Offenses by Officers & Employees of U.S. Page4

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2. Witness Intimidation

Appellants allege that the IRS intimidated their expert witness into not testifying on surrebuttal. They contend that this alleged government misconduct amounted to a denial of their due process rights. ⁸ Appellants also urge us to apply our supervisory powers to reverse the conviction and to order the district court to dismiss the indictment.

In support of their claim of witness intimidation, appellants rely on a line of cases which support the proposition that substantial government interference with a defence witness's free and unhampered choice to testify amounts to a violation of due process. See Webb v. Texas, 409 U. S. 95, 97-98 (1972) (defense witness intimidated into not testifying by remarks of trial judge); Washington v. Texas, 388 U. S. 14, 19 (1967) (right to present witness to establish defense is fundamental to due process); United States v. Goodwin, 625 F. 2d 693, 703 (5th Cir. 1980); and United States v. Hammond, 598 F. 2d 1008, 1012-15 (5th Cir. 1979) (defense witnesses intimidated by FBI agent during court recess and by subpoena to appear before a grand jury); United States v. Henricksen, 564 F. 2d 197, 198 (5th Cir. 1977) (defense witness intimidated by terms of codefendant's plea bargain); United States v. Morrison, 535 F. 2d 223, 226-28 (3rd Cir. 1976) (defense witness intimidated by prosecutor's remarks); United States v. Thomas, 488 F. 2d 334, 335-36 (6th Cir. 1973) (defense witness intimidated by remarks of secret service agent during court recess). Whether substantial government interference with a defense witness occurred is a factual determination to be made by the trial court. See United States v. Goodwin, 625 F. 2d at 703; United States v. Bates, 600 F. 2d 505, 511 (5th Cir. 1979). We review a district court's factual determination under the clearly erroneous standard.

The testimony adduced at the lengthy hearing on the motion to dismiss held on the witness intimidation claim revealed the following pertinent facts. On October 6, 1982 , the government learned that the following day appellants would call as an expert witness Richard Losey, a law school professor and practitioner specializing in tax law. Losey was to testify in support of appellants' theory regarding the legality of the retroactive allocations under 26 U. S. C. §706(c)(2)(A). Prosecution attorneys became curious about Losey's relationship with Chernik. An IRS special agent offered to inquire into the matter.

On the morning of October 7, the special agent called the IRS office and asked whether anyone had information regarding Losey. The special agent's supervisor instructed another agent to call Losey's office and gather some information.

The agent called Losey's office, identified himself as "Mr. Jacobs," and asked for Chernik. A secretary informed the agent that no one by that name worked at the firm. The agent asked the secretary if Chernik was a partner at the firm. The secretary responded that he was not. The agent also asked the secretary if Losey and Chernik were on the faculty at the same law school. The agent told the secretary that he had been referred to the firm by a friend of Chernik. The agent then made further inquiries into the firm's practice. Before ending the conversation, the agent left a number where Losey could return the call.

Losey stated that his secretary informed him about the peculiar call on the morning of October 8, the day after he testified as an expert. Losey claimed that he was chilled by the suspicious phone call because he suspected government involvement. Losey immediately informed one of the defense counsel of the call and told him he would not "feel like one hundred percent" on the stand. Losey further testified that when it was confirmed that the caller was from the IRS, he felt intimidated and feared reprisals. Thus, Losey asserted that the call affected his decision whether to testify on surrebuttal.

Losey also testified, however, that the source of the call was not confirmed until the evening of October 11. Losey testified that he was told by one of the defense counsel on October 9 that the defense lawyers had reached a consensus not to have him testify on surrebuttal.

Counsel for appellant Grutchfield testified that he wanted Losey to testify on surrebuttal on the "international tax law aspects" of the case. Counsel decided against calling Losey to the stand after he confirmed the caller's true identity because he believed Losey was too nervous.

We may infer from the district court's denial of the motion to dismiss based on appellants' witness intimidation claim that the district court found that there was no government misconduct. The district court expressly noted that a simple phone call to investigate the conection between Losey and Chernik did not amount to intimidation. We agree with the district court.

The only evidence of "intimidation" presented by appellants was a telephone call made by an IRS agent to Losey's office. The purpose of the call was to investigate into the relationship between Losey and Chernik. We note that there is nothing improper with investigation of trial witnesses. Indeed, such investigations are often necessary to collect information for cross-examination or impeachment purposes. A telephone call is an appropriate means to conduct such an investigation. In this case, the fact that the IRS agent who placed the call to Losey's office concealed his true identity does not amount to government misconduct.

We also note that there was no evidence presented that the IRS made the call in order to intimidate Losey. ⁹ Moreover, although Losey testified that the call made him nervous, he never stated that he would not testify if called on surrebuttal. On these facts, we cannot find any evidence of witness intimidation by the government. Thus, our review of the record convinces us that the district court's finding on the witness intimidation claim was not clearly erroneous and that the district court properly denied the motion to dismiss. ¹⁰

3. Alleged CIR Involvement

Appellants argue that their convictions should be reversed because the Central Intelligence Agency was involved in the IRS's investigation of Indec and its personnel. Alternatively, appellants seek a remand of this case for a hearing on the alleged CIA involvement.

After a closed hearing on appellants' motion for dismissal of the indictment based on alleged CIA involvement in this case, the district court rejected appellants' claim of CIA involvement and denied the motion to dismiss. The transcript of this hearing was submitted under seal to this court. Our review of the transcript convinces us that the district court properly rejected the claim of CIA involvement and denied and motion to dismiss.

On appeal, appellants continue to insist that the CIA was involved in this case. Appellants have attempted to prove their allegation through the numerous documents lodged with this court. The documents submitted by appellants are wholly outside the record properly before this court. We must limit our review of appellants' claim to the record that was made before the trial court. See Fed. R. App. P. 10(a); Retana v. Apartment, Motel, Hotel & Elevator Operators Union , 453 F. 2d 1018, 1027 (9th Cir. 1972).

4. Brady Material

Appellants further assert that the government's failure to provide them with the purportedly exculpatory statements of Arnoldo Rodriguez mandates reversal of their convictions under Brady v. Maryland, 373 U. S. 83 (1983). Alternatively, appellants contend that reversal is required because the government perpetuated a fraud on the court. We find no Brady violation or fraud upon the court in this case.

Under Brady, the prosecution may not suppress exculpatory evidence that is material to the issue of guilt or punishment. Id. at 87. In a case, such as the present, where a general request for exculpatory evidence is made, "the test for materiality is whether the suppressed evidence 'creates a reasonable doubt that did not otherwise exist.'" United States v. Gardner [80-1 USTC ¶9390], 611 F. 2d 770, 774 (9th Cir. 1980) (quoting United States v. Agurs, 427 U. S. 97, 112 (1976); accord United States v. Cadet, 727 F. 2d 1453, 1467-68 (9th Cir. 1984)). However, in response to a request for exculpatory evidence, the prosecution does not have a constitutional duty to disclose every bit of information that might affect the jury's decision; it need only disclose information favorable to the defense that meets the appropriate standard of materiality. United States v. Gardner , 611 F. 2d at 774-75.

Rodriguez told IRS agents that Bedford 's Central American real estate holdings were nonexistent except on paper. Rodriguez stated that he prepared the fraudulent paperwork and forwarded it to Indec. Although this information was not used at trial, it was included in the government's sentencing report. These statements are clearly not exculpatory.

After trial and sentencing, counsel for Grutchfield interviewed Rodriguez in Costa Rica . In declarations dated April 28, 1983 , Rodriguez states that IRS agents chained him to a chair, coached him as to his answers, and compelled him to give the answers they wanted to hear. He further stated that Grutchfield had no knowledge about the true status of Bedford and its assets and that on several occasions he told the IRS agents of Grutchfield's ignorance on this point.

Based on these latter declarations of Rodriguez, appellants assert that there was a Brady violation. The April 28 declarations of Arnoldo Rodriguez are not properly before us. Considering the record that is properly before us, we find no Brady violation or fraud upon the court in this case.

5. Remaining Allegations of Government Misconduct

Appellants also point to other instances of alleged government misconduct.

We have already discussed the search and seizure of Indec's office. The remedy for any fourth amendment violation is suppression of the tainted evidence. However, other than Chernik's and Yost's post arrest statements, no evidence obtained subsequent to the arrests was introduced at trial.

Appellants also claim that the government improperly threatened a prospective witness in order to have him testify at their trial. Appellants assert that the threat "appears" to be a violation of 18 U. S. C. §872. Appellants clearly lack standing to assert the witness's rights.

Relying on United States v. Stahl [80-1 USTC ¶9165], 616 F. 2d 30 (2d Cir. 1980), appellants argue that the prosecutor's references to money and greed as appellants' motivation for the conspiracy amounted to prejudicial error. The present case is readily distinguishable from Stahl. In Stahl, the prosecutor's trial strategy "included a[n] . . . appeal to class prejudice." Id. at 33. The prosecutor, therefore, engaged in "calculated and persistent efforts" throughout the trial to arouse prejudice against the defendant because of his wealth. Id. at 32. The Second Circuit reversed the conviction because it concluded that this conduct by the prosecutor amounted to prejudicial error. In the present case, the prosecutor made two reference to money and greed as appellants' motivation--one during the opening statement and the other during closing argument. These two isolated references do not constitute misconduct and they clearly do not amount to prejudicial error.

Appellants claim that the district court committed reversible error by allowing the case agent to be in the courtroom throughout the trial. They assert that the case agent abused his position by relaying information and coaching prospective government witnesses. Appellants have cited nothing in the record to substantiate this allegation. Moreover, we find that the district court did not abuse its discretion in allowing the case agent to remain at the prosecutor's table. See, e.g., United States v. Alvarado, 647 F. 2d 537, 540 (5th Cir. 1981). The case agent was exempt from sequestration. See Fed. R. Evid. 615(2) and (3); United States v. Perry, 643 F. 2d 38, 53 (2d Cir.), cert. denied sub nom., 454 U. S. 835 (1981); United States v. Alvarado, 647 F. 2d at 540.

Finally, appellants claim that the IRS agents manipulated the taped conversations and were poor witnesses. The trial court judge and jury are in the best position to judge the accuracy of the taped conversations and the credibility of the witnesses. We find no merit in these claims.

IV. Challenges to 18 U. S. C. §371

Appellants raise several challenges to the conspiracy statute under which they were indicted and convicted. We reject each challenge.

A. Use of 18 U. S. C. §371 to Indict for Violation of Tax Law

Appellants contend that 18 U. S. C. §371 was preempted by Congress' enactment of the comprehensive penal provisions of the Internal Revenue Code. Thus, appellants assert that 18 U. S. C. §371 was not intended to cover conspiracies to defraud the IRS. Relying on this premise, appellants argue that the indictment under this statute was improper and should have been dismissed.

A similar argument was made by the defendant in United States v. Shermetaro [80-2 USTC ¶9589], 625 F. 2d 104, 109-11 (6th Cir. 1980). The Sixth Circuit rejected the argument stating "there is no merit in the contention of appellant that Congress has preempted the field of federal income tax law in Title 26 so as to prevent prosecutions for conspiracy to violate those laws pursuant to 18 U. S. C. §371." Id. at 111. The Sixth Circuit expressly concluded that conspiracies to defraud the IRS are indictable offenses under 18 U. S. C. §371. We agree with the Sixth Circuit. Appellants' indictment under 18 U. S. C. §371 was proper.

B. Constitutionality of "Conspiracy to Defraud" Prong of 18 U. S. C. §371

Appellants also urge us to declare unconstitutionally vague the "conspiracy to defraud the United States " prong of 18 U. S. C. §371. In support of their contention that the "conspiracy to defraud the United States" prong of §371 is unconstitutionally vague, appellants rely exclusively on a case decided by the West Virginia Supreme Court, State ex rel. Whitman v. Fox, 160 W. Va. 633, 236 S. E. 2d 565 (1977). Appellants' reliance on Whitman is misplaced.

In Whitman, the West Virginia Supreme Court ruled on the constitutionality of its state conspiracy statute, W. Va. Code, 61-10-31 (1978), which was modeled on the federal conspiracy statute, 18 U. S. C. §371. The court evaluated the state conspiracy statute under the due process clause of the state constitution and found that the section making it unlawful "to defraud the State, the state or any . . . county or municipality of the State . . ." was unconstitutionally vague. The court held that this prong of the state conspiracy statute "does not adequately inform the citizenry of the activity which may be considered criminal under the statute." Id. at 569. In so holding, the state court commented that the federal conspiracy statute had "miraculously withstood constitutional scrutiny." Id. However, the state court emphasized that it did not "disparage the Federal Courts' wisdom in permitting the word 'defraud' in 18 U. S. C. §371 [1948] to take on expanded meaning with successive imaginative prosecutions." Id.

We are convinced that the conspiracy to defraud prong of 18 U. S. C. §371, as applied in this case, is not unconstitutionally vague.

In United States v. Mazuire, 419 U. S. 544 (1975), the Supreme Court stated "[i]t is well established that vagueness challenges to statutes which do not involve First Amendment freedoms must be examined in the light of the facts of the case at hand." Id. at 550. Accord United States v. Bohonus, 628 F. 2d 1167, 1173-74 (9th Cir.), cert. denied, 447 U. S. 928 (1980); United States v. Broncheau, 597 F. 2d 1260, 1263 (9th Cir.), cert. denied, 444 U. S. 859 (1979). In examining a statute for constitutional vagueness, we consider whether a person of average intelligence would reasonably understand that his or her conduct is proscribed. United States v. Bohonus, 628 F. 2d at 1174; United States v. Broncheau, 597 F. 2d at 1263. Moreover, "[a] vagueness challenge will not be upheld if judicial explication of a statute provides sufficient clarity to afford fair notice." United States v. Bohonus, 628 F. 2d at 1174.

In Dennis v. United States, 384 U. S. 855 (1966), the Supreme Court emphasized that the conspiracy to defraud prong of 18 U. S. C. §371 reaches any conspiracy for the purpose of impairing, obstructing or defeating the lawful function of any government agency. Id. at 861. Thus, 18 U. S. C. §371 clearly applies to conspiracies to impede, impair, obstruct, or defeat the lawful function of the Department of Treasury in the collection of income taxes. See, e.g., United States v. Turkish [80-2 USTC ¶9478], 623 F. 2d 769, 771 (2d Cir. 1980), cert. denied, 449 U. S. 1077 (1981). Appellants had fair notice that their conduct would fall within the proscriptions of 18 U. S. C. §371.

Furthermore, we note that 18 U. S. C. §371 is, by definition, a specific intent crime. The mens rea requirement of §371 eliminates any objection that the statute punishes the accused for an offense of which he or she was unaware. See e.g., United States v. Bohonus, 628 F. 2d at 1174.

Taking each of these considerations into account, we reject appellants' vagueness challenge to §371. Appellants had sufficient notice that conspiracy to obstruct the collection of taxes was punishable under 18 U. S. C. §371 and that their conduct might well fall within the ambit of this section.

C. Embryonic Conspiracy

Relying on United States v. Wieschenberg, 604 F. 2d 326 (5th Cir. 1979), and United States v. Tarnopol, 561 F. 2d 466 (3rd Cir. 1977), appellants contend that the conversations between themselves and the IRS agents were too "embryonic" in nature to support a conviction for conspiracy to defraud the IRS. Essentially, appellants argue that the evidence was legally insufficient to go to the jury. We reject this claim as did the district court. ¹¹ The government's evidence was sufficient to support a finding that appellants conspired to defraud the IRS and acted in furtherance of that objective.

The present case is readily distinguishable from Wieschenberg, and Tarnopol. In Weischenberg, the Fifth Circuit properly reversed the convictions because the government's proof of an illegal objective and an overt act in furtherance of an illegal objective was fatally deficient. The defendants merely engaged in discussions to export items to Russia , which, with the proper authorization, could be freely sold to eastern bloc countries. The evidence presented did not support the conclusion that the defendants had agreed to export the items without the proper license and that any act in furtherance of such an agreement had been committed. In those circumstances, the Fifth Circuit properly declined to hold that "mere association of two or more persons to accomplish legal and possibly illegal goals, accompanied by discussions to promote those goals, but with no discernible direction toward either the legal or the illegal objectives amount[ed] to criminal conduct under 18 U. S. C. §371." Id. 604 F. 2d at 336.

