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Austin Estate Planning & Tax Law Firm Accused by the IRS of Aiding and Abetting Clients Illegally Evade Paying U.S. Taxes. The Lower Court has Ruled in Favor of the IRS, Now the Lawyers are Rushing to the Attorney-Friendly 5th Circuit for Protection and a Reversal of the Adverse Ruling

Here, the Firm’s attorney-client privilege arguments do not meet its burden to rebut a Powell showing, in large part because the Firm makes a blanket assertion and does not produce a privilege log or similar device. See, e.g., Hanse v. United States, 2018 WL 1156201, at *6 (N.D. Ill. Mar. 5, 2018) (concluding that a “blanket assertion of privilege,” which did not properly assert attorney-client privilege on a document-by-document basis, was “insufficient to challenge the validity of the IRS summons”).

Taylor Lohmeyer Law Firm PLLC v. United States (5:18-cv-01161), District Court, W.D. Texas (2018)

This is a government case where the IRS is alleging that this Estate and Tax Planning Law Firm in Austin Texas helped clients illegally avoid paying U.S. Taxes and they want the client list. The lower court has obliged, now it’s off to the 5th Circuit Appellate panel to rule on….

Fred Lohmeyer graduated from The University of Texas at Austin in 1960, with the degree of Bachelor of Business Administration, and in 1962, with the degree of Doctor of Jurisprudence. While at the Law School of the University of Texas at Austin, he was an Associate Editor of the Texas Law Review and a member of Phi Delta Phi legal fraternity.

Mr. Lohmeyer’s primary focus is on the practice of estate planning and probate law.  Mr. Lohmeyer is Board Certified by The Texas Board of Legal Specialization as a specialist in the field of Estate Planning & Probate Law.

He is a Fellow of the American College of Trust and Estate Counsel. He was named as a Texas Super Lawyer in the fields of Estate Planning/Trusts in Texas Monthly Magazine, from 2003 to 2014.

Mr. Lohmeyer is a Fellow of the Texas Bar Foundation. He was a member of the Board of Governors of the Dallas Estate Planning Council in 1997-1998. He was a member of the Council of the Probate, Trusts, and Estates Section of the Dallas Bar Association in 1992-1993.

For many years, Mr. Lohmeyer was a frequent author and speaker at tax and estate planning law courses sponsored by the Professional Development Program of the Texas Bar Association, and was also an author and speaker at a tax law course sponsored by The Texas Society of Certified Public Accountants.

Mr. Lohmeyer served as a member of The Board of Trustees of King College in Bristol, Tennessee from 2001 to 2008, and was an Elder in the Highland Park Presbyterian Church in Dallas, Texas, for many years.  He recently served as an Elder in the First Presbyterian Church of Kerrville, Texas, and is currently serving as a Director of the Symphony of the Hills Association, Inc., Kerrville, Texas.

SUMMARY OF COMPLAINT

This case is about the Internal Revenue Service’s attempt to seek by John Doe summons certain information related to the clients of Taylor Lohmeyer Law Firm PLLC (“the Firm”), including the clients’ names.

The Firm is the Kerrville estate-planning practice of Fred Lohmeyer and, until his death in 2016, John Taylor.

The IRS previously audited a taxpayer (Taxpayer-1) who used the Firm to “set up foreign accounts, foreign trusts, and foreign corporations to avoid paying U.S. taxes for which he was liable.”

This audit led to a closing agreement with Taxpayer-1 “admitting an unpaid income tax liability of over $2 million from unreported income of over $5 million for the 1996 through 2000 years, as well as additional penalties (including civil fraud penalties) from foreign entities set up and managed by Taylor Lohmeyer.”

Here, the IRS seeks names of and other information related to the Firm’s clients between 1995-2017 to investigate the tax liability of those who used the Firm to “create and maintain foreign bank accounts and foreign entities that may have been used to conceal taxable income in foreign countries.”

