99-2 USTC ¶50,660] H.W. Reeder, D.O. P.C. (aka Harold Reeder, PC), a corporation, and Harold Reeder, D.O., Plaintiffs-Appellants v. United States of America, Defendant-Appellee

(CA-9), U.S. Court of Appeals, 9th Circuit, 98-16045, 6/17/99, Reversing and affirming an unreported District Court decision

[Code Sec. 6331 ]

Levies and liens: Damages: Effective levy: Valuation of assets: Ownership: Conduct of IRS agent: Recklessness.--A corporation was not entitled to damages for an IRS agent's allegedly reckless levy since the agent sufficiently estimated the combined value of corporate assets and concluded that they were worth more than the cost to perform the seizure and sale. Further, the agent's failure to ascertain that most of the levied assets were not owned by the corporation prior to issuing the levy was not unreasonable since its Form 433-B, Collection Information Statement for Businesses, did not indicate that the assets were leased.
[Code Secs. 6343 and 7432 ]

Levies and liens: Failure to release: Damages: Conduct of IRS agent: Recklessness not shown.--The trial court did not err in its determination that an IRS agent's failure to release levies on a corporation's assets after the corporation paid its deficiencies did not amount to reckless and intentional conduct. Although Code Sec. 6343 requires release of a levy upon full payment, no regulations existed under the statute at that time. The agent may have been negligent in believing that the levies were moot upon full payment and, thus, did not need to be released, but she was not necessarily reckless or intentional. Finally, the corporation could not bring a damage action against the agent under Code Sec. 7432 since that statute applies only to federal tax liens, not levies. [Code Sec. 7433 ]

Standing to sue: Who is the taxpayer: Damage claim: Failure to release lien: Unauthorized collection actions: Damages: Involuntarily dissolved corporation: State law.--An individual lacked standing to proceed with damage claims against the government in connection with the assessment of payroll taxes against his involuntarily dissolved corporation since the corporation, not the individual, was the taxpayer. The government waived its immunity to such suits only when they were brought by the direct taxpayer. However, although the corporation's charter had been terminated by the time it filed suit, under state ( Arizona ) law, it had standing to dispute the assessment as part of its winding up process. BACK REFERENCES: ¶41,778.40

Before: CHOY, MICHEL ¹ and THOMAS, Circuit Judges.

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

MEMORANDUM ²

H.W. Reeder, D.O. P.C. (aka Harold Reeder, P.C.) (the "taxpayer") and Harold Reeder, D.O. ("Reeder") appeal from the district court's dismissal of their claims for damages from seizures and levies for lack of standing and for failure to prove a violation of either Internal Revenue Code ("IRC") (26 U.S.C.) §7432 or §7433. ³ See H.W. Reeder, D.O. P.C. v. United States , No. 93-01327- PHX - PGR (D. Ariz. Mar. 23, 1998 ). We have jurisdiction pursuant to 28 U.S.C. §1291 (1994). We reverse the district court's dismissal for lack of standing as to the taxpayer, affirm the dismissal for lack of standing as to Reeder individually, and as to the taxpayer affirm that its §§7432 and 7433 claims were not proven. Because the parties are familiar with the facts of the case, we will not recount them here.

I

STANDING

Although we review de novo whether the taxpayer or Reeder as an individual had standing to bring this action, see Hughes v. United States [92-1 USTC ¶50,086], 953 F.2d 531, 535 (9th Cir. 1992), the district court correctly held that Reeder does not have standing as an individual because he is not the "taxpayer" for purposes of §§7433 and 7432. Waivers of sovereign immunity, such as those contained in section 7433 and 7432, must be strictly construed. See Lehman v. Nakshian, 453 U.S. 156, 160-61 (1981). Therefore the waiver must be express. The definition of "taxpayer," however, does not by its terms expressly include individuals like Reeder when the tax is assessed against their corporation. See IRC §7701(a)(14) (defining taxpayer as "any person subject to any internal revenue tax"). Here, the payroll taxes in question were owed only by the taxpayer (i.e., the corporation), not the individual, and the government has thus far directed its communications solely towards the corporation and sought to enforce the tax liability in question only against the corporation.

Under Ninth Circuit law interpreting the term "taxpayer," moreover, only direct taxpayers can bring the claims at issue here. See Allied/Royal Parking L.P. v. United States, 166 F.3d 1000, 1003 (9th Cir. 1999) (affirming dismissal of claims brought by individuals under §7433); Ferrel v. Brown [93-2 USTC ¶50,613], 847 F. Supp. 1524, 1528 (W.D. Wash. 1993) ("[T]he waiver of sovereign immunity under §7433 is limited to claims by the direct taxpayer." (emphasis added)), aff'd [94-2 USTC ¶50,611], 40 F.3d 1049, 1049-50 (9th Cir. 1994) (adopting district court opinion). Here, the direct taxpayer unquestionably is the corporation H.W. Reeder D.O. P.C., not Reeder. That Reeder may someday acquire the liability does not make him the "taxpayer" for the years in question. Thus, Reeder lacks standing and the district court's dismissal of his claims on this basis is affirmed.

Under Ninth Circuit law, the capacity of the taxpayer, once a professional corporation incorporated in Arizona, to file a complaint against the government in federal court, is governed by Arizona law. See Levin Metals Corp. v. Parr-Richmond Terminal Co., 817 F.2d 1448, 1451 (9th Cir. 1987). The taxpayer's charter was revoked for the last of several times on April 10, 1990 , yet the taxpayer filed the present action in July, 1993. Although corporate existence terminates upon the issuance of a certificate of revocation, see Ariz. Rev. Stat. Ann. §10-095(E), a corporation that is involuntarily dissolved is allowed to protect its rights in winding up its affairs. See United Bank of Ariz. v. Sun Valley Door & Supply, Inc., 149 Ariz. 64, 716 P.2d 433, 437, 438 (1986). The parties dispute whether the taxpayer was "winding up" when it filed suit in July, 1993. ⁴

Arizona law supports the conclusion that the taxpayer was "winding up" its affairs when it brought this claim against the United States and therefore had standing. First, Arizona law does not require that a corporation wind up its affairs within any set time period. Thus, the three-year delay between revocation of the charter and the filing of the complaint does not preclude a finding that the corporation was winding up its affairs. Second, Ariz. Rev. Stat. Ann. §10-105 specifically provides for the survival of remedies after the dissolution of a corporation, including the filing of an action by the shareholders (here, Reeder himself) in the corporate name. Finally, Arizona courts have interpreted §10-105 to include the right, inter alia, to file a lawsuit on behalf of the dissolved corporation. See United Bank, 149 Ariz. at 67, 716 P.2d at 436 ("Nothing in A.R.S. §10-105 specifically limits the available remedy solely to a lawsuit. . . ."). The payment of taxes and associated disputes is clearly part of a corporation's "winding up" process after dissolution. See Continental Oil Co. v. United States [36-1 USTC ¶9266], 14 F. Supp. 533, 537 (Ct. Cl. 1936) (finding under Arizona law that the dissolved corporation continued to exist after dissolution and that the "adjustment of taxes due from the [dissolved corporation] was among the things necessary to the closing up of its business."). Under United Bank, the taxpayer had the right to bring an action against the government as part of that winding up process. Therefore, the district court's dismissal of the taxpayer's claims for lack of standing is reversed. ⁵

II

SECTION 7433 CLAIMS

Section 7433(a) provides a remedy for taxpayers who have been harmed when an officer or employee of the IRS , "recklessly or intentionally disregards any provision of this title, or any regulation promulgated under this title." The taxpayer asserts that this statute was violated by the conduct of Vicki Harding, an IRS revenue officer, when she seized its assets and failed to release levies on certain of its accounts receivable.

A. Seizure of Office Assets in Alleged Violation of IRC §6331(f)

The taxpayer contends that officer Harding recklessly or intentionally violated §6331(f), which prohibits an IRS revenue officer from levying and seizing assets "if the amount of the expenses which the Secretary estimates (at the time of levy) would be incurred by the Secretary with respect to the levy and sale of such property exceeds the fair market value of such property at the time of levy." Harding's reckless and intentional disregard of §6331(f) allegedly occurred when she proceeded with the levy and seizure of the taxpayer's assets without first estimating the likely proceeds of the sale of all the property seized and when she failed to determine that most of the assets were not owned by the taxpayer, but instead were merely on loan or under lease.

While §6331 does require that an estimate be made of the value of the assets at the time of the seizure, it does not require that an exact assessment of value be made or that an independent investigation of value be performed. Section 6331(f) also does not require that an estimate be made prior to the seizure or that all ownership questions be resolved prior to or at the time of the seizure. See United States v. National Bank of Commerce [85-2 USTC ¶9482], 472 U.S. 713, 721 (1985) (Section 6331 is a "provisional remedy, which does not determine the rights of third parties until after the levy is made, in postseizure administrative or judicial hearings."). The district court did not clearly err in finding that Harding made a sufficient estimate of the combined value of the assets at the time of seizure and concluded that the assets were worth more than the estimated $900 she estimated it would cost to perform the seizure and sale of the assets. To aid her in her valuation of the assets, Harding relied on Form 433-B, in which Reeder himself disclosed a value of the assets of over $16,000. ⁶ This form did not indicate that any of the assets were merely leased. During the seizure, Harding did become aware that one asset, the copier, was leased, but its value was only $950 of the more than $16,000 in total assets. All the other assets appeared to belong to the taxpayer. Harding in fact did not learn that other assets were not owned by the taxpayer until sixteen days after the seizure when she received a letter from taxpayer's counsel to this effect. Thus, at the time of the seizure Harding reasonably believed that the combined value of the assets still exceeded the estimated cost of conducting the seizure and sale of the assets. At the very least, no evidence established or even tended to establish that any violation of §6331(f) by Harding, assuming one existed, was reckless or intentional, or that the district court clearly erred in finding a lack of recklessness or intentionality.

B. Failure to Release Certain Levies in Alleged Violation of IRC §6343(a)(1)

Section 6343(a) provides that levies shall be released if "the liability for which such levy was made is satisfied or becomes unenforceable by reason of lapse of time. . . ." The taxpayer correctly points out that Harding's procedure for releasing levies appears to have been flawed in some respects. For example, §6343 requires that levies be released when "satisfied," yet Harding did not release those levies paid in full. In addition, an accounts receivable list bearing running annotation is an important record generated by the IRS and it was lost, making it more difficult to determine which patients paid and which did not.

These failings, however, do not necessarily amount to a reckless or intentional disregard of the statute. For example, §6343 was amended in 1989 to require release of satisfied levies, which Harding failed to do, but no regulations were put in place to guide an IRS officer in Harding's situation until 1994. See 26 C.F.R. §301.6343-1(f) (effective as amended Dec. 30, 1994 ). Harding may have concluded, as the district court certainly did, that it was not necessary to release the levies on which she received full payment since such levies "would have been moot once the full payment was made." H.W. Reeder D.O. P.C., slip op. at 14. Although this explanation may not excuse a violation of §6343, it does support the district court's conclusion that Harding was not acting recklessly or with intent to violate the statute by failing to release these levies. Furthermore, the basic procedures were arguably adequate even though some paperwork was lost, because each notice of levy included a copy that was to be sent to the taxpayer when the levy was paid so that the taxpayer would receive the same information as the IRS and be able to monitor the payments as they were made. See id. at 13.

Although certain of Harding's actions may have been flawed, and may even constitute negligence, the district court did not clearly err in concluding that these actions did not amount to recklessness or an intentional disregard of the requirements of §6343. Its decision not to impose liability under section 7433 is therefore affirmed.

