Mazurek v. United States

IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT

_______________________________

No. 00-31430
_______________________________

ZBIGNIEW EMILIAN MAZUREK,

Plaintiff-Appellant,

versus

UNITED STATES of AMERICA,

Defendant-Appellee.

_________________________________________________

Appeal from the United States District Court
for the Eastern District of Louisiana
_________________________________________________

November 7, 2001

Before GARWOOD and WIENER, Circuit Judges, and CLEMENT,* District
Judge.

WIENER, Circuit Judge:

Plaintiff-Appellant Zbigniew Emilian Mazurek challenges the

district court’s denial of his motion to quash the summons of the

U.S. Internal Revenue Service (the “IRS”), issued in response to a

request by the French Tax Authority (the “FTA”), for Mazurek’s

financial records. We conclude that, because the IRS acted in good

faith and met its burden under United States v. Powell,1 it is

*
Chief Judge of the Eastern District of Louisiana, sitting
by designation.
1
379 U.S. 48 (1964).
entitled to enforcement of its summons. We therefore affirm the

ruling of the district court.

I.

FACTS AND PROCEEDINGS

Mazurek is the subject of an investigation by the FTA

concerning his civil liability for French taxes. In the course of

its investigation, the FTA requested that the IRS obtain Mazurek’s

relevant financial information located in the United States. The

FTA made this request pursuant to the terms of the Convention

Between the Government of the United States and the Government of

the French Republic for the Avoidance of Double Taxation and the

Prevention of Fiscal Evasion with Respect to Tax on Income (the

“Treaty” or the “U.S.-France Tax Treaty”). In relevant part, the

Treaty provides for the exchange of tax and financial information

between France and the United States, but does not obligate either

country to supply information that is not obtainable under the laws

of either country.

Assistant IRS Commissioner (International) John T. Lyons,

designated under the Treaty as the Competent Authority for the

United States, reviewed the FTA’s request and found it to be within

the guidelines of the Treaty. After Lyons’s approval, an IRS agent

issued a summons to Bank One of Louisiana on behalf of the FTA,

ordering that bank to turn over Mazurek’s relevant financial

documents to the IRS. In accordance with Internal Revenue Code

(“I.R.C.”) § 7609, Mazurek was notified of the service of the

2
summons. In response, Mazurek exercised his statutory right under

I.R.C. § 7609 by filing a motion to quash the summons. The IRS

responded with a motion seeking to dismiss Mazurek’s motion for

failure to state a claim and to obtain an order enforcing the

summons.

The district court referred the matter to a magistrate judge

who, after hearing from both parties, issued a Report and

Recommendation. In it the magistrate judge concluded that

discovery and a full evidentiary hearing were not necessary, and

the summons should be enforced. Adopting the magistrate judge’s

Report and Recommendation, the district court denied Mazurek’s

motion to quash and granted the IRS’s motion to enforce.

During the course of these proceedings in the district court,

Mazurek initiated a separate action in a French forum, contesting

the FTA’s determination that he was a French resident for the

period covered by the FTA’s investigation. In his district court

motion to quash and his response to proceedings before the

magistrate judge (and again on appeal), Mazurek asserted that under

French law the FTA could not continue its investigation until a

final decision on his residency status is made, arguing that it

would therefore be improper for the IRS to provide his financial

information to the FTA at this time. The magistrate judge found

this argument to be inapposite, concluding that the IRS had

presented a prima facie case for enforcement and that Mazurek had

failed to allege facts or produce evidence sufficient to undermine

3
the government’s prima facie case. More to the point, the

magistrate judge determined that Mazurek had not alleged facts

sufficient to show that the IRS was acting in bad faith in issuing

the summons and seeking to enforce it on behalf of the FTA. The

magistrate judge observed that Mazurek’s arguments and requests for

information inappropriately focused on the legitimacy and bad faith

of the FTA in requesting the summons rather than on the good faith

of the IRS in seeking to comply with that request under the Treaty.

The magistrate judge was convinced that Mazurek’s arguments

regarding residency were directed at matters of French law best

left for French authorities to resolve. After the district court

adopted the magistrate judge’s report and entered judgment in favor

of the IRS, Mazurek timely appealed.

II.

