Crow v. United States of America
Filing
17
MEMORANDUM DECISION AND ORDER. IT IS HEREBY ORDERED The Government's Motions to Dismiss (Dkt. 14, Case No. 1:20-mc-00280-DCN) and (Dkt. 14, 1:20-mc-00281-DCN) are GRANTED. Intervenors Petitions to Quash (Dkt. 1 , No. 1:20-mc-00280-DCN) and (D kt. 1 ,No. 1:20-mc-00281-DCN) are DENIED as MOOT. Intervenors' Motions to Consolidate Cases (Dkt. 47 , Case No. 1:18-cv-00452-DCN), (Dkt. 10 , Case No. 1:20-mc-00280-DCN), and (Dkt. 11 , Case No. 1:20-mc-00281-DCN) are DENIED. Crow v. Unit ed States (Case No. 1:20-mc-00280-DCN) and Crow v. United States (Case No. 1:20-mc-00281-DCN) are hereby DISMISSED and CLOSED. This Order shall be filed in all three of the aforementioned cases (1:18-cv-00453-DCN, 1:20-mc-00280-DCN, and 1:20-mc-281-DCN). Signed by Judge David C. Nye. (caused to be mailed to non Registered Participants at the addresses listed on the Notice of Electronic Filing (NEF) by (kt)
UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF IDAHO
UNITED STATES OF AMERICA,
Case Nos. 1:18-cv-00452-DCN
1:20-mc-00280-DCN
1:20-mc-00281-DCN
Petitioner,
STEVE VAUGHT, President of Alpha
Lending, LLC, d/b/a Marigold Credit,
and Member-Manager of Alpha Holding
Company, LLC,
MEMORANDUM DECISION AND
ORDER
Respondent,
S. CROW COLLATERAL
CORPORATION and STANLEY D.
CROW,
Intervenors.
I.
INTRODUCTION
Pending before the Court are several related motions in the three above-referenced
cases. Most recently, S. Crow Collateral Corporation (“SCCC”) and Stanley D. Crow’s
(collectively “Intervenors”) filed Motions to Consolidate the three cases. Dkt. 47.1 In Crow
v. United States (Case No. 1:20-mc-00280-DCN) and Crow v. United States (Case No.
1:20-mc-00281-DCN), the two related miscellaneous cases, the Intervenors filed Petitions
to Quash IRS summonses that had been issued. Dkt. 1.2 The Government later withdrew
the summonses and filed Motions to Dismiss the miscellaneous cases, contending that the
1
Where possible, and unless otherwise indicated, record citations refer to Case No. 1:18-cv-00452-DCN.
The related Motions to Consolidate Cases are Dkt. 10, Case No. 1:20-mc-00280-DCN and Dkt. 11, 1:20mc-00281-DCN.
2
See Dkt. 1 of each of the aforementioned miscellaneous cases.
MEMORANDUM DECISION AND ORDER 1
Petitions to Quash are moot. Dkt. 14.3
Having reviewed the record and briefs, the Court finds that the facts and legal
arguments are adequately presented. Accordingly, in the interest of avoiding further delay,
and because the Court finds that the decisional process would not be significantly aided by
oral argument, the Court will decide the motions without oral argument. Dist. Idaho Loc.
Civ. R. 7.1(d)(1)(B).
Upon review, and for the reasons set forth below, the Court GRANTS the
Government’s Motions to Dismiss, DENIES as MOOT the Petitions to Quash in the
miscellaneous cases, and DENIES Intervenors’ Motions to Consolidate Cases.
II.
BACKGROUND
The main lawsuit, Vaught, arises out of the IRS’s investigation of Intervenors. In
the course of its investigation, the IRS issued a third-party summons to Steve Vaught as
president of Alpha Lending, LLC on January 19, 2018, and to Vaught as member-manager
of Alpha Holding Company, LLC, d/b/a Marigold Credit on January 24, 2018.4 Both thirdparties summonses directed Vaught to (1) appear before the IRS on March 13, 2018 and
(2) give testimony and produce for examination records and documents of the companies
on whose behalf he was appearing. Vaught did neither.
On October 17, 2018, the Government filed its petition to enforce the two
summonses the IRS served on the Alpha Companies. Dkt. 1. On November 26, 2018,
3
See Dkt. 14 of the miscellaneous cases.
4
Collectively, Alpha Lending, LLC and Alpha Holding Company, LLC will be referred to as the “Alpha
Companies.”
MEMORANDUM DECISION AND ORDER 2
Intervenors filed their memorandum of law in opposition to the petition to enforce the IRS
summonses, and in support of their motion to quash. Dkt. 7. The Court subsequently
granted Intervenors leave to file an amended opposition to the petition to enforce and in
support of their motion to quash, (Dkt. 38), which Intervenors did on December 18, 2019
(Dkt. 39). Briefing was ripe on January 16, 2020. The case was subsequently reassigned to
Judge James M. Moody from the Eastern District of Arkansas on February 12, 2020. Dkt.
