Opinion
CASE NO. 3:01-cv-627-J-25HTS
August 23, 2002
Durwin Walter Davis, Pro Se, Jacksonville, Fl, for the Plaintiff.
Bruce T. Russell, U.S. Dept. of Justice, Tax Division, Washington, DC, for the Defendants.
ORDER
THIS CAUSE is before the Court on the government's Motion to Dismiss Amended Complaint (Dkt. 27), and Plaintiff's response thereto. Upon consideration of same, the Court finds as follows:
Defendants, sued in their individual capacities, are employees of either the Treasury Department or the Internal Revenue Service ("IRS"). Plaintiff's allegations relate to the actions allegedly taken by these individuals in the assessment and collection of Plaintiff's federal income tax for the years 1990 through 1992. Plaintiff claims that Defendants tampered with computer records, backdated material, made fraudulent entries and gave misinformation regarding these income tax liabilities. To support these claims, Plaintiff specifically alleges that Defendants used false and fraudulent means to estimate his gross income without a known taxable activity and without a signed and verifiable "23C" assessment certificate. See First Amended Complaint at ¶ 12. According to Plaintiff, he "has never been involved [or] registered to do business in an [e]xcise taxable activity." See First Amended Complaint at ¶ 14. He claims that there is false information in the IRS's computer records that "makes it appear that [P]laintiff is a person liable for a taxable activity in which Plaintiff is not involved." See First Amended Complaint at ¶ 21. He also complains of Defendants' "zero tolerance policy" and their use and maintenance of a "blacklist."
In violation of Federal Rule of Civil Procedure 10, the amended complaint does not set forth in the caption the names of the defendants being sued. However, in the body of the amended complaint, Plaintiff alleges that it is a suit against Dorothy W. Rucker, Davida Parker, and Paul H. O'Neill.
This action was originally brought in state court, pursuant to Florida Statute § 713.21, seeking to cancel federal income tax liens filed against his property, and seemingly to discharge his tax debts. The United States removed this action to federal court on June 6, 2001, pursuant to 28 U.S.C. § 1441(a) and 1442. Plaintiff filed an amended complaint on November 26, 2001.
Plaintiff further alleges that by ignoring procedural requirements, Defendants committed fraud "to gain an increase in cash acquisition at any cost." See First Amended Complaint at ¶ 12. It appears that Plaintiff is contending that there are no enforcement regulations related to the taxes assessed against him by the IRS. Lastly, Plaintiff contends that prior to his tax assessments he was denied a "due process hearing to meet with [D]efendants involved in the matters raised herein and was denied the opportunity for meaningful participation and opportunity to reveal wrongful data contained in the IRS computer records . . . ., " see First Amended Complaint at ¶ 16, and that he was "deprived of the opportunity to examine and verify in person the identity and pocket commissions of Defendants and to verify for the record the delegation of authority of Defendants," see First Amended Complaint at ¶ 22.
Pocket commissions are identification badges issued to IRS employees as a means of identifying themselves to the public when performing their official duties. See IRM §§ 1.16.4.1.1-1.2, 1.16.3.1-3.2.
Based on the above, Plaintiff claims that his Fifth Amendment right to due process was violated and that the actions of which he complains violate the Bill of Attainder prohibitions in Article I, §§ 9 and 10 of the United States Constitution. Plaintiff seeks a declaration, pursuant to 28 U.S.C § 2201, that the acts and policies of Defendants violate Plaintiff's constitutional rights; an injunction, pursuant to 28 U.S.C. § 2202, enjoining Defendants from using a blacklist database and requiring Defendants to remove Plaintiff's name from the blacklist and a writ of prohibition prohibiting Defendants from maintaining classifications and records for purposes not authorized by the United States Constitution, pursuant to 28 U.S.C. § 1361, 1651 and Federal Rule of Civil Procedure 65(a).
The Government raises several arguments in support of its motion to dismiss. The Court addresses only a few of these arguments.
Many of the governments arguments pertain to claims for damages. Plaintiff has made no claim for damages; thus, these arguments are irrelevant and unnecessary.
