Michael Presley v. United States , 895 F.3d 1284 ( 2018 )

Case: 17-10182 Date Filed: 07/18/2018 Page: 1 of 22
[PUBLISH]
IN THE UNITED STATES COURT OF APPEALS
FOR THE ELEVENTH CIRCUIT
________________________
No. 17-10182
________________________
D.C. Docket No. 9:16-cv-81735-RLR
MICHAEL PRESLEY,
CYNTHIA PRESLEY,
BMP FAMILY LIMITED PARTNERSHIP,
PRESLEY LAW AND ASSOCIATES, P.A.,
Plaintiffs - Appellants,
versus
UNITED STATES,
Defendant - Appellee.
________________________
Appeal from the United States District Court
for the Southern District of Florida
________________________
(July 18, 2018)
Before WILSON and ROSENBAUM, Circuit Judges, and TITUS, * District Judge.
*
Honorable Roger W. Titus, United States District Judge for the District of Maryland,
sitting by designation.
Case: 17-10182 Date Filed: 07/18/2018 Page: 2 of 22
ROSENBAUM, Circuit Judge:
To say that the 1980 United States Men’s Olympic Hockey Team had the
odds stacked against it would be an understatement. With a roster of amateur
players whose age averaged 22, the U.S. team had been routed 10-3 by the Soviet
team less than two weeks before the Olympics began. 1 And that was not surprising
since the Soviet team was filled with seasoned professionals, had won the past four
Olympic gold medals, and had not even lost an Olympic game since 1968. 2
Beating the Soviet team seemed impossible. Yet on February 22, 1980, the U.S.
team—led by Coach Herb Brooks—did exactly that, scoring a 4-3 “Miracle” win.3
1
E.M. Swift, A Reminder of What We Can Be, Sports Illustrated, Dec. 22, 1980,
https://www.si.com/vault/1980/12/22/106775781/a-reminder-of-what-we-can-be; Miracle (Walt
Disney 2004).
2
https://www.hockey-reference.com/olympics/teams/URS (last visited July 10, 2018).
3
In many ways, Coach Brooks’s story mirrored that of the 1980 team. Cut from the
Olympic team in 1960, Brooks steadily rose through the coaching ranks, earning a reputation for
fanatical preparation. Jamie Fitzpatrick, The Miracle Unfolds,
https://www.thoughtco.com/miracle-on-ice-american-hockey-2778288 (last visited July 9, 2018).
Coach Brooks knew the U.S. team faced overwhelming odds, but he used that fact to motivate
the players. Indeed, the legendary pregame speech attributed to Coach Brooks relied in
significant part on the long odds the team faced. The speech was so unforgettable that years
later, for purposes of shooting the film Miracle, team member Jack O’Callahan (who faced the
additional odds of coming back from a knee injury sustained in the 10-3 pre-Olympics loss to the
Soviets) was able to recreate Coach Brooks’s speech based on his own memories and those of his
teammates. Bill Littlefield, Hollywood Scores a ‘Miracle’ With Locker Room Speech, WBUR,
http://www.wbur.org/onlyagame/2015/06/06/us-miracle-olympics-herb-brooks (last visited July
10, 2018). In that speech, Coach Brooks is said to have told the team, among other things, “[I]f
we played [the Soviets] ten times, they might win nine. But not this game, not tonight.” See
Miracle (Walt Disney 2004).
2
Case: 17-10182 Date Filed: 07/18/2018 Page: 3 of 22
Our history contains many such stories of triumphs over long odds. This,
however, is not one of those.
Plaintiffs-Appellants—a lawyer, his law firm, and associated parties—urge
creative arguments to avoid their bank’s compliance with Internal Revenue Service
(“IRS”) summonses for their account records. But forget about tough odds the
U.S. hockey team faced, Plaintiffs face-off with something even more formidable:
the Supreme Court’s holdings long ago in United States v. Miller, 425 U.S. 435
(1976), and United States v. Powell, 379 U.S. 48 (1964). Those cases completely
foreclose Plaintiffs’ arguments. For this reason, neither Plaintiffs nor their law-
firm clients whose interests Plaintiffs attempt to invoke have a viable Fourth
Amendment objection to the IRS’s collection of Plaintiffs’ bank records from
Plaintiffs’ bank. We therefore affirm the district court’s order denying the
quashing of the IRS’s summonses.
