Opinion
CIVIL ACTION NO. 98-2515 (JEI).
March 1, 1999.
BLANK ROME COMISKY MCCAULEY LLP, By: William C. Mead, Jr., Cherry Hill, New Jersey, Counsel for Plaintiff Gerald Shreiber.
UNITED STATES DEPARTMENT OF JUSTICE, By: R. Scott Clarke, Trial Attorney, Tax Division, Washington, D.C., Counsel for Defendants.
OPINION
Presently before this Court is a motion for summary judgment filed by the defendants, Robert Mastrogiovanni and the Internal Revenue Service, as to the claims of the plaintiff, Gerald B. Shreiber. The plaintiff alleges that during an Internal Revenue Service audit of his income taxes, the defendants, acting under the color of federal law, violated his constitutional rights. In making this motion for summary judgment, the defendants appear willing to accept the allegations of the plaintiff, but simultaneously deny their veracity. Since the defendants dispute potentially material facts, the plaintiff argues that this motion should be characterized as a motion to dismiss pursuant to Fed.R.Civ.P. 12(b)(6). This Court agrees and will treat the motion accordingly and accept the allegations of the plaintiff as true.
Because this court finds that (i) a Bivens remedy is unavailable in light of the existing congressional structure already providing remedies for improper tax collection and (ii) any cause of action for improper IRS conduct has not yet accrued, plaintiff's claims must be dismissed. Accordingly, defendants' motion to dismiss the complaint will be granted.
I BACKGROUND
Working as a revenue agent with the Internal Revenue Service ("IRS") in 1995 and 1996, defendant Robert A. Mastrogiovanni ("Mastrogiovanni") conducted a tax audit of the plaintiff, Gerald B. Shreiber ("Shreiber"), for the tax years 1991, 1992 and 1993. The plaintiff alleges that Mastrogiovanni conducted the audit with a motivation to discriminate against Shreiber because of his religious beliefs. Shreiber asserts that on August 11, 1995, Mastrogiovanni left a voice mail message at Shreiber's place of business stating: "[h]ey you Jew bastard piece of shit. This is White Trash. I am going to get you."
Upon completion of the audit, Mastrogiovanni was involved in preparing a memorandum, dated May 2, 1996, which proposed adjustments to Shreiber's taxable income for the years 1991, 1992 and 1993. The IRS relied on this memorandum and decided to substantially increase Shreiber's 1991, 1992 and 1993 income tax liability. As a result, the IRS District Director for the Newark, New Jersey District, J. J. Jennings, sent Shreiber and his wife a "thirty-day letter," dated May 31, 1996, proposing adjustments to Shreiber's income tax liability for the years in question. Shreiber filed a timely appeal with the Office of the Regional Director of Appeals and is currently awaiting a conference to contest the proposed adjustments. As of the day of this opinion, the IRS has yet to assess the proposed adjustments to Shreiber's tax liability.
Shreiber alleges that Mastrogiovanni conducted his audit and prepared the memorandum while influenced by an evil motive and intent to discriminate against Shreiber because of his religious beliefs. Shreiber filed a claim on May 29, 1998, alleging violations of his constitutional rights as guaranteed by the Due Process clause of the Fifth Amendment. Shreiber acknowledges that there is no federal statute from which he may seek relief for damages resulting from the pain and suffering he received from the alleged violation of his constitutional rights. However, the plaintiff argues that this court should infer a damage remedy directly from the Constitution pursuant to Bivens v. Six Unknown Named Agents of the Federal Bureau of Narcotics, 403 U.S. 388 (1971).