In Tarnopol, the Third Circuit reversed the defendants conviction for conspiracy to defraud the United States under 18 U. S. C. §371. The Third Circuit correctly held that defendants' failure to record certain sales on a sales journal and accounts receivable ledger did not establish an agreement to impede or obstruct the lawful function of the IRS. 561 F. 2d at 474-75.

In the present case, the evidence amply supported the inference of an agreement to defraud the IRS and demonstrated acts in furtherance of that objective. The various meetings between appellants and the undercover agents indicated that appellants conspired to defraud the United States by agreeing to promote and effect the sale of Bedford partnership interests to Paoli through a scheme that would enable Paoli to deduct 1980 Bedford losses to which Paoli was not entitled. In furtherance of their plan, appellants: (1) held meetings with Paoli; (2) provided him with detailed advice as to how he could, in 1981, purchase from them an interest in the Bedford partnership and deduct the 1980 Bedford losses on his 1980 personal tax return; and (3) provided Paoli with backdated and fraudulent documentation which he was to present to the IRS in the event of an audit. The documentation indicated that Paoli entered the Bedford partnership in May of 1980, when in fact Paoli actually became a partner in 1981.

D. Sentencing Under 18 U. S. C. 371

We reject as frivolous appellants' contention that they were improperly sentenced under the provisions of 18 U. S. C. §371. Appellants argue that the felony sentence was improper because the object of the conspiracy was not the commission of the felony. The exception in §371 which provides that the punishment for conspiracy shall not exceed the maximum punishment for the underlying offense applies only to conspiracies to commit substantive offenses, and not to conspiracies to defraud the United States .

V. Miscellaneous Issues

Appellants jointly present several other claims which they contend require reversal of their convictions. We consider these remaining contentions below.

A. Scope of Discovery and Cross-Examination

Appellants argue that the district court committed reversible error by limiting the scope of discovery and cross-examination. Appellants claim that the evidence sought to be divulged through the discovery orders and cross-examination would have supported their claims of government misconduct in this case.

We review the district court's ruling on the discovery request and scope of cross-examination under the abuse of discretion standard. Our review is limited to the record made at trial.

1. Discovery Request Under Fed. R. Crim. P. 16(a)(1)(C)

Pursuant to Fed. R. Crim. P. 16(a)(1)(C), appellants moved the district court for discovery of internal government documents prepared by government agents in connection with the investigation and prosecution of appellants. ¹² Fed. R. Crim. P. 16(a)(1)(C) provides that the defendant is entitled to discovery of materials in the possession, custody, or control of the government which are material to the preparation of the defense. To secure a discovery order under Fed. R. Crim. P. 16(a)(1)(C), a defendant must first make a prima facie showing of materiality. United States v. Cadet, 727 F. 2d at 1468. Materiality is not established by a general description of the documents sought or by a conclusory argument that the requested information was material to the defense. Id. Upon careful review of appellants' request for internal government documents in this case, we find that appellants' request was inadequate to meet the requirements of Rule 16(a)(1)(C).

Appellants' discovery request failed to present any facts which would tend to show that the government was in possession of information that would be material to the defense. Appellants' bald assertions of suspected. CIA involvement in this case were insufficient to make a prima facie case of materiality to entitle appellants to the requested documents. ¹³

2. Limitations on Cross-Examination

Appellants also take issue with some of the district court's rulings on the scope of the cross-examinations. All but one of the rulings specifically objected to by appellants occurred during the pre-trial suppression hearing. The district court curtailed the cross-examination when defense counsel attempted to probe into the government's legal strategy for the search of Indec's office. The government objected to the questions because they required the agent to divulge material within the attorney-client privilege or because the questions were attempts to discover the contents of internal government documents which could not be obtained through discovery.

The district court did not abuse its discretion in sustaining the objections and in denying appellants' motion to strike the witness's testimony. The cross-examination related to collateral matters which had no bearing on the truth of the witness's direct testimony. See e.g., United States v. Seifert, 648 F. 2d 557, 561-62 (9th Cir. 1980). Moreover, none of the evidence seized in the search was used at trial. Thus, any error resulting from the district court's refusal to strike the witness's testimony was harmless.

The only instance of district court intervention in cross-examination at trial was with regard to appellants' request for production of the case agent's notes which he took during the trial. The district court determined that the agent was not required to give appellants his notes because he had not referred to them in order to testify. The district court is in the best position to determine the veracity of a witness's statements. We will not second guess the district court's determination regarding the agent's credibility. Accordingly, we find no abuse of discretion, in the district court's denial of appellants' motion for production of the case agent's notes.

B. Challenge to Expert Witness

Appellants contend that William T. Hutton was not qualified to testify as an expert because Hutton is an income tax, not a partnership tax specialist. They argue that Hutton's testimony was highly prejudicial and therefore reversal is required.

The determination whether an expert witness has sufficient qualifications to testify is a matter within the district court's discretion. United States v. Trice, 476 F. 2d 89, 91 (9th Cir.), cert. denied, 414 U. S. 843 (1973). In this case, the district court did not abuse its discretion by allowing Hutton to testify as an expert witness.

Hutton is an attorney, professor, and author in the area of income tax. Hutton testified that he had taught partnership taxation. Appellants' argument that Hutton lacked "specific experience" in partnership taxation goes to the weight of his testimony, not to its admissibility. See Bitton v. International Transport, Inc., 437 F. 2d 817, 822 (9th Cir. 1970).

C. Severance

Chernik and Grutchfield argue that the district court committed reversible error in denying their motions for severance. We reject their claims.

The law is well settled that a motion for severance is addressed to the trial court's discretion. United States v. Seifert, 648 F. 2d at 563. Before this court will reverse a conviction because of a district court's refusal to grant severance, "the defendant must show that failure to sever was so manifestly prejudicial that it outweighed the dominant judicial concern with judicial economy and compelled the exercise of the trial court's discretion to sever." Id. The defendant must show a violation of one of his or her substantive rights in order to make a showing of such manifest prejudice. Id.

Where, as here, the reason for severance is the asserted need of a codefendant's testimony, the moving defendant must show that he or she would call the codefendant at a severed trial, that the codefendant would in fact testify, and tht the testimony would be favorable to the moving defendant. Id. In addition, the district court must consider the possible weight and credibility of the testimony and the economy of severance at the point the motion was made. Id. at 564.

Applying these considerations to the case before us, we are convinced that the district court did not abuse its discretion in denying Chernik's and Grutchfield's motions for severance. First, neither Chernik nor Grutchfield was prevented from presenting an individual defense. Chernik was able to present his defense theory that he reasonably believed that the retroactive allocation of the Bedford partnership interest to Paoli was legal. Chernik's defense was bolstered by Losey's testimony. Chernik also presented his defense theory that he did not participate in the negotiations and agreement with Paoli. Likewise, Grutchfield was able to present his defense theory. Grutchfield presented his "reliance on counsel" theory which was also bolstered by Losey's testimony. Grutchfield also was able to submit his innocent bystander defense theory to the jury.

Second, the denial of the motion for severance did not create a prejudicial "spillover" of evidence. Except for Chernik's and Yost's post-arrest statements which were admitted with careful limiting instructions, all of the government's evidence was admissible against all of the appellants. See Hernandez v. United States , 300 F. 2d 114, 122 (9th Cir. 1962). Indeed, the district court found that the tapes were "absolutely devastating" against appellants and Yost. Thus, even if severance had been granted, the tapes would have been introduced at each trail.

Next, Chernik and Grutchfield are wrong insofar as they claim that the district court was required to grant their severance motions because their codefendants averred that they would present evidence favorable to Chernik and Grutchfield if severance were granted. These offers to testify at the several trial were conditional. Little, Chernik, and Grutchfield stated that they would testify at severed trials only when their own proceedings, including any appeals, were complete. Thus, it was unclear whether the codefendants would have testified if severance were granted. Furthermore, given the condition imposed by appellants, the scheduling of the several trials would be impossible. The district court properly refused to allow Chernik and Grutchfield to "play games" with the scheduling of the trials. See e.g., United States v. Gay, 567 F. 2d 916, 918-20 (9th Cir.), cert. denied, 435 U. S. 999 (1978). The codefendants' conditional offer to testify provided adequate grounds for the district court to exercise its discretion against severance in this case. See id.

Finally, the weight and reliance of the codefendants' proferred testimony was questionable. With regard to Chernik, Little and Grutchfield stated that they would testify that Chernik did not specifically negotiate the Bedford transaction with Paoli and did not draft the documents used in the transaction or know the details of their contents. With regard to Grutchfield, the essence of Little's and Chernik's proferred testimony was that Grutchfield was not part of the negotiations with Paoli which occurred prior to September 21, and only attended the September 21 meeting at Little's request.

The extent of Chernik's and Grutchfield's participation in the conspiracy was evidenct from the tapes. The codefendants' proferred testimony, while arguably superficially "favorable," would have added little if anything to Chernik's and Grutchfield's defense. Thus, balancing the introduction of the codefendants' proferred testimony against the need for judicial economy, here the balance clearly tipped in favor of a joint trial.

In sum, in evaluating each of the above considerations, we must conclude that the district court acted well-within its discretion in denying the motions for severance.

VI. Issues Relating to Individual Appellants

A. Variance Between Indictment and Proof

Grutchfield contends that there was a fatal variance between the indictment and the government's evidence because the indictment charged one conspiracy and the evidence showed two conspiracies. Specifically, Grutchfield asserts that there were three variances between the indictment and the proof: (1) the indictment alleged that the conspiracy commenced on or about December 24, 1980 , whereas the proof showed that there was no discussion relating to a backdated partnership investment until December 29, when Yost met with White; (2) the indictment alleged that the purpose of the conspiracy was to sell a partnership interest to Paoli, and the proof showed that Paoli never became involved in the negotiations until February 6; (3) the indictment alleged one continuing conspiracy whereas the proof showed two conspiracies, one beginning in December of 1980 and a second one beginning in August of 1981.

Grutchfield's first two alleged variances are without merit. The proof showed that White first contacted Indec on December 24, 1980 . He was referred to Yost. Yost indicated that Indec could assist White's wealthy client secure a tax shelter and that Indec could arrange a 1980 tax write-off even if the client's check was not received until January of 1981. The client was Paoli. At the December 29 meeting between White and Yost, Yost indicated that a backdated promissory note could be used to document the client's participation in Bedford as of June 1, 1980 . Yost gave White a subscription agreement and a promissory note for White and his client to examine.

Grutchfield's attempt to build a variance argument on the basis that the backdated documents were not discussed until December 29 and that Paoli did not appear on the scene in person is meritless. The fact that Yost did not expressly discuss use of the backdated material until the first inperson meeting on December 29, or that the actual identity of White's wealthy client was not known by appellants until February 6 are not variances between the proof and the indictment.

Moreover, even if these two items did create a variance, either of these two variances would not affect Grutchfield's, or the other appellants' substantial rights. "A variance between indictment and proof does not require reversal unless it affects the substantial rights of the parties." United States v. Von Stoll, 726 F. 2d 584, 587 (9th Cir. 1984) (citations omitted).

We are also not persuaded by Grutchfield's argument that the indictment alleged a single conspiracy but that the evidence established two conspiracies. Grutchfield's argument is based principally on the six-month hiatus in the undercover investigation.

"The standard of review for sufficiency of the evidence of a single conspiracy is whether any rational trier of fact could have found a single conspiracy on the evidence presented. The standard for determining the existence of a single conspiracy is whether there was 'one overall agreement' among the parties to carry out the objectives of the conspiracy." United States v. Bloch, 696 F. 2d 1213, 1215 (9th Cir. 1982) (citations omitted).

We conclude that a rational trier of fact could have found a single conspiracy to defraud the IRS on the evidence presented in this case. The conspiracy involved the same general scheme, the same key actors, the same methods of accomplishing the transaction, and the same objective. Thus, the conspiracy consisted of one overall agreement between appellants and Yost to promote and sell a partnership interest in Bedford to Paoli for him to use as a tax shelter on his 1980 return and to provide him with false documentation which would "prove" his entry into the partnership as of May 1980, despite his actual entry in 1981.

The six-month hiatus in the IRS investigation did not terminate the "conspiracy" that began in December 1980, and create a new conspiracy in August 1981. "A single overall agreement need not be manifested by continuous activity. There may be a suspension of activities which does not divide a single conspiracy into more than one." Id.

A conspiracy is presumed to continue until there is an affirmative evidence of abandonment, withdrawal, disavowal or defeat of the purposes of the conspiracy. Id. There was no such affirmative evidence presented in this case. The IRS agents, not appellants, created the six-month hiatus. Indeed, we note that even after agent White informed Yost that he had advised Paoli not to invest, Yost initiated a call to White. The evidence was sufficient to support the finding of a single conspiracy.

Closely related to Grutchfield's claim of the existence of two conspiracies, is his challenge to the district court's failure to give a cautionary instruction regarding the evidence which related to the early stages of the conspiracy as against Grutchfield.

Throughout the trial, Grutchfield's counsel repeatedly objected to the admission of testimony relating to meetings between the undercover agents which occurred prior to September 21, the first time Grutchfield appeared on the scene. At the close of the government's case in chief, the district court expressly ruled all of the evidence admissible against Little, Chernik, and Yost but reserved its ruling as to Grutchfield. The district court never expressly ruled on the admissibility of the evidence as to Grutchfield nor did the district court give the jury a cautionary instruction regarding the evidence relating to the early stages of the conspiracy. While it would have been preferable for the district court to make an express ruling as to Grutchfield, this omission by the district court does not amount to reversible error.

The record demonstrates that there was sufficient evidence other than the coconspirators' statements independently establishing a single conspiracy. See United States v. Perez, 658 F. 2d 654, 658-59 (9th Cir. 1981); United States v. Eaglin, 571 F. 2d 1069, 1077 (9th Cir. 1977), cert. denied, 435 U. S. 906 (1978). Once the conspiracy was established, only slight evidence was required to establish Grutchfield's connection with the conspiracy. See, e.g., id. Grutchfield's participation at the September 21 meeting more than satisfied the minimal quantum of proof necessary to prove the connection. See id. Once the conspiracy and Grutchfield's participation were established, all of the appellants' acts and statements made in furtherance of the conspiracy at any time during the cause of the conspiracy were admissible against Grutchfield. See, e.g., id.; see also Hernandez v. United States, 300 F. 2d at 122.

The district court did not err by failing to give a cautionary instruction as requested by Grutchfield. The evidence relating to the early stages of the conspiracy was properly admitted against Grutchfield.

B. Sufficiency of Evidence

Appellants Chernik and Grutchfield each challenge the sufficiency of the evidence supporting their convictions. When reviewing the sufficiency of the evidence to support a conviction, this court must examine the evidence in the light most favorable to the government and determine whether any rational trier of fact could have found the essential elements of the offense beyond a reasonable doubt. Jackson v. Virginia , 443 U. S. 307, 319 (1979).

Our review of the record in this matter convinces us that there was sufficient evidence for a rational jury to find all the essential elements of the conspiracy charge beyond a reasonable doubt as to both Chernik and Grutchfield. The evidence was clearly sufficient to support the jury's finding that Chernik and Grutchfield were knowing and willing coconspirators.

With regard to Chernik, the record demonstrates that he was present at the meetings held on February 6, September 21, and October 7, 1981 . At the February 6 meeting, Little introduced Chernik as Indec's tax attorney and theorist. Although Chernik did not say much at the meeting, he was present while Little and Yost gave Paoli a detailed explanation of the Bedford scheme and the mechanics of the proposed sale. Little and Yost pressed Paoli to close the deal so that the following week Chernik could take the backdated subscription agreement and promissory note which they had prepared for Paoli to Bedford's general partner in the Cayman Islands.

At the September 21 meeting, Chernik listened as Little again outlined the mechanics of the proposed Bedford transaction to Paoli. After Little left the meeting, Chernik stayed to provide answers to Paoli's questions regarding the backdated sale of Little's and Grutchfield's interests in Bedford . Chernik attempted to calm Paoli's doubts about the secrecy of his investment and the possibility of problems with the IRS. Chernik, along with Grutchfield, assured Paoli that they would secure the backdated dunning letters to further document that the Bedford transaction had been undertaken in May of 1980. Moreover, Chernik explained to Paoli and Russo that the backdated promissory note was necessary and sufficient to circumvent the prohibition on retroactive allocations.

