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Williams Development & Construction, Inc. v. United States

United States District Court, D. South Dakota, Southern Division

December 10, 2019

WILLIAMS DEVELOPMENT & CONSTRUCTION, INC.; CRAIG WILLIAMS; LEE WILLIAMS; WDC COMMERCIAL REAL ESTATE, INC.; WILLIAMS WORKING CAPITAL PARTNERSHIP; WILLIAMS MANAGEMENT TRUST; CRAIG & LEE WILLIAMS FAMILY PARTNERSHIP; LEE AND CRAIG PARTNERSHIP 100 LTD; LEE AND CRAIG PARTNERSHIP 200 LTD; LEE AND CRAIG PARTNERSHIP 300 LTD, Plaintiffs,
v.
UNITED STATES OF AMERICA, Defendant.

          ORDER GRANTING IN PART AND DENYING IN PART PLAINTIFFS' MOTION TO QUASH THIRD-PARTY SUBPOENAS DOCKET NO. 44

          VERONICA L. DUFFY United States Magistrate Judge

         INTRODUCTION

         This matter is before the court on plaintiffs' amended complaint seeking damages for defendant United States' (hereinafter “government”) unlawful disclosure of their taxpayer identification numbers. See Docket No. 15. Jurisdiction is premised on the presence of a federal question, 28 U.S.C. § 1331. Now pending is plaintiffs' motion to quash subpoenas served on 13 third parties by the government. See Docket No. 44. The district court, the Honorable Lawrence L. Piersol, referred the motion to this magistrate judge for determination pursuant to 28 U.S.C. § 636(b)(1)(A) and the October 16, 2014, standing order of the court. See Docket No. 46.

         FACTS

         Plaintiffs filed their original complaint in this matter on March 26, 2018, seeking to quash various administrative summonses issued to 15 third parties by the Internal Revenue Service (“IRS”) on March 8, 2018. See Docket No. 1. Plaintiffs argued that some of the plaintiffs had been referred for criminal investigation and, after such a referral, the IRS was prohibited from using administrative summonses to gain evidence. Id. After the filing of plaintiffs' complaint, the IRS withdrew its summonses to Citibank and Wells Fargo Bank, two of the 15 third parties which had previously received summonses. See Docket No. 34 at p. 2.

         On April 27, 2018, plaintiffs filed an amended complaint asserting the additional claims that the IRS had made unlawful disclosures in the summonses to the third parties of (1) the fact that some of the plaintiffs were under criminal investigation and (2) of some of the plaintiffs' taxpayer identification numbers. See Docket No. 15. The government made a motion to dismiss pursuant to Fed.R.Civ.P. 12(b)(1) and (6), arguing the court lacked jurisdiction for plaintiffs' request to quash the summonses because that claim was mooted when the government withdrew the summonses and that plaintiffs had failed to state a claim upon which relief could be granted on the unlawful disclosure claims. See Docket No. 24.

         The district court granted in part and denied in part the government's motion to dismiss. See Docket No. 34. The court agreed the request to quash the now-withdrawn summonses was moot and dismissed this claim from plaintiffs' amended complaint. Id. at p. 5. The court found the disclosure by the IRS that the summonses were issued by an IRS criminal investigative agent was not unlawful and could not be asserted by plaintiffs as a basis for their request for damages. Id. at pp. 9-10.

         The court decided, however, that plaintiffs had at least articulated a valid claim by asserting the IRS had unlawfully disclosed some of the plaintiffs' taxpayer identification numbers and by indicating some of the plaintiffs were under criminal investigation. Id. at pp. 10-18. The court accordingly allowed these claims to go forward. Id. The court indicated, however, that if the government were able to prove the third parties were in possession of plaintiffs' taxpayer identification numbers prior to the third parties' receipt of the IRS summonses, the court would likely find this fact fatal to plaintiffs' damages claims on that issue. Id. at p. 18.

         Following the district court's ruling on the government's motion to dismiss, then, one of the key issues regarding plaintiffs' request for damages for allegedly unlawful disclosures by the IRS is whether the 15 recipients of the IRS's administrative summonses already knew plaintiffs' taxpayer identification numbers prior to the time the third parties received the March 8, 2018, IRS summonses.

         To that end, on July 19, 2019, the government served plaintiffs with requests to admit as to all 15 third parties. See Docket No. 48-1. The requests asked plaintiffs to admit that each of the third parties had prior knowledge of plaintiffs' taxpayer identification number before receiving the IRS summons. Id. Plaintiff Craig Williams admitted this was true as to 2 of the 15 third parties, but denied it was true as to the remaining 13 third parties. See Docket No. 48-2 at pp. 3-4. Accordingly, the government served each of the remaining 13 third parties with subpoenas duces tecum pursuant to Fed.R.Civ.P. 45 to seek confirmation from the third parties as to whether they knew plaintiffs' taxpayer identification numbers prior to receiving the IRS summonses.

         The government's subpoena to Citibank, N.A., in Sioux Falls, South Dakota, asked Citibank to provide one of the following two categories of documents in their possession concerning each of the named plaintiffs in this case:

1. Account opening documents for each of the account holders listed above, including but not limited to the documentation provided to you by each of the account holders. The records sought include (but are not limited to) correspondence and notices, signature cards, loan applications, loan files, and similar documents. This request also includes documents relating to any credit card, deposit account, line of credit, or other account at the bank, including its affiliates, branches or predecessor banks.
2. To the extent the documents responsive to Request No. 1 do not identify the Social Security Number or Employee Identification Number of each of the account holders listed above, this request seeks for each account held by an account holder listed above, documents and records, prior to March 8, 2018, including electronically-stored information, that reflect the Social Security Number or Employee Identification Number of the account holder.

See Docket No. 45-2 at p. 61.

         The administrative summons which the IRS had previously served on Citibank, N.A. on March 8, 2018, would have (had it not been withdrawn) required ...


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