United States District Court, E.D. Michigan, Southern Division
JODI C. HOHMAN et al., Plaintiffs,
UNITED STATES OF AMERICA, Defendant.
OPINION AND ORDER GRANTING DEFENDANT'S SECOND
MOTION TO DISMISS FOR LACK OF SUBJECT-MATTER JURISDICTION
MATTHEW F. LEITMAN UNITED STATES DISTRICT JUDGE
September 2015, the Internal Revenue Service served two
so-called “John Doe” summonses on JP Morgan Chase
Bank. The Internal Revenue Code requires the IRS to obtain
federal court approval before serving such summonses, but the
IRS did not do so here. The summonses directed Chase Bank to
deliver to the IRS records related to three accounts, which
were identified only by account number.
three accounts belonged to Plaintiffs Jodi C. Hohman, JHohman
LLC, and You Got Busted By Me LLC (“Busted LLC”).
In this action, these three Plaintiffs and Plaintiff Terry
Miller (the sole member and owner of Busted LLC) allege that
the IRS's efforts to obtain their financial records
through the use of the John Doe summonses violated the
federal Right to Financial Privacy Act, 12 U.S.C. § 3401
et seq. (the “RFPA” or
“Act”). Plaintiffs seek damages from the United
States under that Act. The United States contends that its
sovereign immunity bars Plaintiffs' RFPA claims. For the
reasons stated below, the Court agrees, and it therefore
DISMISSES Plaintiffs' claims.
Internal Revenue Code authorizes the IRS to serve
administrative summonses that compel third parties to produce
documents related to taxpayers who are under investigation.
See 26 U.S.C. § 7603. The Code generally
requires that these summonses identify the person whose
records are sought. See 26 U.S.C. § 7609. But
one provision of the Code, 26 U.S.C. § 7609(f)
(“Section 7609(f)”), allows the IRS to serve
summonses that do not identify the person whose records are
sought. Summonses issued under Section 7609(f) are known as
John Doe summonses.
7609(f) requires the IRS to obtain approval from a federal
district court before serving a John Doe summons. See
Id. A federal court may approve such a summons only if
it finds that:
(1) the [John Doe] summons relates to the investigation of a
particular person or ascertainable group or class of persons;
(2) there is a reasonable basis for believing that such
person or group or class of persons may fail or may have
failed to comply with any provision of any internal revenue
(3) the information sought to be obtained [by the John Doe
summons] is not readily available from other sources.
case is about two John Doe summonses that the IRS served in
September 2015. First, on September 25, 2015, the IRS served
on Chase Bank a John Doe summons that sought financial
records for two separate accounts (the “First John Doe
Summons”). (See Am. Compl. at ¶¶ 34,
37, ECF #36 at Pg. ID 500-01.) The accounts were identified
only by account number. (See id.) Second, on
September 30, 2015, the IRS served on Chase Bank a second
John Doe summons that sought financial records for a single
account (the “Second John Doe Summons”). (See
Id. at ¶¶ 53, 56, ECF #36 at Pg. ID 507-08.)
Again, the account was identified only by account number.
did not seek or obtain approval from a federal district court
to issue either of the John Doe summonses. (See Id.
at ¶¶ 40, 78, ECF #36 at Pg. ID 502, 515.)
October 2015, Chase Bank notified Hohman and her company
JHohman LLC that it (Chase Bank) had received the
First John Doe Summons from the IRS and that the summons
sought records for accounts “relating” to them.
(Id. at ¶34, ECF #36 at Pg. ID 500.) On
November 25, 2015, Hohman and JHohman LLC filed a petition in
this Court to quash the First John Doe Summons. (See
Id. at ¶50, ECF #36 at Pg. ID 506.) In their
petition to quash, Hohman and JHohman LLC argued that the
First John Doe Summons did not meet the requirements listed
in Section 7609(f). See Petition to Quash, Jodi
C. Hohman et al. v. United States of America et al.,
15-mc-51669, Docket #1 (E.D. Mich. Nov. 25, 2015).
the proceedings on the petition to quash, the IRS produced
sworn declarations from the IRS agents who had issued the
First John Doe Summons (the “Declarations”).
(See Am. Compl. at ¶51, ECF #36 at Pg.
ID 506.) The IRS attached a copy of the First John Doe
Summons to the Declarations. The copy was partially redacted.
(See Id. at ¶55, ECF #36 at Pg. ID 507.) It
revealed the first account number listed on the summons but
masked the second account number. (See id.)
and JHohman LLC reviewed the partially redacted First John
Doe Summons and determined that the first account number on
that summons belonged to JHohman LLC. (See id.)
However, because the second account number remained redacted,
Hohman and JHohman LLC were unable to determine who owned
that account. (See id.) Their subsequent
investigation led them to believe that the second account
belonged either to Miller, individually, or his company,
Busted LLC. (See Id. at ¶59, ECF #36 at Pg. ID
Declarations also revealed for the first time that the IRS
had served the Second John Doe Summons on Chase Bank.
(See Id. at ¶53, ECF #36 at Pg. ID 507.) The
IRS attached an unredacted copy of the Second John Doe
Summons to the Declarations. (See Id. at ¶54,
ECF #36 at Pg. ID 507.) Hohman and JHohman LLC reviewed that
summons and determined that it sought records relating to an
account belonging to Hohman, individually. (See Id.
at ¶56, ECF #36 at Pg. ID 508.)
April 20, 2016, Plaintiffs filed this civil action.
Plaintiffs' only remaining claims are against the United
States under the RFPA. (See Am. Compl. at ¶75, ECF
#36 at Pg. ID 514.) The RFPA “accords customers of
banks and similar financial institutions certain rights to be
notified of and to challenge in court administrative
subpoenas of financial records in the possession of
banks.” SEC v. Jerry T. O'Brien, Inc., 467
U.S. 735, 745 (1984).
bring their RFPA claims under Section 3417 of the Act. That
section creates a private cause of action for violations of
the RFPA and waives the United States' sovereign immunity
for certain claims by a “customer.” It reads in
(a) Liability of Agencies or Departments of United
States or Financial Institutions Any agency or
department of the United States . . . obtaining or disclosing
financial records or information contained therein in
violation of [the RFPA] is liable to the customer to