Kasian v. Internal Revenue Service et al, No. 2:2010cv01462 - Document 15 (D. Ariz. 2010)
Court Description: ORDER denying petitioner's 3 MOTION for Temporary Restraining Order. (See document for further details). Signed by Judge James A Teilborg on 7/13/10. (LAD)
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Kasian v. Internal Revenue Service et al 1 Doc. 15 WO 2 3 4 5 6 IN THE UNITED STATES DISTRICT COURT 7 FOR THE DISTRICT OF ARIZONA 8 9 Stefan Kasian, 10 11 Petitioner, vs. 12 13 Internal Revenue Service and Revenue Agent David Tolman, 14 Respondents. 15 ) ) ) ) ) ) ) IRS) ) ) ) ) ) No. CV-10-1462-PHX-JAT MC-10-0058-PHX-JAT ORDER 16 17 Pending before the Court is Mr. Stefan Kasian’s (“Petitioner”) Motion for a 18 Temporary Restraining Order (Doc. 3). After reviewing the Motion and the Government’s 19 Response (Doc. 5), the Court denies the Motion.1 20 I. Background and Procedural History 21 On approximately May 27, 2010, IRS Revenue Agent David Tolman issued 22 administrative summonses to Bank of America, Chase Home Finance, LLC, Capital Title 23 Agency, Inc., M&I Bank, Heritage Bank, JP Morgan Chase Bank, NA, Transnation Title 24 Insurance, Wells Fargo Bank, NA, CITI Residential Lending, Inc., and AMC Services, Inc. 25 (Doc. 3 at 9-31). The IRS issued these third-party summonses to obtain and investigate 26 records related to Petitioner’s potential tax liabilities. (Doc. 5 at 4). Petitioner filed this 27 28 1 Petitioner did not file a reply to the Government’s Response. Dockets.Justia.com 1 Motion for a Temporary Restraining Order to prevent the Government’s enforcement of 2 these summonses until “after [his] [Freedom of Information Act (“FOIA”)] request is 3 completely fulfilled and Petitioner has [a] reasonable time to review and respond . . . .” (Doc. 4 3 at 5). 5 II. Analysis 6 The Government argues this Court should deny Petitioner’s request for a temporary 7 restraining order based on the Anti-Injunction Act. “Absent a clear congressional command 8 to the contrary, federal courts retain their authority to issue injunctive relief in actions over 9 which they have jurisdiction.” Califano v. Yamasaki, 442 U.S. 682, 705 (1978). The Anti- 10 Injunction Act both prohibits suits to restrain the assessment or collection of taxes and a 11 court’s ability to grant equitable relief. 26 U.S.C. § 7421(a) ( “[N]o suit for the purposes of 12 restraining the assessment or collection of any tax shall be maintained in any court by any 13 person.”); see Shannon v. United States, 521 F.2d 56, 58 (9th Cir. 1975). These broad 14 prohibitions under the Anti-Injunction Act not only apply to the assessment and collection 15 of the tax itself, but also to activities intended to, or which may culminate in, the assessment 16 or collection of taxes. Blech v. United States, 595 F.2d 462, 466 (9th Cir. 1979). 17 A. 18 Congress has created certain exceptions to the Anti-Injunction Act. 26 U.S.C. § 19 7421(a) (listing sections 6015(e), 6212(a) and (c), 6213(a), 6225(b), 6246(b), 6330(e)(1), 20 6331(I), 6672(c), 6694(c), 7426(a) and (b)(1), 7429(b), and 7436 as exceptions to the Act). 21 Petitioner’s motion to quash (26 U.S.C. § 7609) is not one of the included exceptions to the 22 Anti-Injunction Act. See Morrow v. United States, 2008 WL 3243955, *1 (E.D. Wash. 23 1008); Hill v. Mosby, 896 F.Supp. 1004, 1005 (D. Idaho 1995) (holding that the petitioner’s 24 motion to quash IRS third-party summonses did not implicate the Anti-Injunction Act’s 25 statutory exceptions). Therefore, these statutory exceptions do not provide a basis for a 26 temporary restraining order. 27 /// Statutory Exceptions to the Anti-Injunction Act 28 -2- 1 B. 2 The Supreme Court has also recognized a very narrow judicial exception to the Anti- 3 Injunction Act where: “1) it is clear that under no circumstances could the government 4 ultimately prevail; and 2) equity jurisdiction otherwise exists, i.e., the taxpayer would 5 otherwise suffer irreparable injury.” Church of Scientology of Cal. v. United States, 920 F.2d 6 1481, 1485 (9th Cir. 1990) (citing Comm’r v. Shapiro, 424 U.S. 614, 627 (1976)). 7 Judicial Exception to the Anti-Injunction Act 1. The Government’s Inability to Succeed on the Merits 8 “[T]he district court must determine the possibility of success of the Government’s 9 assessment based upon the information available to the court at the time of the [suit’s] filing 10 . . . .” Church of Scientology, 920 F.2d at 1485-86. This prong is fulfilled “[o]nly if it is then 11 manifest under the most liberal view of the law and the facts, that the government cannot 12 prove its claim.” Id. at 1486 (internal citation omitted). The Supreme Court has noted the 13 Government’s “good faith” in pursuing a claim fulfills this standard. Enochs v. Williams 14 Packing & Navigation Co., 370 U.S. 1, 7 (1962). “A ‘heavy’ burden falls upon the taxpayer 15 to show an abuse of process or the lack of institutional good faith.” United States v. 16 Dynavac, Inc., 6 F.3d 1407, 1414 (9th Cir. 1993). Petitioner has failed to demonstrate the 17 Government’s inability to succeed on the merits. 