III

SECTION 7432 CLAIM

Section 7432(a) allows a taxpayer to bring an action for damages against the IRS if "any officer or employee of the [ IRS ] knowingly, or by reason of negligence, fails to release a lien under section 6325 on property of the taxpayer." Section 7432 applies only to a federal tax "lien." The taxpayer argues that Harding's failure to release levies is tantamount to a failure to release liens. However, a levy is not a lien. See Ferrel [93-2 USTC ¶50,613], 847 F. Supp. at 1528 (dismissing §7432 claim because levy imposed was not a lien imposed by the IRS under §6325, as required by §7432), aff'd [94-2 USTC ¶50,611], 40 F.3d 1049 (adopting district court opinion as its own). Even case law relied on by the taxpayer notes the difference between the two. See American Acceptance Corp. v. Glendora Better Builders, Inc. [77-1 USTC ¶9348], 550 F.2d 1220, 1223 (9th Cir. 1977) ("The levy operated as a seizure; a lien is a security interest."). The district court correctly concluded that §7432 did not apply to the acts involving the levies at issue here, and this aspect of its decision is affirmed.

IV

Because we affirm the district court's dismissal of the taxpayer's claims on the merits of liability under sections 7433 and 7432, we need not and do not reach the issue of whether the taxpayer proved any damages. The tax payer Reeder shall bear his own costs.

REVERSED-IN-PART AND AFFIRMED-IN-PART.

¹ The Honorable Paul R. Michel, Circuit Judge, United States Court of Appeals for the Federal Circuit, sitting by designation.

² This disposition is not appropriate for publication and may not be cited to or by the courts of this circuit except as may be provided by Ninth Circuit Rule 36-3.

³ Unless otherwise noted, the statutes and regulations cited throughout this opinion refer to those in effect during the relevant time period in 1991.

⁴ The district court concluded that the taxpayer did not have standing because it was not "winding up." The district court found that Reeder's testimony at trial "completely contradicted the taxpayer's previous representation made to the Court [when he] testified that the taxpayer was not winding up its business subsequent to the time that its corporate charter was revoked." H.W. Reeder D.O. P.C., slip op. at 23. However, it appears that Reeder did not admit that he was not winding up the corporation, because in his testimony he denied saying that the corporation was not winding up and asserted that "[t]echnical matters were winding up." Excerpt of Record 107 at 763. What he apparently meant by the statement cited by the district court is simply that the medical practice was continuing.

⁵ This result avoids a situation where the conduct of the IRS when collecting the taxes could forever go unchallenged because neither the dissolved corporation nor its shareholder has standing to assert claims under sections 7433 and 7432. The government argues that Reeder would have standing to sue if the IRS chose to collect from him as a transferee of the corporate assets under IRC §6901(a). But the IRS has already collected the taxes owed and has no reason to pursue Reeder as a transferee. Thus, under its reading of the law, the IRS could forever avoid a challenge to its practices under sections 7432 and 7433 simply by not asserting transferee liability against a dissolved corporation's shareholders.

⁶ The district court did not clearly err in finding that the evidence established that Harding had Form 433-B in her possession at the time of the seizure and that it indicated that the taxpayer's assets were worth over $16,000. This finding is supported by the district court's credibility determinations at trial and Reeder's amended 1989 tax return, which indicated an identical value of the assets. See H.W. Reeder D.O. P.C., slip op. at 6.

[78-2 USTC ¶9742]Eric Nickerson v. William R. Gilbert, Paul Proulx, James Healey

U. S. District Court, Dist. R. I., Civil Action No. 74-173, 6/6/78

[Code Sec. 6331--result unchanged under '76 Tax Reform Act]

Levy and distraint: Seizure of real estate jointly owned: Seizure of personal property: Immunity of government agents.--In a jury trial, the taxpayer failed to prove that the IRS agents' seizure of personal property located in the building jointly owned by the taxpayer and his son damaged the taxpayer or violated his constitutional rights. Further, the jury did not find that the taxpayer was libeled by the posting of the seizure notice.

George Healy, Jr., 40 Fountain St., Providence, R. I. 02903, for plaintiff. Richard F. Mitchell, Department of Justice, Washington, D. C. 20530, for defendants.

Charge to the Jury

DAY , Senior Judge:

Mr. Foreman and Members of the Jury: We have now reached the final stage of this trial. The issues herein are about to be submitted to you for your determination. It now becomes my duty to instruct you as to the principles of law you must follow in deciding these issues. Although you as the jury as the sole judges of the facts in this case, you are duty bound to follow the law as I shall give it to you in these instructions, and to apply that law to the facts as you find them to be from the evidence that has been presented here during the trial of this case. You are not to single out any particular instruction alone as stating the law governing this case, but must consider these instructions as an entirety.

As you understand, this is a civil action in which Eric Nickerson, a citizen of Rhode Island, is the plaintiff and William R. Gilbert and Paul Proulx, Internal Revenue Officers, and their immediate superior, James Healey, are the defendants. In legal parlance the party who institutes a law suit is the plaintiff. The parties who are sued are the defendants.

This case arises out of certain events which took place on June 5, 1974 , when the defendants Gilbert and Proulx, acting under the supervision of their supervisor, Mr. Healey, entered and seized equipment and tools from a garage and service station in Little Compton which was operated by plaintiff's son, Warren Nickerson, but which was owned jointly by both plaintiff and his son. Said agents padlocked said premises in an attempt to collect federal income taxes due from and unpaid by said son and his wife and posted a notice of tax levy thereupon showing the outstanding tax liability of plaintiff's son and his wife.

The plaintiff alleges in his Complaint that the defendants entered said garage and service station and wrongfully forced him to vacate said property in violation of his right to be free from unreasonable searches and seizures; that the defendants unlawfully and without his consent entered said garage and service station jointly owned by him and his son and wrongfully seized his personal property, and excluded him from said premises in violation of his constitutional rights; that the defendants padlocked said premises and excluded him therefrom and defamed him by conspicuously displaying seizure notices on the premises; further, that the defendants deprived him of said personal property and of his right to carry on his business and occupation and wrongfully deprived him of the use of said property. The plaintiff further alleges that these acts were wrongful, malicious, tortious, and intentional, and were committed with a wanton disregard for the plaintiff's rights.

In addition to compensatory damages for said alleged injuries and losses, plaintiff Eric Nickerson seeks punitive damages against each of said defendants.

In their Answer, the defendants admit that they were employees of the Internal Revenue Service on the date in question who were performing the duties of their employment as such, and denied that they are in any way liable to the plaintiff as alleged by him in his Complaint.

The Complaint and Answer which I have just summarized briefly are what we call the pleadings in this case. They are merely the statements of the parties; they are not evidence and are not to be considered by you as being any proof whatever of the contentions made therein.

I shall now explain some provisions of law which should be helpful to you:

I instruct you that the Fourth Amendment to the Constitution of the United States upholds "the right of the people to be secure in their persons, houses, papers and effects, against unreasonable searches and seizures . . ."

I instruct you that the Internal Revenue Service and its employees are charged by law with the collection of all taxes imposed under the Internal Revenue Code. When an assessment is made for unpaid federal income taxes, and notice and demand for taxes are given to the delinquent taxpayer, it is then the obligation of the Internal Revenue Service and of the appropriate Government officials to make every reasonable effort, in accordance with the law, to collect said assessed taxes.

An assessment for unpaid federal taxes creates by law a lien upon all property of the individuals against whom the assessment is made, and in this case against Warren Nickerson and his wife. By a lien, I mean a legal charge or imposition, much like a mortgage or other security interest, upon the delinquent taxpayer's property, both real and personal. That lien imposed by law will attach to all of the delinquent taxpayer's property that he owns at the time of the assessment, or which he subsequently acquires. The lien is enforceable by the United States for as long as the tax remains unpaid. The Internal Revenue Service is authorized by law to file a public notice of the lien for unpaid federal taxes in an appropriate recording office in the county in which the taxpayer resides, which in this case was in the Town Clerk's office in Little Compton, Rhode Island.

In addition to the filing of a public notice of such federal tax lien, the Internal Revenue Service, its employees, has further statutory authority to collect unpaid federal tax assessments. If an assessment is made for unpaid federal taxes, and if the delinquent taxpayer does not pay his tax bill when he receives it, then the Internal Revenue Service is authorized under the law to proceed to seize and, if necessary, to sell the delinquent taxpayer's property in order to satisfy said outstanding tax liabilities. Virtually all property of a delinquent taxpayer is subject to seizure including jointly-owned property.

The first claim of the plaintiff concerns his interest in real property. The plaintiff and his son Warren Nickerson, at the time involved in this case, owned the building housing Nickerson's Garage and the underlying land as joint tenants. The plaintiff claims that the defendant Internal Revenue officials seized said building, ousted him from the building, and denied him access to it. The defendants on the other hand denied that they seized the building, and claim instead that they seized only the contents of the building belonging to Warren Nickerson and to his wife who were then delinquent in their income tax payments. If you find that the defendants did not seize the building, but merely locked it to secure its contents, then you must find in favor of the defendants with respect to the plaintiff's real property claims.

Because the plaintiff and his son Warren Nickerson owned the land and said building on it as joint tenants, each had a possessory interest in the property and the right to enter upon the premises. However, under the law the Internal Revenue Service had the legal power and authority to seize Warren Nickerson's interest in said property for the payment of his tax liabilities, and accordingly had the authority to take actual possession of said property until Warren Nickerson's interest could be sold at public auction to satisfy his unpaid taxes. After such a sale, if there was such a sale, the plaintiff and the purchaser would own the property between them, and each would have equal access to the property. Therefore, if you find that the defendants seized the property or seized Warren Nickerson's interest in said property, in order to collect the federal taxes owned by Warren Nickerson, then you must find in favor of the defendants with respect to the plaintiff's real property claims.

On the other hand, if you find that the defendants seized the property, not in order to collect federal taxes, but rather for some private or personal purpose of their own, then you must proceed to the immunity defenses, and if you find the immunity defenses inapplicable, then you must proceed to the question of damages, on which issue I will hereinafter instruct you.

The second claim of the plaintiff Eric Nickerson concerns personal property of his which was located within the garage. He claims that tools and equipment of his were wrongfully interfered with through the Internal Revenue seizure. It is for you to determine whether the plaintiff had any tools and equipment locked up in the garage, whether the interference with those tools and equipment was substantial, and whether the defendants intended to exercise dominion and control over this personal property. If you find that the plaintiff, as he claims, did have certain personal property in the building that houses the garage, that there was a substantial interference with his property, and that the defendants intended to exercise dominion and control over this personal property, then you must proceed to consider the immunity defenses that are accorded to the members of the Internal Revenue Service. If you find that the immunity defenses are inapplicable, then you should proceed to the question of damages, on which matters I will hereinafter instruct you. On the other hand, if you find that the plaintiff did not have any personal property on the premises, or that there was no substantial interference with his personal property, or that the defendants did not intend to exercise dominion and control over this personal property, then you must find for the defendants with regard to the plaintiff's personal property claims.

Another claim asserted by the plaintiff is for actual and punitive damages on account of an alleged libel, in the form of the posted seizure notices placed around and about the garage. The defendants were required under Internal Revenue Service procedures to post seizure notices when a seizure was made.

Now, a libel is a false and malicious defamation of a person in writing, tending to expose him to public hatred, contempt or ridicule, or to deprive him of the normal benefits of public confidence and social relationships.

The plaintiff's claim, as asserted in his Complaint, has three essential elements, and these are as follows:

First, that the defendants published the seizure notices, by posting them around Nickerson's Garage, and that these notices were a libel, as I have defined that term.

Second, plaintiff claims that these notices were of and about the plaintiff. By this I mean that, although the seizure notices did not name the plaintiff, they were intended to refer to him, and that it is reasonably probable that members of the public who read the notices would understand them as referring to him.

Third, that this libel was read in fact by members of the general public.

The plaintiff has the burden under the law of establishing these essential elements of his libel claim by a preponderance of the evidence as I have defined that term. If you find that he has done so, then you must proceed to the immunity defenses asserted by the defendants, and if you find the immunity defenses inapplicable, then you must proceed to the question of damages.

I instruct you that truth is a defense to any libel action such as this. If you find that the publications at issue were substantially true, then you must find in favor of the defendants.