With regard to Grutchfield, the record demonstrates that he was present at the meetings held on September 21 and October 7. At the September 24 meeting, Grutchfield was present when Little and Chernik were giving Paoli detailed information on the proposed Bedford transaction. Grutchfield offered Paoli his interest in Bedford . Grutchfield told Paoli that the backdated documents were for display in the event of an audit and emphasized to Paoli that the IRS was not to know about the backdating of the documents. Furthermore, Grutchfield assured Paoli that he could be provided with backdated and fraudulent dunning letters to further document Paoli's participation in Bedford as of May 1980, rather than October 1981, when the Bedford deal was in fact consummated.

The evidence was clearly sufficient to support the jury's findings that Chernik and Grutchfield were knowing and willing conspirators.

Conclusion

In Dahlstrom, the defendants advocated a tax avoidance scheme that did not violate any existing statute, regulations or court ruling. Here, appellants in concert promoted, encouraged, and assisted others to evade payment of taxes by means of a fraudulent retroactive allocation of partnership losses, notwithstanding the existence of a statute which bars retroactive allocation of a partner's interest in a partnership. The statute and pertinent regulation gave fair notice that retroactive allocation of partnership losses to a new member was prohibited. By preparing fraudulent partnership records and backdating the promissory note, appellants unequivocally demonstrated their awareness of the requirements of the law and their intent to circumvent it.

Our review of appellants' contentions and of the record below leaves us firmly convinced that no reversible error has been demonstrated. Accordingly, we affirm the convictions.

^* Honorable Albert Lee Stephens, Jr., Senior United States District Judge for the Central District of California, sitting by designation.

¹ Peter Yost was tried with appellants. Yost was also convicted under 18 U. S. C. §371.

² 26 U. S. C. §704(a) provides:

A partner's distributive share of income, gain, loss, deduction, or credit shall, except as otherwise provided in this chapter, be determined by the partnership agreement.

26 U. S. C. §761(c) provides:

For purposes of this subchapter, a partnership agreement includes any modifications of the partnership agreement made prior to, or at, the time prescribed by law for the filing of the partnership return for the taxable year (not including extensions) which are agreed to by all the partners, or which are adopted in such other manner as may be provided by the partnership agreement.

26 U. S. C. §6031 (1981) provided:

Every partnership (as defined in section 761(a)) shall make a return for each taxable year, stating specifically the items of its gross income and the deductions allowable by subtitle A, and such other information for the purpose of carrying out the provisions of subtitle A as the Secretary may by forms and regulations prescribe, and shall include in the return the names and addresses of the individuals who would be entitled to share in the taxable income if distributed and the amount of the distributive shares of each individual.

Section 6031 was amended in 1982.

³ We note that the substance of some of the instructions which appellants claim should have been given were in fact presented to the jury. Appellants' proffered instructions which were not presented to the jury were: (1) irrelevant; (2) misstated the law; (3) not supported by the evidence; (4) inappropriate attempts to influence the jury; or (5) matters within the province of the jury. The district court properly rejected these instructions.

⁴ Cal. Penal Code §632 provides in relevant part:

Every person who, intentionally and without the consent of all parties to a confidential communication, by means of any electronic amplifying or recording device, eavesdrops upon or records such confidential communication, whether such communication is carried on among such parties in the presence of one another or by means of a telegraph, telephone or other device, except a radio, shall be punishable by fine not exceeding two thousand five hundred dollars ($2,500), . . . or by imprisonment in the state prison, or by both such fine and imprisonment in the county jail or in the state prison. If such person has previously been convicted of a violation of this section or Section 631 or 636, he is punishable by fine not exceeding ten thousand dollars ($10,000), or by imprisonment in the county jail not exceeding one year, or by imprisonment in the state prison, or by both such fine and imprisonment in the county jail or in the state prison.

However, Cal. Pen. Code §633 expressly exempts state law enforcement officers from the proscriptions of §632.

⁵ Only Chernik may challenge the introduction of his post-arrest statements into evidence. The district court allowed his statements into evidence but cautioned the jury that they were to be considered against him only.

⁶ 26 U. S. C. §§ 7214(a)(4), (a)(5) and (a)(6) provide:

Any officer or employee of the United States acting in connection with any revenue law of the United States--

(4) who conspires or colludes with any other person to defraud the United States ; or

(5) who knowingly makes opportunity for any person to defraud the United States ; or

(6) who does or omits to do any act with intent to enable any other person to defraud the United States ; . . .

shall be dismissed from office or discharged from employment and, upon conviction thereof, shall be fined not more than $10,000, or imprisoned not more than 5 years, or both. The court may in its discretion award out of the fine so imposed an amount, not in excess of one-half thereof, for the use of the informer, if any, who shall be ascertained by the judgment of the court. The court also shall render judgment against the said officer or employee for the amount of damages sustained in favor of the party injured, to be collected by execution.

⁷ Appellants cite United States v. Ward, 576 F. 2d 243 (9th Cir. 1978); United States v. Robson [73-1 USTC ¶9381], 477 F. 2d 13, 17 (9th Cir. 1973); Goodman v. United States [66-2 USTC ¶9774], 369 F. 2d 166 (9th Cir. 1966), suppression granted on remand, [68-1 USTC ¶9385] 285 F. Supp. 245, 252 (C. D. Cal. 1968); SEC v. ESM Government Securities, Inc., 645 F. 2d 310, 315-17 (5th Cir. 1981); and United States v. Tweel [77-1 USTC ¶9330], 550 F. 2d 297 (5th Cir. 1977).

⁸ On appeal, appellants urge reversal on due process grounds because of the alleged witness intimidation. They now argue that once a showing of government interference is demonstrated, reversal is required without regard to any prejudice to the defendant. Appellants argue that this standard should be applied to them.

In their motion to dismiss, however, appellants attempted to invoke the court's supervisory powers. Appellants recognized that in order to prevail they must show some prejudice to them flowing from the alleged misconduct. See United States v. Owen, 580 F. 2d 365, 367 (9th Cir. 1978). They also acknowledged that this court will invoke its supervisory power to dismiss an indictment for flagrant prosecutional misconduct only where there is a clear basis in law and fact, and when necessary for the preservation of the integrity of the judicial process. United States v. Rasheed, 663 F. 2d 843, 853 (9th Cir. 1981), cert. denied sub nom., 454 U. S. 1157 (1982).

We need not reconcile this discrepancy in appellants' argument because we agree with the district court that a simple, investigatory phone call does not amount to misconduct or witness intimidation.

⁹ We limit our discussion to the facts before us. We express no comment whether a phone call made with the intent to intimidate a witness amounts to government misconduct which requires reversal of a conviction.

¹⁰ In light of our determination that the district court did not clearly err in rejecting appellants' witness intimidation claim, we need not reach appellants' argument that the alleged intimidation of Losey appears to be a violation of 18 U. S. C. §1503.

¹¹ At the close of the prosecution's case, appellants moved to dismiss the indictment under Fed. R. Crim. P. 29. The district court denied the motion.

¹² Appellants' Rule 16(a)(1)(C) motion provided in relevant part:

Defendant hereby requests the disclosure of the existence and substance of the following material or information that is within the possession, custody or control of the plaintiff, or the existence of which is known or which by the exercise of due diligence could become known to plaintiff, and to permit defendant to inspect and copy or photograph any documents containing such material or information:

A. Notes, reports, memoranda, or other documents authored by employees or agents of the plaintiff Government, including but not limited to the Internal Revenue Service (IRS) and the United States Department of Justice, relating in any way whatsoever to the decision to initiate the investigation or the grand jury sdaproceeding [sic] of the defendant, including but not limited to any report, letter or memorandum authored by the Commissioner, of the Internal Revenue Service or to any individual who the Commissioner delegated authority in this matter; [lists names] and any other individual connected with the investigation employed by plaintiff's IRS Criminal Investigation Division; [lists names] and any other individual employed by plaintiff's IRS in any capacity connected in any manner with the subject matter of this criminal action.

B. All documents and records which indicate the names of persons within the IRS who participated in any phase of the information-gathering process leading to the recommendation of the institution of any grand jury or other criminal proceedings against defendant;

C. All documents or records which purport to authorize the participation of any IRS or non-IRS personnel in any form of grand jury or non-grand jury investigation of defendant;

D. The written transcript of the grand jury proceeding which resulted in an indictment against the defendant.

¹³ We have already discussed and rejected appellants' contention of government misconduct based on alleged CIA involvement in the investigation and prosecution of this case.

 

 

[89-2 USTC ¶9665] Esley E. Schmidt and Mildred R. Schmidt, Plaintiffs v. Clarence M. King, Jr., et al., Defendants

U.S. District Court, Dist. Kan., Civ. 87-2612-S, 9/29/88

[Code Secs. 7421 , 7422 , and 28 U.S.C. Secs. 1340 and 2410 ]

District court: Jurisdiction: Suit to quiet title: Consent by government: Restraint of collection of tax: Anti-Injunction Act.--A district court had personal and subject matter jurisdiction over a couple's action to quiet title, but the court lacked subject matter jurisdiction over the taxpayers' claim for money damages. Since the claim over which the court had jurisdiction was not one for the recovery of tax, the taxpayers' action was not barred by Code Sec. 7421 or 7422 . Under 28 U.S.C. §2410, the United States has provided a limited waiver of its sovereign immunity for the purposes of contesting the procedural regularity of a lien. The waiver applied only to the quiet title claim and not to the taxpayers' claim for money damages. Although the taxpayers' action to quiet title was not barred, their request for a preliminary injunction was barred by the Anti-Injunction Act.
[Code Sec. 7214 ]

Offenses of revenue agents and officers: Constitutional claims: Suits by taxpayers: Immunity of Commissioner and officers.--An action against agents of the IRS for their alleged violations of a couple's constitutional rights was dismissed because the taxpayers failed to make any specific allegations about the factual involvement of the individual defendants. The claims were dismissed under the doctrine of qualified immunity.
[Code Secs. 6020 , 6203 and 6303 ]

Assessment of tax: Time created: Necessity for demand: Revenue agents and officers: Delinquent returns.--Partial summary judgment was granted to the IRS with respect to the issue of a valid assessment, but the motion was denied with respect to the issue of whether a proper notice of assessment and demand for payment had been made. A proper assessment of taxes was made because the IRS prepared a summary report for each taxpayer with supporting records identifying the taxpayers, the character of the liability assessed, the tax period and the amount of the assessments. An alleged failure to prepare substitute returns did not render the notice of deficiency or the assessments defective. In light of the evidence and testimony presented, a factual question still existed as to whether or not the IRS had made a notice of assessment and a demand for payment.
MEMORANDUM AND ORDER

SAFFELS, District Judge:

This matter is before the court on defendant United States ' motions to dismiss or for summary judgment. Plaintiffs filed this suit against the United States , the Internal Revenue Service (IRS), the Commissioner of Internal Revenue, and two individual defendants, District Director Clarence M. King, Jr., and Revenue Officer Max Kennedy. The pro se plaintiffs allege that the defendants wrongfully levied on plaintiff's property to satisfy tax debts. Plaintiffs have alleged that the IRS committed various constitutional due process violations and failed to follow the statutory procedure for levying on plaintiff's property.

In November 1984, plaintiffs, Esley and Mildred Schmidt, each received a "Statutory Notice of Deficiency" from District Director King. Thereafter, the IRS issued numerous liens on plaintiffs' property. Plaintiffs were sent "Notices of Federal Tax Lien." The liens were filed with the register of deeds in Coffey County , Kansas . In April of 1987, the IRS seized plaintiffs' property and sent each plaintiff a "Notice of Seizure" which described eleven pieces of real property in Coffey County , Kansas . On June 18, 1987 , Internal Revenue Officer Max Kennedy held a public sale of the seized property. Four of the eleven parcels of real estate were sold. The remaining seven failed to bring the minimum bid. On July 16, 1987 , the IRS filed two additional "Notices of Federal Tax Lien" on plaintiffs' property, for the amount of tax liability remaining after the June sales. On December 15, 1987 , plaintiffs filed this suit.

The United States brought these motions seeking dismissal of the action on various jurisdictional grounds. Alternatively, the court reads the government's somewhat disorganized brief as seeking a summary judgment on the issues of alleged procedural defects in the IRS' placement of liens on plaintiffs' property.

I. Motions to Dismiss

The court will first deal with the United States ' arguments pertaining to jurisdictional issues. First, the United States argues that this court lacks subject matter jurisdiction because of the sovereign immunity doctrine. It is well established that the United States , as sovereign, is immune from suit, unless it consents to being sued. United States v. Mitchell, 445 U.S. 535, 538 (1980); Amalgamated Sugar Co. v. Bergland, 664 F.2d 818, 823 (10th Cir. 1981).

In the present case, the plaintiffs argue that sovereign immunity has been waived pursuant to a variety of statutory provisions. If sovereign immunity is waived, the court has jurisdiction under 28 U.S.C. §1340 to hear suits challenging an IRS levy on the grounds that the agency failed to follow statutory procedures governing assessments and levies. See Rodriguez v. United States [86-1 USTC ¶9289 ], 629 F. Supp. 333, 337 (N.D. Ill. 1986).

Many federal courts have previously addressed the sovereign immunity issue as presented here. The consensus among these courts is that under 28 U.S.C. §2410(a)(1), the United States has consented to suits which allege procedural defects in an IRS levy on property. Pollack v. United States [87-2 USTC ¶9463], 819 F.2d 144, 145 (6th Cir. 1987) ("[T]his section provides a limited waiver of the United States ' sovereign immunity. A suit under 28 U.S.C. §2410 is proper only to contest the procedural regularity of a lien; it may not be used to challenge the underlying tax liability.") (citations omitted); see also Aqua Bar & Lounge v. United States Treasury [76-2 USTC ¶9554 ], 539 F.2d 935, 934-40 (3d Cir. 1976); Viva v. United States [81-1 USTC ¶9169 ], 490 F. Supp. 1002, 1007 (D. Colo. 1980). Section 2410 permits an action to quiet title to property on which the United States claims a lien.

Although section 2410 waives sovereign immunity for a quiet title action, the statute provides no waiver for damages claims. Ringer v. Basile [87-1 USTC ¶9229 ], 645 F. Supp. 1517, 1526 (D. Colo. 1986); Murray v. United States [82-2 USTC ¶9607 ], 686 F.2d 1320, 1326 (8th Cir. 1982), cert. denied, 459 U.S. 1147 (1983). Thus, section 2410 provides the necessary waiver of sovereign immunity to plaintiffs' quiet title claim, but plaintiffs' claim for money damages against the United States or its agency, the IRS, must be dismissed. Ringer, 645 F. Supp. at 1526 ("Insofar as plaintiff's second claim for relief is for money damages and not to obtain equitable relief or to quiet title, the claim must be dismissed because there is no waiver of sovereign immunity for money damages.") (citing Lafazan v. United States [79-2 USTC ¶9708 ], 79-2 USTC ¶9708 , 88-614 (D. N.J. 1979)).

Second, the United States argues that plaintiffs' claims for injunctive relief are barred by the Anti-Injunction Act, 26 U.S.C. §7421 . The Act states:

Except as provided in sections 6212(a) and (c) , 6213(a) , 7426(a) and (b)(1) , and 7429(b) , no suit for the purpose of restraining the assessment or collection of any tax shall be maintained in any court by any person, whether or not such person is the person against whom such tax was assessed.

26 U.S.C. §7421(a) . Plaintiffs have filed a motion for preliminary injunctive relief. They seek to enjoin the defendants from enforcing "the alleged tax liability against" plaintiffs and from seizing plaintiffs' property. This type of injunctive relief is clearly for the purpose of restraining the assessment and collection of tax liabilities. Thus, plaintiffs requested preliminary injunctive relief is prohibited by the Anti-Injunction Act. This court has previously found that a motion for injunctive relief to prevent the IRS from enforcing a lien or executing a sale on levied property must be dismissed because of section 7421 . Tri-City Construction Co., Inc. v. United States, No. 86-2122-S, slip op. at 3 (D. Kan., unpublished, March 27, 1986 ); see also Marvel v. United States [77-1 USTC ¶9145 ], 548 F.2d 295, 300 (10th Cir. 1977), cert. denied, 431 U.S. 967 (strictly construing this Act).