44.
On December 31, 2020, Intervenors filed the pending Motions to Consolidate Cases
in which they move the Court, pursuant to Federal Rule of Civil Procedure 42(a), to issue
an order consolidating the instant matter with the two miscellaneous cases.
On January 11, 2021, the main case was transferred from Judge Moody back to the
undersigned Judge. Dkt. 48. Then, the Government responded, opposing Intervenors’
Motions to Consolidate. Dkt. 49. A day later, Respondent Steve Vaught also responded,
informing the Court of his non-opposition to Intervenors’ Motions to Consolidate. Dkt. 50.
Intervenors filed a Reply (Dkt. 51), and the issue of consolidation is now ripe.
On February 1, 2021, the Government filed Motions to Dismiss both the related
miscellaneous cases because the IRS had withdrawn the summonses and because it
contended that the Court no longer had jurisdiction under the mootness doctrine. Dkt. 14.
Those matters went through the normal course of briefing and became ripe on March 8,
2021.
III.
DISCUSSION
Federal Rule of Civil Procedure 42(a) provides: “If actions before the court involve
MEMORANDUM DECISION AND ORDER 3
a common question of law or fact, the court may . . . consolidate the actions[.]” The
Government argues that Crow v. United States (Case No. 1:20-mc-00280-DCN) and Crow
v. United States (Case No. 1:20-mc-00281-DCN) are not properly before the Court. Rather,
both actions are moot and should be dismissed because the IRS has withdrawn the
summonses issued to the subjects of both actions. Dkt. 49.
Intervenors agree that the IRS stated in a November 20, 2020 letter that it has
withdrawn the summonses. Dkt. 47-1, at 3. However, Intervenors argue that because they
anticipate the IRS will reissue the summonses, the petitions to quash should not be
dismissed (and the IRS should not be permitted the opportunity to reissue them) until the
Court has considered whether the IRS has acted in bad faith in the three separate actions.
Id. at 8. Specifically, Intervenors insist that the IRS withdrew the summonses due to certain
technical errors. They also state that the IRS has not indicated that it does not intend to
reissue the summonses. And they reason that, because the IRS issued the summonses in
the two related cases during the pendency of the main case, Vaught, the IRS has
demonstrated it will not stop issuing summonses despite the underlying dispute.
The Court concludes that consolidation is not appropriate in this case because the
other two actions are indeed moot. “To qualify as a case fit for federal-court adjudication,
‘an actual controversy must be extant at all stages of review, not merely at the time the
complaint is filed.’” Arizonans for Official English v. Arizona, 520 U.S. 43, 67 (1997)
(quoting Preiser v. Newkirk, 422 U.S. 395, 401 (1975)). “There is thus no case or
controversy, and a suit becomes moot, ‘when the issues presented are no longer live or the
parties lack a legally cognizable interest in the outcome.’” Chafin v. Chafin, 568 U.S. 165,
MEMORANDUM DECISION AND ORDER 4
172 (2013) (quoting Already, LLC v. Nike, Inc., 568 U.S. 85, 91 (2013)).
The Ninth Circuit has previously affirmed a district court’s dismissal of a case based
on mootness once the IRS withdrew its summonses. In Pacific Fisheries Inc. v. United
States, the petitioners moved to quash two IRS summonses. 484 F.3d 1103, 1105 (9th Cir.
2007). After the petitioners moved to quash and sent a letter to the IRS “reiterating their
position that the summonses were unenforceable,” the IRS withdrew the summonses. Id.
The IRS then asked the petitioners to voluntarily dismiss because “the controversy at issue
. . . is [ ] moot.” Id. The petitioners “refused to file voluntary dismissals” unless the “IRS
provided certain information and assurances,” including “assurances that the IRS would
not reissue the summons[es].” Id. at 1105–06. Even though the IRS did not make an
assurance against reissuance, the district court granted the government’s motion to dismiss
based on mootness because the IRS had withdrawn the summonses. Id. at 1106. The Ninth
Circuit affirmed the district court’s determination. It considered the possibility that the IRS
might reissue the summonses at issue in that case but held that the petition to quash became
“moot after the summonses were withdrawn.” Id. at 1111 (noting that the government
“acted reasonably when it asked the taxpayers to voluntarily dismiss the petitions to quash,
given that those petitions were moot after the summonses were withdrawn”).
Similarly, in a separate, unpublished opinion, the Ninth Circuit stated that
“[b]ecause the IRS withdrew the summons, [petitioner] no longer has a justiciable claim
and the district court correctly dismissed [her] petition.” Gillings v. U.S. I.R.S., 122 F.
