BECK v. U.S.

Full title: HILARY M. BECK, ET AL. PETITIONERS VS. UNITED STATES OF AMERICA RESPONDENT

Court: United States District Court, E.D. Kentucky, at Covington

Date published: Sep 11, 2002

CIVIL ACTION NO. 2001-256 (E.D. Ky. Sep. 11, 2002)

Opinion

CIVIL ACTION NO. 2001-256

September 11, 2002

OPINION AND ORDER

WILLIAM O. BERTELSMAN, JUDGE.

This is a case in which the petitioners seek to quash the summonses issued by the Internal Revenue Service (IRS) to six third party record keepers. The matter is before the court on Petitioners' motion to review the Magistrate's order of July 22, 2002 (Doc. 15) and the respondent's motion for summary denial of petition to quash summonses. (Doc. 16).

Jurisdiction

The jurisdiction of a district court to hear a proceeding to quash a third-party record keeper summons is based on 26 U.S.C. § 7609 (h)(1). Clay v. United States, 199 F.3d 876 (6^th Cir. 1999). Section 7609(h)(1) states: "The united states district court for the district within which the person to be summoned resides or is found shall have jurisdiction to hear and determine any proceeding brought under subsection (b)(2), (f), or (g)." This statute is jurisdictional and not merely a venue statute. Pflum v. United States, 125 F.3d 862, 1997 WL 606909 (10^th Cir. 1997) (unpublished); Deal v. United States, 759 F.2d 442 (5^th Cir. 1985).

In Clay, the Sixth Circuit indicated it would strictly construe the mandates of 26 U.S.C. § 7609 (h). It explained:

"A proceeding to quash is, in effect, a civil suit against the United States. It is fundamental that the United States, as sovereign, is immune from suit without its consent. [cites omitted] The `terms of its consent to be sued in any court determine that court's jurisdiction to entertain suit, . . . . Moreover, any waiver of the United States' immunity from suit must be unequivocal. [cites omitted].

Because any exercise of a court's jurisdiction over the United States depends on the United States' consent, the waiver of sovereign immunity in regard to 26 U.S.C. § 7609 must be strictly construed. [cite omitted]. The wording of the statute is clear and unambiguous."

Clay, 199 F.3d at 879.

Here, only one of the third party summonses were served in the Eastern District of Kentucky. Accordingly, the only summons over which this court has jurisdiction is the one issued to Heritage Bank at 1818 Florence Pike, Burlington, Kentucky 41005. (See exhibits to complaint and Declaration of Paul valentine).

The court lacks subject matter jurisdiction over the summonses issued to Bank One of Cincinnati in Cincinnati, Ohio; Huntington National Bank in Columbus, Ohio; Miami Savings Loan in Harrison, Ohio; Merchants Bank Trust in Harrison, Indiana; and Robert Sonntag, CPA located in Aurora Indiana. Therefore, these summonses are not properly before this district court and must be dismissed.

Statute of Limitations as to Heritage Summons

Section 7609(a)(1) requires that when a summons is issued to a third party record keeper, notice must be given to the person to whom the records pertain. 26 U.S.C. § 7609 (a)(1). Any person entitled to notice of a third party summons is entitled to begin a proceeding to quash such summons not later than the 20^th day after the day such notice is given. 26 U.S.C. § 7609 (b)(2)(A). Notice is sufficient if it is given within three days of the day on which service of the summons was made. 26 U.S.C. § 7609 (a)(1). Notice sent by certified mail on or before the third day after the summons is served is proper.

"Courts have determined that notice is `given in the manner provided in subsection (a)(2)' on the date on which notice is mailed by certified or registered mail to the taxpayer under investigation." Clay v. United States, 199 F.3d 876 (6^th Cir. 1999) (citing courts from the 10^th and 11^th Circuits and the Eastern District of Michigan). Thus, the taxpayer must begin proceedings to quash a summons to a third party record keeper within 20 days of the date notice was mailed to him by the IRS. Id. at 878.

In Clay, the petitioners filed a petition to quash summons twenty-two days after the IRS sent them notice of the summons. The Sixth Circuit held that the statute waiving the United States' sovereign immunity must be strictly construed. "The government's waiver of sovereign immunity ends — and thus jurisdiction ends-when the twenty-day limitation period has run." Id. (quoting Faber v. United States, 921 F.2d 1118 (10^th Cir. 1990). Since the petitioners did not file within the twenty-day time period permitted by the statute, they did not fulfill the condition of the United States' waiver of sovereign immunity and the district court was without jurisdiction. Id.

In the case at bar, the respondent served the summons on Heritage Bank on December 6, 2001 and sent notice to petitioners by certified mail on the same day. (Declaration of Paul K. Valentine, ¶¶ 6, 13 and exhibit 4, p. 4). Petitioners had twenty days from December 6, 2001, or until December 26, 2001, to file their petition to quash. They did not file the petition until December 27, 2001. Similarly to Clay, petitioners did not fulfill the condition of the United States' waiver of immunity and the court lacks jurisdiction over the petition.

The court being sufficiently advised,

IT IS ORDERED:

1. The Respondents' motion for summary denial of petition to quash summonses (Doc. #16) be, and it is, hereby granted:

2. The motion to review the order of the Magistrate (Doc. 15) be, and it is, hereby denied as moot; and

3. That this matter be, and it is, hereby dismissed and stricken from the docket of this court.

JUDGMENT

This matter is before the court on petitioners' motion to review the Magistrate's order of July 22, 2002 (Doc. 15) and the respondent's motion for summary denial of petition to quash summonses. (Doc. 16). For the reasons set forth in the Court's Opinion and Order filed contemporaneously with this judgment and the Court being otherwise sufficiently advised,

IT IS ORDERED AND ADJUDGED that respondent's motion for summary denial of petition to quash summonses (Doc. 16) be, and it is, hereby granted and that the petitioners' motion to review the Magistrate's order (Doc. #15) be, and it is, hereby denied as moot; and that this action be, and it is, hereby dismissed and stricken from the docket of this court.