In addition, I instruct you that the defendants, that is, the Internal Revenue agents, were permitted in the scope of their responsibilities as federal officials to post seizure notices in the manner in which the notices in this case were posted. Even if these notices were defamatory of the plaintiff, you may find for the plaintiff only if you find that the posting of these seizure notices were caused or motivated by spite or ill will directed toward the plaintiff by the defendants. Thus, if you find from the evidence and reasonable inferences to be drawn from it, that the actions of the defendants in posting these seizure notices were not motivated by spite or ill will, then you must find in favor of the defendants with respect to the libel claim.

Should you determine from the evidence and the reasonable inferences to be drawn from it that the defendants have, in fact, violated a legally protected right of the plaintiff, you must then decide whether the defendants acted in good faith in such a manner to be immune from liability for damages.

The Government officers, such as the defendants before the Court, who act within the scope of their duties are immune from civil suits for damages, even where their actions have violated a protected right of the plaintiff, if (1) the action was taken in good faith, and (2) such action was taken with a reasonable belief in the propriety of their conduct.

Should you determine that the plaintiff has established by a fair preponderance of the evidence that the defendants did violate a legally protected right or rights of the plaintiff, and that they are not entitled to the defenses from liability that I have described to you, then, in that event, and only in that event, must you determine the actual injury, if any, the defendants' actions caused the plaintiff and for which he is entitled to such compensation, as you believe fair, just and warranted.

* * *

You will return separate verdicts as to each of the defendants, William R. Gilbert, Paul Proulx and James Healey. Each of those verdicts must be unanimous. If you find that the plaintiff has not satisfied you by a fair preponderance of the credible evidence and the reasonable inferences to be drawn from it, that the particular defendant whose case you are considering did commit the acts alleged by the plaintiff, as claimed by plaintiff, or if you find such defendant to be immune from liability as I have described that term, then your consideration of the claim against him will end and your verdict will be in favor of the defendant.

On the other hand, if you find that the plaintiff has established by a fair preponderance of the evidence and the reasonable inferences to be drawn from it that the defendant whose case you are considering did commit the acts alleged by the plaintiff on June 5, 1974 , as claimed by him, and if you find such defendant not to be immune from liability as I have described that term, then, your verdict as to such defendant shall be in favor of the plaintiff.

* * *

Judgment

This action came on for trial before the Court, Honorable Edward W. Day, United States Senior District Judge, presiding, and the issues having been duly tried and a decision having been duly rendered,

It is Ordered and Adjudged that judgment shall enter for the defendants.

[86-1 USTC ¶9173] Guy S. Burroughs II and John W. Platt, Sr., Plaintiffs-Appellants v. Arthur E. Wallingford, Dora Nichols, R.D. Powell, Patrick Hayes, A.A. Muse, Jr., D.W. Cranford, Ruth Krebs, and Annette Rivera, Defendants-Appellees

(CA-5), U.S. Court of Appeals, 5th Circuit, No. 85-2017, Summary Calendar, 1/13/86 , 780 F2d 502, Affirming and remanding unreported District Court decision

[Code Secs. 6331 and 7421 ]

Levy and distraint: Constitutional rights: Damages: Frivolous appeals: Double costs and attorneys fees.--The taxpayers' suit for damages against fellow employees for complying with two tax levies that ordered withholding and payment to the IRS of a portion of the taxpayers' wages was properly dismissed. A temporary restraining order sought by the taxpayers to enjoin the employees from future compliance with the tax liens was properly denied. The income tax laws are constitutional and the tax levy procedure in Code Sec. 6331 does not violate due process. The appellees (the employees against whom the taxpayers' suit for damages was directed) were immune from liability to the taxpayers for their compliance with the levies. The district court did not err in striking the taxpayers' notice of appeal from the order denying their application for a temporary restraining order. The appellees were awarded double costs and attorneys fees and the case was remanded to the district court so that court could make a determination as to the amount of attorneys fees incurred.

Guy S. Burroughs II, 12710 Green River Dr., Houston, Tex. 77044, pro se. Horace E. Campbell, Jr., 3500 Entex Bldg., Houston, Tex. 77002, for defendants-appellees. Carleton D. Powell, John A. Dudeck, Jr., Department of Justice, Washington, D.C. 20530, for Amicus U.S.

Before THOMAS GIBBS GEE, CAROLYN DINEEN RANDALL and W. EUGENE DAVIS, Circuit Judges.

Opinion

Per Curiam

EC: Appellees, employees of Arco Petroleum Products Company, received and complied with two tax levies that ordered that a portion of appellants' wages be withheld and paid to the IRS to satisfy appellants' indebtedness. Appellants then filed this suit for damages against appellees for complying with the tax liens without a court order. Appellants also sought a temporary restraining order enjoining appellees from future compliance with the liens. Appellees filed motions to dismiss the claim against them and sought double costs and attorney's fees. An order was entered on December 12, 1984, denying the temporary restraining order. Appellants filed a notice of appeal to this order on December 28, 1984. On January 8, 1985, a final judgment and order was entered granting appellees' motion to dismiss for failure to state a claim upon which relief could be granted and striking appellants' notice of appeal. Appellants then filed this appeal. We affirm and award double costs and attorney's fees for prosecuting a frivolous appeal.

Appellants' suit raises the ghosts of arguments past challenging the income tax laws. Appellants argue that (1) a lien cannot be placed on their "right to earn and hold property" because the Declaration of Independence states that this right is "un-a-lien-able;" (2) only artificially created persons, such as corporations, can be taxed; and (3) they were denied due process by the levies.

The constitutionality of income tax laws has been consistently upheld, Stites v. United States [84-2 USTC ¶9954 ], 746 F.2d 1085 (5th Cir. 1984) (and cases cited), and appellants' arguments otherwise are totally without merit. Additionally, the tax levy procedure in IRC §6331 does not violate due process. Meyers v. United States, 647 F.2d 591 (5th Cir. 1981). At any rate, these matters are properly considered in a suit against the IRS and not against appellees. Appellees in this case are guilty of nothing more than complying with two IRS levies issued by authority of sections 6331 and 6332(a) of the Internal Revenue Code. They are immune from liability to appellants for complying with the levies. ¹ I.R.C. §6332(d) (West 1967). Appellants also contend that the district court erred in striking their notice of appeal from the order denying their application for a temporary restraining order. The denial of this application was not appealable, Nelson v. Rosenthal [76-2 USTC ¶9690 ], 539 F.2d 1034, 1035 (5th Cir. 1976), and even if the district court erred in striking the notice of appeal, it was harmless error.

Appellees seek double costs and attorney's fees from appellants on the grounds that the appeal is frivolous. In Lonsdale v. Commissioner of Internal Revenue [81-2 USTC ¶9772 ], 661 F.2d 71 (5th Cir. 1981), we warned that appeals premised on meritless and "long-defunct" arguments such as those advanced in this case invited sanction. Accordingly, we award appellees double costs and attorney's fees. Because the record does not reflect the amount of attorney's fees incurred, we remand to the district court to make this determination. Knoblauch v. Commissioner of Internal Revenue [85-1 USTC ¶9104 ], 749 F.2d 200 (5th Cir. 1984), cert. denied, 106 S.Ct. 95 (1985).

AFFIRMED and REMANDED.

[86-1 USTC ¶9392] Patricia Pawlowske, Plaintiff v. Chrysler Corp., et al., Defendants

U.S. District Court, No. Dist. Ill., 85 C 4209, 2/13/85 , 623 FSupp 569

[Code Secs. 6331 and 6332 ]

Levy and distraint: Effect of levy: Damages.--An individual had no right to recover damages from her employer as a result of the employer's compliance with an IRS levy on the taxpayer's wages. The fact that the notice of levy was not preceded by a notice of seizure and a court order did not make the levy ineffective. Further, the taxpayer's wages did constitute property subject to levy. Although the court ordered sanctions against the taxpayer under Fed. Rul. Civ. Pro. 11 (for bringing a frivolous action), it delayed the imposition of such sanctions until it received more information from the parties involved.

Patricia Pawlowske, 5 Sparrow Road, Carpentersville, Ill. 60110, pro se. David N. Carvalho, Skadden, Arps, Slate, Meagher, Flom, 333 W. Wacker Dr., Chicago, Ill. 60606. David W. King, Chrysler Corporation, P.O. Box 1919, Detroit, Mich. 48288, for defendants.

MEMORANDUM OPINION AND ORDER

HART, District Judge:

Plaintiff Pawlowske filed this pro se complaint alleging that defendants "did unlawfully and without due process of law remove $568.37 from Plaintiff Pawlowske's payroll check without her permission" and seeking actual damages in the amount withheld, punitive damages of $10,000, and her costs of bringing this suit. Presently before the court are the parties' cross-motions for summary judgment and defendants' motion for sanctions.

There are only two facts pertinent to these motions and they both are undisputed. ¹ On June 28, 1984 the Internal Revenue Service ( IRS ) served a notice of Levy on Wages, Salary and Other Income on defendant Chrysler Corporation demanding payment of $568.37 from plaintiff's wages. On July 18, 1984 Chrysler sent the IRS a check in that amount.

I.

Under 26 U.S.C. §6331(a) the IRS (or more properly the Secretary of the Treasury and that person's agents) has the power to collect delinquent taxes "by levy upon all property and rights to property." The term "levy" is defined in §6331(b) as including "the power of distraint and seizure by any means." Section 6332(a) obligated Chrysler to surrender that portion of plaintiff's salary called for by the notice of levy. Indeed, had Chrysler not complied with the levy it would have become personally liable under §6332(c) for the amount plus a penalty equal to half the amount. Section 6332(d) of the Internal Revenue Code states that one who complies with a levy "shall be discharged from any obligation or liability to the delinquent taxpayer with respect to such property or rights to property arising from such [compliance with the levy]." Thus, plaintiff has no right to recover anything from Chrysler (or its employees) because of its compliance with the levy. ²

Despite this perfectly clear law, plaintiff argues that Chrysler is not protected by §6332(d) because the levy with which it purportedly complied was defective for several reasons. First and foremost, plaintiff argues the levy was ineffective because it was not preceded by a Notice of Seizure and a court order. However, numerous cases make clear that a Notice of Levy is all that is required for the IRS to gain possession of the property (or in plaintiff's phrasing, the Notice of Levy "makes" a levy). See In re Chicagoland Ideel Cleaners, Inc. [74-1 USTC ¶9424 ], 495 F.2d 1283, 1285 (7th Cir. 1974), aff'd sub nom. Phelps v. United States [75-1 USTC ¶9467 ], 421 U.S. 330, 335-37 (1975) ("notice of levy and demand are equivalent to seizure"); United States v. Pittman [71-2 USTC ¶9650 ], 449 F.2d 623, 627 (7th Cir. 1971); Rosenblum v. United States [62-1 USTC ¶9384 ], 300 F.2d 843, 844-45 (1st Cir. 1962); United States v. Eiland [55-1 USTC ¶9487 ], 223 F.2d 118, 121 (4th Cir. 1955). The cases plaintiff relies upon to argue that more than a notice of levy is required were decided under a version of the statute that was replaced in 1954 with significantly different language, and the cases just cited make clear that plaintiff's cases are no longer good law. See 495 F.2d at 1285; 449 F.2d at 627 and n.3; and 300 F.2d at 845.

Plaintiff's statutory argument for her idea that a Notice of Seizure must precede a levy is based on §6502(b) , which states "The date on which a levy on property or right to property is made shall be the date on which the notice of seizure provided in section 6335(a) is given." That means, argues plaintiff, that a levy is not "made" (i.e., effective) until a notice of seizure is given. Besides being inconsistent with the binding and directly-on-point authority already cited, plaintiff's argument is a distortion of the statute. Section 6502(b) does not define what the IRS must do to make a valid levy; rather, it simply chooses an event (the service of a notice of seizure) from which it can easily be determined whether the IRS 's collection attempt falls within the six-year time limit on tax collection stated in §6502(a) . Indeed, plaintiff's interpretation is completely nonsensical because the event she wants to precede a valid levy (the notice of seizure) always comes after the levy. See §6335(a) , stating that "As soon as practicable after seizure of property, notice in writing shall be given by the Secretary or his delegate to the owner of the property. . ." (emphasis added).