I.
In 2016, the IRS sent three summonses to Bank of America, N.A., (the
“Bank”) in the course of investigating the 2014 federal income-tax liabilities of
each of Plaintiffs Michael Presley, Cynthia Presley, BMP Family Limited
Partnership, and Presley Law and Associates, P.A. (“Presley Law”). The
summonses sought records “pertaining to any and all accounts over which [each
Plaintiff] has signature authority,” including bank statements, loan proceeds,
3
Case: 17-10182 Date Filed: 07/18/2018 Page: 4 of 22
deposit slips, records of purchase, sources for all deposited items, and copies of all
checks drawn.
As we have suggested, Plaintiff Michael Presley is an attorney, while
Presley Law is his law firm. Among the records the IRS sought were the law
firm’s escrow and trust bank-account records, which were held in the names of
Presley Law and BMP. 4 Both accounts contained information about client
finances. The IRS notified Plaintiffs of these summonses, but it did not inform
Plaintiffs’ clients because it was not investigating them.
Plaintiffs moved to quash. They objected only to the Bank’s production of
records related to their escrow and trust accounts, contending that these records
revealed their clients’ financial information. The government moved to dismiss,
and the district court granted its motion. The district court reasoned that the
summonses complied with the governing standard announced in Powell, 379 U.S.
at 57-58, because the summonses were narrowly drawn and relevant to the IRS’s
investigation. In addition, the district court concluded that Plaintiffs lacked
standing to challenge the summonses as violations of their clients’ privacy because
their clients lacked a reasonable expectation of privacy in records held by the
Bank.
4
Neither the Amended Petition nor any other part of the record sets forth Cynthia
Presley’s relationship to the escrow and trust accounts summonsed. But one of the summonses
sought “all records without limitation, pertaining to any and all accounts over which MICHAEL
PRESLEY . . . & CYNTHIA PRESLEY . . . have signature authority . . . .”
4
Case: 17-10182 Date Filed: 07/18/2018 Page: 5 of 22
Plaintiffs now appeal.
II.
We will not reverse an order enforcing an IRS summons unless it is “clearly
erroneous.” United States v. Morse, 532 F.3d 1130, 1131 (11th Cir. 2008) (per
curiam); United States v. Medlin, 986 F.2d 463, 466 (11th Cir. 1993).
Determining whether the district court’s order was clearly erroneous requires
us to first consider the general framework governing the enforceability of IRS
summonses. To ensure compliance with the tax code, Congress designed a system
that gives the IRS “broad statutory authority to summon a taxpayer to produce
documents or give testimony relevant to determining tax liability.” United States
v. Clarke, 134 S. Ct. 2361, 2364 (2014).
Section 7602 of the Internal Revenue Code is the “centerpiece of that
congressional design.” United States v. Arthur Young & Co., 465 U.S. 805, 816,
(1984). Under § 7602, the IRS may inquire into the correctness of a return by
“examin[ing] any books, papers, records, or other data . . . .” 26 U.S.C. §
7602(a)(1) & (2). This summons power is not limited to examining documents of
the taxpayer under investigation but also extends to allow the IRS to obtain
relevant information from a third party. 26 U.S.C. § 7602(a)(2). But where, as
here, the IRS issues a summons to a third-party recordkeeper to gather information
5
Case: 17-10182 Date Filed: 07/18/2018 Page: 6 of 22
about a taxpayer, the IRS must notify the taxpayer of the summons pursuant to 26
U.S.C. § 7609(a).
To guard against potential abuses of this “broad” power, the courts—and not
the IRS—are authorized to enforce this summons power. United States v.
Bisceglia, 420 U.S. 141, 146 (1975) (“Substantial protection is afforded by the
provision that an Internal Revenue Service summons can be enforced only by the
courts.”). In United States v. Powell, 379 U.S. 48 (1964), the Supreme Court set
forth the analytical framework that governs the courts’ enforcement decisions.