Res Judicata
With the exception of his claim about the IRS maintaining a blacklist, Plaintiff's claims are thinly veiled collateral attacks on the assessment and collection activities regarding Plaintiff's tax liabilities for the years 1990-1992. These tax liabilities were the subject of his bankruptcy proceedings in In re Durwin Walter Davis, Case No. 97-5503-3F3 (Bankr. M.D. Fla.). These proceeding resulted in an order of confirmation. Therefore, any claims Plaintiff has against these Defendants for incorrectly classifying his tax status or liability are barred by the doctrine of res judicata. See In re Justice Oaks II, Ltd., 898 F.2d 1544, 1552 (11th Cir. 1990) (bankruptcy court's order of confirmation '"is an absolute bar to the subsequent action or suit between the same parties. . . in respect of every matter which was actually offered and received to sustain the demand, but also as to every [claim] which might have been presented'").The doctrine of res judicata applies if: "(1) the prior decision [was] rendered by a court of competent jurisdiction; (2) there [was] a final judgment on the merits; (3) both cases . . . involve the same parties or their privies; and (4) both cases . . . involve the same causes of action." See In re Piper Aircraft Corp., 244 F.3d 1289, 1296 (11th Cir. 2001) (citations omitted). Furthermore, if a claim in a new lawsuit was, or could have been, raised in a prior action, res judicata applies. Id.
There is no question that the confirmation order issued by the bankruptcy court constitutes a final judgment on the merits issued by a court of competent jurisdiction. There is also no doubt that both cases involve the same causes of action. In Citibank, N.A. v. Data Lease Fin. Corp., 904 F.2d 1498 (11th Cir. 1990), the Eleventh Circuit articulated that" "if a case arises out of the same nucleus of operative fact. . . as a former action, [then] the two cases are really the same "claim" or "cause of action" for purposes of res judicata.'" Id at 1503 (quoting Ruple v. City of Vermillion, 714 F.2d 860, 861 (8th Cir. 1983)). Because both of Plaintiff's claims issue from a single event, namely, the assessment and collection of his federal income tax liabilities for the years 1990 through 1992, the fourth element is met. The Court further finds that the third element has been met, even though these Defendants were not parties to the bankruptcy proceeding.
It is axiomatic to state that in order to obtain prospective relief in the form of a declaration or injunction, Plaintiff has to show a justiciable need for the relief The only justiciable need Plaintiff could have for such relief is to extinguish his tax liabilities and the corresponding liens. The only party that can give him the relief he seeks regarding these tax liabilities is the United States. Thus, the third element is satisfied, and the doctrine of res judicata bars Plaintiff's claims, regarding these tax liabilities.
Furthermore, Plaintiff's argument that res judicata cannot apply because the bankruptcy court is an Article I court and not an Article III court is frivolous. Plaintiff had the opportunity to appeal any decision by the bankruptcy court to this court and, in fact, did take an appeal of the bankruptcy court's decision. However, his appeal was dismissed for failure to prosecute. Thus, any issues related to the assessment and collection activities of his tax liabilities for the years in question are finally decided.
Anti-injunction Act and Declaratory Judgment Act
Even if the Court were to find that res judicata did not bar portions of this lawsuit, the Court would find that the Anti-Injunction Act, 26 U.S.C. § 7421(a), and the Declaratory Judgment Act, 28 U.S.C. § 2201, prohibit Plaintiff claims regarding the assessment and collection activities of Plaintiff's tax liabilities.
The Anti-Injunction Act provides "no suit for the purpose of restraining the assessment or collection any tax shall be maintained in any court by any person." 26 U.S.C. § 7421(a).
The Declaratory Judgment Act specifically excludes controversies regarding federal taxes. "In a case or controversersy within its jurisdiction, . . . except with respect to Federal taxes . . . any court of the United States. . . may declare the rights and other legal relations of any interested party seeking such declaration. . . ." 28 U.S.C. § 2201(a).
As part of the Internal Revenue Code, the Anti-Injunction Act provides that "no suit for the purpose of restraining the assessment or collection of any tax shall be maintained in any court by any person. . . ." 26 U.S.C. § 7421(a). The "manifest purpose [of] the Anti-Injunction Act] is to permit the United States to assess and collect taxes alleged to be due without judicial intervention, and to require that the legal right to the disputed sums be determined in a suit for refund. " Enochs v. Williams Packing Navigation Co., 370 U.S. 1, 7 (1962). Thus, the focus of the Court's inquiry is whether the primary purpose of the relief requested is to restrain the collection and assessment of taxes or to enjoin the alleged actions of Defendants. Linn v. Chivatero, 714 F.2d 1278, 1282 (5th Cir. 1983).
"There is no dispute. . . that the federal tax exception to the Declaratory Judgment Act is at least as broad as the Anti-Injunction Act." Bob Jones University v. Simon, 416 U.S. 725, 732 n. 7 (1974). Thus, any analysis regarding the Anti-Injunction Act applies equally to Plaintiff's claims for declaratory relief.
