November 7, 2013
DONALD HUENE, Plaintiff,
UNITED STATES DEP'T OF THE TREASURE, INTERNAL REVENUE SERVICE, Defendant.
FINDINGS & RECOMMENDATIONS
ALLISON CLAIRE, Magistrate Judge.
On November 6, 2013, the court held a hearing on the parties' cross-motions for summary judgment. Donald R. Huene appeared in pro per. Gerald A. Role appeared for defendant. On review of the motions, the documents filed in support and opposition, upon hearing the arguments of plaintiff and counsel, and good cause appearing therefor, THE COURT FINDS AS FOLLOWS:
On December 14, 2010, plaintiff executed an IRS Form 2848, designating his certified public accountant ("CPA"), Richard L. Holland, as his power of attorney. Huene Decl., Ex. 1, ECF No. 65 at 13-14. In March 2011, plaintiff and Mr. Holland met with IRS agent Sui E. Chan at Mr. Holland's Fresno office. Huene Decl. ¶ 3; Holland Decl. ¶¶ 3-5. At this meeting, plaintiff verbally informed the IRS agent that he was revoking his power of attorney previously granted to Mr. Holland. Holland Decl. ¶ 4.
Notwithstanding the oral revocation, plaintiff wrote multiple letters to the IRS in March and April 2011 asserting that he is proceeding in propria persona, but then referring to Mr. Holland as his "co-counsel" and stating that Mr. Holland can assist plaintiff in representation:
1. On March 16, 2011, plaintiff wrote a letter to Agent Chan, stating "[y]ou do have authorization so that Mr. Holland, CPA, can assist me in representation." Shelly Decl., Ex. A, ECF No. 68-3 at 5-6.
2. On March 21, 2011, plaintiff wrote to Agent Chan, stating "As you know, I was not present during your previous meeting with R. Holland, CPA. My information would indicate that you were there for about six hours and we produced documents and papers referable to that meeting." Shelly Decl., Ex. B, ECF No. 68-3 at 7-8. This letter indicates that Mr. Holland received a courtesy copy of the letter. See id. 8.
3. On March 23, 2011, plaintiff wrote to Agent Chan, stating that "[a]s regards to our meeting, I must have R. Holland CPA accompanying me, as I previously informed you." Shelly Decl., Ex. D, ECF No. 68-3 at 10-11.
4. April 7, 2011, plaintiff wrote the following to Agent Chan:
I have now received your letter of April 5, 2011, addressed to Richard L. Holland, CPA, with no copy to me. [¶] Let me reiterate, perhaps clarify, my previous correspondence. I am appearing for your audit and all present and subsequent litigation in propria persona, and may have occasional a [sic] co-counsel with me at times. Consequently, you are hereby instructed to contact only me, the party in propria persona. You are free to copy Richard L. Holland, CPA as co-counsel, but I am the one that is the primary contact mandated by law.
Shellnoy Decl., Ex. D, ECF No. 68-3 at 13-14.
Agent Chan frequently updated her supervisor, Anthony Shelly, Supervisory Internal Revenue Agent with the IRS, on the progress of the case concerning plaintiff. Shelly Decl. ¶ 3. It was this last letter dated April 7, 2011 that confused Anthony Shelly because plaintiff had previously filed an IRS Form 2848 designating Mr. Holland as his power of attorney for the tax year under examination and he had not filed anything rescinding the power of attorney. Shelly Decl. ¶ 6. In an attempt to clarify, Anthony Shelly and Agent Chan contacted Mr. Holland on April 13, 2011 to ask whether it was indeed plaintiff's intent to revoke the power of attorney. Id . ¶ 7. Mr. Shelly asserts that Mr. Holland told him during this contact that the power of attorney was not revoked. Id . Mr. Holland refutes this assertion. Holland Decl. ¶ 10.