ANALYSIS

A. Enforcement of the Summons

1. Standard of Review

In reviewing the district court’s grant of a motion to enforce

a summons, we accept all facts found by the district court unless

they are clearly erroneous.2 We then determine whether the

2
Fed. R. Civ. P. 52(a).

4
government has demonstrated a prima facie case by fulfilling the

four factors delineated in Powell.3 The burden on the government

to produce a prima facie case is “slight” or “minimal.”4 Next, if

the government meets its burden, we assess whether the opponent of

the summons fulfills his “heavy” burden of rebutting the

proponent’s case by either undermining the proponent’s contentions

regarding any of the Powell factors or by demonstrating that

enforcement of the summons would result in an “abuse” of the

court’s process.5

2. The IRS meets the Powell Factors

In Powell, the Supreme Court identified four factors that the

government must show to establish a prima facie case for summons

enforcement: (1) The investigation is conducted pursuant to a

legitimate purpose; (2) the inquiry is relevant to that purpose;

(3) the information sought is not already within the IRS’s

possession; and (4) the administrative steps required by the I.R.C.

3
379 U.S. 48 (1964).
4
See Barquero v. United States, 18 F.3d 1311, 1317 (5th Cir.
1994); United States v. Davis, 636 F.2d 1028, 1034 (5th Cir. 1981);
see also Lidas v. United States, 238 F.3d 1076, 1082 (9th Cir.
2001) (citing Barquero and interpreting the same Treaty provision
as the instant case).
5
See United States v.Southeast First Nat. Bank, 655 F.2d
661, 664-65 (5th Cir. 1981); see also Lidas, 238 F.3d at 1081
(resolving a summons dispute under the U.S.-France Tax Treaty and
holding that an affidavit by Lyons, making the same declarations as
in the instant case, established a prima facie case and that
petitioners could not meet their heavy burden of rebutting the
affidavit).

5
have been followed.6 The government’s minimal burden at this stage

can be fulfilled by a “simple affidavit” by the IRS agent issuing

the summons.7 The Powell framework is employed even when, as here,

we consider a summons issued pursuant to a request by a treaty

partner.8

Assistant IRS Commissioner Lyons reviewed the FTA’s request

and submitted an affidavit to the district court stating that: (1)

The FTA’s request was properly made; (2) the requested information

was not already in the possession of either the IRS or the FTA; (3)

the requested information could be relevant to an investigation of

Mazurek’s French civil tax liability; and (4) the same type of

information could be obtained by the FTA under French law and, if

the situation were reversed, the United States could properly

request such information from France. On its face, the affidavit

establishes the IRS’s compliance with Powell’s last three factors.

In addition, the IRS meets Powell’s first (“legitimate purpose”)

requirement because it is attempting to fulfill the United States’s

obligations under the Treaty efficiently. Assisting the

investigation of a foreign tax authority has been held to be a

legitimate purpose by itself.9 With the Lyons affidavit,

6
379 U.S. 48 at 57-8.
7
Davis, 136 F.2d at 1034; Lidas, 238 F.3d at 1082.
8
United States v. Stuart, 489 U.S. 353, 356 (1989).
9
See United States v. A.L. Burbank & Co., 525 F.2d 9, 16-7
(2d. Cir. 1975) (“American administrative procedures (which include

6
therefore, the IRS established a prima facie case under Powell.

B. Mazurek’s Failed Challenge

To rebut the government’s prima facie case, Mazurek had either

to refute one of the Powell factors that the IRS established or to

show that enforcement in the district court would amount to an

“abuse” of the judicial process.10 An abuse of the judicial process

occurs when a summons is sought for an “improper purpose, such as

... harass[ing] the taxpayer, ... put[ting] pressure on him to

settle a collateral dispute” or obtaining information solely for a

criminal prosecution under the guise of a civil liability

investigation.11

1. Abuse of Process

As already noted, in contrast to the IRS’s slight prima facie

burden, the taxpayer’s burden at the rebuttal stage is heavy.

Mazurek cannot show that the IRS’s summons constituted an abuse of

the judicial process. He has adduced no evidence, and indeed has

not even alleged, that the summons is being used to harass, to

gain leverage, or pretextually to develop a criminal investigation.

