Source: https://law.justia.com/cases/federal/appellate-courts/F2/713/1405/149804/
Timestamp: 2019-12-09 12:25:28
Document Index: 160499859

Matched Legal Cases: ['§ 1983', '§ 6213', '§ 6212', '§ 6213', '§ 6213', '§ 7423', '§ 6213']

Hans Bothke, Plaintiff-appellant, v. Fluor Engineers and Constructors, Inc., et al., Defendants,andw.j. Terry, Defendant-appellee, 713 F.2d 1405 (9th Cir. 1983) :: Justia
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Hans Bothke, Plaintiff-appellant, v. Fluor Engineers and Constructors, Inc., et al., Defendants,andw.j. Terry, Defendant-appellee, 713 F.2d 1405 (9th Cir. 1983)
U.S. Court of Appeals for the Ninth Circuit - 713 F.2d 1405 (9th Cir. 1983) Argued and Submitted Dec. 10, 1982. Decided Jan. 24, 1983
Terry twice submitted a "Recommendation for Nonfiling of Notice of Tax Lien" noting, "Because of sensitivity of 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." During the litigation she stated that by "sensitivity" she was referring to the volume of correspondence the IRS had received from Bothke.
She made several requests to the Fresno IRS Center for a copy of Bothke's return. Her handwritten notations on the "TDA History Record" said, "Wanted to have a copy before seeing T [ax] P [ayer] because of delicacy [blank] of situation."
Executive officials have long enjoyed some form of immunity for acts performed in the course of their official duties. The underlying rationales are (1) the injustice of imposing personal liability on one whose public office obliges the exercise of discretion and (2) the danger that potential liability will compromise the forthright performance of official duties. See, e.g., Scheuer v. Rhodes, 416 U.S. 232, 239-40, 94 S. Ct. 1683, 1688, 40 L. Ed. 2d 90 (1974).
The rules governing official immunity are largely of judicial making and have changed considerably over the years. Earlier cases wrestled with the issue with varying results. See id. 416 U.S. at 241, 94 S. Ct. at 1689. In some instances courts did not foreclose recovery on immunity grounds, see, e.g., Bates v. Clark, 95 U.S. 204, 24 L. Ed. 471 (1877), and were reluctant to formulate a rule that would do so irrespective of the circumstances, see O'Campo v. Hardisty, 262 F.2d 621, 625 (9th Cir. 1958).
Eventually, executive officials performing discretionary functions were protected from damage suits by absolute official immunity, if they had acted within the "outer perimeter" of their duties. E.g., Barr v. Matteo, 360 U.S. 564, 575, 79 S. Ct. 1335, 1341, 3 L. Ed. 2d 1434 (1959) (opinion of Harlan, J.).
This general rule was applied to IRS agents. Sowders v. Damron, 457 F.2d 1182, 1184 (10th Cir. 1972); Bridges v. IRS, 433 F.2d 299, 300 (5th Cir. 1970); David v. Cohen, 407 F.2d 1268, 1271-72 & n. 2 (D.C. Cir. 1969); Bershad v. Wood, 290 F.2d 714, 716, 719 (9th Cir. 1961).
A major change occurred when the Supreme Court concluded that absolute immunity was inappropriate for state executive officials sued under 42 U.S.C. § 1983 for violating federal rights. Scheuer v. Rhodes, 416 U.S. 232, 238-49, 94 S. Ct. 1683, 1687-93, 40 L. Ed. 2d 90 (1974). The Court recognized that Congress had not intended to abrogate entirely the immunity accorded some officials by common law. Id. at 243, 94 S. Ct. at 1690. While judges and legislators acting within their traditional roles continued to enjoy absolute immunity, id. at 243-44, 94 S. Ct. at 1690, state executive officials would have only qualified immunity. Id. at 247-48, 94 S. Ct. at 1692.
The Court left the immunity question for federal officials to the courts of appeals when it acknowledged a damages remedy against those persons in suits for federal constitutional violations. Bivens v. Six Unknown Named Federal Narcotics Agents, 403 U.S. 388, 390-98, 91 S. Ct. 1999, 2001-06, 29 L. Ed. 2d 619 (1971). This circuit reasoned that immunity accorded federal officials in Bivens actions should be no greater than that accorded state officials under section 1983 for identical violations. Mark v. Groff, 521 F.2d 1376, 1380 (9th Cir. 1975).