II MOTION TO DISMISS STANDARD
Fed.R.Civ.P. 12(b)(6) provides that a court may dismiss a complaint "for failure to state a claim upon which relief can be granted." In considering a Rule 12(b)(6) motion, the court will accept the allegations of the complaint as true. Scheuer v. Rhodes, 416 U.S. 232, 236 (1974). Dismissal of claims under Fed.R.Civ.P. 12(b)(6) should be granted only if "it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief." Conley v. Gibson, 355 U.S. 41, 45-46 (1957). Although the court must assume as true all facts alleged, "[i]t is not . . . proper to assume that the [plaintiff] can prove any facts that it has not alleged." Associated General Contractors of Calif., Inc., v. California State Council of Carpenters, 459 U.S. 519, 526 (1983). Finally, when "[c]onfronted with [a 12(b)(6)] motion, the court must review the allegations of fact contained in the complaint; for this purpose the court does not consider conclusory recitations of law." Commonwealth of Pennsylvania v. Pepsico, Inc., 836 F.2d 173, 179 (3d Cir. 1988) (emphasis added).
III DISCUSSION
In order to prevail in his claim, Shreiber must prove: (1) Mastrogiovanni violated Shreiber's constitutional rights when he conducted an IRS income tax audit and recommended proposed adjustments to Shreiber's tax liability; and (2) despite the absence of any statutory remedy to redress pain and suffering resulting from an unconstitutional audit, this Court should infer a Bivens remedy for Mastrogiovanni's alleged discriminatory conduct. The defendants contend that the claims against Mastrogiovanni and the IRS must be dismissed for two reasons.
First, defendants argue that the exiting remedial scheme provided by Congress to redress claims arising out of tax collection activities precludes the inference of a Bivens remedy. See Schweiker v. Chilicky. 487 U.S. 412 (1988).
Alternatively, defendants argue that even if Shreiber's allegations are true, he has failed to state a constitutional violation because theproposed adjustments do not amount to a deprivation of property since Shreiber has suffered no present harm. Since any illegality in the tax determination made by Mastrogiovanni can be rectified by the many levels of administrative and judicial review ahead, Shreiber's only potential harm would be the costs incurred in the appeal process.
This limited potential deprivation of property would not arise until and unless it is finally determined that the proposed adjustments were incorrectly proposed. Accordingly, this claim is premature. If it is determined at the conclusion of the administrative and legal processes that the proposed adjustments were incorrectly determined without a reasonable basis, Shreiber might have a cognizable harm equal to the costs of the proceedings. However, if the administrative and legal processes available to Shreiber affirm Mastrogiovanni's proposed adjustments, Shreiber will have suffered no harm and will have no cause of action under Bivens, even if such a remedy were theoretically available.
This Court declines to opine whether § 7433, discussed infra , p. 7, would be available to redress Shreiber's claims or whether he would be able to recover his reasonable litigation and administrative costs pursuant to 26 U.S.C. § 7430, were he to prevail in challenging the proposed adjustments.
The Court agrees with both of the defendants' arguments and declines to extend Bivens to the case at bar.
A.
26 U.S.C. § 7433 permits a taxpayer to pursue a civil action for damages resulting from unauthorized actions taken during the collection of federal taxes. See 26 U.S.C.A. § 7433 (West Supp. 1998); Barron v. United States, 998 F. Supp. 117, 119 (D.N.H. 1998). It states, in part, the following:
If, in connection with any collection of Federal tax with respect to a taxpayer, any officer or employee of the Internal Revenue Service recklessly or intentionally, or by reason of negligence disregards any provision of this title, or any regulation promulgated under this title, such taxpayer may bring a civil action for damages against the United States in a district court of the United States. Except as provided in section 7432, such civil action shall be the exclusive remedy for recovering damages resulting from such actions.Id. § 7433(a). Congress enacted § 7433 to address concerns over improper collection activities and the lack of a remedy to address unreasonable actions of an IRS employee. See Venen v. United States, 38 F.3d 100, 105 (3d Cir. 1994).