On June 7, 2011, plaintiff wrote to Anthony Shelly:
I received a call and an email from my CPA, Richard L. Holland. You apparently have not read my previous letters. I rescinded Mr. Holland's release. I also informed Ms. Chan that the only way to reach me was by letter and I would respond promptly.... [¶] Now I found that you have phone Mr. Holland despite my telling you not to.... [¶] Because of your unauthorized communications with my CPA, I am getting bills from Mr. Holland which would not have existed had you not made the contact.
Shelly Decl., Ex. J, ECF No. 68-3 at 18.
Plaintiff wrote another letter to Anthony Shelly on July 11, 2011 regarding "a serious breach of the law on [Shelly's] part." Shelly Decl., Ex. M, ECF No. 68-3 at 24-25. Specifically, plaintiff stated:
As you know, I informed you by written expression that I was rescinding my authorization for you to contact my C.P.A., and directed you to contact me instead. The purpose was obvious: the contacts by the IRS to my accountant were costing me money, and those contacts were unnecessary and resulting in no resolution. In spite of that letter telling you that you had (and have) no authority to deal with my accountant directly, you nonetheless contacted him again, and then again. You did this knowing that his time was expensive, not to the IRS or you personally, but rather to me.
In response to this letter and because there was still confusion as to whether Mr. Holland was representing plaintiff, Anthony Shelly sent a letter to Mr. Holland (with a copy to plaintiff) on July 18, 2011 asking for clarification as to whether he was continuing as plaintiff's representative or whether plaintiff was revoking the power of attorney. Shelly Decl., Ex. N, ECF No. 68-3 at 26-27.
On July 19, 2011, plaintiff responded to Mr. Shelly's letter, stating "[f]or at least the third time, I am instructing you to have all further communication with me directly." Shelly Decl., Ex. O, ECF No. 68-3 at 28.
On July 27, 2011, Anthony Shelly sent a letter to plaintiff with instructions on how to revoke a power of attorney. Shelly Decl., Ex. P, ECF No. 68-3 at 29-35.
Due to the IRS agents' "contact[s], " "communications, " and "conference[s]" with Mr. Holland following plaintiff's oral revocation, Mr. Holland billed plaintiff $360. Huene Decl. ¶ 6; Holland Decl. ¶¶ 6-8.
Plaintiff filed a complaint on August 5, 2011 against the Internal Revenue Service ("IRS") and Anthony Shelly pursuant to the Privacy Act of 1974, 5 U.S.C. § 552a and 26 U.S.C. § 6103; the Freedom of Information Act, 5 U.S.C. § 552; the Federal Declaratory Judgment Act, 26 U.S.C. § 2201; and the Civil Rights Act of 1964, 42 U.S.C. § 1983.
On August 27, 2012, plaintiff filed a first amended complaint asserting a single claim as to the IRS alleging that one of defendant's agents, Anthony Shelly, disclosed plaintiff's tax return information to his accountant in violation of 26 U.S.C. § 6103. Plaintiff seeks damages pursuant to 26 U.S.C. § 7431.
A principal purpose of the summary judgment procedure is to identify and dispose of factually unsupported claims. Celotex Corp. v. Cattrett , 477 U.S. 317, 323-24 (1986). Summary judgment is proper when the "pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(c). "In considering a motion for summary judgment, the court may not weigh the evidence or make credibility determinations, and is required to draw all inferences in a light most favorable to the non-moving party." Freeman v. Arpaio , 125 F.3d 732, 735 (9th Cir. 1997).