As her final argument on this point, plaintiff intimates that judicial process is necessary before her salary can be levied upon. That is simply not so, and the absence of judicial process does not violate any constitutional provision. See United States v. National Bank of Commerce [85-2 USTC ¶9659 ], 105 S.Ct. 2919, 2924-25 (1985). Therefore, the notice of levy was sufficient to require defendants to pay the money demanded and to give them the protection of §6332(d) .

Plaintiff also argues that because §6331 specifically states a notice of levy is sufficient to "make" a levy on the salary of a federal or District of Columbia employee, serving a notice of levy is not sufficient to "'make" a levy on the salary of a private sector employee. That same argument was clearly rejected in Sims v. United States [59-1 USTC ¶9338 ], 359 U.S. 108, 112-13 (1959), which explains that federal and District of Columbia employees were specifically mentioned to overcome authority treating them differently and to make clear they were to be treated just like every other employee.

Finally, plaintiff argues that her wages were not subject to levy because only property "subject to forfeiture" under §7321 can be seized, and only property that can be seized can be levied upon. However, "it is quite clear, generally, that accrued salaries are property and rights to property subject to levy." Sims v. United States [59-1 USTC ¶9338 ], 359 U.S. 108, 110-111 (1959). Again, then, plaintiff's argument is blocked by binding precedent she simply ignores. And even on its own terms plaintiff's attempt to smuggle the limitations on forfeiture proceedings into the section on levy fails. Forfeiture and levy are two entirely distinct ways for the IRS to gain possession of property. Neither depends on the provisions respecting the other, and the things each procedure can reach are separately and independently defined. Compare 26 U.S.C. §§5607 , 5608 , 5612 , 5613 , 5615 , 5661 , 5671 , 5673 , 5683 , 7601-7604 , 7321 (defining property subject to forfeiture) with §6331(a) (defining property subject to levy). The only way plaintiff has managed to tie the levy and forfeiture provisions together is through the same argument (that notice of seizure must precede a levy) rejected above. Therefore, plaintiff's salary was a proper subject of the levy process.

II.

Defendants request costs and attorney fees, arguing that this action is frivolous. Fed.R.Civ.P. 11 requires that all pleadings be signed by a party not represented by an attorney and states that by signing her complaint and other filings plaintiff certifies that she

has read the pleading, motion, or other paper; that to the best of [her] knowledge, information, and belief formed after reasonable inquiry it is well grounded in fact and is warranted by existing law or a good faith argument for the extension, modification, or reversal of existing law, and that it is not interposed for any improper purpose, such as to harass or to cause unnecessary delay or needless increase in the cost of litigation. . . . If a pleading, motion, or other paper is signed in violation of this rule, the court, upon motion or upon its own initiative, shall impose upon the person who signed it . . . an appropriate sanction, which may include an order to pay to the other party or parties the amount of the reasonable expenses incurred because of the filing of the pleading, motion, or other paper, including a reasonable attorney's fee.

By using the words "shall impose" the rule makes imposition of a sanction where Rule 11 has been violated mandatory. Eastway Const. Corp. v. City of New York, 762 F.2d 243, 253-54 and n.7 (2d Cir. 1985) (reversing district court's denial of motion for fees). ³ Subjective bad faith is no longer a prerequisite to Rule 11 sanctions; "[t]he standard is an objective one." Frazier v. Cast, 771 F.2d 259, 263 (7th Cir. 1985). ⁴ And as the Rule and the cases make clear, pro se litigants are subject to Rule 11, though the concerns of Haines v. Kerner, 404 U.S. 519 (1972), must be taken into account in evaluating pro se papers. See, e.g., Tarkowski v. County of Lake, 775 F.2d 173, 176 (7th Cir. 1985) (reversing and remanding for reconsideration refusal to sanction pro se litigant and strongly implying sanctions are required); Williams v. Duckworth, 617 F.Supp. 597, 601-02 (N.D.Ind. 1985) (awarding attorney's fee and fine payable to court against pro se litigant); Richcreek v. Grecu [85-2 USTC ¶9520 ], 612 F.Supp. 111, 117 (N.D.Ind. 1985) (awarding reasonable attorney's fees against pro se tax litigant); Johnson v. United States [85-1 USTC ¶9384 ], 607 F.Supp. 347, 349-50 (E.D.Pa. 1985) (same); Miller v. United States [85-2 USTC ¶9468 ], 604 F.Supp. 804, 805-06 (E.D.Mo. 1985) (same). Finally, the Seventh Circuit has repeatedly warned that tax litigants who clog the courts with frivolous arguments will be sanctioned. See Lovell v. United States [85-1 USTC ¶9208 ], 755 F.2d 517, 519-20 (7th Cir. 1984), and cases cited therein.

Plaintiff claims her arguments have never been made before, and the advisory committee notes to Rule 11 do say that sanctions should not be used to chill creativity, but clearly creativity is not enough by itself. The creativity must be in service of a good faith application of the law or at least a good faith request for a change in the law. Plaintiff has done neither here. This is precisely the sort of "creativity" Rule 11 should chill. Cf. In re TCI Ltd., 769 F.2d 441, 447-48 (7th Cir. 1985) (upholding sanctions under 28 U.S.C. §1927 against the same argument).

Plaintiff also claims that the dissent in United States v. National Bank of Commerce [85-2 USTC ¶9659 ], 105 S.Ct. 2919, 2931-39 (1985), shows "that interpretation of the intent and application of the Internal Revenue Code is still being questioned in 1985, and subject[ed] to review" (brief opposing summary judgment at 10). However, the issue that provoked dissent in the National Bank case is entirely different from that involved here and to the extent it is relevant here National Bank shows plaintiff's complaint has no basis in law, so that case does nothing to show that the actions plaintiff here challenges are open to question.

Each of plaintiff's arguments was precluded by precedent and invalid on its merits. The court concludes plaintiff violated Rule 11 and sanctions must be imposed. However, this court lacks the information necessary to determine what sanction is appropriate. Defendants are therefore directed to file not later than December 31, 1985 a statement as to what their costs and attorney's fees have been, properly supported by affidavit.

Plaintiff may file a response, including if she wishes a statement concerning her financial ability, no later than January 21, 1986.

If plaintiff wishes to appeal this court's decision denying her motion for summary judgment and granting defendants' motion for summary judgment and sanctions, she must do so by filing a notice of appeal with this court no later than thirty days from the date of this opinion. Her time for filing a notice of appeal is not suspended while this court considers the issue of an appropriate sanction. Exchange Nat. Bank of Chicago v. Daniels, 763 F.2d 286, 291 (7th Cir. 1985). This court will not lose jurisdiction of the sanctions question if plaintiff does appeal. Patzer v. Board of Regents, 763 F.2d 851, 859 (7th Cir. 1985).

IT IS THEREFORE ORDERED that plaintiff's motion for summary judgment is denied, defendants' motion for summary judgment and sanctions is granted, and judgment is entered against plaintiff and in favor of defendants. Defendant shall file a statement of the fees and costs incurred in this action no later than December 31, 1985 and plaintiff shall file any response no later than January 21, 1986.

¹ Neither side has filed the statements required by this court's local rules 12(e) and 12(f) (though defendants' lawyer has filed an affidavit simply stating that all the facts in his brief are true). Nonetheless, the relevant facts are contained in the briefs and are not disputed.

² Plaintiff does have a way to challenge the levy, but her remedies are against the IRS , not Chrysler. See, e.g., 26 C.F.R. §301.6343-1(b)(2) .

³ In dicta the Seventh Circuit has apparently approved of Eastway, though in somwhat guarded language. In re TCI Ltd., 769 F.2d 441, 446 (7th Cir. 1985) ("Rule 11 was amended in 1983 to make it easier for a court to award fees, indeed perhaps to make the award mandatory in some cases"; but compare id. at 448, finding that in refusing to award fees for a "baseless" complaint under the discretionary standard of 28 U.S.C. §1927 the trial judge "came close to the line of abuse [of discretion]"). In the later case of Tarkowski v. County of Lake, 775 F.2d 173 (7th Cir. 1985), the court, without referring to Eastway, seems to say that sanctions are mandatory. See id. at 175 ("Rule 11 requires that sanctions be imposed if a pleading or other filing [violates the Rule]" (emphasis added)). Some other courts have refused to impose sanctions for a Rule 11 violation either because the violator was pro se or the court simply decided in its discretion that sanctions were not warranted. See, e.g., Blume v. Leake [85-2 USTC ¶9514 ], 618 F.Supp. 95, 97 (D. Idaho 1985) (giving a pro se litigant the "benefit of the doubt" but warning that future violations will result in sanctions); Bigalk v. Federal Land Bank Ass'n, 107 F.R.D. 210, 213 (D.Minn. 1985) (refusing sanctions because pro se litigants had not been able to get counsel and "showed that their efforts were sincere"); Baranski v. Serhant, 106 F.R.D. 247, 249-50 (N.D.Ill. 1985) (refusing to sanction a baseless count included due to innocent mistake and interpreting committee notes stating that courts have "discretion to tailor sanctions to the particular facts of the case" meaning that courts have discretion not to impose sanctions at all). However, those cases cannot be squared with the plain language of the Rule. Discretion is exercised in deciding what to award, not whether.

⁴ In Davis v. United States, 104 F.R.D. 509, 512 n.2 (N.D.Ill. 1985), this court followed Suslick v. Rothschild Securities, 741 F.2d 1000, 1007 (7th Cir. 1984), in requiring subjective bad faith before Rule 11 sanctions could be imposed, but opined that Suslick appeared inconsistent with the intent of Rule 11's drafters. In Rodgers v. Lincoln Towing Service, Inc., 771 F.2d 194, 205 (7th Cir. 1985), the court made clear that despite Suslick's quotation of the new version of Rule 11 (see 741 F.2d at 1003 n.3) the Suslick court was interpreting the old version of Rule 11 so no inconsistency was committed. See also Indianapolis Colts v. Mayor & City Council of Baltimore, 775 F.2d 177, 181 (7th Cir. 1985) (noting that the 1983 amendment of Rule 11 "changed the standard for finding a violation of the rule from a subjective to an objective standard").

[88-1 USTC ¶9143] Hans Bothke, Plaintiff-Appellant v. Fluor Engineers & Constructors, Inc., et al., Defendants, and W.J. Terry, Defendant-Appellee

(CA-9), U.S. Court of Appeals, 9th Circuit, 85-6361, 12/16/87 , 834 F2d 804, Affirming an unreported District Court decision

[Code Sec. 6331 --Result unchanged by the Tax Reform Act of 1986]

Levy and distraint: Wrongful levy action: Damages: Immunity of IRS agent: Qualified immunity.--An IRS agent acted in an objectively reasonable manner when she construed a letter that she received from the taxpayer as a general diatribe against the IRS rather than as a request for abatement of the assessment. Further, her conduct with regard to the taxpayer's case did not egregiously violate any of his constitutional rights. Thus, she was entitled to qualified immunity from suit.

Hans Bothke, Orange, Calif., pro se. Roger M. Olsen, Assistant Attorney General, Michael L. Paup, Elaine F. Ferris, Department of Justice, Washington, D.C. 20530, for defendant-appellee.

Before FERGUSON, NELSON and BEEZER, Circuit Judges.

Opinion

NELSON, Circuit Judge:

This case has a protracted administrative and judicial history and is before this court for the third time. Hans Bothke, a pro se plaintiff, brought a Bivens ¹ action alleging that an IRS agent, defendant W.J. Terry, violated his constitutional rights in conjunction with an IRS levy on his wages for nonpayment of taxes allegedly due in 1977. He appeals from the district court's entry of summary judgment against him on the basis of defendant Terry's qualified immunity. We affirm.