Nevertheless, plaintiffs correctly argue that section 7421 is no bar to their quiet title action against the United States (Count V of plaintiffs' complaint). The Third Circuit has held that the Anti-Injunction Act poses no barrier to a section 2410 quiet title action, since the action does not challenge the underlying tax assessment but instead the validity of the tax lien and sale. See Aqua Bar & Lounge, 539 F.2d at 940; see also Pollack, 819 F.2d at 145 ("A suit under 28 U.S.C. §2410 is proper only to contest the procedural regularity of a lien; it is not used to challenge the underlying tax liability."). Thus, although plaintiffs' request for preliminary injunction must be dismissed because of section 7421 , the court still has jurisdiction to hear plaintiffs' section 2410 quiet title claim.

Third, the United States argues that the court lacks jurisdiction to the extent that plaintiffs seek to recover property seized in the collection of their tax liability. Defendants base this argument on 26 U.S.C. §7422(a) . This section prohibits suits for the recovery of any tax alleged to have been illegally assessed or collected until a claim for a refund is filed with the Secretary of Treasury. However, in the present case, the claim over which this court has jurisdiction is not one for the recovery of a tax, but one to quiet title to property. Thus, section 7422 is not applicable. Moreover, if the court were to adopt the United States ' argument, the section 2410 quiet title action would become meaningless. The section 2410 quiet title action is a recognized method for challenging a tax lien on property. See Busse v. United States [76-2 USTC ¶9676 ], 542 F.2d 421, 425 (7th Cir. 1976) ("Other remedies are available to contest a tax lien, including a suit to quiet title under 28 U.S.C. §2410 . . . ."). The court is not compelled to read these statutes in a manner that creates conflicting meanings. Thus, the court finds that plaintiffs' quiet title claim is not barred by 26 U.S.C. §7422(a) .

Fourth, the United States argues that the court lacks personal jurisdiction regarding the claims against the individual IRS officers, because of insufficiency of process. The United States argues that the service was insufficient because it was not personal service pursuant to Rule 4(d). However, the court records indicate that personal service pursuant to Rule 4(d)(1) of the Federal Rules of Civil Procedure was made on defendants Max Kennedy and Clarence King on April 13, 1988 . Thus, this argument fails.

Fifth, the United States argues that the individual federal defendants (Officer Kennedy and District Director King) must be dismissed because of "official" or "qualified" immunity. A suit against public servants in their official capacity imposes liability on the governmental entity their office represents, not on the particular public servant. Griess v. Colorado , 841 F.2d 1042, 1045 (10th Cir. 1988). Therefore, the individual defendants are personally immune from liability in their official capacity.

However, plaintiffs assert damage claims against the individual defendants in their individual capacity. Plaintiffs may pursue damage claims against individual public servants for violations of constitutional rights. See Bivens v. Six Unknown Named Agents of Federal Bureau of Narcotics, 403 U.S. 388, 397 (1971). The defense of qualified immunity, however, may be available to these individual defendants. See Harlow v. Fitzgerald, 457 U.S. 800, 818 (1982); Atkinson v. O'Neill, et al., No. 87-2152, slip op. at 5 (D. Kan., unpublished, Jan. 4, 1988 ).

To recover damages from IRS officers in their individual capacities, the plaintiffs must assert specific allegations of unconstitutional conduct by the individual officers, and plaintiffs must show a lack of good faith in actions beyond the defendants' authority. White v. Commissioner [83-1 USTC ¶9105 ], 537 F. Supp. 679, 684 (D. Colo. 1982). To state a claim on which relief can be granted, plaintiffs' complaint must contain specific allegations of unconstitutional conduct regarding the actual involvement of each defendant. Oldland v. Kurtz [82-1 USTC ¶9284 ], 528 F. Supp. 316, 322 (D. Colo. 1981).

First of all, the only alleged contact District Director King had with plaintiffs was signing off on the notices of deficiency and signing the quit-claim deeds to the buyers of plaintiffs' property. Plaintiffs have failed to allege any facts in which defendant King was linked to violating any of their constitutional rights. Therefore, defendant King is immune from suit. See Hall v. United States [83-1 USTC ¶9345 ], 704 F.2d 246, 250-51 (6th Cir. 1983), cert. denied, 464 U.S. 1002 (1983); Atkinson, slip op. at 5.

In their complaint against the defendants, plaintiffs made various broad allegations of constitutional deprivations. Plaintiffs allege that they were subjected to invidious discrimination because the defendants had labeled them as "illegal tax protesters". Also, plaintiffs allege that they were denied due process because they were afforded no hearing to contest the assessments. Furthermore, plaintiffs allege they were denied constitutional due process because defendants did not follow the statutory procedure in levying upon their property.

Plaintiffs' complaint fails to make any specific allegations about the factual involvement of the individual defendants to these vague allegations of constitutional deprivation. Therefore, the court finds that the claims against the individual defendants will be dismissed. See Atkinson, slip op. at 5; Oldland, 528 F. Supp. at 321-22 (There, plaintiffs made some of the same allegations as plaintiffs in the present case. The court found that "[t]he complaints here do not contain any specific allegations of unconstitutional conduct by any of the respondents."); see also Rodriguez, 629 F. Supp. at 350 ("It is one thing for a court to create a damage remedy when IRS agents employ unconstitutional searches and seizures or use their powers to repeatedly harass taxpayers, and quite another to presume that an additional remedy is needed when the issue goes to the heart of the tax collection process.")

II. Motion for Summary Judgment

Having found that the plaintiffs can proceed with a quiet title claim against the United States under 28 U.S.C. §2410, the court will now consider the United States ' motion for summary judgment. Basically, plaintiffs claim that the levy on their property is void because the United States did not follow the proper statutory procedures in assessing their taxes and levying on the property. Plaintiffs make three arguments alleging defects in the procedure used by the United States: First, the United States never made valid tax assessments as mandated by 26 U.S.C. §6203 ; second, the United States failed to prepare adequate substitute returns pursuant to 26 U.S.C. §6020(b)(1) before sending the notice of deficiency; and third, the United States failed to send "Notice and Demand for Payment" as mandated by 26 U.S.C. §6303(a) .

The court has made a thorough review and study of the relevant tax statutes at issue. The procedural framework for a valid tax lien requires first that the IRS make a valid assessment of the taxes pursuant to 26 U.S.C. §6203 . After a valid assessment has been made, the IRS must send a section 6212 notice of deficiency to the taxpayer. Then, the IRS must provide a "Notice and Demand for Payment" of the assessed tax pursuant to section 6303(a) . After complying with these procedures, the IRS can take a lien on the delinquent taxpayer's property. 26 U.S.C. §6321 .

After reviewing the extensive arguments and exhibits presented in both parties' briefs, the court finds that the IRS made a valid 6203 assessment in the present case. The United States , in its memorandum in support of this motion, attached certified copies of "Certificates of Assessments and Payments" of the taxes for which plaintiffs were assessed. These certificates are sufficient documentation of the statutory required assessments. See Baily v. United States [73-1 USTC ¶9472 ], 355 F. Supp. 325, 330 (E.D. Pa. 1973) (The certificates of assessment and payments are sufficient to fulfill the requirements of section 6203 .).

In addition, copies of the "Summary Report of Assessments" that cover each plaintiff and pertain to the taxes at issue were submitted as exhibits by the United States . An IRS regulation states:

The assessment shall be made by an assessment officer signing the summary record of assessment. The summary record, through supporting records, shall provide identification of the taxpayer, the character of the liability assessed, the taxable period, if applicable, and the amount of the assessment.

26 C.F.R. §301.6203-1 (1988). A proper assessment of taxes is made when this procedure is followed. Brafman v. United States [67-2 USTC ¶12,494 ], 384 F.2d 863, 867 (5th Cir. 1967). The summary report for each plaintiff in the present case was signed by the assessment officer, and thus provides the proper assessments.

The second procedural defect alleged by plaintiffs is that the United States failed to make substitute returns for the plaintiffs pursuant to 26 U.S.C. §6020(b)(1) . Plaintiffs claim that without such returns a valid assessment or notice of deficiency cannot be executed. The controversy argued in the parties' briefs centered on whether this court should follow the Tax Court's ruling in Hartman v. Commissioner [CCH Dec. 33,543 ], 65 T.C. 542 (1975), which held that section 6020(b)(1) is not a prerequisite to a valid assessment. The controversy, however, has been settled in this circuit. The Tenth Circuit has noted:

We do not mean to suggest that this statute [26 U.S.C. §6020 ] is anywise mandatory on the Commissioner. In this connection, see United States v. Verkuilen [82-2 USTC ¶9618 ], 690 F.2d 648, 657 (7th Cir. 1982); Hartman v. Commissioner [CCH Dec. 33,543 ], 65 T.C. 542 (1975).

Smalldridge v. Commissioner [86-2 USTC ¶9764 ], 804 F.2d 125, 127 n.2 (10th Cir. 1986). The Seventh Circuit case cited by the Tenth Circuit in Smalldridge states:

[T]he tax court in Hartman v. Commissioner [CCH Dec. 33,543 ], 65 T.C. 542 (1975), held that 26 U.S.C. §6020(b)(1) does not make it mandatory that the Secretary of Treasury file a tax return before issuing a statutory notice of deficiency. The court emphasized that the bulkwark of our income tax system is voluntary self-reporting.

U.S. v. Verkuilen [82-2 USTC ¶9618 ], 690 F.2d 648, 657 (7th Cir. 1982). Thus as a matter of law, the court finds that the United States' alleged failure to prepare section 6020(b) substitute returns does not render the notice of deficiency or the assessments against plaintiffs defective. Therefore, the court will grant the United States summary judgment on this matter.

Finally, plaintiffs contend that the United States failed to provide plaintiffs with proper notice of assessment and demand of payment pursuant to 26 U.S.C. §6303(a) . Notice and demand of payment is required before the government can enforce a lien on a taxpayer's property. 26 U.S.C. §6321 .

The United States argues that the notice of federal tax lien sent to the plaintiffs stated that demand had been made. The United States argues that this provides sufficient proof that the required section 6303 demand has been made. The United States relies on United States v. Lorson [73-1 USTC ¶9449 ], 480 F.2d 554 (2d Cir. 1973) for support. However, in that case, the certificates of assessment and payments also noted that demand had been made. The certificates of assessment and payments in the present case lack such notations. Furthermore, a New Jersey federal district court has stated that "demand must be more than a mere formal reference in the notice of tax lien and levy." Yannicelli v. Nash [72-2 USTC ¶9763 ], 354 F. Supp. 143, 152 (D.N.J. 1973); see also Ruth v. O.S.V. The Marie & Winifred [57-1 USTC ¶9665 ], 150 F. Supp. 630, 632 (D. Mass. 1957) ("The mere formal reference in the notice of tax lien to 'taxes (including interest and penalties), which after demand for payment thereof remain unpaid' is not a sufficient demand for payment of the tax to provide basis for a tax lien.") (citations omitted).

In light of the exhibits submitted and the arguments presented, the court finds that a factual question still exists on whether the IRS has made the section 6303 notice of assessment and demand of payment. Therefore, the court will deny the United States ' motion for summary judgment for the part pertaining to this issue.

IT IS BY THE COURT THEREFORE ORDERED that the court has jurisdiction under 28 U.S.C. §2410 and §1340 to hear plaintiffs' quiet title claim.

IT IS FURTHER ORDERED that 26 U.S.C. §7421 bars plaintiffs' claim for preliminary injunction relief; thus this claim is dismissed.

IT IS FURTHER ORDERED that plaintiffs' damage claims against defendants King and Kennedy are dismissed because of the doctrine of qualified immunity.

IT IS FURTHER ORDERED that defendants' motion for summary judgment is partially granted in regard to the valid assessment issue and the substitute return issue.

IT IS FURTHER ORDERED that defendants' motion for summary judgment is denied in regard to the issue of whether proper notice of assessment and demand for payment has been made.

 

 

 

[90-2 USTC ¶50,487] Esley E. Schmidt and Mildred R. Schmidt, Plaintiffs-Appellants v. Clarence M. King, Jr., District Director, Max J. Kennedy, Revenue Officer, Internal Revenue Service, Commissioner of the Internal Revenue Service , United States of America , Does I Through X Inclusive, Defendants-Appellees

(CA-10), U.S. Court of Appeals, 10th Circuit, 89-3240, 9/6/90 , 913 F2d 837, Reversing and remanding District Court, 89-2 USTC ¶9665

[Code Secs. 7402 , 7421 and 7422 ]

Jurisdiction: District court: Suit to quiet title.--The district court did not have jurisdiction under the quiet title provision of 28 U.S.C. §2410(a) to consider taxpayer claims which did not challenge the procedures used to enforce tax liens against their property. The claims, which challenged the IRS tax liens, levy and sale of their property to satisfy assessed tax deficiencies, attacked the procedures relating to the assessment and notice and demand of tax deficiencies. The IRS's deficiency assessment and collection of taxes may not be attacked under the authority of 28 U.S.C. §2410.

Esley E. Schmidt, pro se. Benjamin L. Burgess, Jr., United States Attorney, Wichita, Kan. 67202, Shirley D. Peterson, Assistant Attorney General, Gary R. Allen, Kenneth L. Greene, Curtis C. Pett, Department of Justice, Washington, D.C. 20530, for defendants-appellees.

Before SEYMOUR, BRORBY, and EBEL, Circuit Judges.

Per Curiam"

EC: The initial issue before us in this case is whether the district court had jurisdiction to consider this action, which plaintiffs Esley E. and Mildred R. Schmidt characterize as an action to quiet title under 28 U.S.C. §2410. Because Mr. and Mrs. Schmidt were actually challenging the Internal Revenue Service's deficiency assessment and collection of taxes, which may not be attacked under the authority of section 2410, we conclude the district court lacked jurisdiction to consider this lawsuit. ¹

Mr. and Mrs. Schmidt did not file tax returns for the years 1978 through 1983. The I.R.S. thereafter assessed tax deficiencies for those years. When the Schmidts ignored the deficiencies, the I.R.S. filed liens and issued a notice of levy on eleven parcels of their property. The I.R.S. seized all of the property and sold four of the parcels. Because the tax liability was not satisfied by the sale, the I.R.S. filed additional tax liens.

Subsequently, the Schmidts filed a complaint in district court against the United States , I.R.S., and various I.R.S. employees (I.R.S.), seeking damages for assessing and collecting taxes and seizing and selling their property, and injunctive and declaratory relief to prevent the I.R.S. from engaging in future collection activities. The Schmidts primarily alleged that (1) the I.R.S. made an unlawful deficiency assessment and failed to follow proper procedure in making the assessment, (2) they are not subject to income taxes, (3) they were improperly labeled as taxpayers, and (4) the I.R.S. did not issue a notice of assessment and demand for payment prior to levying on and selling their property. Defendants filed a motion for summary judgment asserting, among other things, that the district court lacked jurisdiction under section 2410 to hear this action. The district court dismissed the portions of the complaint seeking damages and injunctive relief. The court determined that it had jurisdiction only over the claims that challenged the tax lien, levy, and sale because those claims sought to quiet title under the section 2410 waiver of sovereign immunity. Although the district court decided the I.R.S. had made a valid tax assessment, it concluded a factual question existed on whether the I.R.S. had made a proper notice of assessment and demand for payment. In a subsequent order, after defendants again filed a motion for summary judgment, the district court held that the Schmidts did receive the proper notice and demand requisite to a valid tax lien.

Although Mr. and Mrs. Schmidt raise several arguments on appeal relating to the merits of this action, we do not address those arguments because we conclude the district court lacked jurisdiction to consider this action. A suit naming the United States as a party may be brought in district court "to quiet title to . . . property on which the United States has or claims a mortgage or other lien." 28 U.S.C. §2410(a). If a taxpayer seeks to quiet title to property upon which the United States has a lien, he may bring a quiet title action under section 2410(a), without paying the tax. Section 2410(a) waives the United States ' sovereign immunity for actual quiet title actions. See United States v. John Hancock Mut. Life Ins. Co., 364 U.S. 301 (1960). Waivers of sovereign immunity under section 2410(a) must be read narrowly. See, e.g., Estate of Johnson [88-1 USTC ¶9165 ], 836 F.2d 940, 943-44 (5th Cir. 1988). Federal courts considering the issue of waiver of sovereign immunity under section 2410(a) have unanimously concluded that it may not be construed as permitting a collateral attack on the merits of a tax assessment. See, e.g., Pollack v. United States [87-2 USTC ¶9463 ], 819 F.2d 144, 145 (6th Cir. 1987); Laino v. United States [80-2 USTC ¶9724 ], 633 F.2d 626, 633 n.8 (2d Cir. 1980); Aqua Bar & Lounge, Inc. v. United States Dep't of Treasury, I.R.S. [76-2 USTC ¶9554 ], 539 F.2d 935, 938-39 (3d Cir. 1976); Rodriguez v. United States [86-1 USTC ¶9289 ], 629 F. Supp. 333, 336 (N.D. Ill. 1986); Viva, Ltd. v. United States [81-1 USTC ¶9169 ], 490 F. Supp. 1002, 1007 (D. Colo. 1980).