The party moving for summary judgment bears the initial burden of identifying those portions of the pleadings, discovery, and affidavits that demonstrate the absence of a genuine issue of material fact. Celotex , 477 U.S. at 323. An issue of fact is "genuine" only if there is sufficient evidence for a reasonable fact finder to find for the non-moving party. Anderson v. Liberty Lobby, Inc. , 477 U.S. 242, 248-49 (1986). A fact is "material" if it may affect the outcome of the case. Id. at 248. If the party moving for summary judgment does not have the ultimate burden of persuasion at trial, that party must produce evidence which either negates an essential element of the non-moving party's claims or that party must show that the non-moving party does not have enough evidence of an essential element to carry its ultimate burden of persuasion at trial. Nissan Fire & Marine Ins. Co. v. Fritz Cos. , 210 F.3d 1099, 1102 (9th Cir. 2000). Once the moving party meets its initial burden, the non-moving party must go beyond the pleadings and, by its own evidence, "set forth specific facts showing that there is a genuine issue for trial." Fed.R.Civ.P. 56(e).
In order to make this showing, the non-moving party must "identify with reasonable particularity the evidence that precludes summary judgment." Keenan v. Allan , 91 F.3d 1275, 1279 (9th Cir. 1996). In addition, the party seeking to establish a genuine issue of material fact must take care adequately to point a court to the evidence precluding summary judgment because a court is "not required to comb the record to find some reason to deny a motion for summary judgment.'" Carmen v. San Francisco Unified School Dist. , 237 F.3d 1026, 1029 (9th Cir. 2001) (quoting Forsberg v. Pacific Northwest Bell Telephone Co. , 840 F.2d 1409, 1418 (9th Cir. 1988)). If the non-moving party fails to point to evidence precluding summary judgment, the moving party is entitled to judgment as a matter of law. Celotex , 477 U.S. at 323.
Plaintiff moves for judgment on his claim that the IRS improperly disclosed "tax return information" to plaintiff's CPA after plaintiff orally revoked his power of attorney, in violation of 26 U.S.C. §6103(a). In order to succeed in this action, plaintiff must prove that the IRS "disclose[d]" a "return or return information" to an unauthorized person. 26 U.S.C. § 7431(a). Each of these phrases has a particular statutory definition, as set forth in Section 6103. Section 6103 defines a "disclosure" as "the making known to any person in any manner whatever a return or return information." 26 U.S.C. § 6103(b)(8). Plaintiff must also prove that the information provided was either a "return" or "return information" as defined by 26 U.S.C. § 6103. 26 U.S.C. § 7431(a)(1). A "return" for purposes of section 6103 means:
[A]ny tax or information return, declaration of estimated tax, or claim for refund required by, or provided for or permitted under, the provisions of this title which is filed with the Secretary by, on behalf of, or with respect to any person, and any amendment or supplement thereto, including supporting schedules, attachments, or lists which are supplemental to, or part of, the return so filed.
26 U.S.C. § 6103(b)(1). Section 6103 defines "Return information" as:
[A] taxpayer's identity, the nature, source, or amount of his income, payments, receipts, deductions, exemptions, credits, assets, liabilities, net worth, tax liability, tax withheld, deficiencies, overassessments, or tax payments, whether the taxpayer's return was, is being, or will be examined or subject to other investigation or processing, or any other data, received by, recorded by, prepared by, furnished to, or collected by the Secretary with respect to a return or with respect to the determination of the existence, or possible existence, of liability (or the amount thereof) of any person under this title for any tax, penalty, interest, fine, forfeiture, or other imposition, or offense [...]
26 U.S.C. § 6103(b)(2)(A).
A. Validity of Oral Revocation
Plaintiff moves for summary judgment on his claim that his March 2011 oral revocation was valid. In support, plaintiff relies on the California Probate Code and Karen Rush v. JLJ, Inc. , 988 F.2d 1112 (11th Cir. 1993), which discusses Alabama law.
Defendant moves for judgment on the ground that a revocation of a power-of-attorney must be in writing pursuant to IRS regulations, and therefore plaintiff's oral revocation was invalid.