Quoting Mark v. Groff, the Supreme Court agreed with this court and most circuits, which had reached similar conclusions. Butz v. Economou, 438 U.S. 478, 486 & n. 9, 498-500, 505-07, 98 S. Ct. 2894, 2900 & n. 9, 2906-07, 2910-11, 57 L. Ed. 2d 895 (1978). A different holding would "stand the constitutional scheme on its head." Id. at 504, 98 S. Ct. at 2909. Qualified immunity for federal executive officials struck a balance between the interests underlying immunity and the need for a remedy for constitutional violations. Id. at 497, 504-06, 98 S. Ct. at 2909-11.
Significantly for our purposes here, Mark v. Groff was a suit against IRS officials, as were three of the other circuit cases cited and followed in Butz. See Weir v. Muller, 527 F.2d 872, 874 & n. 1 (5th Cir. 1976)2 ; Black v. United States, 534 F.2d 524, 527 (2d Cir. 1976); G.M. Leasing Corp. v. United States, 560 F.2d 1011, 1015 (10th Cir. 1977), cert. denied, 435 U.S. 923, 98 S. Ct. 1485, 55 L. Ed. 2d 516 (1978).
The Supreme Court seemingly accepted no more than qualified immunity for IRS officials in the remand that preceded the last-mentioned case. G.M. Leasing Corp. v. United States, 429 U.S. 338, 360, 97 S. Ct. 619, 632, 50 L. Ed. 2d 530 (1977). The Fourth Circuit also had selected the qualified immunity standard for IRS officials. White v. Boyle, 538 F.2d 1077, 1080 (4th Cir. 1976).
After Butz, circuit cases have continued to apply the qualified immunity standard to tax officials sued for constitutional torts. See Hall v. United States, 704 F.2d 246, 249, 250 & n. 2 (6th Cir. 1983) (levy without statutory deficiency notice); Granger v. Marek, 583 F.2d 781, 784 (6th Cir. 1978).
Apparently the only exception was a brief per curiam opinion in this circuit, Stankevitz v. IRS, 640 F.2d 205 (9th Cir. 1981),3 the case relied on by the court below in holding Terry absolutely immune. Stankevitz accorded absolute immunity to IRS officials who audited the plaintiff's tax return and assessed a deficiency.
In so doing, the opinion followed another part of Butz, which stated that executive officials have absolute immunity if, in an administrative proceeding, they assume a role analogous to that of a judge or prosecutor in a traditional trial setting. 438 U.S. at 508-17, 98 S. Ct. at 2911-16. Quoting Butz, Stankevitz accorded the IRS defendants absolute immunity because they were " 'responsible for the decision to initiate or continue a proceeding subject to agency adjudication.' " 640 F.2d at 206 (quoting 438 U.S. at 516, 98 S. Ct. at 2916).
The quasi-judicial absolute immunity Butz accorded certain executive officials was predicated on the close similarity of this formal agency adjudication to a traditional courtroom trial. The Supreme Court recently re-emphasized that absolute immunity for participants in judicial proceedings "stem [s] 'from the characteristics of the judicial process.' " Briscoe v. LaHue, --- U.S. ----, ----, 103 S. Ct. 1108, 1115-16, 75 L. Ed. 2d 96 (1983) (No. 81-1404) (quoting Butz, 438 U.S. at 512, 98 S. Ct. at 2913). See also Sellars v. Procunier, 641 F.2d 1295, 1298-1300 & nn. 6-9 (9th Cir.), cert. denied, 454 U.S. 1102, 102 S. Ct. 678, 70 L. Ed. 2d 644 (1981).
Formal administrative adjudication shares with judge-supervised trials two key qualities that diminish the need for individual suits to correct constitutional transgressions: (1) the impartiality of the decision maker and (2) the reliability of the information forming the basis of the decision. See Butz, 438 U.S. at 512-13, 98 S. Ct. at 2913-14. Safeguards inherent in both forums foster these qualities.