First, for the government to establish a prima facie case for enforcement, it
must demonstrate that (1) the investigation has a legitimate purpose, (2) the
information summoned is relevant to that purpose, (3) the IRS does not already
possess the documents sought, and (4) the IRS has followed the procedural steps
required by the tax code. Id. at 57-58. If the government satisfies Powell, the
“burden shifts to the taxpayer ‘to disprove one of the four Powell criteria, or to
demonstrate that judicial enforcement should be denied on the ground that it would
be an ‘abuse of the court’s process.’’” United States v. Centennial Builders, Inc.,
747 F.2d 678, 680 (11th Cir. 1984) (quoting United States v. Beacon Fed. Sav. &
Loan, 718 F.2d 49, 52 (2d Cir. 1983)). But significantly, a court’s review is
narrowly circumscribed. A court may inquire as to only whether the “IRS issued a
summons in good faith, and must eschew any broader role of oversee[ing] the
6
Case: 17-10182 Date Filed: 07/18/2018 Page: 7 of 22
[IRS’s] determinations to investigate.” Clarke, 134 S. Ct. at 2367 (alterations in
original and internal quotation marks omitted) (quoting Powell, 379 U.S. at 56)).
III.
Plaintiffs do not contend that the IRS failed to comply with Powell. Instead,
they assert that Powell does not apply at all because the Fourth Amendment and
the Internal Revenue Code preclude its application in the circumstances of this
case. We conduct our analysis of Plaintiffs’ arguments in two parts. First, we
address whether Plaintiffs have standing to raise their clients’ Fourth Amendment
claims. 5 Second, we consider the merits of Plaintiffs’ claims.
A. Standing
Plaintiffs argue that they have standing to guard their clients’ privacy rights
under the Fourth Amendment. The government disagrees. We need not decide
this issue.
Privacy is personal. See, e.g., Rakas v. Illinois, 439 U.S. 128, 132 (1978);
see also Crosby v. Paulk, 187 F.3d 1339, 1345 n.10 (11th Cir. 1999) (“[T]he
5
Plaintiffs have Article III standing to raise their clients’ objections under the Internal
Revenue Code because § 7609(b)(2) grants any person who has received notice of an IRS
summons the right to file a petition challenging the summons on any ground. See United States
v. Gottlieb, 712 F.2d 1363, 1369 (11th Cir. 1983) (ruling against the summoned party by holding
that § 7609(f) was inapplicable to unnamed, unsummoned taxpayers and stating that “our
holding does not leave unidentified third parties wholly without protection. [The summoned
party] . . . can argue that the summons was issued for the purpose of obtaining the third party
records and that the audit of the [summoned party] itself was a mere pretext or subterfuge”).
7
Case: 17-10182 Date Filed: 07/18/2018 Page: 8 of 22
Crosbys are precluded from asserting Fourth Amendment rights of third parties
who were subject to searches . . . .”); Lenz v. Winburn, 51 F.3d 1540, 1549 (11th
Cir. 1995) (“[C]ourts have held that a person does not have a reasonable
expectation of privacy in another’s belongings.”). So under most circumstances,
Plaintiffs must demonstrate that their own privacy rights are at stake.
Here, Plaintiffs contest only others’ privacy rights. As a result, they would
ordinarily lack Fourth Amendment standing.
But some debate exists over whether those in situations analogous to
Plaintiffs’ have standing to assert their clients’ interests. That’s because Plaintiffs
include an attorney and his law firm, and as non-targets of the investigation,
Plaintiffs’ clients could face obstacles in raising their own privacy objections. See
United States v. Zadeh, 820 F.3d 746, 755 (5th Cir. 2016) (permitting doctor-
plaintiff to raise the privacy objections of his clients); In re McVane, 44 F.3d 1127,
1136 (2d Cir. 1995) (permitting summoned party to raise privacy objections of
family members).
Recognizing the clients’ hurdles in pursuing their own objections, some
courts have authorized third-party standing in similar circumstances. In Reiserer v.
