Privacy Act Page2

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[Concurring Opinion]

TJOFLAT, Circuit Judge, specially concurring:

I agree that the Privacy Act claims in this case should be remanded to the district court for further consideration; I write separately to emphasize my understanding of the court's decision. ¹

In addressing the breadth of the exception in subsection (e)(7) of the Privacy Act ² for records "pertinent to and within the scope of an authorized law enforcement activity," the court holds "that to the extent that the IRS has engaged in the practice of collecting protected information, unconnected to any investigation of past, present, or anticipated violations of the statutes which it is authorized to enforce, subsection (e)(7) of the Act has been violated." Ante, p. 1781. I agree with this holding; subsection (e)(7)'s prohibition against collecting records that describe how an individual exercises his first amendment rights should not be circumvented by fishing expeditions disguised as "law enforcement activity." I wish to emphasize, however, that the district court must have broad discretion in determining whether an agency's record collection is part of a law enforcement activity; in actually reviewing the records and the circumstances surrounding their collection, the district court is in the best position to determine the applicability of the (e)(7) law enforcement exception. Thus, while the determination of the applicability of the exception is a mixed question of law and fact, its factual character predominates and our review of a district court's finding on this issue should so recognize.

The inquiry into the law enforcement exception's relevance in a given case must, of course, depend on the facts and circumstances. In the case before us, the defendant is a tax protester. Tax protesters often set out to violate the law, see, e.g., United States v. Douglass [73-1 USTC ¶9334], 476 F. 2d 260 (5th Cir. 1973), and the IRS may therefore be entitled to greater leeway in maintaining records on their activities. In my view, Clarkson's status as a tax protester is a factor the district court may consider in determining the exception's applicability. As the court notes, the law enforcement exception was designed "to make certain that political and religious activities are not used as a cover for illegal or subversive activities," ante, p. 1780, citing 120 Cong. Rec. H10,892 (daily ed. Nov. 20, 1974 ). This concern seems especially relevant when the record collection involves tax protesters.

I also add a comment to the court's holding that a plaintiff who proves a subsection (e)(7) violation "may be entitled to have the offending records amended or expunged even if the records are not maintained within the agency's system of records." Ante, p. 1783. On the facts of this case, where the IRS has admitted the existence of (e)(7) material outside of its records system, I agree that Clarkson may be entitled to relief if the law enforcement exception is found not to apply. I express no view, however, as to whether a plaintiff's bare allegation that an agency is maintaining records in violation of subsection (e)(7) is sufficient to require the agency to search beyond its system of records for potentially offensive material. I am concerned that such a holding could

cause an enormous burden to be placed upon agencies that maintain records. For each Privacy Act request, a staff would have to cull and screen the countless, potentially millions of pages of documents, regardless of how labelled, indexed, or stored, in order to discover materials pertaining to the requestor. Such a ruling would be contrary to the purpose of the statute and to sound public policy.

Grachow v. United States Customs Service, 504 F. Supp. 632, 636 (D. D. C. 1980).

Thus, while on the facts of this case Clarkson may be entitled to relief, this does not necessarily mean that every plaintiff who alleges agency maintenance of first amendment material will be entitled to a judicially enforced scavenger hunt through that agency's records.

CLARK, Circuit Judge, specially concurring: I enthusiastically concur in Judge Tuttle's opinion which admirably and painstakingly analyzes a citizen's First Amendment protection of his freedom of speech rights as amplified by the Privacy Act. However, once again I take issue with the holding that a pro se litigant who substantially prevails cannot recover attorney fees, as I did in Lovell v. Alderete, 630 F. 2d 428, 434 (5th Cir. 1980). I recognize that precedent binds us as a panel and therefore under the law the instant opinion is correct.

Nevertheless, I continue to speak out against an interpretation of the statute that permits reimbursement for money spent for attorney fees but denies it for time spent to accomplish the same result. Time is precious to everyone. Taking time away from gainful employment or enjoyable leisure to enforce one's rights is a valuable consideration for which reimbursement should be obtainable, and is just as much "a stock in trade" as is an attorney's time. There is nothing in the Act or Congressional history to suggest that Congress intended to favor a person with money who could afford an attorney over a poorer person who could not, and who could not enlist free legal services.

Therefore, I register my disagreement with this holding, while recognizing that we as a panel are bound by Lovell.

¹ I do not address the issue of costs in the FOIA case or the applicability of subsections (e)(1) and (e)(5) of the Privacy Act.

² 5 U. S. C. §552a(e)(7) (1976) provides:

(e) . . . Each agency that maintains a system of records shall--

* * *

(7) maintain no record describing how any individual exercises rights guaranteed by the First Amendment unless expressly authorized by statute or by the individual about whom the record is maintained or unless pertinent to and within the scope of an authorized law enforcement activity.

(Emphasis supplied.)

 

 

 

 

[81-1 USTC ¶9366]Anthony Lobosco and Sally Lobosco, Plaintiffs v. Internal Revenue Service, Defendant

U. S. District Court, East. Dist. N. Y., 77 Civ. 1464, 1/14/81

[Freedom of Information Act and Privacy Act]

Freedom of Information Act: Tax audit files: Privacy Act: Record amendment request: Exempted system of records: Attorneys' fees.--The court upheld the IRS determination on summary judgment that the audit administrative files of the taxpayer and his corporation that the taxpayer sought to amend by deleting all references connecting the taxpayer and his corporation to an organized crime family were exempt from the amendment provision of the Privacy Act under 5 U. S. C. 552a(k)(2) because they were within systems of records comprising investigatory material compiled for law enforcement purposes. The court rejected the taxpayer's challenge to the exemption based on claims of noncompliance with the notice requirements and that the exemption was of limited duration. The taxpayer failed to substantiate the claim that disclosure was required under the Privacy Act because they had been denied any right, privilege, or benefit to which he would otherwise be entitled as a result of the maintenance of the files and a claimed disclosure to other governmental agencies. The plaintiff was found to have substantially prevailed in the Privacy Act suit, and the initial motion by the government for summary judgment on the application for attorneys' fees was denied. The plaintiff failed to file any application for such fees as directed by the court and thus the court dismissed the complaint. The court held also that the plaintiff's renewed FOIA request was already disposed of in a prior order (78-2 USTC ¶9578) and no new legal or factual developments warranted reconsideration.

Hyman Bravin, for plaintiffs. Edward R. Korman, United States Attorney, Herbert G. Johnson, Assistant United States Attorney, Brooklyn, N. Y. 11201, Beth A. Kaswan, for defendant.

Memorandum Decision and Order

SIFTON, District Judge:

This motion, brought originally by the defendant, Internal Revenue Service ("IRS"), as a motion to dismiss plaintiffs', Anthony Lobosco and Sally Lobosco, amended and supplemental complaint pursuant to Rule 12(b) of the Federal Rule of Civil Procedure, is now being considered, pursuant to that Rule, as a motion for summary judgment pursuant to Federal Rule of Civil Procedure 56, after an adjournment pursuant to Rule 56(f) to permit discovery to be completed. ¹

This action began in 1977, when plaintiffs petitioned this Court under the Freedom of Information Act ("FOIA"), 5 U. S. C. 552, and under the Privacy Act ("PA"), 5 U. S. C. 552a, to order the defendant to produce certain documents relating to a tax audit by the IRS of Ascor Scrap Iron, Inc. ("Ascor"), a corporation controlled by one of the two plaintiffs, Anthony Lobosco, and to order the defendant to delete all references in those documents and in other documents already disclosed by defendant connecting Anthony Lobosco and Ascor to an organized crime family. Plaintiffs sought attorneys' fees in connection with both claims.

In a Memorandum Decision and Order dated June 23, 1978 [78-2 USTC ¶9578], this Court granted defendant's motion for summary judgment in the FOIA claim on the ground that the documents whose disclosure plaintiffs sought, which had not been voluntarily already disclosed by the IRS, were exempted from the disclosure provisions of the FOIA. The exemptions at issue were 5 U. S. C. 552(b)(3), which encompasses information "specifically exempted from disclosure by statute;" 5 U. S. C. 552(b)(7) which relates, inter alia, to investigatory records compiled for law enforcement purposes, the disclosure of which would constitute an unwarranted invasion of personal privacy; and those portions of 5 U. S. C. 555(b)(3), (5), and (7) which exempt from disclosure certain work product information.

Defendant's motion for summary judgment was denied with respect to the PA claim. However, before considering the merits of the claim, the Court directed the plaintiffs to exhaust their administrative remedies by seeking correction of the records from the IRS itself, as required by 5 U. S. C. 552a(d)(2) and (3). When they had exhausted their administrative remedy, plaintiffs filed an amended and supplemental complaint indicating that they had made an unsuccessful request to the IRS, and, therefore, were resuming their action in this Court.

Plaintiffs alleged in their new complaint that defendant had violated its continuing obligation under 5 U. S. C. 552a(e)(1) "to maintain in its records only such information about an individual as is relevant and necessary to accomplish a purpose of the agency" by failing to expunge those parts of the record which tend to connect plaintiff Anthony Lobosco's corporation to an organized crime family. In addition, plaintiffs alleged that defendant has released to other federal agencies, New York State agencies and departments, the District Attorney of Queens County, and the Bureau of Consumer Affairs of the City of New York information allegedly linking Ascor and the plaintiff Anthony Lobosco to an organized crime family and to Joseph Laratro, an organized crime figure. Plaintiffs' prayer requested that this Court issue an injunction under 5 U. S. C. 552 ordering defendant to cease withholding the heretofore undisclosed documents pertaining to plaintiff Anthony Lobosco or Ascor, that the Court issue an injunction ordering the defendant to expunge the references to organized crime in the plaintiff's records and in any records pertaining to Ascor, and that the Court grant reasonable attorneys fees to the plaintiffs on both FOIA and PA claims, as authorized by 5 U. S. C. 552(a)(4)(E) and 5 U. S. C. 552a(g)(2), respectively.

Defendant then filed this motion to dismiss the amended and supplemental complaint. In support of its motion, defendant contends that (1) the documents plaintiffs seek to amend are within systems of records exempted from the amendment provisions of the PA under 5 U. S. C. 552a(k)(2); (2) the records plaintiffs seek to amend are records pertaining exclusively to Ascor and, as corporate records, are not subject to the PA amendment provisions; and (3) information has not been transferred by the IRS to any other agency so that further disclosure is not warranted.

Before considering these arguments, plaintiffs' apparently renewed request for disclosure under the FOIA may be disposed of without further discussion. This issue was decided in this Court's Memorandum Decision and Order dated June 23, 1978 . No new legal or factual developments warrant reconsideration.

Pursuant to 5 U. S. C. 552a(g)(1)(A), this Court has jurisdiction to hear plaintiffs' PA claim since the IRS has made a determination not to amend plaintiff's record.

Plaintiffs' request for relief in the form of amendment under the PA requires examination of defendant's claimed exemption from compliance with the amendment provisions of the PA.

Section 552a(g)(2)(A) allows the court in any suit brought under the provisions of subsection (g)(1)(A) to "order the agency to amend the individual's record in accordance with his request or in such other way as the court may direct [;and i]n such a case, the court shall determine the matter de novo."

Plaintiffs' application for an order directing the IRS to amend the records pertaining to plaintiff Anthony Lobosco and to Ascor is based on a claimed violation of section 552(a)(e)(1) of the PA, which provides in pertinent part:

"Each agency that maintains a system of records shall

(1) maintain in its records only such information about an individual as is relevant and necessary to accomplish a purpose of the agency required to be accomplished by statute or by executive order of the President."

5 U. S. C. 552a(e)(1).

If subsection (e)(1) is applicable to these proceedings, a disputed question of fact exists concerning the relevancy of the information which plaintiffs seek to expunge from the records which would bar summary judgment. However, if defendant is correct in its contention that, pursuant to 5 U. S. C. 552a(k)(2), the records in question are exempted from the amendment provisions of the PA, subsection (e)(1) does not apply. 5 U. S. C. 552a(k)(2) provides:

"The head of any agency may promulgate rules in accordance with the requirements (including general notice) of sections 553(b)(1)(2), and (3), (c), and (e) of this title, to exempt any system of records within the agency from subsections (c)(3), (d)(e)(1), (e)(4)(G), (H), and (I), and (f) of this section if the system of records is

"(2) investigatory material compiled for law enforcement purposes, other than material within the scope of subsection (j)(2) of this section. . . ."

In support of its position that section 552a(k)(2) of the PA applies to the records plaintiffs seek to amend, defendant has filed an affidavit stating that all of the documents in question are contained in the audit administrative files of Anthony and Sally Lobosco or of Ascor and that those files have been exempted by the Treasury Department from the requirements of the PA. Audit administrative files, known as Privacy Act System Treasury/IRS 42.001, have been classified by the Treasury Department as a system of records comprising "investigatory material compiled for law enforcement purposes," qualifying for the exemption provided in 5 U. S. C. 552a(k)(2).