The Secretary of the Internal Revenue Service is delegated with the authority to prescribe "all needful rules and regulations for the enforcement of Title 26." 26 U.S.C. § 7805; see also 26 U.S.C. § 7801. Pursuant to that authority, the Secretary promulgated 26 C.F.R. § 601.503(a), which states that a power of attorney must be in writing and must contain the following information:
(1) Name and mailing address of the taxpayer;
(2) Identification number of the taxpayer (i.e., social security number and/or employer identification number);
(3) Employee plan number (if applicable);
(4) Name and mailing address of the recognized representative(s);
(5) Description of the matter(s) for which representation is authorized which, if applicable, must include -
(i) The type of tax involved;
(ii) The Federal tax form number;
(iii) The specific year(s)/period(s) involved; and
(iv) In estate matters, decedent's date of death; and
(6) A clear expression of the taxpayer's intention concerning the scope of authority granted to the recognized representative(s).
A properly completed Form 2848 satisfies this requirement, as does another document that provides the same information. See 26 C.F.R. § 601.503(b). This power-of-attorney form must be signed by the individual taxpayer. Id . § 601.503(c)(1). On December 14, 2010, plaintiff submitted a signed Form 2848 to designate his CPA as his power of attorney. See Pl.'s Mot. Summ. J., Ex. 1, ECF No. 65 at 13-14.
Pursuant to 26 C.F.R. § 601.505(a)(2), a revocation of a power of attorney must also be in writing:
A taxpayer may revoke a power of attorney without authorizing a new representative by filing a statement of revocation with those offices of the Internal Revenue Service where the taxpayer has filed the power of attorney to be revoked. The statement of revocation must indicate that the authority of the first power of attorney is revoked and must be signed by the taxpayer. Also, the name and address of each recognized representative whose authority is revoked must be listed (or a copy of the power of attorney to be revoked must be attached).
The language of this regulation is mirrored in the Internal Revenue Manual § 22.214.171.124.9.
Plaintiff argues that the Internal Revenue Manual's directive for a written revocation violates black letter law. In support, plaintiff cites only to California and Alabama law, neither of which is controlling here. Insofar as plaintiff is arguing that an oral revocation is valid in other contexts, the fact remains that in this context, the IRS regulation specifically directs that a revocation of a power of attorney must be in writing. Moreover, to the extent plaintiff's motion can be construed as a challenge to the Secretary of the Treasury's authority to promulgate regulations or as an argument that the regulation at issue, 26 C.F.R. § 601.505(a)(2), is arbitrary or capricious, see Good Samaritan Hosp. v. Shalala , 508 U.S. 402, 419 (1993), plaintiff presents no legal argument in support. See Pl.'s Mot. Summ. J 7:12-14.
Accordingly, based on the undisputed facts and the IRS regulation that a revocation of a power of attorney must be in writing, the court finds as a matter of law that plaintiff's oral revocation is invalid. Accordingly, plaintiff's motion for summary judgment should be denied and defendant's motion should be granted as to this issue.
B. Identification of Information Disclosed
Even if the oral revocation were valid, summary judgment should nonetheless be entered for defendant because plaintiff does not identify what tax return information was disclosed to his CPA. As plaintiff is proceeding under 26 U.S.C. § 6103, he must submit evidence of the disclosure of "return or return information." But the evidence before the court establishes only that the IRS made "contact" and had "communications" and "conference[s]" with the CPA after the oral revocation. See Pl.'s Mot. Summ. J. 5; see also Huene Decl. ¶ 6; Shelly Decl. ¶¶ 7, 10. Anthony Shelly declares that these contacts were an attempt to clarify whether plaintiff intended to revoke Mr. Holland's power of attorney. Shelly Decl. ¶¶ 7, 10. None of this evidence establishes the disclosure of "return or return information."
The greatest detail regarding the nature of information disclosed to Mr. Holland appears in the first amended complaint, wherein plaintiff accuses the IRS in general terms of unlawfully disclosing his "tax return information, " FAC ¶ 5,  but "return information" has a carefully delimited statutory definition, see 26 U.S.C. § 6103(b)(2)(A). Plaintiff presents no affidavits or other evidence identifying the information allegedly disclosed, and he states only that he was billed by his CPA after "conferences the IRS had with my CPA." Huene Decl. ¶ 6. In light of plaintiff's broad and unspecific allegation that his "return information" was disclosed, summary judgment should be entered for defendant for failure of proof.
