456-KLR,

                                     9:11-mc-80457-KLR

9:11-mc-80456-KLR

UNITED STATES OF AMERICA,

                                                                       Plaintiff-Appellee,

                                              versus

MICHAEL CLARKE,
As Chief Financial Officer of Beekman Vista, Inc.,
DYNAMO HOLDINGS LIMITED PARTNERSHIP,

                                                                  Defendants-Appellants.

----------------------------------------------------------
9:11-mc-80457-KLR

UNITED STATES OF AMERICA,

                                                                       Plaintiff-Appellee,

                                              versus

DYNAMO HOLDINGS LIMITED PARTNERSHIP,
                 Case: 12-13190        Date Filed: 04/18/2013        Page: 2 of 7

                                                                 Intervenor Plaintiff-Appellant,

MICHAEL CLARKE,
As Chief Financial Officer of Dynamo GP, Inc.,
As General Partner of Dynamo Holdings Limited
Partnership,

                                                                          Defendant-Appellant.
---------------------------------------------------------
9:11-mc-80459-KLR

UNITED STATES OF AMERICA,

                                                                            Plaintiff-Appellee,

                                              versus

DYNAMO HOLDINGS LIMITED PARTNERSHIP,

                                                                 Intervenor Plaintiff-Appellant,

RITA HOLLOWAY,
As Trustee for the 2005 Christine Moog Family
Delaware Dynasty Trust,

                                                                                    Defendant.
--------------------------------------------------------------
9:11-mc-80460-KLR

UNITED STATES OF AMERICA,

                                                                            Plaintiff-Appellee,

                                              versus

MARC JULIEN,
As Trustee for the 2005 Robert Julien Delaware
Dynasty Trust,

                                                 2
                Case: 12-13190        Date Filed: 04/18/2013       Page: 3 of 7

                                                                                     Defendant,

DYNAMO HOLDINGS LIMITED PARTNERSHIP,

                                                             Intervenor Defendant-Appellant.
------------------------------------------------------------------
9:11-mc-80461-KLR

UNITED STATES OF AMERICA,

                                                                            Plaintiff-Appellee,

                                             versus

ROBERT JULIEN,

                                                                         Defendant-Appellant,

DYNAMO HOLDINGS LIMITED PARTNERSHIP,

                                                            Intervenor Defendant-Appellant.

                               ________________________

                      Appeal from the United States District Court
                          for the Southern District of Florida
                            ________________________

                                       (April 18, 2013)

Before MARCUS, BLACK and SILER, * Circuit Judges.

PER CURIAM:

       This case involves the Internal Revenue Service’s (IRS) issuance of five

administrative summonses, pursuant to 26 U.S.C. § 7602, during an investigation

       *
        Honorable Eugene E. Siler, Jr., United States Circuit Judge for the Sixth Circuit, sitting
by designation.
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              Case: 12-13190      Date Filed: 04/18/2013   Page: 4 of 7

into the tax liabilities of Dynamo Holdings Limited Partnership (Dynamo).

Specifically, (1) Michael Clarke, in his capacity as the chief financial officer of

Beekman Vista, Inc., and Dynamo GP, Inc.; (2) Robert Julien; and (3) Dynamo

(collectively Appellants) appeal the district court’s orders granting the IRS’s

petitions to enforce the summonses. After careful review of the record, and having

had the benefit of oral argument, we vacate the district court’s order enforcing the

summonses and remand for the district court to hold a hearing.

      To obtain enforcement of a summons, the IRS must make a four-part prima

facie showing that (1) “the investigation will be conducted pursuant to a legitimate

purpose,” (2) “the inquiry may be relevant to the purpose,” (3) “the information

sought is not already within the Commissioner’s possession,” and (4) “the

administrative steps required by the Code have been followed.” United States v.