App’x 360, 361 (9th Cir. 2005) (citing Hacienda Valley Mobile Estates v. City of Morgan
Hill, 353 F.3d 651, 661 (9th Cir. 2003)). Even though the petitioner in Gillings, like
MEMORANDUM DECISION AND ORDER 5
Intervenors here, contended that the summonses were not moot because they would likely
be reissued, the Ninth Circuit reasoned that it could not afford any effective relief that the
petitioner had not already received, and thus petitioner no longer had a justiciable claim.
Id.
The Ninth Circuit is far from alone in this rule of law. Many courts have held that
the withdrawal of an IRS summons moots a petition to quash that summons. Schaeffler v.
United States, 2016 WL 3369538, at *2 (S.D.N.Y. June 17, 2016), aff’d, 696 F. App’x 542
(2d Cir. 2017); Malone v. IRS, 237 F.2d 54, 54 (6th Cir. 1956) (per curiam); MaxCrest Ltd.
v. United States, 2016 WL 3211228, at *1 (N.D. Cal. Mar. 25, 2016); Brinkman v. U.S.,
Inc. ex rel. IRS, 2015 WL 9920980, at *2 (D. Minn. Dec. 16, 2015); Dew v. United States,
2010 WL 889987, at *2 (D.S.C. Jan. 20, 2010); Fisher v. United States, 676 F. Supp. 2d
1165, 1170 (W.D. Wa. 2009); Hardee v. United States, 2007 WL 3037308, at *1
(W.D.N.C. Oct. 16, 2007); Thompson v. United States, 2007 WL 2778663, at *2 (S.D.
Ohio Sept. 21, 2007); Thompson v. United States, 2007 WL 1891167, at *2 (D.D.C. June
29, 2007); Dame v. United States, 643 F. Supp. 533, 534 (S.D.N.Y. 1986).
The Court concludes that these precedents are applicable here. No party disputes
that the IRS has withdrawn the summonses in Crow v. United States (Case No. 1:20-mc0028-DCN) and Crow v. United States (Case No. 1:20-mc-00281-DCN). Under controlling
and persuasive caselaw, which explicitly considered the possibility of the reissuance of
withdrawn summonses but nonetheless held that withdrawing the summonses mooted the
petitions to quash, there are no longer justiciable claims in front of the Court in the
miscellaneous cases. Consequently, the miscellaneous cases must be dismissed and do not
MEMORANDUM DECISION AND ORDER 6
necessitate consolidation.
Lastly, in the principal case Intervenors rely on, Schaeffler v. United States, 696 F.
App’x 542, 543 (2d Cir. 2017), the Second Circuit came to the same conclusion as the
conclusion in the cases already discussed and cited. In affirming the district court’s
conclusion that a petition to quash was moot because the IRS had withdrawn the summons,
the court did “not give much credence to Schaeffler’s speculation about how events may
play out in the future should the IRS seek” the documents again. Id. Here too, the Court
finds Intervenors’ arguments to be speculative at best.5 Thus, Schaeffler does not alter the
Court’s conclusion that the related petitions to quash are moot.
For the foregoing reasons, the Court grants the Government’s Motions to Dismiss
the miscellaneous cases, denies as moot the Petitions to Quash in the miscellaneous cases,
and denies Intervenors’ Motions to Consolidate in all three cases.
IV.
ORDER
It is HEREBY ORDERED:
1. The Government’s Motions to Dismiss (Dkt. 14, Case No. 1:20-mc-00280DCN) and (Dkt. 14, 1:20-mc-00281-DCN) are GRANTED.
2. Intervenors’ Petitions to Quash (Dkt. 1, No. 1:20-mc-00280-DCN) and (Dkt. 1,
No. 1:20-mc-00281-DCN) are DENIED as MOOT.
5
The parts of Schaeffler upon which Intervenors place their greatest focus were afterthoughts, i.e., dicta.
After its holding, the Second Circuit went on to assume without deciding that, even if the voluntary
cessation exception applied, the IRS had met its burden through repeated assurances that it would not
reissue a summons and all “potential effects of the summons ha[d] thus been fully eradicated.” Id. at 543–
44. However, those issues were not material to the court’s holding. The court’s holding was that a
withdrawn summons rendered the petition to quash moot without need for further analysis.
MEMORANDUM DECISION AND ORDER 7
3. Intervenors’ Motions to Consolidate Cases (Dkt. 47, Case No. 1:18-cv-00452DCN), (Dkt. 10, Case No. 1:20-mc-00280-DCN), and (Dkt. 11, Case No. 1:20mc-00281-DCN) are DENIED.
4. Crow v. United States (Case No. 1:20-mc-00280-DCN) and Crow v. United
States (Case No. 1:20-mc-00281-DCN) are hereby DISMISSED and
CLOSED.
5. This Order shall be filed in all three of the aforementioned cases (1:18-cv-00453DCN, 1:20-mc-00280-DCN, and 1:20-mc-281-DCN).
DATED: May 20, 2021
_________________________
David C. Nye
Chief U.S. District Court Judge
MEMORANDUM DECISION AND ORDER 8
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