The first quality is fostered in formal agency adjudication by the checks and balances afforded when a different person assumes the roles comparable to those of prosecutor and judge, with the adjudicator independent of agency control. Hearing examiners are neither required to perform prosecutorial and investigative functions inconsistent with their judicial role nor to answer to those who do. Id. at 513-14, 98 S. Ct. at 2914-15. This unbiased adjudicator provides a check on agency zeal. Id. at 515, 98 S. Ct. at 2915. One group of quasi-prosecutorial agency officials immunized in Butz were those who brought a proceeding to seek sanctions. Id. at 515, 98 S. Ct. at 2915. They did not impose the sanctions.
The second quality is fostered by having the transcript and exhibits of oral and documentary evidence constitute the exclusive record on which the decision must be based. The decision maker must explain the decision with findings and conclusions. An adversarial procedure allows cross-examination of witnesses, a challenge to the government's theories, and the sobering requirement of airing these theories in a public forum. Id. at 512-13, 517, 98 S. Ct. at 2913-14, 2916.
The disinterested examiner may accept or reject the government's theories, after hearing both sides and all relevant evidence. Id. at 517, 98 S. Ct. at 2916. The other agency "prosecutorial" personnel granted absolute immunity in Butz were those who present evidence in an agency hearing, the purpose being to encourage the fullest possible presentation of evidence to the decision maker. See id.
IRS defendants performing functions the Stankevitz defendants did may legitimately be covered by the executive-branch analog to prosecutors' quasi-judicial immunity as outlined in Butz, 438 U.S. at 515-17, 98 S. Ct. at 2915-16. Their actions triggered the deficiency proceeding with its procedural safeguards, including preseizure, preassessment notice and an opportunity for the taxpayer to take his case to the impartial forum of the Tax Court.
Qualified immunity for federal executive officials is the general rule and absolute immunity the exceptional case, a proposition first voiced in Butz, 438 U.S. at 506-08, 98 S. Ct. at 2910-12, and recently reiterated in Harlow v. Fitzgerald, --- U.S. ----, 102 S. Ct. 2727, 2736, 73 L. Ed. 2d 396 (1982). Were we to accord absolute immunity to defendant Terry under the guise of applying Butz, its carefully delineated exception would overwhelm the rule set forth in that case.
The immunity available depends not on an official's job title or agency, but on the function that person was performing when taking the actions that provoked the lawsuit. See, e.g., Richardson v. Koshiba, 693 F.2d 911, 913-14 (9th Cir. 1982) (even judicial personnel are not absolutely immune when performing executive functions); Harlow, 102 S. Ct. at 2735. See also Scheuer v. Rhodes, 416 U.S. at 247, 94 S. Ct. at 1692.
For executive officials other than the President, the Supreme Court has extended absolute immunity to those playing an integral part in judge-supervised trials or in closely analogous proceedings. See id. at 2733 (citing Butz, 438 U.S. at 508-17, 98 S. Ct. at 2911-16); Briscoe v. LaHue, --- U.S. at ----, 103 S. Ct. at 1115-21. It has denied absolute immunity to senior aides to the President, Harlow, 102 S. Ct. at 2736, Cabinet members, see id. at 2734 (citing Butz, 438 U.S. at 506, 98 S. Ct. at 2910-11), and state governors, see Harlow, 102 S. Ct. at 2733 (citing Scheuer v. Rhodes, 416 U.S. at 247-48, 94 S. Ct. at 1692).
Because Terry does not fit within the subcategory of executive officials held absolutely immune in Butz, a new category of absolutely immune executive officials would have to be created to exempt her unqualifiedly from liability. New categories are recognized only in "exceptional situations where it is demonstrated that absolute immunity is essential for the conduct of public business." Butz, 438 U.S. at 507, 98 S. Ct. at 2911.
A defendant official bears the burden of proving that "public policy requires an exemption of that scope," id. at 506, 98 S. Ct. at 2911, that "the responsibilities of his office embraced a function so sensitive as to require a total shield from liability." Harlow, 102 S. Ct. at 2736. A court evaluates this possibility by assessing the importance of public policy considerations through "reference to the common law, or more likely, our constitutional heritage and structure." Id. at 2736 n. 20.
Police officers, whose important duty to protect the public may involve deprivations of liberty through arrests, are entitled only to qualified immunity, Scheuer, 416 U.S. at 245, 94 S. Ct. at 1691, though their actions would seem equally likely to invite retaliatory suits. Law enforcement personnel executing levies were traditionally not protected by any immunity under the common law. IRS agents are "relatively low-level executive officers" with a correspondingly "narro [w] range of official discretion." Mark v. Groff, 521 F.2d at 1380-81. Cf. G.M. Leasing, 560 F.2d at 1014 (levying is "ministerial" rather than "discretionary" activity).