Plaintiffs do not dispute that the Treasury Department has exempted audit administrative files from the amendment provisions of the PA or that the files at issue are part of that exempted system of records, but they challenge the claim of exemption on other grounds. First, they allege that they did not receive timely notice of the exemption. 5 U. S. C. 553(b) requires:

"General notice of proposed rule making shall be published in the Federal Register, unless persons subject thereto are named and either personally served or have actual notice thereof in accordance with law."

Plaintiffs allege that notice of the exemption of systems of records was not published in the Federal Register until September 26, 1977 , a date subsequent to the commencement of this action and that, therefore, defendant's files and records pertaining to plaintiff are not exempt under 5 U. S. C. 552a(k)(2). They argue that exempt status cannot be conferred on the files retroactively.

It is unnecessary to decide this issue here, because plaintiffs' argument is based on a mistaken belief as to the date of publication of notice of the exemption.

Defendant, in an affidavit submitted subsequent to plaintiffs' objection, has corrected that error, pointing out that the Treasury Department published its "Notice of Exempt Systems of Records" as early as April 26, 1975 , in 40 Fed. Reg. 37613 and that "Final Notice of Regulations Exempting Systems of Records" was published on October 2, 1975 . 40 Fed. Reg. 45695. The notice published on September 26, 1977 , on which plaintiffs rely for their argument, was published in compliance with the requirements of 5 U. S. C. 552a(e)(4), which mandates annual publication of notice of exempt systems of records. Accordingly, it must be concluded that defendant has complied with the notice requirements of 5 U. S. C. 552a(k).

Plaintiffs next argue that the exemption under 552a(k)(2) of the PA remains in effect with regard to particular records only until the records have been evaluated with respect to their necessity, accuracy, timeliness, completeness, and relevancy and that with regard to timeliness, at least, the records are no longer exempted since all criminal proceedings involving plaintiff have terminated. In support of this argument plaintiffs point to statements as to the basis for the republication of the exemption appearing at 42 Fed. Reg. 49404-07 to the effect that the kind of immediate evaluation of timeliness, completeness, necessity, accuracy, and relevancy required by the PA cannot be made in the case of tax audit files. Plaintiffs read this to mean that at some given date later on in an investigation when such an evaluation can be made the exemption must terminate because it no longer has a basis. The problem with plaintiffs' argument seeking to impose a "condition subsequent" or limited duration on the section 552a(k)(2) exemption is that it was considered by Congress and rejected.

The legislative history of the PA makes it clear that Congress did not intend to impose any restrictions on the duration of the exemption given investigative records under 5 U. S. C. 552a(k)(2). The Senate's bill did contain a provision mandating that investigative records may not be exempted for longer than is necessary to commence criminal prosecution. S. Rep. No. 43-1183, 93rd Cong., 2d Sess. (1974), reprinted in [1974] U. S. Code Cong. & Admin. News pp. 6916, 6989. However, the final version of the PA, presented on the floor of Congress without committee consideration or report, eliminated this restriction. 120 Cong. Rec. 40400-09. Thus, the fact that the initial reason for classifying the documents as exempt may no longer apply does not deprive them of protected status. See, e.g., Irons v. Bell , supra, 596 F. 2d at 471; Pacheo v. FBI, 456 F. Supp. 1024, 1035 (D. C. P. R. 1978).

Although plaintiffs have been allowed time for discovery in order to challenge defendant's statements, that the records in question were investigative materials of the type which would be exempted under 5 U. S. C. 552a(k)(2), they have failed to do so. Consequently, the only remaining basis upon which to challenge defendant's claim of exemption under subsection (k)(2) of the PA is a possible application of the proviso contained in 5 U. S. C. §552a(k)(2), which requires disclosure (but not amendment) if any individual is denied any right, privilege, or benefit to which he would otherwise be entitled by federal law or for proviso contained in 5 U. S. C. 552a(k)(2), a result of the maintenance of such material.

Plaintiffs have not alleged that files pertaining to them resulted in the denial of any right, privilege, or benefits to which they would have been otherwise entitled under federal law. They claim, however, that the IRS transferred information from its files to the New York City Bureau of Consumer Affairs and to the Queens County District Attorney, resulting in a denial of a municipal license.

This claim is made on the present motion simply by cross-reference in plaintiffs' attorney's affidavit to an earlier affidavit filed by the attorney in connection with plaintiffs' FOIA claims which in turn refers the reader to a still earlier affidavit of plaintiff stating that "the Internal Revenue Service has released to other governmental agencies information attempting to link Ascor and/or myself to an organized crime family." Although the affidavit of plaintiffs' attorney sought discovery at the time the earlier affidavits were filed to obtain what was then concededly lacking, namely, "evidence . . . to substantiate my client's statement" and although plaintiffs have been allowed ample opportunity to establish that the transfer of information took place and that it resulted in denial of a right, privilege or benefit to which plaintiffs would otherwise be entitled or for which they would otherwise be eligible, no substantiation has been offered on this motion. No disputed issue of fact exists requiring trial. Accordingly, defendant is entitled to summary judgment.

Plaintiffs' request for attorney's fees in connection with both the FOIA and PA claims remains to be considered.

Subsection (a)(4)(E) of the FOIA provides:

"The court may assess against the United States reasonable attorney fees and other litigation costs reasonably incurred in any case under this section in which the complainant has substantially prevailed."

5 U. S. C. 552(a)(4)(E).

It is the law of this Circuit that a judgment favoring the plaintiff is not an absolute prerequisite to an award of attorney fees under the FOIA. Vermont Law Income Advocacy Council v. Usery, 546 F. 2d 509, 513 (2d Cir. 1976). Furthermore, a plaintiff may be deemed to have "substantially prevailed" in his action if, during the pendency of the action, the government voluntarily discloses the material sought in the complaint. Kaye v. Burns, 411 F. Supp. 897 (S. D. N. Y. 1976).

To be said to have substantially prevailed in the absence of a judgment in his favor, a plaintiff "must show at minimum that the prosecution of the action could reasonably have been regarded as necessary and that the action had substantial causative effect on the delivery of the information." Vermont Law Income Advocacy Council v. Usery, supra, at 513.

Defendant concedes that in accordance with the standards set forth in Vermont Law v. Usery, supra, plaintiffs could be deemed to have "substantially prevailed" on their FOIA claim, but argues that, because defendant's refusal to disclose the requested records had a reasonable basis in law, attorney fees should not be awarded plaintiffs. I agree that plaintiffs' request for attorney fees meets the test set forth in Vermont Law, but I do not accept the second part of defendant's argument.

Although the determination that an agency's refusal to disclose information had a reasonable basis in law is one factor for the Court to consider in exercising its discretion to grant or deny attorney fees under the FOIA, it is not a sufficient basis alone upon which to deny the award. As noted in Kay v. Burns, supra, 411 F. Supp. at 905, two factors are required to be considered before an award of attorney fees can be denied. These are: the reasonable basis of the government's refusal to disclose and the private commercial nature of the benefit sought by the plaintiff. Id. The presence of both these factors has been required to deny an otherwise permissible award of attorney fees in virtually every case where the matter was considered. See, e.g., Polynesian Cultural Center, Inc. v. NLRB, 600 F. 2d 1327 (9th Cir. 1979); Long v. U. S. Internal Revenue Service, 596 F. 2d 362 (10th Cir. 1979); Chamberlain v. Kurtz, 589 F. 2d 827 (4th Cir. 1979); Blue v. Bureau of Prisons, 570 F. 2d 529 (5th Cir. 1978); Nationwide Bldg. Maintenance Inc. v. Sampsen, 559 F. 2d 704 (D. C. Cir. 1977); James v. U. S. Secret Service, 81 F. R. D. 700 (D. D. C. 1979); Shermco Industries Inc. v. Secretary of U. S. Air Force, 452 F. Supp. 306 (D. C. Tex. 1978); MCA Inc. v. Internal Revenue Service, 434 F. Supp. 212 (C. D. Cal. 1977).

Attorney fees in a PA action are governed by 5 U. S. C. 552a(g)(2)(B), which provides:

"The court may assess against the United States reasonable attorney fees and other litigation costs reasonably incurred in any case under this paragraph in which the complaint has substantially prevailed."

Since the language of this section is virtually identical to subsection (a)(4)(E) of the FOIA and since there is no case law indicating the contrary, plaintiffs' request for attorney fees under the PA will be treated in the same manner as their request under the FOIA.

Although plaintiffs' request for further amendment of the IRS file pertaining to them has been denied, the IRS did voluntarily amend those records by including on every page containing a reference connecting plaintiff Anthony Lobosco to an organized crime family the following statement:

"There is absolutely no evidence of any connection between Anthony Lobosco, M. Lobosco Baling Co., Inc. (also known as Ascor Scrap Iron, Inc.), and any organized crime family."

This is sufficient to deem the plaintiffs to have "substantially prevailed" in their PA suit. Plaintiffs must, however, still show that their action has benefitted the public, and that it was not brought primarily for their own, private commercial gain.

Since plaintiffs' application for attorney fees cannot be disposed of as a matter of law, summary judgment on that issue in defendant's favor must be denied. Plaintiffs are directed to serve and file any application for attorney fees which it intends to make, returnable February 24, 1981 , at 4:30 p. m., within 20 days of the date of filing of this decision. Defendant's motion for summary judgment is granted with respect to plaintiffs' PA claim and denied with respect to plaintiffs' request for attorney fees.

The Clerk is directed to mail a copy of the within to all parties.

SO ORDERED.

¹ Plaintiffs question the Court's application of Rule 56 of the Federal Rules of Civil Procedure. They argue that, since no reference was made to Rule 12(b)(6) or 12(c) indefendant's motion to dismiss the amended complaint, this Court may not apply the provisions of Rule 12 to treat the motion as one pursuant to Rule 56.

There is no question that defendant's application in substance seeks relief under Rule 12(b)(6) and 12(c). Moreover, the parties were advised that the application would be so treated, and on that basis plaintiffs obtained an extensive adjournment of the motion to complete discovery. Accordingly, the matter is ripe for consideration on the IRS's motion.

SIFTON, District Judge:

By Memorandum Decision and Order dated January 13, 1981 , I denied the motion of defendant for summary judgment with respect to plaintiff's claim for attorney's fees and directed plaintiff to file any application for such fees which it intends to make within twenty (20) days, returnable February 24, 1981 . No such motion has been filed, and no request for an extension of time has been made. Accordingly, the Clerk is directed to enter judgment in accordance with this Court's Memorandum Decision and Order of June 23, 1978 , and January 13, 1981 , dismissing plaintiff's complaint in its entirety.

 

 

[83-1 USTC ¶9396]Dorothy M. Lilienthal and Herbert E. Lilienthal v. Charles A. Parks, District Director of IRS

U. S. District Court, Eastern Dist. Ark. , Jonesboro Div., No. J-C-82-91, 574 FSupp 14

[Code Secs. 6103 and 7213]

Freedom of Information Act: Exhaustion of administrative remedies: Privacy Act: Unauthorized disclosure of information.--The taxpayers, who filed suit under the Freedom of Information Act and the Privacy Act in order to compel the IRS to produce certain documents relating to them, failed to comply with IRS procedures requiring that requests made pursuant to the FOIA and the Privacy Act be accompanied by either a "signature, address and one other identifier which contains the requester's signature, such as a photocopy of a driver's license," or a "notarized statement swearing or affirming their identity." As a consequence, they failed to exhaust the administrative remedies required by the FOIA and the Privacy Act, and their claims had to be dismissed. Further, the taxpayers' First Amendment claim for redress of grievances and Fifth Amendment claim of denial of due process were dismissed for failure to state a claim upon which relief could be given.

herbert E. Lilienthal, Box 126, Maynard, Ariz. 72444, pro se. Diane S. Mackey, Assistant United States Attorney, Little Rock Ark. 72203, Paige E. Refee, Department of Justice, Washington, D. C. 20530, for IRS.

Memorandum and Order

EISELE, District Judge:

Plaintiffs have filed suit pro se pursuant to the Freedom of Information Act (FOIA), 5 U. S. C. §552, the Privacy Act, 5 U. S. C. §552a, the First & Fifth Amendments to the United States Constitution, and 28 U. S. C. §1361, in order to compel the Internal Revenue Service (IRS) to produce certain documents relating to the plaintiffs. The defendant has moved to dismiss the complaint. For the reasons set forth below, the motion is granted.

Facts

The plaintiffs are two Arkansas citizens who seek to review records and all agency requests for information about them, as contained in tax files held by the IRS. Defendant is Director of the IRS office for the State of Michigan . ¹ In their April 8, 1982 , complaint, the plaintiffs state that they had written the defendant on two occasions to obtain the information they seek, but that the defendant failed to respond to their requests within the ten-day time limitation specified in 5 U. S. C. §552(a)(6)(A)(i). They also contend that they have exhausted their administrative remedies and are consequently entitled to both affirmative injunctive relief--i.e., an order from this Court compelling the production of the documents--as well as attorneys fees.