Plaintiff alleges deprivation of his constitutional rights during the audit which resulted in proposed increases to his tax liability. The language and statutory history of section 7433 suggests that its scope is limited to violations of the Internal Revenue Code ("IRC") during collections of federal taxes and not during the assessment phase. See Miller v. United States, 66 F.3d 220, 223 (9th Cir. 1995) (challenge to determination of tax not actionable under § 7433), cert. denied, 517 U.S. 1103 (1996); Shaw v. United States, 20 F.3d 182, 184 (5th Cir. 1994) (damages unavailable under § 7433 "for an improper assessment of taxes"), cert. denied, 513 U.S. 1041 (1994); Gonsalves v. I.R.S., 975 F.2d 13, 16 (1st Cir. 1992) (finding that the legislative history of § 7433 precluded a claim based upon the determination of a tax);Arnett v. United States, 889 F. Supp. 1424 (D.Kan. 1995); see also Venen, 38 F.3d at 105 (noting the difference between the body of law aimed at curbing abuse in collection activities with privacy violations stemming from improper disclosure of confidential information); but see Miklautsch v. Gibbs, No. A89-291, 1990 WL 236045, at *6 (D.Alaska Nov. 6, 1990) (finding that the intent of Congress in passing section 7433 was to create a cause for a wrongful assessment if the assessment resulted in collection activities, even if the collection itself was carried out lawfully).
These cases rely on an early draft of section 7433 which initially gave tax payers a cause of action "for damages in connection with the determination or collection of any Federal tax," H.R. Conf. Rep. No. 100-1104, 100th Cong., 2d Sess. 228 (1988), and was later changed to reflect a deletion of the word "determination." The Conference Report on § 7433 explicitly states that "[a]n action under this provision may not be based on alleged reckless or intentional disregard in connection with the determination of tax." H.R. Conf. Rep. No. 100-1104, 100th Cong., 2d Sess. 229 (1988). Therefore, the plain language of the statute and its supporting legislative history foreclose an action by the plaintiff exclusively based on an alleged improper assessment of taxes.
The plaintiff concedes that § 7433 does not provide him with relief. Even if § 7433 created a cause of action in this case, § 7433 does not provide a remedy for pain and suffering. Section 7433(b) limits recovery to actual economic damages and costs of the action. Furthermore § 7433(a) explicitly states that this is the exclusive remedy for recovering damages for such actions. Precisely because § 7433 is the exclusive statutory remedy and does not create a cause of action for the instant plaintiff, Shreiber argues that this Court should infer a Bivens remedy because section 7433 does not provide redress for the alleged constitutional deprivations in this case.
B.
In Bivens v. Six Unknown Named Agents of the Federal Bureau of Narcotics, the Supreme Court recognized that a federal officer who acts under the color of federal law possesses a greater capacity to inflict harm than does a private citizen relying only on her own authority. See Bivens, 403 U.S. 388, 392. Recognizing this potential abuse of power, the Court held that, despite the absence of a statutory remedy, it was proper for the Court to infer directly from the Constitution a remedy for money damages against the individual officers for violating a citizen's Fourth Amendment rights.
In arriving at the decision in Bivens, the Court identified two factors which made such a remedy proper. First, there were "no special factors counseling hesitation in the absence of affirmative action by congress."Bivens, 403 U.S. at 396. Second, the Court recognized that there was "no explicit Congressional declaration that persons injured by a federal officer's violation . . . may not recover money damages from the agents, but must instead be remitted to another remedy, equally effective in the view of Congress." Id. at 397.
After Bivens, the Supreme Court inferred other "Bivens actions" for money damages against federal officers who act under color of federal law to deprive an individual of their constitutional rights. See Davis v. Passman, 442 U.S. 228 (1979) (inferring damage remedy for violation of Due Process Clause of the Fifth Amendment for gender discrimination);Carlson v. Green, 446 U.S. 14 (1980) (inferring damage remedy for violation of Cruel and Unusual Punishments Clause of the Eight Amendment). In the above cases, the Supreme Court inferred a "Bivens action" for damages. However, in determining the appropriateness of such a remedy, the Court expressly relied on the absence of "special factors" and the absence of a Congressional exclusive statutory remedy. See Carlson, 446 at 18-19; Passman, 442 at 246-247.
Whether placed under the rubric of "special factors" or "absence of a Congressional exclusive statutory remedy," the Supreme Court has made it clear that a Bivens remedy should not be implied if Congress has "expressly precluded the creation of such a remedy by declaring that existing statutes provide the exclusive mode of redress." Bush v. Lucas, 462 U.S. 367, 373 (1983).