When the taxpayer challenges the procedural regularity of the tax lien and the procedures used to enforce the lien, and not the validity of the tax assessment, sovereign immunity is waived and the district court does have jurisdiction over a quiet title action. Aqua Bar & Lounge, 539 F.2d at 939; see also Rodriguez, 629 F. Supp. at 339 (action challenging only procedure used in making levy, not merits of assessment, not contrary to rule that deficiency determination can be challenged only in Tax Court unless paid first); Yannicelli v. Nash, 354 F. Supp. 143, 151 (D.N.J. 1972) (suit questioning legality of procedure used to enforce jeopardy assessment within jurisdiction of section 2410). Typically, a taxpayer with a valid quiet title action will admit any assessed taxes are due. Id.

The taxpayers in this case do not challenge the procedures used to enforce the tax lien. Rather, they attack the procedures of the assessment and notice and demand and, ultimately adjudication of whether they owe taxes. Section 2410 does not extend to challenges for procedural irregularities in assessment or collection of taxes. Thus, the taxpayers were required to pay their taxes first before filing an action in district court. See Falik v. United States [65-1 USTC ¶9295 ], 343 F.2d 38, 42-43 (2d Cir. 1965). Section 2410 does not waive sovereign immunity for an action such as this, and the district court therefore lacked jurisdiction to consider this action.

The judgment of the United States District Court for the District of Kansas is VACATED, and the action is REMANDED for dismissal for lack of jurisdiction.

¹ After examining the briefs and appellate record, this panel has determined unanimously that oral argument would not materially assist the determination of this appeal. See Fed. R. App. P. 34(a); 10th Cir. R. 34.1.9. The case is therefore ordered submitted without oral argument.

 

 

 

 

[95-1 USTC ¶50,149] Donald W. Fausner, Anita C. Fausner, Petitioners-Appellants v. Commissioner Internal Revenue Service, Respondent-Appellee

(CA-9), U.S. Court of Appeals, 9th Circuit, 93-70625, 2/14/95 , Affirming the Tax Court, 65 TCM 2442, Dec. 48,993(M) , TC Memo. 1993-170

[Code Secs. 7214 , 7430 , 7443A and 7483 ]

Tax Court rules: Appeals: Litigation costs: Awards: New questions.--The Tax Court's decision that a husband and wife were not entitled to litigation costs and punitive damages arising out of the settlement of partnership issues pertaining to a tax shelter project was affirmed because they did not dispute the decision under Code Sec. 7430 . Additionally, the appellate court could not properly consider any of the other issues, which were addressed by the taxpayers for the first time on appeal.

Donald W. Fausner, Anita C. Fausner, 12488-175 Paseo Lucido, San Diego, Calif. 92128-3542, for petitioner-appellant. Gary R. Allen, S. Robert Lyons, Department of Justice, Washington , D.C. 20530 , for respondent-appellee.

Donald W. and Anita C. Fausner, pro se.

è Caution: This court has designated this opinion as NOT FOR PUBLICATION. Consult the Rules of the Court before citing this case.ç

Before: TROTT, FERNANDEZ, and T.G. NELSON, Circuit Judges.

MEMORANDUM ^*

Donald and Anita Fausner petition pro se for review of the tax court's denial of their motion for an award of litigation costs and punitive damages against the Commissioner of Internal Revenue (CIR) in connection with their successful petition for a redetermination of additions to their tax. We affirm the tax court's decision.

II

The Fausners contend that the special trial judge

lacked jurisdiction under 26 U.S.C. §7443A because the amount of deficiency in dispute was over $10,000.00. While the additions originally assessed against the Fausners in the notice of January 14, 1991 , including the section 6653(a)(2) penalties amount to a sum over $10,000.00, it is undisputed that the CIR had conceded all of the additions before the hearing took place. Tax court jurisdiction in this case was therefore based not on the small tax provision of 26 U.S.C. §7443A(b)(2) , but on section 7443A(b)(3) , which allows the chief judge of the tax court to assign to a special trial judge "any proceeding where neither the amount of deficiency placed in dispute . . . nor the amount of any claimed overpayment exceeds $10,000." ¹

Under section 7443A(b)(3) , in keeping with the circumstances of this case, it was appropriate for the special trial judge both to hear and to decide this case.

III

On appeal, the Fausners state that they do not dispute the tax court's denial of their motion for costs and fees pursuant to 26 U.S.C. §7430 and Rule 231, because this is not the statute under which they seek to sue. Instead, they wish to bring suit under 26 U.S.C. §7214 . They do not seek now to be reimbursed for any costs and fees they incurred in this dispute with the IRS. We therefore do not review the decision denying the Fausners' motion pursuant to 26 U.S.C. §7430 and Rule 231.

While the Fausners earlier in this appeal sought punitive damages from the CIR under 26 U.S.C. §7214 , they now seem to be aware that they lack standing to bring criminal charges against the CIR or any agents of the IRS, because they ask this panel to "pass to the U.S. Attorney for San Diego County . . . the details of this case for prosecuting those particular IRS officials named in service of our motion that have determined and persisted in the execution of the meritless Notices of Deficiency and reports of changes to individuals [sic] income tax."

As the Fausners appear to recognize, section 7214 is a criminal statute over which the tax court lacks jurisdiction. See Rice v. Commissioner [CCH Dec. 35,362(M) ], T.C.M. (P-H) ¶78, 334 (1978 WL 3012 at *3) (1978). The provision granting a district court discretion to award a fee to informers applies only after there has been a criminal conviction. See Brunwasser v. Jacob [78-2 USTC ¶9603 ], 453 F. Supp. 567, 572-73 (W.D.Pa. 1978), aff'd, 605 F.2d 1194 (3d Cir. 1979). The Fausners' allegations do not in any case fall within the terms of section 7214 . Even if they did, the Government's decision whether or not to prosecute individuals under the criminal law is a matter distinct from and external to the authority of the courts.

Aside from any question of punitive damages, the Fausners demand a refund of monies they allegedly overpaid for tax year 1982. The Fausners' earlier attempt to litigate this issue (Tax Court Docket No. 4396-91) was dismissed for jurisdictional reasons. They may not attempt to relitigate this dispute under the guise of bringing an action relating to additions assessed (and conceded) separately. Additionally, the Fausners demand refunds for amounts they allegedly overpaid in tax years 1983 and 1984. Because they raise these issues for the first time on appeal, without further explanation, we do not consider them. Whittaker Corp. v. Execuair Corp., 953 F.2d 510, 515 (9th Cir. 1992).

III

Because the Fausners do not dispute the decision denying their motion for costs under 26 U.S.C. §7430 , and because they bring no other issue on appeal that may properly be considered by this court, the order of the special tax judge is hereby AFFIRMED.

AFFIRMED.

^* This disposition is not appropriate for publication and may not be cited to or by the courts of this circuit except as provided by Ninth Circuit Rule 36-3.

¹ The amount the Fausners claim to have overpaid in 1991 is not the subject of the instant action, but was determined by the partnership case, docket No. 26210-88S. The Fausners' attempt to dispute that assessment was rejected by the tax court in its order relating to the action filed in docket No. 4396-91.

 

 

 

[97-1 USTC ¶50,396] Richard J. Steinman, Plaintiff v. Internal Revenue Service, et al., Defendants

U.S. District Court, Dist. Ariz., CIV. 95-1903 PHX PGR, 3/21/97

[Code Secs. 7422 , 7432 and 7433 ]

Jurisdiction: Sovereign immunity: Government employees: Official capacity: Administrative remedies: Payment of assessed tax: Administrative claim for refund.--A district court lacked jurisdiction over an individual's complaint alleging the unlawful imposition of tax liens and levies. The complaint against IRS employees in their official capacities was barred by sovereign immunity because the taxpayer failed to first exhaust his administrative remedies. Furthermore, the taxpayer did not pay the assessed tax and did not file an administrative claim for refund.

[Code Sec. 7421 ]

Jurisdiction: Anti-Injunction Act: Exceptions.--A district court lacked jurisdiction over a taxpayer's request for injunctive relief because he failed to allege nonfrivolous grounds for invoking any of the exceptions to the Anti-Injunction Act.
[Code Secs. 7214 and 7433 ]

Government employees: Individual capacity: Damages action: Bivens action: Constitutional rights.--A taxpayer's damages action against IRS agents in their individual capacities was dismissed because none of the agents was personally served with the complaint. Moreover, the complaint did not state a claim against the agents in their individuals capacities because Code Sec. 7214 does not create a private right of action, and a Bivens actions could not be maintained against the agents in their individual capacities for an alleged violation of the taxpayer's constitutional rights.

Richard J. Steinman, 12590 N. 73rd Place, Scottsdale, Ariz. 85260, pro se. Janet Napolitano, United States Attorney, Phoenix, Ariz. 85025, Charles M. Duffy, Department of Justice, Washington, D.C. 20530, for defendant.

ORDER

ROSENBLATT, District Judge:

Pursuant to the Court's order of April 23, 1996 (doc. #24) which dismissed the plaintiff's original complaint with leave to amend, the plaintiff filed an Amended Complaint on May 10, 1996 against Treasury Secretary Robert Rubin, I.R.S. Commissioner Margaret Milner Richardson, and I.R.S. agents/employees Patrick Rudy ¹ and B. Atwood, all of whom were named both individually and in their official capacities. The Amended Complaint, which arises from the allegedly unlawful imposition of federal tax liens and levies against the plaintiff, contains ten counts alleging a failure to provide notice of records required to be kept pursuant to 26 U.S.C. §6001 (Count One), a failure to provide notice of liability pursuant to 26 U.S.C. §6011 (Count Two), a failure to make a valid assessment pursuant to 26 U.S.C. §6201 and §6203 (Count Three), a failure to provide notice and demand pursuant to 28 U.S.C. §6303 (Count Four), a failure to provide notice of deficiency pursuant to 26 U.S.C. §6212 (Count Five), deprivation of rights under color of state law (Count Six), and violation of 26 U.S.C. §7214(a)(1), (2), (7) and (8) (Counts Seven-Ten). The Amended Complaint alleges that this Court has jurisdiction pursuant to 26 U.S.C. §7433, et seq., 28 U.S.C. §1331, §1340, §1346(a)(1), §1391(e) and/or §1402.

The Court finds that the amended complaint must be dismissed pursuant to Fed.R.Civ.P. 12(b)(1) for lack of subject matter jurisdiction as to all claims against the defendants in their official capacities due to the bar of sovereign immunity. A suit against United States employees in their official capacities is essentially a suit against the United States and is barred by sovereign immunity absent statutory consent. Gilbert v. DaGrossa [85-2 USTC ¶9665], 756 F.2d 1455, 1458 (9th Cir. 1985); Hutchinson v. United States [82-1 USTC ¶9405], 677 F.2d 1322, 1327 (9th Cir. 1982).

None of the jurisdictional bases asserted in the amended complaint operate to waive the government's sovereign immunity. First, although 26 U.S.C. §7433 permits a taxpayer to sue the United States when IRS employees recklessly or intentionally disregard internal revenue statutes or regulations in their collection activities, the statute requires the taxpayer to first exhaust the administrative remedies available within the I.R.S. before bringing suit against the government, see §7433(d)(1), and a failure to exhaust deprives the Court of jurisdiction over such claims. Conforte v. United States [93-1 USTC ¶50,274], 979 F.2d 1375, 1377 (9th Cir. 1993). Although the amended complaint alleges that the plaintiff attempted to exhaust all administrative remedies, the plaintiff has not established through significant probative evidence that he has complied with the I.R.S.' exhaustion requirements set forth in Treas. Reg. §301.7433-1 which require in part that a written administrative claim must be sent to the District Director, marked for the attention of the Chief, Special Procedures Function, and must state, inter alia, the grounds for the claim in reasonable detail, a description of the injuries incurred, and the dollar amount of the claim. ² Second, 28 U.S.C. §1331 and §1340 are general jurisdictional statutes which do not waive sovereign immunity. Fostvedt v. United States , 978 F.2d 1201, 1203 (10th Cir. 1992); Holloman v. Watt, 708 F.2d 1399, 1401 (9th Cir. 1983). Third, although 26 U.S.C. §1346(a)(1) allows a taxpayer to file a suit for recovery of a federal tax, a district court does not have jurisdiction over such a refund suit unless the taxpayer has first paid the assessed tax and filed an administrative claim for a refund with the I.R.S. United States v. Dalm [90-1 USTC ¶50,154; 90-1 USTC ¶60,012], 494 U.S. 596, 601-02 (1989). The plaintiff has neither alleged in the Amended Complaint nor submitted significant probative evidence establishing that he has met these requirements. Fourth, 28 U.S.C. §1391(e) and §1402 are not even jurisdictional statutes, they venue statutes.

The Court further finds that it lacks subject matter jurisdiction over the plaintiff's requests for injunctive relief contained in the Amended Complaint due to the bar of the Anti-Injunction Act, 26 U.S.C. §7421(a), which prohibits courts from granting injunctions restraining the assessment or collection of taxes. Although the plaintiff is not jurisdictionally barred from seeking an injunction if his suit falls into one of the statutory or judicially created exceptions to the Anti-Injunction Act, Jensen v. I.R.S. [88-1 USTC ¶9130], 835 F.2d 196, 198 (9th Cir. 1987), the Amended Complaint fails to allege any non-frivolous grounds for invoking any of the exceptions.

While sovereign immunity does not bar damage actions against federal officials in their individual capacities for violation of a person's constitutional rights, Gilbert v. DaGrossa [85-2 USTC ¶9665], 756 F.2d at 1459, the Court finds that all individual capacity claims against the defendants in the Amended Complaint must be dismissed pursuant to Fed.R.Civ.P. 12(b)(5) due to a lack of proper service. In order to bring an action against a government official in his or her individual capacity, a plaintiff must effect personal service in compliance with Fed.R.Civ.P. 4(d)(1); service at the defendant's place of employment is insufficient. Johnston v. Horne, 875 F.2d 1415, 1424 (9th Cir. 1989); Dale-Murphy v. Winston, 837 F.2d at 355. The returns of service on file establish that none of the individual defendants were personally served with either the original complaint or the Amended Complaint.

Furthermore, the Amended Complaint fails to state any claim against the defendants in their individual capacities. First, 26 U.S.C. §7214, which subjects revenue officers and agents to criminal liability for engaging in various prohibited conduct, does not provide for a private right of action. Detwiler v. United States [76-1 USTC ¶9140], 406 F.Supp. 695, 700 (E.D.Pa. 1975), aff'd w/o op., 544 F.2d 512 (3rd Cir. 1976), cert. denied, 429 U.S. 1105 (1977). Second, an action pursuant to 42 U.S.C. §1983 may not be maintained against federal government officials since their actions are performed under color of federal law and not state law, ³ Dale-Murphy v. Winston, 837 F.2d 348, 355 (9th Cir. 1987); Stonecipher v. Bray [81-2 USTC ¶9614], 653 F.2d 398, 401 (9th Cir. 1981), cert. denied, 454 U.S. 1145 (1982), nor may an action pursuant to Bivens v. Six Unknown Named Federal Narcotics Agents, 403 U.S. 388 (1971), be maintained against the defendants in their individual capacities for any alleged violations of the plaintiff's constitutional rights. Wages v. I.R.S., 915 F.2d 1230, 1235 (9th Cir. 1990), cert. denied, 498 U.S. 1096 (1991) (noting that the Ninth Circuit has "never recognized a constitutional violation arising from the collection of taxes.") Even if the plaintiff could identify a constitutional violation, Bivens would still not provide him with a cause of action given the statutory mechanism for relief provided in the Internal Revenue Code. Wages, at 1235. Third, the Amended Complaint in no way states a federal R.I.C.O. claim against the defendants in their individual capacities, nor does it state any kind of a claim against them for violating the cited criminal statutes since those statutes do not provide for a private right of action. See Aldabe v. Aldabe, 616 F.2d 1089, 1092 (9th Cir. 1980) (Court found no basis for civil liability under 18 U.S.C. §241 or §242). Therefore,

IT IS ORDERED that the Federal Defendants' Motion for Summary Judgment With Respect to the Plaintiff's Amended Complaint (doc. #31) is granted to the extent that all claims in the Amended Complaint against the individual defendants in their official capacities are dismissed pursuant to Fed.R.Civ.P. 12(b)(1) and all claims against the individual defendants in their individual capacities are dismissed pursuant to Fed.R.Civ.P. 12(b)(5) and 12(b)(6). The Clerk of the Court shall enter judgment accordingly.