The defendant admits that written requests were received, but states that the plaintiffs have not exhausted their administrative remedies. Specifically, the defendant contends that plaintiffs have failed to submit "proper" requests, since the written requests received by the IRS failed to identify properly the requesting parties in accordance with agency regulations.

The record indicates that in a letter dated March 5, 1982 , plaintiff Herbert Lilienthal requested the information from the Michigan office of the Department of the Treasury. His wife and co-plaintiff, Dorothy Lilienthal, made an identical request in a letter dated March 8, 1982 . Both letters were received in the District Director's office on March 11, 1982 .

On March 12, 1982 , the defendant wrote both plaintiffs and informed them that their requests were inadequate. Defendant stated that the plaintiffs must: provide a more detailed description of the records they sought; provide their "taxpayer identification number" (e.g., their social security number); and provide adequate verification of their identity. The Court observes that although the defendants's instructions were contained in a form letter, the form clearly indicated the steps the plaintiffs must take to comply with the IRS's requirements.

On March 23, 1982 , the plaintiffs each mailed letters to the defendant in an apparent attempt to comply with the requirements outlined in the defendant's March 12, 1983 , letters. This time, the plaintiffs more clearly identified the information they sought and provided their social security numbers. They did not, according to the defendant, comply with the requirements for the verification of their identity. Therefore, on March 26, 1982 , the defendant again wrote both of the plaintiffs to inform them of their requests' remaining deficiency. As the defendant's letters disclosed, the plaintiffs could meet the identification requirement by either of two means: submitting their "signature, address and one other identifier which contains the requester's signature such as a photocopy of a driver's license,"; or by presenting "a notarized statement swearing to or affirming" their identity.

The plaintiffs never submitted such information. Instead, they filed the pending suit on April 18, 1982 , and requested the relief noted above.

Applicable Law

1. FOIA Issue. Under 5 U. S. C. §552(a)(4)(B), a federal district court may "enjoin [an] agency from withholding agency records and . . . order the production of any agency records improperly withheld from the complainant." It may also award attorneys fees to a complainant who has substantially prevailed in its effort to obtain information, 5 U. S. C. §522(a)(4)(E). See Ginter v. Internal Revenue Service [81-1 USTC ¶9417], 648 F. 2d 469 (8th Cir. 1981).

Yet it is axiomatic that the federal court may not act if it lacks subject matter jurisdiction. Before a court may review administrative actions (or inaction), it must first determine whether the statute under which the claim is brought requires exhaustion of administrative remedies. If the statute requires such exhaustion and the Court finds the plaintiff has not exhausted his remedies, then the Court lacks jurisdiction and the case must be dismissed.

The Fifth Circuit addressed the exhaustion issue in connection with the FOIA and determined:

Although these sections do not expressly require that a claimant exhaust his administrative remedies prior to requesting judicial relief, they clearly do imply that exhaustion is required. Exhaustion of administrative remedies is a general prerequisite to judicial review of any administrative action. * * * We conclude that the FOIA should be read to require that a party must present proof of exhaustion of administrative remedies prior to seeking judicial review.

Hedley v. United States, 594 F. 2d 1043, 1044 (5th Cir. 1979) (citations omitted).

This Court believes that Hedley is well-founded. wellfounded.

Perhaps in an effort to ensure that the exhaustion requirement not be too onerous, Congress provided in 5 U. S. C. §522(a)(6)(C) that with certain exception:

Any person making a request to any agency for records . . . shall be deemed to have exhausted his administrative remedies with respect to such request if the agency fails to comply with the applicable time limit provisions. . . .

Thus, if the defendant failed to comply with the applicable deadlines, the plaintiffs' administrative remedies could be deemed exhausted.

In this case, the defendant comply with the applicable deadlines. Under 5 U. S. C. §522(a)(6)(A)(i), the agency must determine within ten days after receipt of a request whether to comply with the request. ² It must then immediately notify the person making the request of its decision. The defendant responded to each of the plaintiffs' requests within ten days of receipt. Therefore, section 552(a)(6)(C) is unavailing to the plaintiffs. Cf. Jencks v. United States Marshals Service, 514 F. Supp. 1383, 1387 (S. D. Ohio 1981) (remedies deemed exhausted under section 552(a)(6)(C) because defendant failed to make a determination within deadline).

The Court must thus determine whether the plaintiffs have otherwise exhausted their administrative remedies. It is clear they have not. Although the FOIA vests individuals with a means of obtaining certain government records from federal agencies, the Act contemplates the creation of procedures that individuals must follow if they seek to obtain such information. See 5 U. S. C. §§ 522(a)(1), (4). The IRS has promulgated regulations that describe the applicable procedures for an FOIA request. See 26 C. F. R. §601.702 (1982). For purposes of this lawsuit, the most critical are those that outline the means by which a person establishes his identity. For one who, like plaintiffs, requests documents by mail, he may normally meet the identification requirement through:

The submission of the requester's signature, address, and one other identifier (such as a photocopy of a driver's license) bearing the requester's signature, in the case of a request by mail, or

. . . The presentation . . . of a notarized statement swearing to or affirming such person's identity.

26 C. F. R. §§ 601.702(c)(4)(ii)(B), (C) (1982). ³

It is clear from the copies of the correspondence between plaintiffs and defendant, that plaintiffs provided neither "one other identifier" nor a "notarized statement swearing to or affirming [their] identity." The defendant thus acted properly in not granting the plaintiffs' request. ⁴

Since the plaintiffs must follow the procedure set forth in the regulations, see Powell v. Kopman [81-1 USTC ¶9383], 511 F. Supp. 700, 703 (S. D. N. Y. 1981); Reith v. Internal Revenue Service, Stand. Fed. Tax. Rep. (CCH) (¶9705) at p. 85,321) (N. D. Ind. 1980); White v. Loury, Stand. Fed. Tax. Rep. (CCH) (¶9512 at p. 84,606) (N. D. Ohio 1978), and have not done so, they have failed to make a proper request under the FOIA. ⁵ As a consequence, they have failed to exhaust their administrative remedies and the FOIA claim must be dismissed. See id. at p. 84,608 (claim must be dismissed since plaintiff did not properly identify himself in accordance with the FOIA and the IRS regulations).

2. Privacy Act Claim. In concert with their FOIA request, the plaintiffs also invoke the Privacy Act, 5 U. S. C. §522a, as grounds for relief. The pleadings are unclear as to the nature of the plaintiffs' claim. Yet construing the pro se claim liberally, it is possible to infer that the plaintiffs were seeking to determine to what agency, if any, the IRS had released any information regarding the plaintiffs. ⁶

As in requests pursuant to the FOIA, requests made under the Privacy Act must comport with the IRS's procedures. Such procedures are set forth in 31 C. F. R. §1.26(d)(1) (1982). An individual's request must, inter alia, clearly state that it is a "Request for accounting of disclosures" or a "request for notification and access". It must include the individual's social security number and specify the name and location of the particular system of records sought. An individual must also provide "such identification . . . as may be specified in the appropriate appendix to this subpart. . . ." 31 C. F. R. §1.26(d)(v) (1982). That appendix--"Appendix B"--sets forth the requirements an individual must meet to appropriately verify his identity. 31 C. F. R. App. B, §(c)(8). Those requirements are identical to those established under FOIA regulations. Compare id. with 26 C. F. R. §601.702(c)(4)(ii) (1982). As with the plaintiffs' FOIA requests, their Privacy Act requests must be accompanied by either "one other identifier" or "a notorized statement swearing or affirming to such individual's identity." See C. F. R. App. B §(c)(8)(ii) & (iii) (1982).

The plaintiffs did not comply with this requirement. Therefore, the defendant was under no duty to grant the plaintiffs' requests. ⁷ The plaintiffs' Privacy Act claim must therefore be dismissed for failure to exhaust their administrative remedies.

3. First & Fifth Amendments Claims. The plaintiffs' complaint contains no clues as to the factual bases underlying their First and Fifth Amendment claims. Their memorandum in opposition to the defendant's motion to dismiss contains several vague references to the Amendments. It appears that their First Amendment claim rests on the contention that under the Amendment they are entitled to seek redress of grievances; and that the defendant must provide them with such redress. Their Fifth Amendment claim appears to be that by not turning over the files they have requested, the defendant has deprived them "of Life, Liberty , or Property without due process of law." The Court has already determined that the plaintiffs have failed to exhaust their administrative remedies. Even if plaintiffs were to prove the facts averred, it does not appear that they give rise to a violation of constitutional rights. The claims must be dismissed for failure to state a claim upon which relief can be given. See Reith, at p. 85,323 (dismissing First and Fifth Amendment claims on similar grounds). See also Bennett v. Berg, 685 F. 2d 1053, 1056-58 & n. 4 (8th Cir. 1982).

4. Section 1361 Claim. Construing their complaint liberally, it could be inferred that plaintiffs attempt to raise a claim under 18 U. S. C. §1361. That statute is a jurisdictional statute that vests the district courts with jurisdiction to compel an officer or employee of the United States to perform a duty owed to an individual. The statute does not, however, create special liability or an independent cause of action. Carter v. Seamans, 411 F. 2d 767 (5th Cir. 1969), cert. denied, 397 U. S. 941 (1970); White v. Administrator of General Services Administration, 343 F. 2d 444, 447 (9th Cir. 1965). Furthermore, an individual must exhaust his administrative remedies before invoking section 1361. Beale v. Blount, 461 F. 2d 1133, 1137 (5th Cir. 1972). As noted above, the plaintiffs have not exhausted their administrative remedies and therefore the claim must be dismissed.

Conclusion

It is therefore Ordered that the defendant's motion be, and it is hereby, granted, and that the complaint be dismissed without prejudice.

Judgment

Pursuant to the Memorandum and Order filed in this matter this date, it is Considered, Ordered and Adjudged that this case be, and it is hereby dismissed without prejudice.

¹ Defendant contends that since he is merely an officer of the IRS, he is not a proper party defendant to an action brought under the FOIA or the Privacy Act. Instead, he asserts that the agency is the proper party defendant. Since the Court dismisses the case on other grounds, it need not reach this issue.

² In "unusual circumstances", the period may be extended for up to ten more days. See 5 U. S. C. §552(a)(6)(B).

³ In some cases, the IRS may require additional means of verifying the requester's identity. See 26 C. F. R. §601.702(c)(4)(ii) (1982) ("Additional proof of a person's identity shall be required . . . if it is determined that additional proof is necessary to protect against unauthorized disclosure of information in a particular case.")

⁴ Indeed, income tax returns and return information are confidential and may be disclosed by federal officers only under limited circumstances. See 26 U. S. C. §6103. Improper disclosure can result in criminal and civil liability. See 26 U. S. C. §§ 7213, 7431.

⁵ In addition, they have not appealed the defendant's decision administratively, pursuant to 5 U. S. C. §522(a)(6)(A)(ii). Such an appeal of an adverse decision by the IRS is a precondition to filing suit in federal court, at least where the IRS has complied with the applicable time limit provisions. See Reith at p. 85,323. See also Jenks, 514 F. Supp. at 1386-87.

⁶ Although the plaintiffs' complaint is not so cryptic as certain others, see, e.g., Norman v. Reagan, 95 F. R. D. 476 (D. Ore. 1982), it nevertheless is impossible to determine on what factual basis they are making their Privacy Act claim. However, in their Memorandum in Opposition to Defendant's Motion to Dismiss they state: "Under the Privacy Act of 1974, 5 U. S. C. Sec. 552(a) [sic] what agency they may have released any information from the files they keep on the Plaintiffs. . . ." This apparently is meant to suggest that they seek to know whether the IRS has released any information contained in IRS files to other agencies.

⁷ The IRS must act upon valid Privacy Act requests within thirty days of their receipt. 31 C. F. R. §1.26(g) (1982). Since the requests were not in proper form, they were not technically "received". As subsection 1.26(f) provides, a request is deemed "received" only as of the date that all requirements listed in subsection 1.26(d) have been satisfied. The plaintiffs' failure to furnish adequate verification of their identity resulted in their noncompliance with subsection 1.26(d).

 

 

[85-2 USTC ¶9855]John T. Dowd, Helen Dowd, and Intergold Corporation, Plaintiffs-Appellants v. Internal Revenue Service, Defendant-Appellee

(CA-2), U.S. Court of Appeals, 2nd Circuit, 85-6156, 776 F2d 1083, 11/13/85 , Affirming unreported District Court decision

[Privacy Act 5 U.S.C. §552(a)]

Suits by taxpayers: Privacy Act: Destruction of records.--The Court of Appeals affirmed the dismissal of a Privacy Act suit, which was brought by the taxpayer after his FOIA request revealed that cancelled checks, bank deposit tickets, and affidavits from business associates were missing from the taxpayers' IRS file and apparently had been destroyed. The actions of IRS employees which resulted in the destruction of the documents were correctly characterized by the District Court an negligent, and there was no evidence of willful or intentional conduct, which is necessary to support a Privacy Act suit.

