Searching over 5,500,000 cases.


searching
Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.

Hohman v. United States

United States District Court, E.D. Michigan, Southern Division

July 11, 2017

JODI C. HOHMAN et al., Plaintiffs,
v.
UNITED STATES OF AMERICA, Defendant.

          OPINION AND ORDER GRANTING DEFENDANT'S SECOND MOTION TO DISMISS FOR LACK OF SUBJECT-MATTER JURISDICTION (ECF #32)

          MATTHEW F. LEITMAN UNITED STATES DISTRICT JUDGE

         In 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.

         The 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.

         I

         A

         The 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.

         Section 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 law; and
(3) the information sought to be obtained [by the John Doe summons] is not readily available from other sources.

Id.

         B

         This 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. (See id.)

         The IRS 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.)

         C

         In October 2015, Chase Bank notified Hohman and her company JHohman LLC[1] 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).

         During 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.)

         Hohman 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 508.)

         The 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.)

         D

         On April 20, 2016, Plaintiffs filed this civil action. Plaintiffs' only remaining claims are against the United States under the RFPA.[2] (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).

         Plaintiffs 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 relevant part:

(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 ...

Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.