In Schweiker v. Chilicky, 487 U.S. 412 (1988), the Supreme Court granted certiorari to consider the claims of a group of individuals whose social security disability benefits had been terminated. Although the benefits were later restored, the petitioners claimed that the termination of benefits was accomplished in contravention to their due process rights as guaranteed by the Fifth Amendment. They asserted that the unlawful termination created a cause of action directly against the officers in their individual capacities and the claimants brought suit requesting several forms of relief, including money damages, to redress the pain they suffered as a result of the termination. See Schweiker at 418-19.
Since no applicable statute to recover money damages from an unconstitutional termination of Social Security benefits existed, the Supreme Court was compelled to determine if a Bivens remedy was applicable which gave rise to a claim for money damages against the officers who made the decision to terminate the Social Security benefits. The Court relied on its decision in Bush v. Lucas and determined that it was not prudent to infer a Bivens remedy when Congress had already created a comprehensive and administrative system to provide meaningful relief for those denied benefits. See Schweiker, at 422 (citing Bush v. Lucas, 462 U.S. 367, 368 (1983)).
The Supreme Court acknowledged that despite the complex remedial scheme provided by Congress for Social Security benefits, there was no relevant provision for money damages against officials for unconstitutional conduct. See id. at 424. The Court agreed that the statutory remedy would not compensate the claimants for either the hardships caused by the delay in receiving income or for the harm suffered from the alleged wrongs. Furthermore, the Court recognized that the creation of a "Bivens remedy" would fill the statutory void and provide a claimant with complete relief for injuries which would otherwise go unredressed. See id. at 425. However, the Court would not substitute its own judgment for that of Congress: "[w]hether or not we believe that its response was the best response, Congress is the body charged with making the inevitable compromises required in the design of a massive and complex welfare benefits program." Id. at 429.
This reasoning is equally compelling with the complex statutory scheme provided by Congress for the collection of taxes and the remedies available to taxpayers who believe they have been incorrectly assessed. Currently, Shreiber is appealing the proposed assessments with the Regional Office of Appeals and is awaiting a conference to determine what proposed adjustments will be assessed by the filing of a deficiency notice. If Shreiber wishes to challenge the deficiency, he has the right to appeal to the tax court, a decision which can be appealed to the Court of Appeals, see 26 U.S.C.A. § 7482, or Shreiber can pay the taxes and sue for a refund in the district court. See 26 U.S.C. § 7422.
The plaintiff argues that Schweiker is not dispositive in this case because, as discussed above, § 7433 applies only to "collections" of taxes and not proposed assessments. According to Shreiber, since Congress has not addressed the relevant constitutional violations, there are no "special factors" which would prevent the inference of a Bivens remedy. This Court rejects plaintiff's argument. The absence of a specific Congressional remedy in this highly regulated field does not imply that Congress intended to leave open a Bivens remedy for actions not addressed by statute.
While it is true that section 7433 reads "in connection with any collection of Federal tax with respect to a taxpayer," it does not necessarily follow that Congress gave no thought to actions concerning the assessment of tax liability. The legislative history suggests otherwise. See supra, p. 9. Since Congress has legislated heavily in the area of tax collection and offered a specific structure for challenging the imposition of such a tax, this Court is reluctant to infer a Bivens remedy in such a context.
Although the Third Circuit has not addressed the creation of a Bivens remedy in the context of tax collection, several Circuit Courts that have addressed this question have declined to suggest that a Bivens remedy should be created for the alleged deprivation of constitutional rights occurring during the collection of federal taxes. See Fishburn v. Brown, 125 F.3d 979, 982-83 (6th Cir. 1997); National Commodity Barter Ass'n v. Archer, 31 F.3d 1521, 1532 (10th cir. 1994); Vennes v. An Unknown Number of Unidentified Agents of the United States, 26 F.3d 1448, 1452-53 (8th Cir. 1994), cert. denied, 513 U.S. 1076 (1995); McMillen v. United States Dep't of Treasury, 960 F.2d 187, 190-91 (1st Cir. 1991); Wages v. Internal Revenue Service, 915 F.2d 1230, 1233 (9th Cir. 1990); see also,Barnard v. Pavlish, No. 97-CV-0236, 1998 WL 247768, (M.D.Pa. 1998), at *8; Brown v. Johnson, 889 F. Supp. 355, 358 (W.D.Ark. 1995).
