United States v. Mrvic

Background

The United States filed a one-count complaint against Vladimir Mrvic to collect penalties assessed by the Internal Revenue Service (IRS) relating to the 2011 tax year. The opinion states that the IRS assessed about $4 million in penalties in October 2019. The underlying dispute involved required reports of foreign bank and financial accounts and civil penalties for failing to file them.

Mrvic is a United States citizen who lives abroad. The Government tried for a substantial period to serve him in Serbia under the Hague Convention, an international agreement governing service of legal documents abroad. The Serbian authorities ultimately indicated that Mrvic might no longer be in Serbia and might instead be in the Republic of Srpska, a constituent republic of Bosnia-Herzegovina. The Government did not have an address for him there and was unable to locate one through additional searches.

During the IRS examination, Mrvic had given power of attorney to four attorneys: Seth G. Cohen, Aaron Schumacher, Shannon Smith Retzke, and Hallie Aronson. The Government asked the court for permission to use alternate service under Federal Rule of Civil Procedure 4(f)(3), which allows a court to order another method of serving an individual in a foreign country when the method is not prohibited by an international agreement.

Court’s analysis

The court explained that Rule 4(f)(3) does not require a plaintiff to try every other service method first. The proposed method must not be prohibited by an international agreement and must be reasonably calculated, under the circumstances, to give the defendant notice and an opportunity to respond. The court also considered the Government’s efforts to serve Mrvic and whether court intervention was necessary.

The court followed the majority approach in the Southern District of New York permitting service through United States counsel as a way to transmit documents to a defendant abroad. It concluded that the Hague Convention did not prohibit service through a representative in the United States.

The court did not authorize service through Cohen. Cohen told the Government that he had not recently communicated with Mrvic, had been unable to reach him, did not know his current whereabouts, no longer represented him, and was not authorized to accept service. Based on those facts, the court found that service through Cohen would not be reasonably likely to notify Mrvic.

The court reached a different conclusion concerning Schumacher, Retzke, and Aronson of Withers Berman LLP. Those attorneys had represented Mrvic in the administrative tax examination underlying the collection action, and Mrvic had given them power of attorney. Schumacher had also submitted a detailed protest to the IRS on Mrvic’s behalf. Although the attorneys did not agree to accept service, the court found that their prior relationship with Mrvic and their likely ability to communicate with him made it likely that service through them would provide notice. The court also noted that they are officers of the court and assumed they would comply with a court directive to provide the documents to Mrvic.

The court separately considered the Government’s request to serve Mrvic through a tax preparer who had filed his 2021 tax return. The court found that the record contained only a single tax form filed about 11 months earlier and did not establish adequate communication between the preparer and Mrvic. It also noted that the tax preparer might have represented Mrvic only for that tax return and did not have the same duties as an officer of the court.

Disposition

The court granted the Government’s motion for alternate service in part. It ordered the Government to serve the summons, complaint, and order by mail on Schumacher, Retzke, and Aronson within 14 days of the order, with instructions that they provide the documents to Mrvic by mail and email. The Government must file a certificate of service within three days after service.

The court denied the request to serve Mrvic through the tax preparer without prejudice to renewing that request after showing adequate communication between the preparer and Mrvic and providing additional legal briefing on whether that form of service is proper.