¹ The defendants contend that there is no I.R.S. employee named Patrick Rudy.

² The Court notes that the plaintiff's response to the summary judgment motion fails to comply with Local Rule 1.10(l)(1) inasmuch as the plaintiff did not submit any statement of facts. Although it is not the Court's "task to scour the record in search of a genuine issue of triable fact" when the nonmoving party "fails to identify with reasonable particularity the evidence that precludes summary judgment[,]" Keenan v. Allan, 91 F.3d 1275, 1279 (9th Cir. 1996), the Court has nevertheless considered the documents in Exhibit C to the Amended Complaint, which the Amended Complaint alleges shows exhaustion of administrative remedies, and concludes that those documents are insufficient to comply with the applicable Treasury Regulation.

³ The fact that notices of federal tax lien were sent to the Maricopa County Recorder's Office to be recorded does not subject any of the individual defendants to §1983 liability.

 

 

 

 

 

[99-1 USTC ¶50,146] Michael D. Strong v. United States of America

U.S. District Court, West. Dist. La. , Lafayette-Opelousas Div., Civ. 6:98-1452, 12/9/98

[Code Sec. 7214 ]

Jurisdiction: Actions against IRS officers: Return information, disclosure of: Private right of action: Lack of.--Jurisdiction was lacking over an individual's damage claim arising out of alleged wrongful disclosure of return information by IRS employees. Code Sec. 7214 , which provides for a damage award against an IRS officer for violation of a statute, neither explicitly nor implicitly provided a private right of action until after a criminal conviction. Moreover, the existence of a private right of action in Code Sec. 7431 , the wrongful disclosure statute, did not establish such a right under Code Sec. 7214 .

[Code Sec. 7431 ]

Disclosures: Unauthorized acts: Pleadings: Sufficient facts.--An individual pleaded sufficient facts to state a cause of action under Code Sec. 7431 since his claim that his wife, an IRS employee, had been informed that his return information was "gossiped" about in an IRS office showed that the government was sufficiently notified as to a wrongful disclosure claim.
[Code Sec. 7431 ]

Disclosures: Jury trial: Right to.--An individual was not entitled to a jury trial in connection with his wrongful disclosure of return information claim since such a right was not expressly provided by statute.

MEMORANDUM RULING AND JUDGMENT

MELANCON, District Judge:

Before the Court is a Motion To Dismiss Or For A More Definite Statement And To Strike The Jury Demand [document 4] filed by the United States of America, defendant in this action. For the reasons that follow, the motion to dismiss is granted in part and denied in part.

Background

Michael D. Strong is married to K. Denise Brewerton, an employee of the United States Internal Revenue Service ("IRS"). (R. 1, ¶3). Plaintiff filed this complaint against the United States alleging that the IRS wrongfully disclosed his tax return information in violation of Title 26 of the United States Code section 7431. He further alleges that the IRS has refused to deal fairly with him because he is married to an IRS employee, and that the refusal constitutes willful oppression of him in violation of Title 26 of the United States Code section 7214(a). Plaintiff requests a trial by jury as to his claims against the United States .

Analysis

In its motion to dismiss, the Government argues: (1) there is no private right of action under section 7214 and the Court therefore lacks subject matter jurisdiction; (2) plaintiff does not allege sufficient details to enable the Government to investigate his allegations and frame a response and plaintiff's claim for wrongful disclosure under section 7431 should be dismissed for failure to state a claim. Alternatively the Government requests that plaintiff be required to amend his complaint with sufficient detail to state a valid claim; and (3) plaintiff is not entitled to a jury trial in this action. Each of these issues will be addressed in turn.

A. Whether plaintiff has a private right of action under section 7214

The Government argues that while section 7214 provides for a damage award against revenue officers for violation of a statute, those damages can only be awarded after the criminal conviction of the revenue officer. The statute provides as follows:

Any officer or employee of the United States acting in connection with any revenue law of the United States--

(1) who is guilty of any extortion of willful oppression under color of law . . . shall be dismissed from office or discharged from employment and, upon conviction thereof, shall be fined not more than $10,000, or imprisoned not more than 5 years, or both. The court may in its discretion award out of the fine so imposed an amount, not in excess of one-half thereof, for the use of the informer, if any, who shall be ascertained by the judgment of the court. The court also shall render judgment against the said officer or employee for the amount of damages sustained in favor of the party injured, to be collected by execution.

Plaintiff argues that criminal conviction of the perpetrator as a prerequisite to suit "ignores the principal issue as to §7214: does this section create a private right of action?" (R. 7). Plaintiff contends, even if 7214 does not specifically create a private right of action, the Court should find one is "implied," "and it is not limited by some strained interpretation that the United States must first, in its sole discretion, prosecute and convict the federal officer guilty of the oppression of taxpayers." Id. In support of his position, plaintiff relies on a dissenting opinion in United States v. Barrett [88-1 USTC ¶9193], 837 F.2d 1341 (5th Cir. 1988), which dealt with a tax summons enforcement case rather than section 7214. Id. Plaintiff also asserts that the courts in Lowery v. Texas A & M University System, 117 F.3d 242 (5th Cir. 1997) and Cort v. Ash, 422 U.S. 66 (1975) have recently ruled upon and clarified the issue of implied private rights of action. Id.

While it is axiomatic that the Court is not bound by a dissenting opinion, there are instances in which the court may imply a private right of action form a federal statute. In Cort, the Court articulated four factors for analyzing whether a statute implies a right of action:

(1) Is this plaintiff a member of the class for whose "especial" benefit the statute was enacted? In other words, does the statute create a federal right for this plaintiff?

(2) Is there any evidence of legislative intent, whether explicit or implicit, to create or deny a private remedy?

(3) Is it consistent with the legislative scheme to imply a private remedy?

(4) Is the cause of action one traditionally relegated to state law so that implying a federal right of action would be inappropriate?

Lowery, 117 F.3d at 250.

Despite its articulation of these factors, the Supreme Court has emphasized that the "central inquiry remains whether Congress intended to create, either expressly or by implication, a private cause of action." Touche Ross & Co. v. Redington, 442 U.S. 560 (1979). When Congress affords a specific remedial scheme for violation of a statute, a plaintiff is ordinarily precluded from bypassing that scheme in an effort to recover additional remedies. Middlesex City Sewerage Authority v. National Sea Clammers Assoc., 453 U.S. 1, 20-21 (1981).

On its face, section 7214 does not create a private right of action for damages against the United States and plaintiff has provided no legislative history which would support the proposition that Congress intended to create a private cause of action under section 7214. Rather, plaintiff relies on the creation of a private right of action in section 7431 to argue that Congress intended to create a private right of action in section 7214. Contrary to plaintiff's argument, section 7431 supports the Government's position that where Congress has intended to create a private right of action it has done so expressly. ¹ In drafting section 7214, Congress was specific as to the remedies that would be afforded and the one that plaintiff seeks is not permitted. "Where a statute expressly provides a particular remedy or remedies, a court must be chary of reading others into it." George v. Aztec Rental Center, Inc., 763 F.2d 184, 186 (5th Cir. 1985) citing Transamerica Mortgage Advisors, Inc. v. Lewis, 444 U.S. 11, 19 (1979).

Based on the foregoing, plaintiff's position that the Court should ignore the plain language of the statute requiring criminal conviction of the revenue officer and imply a private right of action pursuant to section 7412 is not persuasive and plaintiff has failed to state a claim under Title 26 of the United States Code section 7412.

B. Wrongful disclosure under section 7431

Plaintiff alleges the IRS improperly disclosed information about his tax returns. The Government argues that this claim should be dismissed under Rule 12(b)(6) because the Complaint does not specify who made the alleged improper disclosures to whom, what information was disclosed, and when disclosures were made. "A claim of wrongful disclosure under section 7431 requires (1) that the IRS disclosed confidential tax return information either knowingly or negligently, and (2) that this disclosure was not authorized by section 6103 of the Internal Revenue Code." Wilkerson v. United States [95-2 USTC ¶50,569], 67 F.3d 112, 115 (5th Cir. 1995).

A motion to dismiss requires the court to test the formal sufficiency of the statement of the claim for relief. Doe v. Hillsboro Indep. Sch. Dist., 81 F.3d 1395, 1401 (5th Cir. 1996). In reviewing a complaint under Rule 12(b) of the Federal Rules of Civil Procedure, the court accepts all well pleaded averments as true and views them in the light most favorable to the plaintiff. Cooper v. Sheriff, Lubbock County , 929 F.2d 1078, 1082 (5th Cir. 1991). The issue is not whether a plaintiff will ultimately prevail but whether he is entitled to offer evidence to support his claims. Doe, 81 F.3d at 1401. A claim will not be dismissed unless it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief. Id.

Here, plaintiff's complaint states that he dealt with Mr. John Gray regarding a offer in compromise which was withdrawn after his marriage to an IRS employee, K. Denise Brewerton. (Complaint, ¶¶4-8). The Complaint indicates that Ms. Brewerton was informed on August 7, 1996 that in the Lafayette office of the IRS, plaintiff's tax information was being "openly and illegally discussed and gossiped about by agents and the employees of the IRS due to her relationship with him." Id. at ¶¶9-12. Plaintiff further contends that the discussion of his tax information was part of a common and accepted practice within the New Orleans District of the IRS, which has been attested under oath by one IRS official and acknowledged by members of IRS management. Id. at ¶13. Finally, plaintiff contends that none of the disclosures fall under any of the thirteen exceptions provided in section 6103. Id. at ¶14.

Accepting all well pleaded averments in plaintiff's Complaint as true and viewing them in the light most favorable to the plaintiff, there are sufficient facts from which the Government can infer and is put on notice of the elements of a claim of wrongful disclosure under section 7431. The Government has the ability to use other procedural mechanisms such as traditional pretrial depositions, interrogatories, and requests for admission for the development of the facts underlying the claim.

Alternatively, the Government requests the Court require plaintiff to amend his complaint pursuant to Rule 12(e) in order to allow defendant to frame a responsive pleading. Specifically, the Government contends that plaintiff's characterization of the disclosure as "widespread" or "gossip" does nothing to further the [defendant's] understanding of the alleged disclosures. (R. 4).

Pursuant to Federal Rule of Civil Procedure 8(a)(2), a plaintiff need only provide the defendant with a short and plain statement of its claim which gives the defendant "notice as to what the plaintiff's claim is and upon which grounds it rests." Mitchell v. E-Z Way Towers, Inc., 269 F.2d 126, 130 (5th Cir. 1959); Boudeloche v. Grow Chemical Coatings Corp., 728 F.2d 759, 761- 762 (5th Cir. 1984). "Rule 12(e) should not be used to frustrate the policy [of notice pleading] by lightly requiring a plaintiff to amend his complaint which under Rule 8 is sufficient to withstand a motion to dismiss." Mitchell, 269 F.2d at 132. "[I]f [a] pleading meets the requirements of Rule 8 and fairly notifies the opposing party of the nature of the claim, a motion for more definite statement will not be granted. 2A J. Moore, J. Lucas, & G. Grotheer, Moore 's Federal Practice, P 1218[1] (2d ed. 1990). Similarly, a motion for a more definite statement will not be granted where the moving party can reasonably respond to the non-movant's pleading, but wants the non-movant to plead additional information that could otherwise be later gained through discovery." Mitchell, 269 F.2d at 132.

Plaintiff's complaint is not so indefinite that the Government cannot respond to plaintiff's pleading. As additional information can otherwise be gained through traditional pre-trial discovery, the Government's alternative motion to require plaintiff to provide a more definite statement is denied.

C. Plaintiff's request for a jury trial

The Government contends that plaintiff is not entitled to a jury trial on his wrongful disclosure claim. While plaintiff's failure to address this issue in its memorandum in opposition to the Government's motion may be construed as being unopposed, the Court will address plaintiff's right to a jury trial below.

A right to a jury trial against the United States exists only if Congress has created such right by statute. Information Resources, Inc. v. U.S. [93-2 USTC ¶50,519], 996 F.2d 780, 783 (5th Cir. 1993), citing Lehman v. Nakshian, 453 U.S. 156, 160, 162 n. 9 (1981). "[A] plaintiff in an action against the United States has a right to trial by jury only where Congress has affirmatively and unambiguously granted that right by statute." Id. at 168

Section 7431 permits a taxpayer whose return information is wrongfully disclosed to "bring a civil action for damages against the United States in a district court of the United States ." 26 U.S.C. §7431. The Government contends that section 7431 does not provide for trial by jury and represents that "[a]ll courts that have considered whether plaintiffs are entitled to jury trials pursuant to [section] 7431 have determined that they are not." ²

Because plaintiff has not demonstrated that Congress has "affirmatively and unambiguously" granted a statutory right to a jury trial on a claim under section 7431, plaintiff's jury demand must be stricken and the Government's motion on this issue is granted.

Conclusion

Plaintiff has failed to demonstrate that a private right of action exists under 26 U.S.C. §7214 and the Government's motion to dismiss for lack of subject matter jurisdiction is granted. Also, plaintiff's demand for a jury trial is stricken and plaintiff's 26 U.S.C. §7431 claim will be tried by the court. Because plaintiff's complaint pleads facts sufficient to establish a claim of wrongful disclosure, the Government's motion to dismiss or alternatively to provide a more definite statement is denied.

JUDGMENT

In accordance with the Memorandum Ruling issued on this date,

IT IS ORDERED that the Motion To Dismiss Or For A More Definite Statement And To Strike The Jury Demand filed by the United States of American [rec. doc. no. 4], is GRANTED IN PART and DENIED IN PART as follows:

(1) plaintiff Michael D. Strong's claim under 26 U.S.C. §7214 is DISMISSED WITH PREJUDICE;

(2) plaintiff's demand for a jury trial is STRICKEN; and

(3) the motion is denied in all other respects.

¹ The Government notes that sections 7426, 7428, 7432, 7433 and 7434 of Title 26 of the United States Code expressly provide private rights of action.

² In support of its representation, the Government cites Barrett v. United States, Civ. No. H-83-6929 (S.D. Tex. Feb. 16, 1988 ); Chandler v. United States [88-2 USTC ¶9541], 687 F.Supp. 1515 (D. Utah 1987); Christensen v. United States , 733 F.Supp. 884 (D.N.J.1990): Hellwarth v. United States , No. CA 3-84-0102G (N.D. Tex. June 27, 1985 ); and Agbanc Ltd. v. Berry [88-1 USTC ¶9156], 678 F.Supp. 804 (D. Ariz. 1988).

 

 

[99-2 USTC ¶50,995] Gregory Zolman, Plaintiff v. Internal Revenue Service, et al., Defendants

U.S. District Court, West. Dist. Mich. , So. Div., 1:99cv 295, 11/3/99 , 87 FSupp 2 d 763

[Code Secs. 7214 and 7433 ]

Suits by taxpayers: Wrongful collection, failure to state a claim for: Tax protesters: Meritless constitutional arguments: Sovereign immunity: Government employees: Individual capacity: Bivens claim.--A pro se taxpayer failed to state a valid claim for wrongful collection of tax because he provided no factual basis for his claim that IRS employees disregarded the Internal Revenue Code. Although Code Sec. 7433 provides a limited waiver of sovereign immunity with respect to wrongful collection actions, the taxpayer alleged wrongful assessment and presented only meritless tax protest arguments. He also failed to state a claim against the agents in their individual capacities because Code Sec. 7214 is a criminal statute and does not create a private right of action. Moreover, a Bivens claim was barred since Code Sec. 7433 provides the exclusive remedy for suits against IRS agents.
OPINION

MCKEAGUE, District Judge:

This is a civil action brought by a pro se plaintiff against the Internal Revenue Service and three employees of that agency. Plaintiff's pro se complaint seeks damages under various provisions of federal law. The complaint is virtually devoid of facts, but contains instead various political assertions and arguments in support of plaintiff's contention that he is not subject to the tax laws of the United States . Plaintiff asserts, for example, that he is not involved in the sale of alcohol, tobacco or firearms and is thus not subject to the jurisdiction of the Treasury Department and that Title 26 of the United States Code somehow does not apply to him. Among other provisions of law, plaintiff purports to proceed under 26 U.S.C. §7214, a criminal statute prohibiting certain acts of fraud and extortion by Internal Revenue agents.