In McMillen, the First Circuit considered a claim against the IRS agents for acting rudely, obstinately and negligently in carrying out the tax audit. See McMillen, 960 F.2d at 190. The court explained that the statutory scheme of the Internal Revenue Code established remedies for abuses by IRS employees, such as the right to sue for a tax refund under 28 U.S.C. § 1346(a)(1) and 26 U.S.C. § 7422. The Court acknowledged that these remedies would not provide relief for all alleged abuses, noting that:
The remedies Congress has created are not comprehensive, but they do supply "meaningful safeguards or remedies" and establish "that Congress has provided what it considers adequate remedial mechanisms for constitutional violations that may occur. . . ." When this is true Courts have declined to create Bivens remedies.Id. (citations omitted). This logic is persuasive. Since Congress has made it clear that § 7433 is the exclusive remedy for recovering civil damages based upon violations of the Internal Revenue Code, this Court declines to infer a Bivens remedy in contravention of Congressional policy.
C.
Although this Court declines to infer a Bivens remedy where there is a comprehensive statutory remedial scheme for disputing the actions of the IRS, even were such a theory cognizable the cause of action would not accrue until it had been finally determined through the available administrative and legal proceedings that the proposed adjustments were incorrect. An analogy can be made to claims pursuant to 42 U.S.C. § 1983 alleging malicious prosecution. In Heck v. Humphrey, the Supreme Court held that a "1983 cause of action for damages attributable to an unconstitutional conviction or sentence does not accrue until the conviction or sentence has been invalidated." 512 U.S. 477, 488 (1994). The same reasoning would apply to an action for an alleged unconstitutionally imposed tax. Until the taxpayer's liability is actually and finally determined, there is no harm and no possibleBivens action.
Plaintiff might argue that the mere utterance of a religious epithet is in and of itself a constitutional violation. Although it is obvious that the use of religious slurs by government officials would be reprehensible, the use of such language alone does not establish a constitutional violation. In Abecasis v. Chestnut , Civ. A. No. 93-4246, 1998 WL 151035, at *6 (S.D.N.Y. Mar. 31, 1998), The Southern District of New York was faced with a similar Bivens claim where the plaintiff was called a "Jewish bastard" by police officers. The Court rejected the plaintiff's Bivens claim under the Equal Protection component of the Due Process Clause, holding that "[e]ven a liberal construction of the Complaint cannot overcome the fact that courts have repeatedly held that a law enforcement officer's use of racial or ethnic slurs or other verbal abuse does not, by itself, violate constitutional rights." See also Funderburg v Gangl , Civ. A. No. 93-6580, 1995 WL 222018, at *5 (E.D.Pa. Apr. 12, 1995) ("[t]he use of a racial slur or other abusive language by a police officer is particularly deplorable and never justified. It does not, however constitute a constitutional violation").
D.
The IRS is also named in the complaint as a defendant. A suit against the IRS is a suit against the United States as the IRS cannot be sued.See Freck v. IRS, 37 F.3d 986, 988 n. 1 (3d Cir. 1994) Since the United States is immune from suit under the doctrine of sovereign immunity, and this has not been waived outside of section 7433, the case against the IRS must be dismissed. Further, it is well-settled law that a Bivens action may not be maintained against the United States. A Bivens action may be brought against a defendant only in his or her individual capacity. F.D.I.C. v. Meyer, 510 U.S. 471, 485 (1994); Carlson v. Green, 446 U.S. 14, 21 (1980).IV CONCLUSION
For the reasons set forth in this opinion, this Court holds that the claims against the IRS and Mastrogiovanni must be dismissed for failure to state a claim upon which relief can be granted. An appropriate order will issue on an even date herewith.