Schaeffler v. United States
696 F. App'x 542
| 2d Cir. | 2017Background
- Schaeffler (several related entities and an individual) petitioned to quash an IRS summons issued in an IRS examination of Schaeffler’s U.S. income tax liabilities.
- The IRS withdrew the summons and moved to dismiss; the district court granted dismissal for lack of subject-matter jurisdiction as the case was moot.
- Schaeffler appealed, arguing the case was not moot because the voluntary-cessation exception should apply.
- Schaeffler’s central claim was that the summons was “illegal” to the extent it sought documents potentially covered by attorney‑client or work‑product privileges.
- The Second Circuit reviewed mootness de novo and assumed familiarity with the district-court record and prior proceedings.
Issues
| Issue | Schaeffler's Argument | United States' Argument | Held |
|---|---|---|---|
| Whether withdrawal of the IRS summons rendered the case moot | Withdrawal does not moot the case because the voluntary-cessation exception applies and the summons was "illegal" for seeking privileged materials | Withdrawal moots the case absent a reasonable expectation of recurrence; IRS has authority to issue summonses and withdrew this one | Case is moot; dismissal affirmed |
| Whether the voluntary‑cessation exception to mootness applies | The IRS voluntarily ceased enforcement to avoid judicial resolution of privilege claims, so exception should keep case live | No reasonable expectation of recurrence; IRS withdrawal and representations suffice to moot case | Exception does not apply — no evidence of evasion or improper motive; IRS met burden showing mootness |
| Whether issuance of the summons was an unlawful act making the case non‑moot | Summons became "illegal" by targeting possibly privileged materials, so court should decide privilege now | Even if privilege issues exist, legality of a future lawful summons must be litigated when/if reissued; current withdrawal prevents advisory opinion | Court rejects the characterization of the summons as per se "illegal" absent a live summons; privilege disputes must await a live controversy |
| Whether IRS met its burden to demonstrate mootness after voluntary cessation | Schaeffler argues safeguards are insufficient and IRS may reissue | IRS represented (including at oral argument) it will not reissue as the case is effectively closed; withdrawal eradicated effects and petitioners need not produce documents | IRS satisfied its heavy burden: court accepts representations and finds effects completely eradicated; dismissal affirmed |
Key Cases Cited
- County of Suffolk v. Sebelius, 605 F.3d 135 (2d Cir. 2010) (standard of appellate review for mootness)
- Powell v. McCormack, 395 U.S. 486 (U.S. 1969) (definition of mootness and live controversy requirement)
- Fox v. Board of Trustees of the State Univ. of New York, 42 F.3d 135 (2d Cir. 1994) (mootness deprives federal courts of jurisdiction)
- Los Angeles County v. Davis, 440 U.S. 625 (U.S. 1979) (voluntary cessation generally does not moot a case)
- United States v. W.T. Grant Co., 345 U.S. 629 (U.S. 1953) (principle that voluntary cessation does not automatically render a case moot)
- Friends of the Earth, Inc. v. Laidlaw Environmental Services, 528 U.S. 167 (U.S. 2000) (voluntary cessation and mootness doctrine)
- MHANY Management, Inc. v. County of Nassau, 819 F.3d 581 (2d Cir. 2016) (two‑part test for voluntary‑cessation exception: reasonable expectation of recurrence and whether effects are eradicated)