C. Judgment Independent of the Motion
Lastly, plaintiff must also establish that the IRS in fact disclosed the information at issue, with "disclosure" being defined as "the making known to any person in any manner whatever a return or return information." 26 U.S.C. § 6103(b)(8). Several courts have interpreted the phrase "the making known" as requiring the imparting of information to a person to whom that information was previously unknown. See Brown v. United States , 755 F.Supp. 285, 287 (N.D. Cal. 1990); Elias v. United States , 1990 WL 264722, at *7 n.14 (C.D. Cal. Dec. 21, 1990), aff'd by 974 F.2d 1341 (9th Cir. 1992); Haywood v. United States , 642 F.Supp. 188, 192 (D. Kan. 1986); Pflum v. United States, 2007 WL 1651290, at *6 (D. Kan. June 6, 2007); Calhoun v. Wells, 1980 WL 1637, at *3 (D.S.C. July 30, 1980) ("Only information previously unknown to the person to whom it is imparted may be the subject matter of a disclosure' under this section; i.e. you cannot disclose' information that is already known."); contra Mallas v. United States , 993 F.2d 1111, 1121, n.10 (4th Cir. 1993) (rejecting argument that no "disclosure" had occurred where plaintiff had already provided recipients with information alleged to have been disclosed by the government defendants); but see Miller v. United States , 66 F.3d 220, 223 (9th Cir. 1995) (declining to follow Mallas). For instance, if an employer already knows a taxpayer's name and social security number, providing that information to the employer again is not "making known" anything and is thus not a "disclosure." Haywood , 642 F.Supp. at 192; see also Brown , 755 F.Supp. at 287 (citing Haywood). The court finds this interpretation to be in keeping with the plain meaning of the phrase to "mak[e] known." Accordingly, in order to prove that a disclosure occurred, plaintiff must prove that the information provided to the CPA was previously unknown to him. As plaintiff has failed to identify what information was in fact disclosed to the CPA, he necessarily fails to meet the disclosure requirement as well.
"District courts unquestionably possess the power to enter summary judgment sua sponte, even on the eve of trial." Norse v. City of Santa Cruz , 629 F.3d 966, 971 (9th Cir. 2010) (en banc); see also Cool Fuel, Inc. v. Connett , 685 F.2d 309, 312 (9th Cir. 1982) (holding that district courts may grant summary judgment sua sponte if the parties have had a "full and fair opportunity to ventilate the issues"). Rule 56(f)(3) of the Federal Rules of Civil Procedure provides that the court may consider and grant summary judgment on its own motion after providing the parties fair notice and a reasonable time to respond. The court hereby notifies the parties that it is recommending the entry of summary judgment for defendant under Rule 56(f), in light of plaintiff's failure of proof regarding the disclosure of information to the CPA.
Based on the foregoing, IT IS HEREBY RECOMMENDED that:
1. Plaintiff's motion for summary judgment (ECF No. 65) be denied;
2. Defendant's cross-motion for summary judgment (ECF No. 68) be granted;
3. Summary judgment be entered for defendant on the alternative ground specified above, pursuant to Federal Rule of Civil Procedure 56(f)(3).
These findings and recommendations are submitted to the United States District Judge assigned to the case, pursuant to the provisions of 28 U.S.C. § 636(b)(1). Within fourteen days after being served with these findings and recommendations, any party may file written objections with the court and serve a copy on all parties. Such a document should be captioned "Objections to Magistrate Judge's Findings and Recommendations." Any response to the objections shall be served and filed within fourteen days after service of the objections. The parties are advised that failure to file objections within the specified time may waive the right to appeal the District Court's order. Martinez v. Ylst , 951 F.2d 1153 (9th Cir. 1991).