JAMES HABER v. UNITED STATES OF AMERICA, SIGNATURE BANK CORPORATION
No. 15-2078-cv
United States Court of Appeals for the Second Circuit
May 20, 2016
August Term, 2015
(Argued: January 29, 2016 Decided: May 20, 2016)
CALABRESI, LYNCH, and LOHIER, Circuit Judges.
correctly concluded that it lacked jurisdiction over the suit because the challenged summons was issued “in aid of the collection of . . . an assessment.”
AFFIRMED.
JASPER G. TAYLOR III (Richard L. Hunn, Katherine D. Mackillop, Felice B. Galant, on the brief), Norton Rose Fulbright US LLP, Houston, TX and New York, NY, for Petitioner-Appellant.
DOMINIKA TARCZYNSKA (Benjamin H. Torrance, on the brief), for Preet Bharara, United States Attorney for the Southern District of New York, New York, NY, for Respondеnt-Appellee United States of America.
GERARD E. LYNCH, Circuit Judge:
In this case, we consider a number of challenges raised by the petitioner-appellant, James Haber, to an administrative summons issued by the Internal Revenue Service (“IRS“). The district court (Laura Taylor Swain, Judge) granted the government‘s motion to dismiss Haber‘s petition for lack of subject matter jurisdiction pursuant to
BACKGROUND
The IRS issued an approximately $25 million penalty against Haber and his company, The Diversified Group Incorporated (“DGI“), pursuant to
Haber and DGI then filed suit in the Court of Federаl Claims, arguing that the penalty was erroneously assessed, seeking injunctive relief against the IRS‘s collection efforts, and requesting a refund of the partial payment. The court dismissed the suit for lack of subject matter jurisdiction because Haber and DGI had failed to pay the full penalty before commencing the
Concurrently with that ongoing litigation, an IRS Revenue Officer began conducting an investigation to locate assets to satisfy the unpaid penalty. According to the Revenue Officer, her investigation “suggest[ed] that [Haber] may have access to, and use of, a bank account or bank accounts held in the name of Jill Haber [Haber‘s wife] at Signature Bank, and that such account or accounts may be held in the name of Jill Haber to shield them from the IRS.” J.A. 33 ¶ 6. She further asserted that assets held by Jill Haber “as the nominee or alter-ego or transferee of [Haber]” may bе used “to satisfy the
The Revenue Officer then served the administrative summons at issue in this case on Signature Bank Corporation. That summons was captioned “[i]n the matter of James Haber,” and sought testimony and documents “for any and all accounts that Jill Haber ha[d] signatory [authority] for” from Jаnuary 1, 2013 to the date of the summons. J.A. 23. No penalties had been assessed against Jill Haber. The summons stated that the IRS sought “data relating to the tax liability or the collection of the tax liability or for the purpose of inquiring into any offense connected with the administration or enforcement of the internal revenue laws concerning [James Haber].” J.A. 23.
Haber petitioned the district court to quash the summons, arguing among other things that the IRS was precluded from issuing the summons by an outstanding criminal referral in his case. The government moved to dismiss the рetition for lack of subject matter jurisdiction on the ground that this summons falls into a category for which the United States has not waived its sovereign immunity, specifically, a summons “issued in aid of the collection of . . . an assessment.”
Haber sought jurisdictional discovery to establish that the summons did not fall within the exception to the United States‘s waiver of sovereign immunity for proceedings to quash third-party summonses.
In response to Haber‘s petition, the government produced three documents regarding the termination of the IRS‘s criminal referral of Haber to the Department of Justice (“DOJ“): a supplemental declaration
the United States Attorney‘s Office for the Southern District of New York and the Internal Revenue Service‘s New York Field Office have closed their respective criminal investigations of Mr. Haber and his companies [including the 1099 issue] . . . . In addition, based on my discussions with representatives of the Department of Justice‘s Tax Division . . . , there are no other criminal investigations pending with respect to Mr. Haber.
J.A. 45. After providing those documents, the government moved for a protective order with respect to Haber‘s discovery requests.
The district court granted the government‘s motions to dismiss Haber‘s petition to quash the IRS summons for lack of subject matter jurisdiction and for a protective order barring jurisdiсtional discovery. This appeal followed.
DISCUSSION
We agree with the district court that it lacked jurisdiction because the United States has not waived sovereign immunity to allow suits to quash summonses that are “issued in aid of the collection of . . . an assessment,”
I. Subject Matter Jurisdiction
Generally a person identified as the target of an IRS summons served on a third party, like a bank, is entitled to notice of the summons. The United States has waived its sovereign immunity to allow a person “entitled to notice” to bring suit against it to quash a summons.
We review a district court‘s dismissal for lack of subject matter jurisdiction de novo. Upton v. I.R.S., 104 F.3d 543, 545 (2d Cir. 1997). A plaintiff bears the burden on demonstrating that sovereign immunity has been waived. Makarova v. United States, 201 F.3d 110, 113 (2d Cir. 2000). We conclude that the challenged summons was issued in aid of collection of an assessment. Accordingly, the United States has not waived its sovereign immunity, and the district court lacked jurisdiction over the motion to quash.
