ORDER GRANTING MOTIONS TO DISMISS AND ORDERING EMB>COMPLIANCE WITH SUMMONSES.
SUSAN ILLSTON, District Judge.
Plaintiffs, Catherine Schoop and the corporation she owns, New York Frankfurter Company of California, have filed three related actions against the United States and the Internal Revenue Service: Schoop's "Civil Action - Motion to Quash Summons" (C 13-2230 SI); New York Frankfurter Company's "Civil Action - Motion to Quash Summons" (C 13-2232 SI); and Schoop's "Civil Action - Motion to Quash Third Party Summons" (C 13-2233 SI). Defendant United States has filed a motion to dismiss the three motions to quash, and to compel compliance with the summonses.
The United States' motion is currently scheduled for a hearing on October 11, 2013. Docket No. 21 in Case No. 13-02230. Pursuant to Civil Local Rule 7-1(b), the Court finds these matters appropriate for resolution without oral argument and hereby VACATES the hearing. For the reasons set forth below, the Court hereby GRANTS the motion to dismiss the motions to quash and GRANTS the motion to compel compliance with summonses.
Defendant Internal Revenue Service ("IRS") is conducting a civil examination of the federal tax liabilities of New York Frankfurter Company of California, Inc. for the tax years 2010-2011, and of Catherine Schoop, the sole shareholder and President of New York Frankfurter, for the tax year 2009. Grellas Decl. ¶ 1. Revenue Agent Ariana Grellas is the IRS agent in charge of the investigation. On April 19, 2013, Grellas served a summons on New York Frankfurter, directing Schoop to appear on May 10, 2013 and to produce for examination documents relevant and material to the examination of the federal income tax liability of New York Frankfurter. Grellas Decl. ¶ 4. On April 19, 2013, Agent Grellas also issued a summons directing Schoop to appear on May 10, 2013, and to produce for examination documents relevant and material to the examination of the federal income tax liability of Schoop herself. Id. ¶¶ 12, 14. Schoop did not appear in response to either summons. Id. ¶¶ 5, 13.
On May 8, 2013, Grellas issued a summons to First American Title, seeking testimony and documents relating to purchase and mortgage history of 343 Pioneer Way, Tahoe City, California, purchased by Schoop in 2005. Mot. to Quash, p. 2 in Case No. 13-0223, Grellas Decl. ¶ 21. Grellas stated that documents related to this purchase are relevant in conducting the examination of Schoop's federal income tax liability. Grellas Decl. ¶ 23. Grellas received a response to the summons from First American Title by mail, but has not opened the mail envelope pending resolution of this summons enforcement proceeding. Id. ¶ 22. Grellas stated all administrative steps required by the Internal Revenue Code for issuance of the three summonses have been taken. Id. ¶¶ 10, 19, 26.
On May 16, 2013, plaintiffs filed the three "Civil Action - Motion to Quash Summons" proceedings. Plaintiffs alleged that the information sought has already been obtained by the IRS and that consequently the testimony of Schoop has no legitimate purpose. Mot. to Quash, p. 3; Ho Decl. ¶ 4-6. Plaintiffs alleged that the IRS summons of Schoop is improper and should be quashed because it fails to meet two of the four elements set fourth by the Supreme Court in U.S. v. Powell 379 U.S. 48, 57-58 (1964). Mot. to Quash, p. 3.
On July 12, 2013, the United States filed its motions to dismiss plaintiffs' motions and to compel compliance with the summonses. Docket No. 14 in Case Nos. 13-02230 and 13-02233; Docket No. 13 in Case No. 13-02232.
To enforce a summons, the IRS must establish a prima facie case: (1) that there is a legitimate purpose for the investigation; (2) that the material sought in the summons is relevant to that purpose; (3) that the material sought is not already within the possession of the IRS; and (4) that those administrative steps which are required by the Internal Revenue Code have been taken. Powell, 379 U.S. at 57-58. Once the government establishes its prima facie case, the party moving to quash the summons carries the burden of disproving the existence of a valid purpose or proving that enforcement of the summons would be an abuse of the court's process. Id. at 58. Abuse of process takes place "if the summons had been issued for an improper purpose, such as to harass the taxpayer or to put pressure on him to settle a collateral dispute, or for any other purpose reflecting on the good faith of the particular investigation." Id.
The Ninth Circuit has further stated:
The government's burden is a "slight one" and typically is satisfied by the introduction of the sworn declaration of the revenue agent who issued the summons that the Powell requirements have been met. United States v. Dynavac, Inc., 6 F.3d 1407, 1414 (9th Cir.1993); United States v. Gilleran, 992 F.2d 232, 233 (9th Cir.1993). Once a prima facie case is made a "heavy" burden is placed on the taxpayer to show an "abuse of process" or "the lack of institutional good faith." Dynavac, 6 F.3d at 1414.
Fortney v. United States,
59 F.3d 117, 120 (9th ...