Insofar as Plaintiff complains of the inappropriateness of the classifications made by these officials and their authority to assess and collect taxes from Plaintiff, the Court finds that the Anti-Injunction Act bars this claim. The purpose of Plaintiff's relief is clearly to restrain the government's assessment and collection of these taxes.
In contrast, Plaintiff's allegation that Defendants maintained his name on a "blacklist" does not concern the assessment and collection of taxes. Plaintiff seeks to stop the use of such a list and to have his name removed from the list. It is clear that the primary purpose of the relief is akin to enjoining unconstitutional or illegal actions as opposed to restraining the collection and assessment of taxes. Accordingly, the Anti-Injunction and Declaratory Relief Act have no application to this claim.
Sovereign Immunity
Based on the above findings, all that arguably remains is Plaintiff's claim relating to Defendants' use of a "blacklist." Therefore, the following analysis applies only to this claim.
Sovereign immunity operates as a complete bar to lawsuits against the United States. See State of Florida Department qf Business Regulation v. United States Department of the Interior, 768 F.2d 1248, 1251 (11th Cir. 1985) (citations omitted). When sovereign immunity is invoked, the court must first determine whether the lawsuit is against the United States as sovereign. Id. (citations omitted). A plaintiff cannot escape the sovereign immunity problem simply by designating an officer as a defendant. Id (citations omitted).
Generally, a suit for specific relief — e.g., injunctive or declaratory relief — against a named government official of the United States is deemed to be a suit against the sovereign. Larson v. Domestic Foreign Commerce Corp., 337 U.S. 682, 687-88 (1949). "Only where the official's conduct cannot be attributed to the sovereign because the official had no power to do the challenged acts can it properly be said that the action is not one against the United States as sovereign." State of Florida Department of Business Regulation v. United States Department of the Interior, 768 F.2d 1248, 1252 (11th Cir. 1985) (citations omitted). Thus, the focus is on whether a government official's conduct is so illegal that a suit for specific relief may be brought against the government officer in his individual capacity. Conduct which is considered "so illegal" is conduct that is outside the official's statutory powers or conduct that is within the official's statutory powers but the powers or exercise thereof are constitutionally void. Larson v. Domestic Foreign Commerce Corp., 337 U.S. 682, 702 (1949). "In order to plead successfully that the acts of a government officer exceed his statutory authority a plaintiff must do more than simply allege that the actions of the officer are illegal or unauthorized." Alabama Rural Fire Insurance Co. v. Naylor, 530 F.2d 1221, 1226 (5th Cir. 1976).
The Eleventh Circuit, in the en banc decision Bonner v. City of Prichard, 661 F.2d 1206, 1209 (11th Cir. 1981), adopted as precedent decisions of the former Fifth Circuit rendered prior to October 1, 1981.
As part of the Internal Revenue Service Restructuring and Reform Act of 1998, enacted and effective as of July 22, 1998, section 3707 is an off-Code provision that prohibits the IRS from designating taxpayers as illegal tax protesters or any similar designation. See IRS Restructuring and Reform Act of 1998, § 3707(a)(1), Pub.L. 105-206, Title III, § 3707, July 22, 1998, 112 Stat. 778. Furthermore, under section 3707(a)(2), the IRS is required to remove such a designation from its individual master file and disregard any such designation located in a place other than the individual master file. Section 3707(c) states that the removal of any such designation is not required to begin before January 1, 1999. Thus, Congress has expressly legislated a prohibition against the maintenance of databases designating individuals as "tax protesters." If Defendants are doing what this provision expressly prohibits, then they are acting ulta vires and can be made the object of specific relief See Larson, 337 U.S. at 689. And, no waiver of sovereign immunity is necessary.
Even assuming, however, that this action is really against the United States as sovereign, the Court would still reject the Government's sovereign immunity defense. In 1976, Congress expressly waived the Government's sovereign immunity from prospective relief when it amended § 702 of the Administrative Procedure Act ("APA"). 5 U.S.C. § 702.See Panola Land Buyers Ass'n v. Shuman, 762 F.2d 1550, 1555 (11th Cir. 1985) (citing Sheehan v. Army and Air Force Exchange Service, 619 F.2d 1132, 1139 (5th Cir. 1980), 5 U.S.C. § 702). And, as noted above, the Anti-Injunction and the Declaratory Judgment Acts do not prohibit this claim.