United States, for example, the Ninth Circuit permitted an attorney to raise his
clients’ privacy objections to an IRS subpoena served on the attorney’s bank. 479
F.3d 1160, 1165 (9th Cir. 2007) (“Reiserer does not object to the production of
8
Case: 17-10182 Date Filed: 07/18/2018 Page: 9 of 22
records relating to his leasing companies, but contends that client identity and fee
information should be protected from disclosure.”). The attorney had sought to
represent his clients’ interests on the grounds that the subpoena captured his
clients’ fee information. Id.
But we need not resolve whether Plaintiffs here have standing to assert their
clients’ interests. Plaintiffs’ clients’ objections rely on the Fourth Amendment.
And unlike Article III standing, standing under the Fourth Amendment is not
jurisdictional; instead, we analyze it as a merits issue. See Minnesota v. Carter,
525 U.S. 83, 87 (1998) (“expressly reject[ing]” treating Fourth Amendment
standing like Article III standing); United States v. Noble, 762 F.3d 509, 526 (6th
Cir. 2014) (“Somewhat confusingly, the Supreme Court refers to this burden as
Fourth Amendment standing. This type of standing, however, is not jurisdictional,
nor rooted in Article III . . . .”).
Because Fourth Amendment standing is not jurisdictional, we need not
determine as a separate question whether Plaintiffs have standing under the Fourth
Amendment to raise their clients’ interests. See United States v. Gonzalez, 71 F.3d
819, 827 n.18 (11th Cir. 1996) (determining that the government waived the issue
of standing because it “declined to press th[e] standing issue before the district
court”); Noble, 762 F.3d at 527 (holding that the government may waive its Fourth
Amendment standing argument because the “Supreme Court has made clear,
9
Case: 17-10182 Date Filed: 07/18/2018 Page: 10 of 22
Fourth Amendment standing is akin to an element of a claim and does not sound in
Article III”); see also Steel Co. v. Citizens for a Better Env’t, 523 U.S. 83, 94
(1998) (rejecting the practice of “assuming” Article III standing for the purpose of
deciding the merits, but distinguishing between statutory standing and Article III
standing). Rather, we consider standing as part of the merits when we
substantively address Plaintiffs’ Fourth Amendment claims.
B. Merits
In the administrative-summons context, Plaintiffs’ objections “must be
derived from one of three sources: a constitutional provision;” the Internal
Revenue Code; “or the general standards governing judicial enforcement of
administrative subpoenas enunciated in United States v. Powell . . . .” S.E.C. v.
Jerry T. O’Brien, Inc., 467 U.S. 735, 741–42 (1984).
Here, Plaintiffs offer arguments under the first two sources. First, Plaintiffs
contend that the Fourth Amendment obligates the government to demonstrate
probable cause because their clients had a reasonable expectation of privacy in the
records held by the Bank. Second, Plaintiffs argue that the IRS was obligated to
proceed under 26 U.S.C. § 7609(f) by issuing John Doe summonses to their clients
and petitioning the district court for an ex parte hearing before obtaining Plaintiffs’
bank-account records.
10
Case: 17-10182 Date Filed: 07/18/2018 Page: 11 of 22
We find no merit in these contentions. First, as we explain below, settled
precedent requires us to conclude that Plaintiffs’ clients lack a reasonable
expectation of privacy in financial records held by the Bank, so the Fourth
Amendment does not require a showing of probable cause. Second, the Internal
Revenue Code does not require an ex parte hearing in the circumstances here. And
since Plaintiffs do not dispute that the IRS satisfied the Powell factors, that is the
end of the matter.
1. Plaintiffs’ Clients Lack a Reasonable Expectation of Privacy in
Financial Records Held By the Bank
Plaintiffs contend that the government must show probable cause to enforce
the summonses. And that would be true if Plaintiffs’ clients had a reasonable
expectation of privacy in the financial records held by the Bank. See Carpenter v.
United States, 138 S. Ct. 2206, 2221–22 (2018) (“[T]his Court has never held that
the Government may subpoena third parties for records in which the suspect has a
reasonable expectation of privacy.”). But they don’t.