Defendants, represented by the United States , have moved to dismiss the complaint for failure to state a claim upon which relief can be granted. FED. R. CIV. P. 12(b)(6). Plaintiff has filed a response (docket #10) in which he provides no further factual basis for his claim, but does shift ground concerning the legal basis for his complaint. In his responsive brief, plaintiff cites for the first time 26 U.S.C. §7433, which creates a cause of action against the United States for negligent, reckless or intentional disregard of the provisions of the Internal Revenue Code by an employee or officer of the IRS in connection with the collection of federal taxes. Plaintiff also reiterates the accusation that the defendants have "prosecuted" him without due process of law and have threatened to subject him to laws and regulations that do not apply to him (presumably because he is a sovereign individual immune from federal income taxation).

Upon review of plaintiff's complaint, as amplified by his memorandum, the court determines that the complaint fails to state a claim upon which relief can be granted.

Applicable Standard

Defendants have moved to dismiss the complaint pursuant to Fed. R. Civ. P. 12(b)(6). The standards applicable to a motion to dismiss are well settled. Under Rule 12(b)(6), a complaint may be dismissed only if it is clear that no relief could be granted under any set of facts that could be proved consistent with the allegations of the complaint. See Lawrence v. Chancery Court of Tennessee, 188 F.3d 687, 691 (6th Cir. 1999); Lewis v. ACB Bus. Servs., Inc., 135 F.3d 389, 405 (6th Cir. 1998); Ludwig v. Board of Trustees, 123 F.3d 404, 408 (6th Cir. 1997); Morgan v. Church's Fried Chicken, 829 F.2d 10, 12 (6th Cir. 1987). The court must construe the complaint in the light most favorable to plaintiff, accept all factual allegations as true, and determine whether it is established beyond a doubt that the plaintiff can prove no set of facts in support of his claim that would entitle him to relief. Columbia Natural Resources, Inc. v. Tatum, 58 F.3d 1101, 1109 (6th Cir. 1995); Jones v. City of Carlisle , 3 F.3d 945, 947 (6th Cir. 1993). While this standard is decidedly liberal, it requires more than the bare assertion of legal conclusions. See Advocacy Org. for Patients and Providers v. Auto Club Ins. Ass'n, 176 F.3d 315, 319 (6th Cir. 1999); Nelson v. Miller, 170 F.3d 641, 649 (6th Cir. 1999). The court need not accept as true legal conclusions or unwarranted factual inferences. Murphy v. Sofamor Danek Group, Inc. (In re Sofamor), 123 F.3d 394, 400 (6th Cir. 1997) (quoting Morgan, 829 F.2d at 12). "In practice, a '. . . complaint must contain either direct or inferential allegations respecting all the material elements to sustain a recovery under some viable legal theory.' " Columbia Natural Resources, Inc. v. Tatum, 518 F.3d at 1109 (quoting Allard v. Weitzman (In re DeLorean Motor Co.), 991 F.2d 1236, 1240 (6th Cir. 1993)); see Hahn v. Star Bank, No. 98-3680, -- F.3d --, 1999 WL 681702, at *9 (6th Cir. Sept. 2, 1999). Further, as plaintiff is proceeding pro se, the complaint must be given a liberal reading, and is not held to the standard applicable to complaints drafted by trained legal counsel. See Haines v. Kerner, 404 U.S. 519, 520-21 (1972). Applying these standards, the court concludes that defendants' motions must be granted.

Discussion

Defendant Internal Revenue Service, an agency of the United States of America , asserts sovereign immunity as a defense against plaintiff's suit. Actions against the United States are barred by the doctrine of sovereign immunity unless Congress has explicitly consented to be sued. See United States Dep't of Energy v. Ohio , 503 U.S. 607, 615 (1992). Plaintiff's complaint, as originally submitted, was subject to dismissal on this ground, as plaintiff had not asserted any claim to which Congress had consented. Plaintiff's reply memorandum, however, invokes 26 U.S.C. §7433, a statute in which Congress has expressly authorized suits by taxpayers against the United States . As a pro se plaintiff, Mr. Zolman would be entitled to amend his complaint in order to assert liability against the United States under this statute. Proceeding with the indulgence generally accorded to pro se litigants, the court will construe the original complaint as if it had been amended to invoke section 7433.

So construed, however, plaintiff's complaint continues to be fatally defective. In order to state a valid claim against any defendant, the complaint must set forth facts which, if true, would support a recovery under some recognized cause of action. Plaintiff's submissions to this court utterly fail to state a claim under section 7433. Plaintiff has presented only conclusory allegations to the effect that he is not subject to the income tax laws of this country. Such outlandish contentions have been routinely rejected by the federal courts. See United States v. Mundt [94-2 USTC ¶50,366], 23 [29] F.3d 233, 237 (6th Cir. 1994). In the absence of an allegation of facts supporting the dubious claim that plaintiff now asserts, this court cannot assume that he is immune from the tax laws and is therefore being pursued by defendants in violation of the Internal Revenue Code. To state a claim under section 7433, a plaintiff must assert facts showing that an officer or employee of the IRS has disregarded the provision of the Internal Revenue Code in connection with collection of federal tax. See Williams v. United States, No. 97-5820, 1998 WL 537579, at *4 (6th Cir. Aug. 7, 1998) ("The scope of 7433 is limited to unauthorized collection actions and does not extend to determinations of liability."); Bouquett v. United States [98-1 USTC ¶50,232], No. 96-4239, 1998 WL 69842, at *2 (6th Cir. Feb. 10, 1998) (section 7433 "does not provide taxpayers a cause of action for allegedly improper assessment of amounts of taxes"); Shaw v. United States [94-1 USTC ¶50,254], 20 F.3d 182, 184 (5th Cir. 1994) (even if IRS improperly assessed tax liability against taxpayer, taxpayer had no claim under section 7433 in the absence of proof of improper collection procedures); Ihasz v. United States [97-2 USTC ¶50,871], 997 F. Supp. 547, 549-50 (D. Vt. 1997). Mere assertion of tax liability, without more, is insufficient to create liability. See Shaw [94-1 USTC ¶50,254], 20 F.3d at 184. Plaintiff's submissions are completely devoid of any allegation concerning improper collection procedures by the individual defendants. Plaintiff has therefore failed to state a claim against the United States under section 7433.

Plaintiff's claim against the individual revenue agents is barred by the exclusive remedy provision of 26 U.S.C. §7433. The Sixth Circuit has squarely held that section 7433 is an exclusive remedy and bars claims against individual revenue agents. Fishburn v. Brown [97-2 USTC ¶50,742], 125 F.3d 979, 982-83 (6th Cir. 1997). Consequently, construing plaintiff's complaint as an attempt to assert liability against the individual defendants under the theory of Bivens v. Six Unknown Named Agents of the Federal Bureau of Narcotics, 403 U.S. 388 (1971), the court concludes that such a Bivens claim is barred. See Fishburn [97-2 USTC ¶50,742], 125 F.3d at 982-83. Furthermore, the criminal statute upon which plaintiff relies, 26 U.S.C. §7214, creates no private cause of action and is insufficient to sustain a civil claim. See Purk v. United States , 747 F. Supp. 1243, 1248 (S.D. Ohio 1989); see also Culbertson v. Unknown U.S. Agents, No. 91-cv-40437-FL, 1992 WL 739051, at *1 (E.D. Mich. Oct. 23, 1992 ).

Finally, plaintiff has recently filed a purported notice of default against the individual defendants (docket #11), contending that they have failed to answer the complaint within the time allowed by law. This filing, like the rest of plaintiff's submissions, is meritless. Defendants' motion to dismiss the complaint was a proper response under Fed. R. Civ. P. 12. The entry of a default against these defendants is therefore not permissible. Plaintiff's notice of default will therefore be stricken.

Conclusion

For the foregoing reasons, defendants' motion to dismiss (docket #6) will be granted.

JUDGMENT

In accordance with the opinion filed this date:

IT IS ORDERED that defendants' motion to dismiss the complaint (docket #6), Fed. R. Civ. P. 12(b)(6), be and hereby is GRANTED.

IT IS FURTHER ORDERED that plaintiff's complaint is dismissed with prejudice and that judgment is entered on behalf of all defendants.

IT IS FURTHER ORDERED that plaintiff's purported notice of default (docket #11) be and hereby is STRICKEN on the court's own motion.

 

 

[99-2 USTC ¶50,996] Kelvin J. Devries, Plaintiff v. Judith M. Hammer, Defendant

U.S. District Court, West. Dist. Mich. , So. Div., 1:99cv 111, 11/3/99

[Code Secs. 7214 and 7433 ]

Suits by taxpayers: Actions of IRS employees: Failure to state claim: Bivens action: Proper defendant: Exclusive remedy: Tax protestors: Constitutional claims frivolous.--A taxpayer's pro se suit against an IRS agent alleging fraud and extortion on the basis of an IRS form letter that he received in response to his tax protest arguments was dismissed for failure to state a claim upon which relief could be granted. The taxpayer could not maintain his claim under Code Sec. 7214 since that statute criminalizes acts of fraud and extortion by IRS agents but does not provide a private right of action. Additionally, any Bivens-type claim that the taxpayer asserted was dismissed since he named the IRS agent, and not the United States , as the defendant; moreover, Code Sec. 7433 provides the exclusive remedy for alleged violations of constitutional rights by IRS personnel. The court characterized the taxpayer's constitutional claims as frivolous.

OPINION

MCKEAGUE, District Judge:

This is a civil action brought pro se against a revenue officer of the United States . Plaintiff's one-page complaint charges defendant, Judith M. Hammer, with fraud and extortion arising from a letter from defendant to plaintiff sent in March of 1997. Defendant's letter, attached to the complaint as Exhibit A, appears to be a form letter used by the Internal Revenue Service to respond to inquiries from "tax protesters." The letter states that the Service does not respond to inquiries "of the type you have written" on a point-by-point basis, and goes on to explain that income taxes are authorized by the Sixteenth Amendment to the United States Constitution and the Internal Revenue Code. Plaintiff's complaint asserts that defendant's letter is false and fraudulent and seeks relief pursuant to 26 U.S.C. §7214, which punishes acts of fraud and extortion by employees of the IRS.

Defendant, represented by the United States of America , has moved to dismiss the complaint for failure to state a claim upon which relief can be granted. Plaintiff has submitted a "memorandum in rebuttal" (docket #10), in which he reasserts his charge of fraud and confirms that the basis for his claim is defendant's letter. Plaintiff's memorandum goes on to explain that he is a sovereign citizen of the Republic of Michigan and is not subject to the jurisdiction of the United States of America . Upon review, the court determines that plaintiff's complaint is utterly frivolous and that defendant's motion should be granted.

Applicable Standard

Defendant has moved to dismiss the complaint pursuant to Fed. R. Civ. P. 12(b)(6). The standards applicable to a motion to dismiss are well settled. Under Rule 12(b)(6), a complaint may be dismissed only if it is clear that no relief could be granted under any set of facts that could be proved consistent with the allegations of the complaint. See Lawrence v. Chancery Court of Tennessee, 188 F.3d 687, 691 (6th Cir. 1999); Lewis v. ACB Bus. Servs., Inc., 135 F.3d 389, 405 (6th Cir. 1998); Ludwig v. Board of Trustees, 123 F.3d 404, 408 (6th Cir. 1997); Morgan v. Church's Fried Chicken, 829 F.2d 10, 12 (6th Cir. 1987). The court must construe the complaint in the light most favorable to plaintiff, accept all factual allegations as true, and determine whether it is established beyond a doubt that the plaintiff can prove no set of facts in support of his claim that would entitle him to relief. Columbia Natural Resources, Inc. v. Tatum, 58 F.3d 1101, 1109 (6th Cir. 1995); Jones v. City of Carlisle , 3 F.3d 945, 947 (6th Cir. 1993). While this standard is decidedly liberal, it requires more than the bare assertion of legal conclusions. See Advocacy Org. for Patients and Providers v. Auto Club Ins. Ass'n, 176 F.3d 315, 319 (6th Cir. 1999); Nelson v. Miller, 170 F.3d 641, 649 (6th Cir. 1999). The court need not accept as true legal conclusions or unwarranted factual inferences. Murphy v. Sofamor Danek Group, Inc. (In re Sofamor), 123 F.3d 394, 400 (6th Cir. 1997) (quoting Morgan, 829 F.2d at 12). "In practice, a '... complaint must contain either direct or inferential allegations respecting all the material elements to sustain a recovery under some viable legal theory.' " Columbia Natural Resources, Inc. v. Tatum, 518 F.3d at 1109 (quoting Allard v. Weitzman (In re DeLorean Motor Co.), 991 F.2d 1236, 1240 (6th Cir. 1993)); see Hahn v. Star Bank, No. 98-3680, -- F.3d --, 1999 WL 681702, at *9 (6th Cir. Sept. 2, 1999). Further, as plaintiff is proceeding pro se, the complaint must be given a liberal reading, and is not held to the standard applicable to complaints drafted by trained legal counsel. See Haines v. Kerner, 404 U.S. 519, 520-21 (1972). Applying these standards, the court concludes that defendant's motion must be granted.

Discussion

The asserted basis for plaintiff's claim is violation of 26 U.S.C. §7214. That statute criminalizes certain acts of fraud and extortion committed by revenue officers or agents. Generally, a private citizen has no authority to initiate a federal criminal prosecution. See Linda R.S. v. Richard D., 410 U.S. 614, 619 (1973); Cok v. Cosentino, 876 F.2d 1, 2 (1st Cir. 1989). Only the United States has authority to enforce the criminal laws. Furthermore, criminal statutes do not create private rights of action, unless Congress so provides. Cosentino, 876 F.2d at 2. 26 U.S.C. §7214 does not create a private right of action. See Purk v. United States , 747 F. Supp. 1243, 1248 (S.D. Ohio 1989); see also Culbertson v. Unknown U.S. Agents, No. 91-cv-40437-FL, 1992 WL 739051, at *1 (E.D. Mich. Oct. 23, 1992 ); cf., Johnson v. Cullen, 925 F. Supp. 244, 251 (D. Del. 1996) (no private cause of action for related section 7206). Consequently, the complaint fails to state a claim upon which relief can be granted under 26 U.S.C. §7214.

Reading plaintiff's complaint with the liberality accorded pro se submissions, the court surmises that plaintiff may be attempting to bring a claim for violation of his constitutional rights against the revenue officer pursuant to the theory of Bivens v. Six Unknown Named Agents of Federal Bureau of Narcotics, 403 U.S. 388 (1971). A Bivens action is generally available to seek redress against a federal officer for violation of constitutional rights. A major exception, however, applies to suits against officers of the Internal Revenue Service. The Sixth Circuit has held that Congress has created an exclusive remedy for reckless or intentional torts committed by employees of the IRS. Fishburn v. Brown [97-2 USTC ¶50,742], 125 F.3d 979, 982 (6th Cir. 1997). That remedy is created by 26 U.S.C. §7433, and the only appropriate defendant is the United States of America . The court in Fishburn held that the exclusive remedy provision of section 7433 precludes the maintenance of a Bivens action against an individual revenue officer. [97-2 USTC ¶50,742], 125 F.3d at 983.