A brief description of the applicable statutory provisions is in order. Once the IRS determines that there is a payment deficiency with repect to a taxpayer's income tax return, it is authorized to send a notice of such deficiency to the taxpayer. 26 U.S.C. §6212(a) (1982). ² Within ninety days after the notice is mailed, the taxpayer may file a petition with the United States Tax Court for a redetermination of the deficiency. Id. at §6213(a) . However, if the amount due exceeds the amount reflected on the taxpayer's return merely because of "a mathematical or clerical error appearing on the return," the IRS 's notice to the taxpayer "shall not be considered as a notice of deficiency" entitling the taxpayer to petition the Tax Court for a redetermination. Id. at §6213(b)(1) . ³ Within sixty days after a notice of mathematical or clerical error is sent, the taxpayer may request an abatement of any assessment in the notice, in which event the IRS 's reassessment of the taxpayer's liability is subject to the notice of deficiency procedures provided by §§6212 and 6213(a) . Id. at §6213(b)(2)(A) . The IRS may not commence a levy or court proceeding to collect the assessment during the sixty-day period in which the taxpayer is entitled to request an abatement. Id. at §6213(b)(2)(B) . ⁴

FACTUAL AND PROCEDURAL BACKGROUND

In April, 1978, Bothke filed a timely personal income tax return for the 1977 taxable year. However, on every line except that corresponding to the amount to be refunded, he entered asterisks in lieu of numerical calculations. Bothke entered $1,154.62 as the refund due, which amount corresponded to the amount of taxes withheld by his employer as reflected on the W-2 form submitted with the return. Bothke attached a number of documents to his return, including an affidavit and a memorandum of points and authorities. According to these documents, the IRS had violated Bothke's constitutional right to due process in conjunction with its handling of his income tax return for 1976. Bothke raised numerous constitutional grounds in defense of his refusal to provide more information on his 1977 return, and he claimed that he "had no taxable income pursuant to law and court order in the year of 1977."

The IRS service center in Fresno reviewed Bothke's return, and on March 5, 1979 , sent him a notice of "Correction to Arithmetic." See 26 U.S.C. §6213(g)(2)(D) , quoted supra at note 3. The notice stated that, "based on the information received, [the IRS has] adjusted your return accordingly," and that the balance due from Bothke (after adding penalties and interest and subtracting employer withholdings) was $6,177.87. The notice further stated to "[p]lease let us know if you believe the balance due is incorrect for reasons other than uncredited payments."

Bothke responded on March 15, 1979 , with a four-page "Protest and Objection," in which he complained that the "Correction to Arithmetic" was "not signed, not authenticated, not verified, not trustworthy, nor reliable," unexecuted, without effect, deceptive, in violation of his constitutional right to due process, and failed to apprise Bothke of what information the IRS had relied upon in arriving at the balance due. Bothke also contended that the penalty imposition was unlawful, and he demanded that the IRS answer an attached set of interrogatories within fifteen days or face legal action.

On May 2, 1979 , Fredric Perdue of the Fresno IRS service center sent Bothke a letter which stated that "this is your legal notice that your claim [for $1,154.62] is disallowed." Perdue characterized Bothke's claim as based on Bothke's "view of certain tax laws being unconstitutional" and advised Bothke that he could challenge the IRS 's disallowance of his claim by bringing suit in federal court. On June 6, 1979 , approximately sixty days after the IRS had sent the "Correction to Arithmetic" to Bothke, Mr. S. Espinosa, manager of the IRS taxpayer contact unit in Santa Ana, mailed to Bothke a ten-day notice of the IRS 's intent to levy unless Bothke paid the balance due.

On June 14, 1979 , Bothke wrote to Perdue in Fresno and sent a copy of the correspondence to Espinosa in Santa Ana. Bothke denied Perdue's contention that he was challenging the constitutionality of the tax laws. Bothke stated that his record showed he was "claim[ing] in good faith [his] constitutional right to procedural due process." He objected to Espinosa's letter of June 6 because it did not attest to the validity of the amount claimed due. As soon as the IRS was willing to comply with the law, Bothke wrote, "please schedule a hearing at which we can determine in good faith further steps which should result in the filing of [Bothke's] amended return for the year 1977."

On August 3, 1979 , Bothke's case was turned over to defendant Terry, an IRS revenue officer working in the Santa Ana collection division. She was provided with Bothke's file and a Tax Delinquent Account (TDA), a one-page IRS form showing some history of the case. The file, however, did not include a copy of Bothke's tax return, and Terry requested that Fresno provide her with a copy.

Terry twice submitted a "Recommendation for Nonfiling of Notice of Tax Lien." She wrote that "[b]ecause of the sensitivity of the case, it is in best interest not to file F[ederal] T[ax] L[ien] until extensive research completed on T[ax] P[ayer] claims." According to Terry's notes on the TDA History Record, she "[w]anted to have a copy [of Bothke's return] before seeing T[ax] P[ayer] because of delicacy [blank] of the situation." During this litigation, Terry has testified that she considered this case "sensitiv[e]" because of the volume of correspondence between the IRS and Bothke.

On November 20, 1979 , Terry noted on the TDA History Record that, because of a computer error, she had still not received a copy of Bothke's return. The next day, without having seen the return, she went to Bothke's residence. Bothke was not home, so Terry left her card and a message for him to call her. Bothke telephoned Terry later the same day, and according to Terry's notes on the TDA History Record, she "demanded F[ull] P[ayment]." Bothke responded that "you (the IRS ) violated every one of my rights, you (the IRS ) committed perjury." Terry's notes reflect that Bothke repeated his complaints set forth in his earlier letters to Perdue and Espinosa, that she explained that the taxes needed to be paid, and that "[t]here was nothing more to say."

On November 26, Terry served a wage levy on Bothke's employer, and the levy was executed on November 30 in the amount of $3,415.43. On November 29, one day before the levy was executed, Terry received Bothke's "Objection to Notice of Levy" and accompanying affidavit, which among other things stated that the levy violated Bothke's right to due process because he had not been afforded a notice of deficiency pursuant to 26 U.S.C. §6212(a) .

Bothke resigned from his job to prevent further levies on his wages, then filed an amended 1977 return reflecting dollar amounts rather than asterisks and indicating that a refund was due. When Bothke filed suit against another IRS agent in conjunction with a different levy on Bothke's property, the IRS elected as a policy matter to abate any then-existing assessments and to release its liens with respect to Bothke's 1977 taxes.

In October, 1980, Bothke filed suit against Terry, alleging violations of his statutory and constitutional rights. ⁵ Bothke's complaint alleged that he had never received a notice of deficiency, as required by 26 U.S.C. §§6212 and 6213 , and that Terry had "willfully and knowingly" issued a "spurious" notice of levy on his property. The complaint stated that Terry's actions constituted a "malicious abuse of discretion" and that Terry had acted "in bad faith [and with] bad motive." Bothke alleged that he warned Terry that she was violating his statutory rights, but that Terry thereafter had "unlawfully and maliciously circumvented" Bothke's statutory rights by inducing his employer with the "spurious" levy to deprive Bothke of his property. Bothke further alleged that his employer had "intentionally and maliciously" and recklessly conspired with Terry to deprive Bothke of his property in violation of 26 U.S.C. §6213(a) . As a result of the defendants' conduct, claimed Bothke, he had suffered "emotional distress, embarrassment, humiliation, mental anguish, and loss of peace of mind." Bothke sought $100,000 in compensatory damages and $150,000 in punitive damages from Terry.

1. Bothke I.

On March 22, 1981 , the district court adopted the recommendation of a magistrate and entered summary judgment for Terry on the ground that she was either absolutely or qualifiedly immune because she had acted in subjective good faith. On appeal, this court concluded that Terry was only entitled to qualified immunity and that the district court had failed to assess Terry's objective good faith. Bothke v. Fluor Engineers & Constructors, Inc. [83-2 USTC ¶9556 ], 713 F.2d 1405, 1413 (9th Cir. 1983) (Bothke I ), vacated [84-2 USTC ¶9617 ], 468 U.S. 1201 (1984). We observed that the Supreme Court had recently revised the summary judgment test for qualified immunity, making a government official's objective good faith the only relevant factor. Bothke I, 713 F.2d at 1414 (citing Harlow v. Fitzgerald, 457 U.S. 800, 818 (1982), for the proposition that "government officials are shielded from liability for civil damages insofar as their conduct does not violate clearly established statutory or constitutional rights of which a reasonable person would have known").

According to the court's analysis in Bothke I, Bothke claimed that Terry did not meet Harlow's objective standard because she failed to follow statutory procedures even though Bothke had twice warned her that she was proceeding illegally. Id. at 1414. While Bothke's complaint alleges that the IRS failed to provide him with a notice of deficiency pursuant to 26 U.S.C. §§6212(a) and 6213(a) , the panel accepted arguendo the IRS 's contention that Bothke had only been entitled to a notice of mathematical or clerical error. Id. The panel observed, however, that even under the IRS 's theory of the applicable statutory procedure, Bothke had responded to the "Correction to Arithmetic" well within sixty days, and the IRS had failed to construe his letter of protest as a request for an abatement. Id. The panel also noted that §6213(b)(2) "does not require that the taxpayer put a legal classification on his protest," and concluded that "[i]t seems the IRS proceeded illegally even under its interpretation of the proper procedure to use for [Bothke's] tax return." Id.

Based on the appellate record in Bothke I, it was unclear to the panel what documents other than the TDA had been available to Terry when she levied on Bothke's wages. Id. at 1408, 1415. In remanding to the district court, the panel suggested that if Terry had seen Bothke's March 15 protest letter or was aware of its substance, "it is questionable whether she can meet the objective good faith standard" articulated in Harlow. Id. at 1414-15.

2. Bothke II.

On Terry's appeal to the Supreme Court, Bothke I was vacated and the case was remanded for further consideration in light of Davis v. Scherer, 468 U.S. 183 (1984). Terry v. Bothke [84-2 USTC ¶9617 ], 468 U.S. 1201 (1984). In relevant part, Davis held that "[o]fficials sued for constitutional violations do not lose their qualified immunity merely because their conduct violates some statutory or administrative provision." Davis, 468 U.S. at 194. Thus, the flaw in the reasoning of Bothke I was that the panel examined Terry's qualified immunity in a Bivens action by looking to see if she had violated Bothke's clearly established statutory rights. The inquiry should have focused on whether Terry had violated Bothke's clearly established constitutional rights. Upon the Supreme Court's remand, we in turn remanded to the district court with instructions to dismiss the action "unless . . . Bothke can meet the burden of showing a violation of constitutional rights that were clearly established at the time of the conduct at issue." Bothke v. Fluor Engineers & Contractors, Inc. [84-2 USTC ¶9724 ], 739 F.2d 484 (1984) (Bothke II ).

3. On Remand to the District Court.

On remand, the district court appointed a magistrate who heard testimony and considered exhibits and declarations submitted by the parties. Agent Terry testified that, although she never saw Bothke's return, she believed that there had been a valid assessment and that Bothke had not been entitled to a notice of deficiency. She admitted that she had seen Bothke's March 15 protest letter, as well as his June 14 letter in which he had requested a hearing. However, she thought Bothke's objections were meritless, and she interpreted the March 15 letter as a general protest against the IRS rather than a request for an abatement. Terry proceeded with the levy on the basis of TDA, the "Correction to Arithmetic," and the letters that Bothke had written. She admitted receiving Bothke's "Objection to Notice of Levy" before the levy was executed, and conceded that she could have stopped the levy if she had believed Bothke's objections had merit.

The magistrate first relied on Rutherford v. United States [83-1 USTC ¶9289 ], 702 F.2d 580 (5th Cir. 1983), to conclude that Bothke had a Bivens cause of action, ⁶ then relied on Davis v. Scherer to conclude that Terry was entitled to assert qualified immunity. He noted that Bothke's March 15 protest letter did not expressly request an abatement. Given "the unfocused nature" of Bothke's letter and "the absence of any case law or statute that established that an IRS agent must treat a 'protest' letter as a request for abatement," the magistrate found that Terry "was acting reasonably and well within her discretionary authority" and "was not violating any clearly established constitutional right when she failed to treat the letter as a request for abatement."

The district court adopted the magistrate's findings and conclusions of law and entered summary judgment in favor of Terry.