The Government undertakes this investigation, it states, because offshore tax evasion usually involves a foreign financial account and an offshore entity controlled by nominee directors to hide the taxpayers’ beneficial ownership.

TAYLOR LOHMEYER LAW FIRM PLLC

v. UNITED STATES OF AMERICA

Civil Action No. SA-18-CV-1161-XR

ORDER

On this date, the Court considered the status of this case. On July 29, 2019, Taylor Lohmeyer Law Firm (“the Firm”) moved for a stay pending appeal of this Court’s order enforcing the United States’ counter-petition to enforce its John Doe summons. Docket no. 19. Here, the Court considers that motion, the United States’ response (docket no. 23) and Petitioner’s reply (docket no. 24).

For the reasons explained below, this Court GRANTS Petitioner’s Motion for Stay Pending Appeal (docket no. 19).

This order reaffirms the Court’s previous order granting the Government’s counter-petition to enforce (docket no. 15), but that judgment is stayed pending appeal.

That order retained jurisdiction in this case pending any challenges by the Government of the Firm’s privilege log, should the Firm produce one. The Firm produced no privilege log, so there is no longer a need for this Court to retain jurisdiction.

Accordingly, the Clerk’s office is directed to CLOSE this case.

BACKGROUND

This case is about the Internal Revenue Service’s attempt to seek by John Doe summons certain information related to the clients of the Firm, including the clients’ names. The Firm is the Kerrville estate-planning practice of Fred Lohmeyer and John Taylor.

The IRS previously audited a taxpayer (Taxpayer-1) who used the Firm to “set up foreign accounts, foreign trusts, and foreign corporations to avoid paying U.S. taxes for which he was liable.” Docket no. 4 at 7.

This audit led to a closing agreement with Taxpayer-1 “admitting an unpaid income tax liability of over $2 million from unreported income of over $5 million for the 1996 through 2000 years, as well as additional penalties (including civil fraud penalties) from foreign entities set up and managed by Taylor Lohmeyer.” Id.

In its counter-petition to enforce the John Doe summons, the IRS seeks names of and other information related to the Firm’s clients between 1995-2017 to investigate the tax liability of those who used the Firm to “create and maintain foreign bank accounts and foreign entities that may have been used to conceal taxable income in foreign countries.” Id. at 8.

The Government undertakes this investigation, it states, because offshore tax evasion usually involves a foreign financial account and an offshore entity controlled by nominee directors to hide the taxpayers’ beneficial ownership. Id. at 7.

Before this John Doe summons could issue, the Government was required to make certain minimal showings in an ex parte proceeding before this Court. See 5:18-MC-1046-XR. On October 15, 2018, the Court found that the Government had made these showings through the submission of Revenue Agent Joy Russell-Hendrick’s affidavit. Docket no. 4-1.

This Court found that the Firm did not meet its “heavy burden” of challenging the Government’s showing, and accordingly, the Court granted the Government’s counter-petition to enforce the John Doe summons. Docket no. 15.

DISCUSSION

A district court has inherent authority to manage its docket, including the power to stay proceedings. Whole Woman’s Health v. Hellerstedt, No. A-16-CA-1300-SS, 2017 WL 5649477, at *1 (W.D. Tex. Mar. 16, 2017) (citing Landis v. N. Am. Co., 299 U.S. 248, 254 (1936)). The moving party bears a “heavy burden” of demonstrating that a stay is appropriate. Coastal (Bermuda) Ltd. v. E. W. Saybolt & Co., 761 F.2d 192, 203 n. 6 (5th Cir. 1985).