Rather, the third-party doctrine precludes that conclusion here. According to
that doctrine, a party lacks a reasonable expectation of privacy under the Fourth
Amendment in information “revealed to a third party and conveyed by [that third
party] to Government authorities, even if the information is revealed on the
assumption that it will be used only for a limited purpose and the confidence
placed in the third party will not be betrayed.” Miller, 425 U.S. at 443; see also
11
Case: 17-10182 Date Filed: 07/18/2018 Page: 12 of 22
Centennial Builders, 747 F.2d at 683 (“An Internal Revenue summons directed to
a third party bank or accountant does not violate the Fourth Amendment rights of a
taxpayer under investigation since the records belong to the summoned party and
not the taxpayer.”).
In Miller, 425 U.S. at 444, the Supreme Court considered whether a taxpayer
enjoys a reasonable expectation of privacy in his bank records. There, while
investigating Miller for tax evasion, the IRS subpoenaed his banks, seeking
financial documents, including monthly statements. Miller, 425 U.S. at 440.
Miller objected to the subpoenas, invoking the Fourth Amendment.
The Supreme Court rejected Miller’s challenge for two reasons. First, Miller
had “neither ownership nor possession” of the documents because they were
“business records of the banks.” Id. Second, the nature of the records the IRS was
seeking—checks—further limited Miller’s expectations of privacy since the checks
were “not confidential communications but negotiable instruments to be used in
commercial transactions.” Id. at 442. The Supreme Court recently reaffirmed the
vitality of Miller’s holding. See Carpenter v. United States, 138 S. Ct. at 2220
(2018) (“We do not disturb the application of . . . Miller . . . .”).
Both of the Supreme Court’s considerations in Miller also apply here. As in
Miller, a third-party bank holds the financial records the IRS seeks, and these
records are “not confidential communications” because they are simply registries
12
Case: 17-10182 Date Filed: 07/18/2018 Page: 13 of 22
of financial transactions. Nor does it matter that Plaintiffs’ clients gave their
records to Plaintiffs rather than directly to the bank. Plaintiffs conveyed their
records, such as checks for deposit in Presley Law’s escrow or trust accounts,
knowing that the firm would, in turn, deposit these items with the Bank. So if
Plaintiffs cannot escape Miller directly, Plaintiffs’ clients cannot avoid its
application indirectly. In short, Miller precludes us from holding that Plaintiffs’
clients have a reasonable expectation of privacy in the summoned records.
Despite Miller’s teachings, Plaintiffs assert their clients have a reasonable
expectation of privacy because the Florida Constitution recognizes a privacy right
in the circumstances of this case. But that cannot help Plaintiffs.
State law does not apply here because under the Supremacy Clause, state
laws that conflict with federal laws by impeding the “full purposes” of Congress
must give way as preempted. Geier v. Am. Honda Motor Co., 529 U.S. 861, 899
(2000); see also United States v. Fleet, 498 F.3d 1225, 1227 (11th Cir. 2007);
Matter of Int’l Horizons, Inc., 689 F.2d 996, 1003 (11th Cir. 1982) (“It is clear . . .
that this is a federal law proceeding and that the Bankruptcy Court is not required
to apply the Georgia accountant-client privilege.”); United States v. Moore, 970
F.2d 48, 50 (5th Cir. 1992) (per curiam) (holding that state-law doctor-patient
privilege must yield when it conflicts with IRS’s authority under federal summons
statute).
13
Case: 17-10182 Date Filed: 07/18/2018 Page: 14 of 22
And there is no question that the Florida constitutional provision granting a
privacy interest in bank records would substantially impede the IRS’s ability to
summon bank records pursuant to the Internal Revenue Code. See United States v.