To determine whether the United States has waived sovеreign immunity, we engage in a preliminary review of the IRS‘s contention that it issued the
challenged summons in aid of collection. Cf. Upton, 104 F.3d at 547 (holding that the United States had not waived sovereign immunity after a preliminary assessment of the summons); United States v. Clarke, 134 S. Ct. 2361, 2367 (2014) (explaining that Congress‘s recognition that “power vested in tax collectors may be abused” led it to make “enforcement of an IRS summons contingent on a court‘s approval” (internal quotation marks omitted)).
The Revenue Officer declared, under penalty of perjury, that the challenged summons was issued to aid in collection:
In my capacity as a Revenue Officer, I am conducting an investigation to aid in the collection of Petitioner James Haber‘s (“Petitioner‘s“) liability for a penalty pursuant to
26 U.S.C. § 6707 for the year [that]ended on December 31, 1999. The IRS has already made an assessment against Petitioner for this liability, which currently is approximately $25,000,000. The IRS assessed the penalty because Petitioner failed to register tax shelters in the proper manner.
J.A. 32-33. Haber argues that despite this attestation, we should conclude that the summons was not issued to aid in the collection of the assessment against Haber because, due to Haber‘s various pending legal challenges to the assessment, the IRS cannot begin actual collection of the assessment. We are unpersuaded.
Congress has exempted the IRS from the requirements of notice and judicial review, and thus from its waiver of sovereign immunity, where a summons is “issued in aid of the collection of . . . an assessment made . . . against the person with respect to whose liability the summons is issued.”
Nothing in the statute provides that a summons may be issued in aid of collection, as Haber contends, only where the IRS has the present authority to collect on the assessment or the actual collection is “imminent.” Appellant‘s Br. 10. We decline to read those words into the statute. The text of the exception includes all summonses “issued in aid of the collection of . . . an assessment.”
Moreover, Haber alleges no facts that support an inference that the IRS summons was issued for any other purpose than in aid of collection. Haber offers no affirmative reason to believe that there was any ulterior purpose to the summons. Rather, he argues that because the IRS cannot currently collect on the assessment, “the IRS can have no logical reason to look for assets now,” Appellant‘s Br. 15, and therefore “[o]ne can infer that it must be true that [the] Summons was issued for some other purpose,” id. 16 (emphasis original). We disagree. As noted above, it is perfectly reasonable that once the IRS has made an assessment it would start tracking the taxpayer‘s assets to identify assets it can collect from in the future and to ensure that the resources are not dissipated. We therefore see nothing in the record that casts doubt on the Revenue Officer‘s declaration, or any basis from which we could infer that the IRS acted with some alternative purpose, and not in aid of collection, in issuing the summons.
II. Authority to Issue the Summons
The IRS is not permitted to issue an administrative summons when a “Justiсe Department referral is in effect,”
Section
The 2009 letter from the DOJ to the IRS states that “[t]he referral of this matter is terminated as to James Haber . . . within the meaning of Section 7602(d) of the Internal Revenue Code.” J.A. 41 (emphasis added). The letter effectively accomplished exactly what it purported to do – it terminated the referral.
Nothing in the statutory text suggests that
Because Haber has not alleged any facts making it plausible that a DOJ criminal referral was in effect when the Revenue Officer served the challenged summons in 2014, we need not decide whether a summons that was issued in aid of collection could be quashed because of the existence of a criminal referral at the time it was issued.
III. Denial of Jurisdictional Discovery
In general, a plaintiff may obtain discovery in connection with issues related to the court‘s jurisdiction. “[A] court should take care to give the plaintiff ample opportunity to secure and present evidence relevant to the existence of jurisdiction.” Amidax Trading Grp. v. S.W.I.F.T. SCRL, 671 F.3d 140, 149 (2d Cir. 2011) (internal quotation marks omitted); see All. of Am. Insurers v. Cuomo, 854 F.2d 591, 597 (2d Cir. 1988) (“Before dismissing a case for want of jurisdiction, a court should permit the party seeking the court‘s intervention to engage in discovery of facts supporting jurisdiction.“).
But a district court does not abuse its discretion if it denies jurisdictional discovery where a plaintiff “failed to show how the information [she] hoped to obtain from this discovery would bear on the critical issue” for jurisdiction. Gualandi v. Adams, 385 F.3d 236, 245 (2d Cir. 2004); see Amidax, 671 F.3d at 149; see also Freeman v. United States, 556 F.3d 326, 342 (5th Cir. 2009) (“[A] party is not entitled to jurisdictional discovery if the record shows that the requested discovery is not likely to produce the facts needed to withstand a Rule 12(b)(1) motion.“).
