Opinion
Civil Action No. 98-2258(JWB).
January 8, 1999.
FRIEDMAN SIEGELBAUM, By: Douglas Edlin, Esquire, Roseland, New Jersey SOLOVAY EDLIN EISEMAN, By: Stephen L. Weinstein, Esquire New York, New York, (Of Counsel) (Attorneys for Petitioners).
FAITH S. HOCHBERG, United States Attorney, By: Susan Cassell, Assistant United States Attorney, Newark, New Jersey, CHARLES M. FLESCH, Trial Attorney, Tax Division, U.S. Department of Justice, Washington, D.C., (Attorneys for Respondent)
O P I N I O N
This matter comes before the Court on respondent's motion to dismiss a petition to quash Internal Revenue Service summonses as moot and on petitioners' cross-motion for an order declaring that the summonses were improperly issued. Petitioners filed their Petition to Quash on May 19, 1998.
The Court has jurisdiction over this action pursuant to 26 U.S.C. § 7609.
FACTS
This action relates to three summonses for records from petitioners' bank that were issued by the Internal Revenue Service ("IRS") on April 29, 1998. By letter dated August 14, 1998, the IRS withdrew those summonses. Before that, on May 19, 1998, petitioners filed their Petition to Quash them.
The United States now moves to dismiss the Petition as moot. Petitioners cross-move for an order declaring that the summonses were improperly issued. Respondent does not respond substantively to the cross-motion, but instead argues that it should not be considered because the case is moot, the cross-motion is unrelated to the dismissal motion, and the cross-motion was not filed in accordance with Local Civil Rule 7.1 and Appendix N.
In the Prayer for Relief of their Petition, petitioners request that:
(a) the Summonses be quashed and dismissed;
(b) discovery be allowed by Petitioners so that the grounds set forth [in the Petition] may be inquired into;
(c) if the Summons[es] are determined to have been issued in whole or part in bad faith, to award Petitioners their costs and attorneys fees, to the extent allowed by law; and
(d) the Petitioners have such other and further relief as the Court may deem just and proper.
(Petition at Wherefore Clause). The Petition identifies several companion petitions to quash summonses that were pending in other United States District Courts at the time this Petition was filed.
The Petition alleges that the summonses in question were issued pursuant to a request under the United States-Indian Income Tax Convention ("the Convention") and that they concerned the Indian income tax liability of certain family members of petitioners Girish K. Sharma and Sarita Sharma. (Id., ¶ 4). The Petition asserts that the summonses were improperly issued because: they were not issued pursuant to a legitimate tax purpose as required under United States law and the Convention; they pertain to information outside the three-year limit permitted for review of tax returns under American law, which therefore is not covered by the Convention; and they seek information for certain years to which the Convention is expressly inapplicable. (Id., ¶¶ 6-8). Petitioners also assert that they are entitled to relief by virtue of laches and estoppel, the IRS's failure to follow its own rules regarding Justice Department inquiries, and the fact that the IRS is "attempting to carry out administrative measures at variance with the Constitution." (Id., ¶¶ 9-12).
In support of their cross-motion for an order declaring the summonses to have been improperly issued, petitioners explain that they are relatives of a prominent Indian political figure, Satish Sharma, who they claim has been harassed by the Indian Government for political reasons. (Rutherford Cert., ¶ 9). Petitioners consider the tax inquiry at issue here to be only an extension of that harassment. (Id.) Their papers also recount their extensive dealings with the IRS in connection with its overall tax inquiry pursuant to the Convention.
ANALYSIS
The Court agrees with respondent's position that this action has become moot because the IRS withdrew its summonses. It further determines that it may not grant petitioners the relief they seek, which is in the nature of an advisory opinion. However, the Court concludes that petitioners' Prayer for attorney's fees remains a live issue in this action. It will dismiss the Petition as moot, but retain the action for the purposes of adjudicating any motion for attorney's fees that petitioners wish to file.
