07-3729-cv
USA v. Schulz
UNITED STATES COURT OF APPEALS
FOR THE SECOND CIRCUIT
August Term, 2007
(Argued: February 4, 2008 Decided: February 22, 2008)
Docket No. 07-3729-cv
_____________________________________________
UNITED STATES OF AMERICA,
Plaintiff-Appellee,
– v. –
ROBERT L. SCHULZ, WE THE PEOPLE FOUNDATION
FOR CONSTITUTIONAL EDUCATION, INC., and
WE THE PEOPLE CONGRESS, INC.,
Defendants-Appellants.
____________________________________________
Before NEWMAN, WINTER and
SOTOMAYOR, Circuit Judges.
____________________________________________
Defendants-appellants Robert L. Schulz, We the People Foundation for Constitutional
Education, Inc., and We the People Congress, Inc., appeal an August 15, 2007 judgment of the
United States District Court for the Northern District of New York (McAvoy, J.). We affirm the
district court’s order under 26 U.S.C. § 7408 permanently enjoining defendants from violating
26 U.S.C. §§ 6700 & 6701 based on their distribution of false and misleading materials
concerning corporate obligations to withhold federal taxes on wages.
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ARTHUR T. CATTERALL, Attorney, Tax
Division, Department of Justice, Washington, D.C.
(Richard T. Morrison, Acting Assistant Attorney
General, Gilbert S. Rothenberg, Acting Deputy
Assistant Attorney General, Andrea R. Tebbets,
Attorney, Tax Division, Department of Justice,
Washington, D.C., and Glenn T. Suddaby, United
States Attorney for the Northern District of New
York, on the brief), for Plaintiff-Appellee.
ROBERT L. SHULZ, pro se (Mark Lane, on the
brief), Queensbury, NY, for Defendants-Appellants.
PER CURIAM
Defendants-appellants Robert L. Schulz (“Schulz”), We the People Congress, Inc., and
We the People Foundation for Constitutional Education, Inc. (together with We the People
Congress, the “Corporations”), appeal an August 15, 2007 judgment of the United States District
Court for the Northern District of New York (McAvoy, J.), permanently enjoining defendants
from violating 26 U.S.C. §§ 6700 & 6701 based on their distribution of false and misleading tax
materials concerning corporate obligations to withhold federal taxes on wages.1 See 26 U.S.C.
§ 7408 (providing district courts authority to enjoin persons from engaging in certain “specified
conduct” made illegal by the tax laws, including 26 U.S.C. §§ 6700 & 6701). The district court
also ordered defendants to, inter alia, provide the names and contact information of the
individuals who have received defendants’ tax materials, and to notify such recipients of the
district court’s decision and order.
1
The tax materials at issue were distributed in a packet called the “Blue Folder,” which
was made available by defendants both in hard copy and electronically via the internet. The
district court found that the materials included false representations about the tax laws, as well as
instructions and forms to “legally terminate withholding.”
2
Defendants principally argue that the tax materials at issue constitute protected political
and/or educational speech under the First Amendment of the Constitution. Defendants further
argue that their actions in promoting the materials are otherwise protected under the First
Amendment’s Petition Clause, on the theory that the government has yet to respond to
defendants’ repeated inquiries as to whether, and on what basis, any information in the tax
materials is false. Finally, defendants assert that their actions were not violative of 26 U.S.C.
§§ 6700 or 6701.
We have considered all of defendants’ arguments and find them to be without merit. We
affirm the judgment for substantially the reasons set forth in the district court’s decision. See
United States v. Schulz, __ F. Supp. 2d __, 2007 U.S. Dist. LEXIS 58271 (N.D.N.Y. Aug. 9,
2007).
We also vacate the stay we previously imposed with respect to Paragraph C of the
injunction, which directs defendants to provide to the government the names and contact
information of the individuals who have received the tax materials.2 We find that Paragraph C is
sufficiently tailored to the legal violations at issue, see Society for Good Will to Retarded
Children, Inc. v. Cuomo, 737 F.2d 1239, 1251 (2d Cir. 1984) (“Injunctive relief should be
narrowly tailored to fit the specific legal violations.”), and that the district court did not abuse its
discretion in imposing the conditions specified in that provision, see Ragin v. Harry Macklowe
Real Estate Co., 6 F.3d 898, 909 (2d Cir. 1993) (stating that the scope of an injunction is
reviewed for abuse of discretion). The district court found that defendants’ illegal activities were
2
On September 20, 2007, we denied defendants’ motion to stay the full injunction, and
instead granted their motion only with respect to Paragraph C only.
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harming individuals, who were exposing themselves to criminal liability by following the
defendants’ ill-conceived instructions. See Schulz, 2007 U.S. Dist. LEXIS 58271, at *23.
Requiring defendants to provide the identity and contact information of the recipients of the tax
materials enables the government to monitor the defendants’ obligation under the injunction to
provide a copy of the district court’s order to recipients of the tax materials. Moreover, the
district court found that the defendants’ illegal actions were harming the government, which was
not receiving required tax payments and was forced to expend resources to collect the unpaid
taxes. Id. at * 24. Requiring defendants to provide the identity and contact information of the
recipients of the tax materials enables the government to monitor whether the recipients of
defendants’ materials are violating the tax laws. Thus, we find no abuse of discretion with
respect to the district court’s imposition of the reporting requirements in Paragraph C of the
injunction.
Accordingly, we AFFIRM the district court’s judgment and VACATE the partial stay
on the district court’s injunction. Moreover, we DENY defendants’ pending motion requesting
that we take judicial notice of a petition for rehearing of the Supreme Court’s order denying a
writ of certiorari in We the People Foundation, Inc. v. United States, 485 F.3d 140 (D.C. Cir.
2007), cert. denied, --- S. Ct. ----, 2008 WL 59413 (Jan. 7, 2008), as consideration of the petition
for rehearing in that case is unnecessary to the disposition in this case.
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