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Sean P. Gjerde Dba Law Offices of Sean P. Gjerde v. United States of America

April 7, 2011

SEAN P. GJERDE DBA LAW OFFICES OF SEAN P. GJERDE, PETITIONER,
v.
UNITED STATES OF AMERICA, ET AL.,
RESPONDENTS.



The opinion of the court was delivered by: Kendall J. Newman United States Magistrate Judge

ORDER and FINDINGS AND RECOMMENDATION

Petitioner Sean P. Gjerde dba Law Offices of Sean P. Gjerde (the "petitioner" or "Gjerde") filed a petition to quash two Internal Revenue Service Summons (the "petition") pursuant to 26 U.S.C. §§ 7609(b)(2) and 7609(h).*fn1 (Dkt. No. 1.) The two summonses address various records of petitioner's that are in the possession of two banks.*fn2 Petitioner, an attorney representing himself in this action, raises two main arguments in support of his request. The first argument is that the summonses seek client trust account documents containing the "identity of Petitioner's clients [and] is confidential information to which the IRS is not entitled." (Dkt. No. 1 at 4.) The second argument is that the IRS "already possesses all relevant information to determine Petitioner's tax liability . . . ." (Id.) In the alternative to an order quashing both summonses, petitioner requests that the undersigned issue protective orders blocking the IRS's access to the client trust account records. (Id. at 1.) For the reasons described below, the petition to quash is denied in its entirety.

I. BACKGROUND

In an order dated June 28, 2010, the undersigned ordered petitioner to effect "proper service of process upon" respondents the United States of America, the Commissioner of Internal Revenue, and agent Randall Zielke (the "respondents") within 30 days. (Dkt. No. 2.)*fn3

That same order directed petitioner to serve a copy of the order upon respondents and file a certificate confirming such service. (Id.) Finally, that order directed respondents to "file and serve an opposition to the petition and/or a motion for summary enforcement" within 30 days of being served. (Id.)

When respondents did not file and serve an opposition to the petition and/or a motion for summary enforcement within 30 days, the undersigned issued an Order to Show Cause ("OSC") why the petition should not be summarily granted. (Dkt. No. 4.) In their "Response of the United States to the Court's Order to Show Cause," respondents explained that their failure to timely file and serve an opposition to the petition was due to the fact that petitioner failed to properly effect service upon them. (Dkt. No. 6 at 1-2.) Specifically, respondents state that petitioner served the United States' Attorney's Office, but did not do so via certified mail or via personal service. (Id. at 1.) Respondents also state that petitioner did not serve the United States Attorney General, and that petitioner never filed a proof of service reflecting that the court's June 29, 2010 order was ever properly served upon the United States. (Id. at 1-2.) Respondents argue that petitioner-not respondents-violated the court's June 29, 2010 order, and that given these service issues, respondents' "briefing schedule has not yet begun to run." (Id. at 2.)

Respondents filed a motion to dismiss the petition to quash on the same day they filed their response to the OSC. (Dkt. Nos. 5-6.) Respondents argued both that Gjerde's petition lacks substantive merit and that his failure to properly effect service is sufficient to warrant the summary denial of his petition. (Dkt. No. 6 at 2; Dkt. No. 5 at 1.)*fn4 The fact that the petition was apparently served via first class mail instead of certified mail, and that the petition may not have been properly served upon the United States Attorney General, may each be sufficient to warrant summary denial of the petition. However, in this particular case the undersigned need not determine the consequences of such service because the petition is deficient on the merits.

II. LEGAL STANDARDS

The government can defeat a petition to quash if the government makes a prima facie showing of good faith and the taxpayer fails to establish an adequate defense. United States v. Powell, 379 U.S. 48, 57-58 (1964).*fn5 Under Powell, respondents need only make a prima facie showing of good faith in the issuance of the summons. Lidas, Inc. v. United States, 238 F.3d 1076, 1081-82 (9th Cir. 2001) (citing Powell, 379 U.S. at 57-58). Respondents' burden under Powell is "slight." Stewart v. United States, 511 F.3d 1251, 1254 (9th Cir. 2008).

Respondents must establish that: "(1) the investigation will be conducted for a legitimate purpose; (2) the inquiry will be relevant to such purpose; (3) the information sought is not already within the Commissioner's possession; and (4) the administrative steps required by the Internal Revenue Code have been followed." Lidas, Inc., 238 F.3d at 1081-82 (citing Powell, 379 U.S. at 57-58); accord Crystal v. United States, 172 F.3d 1141, 1144 (9th Cir. 1999). Courts have consistently recognized that declarations or affidavits by IRS directors or agents generally satisfy the Powell requirements. Lidas, Inc., 238 F.3d at 1081-82 (citing cases); accord Crystal, 172 F.3d at 1144 (holding that the government's burden "may be satisfied by a declaration from the investigating agent that the Powell requirements have been met") (citing cases). The IRS's summons power "must be construed broadly." Stewart, 511 F.3d at 1254.

Once the IRS establishes a prima facie case for enforcement of its summons under Powell, the burden shifts to the taxpayer, who "may challenge the summons on any appropriate ground," including failure to meet the Powell requirements. Lidas, Inc., 238 F.3d at 1081-82 (citing Powell, 379 U.S. at 58.) The taxpayer must demonstrate "an abuse of process" or "the lack of institutional good faith." Stewart, 511 F.3d at 1255. The taxpayer bears a "heavy" burden to rebut the presumption of good faith. Id.; Lidas, Inc., 238 F.3d at 1081-82 (citing United States v. Jose, 131 F.3d 1325, 1328 (9th Cir. 1997) (en banc).) Those "opposing enforcement of a summons . . . bear the burden to disprove the actual existence of a valid civil tax determination or collection purpose by the [Internal Revenue] Service." Crystal, 172 F.3d at 1144. To meet this heavy burden, "the taxpayer must allege specific facts and evidence to support his allegations of bad faith or improper purpose." Id. (emphasis added).

III. DISCUSSION

A. Order to Show Cause

In their "Response of the United States to the Court's Order to Show Cause," respondents explained that their failure to timely file and serve an opposition to the petition was due to the fact that petitioner failed to properly effect service upon them. (Dkt. No. 6 at 1-2.) A review of the court's docket confirms that petitioner did not refute these service issues. Respondents' explanation is ...


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