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C & C Liberty Enterprises v. United States

filed*fn*: November 30, 1992.

C & C LIBERTY ENTERPRISES, JOHN A. (CAL) WADSWORTH AND CHARLOTTE WADSWORTH, TRUSTEES, PLAINTIFFS-APPELLANTS,
v.
UNITED STATES OF AMERICA, AND FIRST INTERSTATE BANK, DEFENDANTS-APPELLEES.



Appeal from the United States District Court for the Northern District of California. DC No. CV-91-807-JPV. John P. Vukasin, Jr., District Judge, Presiding

Before: Sneed, Alarcon, and Canby, Circuit Judges.

AMENDED MEMORANDUM

Appellant challenges the district court's denial of the plaintiff's petition to quash summons and grant of respondent's motion for Rule 11 sanctions. The district court concluded that 1) the IRS summonses were valid and enforceable, and 2) the petitioner's arguments against enforcement of the summons were frivolous and without merit.

We affirm. The government presented a prima facie case of the validity of the summonses. The petitioner failed to disprove the IRS's assertions and advanced groundless arguments. Although John Wadsworth signed the petition to quash summons, he did not sign the instant appeal. As a result, John Wadsworth is not a party to this appeal. See Knoblauch v. Commission of Internal Revenue, 749 F.2d 200, 201 n.1 (5th Cir. 1984), cert. denied, 474 U.S. 830 (1985).

I.

FACTS AND PRIOR PROCEEDINGS

Charlotte and John Wadsworth are trustees of C & C Liberty Enterprises. The Wadsworths did not file federal income tax returns from 1984 through 1988. In a letter dated March 8, 1990, Revenue Agent Edward Finley requested all records of the Wadworths' income and their bank statements. The Wadsworths did not provide any of the requested information. The IRS issued a summons on March 1, 1991 to First Interstate Bank requesting all account information for John and Charlotte Wadsworth and for C & C Liberty Enterprises. At the same time, the IRS served notices of the summonses on John and Charlotte Wadsworth and on C & C Liberty Enterprises.

The Wadsworths filed a petition to quash the summonses on March 19, 1991. They claimed the summonses were invalid because 1) the summons form did not have an Office of Management and Budget (OMB) number as required by the Paperwork Reduction Act; 2) the IRS failed to publish its organizational structure; 3) the Examination Branch of the IRS is only authorized to conduct examinations of federal income tax returns filed overseas, and; 4) Agent Finley did not have the authority to issue the summons.

Federal District Court Judge Vukasin denied the Petition to quash summons and granted the government's motion for Rule 11 sanctions against the Wadsworths. Judge Vukasin held that the summonses were "prima facie valid and enforceable" and that "petitioners purported arguments . . . are all utterly frivolous and without merit." First Interstate Bank complied with the summons on July 22, 1991 and produced all of the records. Charlotte Wadsworth filed this timely appeal of the Judgement and Monetary Sanctions on July 11, 1991.

II.

JURISDICTION AND STANDARDS OF REVIEW

This court has jurisdiction under 28 U.S.C. § 1291. The district court's decision to enforce the IRS summons is reviewed for clear error. United States v. Saunders, 951 F.2d 1065, 1066 (9th Cir. 1991). We review district court decisions on Rule 11 sanctions under an abuse of discretion standard. Townsend v. Holman Consulting Corp., 929 F.2d 1358, 1366 (9th Cir. 1990) (en banc).

III.

Discussi ...


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