Richard V. D'Allesandro, 111 Washington Ave. , Albany , N.Y. 12210 , for plaintiffs-appellants. Frederick J. Scullin, Jr., United States Attorney, Utica , N.Y. 13503 , Glenn L. Archer, Jr., Assistant Attorney General, Michael L.Paup, Richard W. Perkins, Patricia M. Bowman, Department of Justice, Washington , D.C. 20530 , for defendant-appellee.

Before FRIENDLY, KAUFMAN, and PRATT, Circuit Judges.

PER CURIAM:

Appellants John and Helen Dowd and their wholly owned company, the Intergold Corporation, were the subjects of both criminal and civil investigations by the Internal Revenue Service. The criminal investigation ended without action being taken. The civil inquiry, however, resulted in the assessment of deficiencies, which the Dowds are now contesting in a separate action.

Pursuant to the Freedom of Information Act ("FOIA"), 5 U.S.C. §552, the Dowds requested their files from the IRS. A subsequent attempt to locate the files revealed that certain documents--cancelled checks, bank deposit tickets, and affidavits from business associates--were missing and had apparently been destroyed. The Dowds thereupon filed a complaint pursuant to the FOIA and, later, a companion complaint pursuant to the Privacy Act of 1974, 5 U.S.C. §552a. The two actions were consolidated in the district court.

The Dowds then engaged in extensive discovery, deposing all twelve IRS employees who had personal knowledge concerning the missing records. In the Albany Federal Building , where the documents had been stored, documents to be destroyed were put in cartons marked "Destroy" and stacked in one specific area of the floor. The employee charged with removing the cartons marked for destruction, Francis Goodall, testified he generally did not inspect them. Instead, he merely checked whether the number of cartons placed in the appropriate area tallied with the number his supervisor had directed should be destroyed.

Arguing that the depositions foreclosed any factual dispute, the government moved for summary judgment. After carefully reviewing the record, Judge Miner granted the government's motion and dismissed the two complaints. The Dowds appeal only from the dismissal of the Privacy Act suit. Essentially for the reasons proffered by the district court, we now affirm.

To prevail in a Privacy Act suit, a plaintiff must prove "the agency acted in a manner which was intentional or willful." 5 U.S.C. §552a(g)(4). The legislative history describes this standard as "somewhat greater than gross negligence." Analysis of House and Senate Compromise Amendments to the Federal Privacy Act, 120 Cong. Rec. 40406 , 40882 (1974). In the instant case, however, the district court correctly characterized the agency's actions as negligent. There is no evidence the employees willfully or intentionally violated the strictures of the Privacy Act. See Albright v. United States , 732 F.2d 181, 189 (D.C. Cir. 1984). Indeed, the appellants failed to demonstrate the IRS had any purpose for destroying these particular files. We find ourselves in agreement with the District of Columbia Circuit, and are unwilling to predicate liability on a finding of mere administrative error. Perry v. Block, 684 F.2d 121, 129 (D.C. Cir. 1982).

Having correctly resolved the legal question, the district court also properly determined the case presented no issue of material fact. The appellants had deposed every employee with firsthand knowledge of the records, and all uniformly denied ordering the destruction of the records. Judge Miner reasoned that, at trial, the Dowds would be forced to rely solely no negative inferences derived from the demeanor of the witnesses. We have found the vague hope of such negative inferences, standing alone, insufficient to present a triable issue of fact. Radix Organization, Inc. v. Mack Truck, Inc., 602 F.2d 45, 48 (2d Cir. 1979); Modern Home Institute, Inc. v. Hartford Accident & Indemnity Co., 513 F.2d 102, 110 (2d Cir. 1975) Therefore, Judge Miner properly granted summary judgment.

In view of this conclusion, we need not consider whether the Dowds would have had any cause of action under the Privacy Act even if the destruction of the records had been intentional.

Accordingly, the judgment of the district court is affirmed.

 

 

[86-1 USTC ¶9162] Joseph U. Alt, Plaintiff v. Commissioner of Internal Revenue, et al., Defendants

U.S. District Court, Dist. Neb., 85-0-160, 12/2/85

[Code Secs. 7213 and 7402 ]

Privacy Act: Disclosure of information: Summary judgment.--An action filed by a taxpayer pursuant to the Privacy Act, that sought a court order compelling the IRS to produce records pertaining to him that were maintained by the IRS in its Audit Information Management System was dismissed. Since it was clear as a matter of law that the records requested by the taxpayer were exempt from disclosure (under §552a(k)(2) of the Privacy Act) and that the taxpayer's complaint failed to state a claim upon which relief could be granted, the government's motion for summary judgment was granted.

Joseph U. Alt, Box 16, Cotesfield, Neb. 68829, pro se. Paul W. Madgett, Assistant United States Attorney, Omaha, Neb. 68101, Karen L. Elias, Department of Justice, Washington, D.C. 20530, for defendants.

Memorandum and Order

STROM, District Judge:

This matter is before the Court on defendants' motion for summary judgment (Filing No. 10). Plaintiff filed this action pursuant to the Privacy Act, 5 U.S.C. §552a, seeking a court order compelling the Internal Revenue Service to produce records for inspection and copying. For the reasons stated below, the Court sustains defendants' motion for summary judgment and dismisses this action pursuant to Fed.R.Civ.P. 12(b)(6), for failure to state a claim upon which relief can be granted.

Also pending is plaintiff's motion to amend his complaint and attached proposed amendment (Filing No. 12). The Court finds that the proposed amendment makes no material changes in plaintiff's substantive complaint, and will allow the amendment to be filed. The complaint, as amended, fails to state a claim upon which belief can be granted.

Summary judgment should be granted "only if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact, and that the moving party is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(c). In passing upon a motion for summary judgment, the district court must view the facts most favorably to the party opposing the motion. Vette Co. v. Aetna Casualty & Surety Co., 612 F.2d 1076, 1077 (8th Cir. 1980). Viewed in that light, the Court finds that plaintiff fails to state a claim upon which relief can be granted.

In his complaint, as amended, plaintiff alleges that he was denied access to documents pertaining to him maintained by the Internal Revenue Service in systems of records known as "Audit Information Management System, IRS 42.008" and Classification and Examination Selection Files-Treasury/IRS 42.016" for the years 1977 through 1984. Plaintiff bases his claim upon the Privacy Act, 5 U.S.C. §552a, which provides, inter alia, that:

[e]ach agency that maintains a system of records shall . . . (1) upon request by an individual to gain access to his record or any information pertaining to him which is contained in the system, permit him . . . to review the record and have a copy made of all or any portion thereof in a form comprehensible to him . . .

5 U.S.C. §552a(d)(1).

However, the documents requested by plaintiff are exempt from the access provisions of the Privacy Act under 5 U.S.C., Section 552a(k)(2) which provides in pertinent part, that:

The head of any agency may promulgate rules, in accordance with the requirements (including general notice) of sections 553(b)(1) , (2) and (3), (c) and (e) of this title, to exempt any system, of records within the agency from [subsection] . . . (d) . . . of this action, if the system of records is--

* * *

(2) investigatory material, compiled for law enforcement purposes . . .

In accordance with subsection (k)(2) of the Privacy Act, systems of records 42.008 and 42.016 have been properly exempted from the access provisions of the Privacy Act. Treas. Reg. §1.36 (1975), 31 C.F.R. §1.36 (1985). Lobosco v. Internal Revenue Service, 81-1 USTC (C.C.H.) ¶9366 (E.D.N.Y. 1981).

The Court finds that it is clear as a matter of law that the records requested by plaintiff are exempted from disclosure by the Privacy Act, 5 U.S.C. §552a(k)(2), and that plaintiff's complaint thus fails to state a claim upon which relief can be granted. Accordingly,

IT IS HEREBY ORDERED that:

(1) Plaintiff's motion for leave to file an amended complaint (Filing No. 12) is granted;

(2) Defendants' motion for summary judgment (Filing No. 10) is granted; and plaintiff's complaint is dismissed.

 

 

[86-2 USTC ¶9761] Donald W. MacPherson, Plaintiff-Appellant v. Internal Revenue Service and Department of Justice, Defendants-Appellees

(CA-9), U.S. Court of Appeals, 9th Circuit, 85-2576, 10/24/86 , Affirming an unreported District Court decision

[Code Secs. 7213 and 7852 ]

Maintenance of taxpayer records: Privacy Act: Applicability of: Pertinence to law enforcement activities: Tax protestor: Public speeches.--Maintenance by the government of records of a tax protestor's activities fell within the "law enforcement activities" exception to the Privacy Act, 5 U.S.C. §552a, which prohibits government agencies from collecting and maintaining some kinds of information about individuals. The court ruled, in affirming the district court's decision, that because the taxpayer's speeches were given in public and were distributed to all interested parties, the materials were not protected by the First Amendment. In addition, because the taxpayer did not allege that the government was using the records for any other purpose than to describe the events of the conference at which the speech was delivered, the court ruled that the government's maintenance of the materials was not violative of the Privacy Act.

Donald W. MacPherson, MacPherson & McCarville, 10220 North 31st Ave., Phoenix, Ariz. 85021, for plaintiff-appellant. Jonathan Cohen, Department of Justice, Washington , D.C. 20530 , for defendants-appellees.

Before GOODWIN, HUG and WIGGINS, Circuit Judges.

Opinion

WIGGINS, Circuit Judge:

Plaintiff Donald W. MacPherson (MacPherson) appeals from a summary judgment entered by the district court on his claims that the IRS violated his rights under the Privacy Act, 5 U.S.C. §552a(b), (e)(1), and (e)(7) (1982). We affirm.

FACTS

The parties have detailed their respective versions of the facts at length in their briefs. Only a few facts, however, are relevant to the issue presented in this appeal, and those are undisputed.

Over the course of several years in the early 1980's, the IRS conducted surveillance of individuals and organizations it felt were connected with the "tax protester" movement. As part of this surveillance, IRS agents anonymously attended several conferences and conventions at which MacPherson was a speaker. The agents took notes of MacPherson's speeches and purchased tapes (later transcribed) of these speeches that were for sale by the sponsoring organizations. These notes and tapes were maintained in a "Tax Protest Project File" in the Phoenix and Houston district offices of the IRS. The materials in the file were later distributed to IRS offices in Denver , Austin , and Fort Worth , to the Department of Justice, and to third parties (defendants and counsel in a criminal trial).

The surveillance was intended to identify to the IRS the leaders of the tax protest organizations and to determine current tax protester strategies. Investigation of several specific individuals has been initiated as a result of the surveillance at issue. The surveillance did not reveal any illegal conduct by MacPherson, and MacPherson is not suspected or accused of any past, present, or anticipated illegal conduct or of the advocacy of illegal acts or violence.

On learning of the IRS file materials from an unidentified third party, MacPherson filed suit alleging seven counts of violation of the Privacy Act, 5 U.S.C. §552a. After extensive discovery, MacPherson and the IRS filed cross-motions for summary judgment on three of the counts, involving maintenance of records of First Amendment activities, 5 U.S.C. §552a(e)(7), maintenance of records irrelevant to agency purposes, 5 U.S.C. §552a(e)(1), and improper disclosure of records, 5 U.S.C. §552a(b). The district court denied MacPherson's motion and granted the government's motion. MacPherson voluntarily dismissed the remaining counts and timely appealed. This court has jurisdiction under 28 U.S.C. §1291 (1982).

STANDARD OF REVIEW

This court reviews a grant of summary judgment de novo. Lojek v. Thomas, 716 F.2d 675, 677 (9th Cir. 1983). We must determine whether there is any genuine issue of material fact and whether the substantive law was correctly applied. Id.

DISCUSSION

Among its various provisions, the Privacy Act prohibits government agencies from collecting and maintaining certain kinds of information about individuals except under certain circumstances. The provision involved here, section 552a(e)(7), ¹ states:

(e) Agency Requirements.--Each agency that maintains a system of records shall--

. . .

(7) maintain no record describing how any individual exercises rights guaranteed by the First Amendment unless expressly authorized by statute or by the individual about whom the record is maintained or unless pertinent to and within the scope of an authorized law enforcement activity[.]

Section 552a(a)(4) defines a record as:

any item, collection, or grouping of information about an individual that is maintained by an agency, including, but not limited to, his education, financial transactions, medical history, and criminal or employment history and that contains his name, or the identifying number, symbol, or other identifying particular assigned to the individual, such as a finger or voice print or a photograph.