STANDARD OF REVIEW

This court reviews de novo the district court's dismissal of a Bivens action on the ground that the defendant has qualified immunity. Chilicky v. Schweiker, 796 F.2d 1131, 1137 (9th Cir. 1986), cert. granted, 108 S.Ct. 64 (1987); Augustine v. McDonald, 770 F.2d 1442, 1445 (9th Cir. 1985). We must determine "whether there is a genuine issue of material fact, and, if not, whether the moving party is entitled to judgment as a matter of law." Simon v. United States [85-1 USTC ¶9371 ], 756 F.2d 696, 697 (9th Cir. 1985). We may affirm on any basis in the record. DeNardo v. Murphy, 781 F.2d 1345, 1347 (9th Cir.), cert. denied, 106 S.Ct. 1962 (1986).

DISCUSSION

1. The Bivens Issue.

We expressly decline to consider whether Bothke has stated a Bivens cause of action. We have jurisdiction, may affirm on any basis in the record, and Terry's qualified immunity disposes of Bothke's claims in their entirety. See Augustine, 770 F.2d at 1445 & n.2 (assuming arguendo that plaintiff stated a Bivens claim and affirming district court's entry of summary judgment on basis of defendants' qualified immunity).

We think the concurring opinion construes Bothke's pro se complaint much too strictly, ⁷ and misinterprets the nature of Bothke's action. Bothke is not claiming a constitutional right to a pre-levy hearing. ⁸ Bothke's claim is that he twice warned Terry that she was proceeding illegally, but that she nonetheless "unlawfully and maliciously circumvented" his statutory right to a pre-levy hearing "in bad faith [and with] bad motive" by serving a "spurious" levy and inducing his employer to deprive Bothke of his property. It is clear from both the complaint and the lengthy record ⁹ that Bothke has been proceeding in this litigation under the theory that Terry intentionally and maliciously bypassed his statutory right to a pre-levy hearing. To now dispense with Bothke's complaint on the ground that he "has no constitutional right to a pre-levy hearing" is to ignore the substance of his allegations--allegations that we are compelled to construe liberally.

In contrast to the concurrence's position, the previous courts to consider this case have apparently concluded that Bothke's complaint raises the issue of Terry's subjective good faith. In Bothke I, the court observed that the district court's decision below "reflect[ed] a determination that Terry acted with subjective good faith." Bothke I, 713 F.2d at 1413. It also concluded that "[t]he district court's findings of [Terry's] subjective good faith survives the clearly erroneous test." Id. at 1415 n.5. The problem of course is that, on Terry's motion for summary judgment, the district court was not entitled to make findings of fact, and the panel in Bothke I erred in applying the "clearly erroneous" test of Fed.R.Civ.P. 52(a) to the district court's entry of summary judgment pursuant to Fed.R. Civ. P. 56. ¹⁰

At this stage of the proceedings, we think there is little to be gained by parsing Bothke's complaint to determine if he has set forth allegations sufficient to withstand a motion for failure to state a claim. By addressing the qualified immunity issue, we can dispose of this case without addressing Bothke's allegations of Terry's subjective intentions, and we can focus instead on the objective reasonableness of her actual conduct. We need not reach the sufficiency of Bothke's complaint to resolve this case, and we choose not to. ¹¹

2. Terry's Right to Assert Qualified Immunity.

Our task in assessing Terry's right to assert qualified immunity in this case is well-defined. Her discretionary acts as an IRS revenue officer are "shielded from liability for civil damages insofar as [her] conduct does not violate clearly established . . . constitutional rights of which a reasonable person would have known." Harlow, 457 U.S. at 818. Terry does not lose her qualified immunity in this Bivens action merely because her failure to construe Bothke's March 15 protest letter as a request for abatement may have violated Bothke's statutory rights under 26 U.S.C. §6213(b) . Davis v. Scherer, 468 U.S. at 194.

While Bothke's complaint casts aspersions on Terry's motivations, our analysis of Terry's right to assert qualified immunity focuses on "the objective reasonableness of [her] conduct." Harlow, 457 U.S. at 818. Her "subjective beliefs" about the lawfulness of her conduct are "irrelevant." Anderson v. Creighton, 107 S. Ct. 3034, 3040 (1987). "[A]s long as [Terry's] actions could reasonably have been thought consistent with the rights they are alleged to have violated," Terry is immune from civil damages liability. Id. at 3038. Moreover, the constitutional rights allegedly violated must have been " 'clearly established' " in a "particularized" sense. Id. at 3039. "The contours of the right must be sufficiently clear that a reasonable official would understand that what he is doing violates that right." Id.

Bothke does not have a constitutional right to a pre-levy hearing. See Phillips v. Commissioner [2 USTC ¶743 ], 283 U.S. 589, 593-601 (1931). However, a line of cases dating back to at least 1979 suggests that Bothke does have a constitutional right not to be subject to abusive tax collection practices. See, e.g., Hall v. United States [83-1 USTC ¶9345 ], 704 F.2d 246, 249 n.1 (6th Cir.), cert. denied, 464 U.S. 1002 (1983); Rutherford, 702 F.2d at 584; Seibert v. Baptist, 599 F.2d 743 (5th Cir. 1979), reversing on rehearing 594 F.2d 423 (5th Cir. 1979), cert. denied, 446 U.S. 918 (1980). But even in 1983, some four years after the events at issue in this case, the specific contours as well as the nature of that right were far from settled. In Rutherford, the case relied upon by the magistrate below, the plaintiffs alleged that the IRS agent engaged in intentional acts of misconduct and harassment far more egregious than those alleged by Bothke. The Fifth Circuit, however, was unwillng sua sponte to hold that plaintiffs had stated a Bivens claim for abusive tax practices. Rather, the court remanded the case to the district court for a determination "whether the substantive aspects of the due process clause actually does create in taxpayers a liberty interest in freedom from abusive behavior of the kind, degree and effect as that attributed to [the defendant tax agent.]" Rutherford, 702 F.2d at 584.

For the purposes of this discussion, we give Bothke the benefit of the doubt. We assume arguendo that in 1979 Bothke had a clearly established constitutional right not to be subjected to abusive tax practices so egregious that they would violate his constitutionally protected "liberty" interests. We further assume arguendo that his complaint alleges facts amounting to what was a clearly established abusive tax practice in 1979.

In addressing the qualified immunity issue, the court below, as have the parties in their briefs, focused on whether it was objectively reasonable for Terry to construe Bothke's March 15 letter as a general protest against the IRS rather than as a request for abatement. While our focus is the same, we do not believe that Terry's right to assert qualified immunity necessarily requires a finding that her conduct was objectively reasonable. If Bothke had a clearly established constitutional right to have his March 15 letter construed as a request for abatement, then Terry's right to assert qualified immunity would depend on the objective reasonableness of Terry's failure to so interpret the letter. However, Bothke has no such constitutional right. If he has a constitutional claim at all, it is a Rutherford claim to be free from conduct by IRS agents that is so egregious that it deprives him of a constitutionally protected "liberty" interest. Thus, even if it was objectively unreasonable for Terry not to construe Bothke's letter as a request for abatement, that does not mean that her conduct was so egregious as to violate Bothke's constitutional rights.

Bothke's tax return was processed in Fresno, and Terry had nothing to do with the determination that Bothke was entitled to only a "Correction to Arithmetic" rather than a notice of deficiency. Terry read Bothke's March 15 protest letter, but the objections Bothke raised in the letter were in large part frivolous. He devoted numerous paragraphs to the contention that his constitutional rights had been violated because the "Correction to Arithmetic" had not been signed by an IRS official. Bothke argued that the document was "void" because "some figures show no dollar mark." Bothke contended that the penalty assessment in the "Correction to Arithmetic" constituted an impermissible sanction on his constitutional rights. However, given the frivolous nature of Bothke's constitutional claims in the March 15 letter and his other correspondence, it was not unreasonable for Terry to disregard his contentions. See Edwards v. Commissioner [82-2 USTC ¶9472 ], 680 F.2d 1268, 1271 n.1 (9th Cir. 1982) (the taxpayer's assertion of misguided constitutional objections does not protect a taxpayer from liability for statutory penalties for failure to file a meaningful tax return).

Nor did Bothke do anything to clarify matters in his subsequent communications with Terry. In his phone conversation with Terry on November 21, he only repeated his generalized complaints that the IRS was committing perjury and violating his rights. In his "Objection to Notice of Levy," received by Terry on November 29, Bothke contended that the levy was unlawful because he had not been served with a notice of deficiency. Terry, however, had no reason to believe that Bothke was entitled to such a notice, for the Fresno IRS center had concluded that Bothke was only entitled to a "Correction to Arithmetic." Moreover, the remainder of Bothke's objections were frivolous.

Terry discussed Bothke's objections and showed Bothke's correspondence to her superiors, and they concluded that Bothke's objections were without merit. ¹² Bothke's complaints in his March 15 letter are for the most part unfocused, frivolous, and so generalized as to be meaningless. He failed to clarify his specific objections when Terry contacted him. His correspondence reflects a combative and litigious attitude hardly calculated to advance his dispute with the IRS toward a rational resolution. Given these factors, we do not think that Terry was objectively unreasonable in construing Bothke's March 15 protest as a general diatribe directed at the tax system rather than as a request for abatement. Her conduct was certainly not egregious. Terry is entitled to assert qualified immunity.

CONCLUSION

For the foregoing reasons, the district court's entry of summary judgment in favor of defendant Terry is affirmed.

¹ See Bivens v. Six Unknown Named Agents, 403 U.S. 388 (1971).

² References herein to Title 26 are to the Internal Revenue Code of 1954, as amended and in effect in 1979, the year in which the events relevant to this action occurred.

³ The term "mathematical or clerical error" is defined to include "an omission of information which is required to be supplied on the return to substantiate an entry on the return." Id. at §6213(g)(2)(D) .

⁴ Additionally, the IRS is statutorily authorized to levy on a taxpayer's property to collect an assessment only if the taxpayer is liable for the tax and the IRS has given the taxpayer notice of its intention to levy no less than ten days before the levy. Id. at §6331(a) .

⁵ Bothke also named his former employer and two of its employees as defendants, but all three parties were dismissed from the action almost immediately.

⁶ In Rutherford, the taxpayers alleged that an IRS agent had willfully and maliciously harassed them with unreasonable demands for documentation, had assessed them with unjustified tax assessments, and had issued an audit report that resulted in an erroneous deficiency assessment of over $30,000. The plaintiffs alleged that the IRS agent's conduct caused them severe mental anguish and forced them to sue for a refund. Rutherford, 702 F.2d at 581-82. The Fifth Circuit acknowledged that the existence of post-deprivation remedies generally satisfies the constitutional requirements of due process for deprivation of property. However, Rutherford construed the plaintiffs' complaint as one seeking damage for the mental anguish and grief that the IRS agent had intentionally caused them and as thus alleging deprivation of "a liberty interest derived from and protected by the substantive aspects of the due process clause." Id. at 583. Because "statutory mechanisms for refund make no allowance for mental anguish caused by harassment," and because no other judicial or administrative remedies appeared to satisfy the plaintiffs' right to due process with respect to the alleged violation of their constitutional rights, the Fifth Circuit suggested that the plaintiffs might have a Bivens action. Id. at 584. Relying on Rutherford, the magistrate concluded that Bothke had a Bivens action because his claim was based on the Terry's conduct in levying on his wages and failing to treat his protest letter as a request for abatement.

⁷ "The allegations of a pro se complaint will be construed liberally." King v. California, 784 F.2d 910, 912 (9th Cir. 1986), cert. denied, 108 S.Ct. 47 (1987).

Seven years after Bothke's complaint was filed, and after this court has just put the parties through over four years of litigating the qualified immunity issue, the concurring opinion now chooses to address the technical merits of Bothke's complaint. In support of its approach, the concurrence incorrectly claims that the district court below "held that Bothke stated a Bivens cause of action." Concurring Opinion at 5. Neither the magistrate nor the district court ever addressed the adequacy of Bothke's complaint. Rather, based on their view of the evidentiary record, they concluded that Bothke's Bivens action withstood a motion for summary judgment. Nothing in the record suggests that Terry challenged the sufficiency of Bothke's complaint below, and she has not raised the issue on this appeal. Thus, Bothke has received no notice that the adequacy of his complaint might be passed upon in this appeal.