Courts consider four factors in determining whether to grant a stay pending appeal: “(1) whether the stay applicant has made a strong showing that he or she is likely to succeed on the merits; (2) whether the applicant will be irreparably injured absent a stay; (3) whether issuance of the stay will substantially injure the other parties interested in the proceeding; and (4) where the public interest lies.” Veasy v. Perry, 769 F.3d 890, 892 (5th Cir. 2014); see also United States v. Transocean Deepwater Drilling, Inc., 537 F. App’x 358, 360 (5th Cir. 2013) (noting the last two factors merge when the government is a party). The first two factors of the traditional standard are the most important, id., but “where there is a serious legal question involved and the balance of the equities heavily favors a stay…the movant only needs to present a substantial case on the merits.” Weingarten Realty Inv’rs v. Miller, 661 F.3d 904, 910 (5th Cir. 2011); see also Ruiz v. Estelle, 666 F.2d 854, 856-57 (5th Cir. 1982). Above all, a stay is “an exercise of judicial discretion” and the propriety of a stay depends on the individualized circumstances of the particular case. Ind. State Police Pension Tr. v. Chrysler LLC, 556 U.S. 960, 961 (2009).

Here, the Court finds that there is a serious legal question involved, the balance of equities heavily favors a stay pending the ongoing appeal, and that the Firm has shown the requisite “substantial case on the merits.” See Weingarten, 661 F.3d at 910.

First, the applicability of the attorney-client privilege to a John Doe summons that seeks a broad range of documentation that is arguably covered by the attorney-client privilege is a serious legal question. This is particularly so given the lack of binding precedent in this circuit on the specific issue of the assertion of privilege in response to a John Doe summons.

The Firm hinges its attorney-client privilege argument on a case out of the Third Circuit. United States v. Liebman, 742 F.2d 807 (3d Cir. 1984). In turn, the Government does cite several Fifth Circuit cases, but the Court finds persuasive the Firm’s attempts at distinguishing those cases (docket no. 24 at 2-5), leaving the Court with little precedent directly responsive to this particular legal issue.

But most persuasively, this Court finds the balance of equities does indeed “heavily favor” the Firm; on the one hand, the Firm would suffer potentially irreparable harm if the summons were enforced against it and that enforcement ultimately turned out to be wrongful upon appeal.

On the other hand, the harm to the Government (and to the public) would be less consequential were the Government required to stay its enforcement of the summons and ultimately prevail on appeal.

The Firm represented to this Court that it is compiling and preserving documents responsive to the summons (docket no. 19 at 11), and if the Firm were to lose on appeal, enforcement of the summons would proceed just as it would if the Court had denied this stay.

This Court need not say the Firm is likely to succeed on the merits; given the serious legal question at issue and the balance of the equities, the Firm need only show a substantial case on the merits, and it has done so. Weingarten, 661 F.3d at 910.

Accordingly, the Court GRANTS Petitioner’s Motion to Stay Order Pending Appeal. Docket no. 19. As noted above, this does not modify the Court’s previous order granting the Government’s counter-petition, though having granted the motion to stay, that judgment is stayed pending appeal. Docket no. 15. The Clerk’s office is further directed to CLOSE this case.

It is so ORDERED.

 

SIGNED this 3rd day of October, 2019.

XAVIER RODRIGUEZ
UNITED STATES DISTRICT JUDGE

Certification of the Electronic Record on Appeal in USCA #19-50506 has been accepted by the 5th Circuit. re 17 Notice of Appeal.

Case Selection Page

Case Number
Title
Opening Date Last Docket
Entry
Originating Case Number
Origin
19-50506
Taylor Lohmeyer Law Firm v. USA
06/04/2019 11/12/2019
16:57:38
0542-5 : 5:18-CV-1161
General Docket
United States Court of Appeals for the Fifth Circuit
Court of Appeals Docket #: 19-50506 Docketed: 06/04/2019
Nature of Suit: 2871 IRS – Third Party Suits (TAX DC)
Taylor Lohmeyer Law Firm v. USA
Appeal From: Western District of Texas, San Antonio
Fee Status: Fee Paid
Case Type Information:
     1) United States Civil
     2) United States
     3)
Originating Court Information:
     District: 0542-5 : 5:18-CV-1161
     Originating Judge: Xavier Rodriguez, U.S. District Judge
     Date Filed: 11/06/2018
     Date NOA Filed:      Date Rec’d COA:
     06/03/2019      06/03/2019