Section 552a(a)(5) defines a "system of records" as:

a group of any records under the control of any agency from which information is retrieved by the name of the individual or by some identifying number, symbol, or other identifying particular assigned to the individual[.]

A. Applicability of Subsection (e)(7)'s General Prohibition. Before we may address the issue of the "law enforcement activity" exception, we must determine whether the materials in question fall within the general proscription of section (e)(7): are they records kept by an agency that maintains a system of records? The materials involved here clearly constitute "records": they contain MacPherson's name and include actual tape recordings of his voice. The parties agree that the government records describe how MacPherson "exercises rights guaranteed by the First Amendment." It is also undisputed here that the IRS and the Justice Department are each an agency that maintains "a system of records."

The defendants contend, however, ² that the records do not fall within the scope of section (e)(7) because the records are not incorporated into the agencies' systems of records; that is, they are not traceable or retrievable by MacPherson's name or other identifying particular. Unlike many provisions of the Privacy Act, however, section (e)(7)'s coverage is not limited to records that are in a "system of records" traceable by the individual's name or some other characteristic. Compare, e.g., 5 U.S.C. §552a(a)(5). Section (e)(7) requires only that the record be maintained by an agency that keeps a system of records, not that the record be a part of that system. See Albright v. United States , 631 F.2d 915, 918-20 (D.C. Cir. 1980); see also Clarkson v. IRS [82-2 USTC ¶9437 ], 678 F.2d 1368, 1372-77 (11th Cir. 1982). The Albright and Clarkson opinions examine the language, history, and purpose of section (e)(7) at length, and we see no need to repeat their analysis here. We agree with their reasoning and with their conclusion that records such as those involved in this case fall within the general proscription of section (e)(7) despite a lack of incorporation into an agency's system of records. A contrary conclusion would allow government agencies to evade the section's prohibition simply by keeping individual records in a collective file untraceable by name but identifiable by nature and content of First Amendment exercise. Such a practice clearly goes against the spirit of the Privacy Act in general and section (e)(7) in particular. Because this is the only disputed issue with regard to the applicability of the general proscription of section (e)(7), we conclude that the records at issue are within that proscription and we proceed to consider its exceptions.

B. Applicability of Law Enforcement Purposes Exception. The government contends that section (e)(7)'s general proscription is inapplicable to the records in question because they are "pertinent to and within the scope of an authorized law enforcement activity." ³ This presents a question of first impression in this circuit.

The district court concluded that

the essential question with respect to the exemption, subsection (e)(7), is whether the investigation record is relevant to an authorized investigation and that there is no requirement that the investigation relate to a specific criminal act or to a specific individual.

Under this standard, the district court found that the records fall within the exception. ⁴

MacPherson argues that "law enforcement activities" within section (e)(7) must involve investigation of a specific violation of the law, and that the IRS thus should not have kept records of his speeches after it became aware that neither he nor the speeches were involved with or advocated illegal activity. He acknowledges that the IRS agents were entitled (perhaps even obligated) to attend the conferences and conventions in issue and determine whether anyone there broke the law, admitted breaking the law in the past, or advocated breaking the law in the future. Having done so and having determined that no one was doing these things, however, MacPherson argues that the agents and the agency were forbidden by section (e)(7) from collecting, maintaining, or disseminating records of the participants' exercise of their First Amendment rights.

The language of the statute itself provides little guidance in interpreting the law enforcement exception to section (e)(7). The statute's definitions do not include the term "law enforcement activities," and the phrase does not appear anywhere else in the statute. The IRS invites the court to look to the "law enforcement purposes" exception to the Freedom of Information Act (FOIA), 5 U.S.C. §552(b)(7), for help in interpreting the language in section (e)(7). Materials are exempt from compelled disclosure under the FOIA if they are "investigatory records compiled for law enforcement purposes" and meet certain other requirements. This circuit has held that an agency with a clear law enforcement mandate may invoke this FOIA exemption if it establishes a "rational nexus" between its law enforcement duties and the document for which the exemption is claimed. See, e.g., Binion v. United States Department of Justice, 695 F.2d 1189, 1194 (9th Cir. 1983).

Although one court has analogized the "law enforcement" provisions of the FOIA and the Privacy Act, see Clarkson, 678 F.2d at 1374 n.10, the different purposes of the two statutes and the two exceptions counsel against such an analogy. The FOIA is intended to promote government disclosure of information. The law enforcement exemption to the FOIA is intended to prevent disclosure of sensitive information about innocent individuals and confidential informants and to relieve district courts of potentially onerous in camera inspections of documents. See Irons v. Bell , 596 F.2d 468, 474 (1st Cir. 1979). A broad reading of the "law enforcement purposes" exception to the FOIA therefore serves privacy by concealing more information from public view.

Section (e)(7) of the Privacy Act, however, is intended to restrict the information about individuals' First Amendment activities that the government may collect and maintain at all. The "law enforcement activities" exception to the First Amendment protections of section (e)(7) of the Privacy Act is intended merely "to make certain that political and religious activities are not used as a cover for subversive activities." 120 Cong. Rec. H10,892 (daily ed. Nov. 20, 1974 ). In the case of section (e)(7), therefore, a narrow reading of "law enforcement activities" better serves the goal of privacy and avoids infringing on the overall First Amendment concerns of section (e)(7). Because of this distinction, we decline to analogize the law enforcement exceptions of the FOIA and the Privacy Act.

Turning to case law, we find that this section of the Privacy Act is relatively undeveloped. Only two other circuits have addressed the issue presented here, and they have established different standards. ⁵ The Eleventh Circuit has held that subsection (e)(7) of the Act is violated "to the extent that the IRS has engaged in the practice of collecting protected information, unconnected to any investigation of past, present or anticipated violations of the statutes which it is authorized to enforce . . . ." Clarkson v. IRS [82-2 USTC ¶9437 ], 678 F.2d 1368, 1375 (11th Cir. 1982); ⁶ accord, Jabara v. Kelley, 476 F.Supp. 561, 581 (E.D. Mich 1979), vacated and remanded, 691 F.2d 272 (6th Cir. 1982), cert. denied, 464 U.S. 863 (1983). This is essentially the standard urged by MacPherson here.

The Sixth Circuit has adopted a somewhat stricter rule. According to that court, section (e)(7) "allows investigation with respect to the exercise of first amendment rights if such investigation is relevant to an authorized criminal investigation or to an authorized intelligence or administrative one." Jabara v. Webster, 691 F.2d 272, 279-80 (6th Cir. 1982), cert. denied, 464 U.S. 863 (1983). ⁷ This latter formulation is essentially the standard applied by the district court.

A common feature of both the Sixth and Eleventh Circuits' opinions, however, is their apparently definitive statement of a "rule" with broad application to section (e)(7) cases. We question the wisdom of painting with such a broad stroke in this area of the law.

There are strong policy considerations on both sides of the issue here. The purpose of the section (e)(7) First Amendment protection is to prevent "collection of protected information not immediately needed, about law-abiding Americans, on the off-chance that Government or the particular agency might possibly have to deal with them in the future." S. Rep. 1183, 93d Cong., 2d Sess., reprinted in 1974 U.S. Code Cong. & Admin. News 6916, 6971. As one court put it:

Merely because [an agency] may act within its authority by monitoring the public or private speeches of a person in the course of a legitimate security investigation does not give it the right to maintain records relating to the contents of these speeches where the investigation does not focus on a past or anticipated specific criminal act.

Jabara v. Kelley, 476 F.Supp. 561, 581 (E.D. Mich. 1979) (emphasis in original) (quoted with approval in Clarkson v. IRS [82-2 USTC ¶9437 ], 678 F.2d 1368, 1374 (11th Cir. 1982)), vacated and remanded, 691 F.2d 272 (6th Cir. 1982), cert. denied, 464 U.S. 863 (1983). As the Clarkson court noted,

By enacting this exception, . . . Congress did not intend to dilute the guarantees of the First Amendment by authorizing the maintenance of files on "persons who are merely exercising their constitutional rights." OMB Guidelines, 40 Fed. Reg. 28965 (1975) (quoting [floor debate in the Congressional Record]).

678 F.2d at 1374.

We recognize that even "incidental" surveillance and recording of innocent people exercising their First Amendment rights may have the "chilling effect" on those rights that section (e)(7) was intended to prohibit. "The mere compilation by the government of records describing the exercise of First Amendment freedoms creates the possibility that those records will be used to the speaker's detriment, and hence has a chilling effect on such exercise." Nagel v. United States Department of Health, Education, and Welfare, 725 F.2d 1438, 1441 (D.C. Cir. 1984). Blanket allowance of such "incidental" surveillance and recording under the guise of general investigation could permit the exception to swallow the rule.

On the other side of the issue, the legitimate investigation and surveillance of suspected criminals and civil offenders inevitably involves observation and recording of the actions of innocent people, sometimes when those people are exercising their First Amendment rights. Some such observation is indisputably necessary to fulfill the exception's goal of "mak[ing] certain that political and religious activities are not used as a cover for subversive activities," 120 Cong. Rec. H10,892 (daily ed. Nov. 20, 1974 ); see also OMB Guidelines, 40 Fed. Reg. 28929 , 28965 (July 9, 1975) (summarizing legislative history), and the very presence of the exception recognizes that some recording of First Amendment activities will take place. Even MacPherson concedes the IRS's right to attend what it regards as "tax protest seminars" and collect information regarding past illegalities, advocacy of violence and IRC violations, and the like. To forbid "incidental" surveillance of innocent people or to require excision of references to such people in surveillance records would be administratively cumbersome and damaging to the completeness and accuracy of the agency records. Blanket prohibition of such surveillance and recording unless the agency was investigating a specific offense or a specific person could thwart agency investigations and seriously undermine agency enforcement operations.

For these reasons, we decline to fashion a hard and fast standard for determining whether a record of First Amendment activity is exempt from section (e)(7) of the Privacy Act because it is "pertinent to and within the scope of an authorized law enforcement activity." The strong policy concerns on both sides of the issue present close and difficult questions and may balance differently in different cases. We therefore elect to consider the factors for and against the maintenance of such records of First Amendment activities on an individual, case-by-case basis.

In the present case, MacPherson's speeches were given in public and distributed to anyone willing to pay the price of the tape. He was aware and even acknowledged in one of his speeches that he might be speaking to IRS agents in the audience. His speeches were a significant part of the conferences and conventions, and the IRS records of them were necessary to give the agency a complete and representative picture of the events. ⁸ There is no allegation and no indication that the records were used or intended to be used for any other purpose than to give a complete picture of the conference. Under these circumstances, we hold that the IRS and Justice Department's maintenance of records of MacPherson's activities fall within the "law enforcement activities" exception to the proscription of section (e)(7) of the Privacy Act. ⁹

Accordingly, we AFFIRM.

¹ The parties agree that the other two counts on which summary judgment was granted, involving sections 552a(b) (distribution of records) and 552a(e)(1) (records irrelevant to agency purpose), are derivative of the section (e)(7) count. The government does not otherwise contest the violation of those sections, and the portions of the appeal based on sections (b) and (e)(1) thus succeed or fail with the portion based on section (e)(7).

² The district court assumed without deciding that the materials in question were "records" within the definition of the Privacy Act, and the government does not argue the issue on this appeal. Nevertheless, the government also states that it does not concede the issue, so we address it here.

³ The government does not contend that either of the other two exceptions (that the records were expressly authorized either by statute or by MacPherson) applies here.

⁴ MacPherson does not concede that the records fall within the exception even if the district court's standard was correct, but he does not strongly dispute the issue on appeal.

⁵ The D.C. Circuit has also interpreted the "law enforcement activities" language of section (e)(7), but in a context that is not helpful here. See Nagel v. United States Department of Health, Education, and Welfare, 725 F.2d 1438, 1441 & n.3 (D.C. Cir. 1983) (holding that employee performance records containing statements made by employees at work, maintained for evaluative or disciplinary purposes, do not violate section (e)(7)); see also American Federation of Government Employees, Local 421 v. Schlesinger, 443 F.Supp. 431, 435 (D.D.C. 1978) (reasonable steps taken by government agencies to prevent conflicts of interest are within law enforcement exception).

⁶ On remand, the district court in Clarkson apparently found that the records in question were not within the exception. MacPherson argues that the Clarkson remand is distinguishable because Clarkson stated in the recorded speeches that he had violated the law, whereas MacPherson did not. The Clarkson remand is difficult to evaluate, however, because the decision is unpublished and the portion of the instant district court record that included a copy of the opinion is not part of the excerpt of record. The Clarkson case is again on appeal to the Eleventh Circuit.

⁷ In neither Clarkson nor Jabara, however, did the circuit courts reach the question of whether a specific agency record fell within the section (e)(7) exception; both cases reversed and remanded for further factual development. Clarkson, 678 F.2d at 1377; Jabara, 691 F.2d at 280.