In subjecting the complaint to a meticulous grammatical dissection, the concurrence appears to acknowledge that Bothke was attempting to plead an abusive tax practice and even concedes that Bothke "might have pleaded abuse by Terry" by rearranging his allegations. Id. at 8 n.3. Nonetheless, the concurrence would apparently not afford Bothke an opportunity to amend. We find the approach to be unduly harsh, particularly in light of Bothke's pro se status and the long history of this case.

⁸ In Bothke I, the panel devoted a footnote to Terry's claim that Bothke's complaint failed to state a Bivens action. Bothke I, 713 F.2d at 1405 n.7. The court observed that "[s]ummary collection procedures have been upheld against due process arguments where the taxpayer had a opportunity for a post-seizure notice and hearing." Id. The court noted, however, that Bothke's complaint was not an attack the IRS 's procedures, but rather was attack on Terry's "acts which allegedly bypassed statutory procedural safeguards." Id.

The court's comment in Bothke I must be read with caution. While the remainder of the opinion is devoted to an incorrect analysis of the qualified immunity issue, footnote 7 is addressed only to the sufficiency of Bothke's complaint. The verb "bypass" denotes intentional action. Liberally construed, Bothke's complaint alleges that Terry acted intentionally, maliciously, and in bad faith to deprive him of his statutory and constitutional rights. We do not read footnote 7 in Bothke I to suggest that a plaintiff has a Bivens action simply because an IRS agent in good faith neglects to follow statutory procedures.

⁹ As observed by Terry's counsel at the summary judgment hearing below, Terry "has been subjected to outrageous remarks in the pleadings against her" and "has been accused of perjury, or conspiracy, for four and a half years."

¹⁰ This case provides a good example of why the Supreme Court has adopted a purely objective test for the availability of qualified immunity. Prior to Harlow, qualified or "good faith" immunity had both an "objective" and "subjective" aspect, with the "subjective component refer[ring] to 'permissible intentions.' " Harlow, 457 U.S. at 815 (quoting Wood v. Strickland, 420 U.S. 308, 322 (1975)). Harlow acknowledged, however, that the subjective component of the test had "proved incompatible" with the policy that insubstantial claims against government officials should not proceed to trial. Id. at 815-16. Some courts have regarded an official's subjective good faith to be a "question of fact . . . inherently requiring resolution by a jury" and thus an inappropriate issue for summary judgment. Id. at 816. In Harlow, the Supreme Court reasoned that "bare allegations of malice should not suffice to subject government officials" to the burdens of trial or extended discovery, id. at 816-17, and concluded that the issue of qualified immunity should turn only on "the objective reasonableness of an official's conduct," id. at 818.

¹¹ For a number of reasons, not the least of which are (1) the apparent discrepancies between Bothke's allegations and the actual facts, (2) the confusion engendered in the complaint and the record by Bothke's miscomprehension of statutory procedures of the tax code, and (3) Bothke's own culpability in this unfortunate episode, the majority does not find this case to be a satisfactory vehicle for charting the parameters of substantive due process and the availability of Bivens actions in the context of alleged abuses by IRS agents.

¹² Terry also saw Bothke's letter of June 14, 1979 , in which Bothke repeated his allegations that the IRS was violating his constitutional rights and requested a hearing with the IRS . However, Bothke did not request an abatement, and in any event, his June 14 letter was not mailed within the sixty-day period for making such a request. See 26 U.S.C. §6213(b)(2)(A) (1982). Moreover, an IRS hearing was not the process due Bothke under any interpretation of the relevant statutory provisions.

Concurring Opinion

BEEZER, Circuit Judge

Taxpayer Bothke brought this Bivens ¹ action against Revenue Agent Terry for damages due to Terry's allegedly wrongful levy on Bothke's wages. Bothke claims that Terry violated due process when she levied on Bothke's wages without first affording him a hearing on his tax liability. The district court held that Bothke stated a cause of action for constitutional violations, but that Terry acted within the scope of her qualified immunity. The court granted summary judgment for Terry.

Because Bothke has no constitutional right to a pre-levy hearing, I concur in the judgment on the basis that Bothke does not state a cause of action under Bivens. Accordingly, I would vacate the judgment and remand with instructions to dismiss the action for failure to state a claim upon which relief can be granted.

I

Bothke filed a timely tax return for 1977 claiming a refund for taxes withheld during that year. On March 5, 1979 the IRS sent Bothke a notice of "Correction to Arithmetic" stating that Bothke owed taxes based on the W-2 form attached to his return. The notice also advised Bothke to "[p]lease let us know if you believe the balance due is incorrect for reasons other than uncredited payments."

Bothke promptly mailed a letter protesting the notice on various grounds. The IRS subsequently notified Bothke that his refund claim had been denied and that his wages would be subject to levy unless he either paid his delinquent tax or contacted the IRS within 10 days.

Terry contacted Bothke in November of 1979. Bothke repeated allegations that the IRS had violated his rights. Terry demanded full payment and told Bothke he could expect further action. Two days later, Terry served a Notice of Levy on Fluor Engineers (Bothke's employer). Fluor paid the IRS approximately half of Bothke's delinquent tax. Bothke terminated his employment with Fluor in order to avoid further levies. Bothke sued Terry and others, claiming violation of his federal constitutional and statutory rights. All defendants other than Terry were dismissed.

Taxpayers who receive notices of correction to their arithmetic may request an abatement of enforcement proceedings. 26 U.S.C. §6213(b)(2) . ² Requests for abatement permit the taxpayer to avail himself of deficiency procedures, including inter alia an opportunity for redetermination of tax liability by the Tax Court before collection of delinquent taxes.

Bothke claims that Terry's failure to regard his protest letter as a request for abatement deprived him of process that was due under the Fifth Amendment and of his rights under 26 U.S.C. §6213 . He seeks $100,000 for compensatory and $150,000 in punitive damages.

The extended procedural history of this case may be summarized as follows:

1. Initial Adjudication In The District Court

The magistrate recommended that summary judgment be granted for Terry on the basis of either qualified or absolute immunity. The district court adopted the magistrate's recommendation and directed that judgment be entered for Terry.

2. Prior Appeal

This Court affirmed in a memorandum disposition. No. 81-5457 (January 24, 1983). Subsequently, the panel withdrew the memorandum, held that Terry was entitled only to qualified immunity, and vacated the portion of the judgment based on absolute immunity. Bothke v. Fluor Engineers and Constructors, Inc. [83-2 USTC ¶9556 ], 713 F.2d 1405 (9th Cir. 1983) (Bothke I). Bothke I suggested, but did not hold, that Bothke stated a cause of action for "acts which allegedly bypassed statutory procedural safeguards . . . ." See Bothke I, 713 F.2d at 1415, n.7.

The Supreme Court granted certiorari, vacated the judgment, and remanded for further consideration in light of Davis v. Scherer, 468 U.S. 183 (1984). Terry v. Bothke [84-2 USTC ¶9617 ], 468 U.S. 1201 (1984). Davis states that, in order to prevail against a defense of qualified immunity, plaintiffs must show that government officials violated rights which were clearly established at the time of the conduct at issue. Davis, 468 U.S. at 197.

This Court remanded the case to the district court with instructions to dismiss the action "[u]nless . . . Bothke can meet the burden of showing a violation of constitutional rights that were clearly established at the time of the conduct at issue . . . ." Bothke v. Fluor Engineers and Constructors, Inc. [84-2 USTC ¶9724 ], 739 F.2d 484 (9th Cir. 1984) (Bothke II).

3. Further Proceedings

The magistrate determined that Bothke stated a Bivens cause of action under the Fifth Amendment, but that Bothke's right to have the IRS treat his protest letter as a request for abatement was not clearly established as required by Davis. Given the absence of any precedent requiring IRS agents to treat protest letters as requests for abatement, the magistrate concluded that Terry acted "well within her discretionary authority when she decided to follow through with the levy on [Bothke's] salary."

The district court adopted the magistrate's findings and recommendations and directed entry of summary judgment for Terry. Bothke appeals.

II

The district court had jurisdiction under the general federal question statute, 28 U.S.C. §1331. See Bivens v. Six Unknown Agents, 403 U.S. 388, 398-99 (1971) (concurring opinion). Summary judgment disposed of all of Bothke's claims against Terry, the only remaining defendant. This Court has jurisdiction under 28 U.S.C. §1291 .

III

The district court held that Bothke stated a Bivens cause of action for Fifth Amendment violations. The existence of a cause of action is a question of law, which this Court reviews de novo. See United States v. McConney, 728 F.2d 1195, 1201 (9th Cir.) (en banc), cert. denied, 469 U.S. 824 (1984).

A. Bivens Cause of Action

Under certain circumstances, federal courts may award damages for constitutional violations, despite the absence of any common law or statutory cause of action.

The federal courts' statutory jurisdiction to decide federal questions confers adequate power to award damages to the victim of a constitutional violation. When Congress provides an alternative remedy, it may, of course, indicate its intent, by statutory language, by clear legislative history, or perhaps even by the statutory remedy itself, that the courts' power should not be exercised. In the absence of such a congressional directive, the federal courts must make the kind of remedial determination that is appropriate for a common-law tribunal, paying particular heed, however, to any special factors counselling hesitation before authorizing a new kind of federal litigation.

Bush v. Lucas, 462 U.S. 367, 378 (1983). The Supreme Court has approved a damages remedy for deprivations of due process under the Fifth Amendment. See Davis v. Passman, 442 U.S. 228 (1979).

Bivens actions lie only for violations of rights secured by the Constitution. See Bivens, 403 U.S. at 396-97. The due process clause of the Fifth Amendment protects both substantive and procedural rights, either of which may serve as a foundation for Bivens actions.

For purposes of the following discussion, I assume that Terry violated 26 U.S.C. §6213(b)(2) when she levied on Bothke's wages before Bothke obtained a hearing before the Tax Court. Because Bothke has no constitutional right to a pre-levy hearing, his complaint does not state a Bivens cause of action for Fifth Amendment violations.

1. Substantive Due Process

The Fifth Amendment protects taxpayers' substantive right to be free of abusive tax collection practices. See e.g. Hall v. United States [83-1 USTC ¶9345 ], 704 F.2d 246 (6th Cir. 1983); Rutherford v. United States [83-1 USTC ¶9289 ], 702 F.2d 580 (5th Cir. 1983) (claim for malicious prosecution, harassment and mental anguish); Seibert v. Baptist, 599 F.2d 743 (5th Cir. 1979) (taxpayer sought damages for malicious prosecution, harassment, unlawful seizure of property, mental anguish, and deprivation of due process and equal protection; see Seibert v. Baptist, 594 F.2d 422, 427 (5th Cir. 1979).

Concluding that Bothke claimed a constitutional violation, the magistrate and district court relied on Rutherford v. United States [83-1 USTC ¶9289 ], 702 F.2d 580 (5th Cir. 1983). The magistrate considered Rutherford "quite similar" to this case. I disagree.

In that case, the Rutherfords alleged that a revenue agent invented additional gross income, intentionally assessed tax twice on the same income, repeatedly demanded useless documentation, accused the taxpayers of hiding money and even demanded, on one occasion, that Rutherford empty his pockets of money. Rutherford, 702 F.2d at 581. Finally, "in the 'coup de grace,' [the agent] arranged for his audit report to be delivered to the Rutherfords' home at 4:30 p.m. on Christmas Eve." Id.

The court found that the Rutherfords had stated a claim for violation of "a liberty interest derived from and protected by the substantive aspects of the due process clause"; the court suggested that a Bivens action for damages would be the appropriate remedy for abusive and malicious tax collection practices. Id. at 583-84.