First Bank, 737 F.2d 269, 274 (2d Cir. 1984) (holding state-law privacy statute that
conflicted with the Internal Revenue Code was preempted); see also St. Luke’s
Reg’l Med. Ctr., Inc. v. United States, 717 F. Supp. 665, 666 (N.D. Iowa 1989)
(“[S]tate law may not establish prerequisites to compliance with [an]
administrative subpoena issued by a federal agency in accordance with and
pursuant to federal statutory law, as such is prohibited [by] article VI, clause 2 of
the United States Constitution.” (internal quotation marks omitted)). So the
privacy right in Florida’s Constitution must yield.6
Faced with these problems, Plaintiffs respond with a proposed solution to
Miller. Relying upon Neece v. IRS, 922 F.2d 573 (10th Cir. 1990), Plaintiffs argue
that if their Fourth Amendment challenge does not succeed, “then [the Right to
Financial Privacy Act, 12 U.S.C. §§ 3401-3422] would apply.” But Plaintiffs
asserted this argument for the very first time only after we held oral argument in
this case, when they filed a Rule 28(j), Fed. R. App. P., supplemental authority
6
The way Plaintiffs attempt to use the Florida Constitution here would plainly interfere
with the IRS’s abilities to execute its summons authority and conduct its investigation. For that
reason, the Court need not conduct a full-on preemption analysis. For a more thorough
discussion of conflict preemption and its several forms, see Arizona v. United States, 567 U.S.
387, 398-400 (2012).
14
Case: 17-10182 Date Filed: 07/18/2018 Page: 15 of 22
contending that the RFPA applies. That is simply too late. See, e.g., United States
v. Njau, 386 F.3d 1039, 1042 (11th Cir. 2004) (per curiam) (refusing to consider
argument raised for the first time in a 28(j) letter).
And even if it weren’t, the RFPA does not help Plaintiffs. In response to the
broad sweep of Miller, Congress enacted the RFPA. The RFPA prohibits financial
institutions from supplying the government with information about their
customers’ financial records, unless the customer authorizes the disclosure of such
information or the government obtains a valid subpoena. See 12 U.S.C. § 3402.
But significantly, the RFPA does not affect the holding in Miller as it
pertains to an IRS summons. On the contrary, the statute explicitly provides that
“[n]othing in this chapter prohibits the disclosure of financial records in
accordance with procedures authorized by Title 26.” 12 U.S.C. § 3413(c); see also
Lidas, Inc. v. United States, 238 F.3d 1076, 1083 (9th Cir. 2001) (“[C]ourts have
consistently interpreted RFPA as exempting IRS summonses provided that the IRS
followed appropriate Title 26 procedures.”).
Nor does Neece assist Plaintiffs. Plaintiffs assert that Neece renders the
RFPA’s exemption of IRS summonses inapplicable in situations like the one here.
There, the Tenth Circuit recognized the RFPA’s exemption of IRS summonses.
See Neece, 922 F.2d at 575-76 (“The legislative history of [the RFPA] confirms
that such records are exempt from the RFPA . . . [a]dministrative summonses
15
Case: 17-10182 Date Filed: 07/18/2018 Page: 16 of 22
issued by the Internal Revenue Service are already subject to privacy safeguards
under section 1205 of the Tax Reform Act of 1976.” (citation and quotation marks
omitted)). And though the court found it inapplicable, it did so only because of the
circumstances in that case—circumstances that do not exist here.
In Neece, the IRS avoided the usual notice requirements under Title 26 by
coaxing the bank into voluntarily disclosing the taxpayer’s records. See id. at 576
(“Defendants’ reading of section 7602(a)(1) would largely negate the taxpayers’
protections found in the RFPA by giving a financial institution the unilateral power
to abrogate those rights if the financial institution decides to cooperate voluntarily
with an IRS investigation of one of its customers.”). That, of course, is not the
case here.
Plaintiffs have not suggested—and the record does not support the notion—
that the IRS neglected to discharge its notice obligations under 26 U.S.C. §
7609(a). Rather, unlike in Neece, the IRS here notified Plaintiffs after summoning
the Bank for records of Plaintiffs’ accounts. And as we explain later in the next
section, that is all the law requires. For these reasons, to enforce the summonses at
issue here, the IRS was not required to demonstrate probable cause.
16
Case: 17-10182 Date Filed: 07/18/2018 Page: 17 of 22
2. Compliance with Powell renders the IRS’s summonses
reasonable, and the IRS was not required to issue John-Doe
subpoenas.
Nevertheless, the mere fact that probable cause does not apply does not
mean the IRS’s authority to issue subpoenas is unbridled. See United States v.