Powell, 379 U.S. 48, 57–58 (1964); see also Nero Trading, LLC v. U.S. Dep’t of

Treasury, IRS, 570 F.3d 1244, 1248 (11th Cir. 2009). Once the IRS makes its

prima facie showing, the burden shifts to the party opposing the summons to either

(1) disprove one of the four elements of the IRS’s prima facie case, or (2)

“convince the court that enforcement of the summons would constitute an abuse of

the court’s process.” Nero, 570 F.3d at 1249 (internal quotation omitted). The

Supreme Court has stated that because the district court’s process is used to

enforce a summons, the court should not permit its process to be abused by

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enforcing a summons that was issued for an improper purpose. See Powell, 379

U.S. at 58. According to the Powell Court, an improper purpose may include any

purpose “reflecting on the good faith of the particular investigation.” Id.

       In Powell, the Supreme Court also explained that a party opposing a

summons is entitled to an adversary hearing before enforcement is ordered, and

that, at the hearing, the opponent “may challenge the summons on any appropriate

ground.” Id. (internal quotation omitted). Subsequently, in United States v.

Southeast First National Bank of Miami Springs, we held that “an allegation of

improper purpose is sufficient to trigger a limited adversary hearing where the

taxpayer may question IRS officials concerning the Service’s reasons for issuing

the summons.” 655 F.2d 661, 667 (5th Cir. 1981) (footnote omitted). 1 More

recently, we have reaffirmed Southeast First National Bank, calling it “the

legitimate offspring of the Supreme Court’s seminal decision in Powell.” Nero,

570 F.3d at 1249.

       Appellants contend they were entitled to discovery and an evidentiary

hearing before the district court granted the IRS’s petitions to enforce the

summonses because they alleged the IRS may have issued and sought to enforce

       1
          In Bonner v. City of Prichard, 661 F.2d 1206, 1209 (11th Cir. 1981) (en banc), this
Court adopted as binding precedent all decisions of the former Fifth Circuit handed down prior
to the close of business on September 30, 1981.

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                Case: 12-13190       Date Filed: 04/18/2013      Page: 6 of 7

the summonses for at least four improper purposes. 2 One of the reasons the IRS

may have issued the summonses, according to Appellants, was solely in retribution

for Dynamo’s refusal to extend a statute of limitations deadline. Although

Appellants raised the possibility of numerous improper purposes, federal pleading

standards allow claims and defenses to be pled in the alternative, and do not

require them to be consistent. See Fed. R. Civ. P. 8(d)(2) & (d)(3). If the IRS

issued the summonses only to retaliate against Dynamo, that purpose “reflect[s] on

the good faith of the particular investigation,” and would be improper. See Powell,

379 U.S. at 58.

       Under our precedents, Appellants were entitled to a hearing to explore their

allegation of an improper purpose.3 As we have explained, in situations such as

this, requiring the taxpayer to provide factual support for an allegation of an

improper purpose, without giving the taxpayer a meaningful opportunity to obtain

such facts, saddles the taxpayer with an unreasonable circular burden, creating an

impermissible “Catch 22.” See Nero, 570 F.3d at 1250; S.E. First Nat’l Bank, 655

F.2d at 667. While “the scope of any adversarial hearing in this area is left to the

       2
          We will not reverse a district court’s order enforcing an IRS summons unless it is
clearly erroneous. Nero, 570 F.3d at 1248. In addition, we review the denial of discovery and an
evidentiary hearing for abuse of discretion. Id.
       3
         Appellants, however, are not entitled to discovery. We have held that the full “panoply
of expensive and time-consuming pretrial discovery devices may not be resorted to as a matter of
course and on a mere allegation of improper purpose.” Nero, 570 F.3d at 1249 (internal
quotation and emphasis omitted).
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              Case: 12-13190     Date Filed: 04/18/2013    Page: 7 of 7

discretion of the district court,” binding Circuit authority requires that Appellants

be given an opportunity “to ascertain whether the Service issued a given summons

for an improper purpose.” Nero, 570 F.3d at 1249. As required by Southeast First

National Bank, on remand Appellants should be permitted to “question IRS

officials concerning the Service’s reasons for issuing the summons[es].” 655 F.2d

at 667 (footnote omitted).

      VACATED AND REMANDED.

                                           7