⁸ To the extent that MacPherson alleges that the IRS notes on his speeches are inaccurate, we note that the Privacy Act makes specific provision for access to and correction and amendment of inaccurate records, see 5 U.S.C. §552a(d), and provides a civil remedy if the agency does not comply, 5 U.S.C. §552a(g); see also Hewitt v. Grabicki, 794 F.2d 1373, 1379 (9th Cir. 1986). Although this section of the Privacy Act is inapplicable to IRS records under some circumstances, see 26 U.S.C. §7852(e) (1982) (certain sections of Privacy Act inapplicable to determination of liability for tax, penalty, interest, etc.), the records involved here are different in kind and so the remedy is available. Cf. Clarkson, 678 F.2d at 1375-77.

⁹ In concluding that the "law enforcement activities" exception exempts the records involved here, we emphasize that we do not decide a number of similar but potentially distinguishable situations that may arise. For example, we do not decide whether the records of MacPherson's speeches would be "pertinent to and within the scope of an authorized law enforcement activity" if the records were filed under his name rather than in a general "tax protestor" file. Likewise we do not decide whether records of the activities of other individuals at the conventions and conferences who did not give public speeches and whose comments were not recorded for sale would fall within the "law enforcement activities" exception. Such cases might raise additional questions about the "scope" of the law enforcement activity involved.

[87-1 USTC ¶9219] Robert Clarkson, Plaintiff-Appellant v. Internal Revenue Service and John Henderson, District Director, Defendants-Appellees

(CA-11), U.S. Court of Appeals, 11th Circuit, 85-8684, Non-Argument Calendar, 1/15/87 , Affirming an unreported District Court decision

[Code Sec. 7213 --Result unchanged by the Tax Reform Act of 1986 ]

Civil suits: Information--unauthorized disclosure: Privacy Act.--The court of appeals ruled that the IRS collected and maintained certain records which were related to investigations of illegal tax protestor activities, a legitimate law enforcement activity. Therefore, the district court properly rejected the individual's Privacy Act claim. Accordingly, the district court also properly refused to award the individual costs on his Privacy Act claim because he did not prevail. Furthermore, the court of appeals found that the IRS did not violate the Privacy Act's disclosure requirements. First, as required by 5 U.S.C. §552a(c)(1), the IRS made an accounting of disclosures of documents relating to the individual by letter stating that no disclosures had been made. Second, the court found that the IRS had not disclosed its records to any outside person or agency other than the individual himself. It rejected the individual's contention that the Act was violated when the IRS made disclosures only to other criminal investigation units within the IRS.

Robert Clarkson, 515 Concord Avenue , Anderson , S.C. 29621 , for plaintiff-appellant. Roger M. Olsen, Acting Assistant Attorney General, Michael L. Paup, Jonathan S. Cohen, Gayle P. Miller, Department of Justice, Washington, D.C. 20530, for defendants-appellees.

Before TJOFLAT, HATCHETT and CLARK, Circuit Judges.

Per Curiam"

EC: This case is back before this court after a remand in Clarkson v. Internal Revenue Service [82-2 USTC ¶9437 ], 678 F.2d 1368 (11th Cir.1982), in which we held (1) that the appellant, Clarkson, had substantially prevailed in his suit under the Freedom of Information Act (FOIA), 5 U.S.C. §552 (1982), and thus the district court should consider whether to award costs to Clarkson; (2) that binding precedent prohibits the award of attorney fees under FOIA to a pro se party; and (3) that although most of the appellant's claims under the Privacy Act of 1974, 5 U.S.C. §552a (1982), were without merit, the district court should consider whether the collection of certain records by the appellee, the Internal Revenue Service (IRS) was "unconnected to any investigation of past, present or anticipated violations of the statutes which it is authorized to enforce." 678 F.2d at 1375 (citing 5 U.S.C. §552a(e)(7)).

On remand, the district court (1) awarded Clarkson costs on his FOIA claim, ¹ (2) rejected Clarkson's Privacy Act claim by finding that the records in question were pertinent to and within the scope of an authorized law enforcement activity, and (3) refused to award Clarkson any costs or attorney fees on his Privacy Act claims. In this appeal, Clarkson contests the latter two actions of the district court, and also argues that the IRS has not given him an accounting of disclosures of the documents it maintains concerning Clarkson, as required by 5 U.S.C. §552a(c)(1).

After reviewing the record of the case, decided on summary judgment, we find that the record fully supports the district court's finding that the undisputed material facts establish that the documents maintained by the IRS are related to investigations of illegal tax protester activities. The uncontroverted affidavits attached to the defendants' supplemental motion for summary judgment reveal that the material in question was collected and maintained in connection with legitimate law enforcement activities. The IRS is, of course, authorized to investigate illegal tax protester strategies and activities. See, e.g., United States v. Vance [84-1 USTC ¶9414 ], 730 F.2d 736, 738 (11th Cir.1984). Thus, the district court properly rejected Clarkson's Privacy Act claim. And, because of this holding, we also hold that the district court properly refused to award Clarkson costs on his Privacy Act claim, because Clarkson did not prevail. ²

Finally, Clarkson contends that he has never received an accounting of disclosures of documents relating to him, as required by 5 U.S.C. §552a(c)(1). Yet, in the record there appears a letter dated September 21, 1979 , from the IRS to Clarkson, stating that no disclosures have been made. Clarkson argues that in fact disclosures were made, but the record reveals that the alleged disclosures were only to other criminal investigation units within the IRS itself. This type of internal disclosure is not the evil against which the Privacy Act was enacted. See id. §552a(c)(1)(A). The record reveals that the IRS has disclosed the records it maintains to no outside person or agency other than Clarkson himself. Thus, there has been no violation of the Privacy Act's disclosure requirements.

For the foregoing reasons, the judgment of the district court is AFFIRMED.

¹ It appears from the record and briefs that Clarkson never filed a bill of costs as required by the district court. Thus, Clarkson, who has offered no explanation for this failure, cannot complain about the fact that he has not received the costs to which he was entitled.

² Even if Clarkson had prevailed in his Privacy Act claim, his request for attorney fees would be precluded by the original panel opinion in this case. 678 F.2d at 1371. In rejecting a request for attorney fees by a pro se plaintiff in a Privacy Act suit, this court is bound by Barrett v. Bureau of Customs, 651 F.2d 1087, 1089 (5th Cir. Unit A 1981), cert. denied, 455 U.S. 950, 102 S.Ct. 1454, 71 L.Ed.2d 665 (1982).

 

 

[87-1 USTC ¶9223] Gary Baronowski v. The Unconstitutionality of the Two Sub-Sections of the Privacy Act, etc

U.S. District Court, East. Dist. La., No. 86-592, 4/30/86

[Code Sec. 7213 --Result unchanged by the Tax Reform Act of 1986]

Disclosures: Unauthorized acts, penalties: Privacy Act.--The court granted the government's motion to dismiss the taxpayer's complaint as to the government's alleged improper refusal to provide documents for which the taxpayer had made a request to the IRS under the Privacy Act. The court noted that an agency's denial of disclosure may be reviewable under the Freedom of Information Act (5 U.S.C. §552 ). Moreover, the court said that it would allow the taxpayer to amend his complaint, but he could not relitigate issues concerning his previously litigated cases challenging the constitutionality and legality of federal tax laws and procedures for their enforcement. If the taxpayer did not comply with the court's order for amending his complaint and if he attempted to relitigate any previously decided issues, the court said his pauper status in the instant case would be revoked as it had been in others. The taxpayer's motion for an injunction to produce records also was denied. However, the court noted that he could avail himself of the discovery provisions of the Federal Rules of Civil Procedure. Further, his motion for hand service by the U.S. Marshal was denied; the court observed that the government had not challenged the insufficiency of process as to service of the original complaint. The taxpayer's motion for recusal severance or transfer was denied because he did not establish any ground for recusal and his allegations of partiality and impropriety by the court were wholly unsubstantiated.

Gary W. Baronowski, 11 Elm St., Gretna, La. 70053, pro se. Steven Gremminger, Department of Justice, Washington, D.C. 20530, for defendants.

Order and Reasons

SCHWARTZ, District Judge:

This matter is before the Court upon defendant's motion to dismiss the complaint and upon plaintiff's motions for hand service, for an injunction to produce all pertinent records, and for recusal, severance and transfer. There is also pending before the Court plaintiff's ex parte motion to amend his complaint. Having considered the record, the memoranda of the parties, the oral argument before the Court and the applicable law, the Court rules as follows:

1. The defendant's motion to dismiss is granted in part. This Court perceives that gravamen of plaintiff's present complaint as the government's alleged improper refusal to provide documents for which plaintiff has made request to the I.R.S. under the Privacy Act. In such cases, an agency's denial of disclosure may be reviewable under the Freedom of Information Act. 5 U.S.C. §552 .

To the extent plaintiff complains that the alleged denial of information inhibited his ability to prosecute his other previously litigated cases challenging the constitutionality and legality of federal tax laws and procedures for their enforcement as applied to the plaintiff, the motion is granted, as this Court will not permit plaintiff to relitigate those issues previously tried in various sections of this Court.

The Court would first observe that plaintiff always had, as he does in this case, civil discovery available to him under the Federal Rules of Civil Procedure, through which reasonable requests for documentation relevant to a pending case may be directed by one party against another. Secondly, and in any event, plaintiff's prior actions have been subject to dismissal on purely legal grounds, such that evidence or documents other than facts stated in the pleadings have not been necessary or relevant to the Courts' resolutions of the issues before them.

For these reasons, the Court cannot allow a relitigation of any issues previously decided, even accepting as true plaintiff's averments that the government improperly denied him access to documents. However, the Court will permit plaintiff to procced with this matter on the following conditions:

On or before May 30, 1986 , plaintiff shall submit to the Court a pleading of no more than five pages, which shall be entitled "Plaintiff's Superseding and Amending Complaint." This document shall take the place of all prior complaints and amendments previously filed in Civil Action no. 86-592, and shall be limited to stating only the matters listed below:

A. It shall briefly and clearly set forth and identify those requests for information which plaintiff alleges the government improperly denied;

B. It shall briefly and clearly state when those requests were made and to whom, explaining what plaintiff has done to comply with the procedures enacted by the government, in statute and regulations, for obtaining such information, and

C. It shall briefly and clearly explain what plaintiff has done to exhaust his administrative remedies for the alleged denial of the information.

In addition, if the plaintiff has not complied with the procedures for obtaining information as outlined by statute and regulations, plaintiff shall include a brief explanation of why he has failed to comply with those procedures.

Notwithstanding this Court's prior order in Civil Action no. 85-4249 revoking plaintiff's pauper status in that and any future actions filed by the plaintiff, the Court shall permit plaintiff to proceed in Civil Action no. 86-592 as a pauper, on the condition that he comply with this Order. However, should plaintiff attempt to relitigate any previously decided issues, his pauper status may be revoked in this action also.

2. In light of the foregoing, plaintiff's ex parte motion to amend his complaint is denied. The intent of this Order is that plaintiff state clearly in a single document those claims which the Court will allow the plaintiff to pursue, as set forth above.

3. Plaintiff's motion for injunction to produce records is denied. As previously mentioned, however, plaintiff may avail himself of the discovery provisions of the Federal Rules of Civil Procedure, pursuant to which he may direct to the government, through its attorney of record, reasonable, limited and clear requests for documents that are relevant to this case. Plaintiff is cautioned, however, that such requests will be reviewed by the Magistrate and this Court, should the government object to any such requests, as it is permitted to do under the Federal Rules of Procedure.

4. Plaintiff's motion for hand service by the United States Marshal is denied. The government has not challenged the insufficiency of service of process in these proceedings as to service of the original complaint. All pleadings subsequent to the original complaint shall be served upon Mr. Gremminger, the government's counsel of record, by plaintiff, either by mail or by hand. If plaintiff wishes to preserve proof that service has been made in any particular instance, he may serve Mr. Gremminger by certified or registered mail.

5. Plaintiff's motion for recusal, severance or transfer is denied. This Court has previously ruled that this matter was properly transferred to this Section, to avoid relitigation of issues previously decided in Civil Action no. 85-4249. Plaintiff has not established any ground for recusal by either this Court or the Magistrate, who shall proceed to decide this matter. Plaintiff's allegations of partiality and impropriety by the Court are wholly unsubstantiated.

 

 

[89-1 USTC ¶9149] Vernon Rubel, Plaintiff v. United States and the Internal Revenue Service, Defendant

U.S. District Court, West. Dist. N.C., Statesville Div., ST-C-87-28, 8/26/88

[Code Secs. 6103 , 7213 , 7431 and 7852 ]

Disclosures: Returns and return information: Treasury Department personnel: Privacy Act: Unauthorized disclosure of information.--A tax practitioner was not entitled to damages for the IRS's alleged wrongful disclosure of his return information in press releases issued after his conviction for tax fraud because the government officers had a good-faith belief that disclosure of the information was permitted. In addition, damages could not be awarded under the Privacy Act (5 U.S.C. §552 ) for the IRS's classification of the tax practitioner in its records as an illegal tax protestor since the evidence was plain that the practitioner was committed to avoiding taxation and since the IRS had sufficient records on which to fairly base their classification. Damages were also not available to the tax practitioner for the IRS's alleged maintenance of records on how he exercised his First Amendment rights because evidence of such records was not presented, and, even if the IRS maintained such records, the collection of facts indicating that the practitioner was an illegal tax protestor was an authorized law enforcement activity.