Bailey, 228 F.3d 341, 349 (4th Cir. 2000) (“The value of constraining
governmental power, which Bailey has urged through his misplaced probable
cause argument, is nevertheless recognized in the judicial supervision of
subpoenas.”). In Oklahoma Press Publishing Co. v. Walling, 327 U.S. 186 (1946),
the Court held that “the basic distinction” between administrative summonses of
business records and actual searches of things in which citizens hold a reasonable
expectation of privacy means a separate Fourth Amendment standard applies to
each circumstance. Id. at 204.
For IRS summonses of bank records, the “gist” of the Fourth Amendment
protection is that the disclosure sought “shall not be unreasonable.” Id. at 208.
This baseline requirement emanates from the interest of all citizens “to be free
from officious intermeddling.” Id. at 213. But an IRS summons is not
unreasonable, provided the IRS “has complied with the Powell requirements.”
United States v. Reis, 765 F.2d 1094, 1096 (11th Cir. 1985) (per curiam). In other
words, when it comes to the IRS’s issuance of a summons, compliance with the
Powell factors satisfies the Fourth Amendment’s reasonableness requirement. See
17
Case: 17-10182 Date Filed: 07/18/2018 Page: 18 of 22
United States v. McAnlis, 721 F.2d 334, 337 (11th Cir. 1983); Bailey, 228 F.3d at
347.
The summonses here satisfy that standard. In fact, as we have mentioned,
Plaintiffs do not contest that the summonses satisfy each Powell factor. For
example, Plaintiffs do not suggest that the files containing their clients’ records are
not relevant to the IRS’s investigation and that the summonses are not narrowly
tailored. See Tiffany Fine Arts, Inc. v. United States, 469 U.S. 310, 321 (1985)
(“[B]y definition, the IRS is not engaged in a ‘fishing expedition’ when it seeks
information relevant to a legitimate investigation of a particular taxpayer. In such
cases, the incidental effect on the privacy rights of unnamed taxpayers is justified
by the IRS’s interest in enforcing the tax laws.”).
Nor do Plaintiffs contend that the summonses were really just a subterfuge
so the IRS could investigate their clients or invade the attorney-client privilege.7
Cf. id. at 322 (“[I]f the district court finds in the enforcement proceeding that the
IRS does not in fact intend to investigate the summoned party, or that some of the
records requested are not relevant to a legitimate investigation of the summoned
7
This latter point bears repeating. Notably, Plaintiffs do not raise their clients’ Sixth
Amendment rights. For that reason, we have no occasion to consider how Plaintiffs’ clients’
Sixth Amendment rights might affect the analysis, if at all. The record likewise contains no
evidence concerning this issue, and “[t]he identity of a client or matters involving the receipt of
fees from a client are not normally within the [attorney-client] privilege.” In re Grand Jury
Proceedings (David R. Damore), 689 F.2d 1351, 1352 (11th Cir. 1982). So today we decide
only that neither the Fourth Amendment nor § 7609’s notice requirements preclude enforcement
of the IRS summonses at issue here.
18
Case: 17-10182 Date Filed: 07/18/2018 Page: 19 of 22
party, the IRS could not obtain all the information it sought unless it complied with
§ 7609(f).”). We are likewise unable to discern any other reason why the
summonses should not be enforced. Because the Powell factors define the
reasonableness of the summonses under the Fourth Amendment and Plaintiffs do
not contest that the summonses satisfy them, our inquiry should be complete.
But Plaintiffs raise yet one more argument—this time under a different
section of the Code. Specifically, Plaintiffs contend that the district court erred by
not holding an ex parte hearing pursuant to § 7609(f). They base their contention
on the premise that in Tiffany, 469 U.S. 310, the Supreme Court allegedly
suggested that the IRS may obtain documents pertaining to unnamed taxpayers in
only two ways: “the summoned party and the unnamed taxpayer must both be
under active investigations, or the United States needs to first conduct a full
hearing pursuant to section 7609(f).” Appellants’ Reply Br. at 8. We find three
problems with this argument.