Furthermore, even if this court had authority to entertain a claim against defendants for violation of plaintiff's constitutional rights, plaintiff has utterly failed to plead a viable claim. His contention that defendant's form letter, Exhibit A to the complaint, is fraudulent or extortionate transcends the frivolous. The letter was general in nature and merely informed plaintiff of the constitutional and statutory sources of authority for the levying of a national income tax. Plaintiff's arguments in support of his contention that the letter somehow violated his constitutional rights are meritless. Similarly outlandish is plaintiff's contention, often rejected by the federal courts, that he is a citizen only of the State of Michigan and is not subject to the jurisdiction of the federal government. See, e.g., United States v. Mundt [94-2 USTC ¶50,366], 29 F.3d 233, 237 (6th Cir. 1994).

Conclusion

Plaintiff's complaint, which seeks redress against a revenue officer for the mailing of a form letter, does not state any actionable claim upon which relief can be granted. The court will therefore grant defendant's motion to dismiss.

JUDGMENT

In accordance with the opinion filed this date:

IT IS ORDERED that defendant's motion to dismiss the complaint pursuant to Fed. R. Civ. P. 12(b)(6) (docket #8) be and hereby is GRANTED.

IT IS FURTHER ORDERED that plaintiff's complaint be and hereby is DISMISSED WITH PREJUDICE and that judgment is entered on behalf of defendant.

 

 

 

[2001-2 USTC ¶50,469] Fred L. Gonser, Plaintiff v. United States of America, on behalf of the Internal Revenue Service, Glen Minsico, Pam Charbonneau and Kim Joiner, Defendants

U.S. District Court, No. Dist. Ga., Macon Div., CIV. 5:00-CV-298-3-WBH, 5/17/2001

[Code Sec. 7421 ]

Suits against the U.S.: Injunctive relief: Assessment and collection of tax: Anti-Injunction Act: Irreparable damage.--A former IRS agent's request for injunctive relief to prohibit the IRS from investigating and harassing him, or disclosing his return information was, as drafted, barred by the Anti-Injunction Act. The taxpayer failed to show that he would suffer irreparable harm absent an injunction because his complaint merely described general instances of improper conduct. However, the court granted the taxpayer leave to amend his complaint.
[Code Sec. 7431 ]

Suit against the U.S. : Unauthorized disclosure: Cause of action.--The government was not entitled to summary judgment with regard to a former IRS agent's claim for unlawful inspection and wrongful disclosure of return information. The only authority cited by the government was a case decided before the amendment of Code Sec. 7431 by the Taxpayer Browsing Protection Act (P.L. 105-35); thus, it was irrelevant.
[Code Sec. 6103 ]

Suit against the U.S. : Freedom of Information Act: Civil damages: Exhaustion of remedies.--A former IRS agent failed to state a claim for alleged violations of the Freedom of Information Act (FOIA) by current IRS employees. Claims against federal employees or for money damages are not permissible under FOIA. He also failed to show that he exhausted his administrative remedies before bringing suit.
[Code Sec. 7214 ]

Suit against the U.S. : Penalties, criminal: Offenses by U.S. employees.--A former IRS agent's claim against current IRS employees for alleged harassment and improper tax return disclosures was dismissed. Code Sec. 7214 , which provides penalties for unlawful acts committed by IRS agents, is a criminal statute that only the government may enforce.
[Code Sec. 7217 ]

Suits against the U.S. : Penalties, criminal: Offenses by members of executive branch.--A former IRS agent's claim against current IRS employees for alleged harassment and improper tax return disclosures was dismissed. The application of Code Sec. 7217 , which imposes a penalty over influencing an audit, is limited to members of the executive branch.
[Code Sec. 7435 ]

Suits against the U.S. : Civil damages: Third-party enticement.--Genuine issues of fact existed with regard to a former IRS agent's claim that the IRS improperly questioned his tax representative. It was unclear whether the individual actually worked for the taxpayer.

[Code Sec. 7402 ]

Suits against the U.S. : IRS Employees: Bivens claim: Summary judgment.--The government was denied summary judgment with regard to a former IRS agent's Bivens-type claims because its motion did not address the allegation.

[Code Sec. 7402 ]

Suits against the U.S. : Discovery: Motion to compel.--A former IRS agent's motion to compel the government to answer interrogatories in his suit against IRS agents for harassment and improper disclosures was denied because a government motion to dismiss was pending.
ORDER

HUNT, JR., District Judge:

Before the Court are Defendants' Motion to Dismiss [9], Plaintiff's Motion to Compel [15], Plaintiff's Motion to Amend the Complaint [17], and Plaintiff's request for Oral Argument [20]. Plaintiff brings the underlying suit for damages and to enjoin the Georgia Division of the Internal Revenue Service ("IRS") pursuant to 28 U.S.C. §§1331, 1340, 1343, 1346 and 1361. Plaintiff alleges jurisdiction and venue are proper pursuant to 28 U.S.C. §1391.

For the reasons that follow, the Court GRANTS Plaintiff's Motion to Amend the Complaint [17], GRANTS IN PART and DENIES IN PART Defendant's Motion to Dismiss [9], DENIES Plaintiff's Motion to Compel [15], and DENIES Plaintiff's request for Oral Argument [20].

I. BACKGROUND

As this case is before the court on Defendant's Motion to Dismiss, the Court must accept the allegations in Plaintiff's Complaint as true and must construe all facts in a light most favorable to the Plaintiff. Fortner v. Thomas, 983 F.2d 1024, 1027 (11th Cir. 1993). Viewed in this light, the following facts emerge: ¹

Plaintiff, Fred L. Gonser is a Certified Public Accountant ("CPA") and former agent of the IRS, where he was employed from 1971 to 1982. Most of this time he worked for Group 1312 in the Macon , Georgia office. At some point during 1980 and 1981, Defendant Glen Minsico and Plaintiff were both employed by the IRS, Macon office, Group 1312. During that time, their manager was Mr. Dick Puckett. As a manager, Mr. Puckett caused disruption amongst the agents and was generally disliked. The agents and other employees under Mr. Puckett's management drafted a letter on February 27, 1981 , that voiced their concerns with his management. Defendant Minsico was a personal friend of Mr. Puckett and the sole employee opposed to the letter written by the other employees. Defendant Minsico considered Plaintiff to be the "ring leader" of the group concerned about Mr. Puckett's management. Apparently, Mr. Puckett resigned from the IRS subsequent to the receipt of the letter from his employees.

Plaintiff resigned from the IRS on February 19, 1982 , and entered private practice as a CPA in Macon , Georgia . Plaintiff's practice requires him to file tax returns with the Macon Division of the IRS and to represent taxpayers before that entity. Sometime after Plaintiff's resignation, Defendant Munsico became the Group Manager of the Macon Division, Group 1312.

The crux of Plaintiff's Complaint involves Defendant Minsico's "vindictive course of action against Plaintiff" as Manager of the Macon Division. Plaintiff alleges that Defendants' intent is to harm him and his clients and put him out of business. Plaintiff's Complaint alleges, inter alia, that Defendant Minsico has made false statements to third parties about Plaintiff and his accounting practice in violation of numerous federal laws and IRS rules, policies and procedures, that Defendant Minsico has improperly communicated with Plaintiff's clients in violation of Circular 230, that Defendant Minsico has improperly maintained private files and background information on Plaintiff in violation of IRS rules, that Defendant Minsico has improperly inspected Plaintiff's return information, Plaintff's clients return information and maintained lists of Plaintiff's clients in violation of Sections 7214 and 7431 of the IRS Code. Plaintiff's Complaint, as amended, alleges that Defendants' actions have also violated the Taxpayer Bill of rights, the Privacy Act and the Fourth Amendment of the United States Constitution.

Plaintiff alleges that Defendants Kim Joiner, Pam Charbonneau and other agents conspired with Defendant Minsico in his scheme to ruin Plaintiff and his business. Defendants have sought to assess high and unfounded taxes in audits of Plaintiff's clients' returns. Defendants have frequently assessed preparer penalties "against Defendant" as part of the audits. ² Corroborating the unsoundness of Defendants unfounded tax assessments and preparer penalties, Plaintiff notes that the Appeals Division of the IRS has either issued no change reports ³ or reduced the taxes substantially and that all preparer penalties "against Defendant" were dismissed upon findings by the Appeals Division that the penalties were without merit. Plaintiff explains that Defendants would often delay the issuing of reports on Plaintiff's clients so that his clients, hamstrung by the statute of limitations, would not be afforded an opportunity to pursue an appeal through the Appeals Division. ⁴ Finally, Plaintiff avers that Defendants have failed to investigate or otherwise respond to numerous complaints that he has filed in connection to Defendants' actions described herein.

II. DISCUSSION

A. Motion to Amend the Complaint

Plaintiff moves the Court for leave to Amend his Complaint. Pursuant to rule 15(a) of the Federal Rules of Civil Procedure, a party may amend a complaint once as a matter of course at any time before a responsive pleading is served. Fed. R. Civ. P. 15. Defendants correctly point out that their present Motion to Dismiss is not a responsive pleading. See Fed. R. Civ. P. 7; see also Burns v. Lawther, 53 F.3d 1237, 1241 (11th Cir. 1995). Defendants represent that they are unopposed to this Motion. Accordingly, the Court hereby GRANTS Plaintiff's Motion to Amend the Complaint.

B. Standard under 12(b)(6)

A district court may dismiss a complaint for failure to state a claim under Federal Rule of Civil Procedure 12(b)(6) only if it is clear that no relief could be granted under any set of facts that could be proved consistent with the allegations. Powell v. United States [91-2 USTC ¶50,514], 945 F.2d 374, 375 (11th Cir. 1991). In evaluating a motion to dismiss for failure to state a claim, a court must accept as true all allegations contained in the complaint and must view the complaint in the light most favorable to the plaintiff. Peterson v. Atlanta Housing Auth., 998 F.2d 904, 912 (11th Cir. 1993). However, while the Court must weigh every inference in plaintiff's favor, "conclusory allegations and unwarranted deductions of fact" may not be taken as true. Associated Home Builders, Inc. v. Alabama Power Co., 505 F.2d 97, 100 (5th Cir. 1974). ⁵ The "threshold of sufficiency that a complaint must meet to survive a motion to dismiss for failure to state a claim is exceedingly low." Quality Foods de Centro America, S.A. v. Latin America Agribusiness Dev. Corp., 711 F.2d 989, 995 (11th Cir. 1983). Thus, a court can dismiss a claim under Federal Rule of Civil Procedure 12(b)(6) only when a plaintiff "can prove no set of facts which would entitle him to relief." Martinez v. American Airlines, Inc., 74 F.3d 247, 248 (11th Cir. 1996).

C. Defendants' Motion to Dismiss

Defendants move to dismiss Plaintiff's Complaint arguing that (1) Plaintiff's request for injunctive relief is barred by the Anti-Injunction Act (the "Act"), (2) Plaintiff has failed to state a claim for which relief can be granted under any theory, and (3) Plaintiff's Complaint fails to state a claim against the individual Defendants.

1. Plaintiff's Claim for Injunctive Relief

Count One of Plaintiffs' Complaint prays for injunctive relief against Defendants. ⁶ Count One alleges that Defendants "promulgated a malicious audit against an affiliate of Plaintiff, violated Circular 230 Internal Revenue Code §7521(b) and (c), 7605(b) and other rules for practice before the Internal Revenue Service." Plaintiff also complains that Defendants encouraged Plaintiff's clients to file complaints against him, subjected taxpayers to unnecessary examinations or investigations and committed various other violations of the statutes, rules, and regulations in furtherance of their campaign against Plaintiff. ⁷ "In further support of the need for injunctive relief," Plaintiff notes that all of the penalties Plaintiff alleges were unlawfully assessed against him by Defendants were overturned and that in response to all of the audits performed by the Macon Division, the Appeals Division either issued "no change reports" or substantially reduced the assessment.

Plaintiff has amended his complaint to request the Court to compel Defendants to comply with and enforce IRS code §7214. The Amended Complaint also requests the Court to issue a writ of mandamus pursuant to 28 U.S.C. §1361 to compel Defendants to enforce compliance with the Internal Revenue Code §§6103, 7214, 7431 and 7435 and compel compliance with the IRS internal policies regarding (1) the improper inspection and disclosure of Plaintiff's income information, (2) the unauthorized maintenance of files on Plaintiff, (3) the illegal interview of Plaintiff's employees, and (4) the improper enticement of Plaintiff's representatives.

Defendants move to Dismiss Count One arguing, inter alia, that injunctive relief is barred by the Anti-Injunction Act, Section 7241 of the Internal Revenue Code. 26 U.S.C. §7241. Defendants maintain that Plaintiff's suit clearly falls within the purview of the Act and that the "special circumstances" necessary for the invocation of the judicially created Enochs exception to the Act are not applicable in this case. The Anti-Injunction Act specifically provides as follows:

(a) [with certain specified exceptions not applicable to this case ⁸], no suit for the purpose of restraining the assessment or collection of any tax shall be maintained in any court by any person, whether or not such person is the person against whom such tax was assessed.

26 U.S.C. §7421 (Prohibition of Suits to Restrain Assessment or Collection). The primary purpose of the Act is "the protection of the Government's need to assess and collect taxes as expeditiously as possible with a minimum of pre-enforcement judicial interference and to require that the legal right to the disputed sums be determined in a suit for refund." Bob Jones University v. Simon [74-1 USTC ¶9438 ], 416 U.S. 725, 736, 94 S.Ct. 2038, 2046 (1974). Another objective of the statute is the "protection of the collector from litigation pending a suit for refund." Id. [74-1 USTC ¶9438 ], 416 U.S. at 737, 94 S.Ct. at 2046. The Act applies to suits that directly implicate the actual assessment or collection of revenue as well as activity that is intended or may culminate in the assessment or collection of taxes. Smith v. Rich [82-1 USTC ¶9206 ], 667 F.2d 1228, 1230 (5th Cir. 1982). This includes injunctions against IRS investigations and allegedly harassing activity. Graham v. United States [82-2 USTC ¶9432 ], 528 F.Supp. 933, 937 (E.D. Pa. 1981); See also Davidson v. C.I.R. [85-1 USTC ¶9272 ], 589 F.Supp. 158 (D.N.Y. 1984) (holding that Act barred suit for injunctive relief where taxpayer alleged that IRS action was racially motivated); DeJulis v. Alexander [75-1 USTC ¶9502 ], 393 F.Supp. 823 (D. Wyo. 1975) (dismissing suit to enjoin alleged harassment by IRS officers where the tax involved was not illegal); White v. Boyle [75-1 USTC ¶9381 ], 390 F.Supp. 514 (D. Va. 1975) (aff'd [76-2 USTC ¶9597 ], 538 F.2d 1077) (dismissing suit against IRS agents alleging that taxpayer was singled out because of his political activities and criticism of the IRS).

In addition to the exceptions enumerated in the statute (inapplicable in this case), there is a narrow judicially created exception to the Act which is sometimes termed the Enochs exception. Enochs v. Williams Packing & Navigation Co. [62-2 USTC ¶9545], 370 U.S. 1, 82 S.Ct. 1125 (1962). The Enochs exception to the prohibition of suits for injunctive relief allows a suit for injunctive relief where it is clearly shown that the government is definitely not going to prevail ⁹ and where the taxpayer has established the equitable grounds for injunctive relief, i.e. that the plaintiff has no other legal remedy and if not enjoined, the plaintiff-taxpayer will suffer irreparable harm. Id. [84-2 USTC ¶9824], 370 U.S. at 6-8. See Hansen v. United States [84-2 USTC ¶9824], 744 F.2d 658 (8th Cir. 1984) (holding that taxpayer must show that under the most liberal view of the law and the facts, there was no possibility that the government could establish its claim and that irreparable harm would occur absent an injunction); Kemlon Products and Development Co. v. United States [81-1 USTC ¶9267], 638 F.2d 1315 (5th Cir. 1981) (holding that in order to satisfy both prongs of Enochs, the plaintiff must show (1) irreparable injury and inadequacy of legal remedy and (2) the situation must be such that under no circumstances can the government ultimately prevail, with the burden on the plaintiff to establish both criteria).

Plaintiff, citing Estate of Michael v. Lullo [99-1 USTC ¶60,339], 173 F.3d. 503 (4th Cir. 1999), argues that his suit is a Mandamus action and as such is not overridden by the Anti-Injunction Act. Plaintiff claims that Michael holds that the Writ of Mandamus and Venue Act may be invoked when there is a clear right to relief sought, a clear duty on the part of the IRS to do the acts requested, and a lack of another remedy.