Laura Lee, 1250 15th St. W., Billings, Mont., Vernon Rubel, P.O. Box 1625, Hickory, N.C. 28603, Michael Sibert, 1148 16th Ave., S., Birmingham, Ala. 35205, Bruce S. Harvey, 225 Peachtree St., N.E., Atlanta, Ga. 30303, for plaintiffs. Charles R. Brewer, United States Attorney, Clifford C. Marshall, Assistant United States Attorney, Asheville, N.C., 28802, Michael J. Salem, Department of Justice, Washington, D.C. 20530, for defendants.

FINDINGS OF FACT AND CONCLUSIONS OF LAW

GORDON, District Judge:

The court held a trial on this matter in July 1988. Plaintiff Vernon Rubel asserted a claim against defendant United States for allegedly wrongful disclosures of tax return information under 26 U.S.C. §7431 . Rubel also asserted two claims against defendant Internal Revenue Service ("IRS") under the Privacy Act, 5 U.S.C. 552a, complaining about the IRS's classification of Rubel as an "illegal tax protestor". After evaluating the evidence, the court enters judgment in favor of the defendants' on all the claims.

FINDINGS OF FACT

The court initially held a trial on this matter in January 1988. At that time, plaintiff asserted only the wrongful disclosure claim, and the parties stipulated to the specific disclosures at issue. The court, however, granted a mistrial in order to allow plaintiff to amend his complaint to add claims under the Privacy Act. Prior to the July 1988 trial, the parties stipulated to facts in regard to the Privacy Act claims. The court now recites the parties' composite stipulations:

1. Plaintiff seeks damages from the United States under 26 U.S.C. §7431 for the alleged illegal disclosure of his tax return information. Plaintiff also seeks damages for alleged violations of certain provisions of the Privacy Act, 5 U.S.C. §§552a(e)(5) and (7).

2. Plaintiff Vernon Rubel is an individual residing in the County of Catawba , State of North Carolina .

3. Defendant United States is a sovereign body politic.

4. Defendant Internal Revenue Service is an "agency" within the meaning of 5 U.S.C. §552a(a)(1).

5. Plaintiff was indicted for violations of 26 U.S.C. §7206(l) on 4 December 1984 in connection with allegations that he had willfully and knowingly made and subscribed fraudulent income tax returns for the taxable years 1978 and 1979.

6. Plaintiff pled not guilty to the charges under Section 7206(l) and, after a short period of pretrial proceedings, received a trial by jury on April 9 through 10, 1985.

7. Following the close of the evidence and arguments thereon, the jury returned a verdict of guilty on two counts of violating Section 7206(l).

8. Subsequent to the jury verdict, on 11 April 1985, the IRS, as is its custom, issued a press release announcing Rubel's conviction.

9. The post-conviction press release, in pertinent part, stated as follows:

HICKORY MAN CONVICTED OF FILING FALSE TAX RETURNS

Statesville --A Hickory tax return preparer was convicted in U.S. District Court yesterday on two counts of filing false Federal income tax returns for himself, the U.S. Attorney's Office announced.

Vernon Rubel, 62, operator of Rubel's Orthopedics and Accutrol Tax Service, was charged with underreporting approximately $57,000 for the years 1978 and 1979 and owes approximately $10,000 in additional taxes. U.S. District Judge Woodrow W. Jones set sentencing for May 6 in Asheville . Rubel could receive the maximum sentence of three years in prison and $10,000 fine on each count of the conviction.

During the two-day trial, Government witnesses testified that Rubel is an Enrolled Agent, having been certified to practice and represent clients before the IRS.

10. On 6, May 1985, United States District Judge Woodrow W. Jones sentenced Rubel to fourteen months on the first count and twenty-four months on the second count, such terms of confinement to be served consecutively. Judge Jones suspended the sentence on the second count and placed Rubel on probation for three years under specific conditions, to wit, that Rubel: 1) remain employed and support his dependents; 2) pay a fine of $5,000; 3) file timely and proper tax returns and pay all taxes due; 4) pay all taxes and penalties to the Treasury for the years 1978 and 1979; and 5) not violate any laws of the United States or of any state of union during the probationary period.

11. Immediately following Rubel's sentencing, on 6 May 1985, the IRS issued a second press release concerning the convictions and sentencing. This second news release stated in pertinent part as follows:

HICKORY MAN SENTENCED IN FEDERAL TAX CASE

Asheville --A Hickory tax return preparer was sentenced in U.S. District Court today to 38 months in prison after his April conviction by a jury on two counts of filing false Federal income tax returns for himself.

Vernon Rubel, 62, operator of Accutrol Tax Service and Rubel's Orthopedics, in Hickory , was also fined $5,000 and placed on three years probation by U.S. District Court Judge Woodrow W. Jones. The court suspended 14 months of the sentence and Rubel was taken into immediate custody by U.S. Marshals to begin serving the remaining 24 months in prison.

The Internal Revenue Service said that Rubel underreported approximately $57,000 for the years 1978 and 1979 and owes approximately $10,000 in additional taxes.

During the sentencing, Jones said that he had to review the case differently from other similar cases because Rubel was a tax practitioner and was in a position to harm the U.S. Government and cause a substantial loss of revenues as an advisor to taxpayers. The court stated that it regarded Rubel's violations as willful and that a citizen cannot defy the law and remain free.

12. As indicated in the news release, Rubel was taken into the immediate custody of the United States Marshal. Rubel was ultimately transported to the Federal Correctional Institution at Tallahassee , Florida . Rubel served eleven months of his sentence before being paroled, and to this time remains on probation.

13. Before the applicable statute of limitations would have expired on the wrongful disclosure claim, Rubel filed this action seeking actual damages in the amount of $100,000,000, or statutory liquidated damages in the amount of $1,000,000, plus punitive damages in the amount of $5,000,000.

14. In his complaint, plaintiff Rubel sets forth the alleged items said to have been disclosed with some particularity. To paraphrase these allegations, Rubel complains that the two press releases issued by the Internal Revenue Service and statements by Assistant United States Attorney Kenneth D. Bell illegally "disclosed" his tax "return information" by--

a. Identifying him as manager of Accu-Trol Tax Service, Inc., in Hickory , North Carolina ;

b. Characterizing him as one who filed tax returns;

c. Stating that he had failed to declare $57,000 as income in tax years 1978 and 1979;

d. Identifying him as a tax consultant in Hickory , North Carolina ;

e. Describing him as a "tax protestor";

f. Stating his age;

g. Stating that he faced fines from the Internal Revenue Service;

h. Accusing him of being a tax protestor whose tax returns for the 1970s were suspect;

i. Stating that he was responsible for the national budget deficit;

j. Stating that he was the owner of Rubel Orthopedics, in Hickory , North Carolina ;

k. Stating that he owed approximately $10,000 in additional taxes;

l. Giving his business address as 2153 North Center Street in Hickory , North Carolina ;

m. Saying that he had been a tax protestor since 1969;

n. Falsely stating that his firm is out of business; and

o. Stating that since 1978, he has been licensed to represent taxpayers before the Internal Revenue Service.

15. Neither press release contained the following information complained of by Rubel:

a. Any information identifying Rubel as a "tax protestor";

b. Any information accusing Rubel of being a tax protestor whose tax returns for the 1970s were suspect;

c. Any information indicating or suggesting that Rubel was responsible for the national budget deficit;

d. Any information relating Rubel's business address as " 2153 North Center Street ";

e. Any information indicating the length of time Rubel had been representing taxpayers before the Internal Revenue Service or preparing tax returns for persons other than himself; or

f. Any information, stating (falsely or otherwise) that Rubel's firm is out of business.

16. For purposes of this lawsuit, plaintiff Rubel complains of the disclosures set forth in paragraph 14, above, and no others.

17. The two press releases constituted two separate instances of communication of Rubel's "return information".

The court supplements the parties' stipulations with the following factual findings relevant to the wrongful disclosure claim:

1. At the July trial, plaintiff's counsel attempted to set aside the stipulation limiting plaintiff's contested disclosures to the items listed in stipulation #14. The court, however, finds that the stipulations, having been signed by the plaintiff and the attorneys for both parties, are binding on the parties.

2. Plaintiff concedes that, at the time of the IRS's press releases, each item on the stipulated list of contested disclosure was a matter of public record. The items were released during Rubel's criminal trial.

3. The government employees who disseminated information on Rubel followed an IRS guideline that return information should not be disclosed unless the information had already become a matter of public record.

The court supplements the parties' stipulations with the following factual findings relevant to the Privacy Act claims:

1. On 20 May 1981, plaintiff wrote a letter to the IRS concerning a summons issued to him, which contained the following passage:

The summons has been issued for the improper purpose of conducting harassment, intimidation and other bad faith tactics against members of Barter Exchange. C.C.H. Tax Service labelled the IRS paranoid on this industry. By merely joining this legal and tax paying exchange the undersigned has been mislabelled an illegal tax protestor. The summons is a part of the sanctions imposed upon him, and part of the revenge the IRS seeks.

2. When summoned to produce records for the IRS in connection with an examination of his 1978 and 1979 tax returns, plaintiff refused to turn over the records. Plaintiff was jailed for contempt of court when he refused to turn the records over in response to a court order enforcing the summons.

3. The examination of plaintiff's 1978 and 1979 tax returns was subsequently referred to the Criminal Investigation Division by Revenue Agent Linda Edge. The referral was received by the Criminal Investigation Division on 31 December 1981. Plaintiff's tax accounts for 1978 and 1979 were directed to be "frozen" on 3 May 1983.

4. Plaintiff wrote a letter to the IRS in May of 1982 requesting information as to whether he was required to file a return, what the authority for any such requirement might be, and information relating to perjury for failing to answer questions. These questions were asked although plaintiff is and was a knowledgeable tax practitioner, who demonstrated, by a lucid explanation at trial, considerable knowledge of depreciation and investment tax credits. Moreover, plaintiff was an enrolled agent who, at the time he wrote the letter, was licensed to represent clients before the Department of Treasury.

5. Plaintiff's place of business was decorated with various posters and signs questioning the constitutionality of the Federal tax system.

6. Plaintiff failed to file his tax returns for 1980, 1981, 1982, and 1983 until sometime in 1986.

7. At the sentencing proceeding following his conviction, plaintiff bypassed his three attorneys and presented the sentencing judge with a packet of documents which, according to plaintiff, constituted a relinquishment of his "franchise".

8. Plaintiff contends that his businesses, Accutrol Tax Service and Rubel Orthopedics, are run as sole proprietorships. However, plaintiff also contends that the ownership of these same businesses is divided in such a way that all income generated by them is assigned to him, but that all other assets are owned by his children.

9. The failure to file income tax returns for several consecutive years as an "illegal tax protest" scheme by the IRS, when such non-filing is indicated to stem from protestor beliefs.

10. "Assignment of income" schemes are regarded by the IRS as "illegal tax protest" activities.

11. The designation of taxpayers as "illegal tax protestors" is pertinent to both civil and criminal tax investigations because: (a) it warns IRS agents of potentially dangerous taxpayers; (b) it highlights possible avoidance and evasion schemes; and (c) it points up the necessity for extra documentation.

12. The IRS classified Rubel as an illegal tax protestor.

13. Plaintiff's 1978 through 1986 tax returns are currently under examination by the IRS.

14. After evaluating the evidence, the court is firmly convinced that Vernon Rubel is totally committed to the avoidance of taxation. He has been convicted of tax fraud. He has filed his returns begrudgingly and belatedly. He has apparently structured his business to unlawfully avoid taxes. He has refused to cooperate with the IRS agents investigating him. He has withheld documents. He has written letters suggestive of a hostile attitude toward taxation. He has decorated his office with anti-taxation writings. He has sought to renounce his citizenship as a means of defending a tax case against him. He has apparently associated with groups inimical to taxation. He has failed to maintain adequate business records. He has evinced an obstinate and uncooperative temperament on the witness stand. In short, Vernon Rubel has been and remains an illegal tax protestor, not only under the IRS's definition, but also under any common sense perception.

CONCLUSIONS OF LAW

A. The Wrongful Disclosure Claim

1. 26 U.S.C. §7431 provides in pertinent part:

SEC. 7431 . CIVIL DAMAGES FOR UNAUTHORIZED DISCLOSURE OF RETURNS AND RETURN INFORMATION.