Furthermore, even if we were to look into Mazurek’s legal

the administrative summonses in issue here) are properly utilized
where the purpose is solely to assist the investigation of a
Canadian potential tax liability.”) (parentheses in original)
(emphasis added).
10
Powell, 379 U.S. at 58; Davis, 636 F.2d at 1034.
11
Powell, 379 U.S. at 58; United States v. Southeast First
Nat. Bank, 655 F.2d 661, 665 (5th Cir. 1981).

7
proceedings in France, we would not find that he has demonstrated

that the FTA’s Treaty request for a summons constituted an abuse of

judicial process, i.e., that the French investigation was or is

being conducted for an illegitimate purpose. Mazurek incorrectly

conflates his challenge to his residency determination and the

alleged illegitimacy of the FTA’s investigation. It does not

follow, simply because Mazurek challenges the FTA’s residency

determination, that the FTA’s investigation is being conducted for

an improper purpose. Mazurek has presented no evidence to suggest

that the FTA is investigating him so as to harass or gain leverage.

To the contrary, Mazurek concedes that the FTA’s sole purpose is to

determine his civil liability for French taxes. Therefore, even if

French law requires the FTA to suspend its investigation pending

resolution of the residency appeal, there is no indication that the

FTA’s purpose is not legitimate in any way. Thus, Mazurek must

challenge the four Powell factors directly.

2. The Powell Factors

Of the four Powell factors, the only one that Mazurek could

conceivably contest is the “legitimate purpose” requirement. He

attempts to do this by arguing that, because he was not a resident

of France for the periods implicated by the FTA investigation, any

request for information covered by the investigation is not for a

legitimate purpose. Essentially, Mazurek contends that, during the

time that the determination of his residency status is awaiting

final resolution in a French court, the FTA’s request cannot be

8
legitimate.

The problem with this reasoning, as the magistrate judge

noted, is that Mazurek focuses on the legitimacy of the FTA’s

investigation, not on the legitimacy of the IRS’s compliance with

the FTA’s request. Yet, to rebut the Powell requirement, Mazurek

must show that the IRS is acting in bad faith.12 As long as the IRS

acts in good faith, it need not also attest to — much lest prove —

the good faith of the requesting nation.13 Requiring district

courts and the IRS to look into the good faith of the requesting

country’s investigation would — at least when, as here, the

taxpayer concedes that the treaty partner is interested only in

civil tax collection — unwisely necessitate an inquiry into the

propriety of the FTA’s actions under French law. And, under the

plain language of Stuart, Mazurek has failed to show that the IRS

acted improperly.

Perhaps Mazurek’s strongest argument for quashing the summons

is his contention that executing the summons would expand the FTA’s

rights by allowing it access to information, through IRS

compliance, that it could not obtain under French law. Mazurek

does not dispute that, if he were a French resident, the FTA would

have the right to request such information from the United States.

12
Stuart, 489 U.S. at 370 (“So long as the IRS itself acts
in good faith, as the term was explicated in United States v.
Powell [citation omitted] and complies with applicable statutes, it
is entitled to enforcement of its summons.”).
13
Id.

9
Rather, he claims that, under French law, the FTA must suspend its

investigation once he challenges his residency and may not

reinstate it while the determination of his residency status for

the years in question is pending. If the FTA must suspend its

investigation during the appeal, Mazurek reasons, then allowing the

IRS to provide the FTA with the requested information during that

time permits the FTA to circumvent French law and obtain

information at a time that it could not obtain it directly.14

It is at least arguable that the FTA cannot use United States

authority to expand its own rights and procure information that the

FTA could not acquire under French laws. Mazurek would support

this argument by references to the Commentary to the Model Tax

Treaty and to non-precedential case law addressing the exchange

provisions of other U.S. Tax Treaties. The Commentary to the Model

Tax Treaty, which contains language similar to the U.S.-France Tax

14
The IRS submitted affidavits from Competent U.S.
Authorities which indicate that the proceedings in French court do
not affect the exchange of information between the U.S. and France.
The Supplemental Declaration of John T. Lyons states:

Upon being advised of this proceeding and certain
represenations being made to the Court by Mr. Mazurek,
Christiane Marechal, Tax Attache3 to the Embassy of
France, and current Competent Authority for the French
Government, has informed me as follows:
....
(b) Under French law, the filing of Mr. Mazurek’s
appeal of the residency determination does not
affect or require the suspension of the prior
request for exchange of information forwarded to
the United States pursuant to Article 27 of the
Convention.

