MONUMENTAL LIFE INSURANCE COMPANY v. UNITED STATES

SIMPSON, CHIEF JUDGE.

This matter is before the Court on motion of the petitioner, Monumental Life Insurance Company ("Monumental"), to quash a summons issued by the Internal Revenue Service (IRS). Also before the Court is the motion of the United States to dismiss the petition to quash for lack of subject matter jurisdiction. For the reasons set forth below, the motion of the United States will be granted.

Monumental wishes to quash a summons that the IRS issued to it during an investigation of Johnson Systems, Inc. The summons seeks records for certain insurance products that Monumental administers and that Johnson Systems purchased. The United States argues that this Court lacks subject matter jurisdiction because the United States has not waived its sovereign immunity. Monumental argues that 26 U.S.C. § 7609, which constitutes a waiver of sovereign immunity, applies to this case.

Section 7609 is part of a larger statutory scheme governing the IRS's investigatory powers. Section 7602 permits the IRS to issue a summons to compel production of books and records of the taxpayer for any statutorily authorized purpose. The IRS may also issue summons to third-parties in furtherance of an investigation. The requirements for so doing are set out in 26 U.S.C. § 7609. Section 7609(b)(2) provides in pertinent part:

Notwithstanding any other law or rule of law, any person who is entitled to notice of a summons under subsection (a) shall have the right to begin a proceeding to quash any such summons not later than the 20th day after the day such notice is given in the manner provided in subsection (a)(2).

Thus, section 7609 does permit a proceeding to quash a summons, but such a proceeding is only available to the person or persons who are entitled to notice of the summons under section 7609(a). Under section 7609(a), the only person entitled to notice is the "person, (other than the person summoned) who is identified in the summons." (emphasis added). Thus, the taxpayer being investigated is the only party who must be provided notice and who is entitled to file a petition to quash a summons issued to a third-party. In this case, Johnson Systems is the "person who is identified in the summons." Monumental is the "person summoned" and is not entitled to notice or to bring a proceeding to quash.

Furthermore, Monumental would have an opportunity to challenge the summons if the United States seeks a court order compelling compliance by Monumental. As pointed out by the United States, these types of administrative summons are not self-enforcing. See United States v. Gilleran, 992 F.2d 232, 233 (9th Cir. 1993). Unlike a subpoena, there is no threat of contempt sanctions if a third-party refuses to comply with a summons. The IRS must obtain a court order compelling compliance with the summons. Thus, any challenges by Monumental to the summons such as relevancy, over breadth, or undue burden could be raised in the enforcement proceeding brought by the United States.

Monumental further argues that the Supreme Court in United States v. Euge, 444 U.S. 707 (1980) and United States v. Bisceglia, 420 U.S. 141 (1975) recognized its right to initiate suit against the United States to quash the summons. We believe Monumental's reliance on these cases is misplaced. In both cases the United States, not the summoned party, had initiated the proceeding. Thus, both Euge and Bisceglia were enforcement proceedings. These cases stand for the proposition that, in the event the United States seeks enforcement, a summoned-party should be allowed to raise objections and assert appropriate defenses in the proceeding before the district court orders enforcement. See Euge, 444 U.S. at 719.

The United States has not waived its sovereign immunity in this matter. Accordingly, the Petition to Quash will be dismissed for lack of subject matter jurisdiction. A separate order will be entered herein in accordance with this opinion.

This matter is before the Court on the petition of Monumental Life Insurance Company to quash. Also before the Court is the motion of the United States to dismiss the petition to quash for lack of subject matter jurisdiction. For the reasons set forth in the memorandum opinion entered herein this date, and the Court being otherwise sufficiently advised, IT IS HEREBY ORDERED AND ADJUDGED that the respondent's motion to dismiss is GRANTED and the petition to quash is DISMISSED.

IT IS SO ORDERED this _____ day of ____________________, 2000.