First, Plaintiffs make this argument for the first time in their reply brief.
That is too late to raise a new issue. See Big Top Koolers, Inc. v. Circus-Man
Snacks, Inc., 528 F.3d 839, 844 (11th Cir. 2008) (“We decline to address an
argument advanced by an appellant for the first time in a reply brief.”); United
States v. Evans, 473 F.3d 1115, 1120 (11th Cir. 2006) (“[A]rguments raised for the
first time in a reply brief are not properly before a reviewing court.”).
19
Case: 17-10182 Date Filed: 07/18/2018 Page: 20 of 22
Second, even if it were not, the text of § 7609(f) does not support Plaintiffs’
argument. Section 7609(f) requires the Secretary to make certain showings
concerning so-called John Doe summonses—summonses that “do[] not identify the
person with respect to whose liability the summons is issued,” 26 U.S.C. §
7609(f)—that is, unnamed persons who are the subject of the IRS investigation in
furtherance of which the summons is issued. But the summonses here identify the
subjects of the IRS’s investigation as Plaintiffs. Specifically, they state that they
seek records “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 the person identified above”
(emphasis added), and the “person[s] identified above” are specified as Michael
Presley, Cynthia Presley, Presley Law, and BMP. Plus, Plaintiffs expressly
concede that their clients are not the subject of an IRS investigation. So the clients
are not “person[s] with respect to whose liability the summons is issued,” 26
U.S.C. § 7609(f), and § 7609(f) does not apply.
Third and finally, Tiffany hurts, not helps, Plaintiffs’ case. In fact, Tiffany’s
holding requires the conclusion that notice to Plaintiffs affords their clients
protection without notifying the unnamed clients specifically.
In Tiffany, the IRS issued summonses to a company for its financial
statements as well as for a list of the names, addresses, and Social Security
20
Case: 17-10182 Date Filed: 07/18/2018 Page: 21 of 22
numbers of persons who had acquired licenses to distribute Tiffany’s products.
469 U.S. at 312. The summonses served dual purposes: to investigate the tax
liabilities of Tiffany and to investigate the tax liabilities of its licensees. Id. at 313.
But because the IRS did not know the identities of the licensees, it provided notice
to only Tiffany. Id. Tiffany contended that since the IRS sought information
about the licensees, the IRS needed to comply with § 7609(f)’s strictures by
obtaining court approval through an ex parte hearing. Id.
The Supreme Court rejected Tiffany’s arguments. The Court held that so
long as the IRS followed the proper notice procedures as to one party it was
investigating (Tiffany), the IRS was not required to comply with § 7609(f) for the
unidentified licensees who were also under investigation but had not received a
summons. Id. at 324. Under those circumstances, the Supreme Court concluded,
“any incidental effect on the privacy rights of unnamed taxpayers is justified by the
IRS’s interest in enforcing the tax laws.” Id. at 321. In further explaining this
holding, the Court reasoned that notice to one of the parties under investigation
would ensure that the “IRS w[ould] not strike out arbitrarily or seek irrelevant
materials” because the summoned party “w[ould] have a direct incentive to oppose
enforcement . . . .” Id.
Plaintiffs seek to draw a distinction between this case and Tiffany. They
argue that Tiffany suggests that if the summoned party—in this case, the Bank—is
21
Case: 17-10182 Date Filed: 07/18/2018 Page: 22 of 22
not under investigation, the IRS must use the § 7609(f) process if the summons
happens to sweep in information about somebody other than the taxpayer being
investigated. But Plaintiffs miss Tiffany’s point. Under Tiffany, it matters only
that Plaintiffs received notice under § 7609(a) that they were being investigated
and were afforded the opportunity to contest the summonses. See id. at 317 n.5
(“[A]ll that matters is that the IRS was pursuing a legitimate investigation of
Tiffany.”). That happened here. And as the Court foresaw in Tiffany, Plaintiffs
have “argued vigorously—albeit unsuccessfully—against enforcement of the
summonses,” to no avail. Id. at 321. So Tiffany cannot help Plaintiffs, either.
V.
For these reasons, the judgment of the district court is affirmed.
AFFIRMED.
22