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Presley v. United States

United States Court of Appeals, Eleventh Circuit

July 18, 2018

UNITED STATES, Defendant-Appellee.

          Appeal from the United States District Court for the Southern District of Florida D.C. Docket No. 9:16-cv-81735-RLR

          Before WILSON and ROSENBAUM, Circuit Judges, and TITUS, [*] District 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] 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.


         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, 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.

         Plaintiffs now appeal.


         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 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 [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)).


         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 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 ...

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