10/15/2019 Open Document APPEARANCE FORM for the court’s review. Lead Counsel? No. [19-50506] (Michael J. Haungs ) [Entered: 10/15/2019 10:46 AM]
10/15/2019 Open Document APPEARANCE FORM for the court’s review. Lead Counsel? No. [19-50506] (Gilbert Steven Rothenberg ) [Entered: 10/15/2019 01:51 PM]
10/15/2019 Open Document APPELLEE’S BRIEF FILED. # of Copies Provided: 0. E/Res’s Brief deadline satisfied. Paper Copies of Brief due on 10/21/2019, for Appellee United States of America. Reply Brief due on 11/05/2019, for Appellant Taylor Lohmeyer Law Firm P.L.L.C. [19-50506] REVIEWED AND/OR EDITED – The original text prior to review appeared as follows: APPELLEE’S BRIEF FILED by USA. Date of service: 10/15/2019, via email – Attorney for Appellant: Knight; Attorney for Appellee: Rennie; US mail – Attorney for Appellee: Smith. [19-50506] (Douglas Campbell Rennie ) [Entered: 10/15/2019 02:32 PM]
10/16/2019 APPEARANCE FORM FILED by Attorney(s) Gilbert Steven Rothenberg for party(s) Appellee USA, in case 19-50506 [19-50506] (CBW) [Entered: 10/16/2019 11:50 AM]
10/16/2019 APPEARANCE FORM FILED by Attorney(s) Michael J. Haungs for party(s) Appellee USA, in case 19-50506 [19-50506] (LLL) [Entered: 10/16/2019 02:35 PM]
10/16/2019 ATTORNEY NOT PARTICIPATING. Curtis Smith is designated as inactive in this case. Reason: Counsel’s name does not appear among the list of appellee’s counsel in the appellee’s brief, and nor has counsel electronically filed an appearance form in the case. [19-50506] (DLJ) [Entered: 10/16/2019 04:22 PM]
10/21/2019 Paper copies of Appellee Brief filed by Appellee USA in 19-50506 received. Paper copies match electronic version of document? Yes # of Copies Provided: 7. Paper Copies of Brief due deadline satisfied. [19-50506] (MRW) [Entered: 10/22/2019 10:56 AM]
10/31/2019 Open Document UNOPPOSED LEVEL 1 EXTENSION REQUESTED by Appellant Taylor Lohmeyer Law Firm P.L.L.C. for filing Reply Brief until 11/12/2019 [19-50506] (Steven Jon Knight ) [Entered: 10/31/2019 12:50 PM]
10/31/2019 EXTENSION RECEIVED for Appellant Taylor Lohmeyer Law Firm P.L.L.C.. Extension Granted to and including 11/12/2019. Reply Brief deadline updated to 11/12/2019 for Appellant Taylor Lohmeyer Law Firm P.L.L.C. [19-50506] (DMS) [Entered: 10/31/2019 01:32 PM]
11/12/2019 Open Document APPELLANT’S REPLY BRIEF FILED by Taylor Lohmeyer Law Firm P.L.L.C.. Date of service: 11/12/2019 via email – Attorney for Appellees: Haungs, Rennie, Rothenberg; Attorney for Appellant: Knight [19-50506] (Steven Jon Knight ) [Entered: 11/12/2019 04:57 PM]
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Laws In Texas is a blog about the Financial Crisis and how the banks and government are colluding against the citizens and homeowners of the State of Texas and relying on a system of #FakeDocs and post-crisis legal precedents, specially created by the Court of Appeals for the Fifth Circuit to foreclose on homeowners around this great State. We are not lawyers. We do not offer legal advice. We are citizens of the State of Texas who have spent a decade in the court system in Texas and have been party to during this period to the good, the bad and the very ugly.

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