It is well established that a petition to quash a summons becomes moot if the summons is withdrawn. Thus, in a Texas case related to this one,Girish K. Sharma Sarita Sharma v. United States of America, 98-cv-1200-D, United States Magistrate Judge Jane J. Boyle issued a Report and Recommendation to dismiss Girish and Sarita Sharma's petition to quash an IRS summons as moot after the summons was withdrawn, and denying their motion for an order declaring that the summonses were improperly issued. (Report and Recommendation, N.D. Tex., Dec. 1, 1998). The Magistrate Judge cited numerous cases which firmly establish that the withdrawal of an IRS summons renders a motion or a petition to quash the summons moot. (Id., ¶ 12 and n. 2 (citing Kearns v. United States, 580 F. Supp. 8 (S.D.Ohio 1983) (holding taxpayers' petition to quash summons rendered moot by IRS administrative withdrawal of summons); Kelly v. United States, 1986 WL 3436, 86-2, U.S. Tax Cas. (CCH) Para. 9610 (C.D.Cal. 1986) (dismissing as moot petition to quash IRS summonses where summonses were withdrawn); Dame v. United States, 643 F. Supp. 533 (S.D.N Y 1986) (dismissing as moot motion to quash IRS subpoena after summons was withdrawn); Dollar v. United States, 57 A.F.T.R.2d 86 998, 87-2 U.S. Tax Cas. (CCH) Para. 9395 (W.D.Wash. 1985) (denying petition to quash IRS summons as moot after summons was withdrawn)). See also Pintel v. United States, 1994 WL 408234 at 1-2, 94-2 U.S.T.C. (CCH) Para. 50,297 (C.D.Cal. 1994) (dismissing petition to quash IRS summonses as moot after summonses were withdrawn).
While this Court is not aware whether this Report and Recommendation has been adopted by a district judge, it finds Magistrate Judge Boyle's presentation to be both comprehensive and persuasive.
As the district court explained in Kearns v. United States:
The mootness doctrine, which has its genesis in Article III, Section 1 of the Constitution, serves to limit the jurisdiction of the federal courts to matters otherwise within their jurisdiction which present an actual case or controversy. The application of this doctrine remains somewhat difficult in many areas.
In the area of summons enforcement, it is clear, however, that where the only relief sought is the quashing of a summons and that summons has been complied with, there is no case or controversy before the Court, and the motion to quash must be dismissed. . . . In the instant case, as the respondent has withdrawn the first summons, there is no longer a case or controversy for this Court to adjudicate with respect to the first summons.580 F. Supp. at 10. Here, as before Magistrate Judge Boyle, petitioners cite no cases to the contrary where courts have determined that a petition or motion to quash was not mooted by the IRS's withdrawal of the summons(es) at issue.
Petitioners rely instead on general principles and analogy. First, petitioners argue that this case is not moot because their prayer for attorney's fees remains a live controversy. They rely on Harrison Brothers Meat Packing Co. v. United States Department of Agriculture , 640 F. Supp. 402 (M.D.Pa. 1986). In that case, which related to disclosures under the Freedom of Information Act, the court held that the action was not rendered moot by the defendant's "sudden and inexplicable" agreement to provide the documents sought by the plaintiffs because the matter of attorney's fees remained viable. As an initial matter, that case would appear to be at odds with Third Circuit precedent that "an interest in attorney's fees does not save a matter from mootness." The Ivy Club v. Edwards, 943 F.2d 270, 276 (3d Cir. 1991). Moreover, having determined the action not to be moot, the court in Harrison Brothers Meat Packing Co. went on to decide the plaintiff's motion for attorney's fees, not to issue a declaration regarding the legality of the defendant's actions.
Here, no motion for any available attorney's fees has been filed. The Court agrees that the question of attorney's fees in this action remains a live controversy, but concludes, in accordance with all of the case law on point, that the IRS's withdrawal of its summons rendered the Petition to Quash moot in every other respect. The Court will retain this action for the purpose of deciding any motion for attorney's fees that petitioners choose to bring. See also Kelly v. United States, 1986 WL 34346 at *l (dismissing motion to quash summonses as moot after IRS withdrew them but awarding attorney's fees to petitioner as prevailing party).