Failure to State a Claim for Relief
Any claim that this alleged blacklist somehow constitutes a "bill of attainder" is simply frivolous. A "bill of attainder" is "a law that legislatively determines guilt and inflicts punishment upon an identifiable individual without . . . the protections of a judicial trial." Nixon v. Administrator of General Services, 433 U.S. 425, 468 (1977). To constitute a bill of attainder, the law must specifically identify the affected persons and must inflict punishment without the benefit of a trial. Selective Service v. Minnesota Public Interest Research Group, 468 U.S. 841, 847 (1984). Accordingly, Plaintiff's claim for relief under this theory fails as a matter of law.
Plaintiff also contends that the use of the blacklist violated his Fifth Amendment right to due process by causing him to be vilified and the object of public shame, disgrace, ridicule and obloquy. Well settled is the principle that injury to reputation alone is not sufficient to state a claim for violation of due process. Cypress Ins. Co. v. Clark, 144 F.3d 1435, 1436-1437 (11th Cir. 1998) (citing Paul v. Davis, 424 U.S. 693, 712 (1976)). When claiming an injury to reputation, a plaintiff is required to show that "the government official's conduct deprived the plaintiff of a previously recognized property or liberty interest in addition to damaging the plaintiffs reputation." Cypress Ins. Co. v. Clark, 144 F.3d 1435, 1436-1437, (citing Paul, 424 U.S. at 712). This rule is referred to as the "stigma-plus" rule, and "[it] is designed to prevent the Due Process Clause from becoming an all-purpose constitutionalization of state tort law." Id at 1437 (citing Paul, 424 U.S. at 701). Plaintiff's allegations fall short of this standard.
Plaintiff faces other hurdles regarding his due process claim. The only injury alleged to be suffered by Plaintiff in this lawsuit is his obligation to pay his tax liabilities for the years 1990 through 1992. As explained above, Plaintiff is barred by the doctrine of res judicata and by the Anti-Injunction and Declaratory Acts from bringing such a claim, even collaterally.
Even assuming that Defendants violated Plaintiff's constitutional rights by using a so-called "blacklist," Plaintiff does not have standing to request declaratory and injunctive relief against these Defendants because he has not alleged a threat of future harm or the need for prospective relief Article III of the United States Constitution requires that a "case" or "controversy" be present in order to confer jurisdiction on federal courts for a particular claim; standing to sue is an essential part of that requirement. See Warth v. Seldin, 422 U.S. 490, 498 (1975). In City of Los Angeles v. Lyons, 461 U.S. 95 (1983), the Supreme Court held that a plaintiff who may have been illegally choked by police, who would have had standing to state a claim for damages, did not have standing to seek injunctive relief against the police, absent evidence that such action will occur in the future. Id at 110. Moreover, without evidence of future harm, no immediate threat exists to warrant injunctive relief Id. at 105.
Leave to Amend
Plaintiff asks that the Court grant him leave to amend his complaint, if it finds that he failed to state a claim for relief Federal Rule of Civil Procedure 15(a) provides that after a responsive pleading is filed "a party may amend [the complaint] . . . only by leave of court or by written consent of the adverse party; and leave shall be freely given when justice so requires." Granting leave to amend following a dismissal of a complaint for failure to state a claim is particularly appropriate. Thomas v. Farmville Mfg. Co., Inc., 705 F.2d 1307, 1307-08 (11th Cir. 1983).
The Court shall allow Plaintiff leave to amend his complaint. In granting Plaintiff leave to amend the complaint, the Court is not granting Plaintiff leave to add new claims. Instead, the Court is granting Plaintiff leave to amend the complaint to state a claim under the "stigma-plus" standard for violations of due process, if appropriate; to add an allegation about the statutory provision allegedly being violated by Defendants, and to allege facts to show that he has standing to seek prospective relief for his due process claim.
Furthermore, when Plaintiff amends the complaint, he shall follow Federal Rule of Civil Procedure 10 by naming in the caption each defendant being sued. Plaintiff shall further abide by Federal Rule of Civil Procedure 8 by providing a short and plain statement of his remaining stigma-plus claim and Rule 10(b) by making the contents of each numbered paragraph limited to a statement of a single set of circumstances.
Accordingly, it is ORDERED:
1. The Government's Motion to Dismiss Amended Complaint (Dkt. 27) is GRANTED without prejudice to Plaintiff to file an amended complaint in accordance with the above.
2. Plaintiff shall have ten (10) days leave to amend the complaint, if appropriate. Failure to amend the complaint within this ten-day period will result in the dismissal of this lawsuit with prejudice.
3. The Court's order staying discovery and relieving the government from Case Management reporting requirements (Dkt. 44) continues to be in effect, pending Plaintiff filing an amended complaint and the government answering or otherwise responding thereto.