The Supreme Court has recently described the showing required for a taxpayer to question an IRS agent. In a case where the government affirmatively invokes the court‘s authority to enforce a summons, the Court explained that the taxpayer is entitled to examine an IRS agent when he
can point to specific facts
or circumstances plausibly raising an inference of bad faith. Naked allegations of improper purpose are not enough: The taxpayer must offer some credible evidence supporting his charge. . . . And although bare assertion or conjecture is not enough, neither is a fleshed out case demanded: The taxpayer need only make a showing of facts that give rise to a plausible inference of improper motive. That standard will ensure inquiry where the facts and circumstances make inquiry appropriate, without turning every summons dispute into a fishing expedition for official wrongdoing.
Clarke, 134 S. Ct. at 2367-68 (emphasis added); see also United States v. Millman, 765 F.2d 27, 29 (2d Cir. 1985) (“Where a taxpayer has made a substantial preliminary showing of such abuse, he is entitled to an opportunity to substantiate his allegations by way of an evidentiary hearing.” (internal quotation marks omitted)).
The district court granted the government‘s motion for a protective order, thereby denying Haber‘s motion for jurisdiсtional discovery, on the ground that Haber “set forth no facts supporting a colorable claim that the Summons was issued for a purpose other than to aid in collecting his tax assessment.” J.A. 119. We review a district court‘s denial of jurisdictional discovery for abuse of discretion. Carpenter v. Republic of Chile, 610 F.3d 776, 780 (2d Cir. 2010). Because Haber‘s request for jurisdictional discovery is based entirely on conclusory and implausible allegations, the district court did not abuse its discretion in deciding that Haber did not meet his burden of showing he was entitled to jurisdictional discovery generally, оr the deposition of the Revenue Officer specifically.
The Revenue Officer declared under penalty of perjury that she is “conducting an investigation to aid in the collection of Petitioner James Haber‘s . . . liability for a penalty” and the “sole purpose of [her] investigation is to locate assets to satisfy Petitioner‘s existing assessed federal tax liability.” J.A. 32-33 ¶ 3-4. Further, the Revenue Officer attested that the “information and documents gathered from the [challenged] summons may assist the IRS in locating assets that are held by Jill Haber, as the nominee or alter-ego or transferee of Petitioner.” J.A. 33-34 ¶ 7.
Haber argues that he has met his burden for jurisdictional discovery and to depose the Revenue Officer for three reasons: “[1] there is circumstantial evidence ‘giving rise to a plausible inference’ that the Declaration is false in that there is no reason for the Summons to be ‘in aid of collection‘; [2] the Summons is internally contradictory and contradicts the Declaration; and [3] substantial evidence exists that the . . . revenue officer declarant . . . is simply not credible.” Appellant‘s Br. 32. The district court did not abuse its discretion in holding that such entirely conclusory allegations did not give rise to a plausible inference that discovery would allow Haber to establish that the summons was not issued in aid of collection or was issued without authority, which may allow Haber to establish jurisdiction.
First, for the same reasons we concluded that Haber‘s argument that the challenged summons was not in aid of collection was meritless, we reject Haber‘s conclusory allegation that “the IRS could not pоssibly be employing its limited resources to identify assets for” the purpose of collection because “[i]t would not make any sense.” Id. 32. As discussed above, it is perfectly logical that the IRS would investigate the assets of someone against whom it has already issued an assessment before it begins, or can begin, collection.
Haber‘s assertion that the declaration contradicts language in the summons is a somewhat closer call. The summons states that Signature Bank is summoned to give documents and testimony “relating to the tax liability or the collection of the tax liability or for the purpose of inquiring into any offense connected with the administration or enforcement of the internal revenue laws concerning [Haber].” J.A. 14 (emphasis added). In contrast to the three reasons stated in the summons, the Revenue Officer‘s declaration states that the “sole purpose of [her] investigation is to locate assets to satisfy Petitioner‘s existing assessed federal tax liability.” J.A. 33 ¶ 4.
The district court found that the inclusion of three alternative bases for the summons was the result of the use of a form summons containing boilerplate language. J.A. 119 n.1. We identify no error in the district court‘s conclusion that the potential contradiction, which can be explained by the use of a boilerplate form, does not constitute “facts and circumstances plausibly calling the Government‘s assertions into doubt,” J.A. 119 n.1, and thus does not provide a basis to grant Haber jurisdictional discovery.5
Finally, there is no merit to Haber‘s claim that the Revenue Officer “is simply not credible,” Appellant‘s Br. 32, because she did not include information about the criminal referral in her first declaration or mention that the United States Attorney was unwilling to grant Haber immunity, id. 35. Haber theorizes that maybe “the Summons is actually in pursuit of a planned investigation, and the collection of the Assessment is mere pretext.” Id. 36 (emphasis original). But
such speculation does not оffer “credible evidence supporting his charge” or show “facts that give rise to a plausible inference of improper motive.” Clarke, 134 S. Ct. at 2367-68. The district court did not abuse its discretion in finding that such unfounded and speculative accusations did not satisfy Haber‘s burden to show that he was entitled to jurisdictional discovery. See Amidax, 671 F.3d at 148.6
We have considered all of Haber‘s other arguments and find them to be without merit. The opinion of the district court is AFFIRMED.