10
Treaty, states, in relevant part:

[A] Contracting State cannot take advantage of the
information system of the other Contracting State if it
is wider than its own.15

The United States tax treaties currently in force are based, in

large part, on the Model Treaty.16 Hence, contends Mazurek, the

Commentary to the Model Treaty should provide some guidance in

interpreting the Treaty at issue. In addition, United States v.

Lincoln First Bank, one of the first cases to address the

discretionary exchange provisions of U.S. Tax Treaties like the one

here at issue, appears to support Mazurek’s contention that a

foreign nation may not use the administrative processes and

governmental agencies of the United States to obtain information

that the foreign nation cannot obtain under its own laws.17

Although these assertions are correct in the abstract, there

are several reasons why Mazurek’s argument is not wholly convincing

under the instant circumstances. First, the Treaty provides in

relevant part:

15
Organization for Economic Co-Operation and Development,
Model Treaty, Art. 26, 1977 Revised Commentary.
16
Dennis D. Curtin, Exchange of Information Under the United
States Tax Treaties, 12 Brook. J. Int’l L. 35, 45-46 (1986).
17
United States v. Lincoln First Bank, 1980 WL 1500 (S.D.N.Y.
1980)(interpreting the U.S.-Norway Tax Treaty, which included a
provision identical to the one at issue, and stating, “The
governmental agencies of the United States should not be employed
to provide information to a foreign country which could not be
obtained under the laws of that country. A holding to the contrary
could result in an unintended circumvention of applicable foreign
laws and related domestic laws.”).

11
 In no case shall the provisions of paragraph 1 [detailing
the information that can be properly requested and the
proper treatment of that information by the requesting
State] be construed so as to impose on a Contracting
State the obligation:
(a) to carry out administrative measures at
variance with the law or the administrative
practice of that or of the other Contracting State;
(b) to supply particulars that are not obtainable
under the laws or in the normal course of the
administration of that or of the other Contracting
State.18

Thus, even though it does not mandate the exchange of information

at variance with French law, neither does the plain language of the

Treaty forbid compliance with an otherwise proper treaty request.

Second, although the Commentary to the Model Treaty provides

guidance, the IRS’s specific commentary and advice on the U.S.-

France Tax Treaty should be given greater weight. As the IRS notes,

the Treasury Department’s Technical Explanation of Article 27

provides only that “[e]ither Contracting State may ... at its

discretion, subject to the limitation of the paragraph and domestic

law, provide information that it is not obligated to provide under

the provisions of this paragraph.”19 The Treasury Department

apparently intended to provide broad discretionary authority to the

Competent Authority when considering a treaty partner’s request.

Moreover, the Treasury Department’s Technical Explanation of

Article 27 does not restrict the plain meaning of the Treaty

18
U.S.-France Income Tax Treaty, Art. 27 ¶ 2 (emphasis
added).
19
See Treasury Department’s Technical Explanation of Article
XXVII, 2 Tax Treaties (CCH) ¶ 3058 at 27, 199-43.

12
language in any way.

Third, Lincoln’s continued viability is questionable. The

Supreme Court’s language in Stuart seems to end the enforcement

inquiry with a determination that the IRS is acting in good faith.

A reasonable reading of Stuart suggests that an assessment of what

would be allowed or disallowed under a foreign nation’s law is

unnecessary. Moreover, a recent case from the Southern District of

New York, where Lincoln was decided, indicates that Lincoln may no

longer be good law, even within the jurisdiction that decided it.20

Finally, even if we were to assume that this country is

prohibited from supplying information that the FTA could not obtain

under French law, Mazurek’s contention in the instant case would

fail because the prohibition he asserts is merely temporal rather

than substantive. In other words, the gravamen of his contention

is that French law prohibits the FTA from gathering materials for

20
Azouz v. United States, 1999 WL 1581401, *1 (S.D.N.Y. 1999)
(interpreting Art. XXVII of the U.S.-Canada Tax Treaty, which is
identical to the provision at issue, and rejecting, as inapposite,
petitioner’s contention that the summons violated Canadian law):

Petitioner’s reliance on United States v. Lincoln First
Bank [citation omitted] does not change this result.
Lincoln First Bank predates the Supreme Court’s ruling in
Stuart and the Treasury Department’s Technical
Explanation of Article XXVII, CCH Tax Treatise ¶ 1950, at
21, 016-3 (contracting States may ‘provide information
that would not be available to the requesting State under
its law or administrative practice or that in different
circumstances would not be available to the State
requested to provide the information.’). Lincoln First
Bank is also at odds with the avowed goals of the
Convention and its predecessor. See, e.g., A.L. Burbank
[citation omitted].