Bothke alleges that Terry was guilty of a "malicious abuse of process" in serving a "spurious document" (the levy). The only basis for Bothke's characterization of Terry's conduct as wrongful is that the levy was "spurious." The reason the levy was spurious was that Bothke had not been afforded a hearing on his tax liability. However, the IRS ' failure to comply with the statutory process of §6213 is not per se abusive behavior. Even assuming that the IRS should have construed Bothke's protest letter as a request for abatement, nothing in Bothke's complaint suggests that the IRS did so deliberately and with intent to harass Bothke. ³

This case closely resembles Zernial v. United States [83-1 USTC ¶9579], 714 F.2d 431 (5th Cir. 1983). In Zernial the taxpayer claimed that revenue agents violated due process when they levied on wages without first providing a notice of deficiency and the opportunity for a hearing on tax liability. The court held that the taxpayer failed to state a claim upon which relief could be granted: "[the taxpayer] has not suggested that there was any abusive behavior by any of the defendants, so this case is clearly distinguishable from Rutherford. The only constitutional claim raised here is one of procedural due process." Id. at 435.

Similarly, Bothke alleges violation of procedural, not substantive, due process. Rutherford is inapposite. Substantive due process does not furnish a basis upon which Bothke may found his Bivens action.

2. Procedural Due Process

The statutory provision for a refund suit (26 U.S.C. §7422 ) satisfies procedural due process, Bob Jones University v. Simon [74-1 USTC ¶9438 ], 416 U.S. 725, 746-47 (1974), unless "irreparable injury may result" if the taxpayer is not afforded a preenforcement hearing. Commissioner v. Shapiro [76-1 USTC ¶9266 ], 424 U.S. 614, 629 (1976). Bothke suffered no irreparable harm when the IRS denied him a pre-levy hearing.

The statute, 26 U.S.C. §6213(b)(2) , allows for a preenforcement hearing upon a taxpayer's request for abatement. However, Congress's decision to afford more than due process for taxpayers does not automatically convert statutory process into constitutional due process. Zernial, 714 F.2d at 435; see Laing v. United States [76-1 USTC ¶9164 ], 423 U.S. 161, 206 (1976) (Blackmun, J., dissenting on other grounds).

Bothke had no constitutional right to a pre-levy hearing on his tax liability. Like the taxpayer's complaint in Zernial, Bothke's complaint "demonstrates on its face that he received all of the process to which he was entitled." Zernial, 714 F.2d at 435. Accordingly, Bothke has no constitutional basis for a Bivens action. Id.

B. Implied Cause of Action Under 26 U.S.C. §6213

The Supreme Court has articulated the standard for determining whether a cause of action may be implied from a statute.

[T]he fact that a federal statute has been violated and some person harmed does not automatically give rise to a private cause of action in favor of that person. Instead, our task is limited solely to whether Congress intended to create the private right of action.

Touche Ross & Co. v. Redington, 442 U.S. 560, 568 (1979) (citations omitted). Neither the language nor the legislative history of 26 U.S.C. §6213(b) suggests Congress intended that section to form the basis for private damage actions against the government or government employees. See generally H.R. Rep. 658, 94th Cong., 2d Sess. at 288-92, reprinted in 1976 U.S. Code Cong. & Admin. News 2897, 3184-88; S. Rep. 938, 94th Cong., 2d Sess. at 374-78, reprinted in 1976 U.S. Code Cong. & Admin. News 3439, 3803-3807. Bothke does not have an implied cause of action under 26 U.S.C. §6213 .

Bothke states no cause of action either under 26 U.S.C. §6213 or under Bivens for Fifth Amendment violations. I would vacate the judgment and remand with instructions to dismiss the action for failure to state a claim upon which relief can be granted.

¹ See Bivens v. Six Unknown Named Agents of Federal Bureau of Narcotics, 403 U.S. 388 (1971).

² "(A) . . . [U]pon receipt of [a request for abatement], the Secretary shall abate the assessment. Any reassessment of the tax with respect to which an abatement is made . . . shall be subject to the deficiency procedures prescribed by this subchapter. (B) [N]o levy or proceeding in court for the collection of such assessment shall be made, begun, or prosecuted during the period in which such assessment may be abated."

³ The broadest allegations in Bothke's complaint are the following:

FIRST CAUSE OF ACTION

* * *

25. By reason of these premises defendant Terry willfully and knowingly issued, executed and delivered a spurious document purporting to have legal force and effect and alleging to be a valid "Notice of Levy" on plaintiff's property, which constitutes a malicious abuse of process under color of federal common law.

26. By reason of these premises it is not within the purview of defendant Terry's duties and responsibilities as an acting group manager for the Internal Revenue Service to violate the Internal Revenue law, specifically Section 6213 , nor to deny plaintiff the protection of the Internal Revenue Law more specifically Section 6213 , and such actions by the defendant Terry constitute a deprivation of plaintiff's rights, privileges and immunities guaranteed under the federal Constitution, and constitute an action in bad faith, bad motive not authorized by law.

SECOND CAUSE OF ACTION

* * *

18. By reason of these premises, defendant Terry, by issuing, executing and delivering the spurious alleged Notice of Levy to the defendant Myers, as stated in the First Cause of Action in Paragraph 11, unlawfully and maliciously circumvented the Statutory Procedure of the Revenue Law . . . .

Allegation 25 does not suggest that Terry knew the document was "spurious", in violation of Bothke's statutory right to a hearing; allegation 25 only suggests that Terry knew she was delivering the document. That Terry's action "constitutes a malicious abuse of process" is a conclusion, not a pleading of fact.

Allegation 26 compounds different thoughts with the result that it does not suggest Terry acted abusively. Bothke connects Terry's failure to heed section 6213 with her "bad faith, bad motive not authorized by law." If Bothke had severed the second thought from the first he might have pleaded abuse by Terry; for example, Bothke simply might have said, 'Terry acted in bad faith.' As it is, however, Bothke compounds the two thoughts. That Terry's failure to heed section 6213 "constitute[s] an action in bad faith" is not a pleading of fact, but a conclusion that does not follow from the predicate.

Similarly, allegation 18 compounds different thoughts. That Terry "unlawfully and maliciously circumvented" the law "by . . . delivering the spurious alleged Notice of Levy" is another conclusion that does not follow from the predicate.

Bothke's other allegations do not suggest that Terry acted abusively. For instance, the complaint recounts objections Bothke made to Terry after she issued the notice of levy. The gist of these objections is that "[t]he arbitrary issuance of form 668-W constitutes a denial of my (plaintiff's) legal remedies which are guaranteed by the Fifth amendment [sic] to the United States Constitution."

84-2 USTC ¶9617]W. J. Terry v. Hans Bothke

Supreme Court of the United States, No. 83-1506, 104 SCt 3566, 468 US 1201, 7/2/84 , Vacating and remanding CA-9, 83-2 USTC ¶9556

[Code Sec. 6331]

Levy and distraint: Damages: Wrongful levy: Agent's immunity.--A taxpayer's motion for damages from an IRS agent who allegedly made a wrongful levy of the taxpayer's wages was denied. The U. S. Supreme Court vacated the Ninth Circuit Court of Appeals' judgment that the agent did not qualify for absolute immunity, and remanded the case to the appellate court for further consideration in light of the Supreme Court's recent decision in Davis v. Scherer (468 U. S. -- (1984)).

Hans Bothke, 400 S. Flower, Orange, Calif. 92668, pro per. Rex E. Lee, Solicitor General, Department of Justice, Washington, D. C. 20530, for petitioner.

The motion of respondent for damages is denied. The petition for a writ of certiorari is granted. The judgment is vacated and the case is remanded to the United States Court of Appeals for the Ninth Circuit for further consideration in light of Davis v. Scherer, 468 U. S. -- (1984).

73-2 USTC ¶9752]Robert Osborn, Individually and On Behalf of All Others Similarly Situated, Plaintiff v. George P. Shultz., Secretary of the United States Treasury and Donald C. Alexander, Commissioner of the United States Internal Revenue Service, Defendants

U. S. District Court, West. Dist. of N. Y., Civil 1973-444, 10/19/73

[Code Secs. 6335 and 7421]

Suit to enjoin collection of tax: Three-judge panel: Class action: Declaratory judgment.--An action for injunctive and declaratory relief and for damages arising from alleged deprivation of taxpayer's constitutional rights, which was accompanied by a request for a three-judge panel and an order permitting a class action, was denied. A taxpayer may not challenge the expenditure of funds by the government in furtherance of war. No suit to restrain the assessment or collection of tax may be maintained unless it is shown that the U. S. cannot establish its claim and the taxpayer will suffer irreparable injury if collection is effected. Declaratory judgments in tax cases are forbidden. Further, no suit for damages may be maintained against the U. S. for a claim arising out of the assessment or collection of any tax.

John M. LeFevre, David C. Leven, 570 Jefferson Ave., Rochester, N. Y., for plaintiff. John T. Elfvin, United States Attorney, Gerald Houlihan, Assistant United States Attorney, J. Brian Ferrel, Department of Justice, Washington, D. C. 20530, for defendants.

BURKE, District Judge:

The complaint herein was filed September 12, 1973. The plaintiffs seek injunctive and declaratory relief and damages arising from the alleged deprivation of plaintiffs' rights under the Constitution of the United States. It also asks that this court request the convening of a three judge court pursuant to Title 28, U. S. C. Sections 2282 and 2284. It also asks that this action be deemed to be a class action brought on his own behalf and on behalf of all other persons similarly situated, viz. and persons and taxpayers who allegedly owe or who may in the future allegedly owe federal taxes and whose personal property has been or will be subject to a levy and distraint without notice and an opportunity for a prior hearing pursuant to Title 26, U. S. C. Section 6331(a). By notice of motion filed September 12, 1973 the plaintiff moved for a temporary restraining order, an order convening a statutory court of three judges and an order permitting a class action. By motion filed September 24, 1973 the government moved to dismiss the complaint. The motions came on for argument on September 24, 1973 and were submitted on written briefs.

Findings of Fact

1. Robert Osborn is a taxpayer.

2. In 1973 he filed his federal income tax return for the tax year 1972. He enclosed with his return a letter stating his objections to the imposition of the tax. After receiving a notice of tax due he sent another letter in which he indicated that he would pay the amount due as soon as he was assured that the amount was correct and that the other grievances mentioned in his previous letter had been properly remedied. A copy of the letter is attached to the complaint.

3. On or about August 28, 1973 shortly after plaintiff had an interview in the Internal Revenue Office in Rochester, New York, his automobile was removed from its parking space without his knowledge or consent. His automobile was seized by employees or agents of the United States Internal Revenue Service acting pursuant to Title 26 U. S. C. Section 3331(a)(b), and with the knowledge of the defendants Schultz and Alexander.

4. Plaintiff was not given notice or an opportunity for a hearing prior to said seizure.

5. Plaintiff claims that the seizure of his automobile under such circumstances constitutes a deprivation of property without due process in violation of the Fifth Amendment of the Constitution of the United States.

Conclusions of Law

1. This court declines to consider the action as a class action.

2. This court declines to request the convening of a three judge court. Trent v. United States [71-1 USTC ¶15,995], 442 F. 2d 405.

3. The plaintiff may not challenge the expenditure of funds by the government in furtherance of war. Pietsch v. President of the United States [70-2 USTC ¶9718], 434 F. 2d 861 (2 Cir. 1970) (Cert. den. 403 U. S. 926).

4. No suit to restrain the assessment or collection of a tax may be maintained. Enochs v. Williams Packing Co. [62-2 USTC ¶9545], 370 U. S. 1.

5. Declaratory judgments in tax cases are forbidden by 28 U. S. C. Section 2201. United States v. Teitelbaum [65-1 USTC ¶9235], 345 F. 2d 672 (Cert. den. 382 U. S. 831).

6. No suit for damages may be maintained against the United States for a claim arising out of the assessment or collection of any tax. Pargament v. Fitzgerald [67-2 USTC ¶9524], 272 F. Sup. 553, 556. (Aff'd [68-1 USTC ¶9301] 391 F. 2d 934) (2 cir. 1968).

7. Plaintiffs' motions are in all respects denied. The government's motion to dismiss the complaint is granted.