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Davidson v. United States

United States District Court, S.D. Texas, Houston Division

January 19, 2018



         Pending before the court[1] is Respondent's Motion to Dismiss (Doc. 4) and the response filed thereto. It is RECOMMENDED that the motion be GRANTED.

         I. Case Background

         This action was filed on May 22, 2017, against the United States of America challenging the Internal Revenue Service's (“IRS”) statutory authority to administratively summons the bank records of Petitioner Kenneth Davidson (“Davidson”) from J.P. Morgan Chase National Bank (“JPMorgan”), Wells Fargo Bank (“Wells Fargo”), Bank of America and Comerica Bank (“Comerica”). Davidson seeks to quash those third-party administrative subpoenas on the grounds that he has filed returns for tax years 2012-2016 and the IRS has not made a showing that it needs the bank records to assess or collect a tax liability.

         On July 19, 2017, the United States moved to dismiss this action, arguing that the court lacks subject matter jurisdiction to grant the relief requested because Davidson failed to file the petition to quash within the statutory limitations period and that Davidson failed to serve the United States in conformity with the Federal Rules of Civil Procedure (“Rules”). The United States also filed a counterclaim against Davidson for enforcement of the summonses.

         In response, Davidson argues that the court has subject matter jurisdiction because the United States waived sovereign immunity through the provisions of 26 U.S.C. § 7609 (“Section 7609”), which allow a taxpayer to challenge an administrative summons issued to a third-party recordholder. Davidson further contends that any claimed defects in service of process should be dismissed because the United States has made an appearance by filing the present motion.

         II. Legal Standard

         Pursuant to Rule 12, dismissal of an action is appropriate whenever the court lacks subject matter jurisdiction. Fed.R.Civ.P. 12(b)(1), 12(h)(3). The party asserting jurisdiction bears the burden of proof to show that jurisdiction does exist. In re FEMA Trailer Formaldehyde Prods. Liab. Litig., 646 F.3d 185, 189 (5thCir. 2011)(citing Ramming v. United States, 281 F.3d 158, 161 (5th Cir. 2001)).

         The court may decide a motion to dismiss for lack of jurisdiction on any of three bases: “(1) the complaint alone; (2) the complaint supplemented by undisputed facts evidenced in the record; or (3) the complaint supplemented by undisputed facts plus the court's resolution of disputed facts.” Ramming, 281 F.3d at 161 (citing Barrera-Montenegro v. United States, 74 F.3d 657, 659 (5th Cir. 1996)). The court, in determining whether it is properly vested with subject matter jurisdiction, is “free to weigh the evidence and resolve factual disputes in order to satisfy itself that it has the power to hear the case.” Krim v., Inc., 402 F.3d 489, 494 (5th Cir. 2005)(quoting Montez v. Dep't of Navy, 392 F.3d 147, 149 (5th Cir. 2004)).

         III. Analysis

         Presently before the court is the United States' motion to dismiss and its counterclaim for summons enforcement. The court first determines whether it can exercise jurisdiction over the petition to quash the summonses.

         A. Motion to Dismiss for Lack of Subject Matter Jurisdiction

         It is well-settled that the United States cannot be sued unless it waives its sovereign immunity in explicit and unequivocal terms. See United States v. Dalm, 494 U.S. 596, 608 (1990); Wilkerson v. United States, 67 F.3d 112, 118 (5th Cir. 1995). “Where Congress has statutorily waived the United State's sovereign immunity, an action against the government will be strictly construed and a court will lack subject matter jurisdiction over any action that does not fit within the scope of the Congressional waiver.” Taylor v. United States, 292 Fed.Appx. 383, 385 (5th Cir. 2008)(citing Wilkerson, 67 F.3d at 118)(unpublished).

         Pursuant to 26 U.S.C. §§ 7602-7613, the IRS has the authority to summons a taxpayer and others to produce documents relevant to the determination of a tax liability. Section 7609 outlines the procedures to be used when the IRS issues a summons to a third party for records or testimony concerning the tax liability of a taxpayer. In such a case, the taxpayer is also entitled to notice of the third-party summons. See 26 U.S.C. § 7609(a)(1), (2). The statute permits service by certified mail on third parties and notice by certified mail to the taxpayer's last known address. 26 U.S.C. 7603(b); 7609(a)(2).

         Upon receiving notice, the taxpayer has the right to initiate a lawsuit to quash the third-party subpoena “not later than the 20thday after the day such notice is given in the manner provided in subsection (a)(2).” See 26 U.S.C. § 7609(b)(2)(A). In Taylor, the court recognized that this section is a limited waiver of sovereign immunity and that ...

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