13
its investigation while he continues to appeal the French

determination of his residency. Mazurek cannot, and does not,

contend that as a general, substantive matter of French law, the

FTA cannot obtain access to such financial information at all.

Thus, even if under French law the FTA was not permitted to

continue its investigation pending final determination of the

residency issue, the FTA retains the substantive right to procure

the requested information. Viewed in this light, enforcement of

this IRS summons, issued pursuant to the FTA’s request before

commencement of Mazurek’s residency appeal, would not constitute an

expansion of the rights that the FTA otherwise possesses under

French law — or under the laws of this country for that matter.

C. Mazurek’s Request for Discovery and an Evidentiary Hearing

1. Standard of Review

The scope of discovery and availability of a hearings on a

motion to quash a summons is left to the sound discretion of the

district court.21 Therefore, we review that court’s denial of

Mazurek’s request for discovery, and for a full evidentiary

hearing, for abuse of discretion.

2. Denial of Mazurek’s Request

Mazurek argues that he should have been afforded an

21
See Hintze v. Internal Revenue Service, 879 F.2d 121, 126
(4th Cir. 1989) (“[W]hether to conduct an evidentiary hearing in
the course of summons enforcement proceedings is a matter committed
to the sound discretion of the district court.”) overruled on other
grounds, United States v. Church of Scientology, 506 U.S. 9 (1992).

14
opportunity for discovery and a full evidentiary hearing. The

magistrate judge decided, however, that discovery was unnecessary

and granted the IRS a protective order covering the documents

Mazurek requested. In so doing, the magistrate judge stated that

“[t]he court agrees with the government’s argument that plaintiff’s

discovery requests and requests for admission would deal with

French governmental actions and interpretations of French law which

are beyond the power of this court to review.” Nevertheless, the

magistrate judge did allow Mazurek to supplement the record with

any evidence related to his motion to quash the summons.

Mazurek has not established any abuse of discretion. First,

as noted by the Supreme Court, allowing full opportunities for

discovery would contravene the purpose of a summons enforcement

proceeding, which is summary in nature.22 The Fourth Circuit

reviewed case law from several circuits (including this one) in

relation to discovery and evidentiary hearings for summons

proceedings and concluded that “[t]here is no requirement that the

court conduct such a hearing or permit discovery in each and every

case.”23

22
Stuart, 489 U.S. at 369 (citing the legislative history of
I.R.C. § 7602(c)).
23
Hintze, 879 F.2d at 126-27 (4th Cir. 1989)(quoting United
States v. Harris, 628 F.2d 875, 879 (5th Cir. 1980) (“A taxpayer’s
right to an adversary hearing on the good faith issue is not
absolute.”); United States v. Southern Tanks, Inc. 619 F.2d 54, 56
(10th Cir. 1980) (“As a general rule, discovery is available in
summons enforcement proceedings only in extraordinary
situations.”)).

15
 Second, as Mazurek’s argument on appeal confirms, the

information he sought to procure through discovery and to present

during an evidentiary hearing relates to the propriety of the FTA’s

investigation under French civil tax law. His document requests

reflect this same focus. Producing evidence that may demonstrate

the bad faith of a French tax agency purely as a matter of French

civil tax law is irrelevant to the only good faith issue under

Powell, ie., the good faith of the IRS in honoring the French

request. And, Mazurek does not seek to discover, or allege that he

needs to discover, information that would impugn the good faith of

the IRS in issuing the summons or enforcing it in compliance with

the FTA’s request.

District courts are afforded wide leeway in fashioning the

scope of discovery in summons enforcement proceedings because

ultimate issues of responsibility are not decided in these

proceedings. Given this broad discretion and Mazurek’s misdirected

discovery requests, we are satisfied that the district court acted

well within its discretion in denying discovery and an evidentiary

hearing.

III.

CONCLUSION

For the foregoing reasons, Mazurek’s appeal from the denial

of his motion to quash the IRS’s summons is denied. The district

court’s rulings are, in all respects,

AFFIRMED.

16
17