18 The Commissioner of Internal Revenue possesses the duty to make inquiries, 19 determinations, and assessments of all taxes imposed by the Internal Revenue Code, as well 20 as investigate any potential offenses involving these laws. See Donaldson v. United States, 21 400 U.S. 517, 523-24 (1971). Specifically, the Commissioner may examine books, records, 22 and other data through a summons to determine the correctness of a return or collect a tax 23 liability. See 26 U.S.C. § 7602(a). Thus, the IRS has statutory authority to issue third-party 24 summonses regarding a taxpayer’s compliance with federal tax laws. See id. 25 Here, Petitioner wants to prevent the Government from enforcing the summonses 26 until “after [his] [FOIA] request is completely fulfilled and Petitioner has [a] reasonable time 27 to review and respond . . . .” (Doc. 3 at 5). Petitioner has not provided any evidence to 28 suggest wrongdoing or bad faith by the IRS or its employees. Petitioner’s conclusory -3- 1 allegations lack any meaningful degree of specificity as to the agency’s purported 2 misconduct. As such, any court-imposed restraint upon the summonses is not justified 3 because the Court has no evidence before it which shows the Government is not acting in 4 good faith. Therefore, Petitioner has failed to establish the Government’s inability to succeed 5 on the merits. 6 7 2. Irreparable Harm Petitioner has also failed to demonstrate that irreparable harm would result absent a 8 temporary restraining order. 9 [temporary restraining order] exists only when the harm suffered impairs the Court's ability 10 to grant an effective remedy to the moving party, if the moving party ultimately succeeds on 11 the merits.” Crow Creek Sioux Tribal Farms, Inc. v. U.S. I.R.S., 684 F. Supp. 2d 1152, 1157 12 (D.S.D. 2010); see RoDa Drilling Co. v. Siegal, 552 F.3d 1203, 1210 (10th Cir. 2009) 13 (finding that a plaintiff will have satisfied the irreparable harm requirement by showing that 14 the harm experienced will be of the type that cannot be compensated after the fact by legal 15 remedies). In other words, harm is irreparable when it cannot be remedied except through 16 a restraining order. See Designer Skin, LLC v. S & L Vitamins, Inc., 2008 WL 4174882, at 17 *5 (D. Ariz. Sept. 05, 2008). “The irreparable harm necessary to justify granting a 18 On approximately May 27, 2010, IRS Agent Tolman issued administrative 19 summonses to several financial institutions to obtain Petitioner’s records. (Doc. 5 at 2). The 20 IRS also requested certain disclosures from Petitioner, which included financial records and 21 account information. (Doc. 3 at 2-3). Petitioner argues that the IRS acted in both “bad faith” 22 and “malice aforethought” by issuing these summonses. (Doc. 3 at 3). Presumably, 23 Petitioner is alleging that because the IRS is seeking financial records illegitimately, he will 24 be irreparably harmed by these disclosures. However, this Court cannot rely on mere 25 allegations to issue a temporary restraining order. 26 In other words, Petitioner’s Motion relies on only conclusory statements to challenge 27 the summonses’ legitimacy. Petitioner does not even allege how the IRS and its officials are 28 acting in bad faith. He simply attributes the Government’s summonses to bad faith or other -4- 1 illegitimate conduct. Likewise, Petitioner does not explain how the summonses would cause 2 irreparable harm. On this record, the Court cannot conceive of any circumstance where the 3 production of financial records would foreclose Petitioner’s ability to obtain a legal remedy. 4 See RoDa, 552 F.3d at 1210. 5 If the summonses ultimately proved to be unlawful, Petitioner would have an adequate 6 damage remedy against the United States under the Federal Torts Claim Act. 28 U.S.C. § 7 1346(e) (“The district courts shall have original jurisdiction of any civil action against the 8 United States provided in section 6226, 6228(a), 7426, or 7428 (in the case of the United 9 States district court for the District of Columbia) or section 7429 of the Internal Revenue 10 Code of 1986"); see also Youngstown Sheet & Tube Co. v. Sawyer, 103 F. Supp. 978, 980 11 (D.D.C. 1952), aff’d, 343 U.S. 579 (1952). Further, “if the summons[es] were improperly 12 issued or enforced a court could order that the IRS' [records] . . . be either returned or 13 destroyed.” Church of Scientology, 506 U.S. at 15; see also United States v. Admin. Enters., 14 Inc., 46 F.3d 670, 671 (7th Cir. 1995) (“It is not too late to give appellants meaningful relief, 15 for example in the form of an order directing the government to return the documents and all 16 copies it has made of them.”). For these reasons, the Court does not believe the summonses 17 will cause irreparable harm to Petitioner. 18 III. Conclusion 19 After reviewing the record, the Court concludes that neither a statutory nor judicial 20 exception to the Anti-Injunction Act is available to Petitioner. First, Petitioner’s motion to 21 quash, available under 26 U.S.C. § 7609, falls outside the statutory exceptions found within 22 26 U.S.C. § 7421(a). Second, Petitioner has failed to demonstrate the Government's inability 23 to succeed on the merits and that irreparable injury will result absent a temporary restraining 24 order. Because no exception to the Anti-Injunction Act is available to Petitioner, the Court 25 will apply the Anti-Injunction Act in this case. As indicated above, the Anti-Injunction Act 26 bars this Court from entering an injunction to restrain the collection of taxes. Thus, 27 Petitioner’s request for a temporary restraining order to block the IRS’ summonses will be 28 denied. -5- 1 Accordingly, 2 IT IS ORDERED that Petitioner’s Motion for a Temporary Restraining Order (Doc. 3 4 3) is DENIED. DATED this 13th day of July, 2010. 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 -6-
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