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.



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           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.”

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         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



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         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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