(a) In General.--

(1) Disclosure by employee of United States.--If any person who is not an officer or employee of the United States knowingly, or by reason of negligence, discloses any return or return information with respect to a taxpayer in violation of any provision of section 6103 , such taxpayer may bring a civil action for damages against the United States in a District Court of the United States. . . .

(b) No liability for Good Faith but Erroneous Interpretation.--No liability shall arise under this section with respect to any disclosure with results from a good faith, but erroneous, interpretation of section 6103 .

2. 26 U.S.C. §6103 provides in pertinent part:

SEC. 6103 . CONFIDENTIALITY AND DISCLOSURE OF RETURNS AND RETURN INFORMATION.

(a) General Rule.--Returns and return information shall be confidential, and except as authorized by this title--

(1) no officer or employee of the United States, . . . shall disclose any return or return information obtained by him in any manner in connection with his service as such officer or an employee or otherwise or under the provisions of this section. . . .

(b) Definitions.--For purposes of this section--

(8) Disclosure.--The term "disclosure" means the making known to any person in any manner whatever a return or return information.

3. Section 6103 establishes a general rule against the disclosure of tax return information, and the section does not expressly make an exception to that rule in regard to return information that has become a part of the public record. Defendant United States nonetheless contends that government officers may make press releases containing return information provided that the return information is already a matter of public record. In this regard, defendant maintains that the release of return information after the information is part of the public record is not a "disclosure"--not a "making known"--of return information. "Disclosure", the argument runs, denotes a release of non-public information, not the mere reiteration of information already in the public arena. The government also explains that it has always been its practice to make press releases after criminal trials, that nothing in the legislative history of Section 6103 indicates that Congress sought to preclude such releases, and that such releases inform the public that the government enforces the tax laws. Finally, the government stresses that most courts confronted with this issue have concluded that government officers are permitted to release return information that is already part of the public record.

4. Plaintiff disagrees with the government's position. Plaintiff asserts that Section 6103 is very specific in its terms, that Section 6103 states that only in specific instances may return information be released, and that Section 6103 does not permit government officers to release return information that is a matter of public record. Plaintiff explains that Congress has sought to encourage citizens to make full and frank disclosures on their tax returns. In enacting Sections 7431 and 6103 , Congress wanted to allay fears that government officers entrusted with confidential return information would negligently or knowingly expose such information. Thus, Congress specifically limited the instances when the government officers could lawfully release return information and did not authorize the release of return information that is a matter of public record. Plaintiff further maintains that the beneficial deterrent effect of the press releases is offset by the risk of abuse incident to such releases. If a government officer can release tax return information merely by inserting the information on the public record, what is to prevent the officer from instituting a marginal or frivolous suit merely for the purpose of placing the information on the public record. In the end, plaintiff contends that, even though the press has the right to release return information contained in the public record, government officers, being responsible for the enforcement of the tax laws, being in an adversial relationship to suspected tax violators, and being specifically limited in their authority, do not have the prerogative to release return information merely because it's on the public record.

5. The court need not, and will not, decide the issue of whether government officers may release return information that is a matter of public record. The parties have presented forceful arguments in favor of their respective positions. The court sees the merits to each side of this difficult issue. Clearly, the difficulty inherent in resolving this issue indicates that the government officers who prepared the press releases acted pursuant to at least a good faith interpretation of the law. The court cannot expect the government officers to somehow divine the ultimate resolution of this issue. The majority of cases indicate that the officers may release return information that is a matter of public record. Indeed, it may very well be the case that, as a matter of definition, press releases containing only public information are not "disclosures" under Section 6103 . In the end, from an objective standpoint, the government officers had a solid basis on which to interpret Section 6103 as permitting the press releases at issue in this case.

6. Section 7431 states that "no liability shall arise under this section with respect to any disclosure that results from a good faith . . . interpretation of section 6103 ." Inasmuch as the government officers acted pursuant to at least a good faith interpretation of 6103, the court holds in favor of the government with respect to plaintiff's claim under Section 7431 .

B. Privacy Act Claims

1. The first issue for resolution under the Privacy Act is whether any classification of Rubel as an illegal tax protestor violated 5 U.S.C. §552a(e)(5), thereby entitling Rubel to damages under 5 U.S.C. §552a(g)(1)(C).

2. Section 552a(e)(5) provides as follow:

(e) AGENCY REQUIREMENTS--Each agency that maintains a system of records shall--

(5) maintain all records which are used by the agency in making any determination about any individual with such accuracy, relevance, timeliness, and completeness as is reasonably necessary to assure fairness in the determination.

3. Section 552a(g)(1)(C) provides as follows:

(g)(1) CIVIL REMEDIES.--Whenever any agency . . .

(C) fails to maintain any record concerning any individual with such accuracy, relevance, timeliness and completeness as is necessary to assure fairness in any determination relating to the qualifications, character, rights, or opportunities of, or benefits to the individual that may be made on the basis of such record, and consequently a determination is made which is adverse to the individual; . . . the individual may bring a civil action against the agency, and the district courts of the United States shall have jurisdiction in the matters under the provisions of this subsection.

4. Plaintiff contends that the IRS's records were not sufficiently accurate, relevant, timely, or complete to asssure fairness in the IRS's classification of Rubel as an illegal tax protestor. According to plaintiff, the IRS made the classification of Rubel as an illegal tax protestor on three separate occasions:

First, some time during 1983, the Memphis Service Center made a classification of illegal tax protestor for the years 1980, 1981, 1982, and 1983. Second, sometime between December 31, 1987 , and February 18, 1988 , the Memphis Service Center made a classification of illegal tax protestor for the years 1978 and 1979. Third, as part of the criminal investigation in 1983 or 1984 Dan Guerrini made a determination that Rubel was a tax protestor.

(Plaintiff's Proposed Findings of Fact and Conclusions of Law, p. 28).

5. As previously stated, the court agrees with the IRS's assessment of Rubel as an illegal tax protestor. The evidence is plain that Rubel is committed to avoiding taxation and is prepared to employ schemes in pursuit of that end.

6. Plaintiff presented no evidence that the IRS maintained inaccurate, irrelevant, or untimely records.

7. The court also concludes that the records were sufficiently complete to assure that the determination of Rubel was effected in a fair manner. The IRS based the 1983 classification of Rubel as an illegal tax protestor on the fact that Rubel, as tax practitioner and enrolled agent of the IRS, wrote a letter to the IRS asking basic tax questions, such as whether and why he had to file a tax return. The IRS viewed these questions, when asked by one knowledgeable about taxation, as indicative of tax protest beliefs. The IRS also based the classification on the fact that Rubel had not filed a tax return for 1980-83. The IRS has a sufficiently complete record on which to base the 1983 classification. Also, according to the plaintiff, in 1987 or 1988 the IRS classified Rubel as a tax protestor for the tax years 1978 and 1979. In making this alleged retroactive classification, the IRS had the records relating to Rubel's letters and late filings. Moreover, the IRS had records on the fact that Rubel had been convicted of tax fraud for the years in question. Thus, the IRS clearly had a sufficient records on which to fairly base any classification of Rubel as an illegal protestor for the years 1978 and 1979. Finally, plaintiff contends that IRS special agent Dan Guerrini, as a part of his investigation of Rubel for tax fraud in 1983-84, opined that Rubel was a tax protestor and reported his opinion to the Tax Protestor Coordinator in Greensboro , North Carolina . Guerrini arrived at his opinion based on a common sense assessment of the available information--an assessment in which the court concurs. Guerrini did not, however, make the official "adverse determination" that Rubel was a tax protestor. Guerrini merely amassed information on whether Rubel violated the tax laws and, incident thereto, whether Rubel manifested a hostile attitude on taxation. The basis of Guerrini's opinion that Rubel was a tax protestor is only derivatively significant to the issue of whether the IRS's "adverse determination" against Rubel was based on insufficient records. As stated above, the IRS had a sufficient basis in 1983 to label Rubel as a tax protestor. To the extent that the IRS had integrated Guerrini's recommendation into the information relating to Rubel's classification, it only strengthened the IRS's basis for making the classification of Rubel as an illegal tax protestor. For this reasons, the court concludes that plaintiff's claim under Section 552a(e)(5) and a(g)(1)(C) must fail.

8. Rubel additionally asserts that the classifications of him as a tax protestor violated 5 U.S.C. §552a(e)(7), thereby entitling him to damages under 5 U.S.C. §552a(g)(1)(D).

9. Section 552a(e)(7) provides as follows:

(e) AGENCY REQUIREMENTS--Each agency that maintains a system of records shall--

(7) maintain no record describing how any individual exercises rights guaranteed by the First Amendment unless expressly authorized by statute or by the individual about whom the record is maintained or unless pertinent to and within the scope of any authorized law enforcement activitiy.

10. Section 552a(a)(3) provides as follows:

(a) DEFINITIONS--For purposes of this section--

(3) the term "maintain" includes maintain, collect, use or disseminate.

11. Section 552a(g)(1)(D) provides as follows:

(g)(1) CIVIL REMEDIES.-- Whenever any agency . . .

(D) fails to comply with any other provision of this section, or any rule promulgated thereunder, in such a way as to have an adverse effect on an individual, the individual may bring a civil action against the agency, and the district courts of the United States shall have jurisdiction in the matters under the provisions of this subsection.

12. Section 552a(e)(7) only proscribes the maintainance of records on how a citizen exercises First Amendment rights. Reuber v. United States , 829 F.2d 133, 142-43 (D.C. Cir. 1987). A plaintiff thus must present evidence that the government agency maintained records on the content of the plaintiff's protected expression; records indicating that a citizen merely favors or disfavors a law, absent some recordation of the substance of the citizen's remarks, are not sufficient.

13. Plaintiff herein presented no evidence in his case-in-chief that the IRS maintained records on how Rubel exercised his First Amendment rights. The only possible evidence suggestive that IRS collected information on how Rubel exercised such rights came from the testimony of Guerrini, a witness for the government.

13. Guerrini conducted a criminal investigation of Rubel for tax fraud. Revenue Agent Linda Edge referred the case to Guerrini after Rubel refused to turn over records pertinent to Rubel's 1978-79 tax liability. During his criminal investigation of Rubel, Guerrini reached the opinion that Rubel was an illegal tax protestor. Using his experience as a revenue agent and his common sense, Guerrini detected a number of protestor symptoms. Rubel had refused to turn over his records. Rubel had asserted arguments in his petition to quash the IRS summons which Guerrini believed to be typical to tax protestors. Rubel had decorated his office with writings critical of the tax system. Rubel had sent a letter to the Memphis Service Center asking fundamental questions about the legitimacy of taxation. And, other members of the IRS had told Gerrini that Rubel had participated in tax protestor groups. Based on these indications, as well as the indication that Rubel had committed tax fraud for the years in question, Guerrini concluded that Rubel was trying to avoid or disrupt the tax system--that Rubel was an illegal tax protestor.

14. Even assuming that, based on the preceding paragraph, Guerrini can be said to have maintained records on how Rubel exercised his First Amendment rights, the court nonetheless concludes that Guerrini's "collection" of the above-mentioned facts was an "authorized law enforcement activity" under Section 552a(e)(7). The "illegal tax protestor" label apprises IRS agents that the suspect could be dangerous, that the suspect may be employing imaginative schemes to avoid taxes, and that additional documentation may be necessary. The court holds that once an IRS agent receives a criminal referral, the agent may investigate the suspect and, in so doing, may observe and record any protestor type writings and attitudes. The agent, in addition, may transmit to the appropriate official an opinion that the suspect is, or may be, an illegal tax protestor. Detection of protestor attitudes is particularly related to the enforcement and protection of the tax system when, as here, the suspect is a tax practitioner. In conclusion, having received a criminal referral on Rubel, Guerrini was permitted to note and record facts indicating that Rubel was an illegal tax protestor. Therefore, plaintiff's claim under Section 552a(e)(7) must fail.

15. The court does not hold, however, that the IRS, under the guise of enforcing the tax laws, is at liberty to investigate the community at large to discern tax protestors. The court merely holds that when an investigation has focused on a suspect, then it is a legitimate law enforcement activity for the investigating officer to note and record facts relating to the suspect's anti-taxation activities and attitudes.

JUDGMENT

The court held a trial on this matter in July 1988. Plaintiff Vernon Rubel asserted a claim against defendant United States for allegedly wrongful disclosures of tax return information under 26 U.S.C. §7431 . Rubel also asserted two claims against defendant Internal Revenue Service ("IRS") under the Privacy Act, 5 U.S.C. 552a, complaining about the IRS's classification of Rubel as an "illegal tax protestor". For the reasons stated in the Findings of Facts and Conclusions of Law, entered contemporaneously herewith, IT IS ORDERED and adjudged that the plaintiff have and recover nothing from the defendants and that the action be, and the same is, dismissed.