Petitioners also invoke the general mootness principle that an action may not become moot when it involves a voluntary cessation of allegedly illegal conduct. Here, the Court again agrees with Magistrate Judge Boyle's assessment of petitioners' position. (Sharma v. United States, Report and Recommendation, ¶¶ 20-21). Petitioners correctly note that "[a]s a general rule, `voluntary cessation of allegedly illegal conduct does not deprive the tribunal of power to hear and determine the case, i.e. does not make the case moot.'" County of Los Angeles v. Davis, 440 U.S. 625, 631 (1979) (quoting United States v. W.T. Grant Co., 345 U.S. 629 (1953)). In such circumstances, the case will only be rendered moot if: "`(1) it can be said with assurance that there is no reasonable expectation . . .' that the alleged violation will recur," and "(2) interim relief or events have completely and irrevocably eradicated the effects of the alleged violation." (Id., citations omitted). The burden rests on the defendant to demonstrate that "`there is no reasonable expectation that the wrong will be repeated.'" and the burden "is a heavy one." United States v. W.T. Grant Co., 345 U.S. at 633 (citations omitted).
The Court does not understand petitioners to argue that this action falls into the mootness exception for actions that are capable of repetition yet evading review. To the extent that they do, the Court finds that argument unpersuasive for the reasons articulated in Magistrate Judge Boyle's Report and Recommendation. ( Sharma v. United States , Report and Recommendation, ¶ 19). Most importantly, petitioners have failed to offer any evidence at all which would suggest that the summonses will likely be issued again. ( Id .) See also Dollar v. United States , 1985 WL 6009 at *1 ("There is no basis for concluding that the Internal Revenue Service intends to serve [the plaintiff] with a new summons. Should such occur, however, plaintiff is entitled to seek appropriate relief from this court.")
Petitioners cite no particular reason for believing that the IRS will attempt to reissue the summonses in question. See Dollar v. United States , 1985 WL 6009 at *1 ("There is no basis for concluding that the Internal Revenue Service intends to serve [the plaintiff] with a new summons. Should such occur, however, plaintiff is entitled to seek appropriate relief from this court.") However, respondent professes no intention not to do so, and the burden rests on it to show that there is no reasonable expectation that the allegedly illegal actions will be repeated. ( Cf . Sharma v. United States , Report and Recommendation at ¶ 20 (finding allegedly illegal behavior could not reasonably be expected to recur where respondent set forth that they had no knowledge that petitioners would once again be subject to a summons by the IRS)).
However, even in cases involving voluntary cessation of allegedly illegal conduct, "mootness may result if the Defendants have accorded all the relief that the court is prepared to give. . . ." C. Wright, A. Miller E. Cooper, 13A Federal Practice Procedure, § 3533.7 (citing DeShields v. United States Parole Commission, 593 F.2d 354 (8th Cir. 1979) (determining that requests for declaratory and injunctive relief that the plaintiff was entitled to prompt consideration for parole were mooted by his release on parole)). With the possible exception of attorney's fees, petitioners have obtained all of the relief to which they are entitled. The Court does not have the power to afford them the declaratory relief they seek. As Magistrate Judge Boyle explained, the Court may not award declaratory relief on a petition to quash an IRS summons. (Sharma v. United States, Report and Recommendation, ¶ 20 (citing ¶ 7)). In particular, 28 U.S.C. § 2201 allows courts to issue declaratory judgments "except with respect to Federal taxes. . . ." Petitioners have presented no evidence that any of the limited exceptions to this prohibition apply here. See 12 Moore's Federal Practice § 57.20[3][a] (listing two exceptions to prohibition on declaratory judgments in tax cases: (i) when the government cannot prevail on the merits under any circumstances, and (ii) when an aggrieved party has no other means of obtaining judicial review and the taxpayer will suffer irreparable injury without court intervention). The Court cannot afford petitioners the relief they now request. Thus, the action does not remain live under the exception to the mootness doctrine for voluntary cessation of allegedly illegal conduct.
CONCLUSION
For the foregoing reasons, respondent's motion to dismiss is granted and petitioners' cross-motion for an order declaring that the summonses were improperly issued is denied. The Court will retain this action for the purposes of deciding any motion for attorney's fees that petitioners choose to file. If no such motion is filed before January 28, 1999, this action will be dismissed in its entirety.
O R D E R
For the reasons set forth in the Court's Opinion filed herewith,
It is on this day of January, 1999,
ORDERED that respondent's motion to dismiss the Petition to Quash IRS Summonses be, and it hereby is granted; and it is further
ORDERED that petitioners' cross-motion for an order declaring that the summonses were improperly issued be, and it hereby is denied.