But the law reflects also a Congressional determination that the taxpayer should be afforded certain procedural rights, which the IRS is bound to respect. See, e.g., Laing v. United States, 423 U.S. 161, 96 S. Ct. 473, 46 L. Ed. 2d 416 (1976). In balancing these interests, Congress has determined that violations of the procedural rights at issue here are exceptions to the Anti-Injunction Act. See 26 U.S.C. §§ 6213(a), (b) (2), 7421(a).
Unjustified governmental invasion of property rights by seizure can occasion physical hardship, see Commissioner v. Shapiro, 424 U.S. 614, 629-30 & n. 11, 96 S. Ct. 1062, 1071-72 & n. 11, 47 L. Ed. 2d 278 (1976), but the affront to the citizen's notions of the place of government in our society, when personally confronting the misuse of its awesome power, may engender a turmoil that is more profound than the physical effects of the deprivation. Cf. Bivens, 403 U.S. at 391-92, 394-96, 91 S. Ct. at 2002-03, 2003-05.
With the IRS's broad power must come a concomitant responsibility to exercise it within the confines of the law. The Court has emphasized that no official is above the law, and that broad powers present broad opportunities for abuse. Butz, 438 U.S. at 505-06, 98 S. Ct. at 2910-11. Cf. Mark v. Groff, 521 F.2d at 1380 n. 4.
The decision below reflects a determination that Terry acted with subjective good faith. However, when it was rendered, officials asserting the qualified immunity defense had to demonstrate that they met an objective standard of good faith as well. See, e.g., Wood v. Strickland, 420 U.S. 308, 321, 95 S. Ct. 992, 1000, 43 L. Ed. 2d 214 (1975). Ignorance or disregard of settled, undisputable law negates this defense even if subjective good faith exists. Id.
The Supreme Court has since revised the summary judgment test for qualified immunity, making objective good faith the only requirement. The district court is to place its " [r]eliance on the objective reasonableness of an official's conduct." Harlow, 102 S. Ct. at 2739. " [G]overnment officials performing discretionary functions generally 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." Id. at 2738 (emphasis supplied).
For the condition precedent of liability to be met, there must be a lawful assessment, either a voluntary one by the taxpayer or one procedurally proper by the IRS. Because this country's income tax system is based on voluntary self-assessment, rather than distraint, Flora v. United States, 362 U.S. 145, 176, 80 S. Ct. 630, 646-47, 4 L. Ed. 2d 623 (1960), the Service may assess the tax only in certain circumstances and in conformity with proper procedures.
Bothke believes that the IRS had to follow the deficiency proceedings of 26 U.S.C. §§ 6212, 6213(a), under which he was entitled to a preassessment notice of deficiency which gave him 90 days to petition the Tax Court. Terry argues that the IRS was proceeding properly under an exception to the statutory requirement, whereby no deficiency notice is necessary if the amount assessed is the result of a mathematical or clerical error on the face of the return. Id. § 6213(b) (1), (g) (2).
Even under this exception, the regular deficiency-proceeding safeguards are mandatorily triggered if the taxpayer requests an abatement within 60 days. Id. § 6213(b) (2). Bothke responded to the IRS's Correction to Arithmetic well within that time.
The IRS failed to construe his protest as a request for abatement because he did not cite this statute. But the notice to Bothke did not suggest that the IRS expected a statutory reference before it would conclude that the taxpayer's procedural rights under the statute had been triggered. Rather, it indicated that Bothke could challenge the correction merely by "let [ting] us know if you believe that the balance due is incorrect."
Bothke is clearly not without fault in the creation of this situation in view of the manner in which he prepared his 1977 tax return. The Service, however, has efficient methods for dealing with such returns. Our decision will not hamper it from pursuing those proper methods in similar situations. Cf. Fullerton Market Cold Storage Co. v. Cullerton, 582 F.2d 1071 at 1078 (7th Cir. 1978).
Bothke emphasized below that he was suing agent Terry individually for allegedly acting in violation of legal duties and was not suing the United States. At a hearing the magistrate rejected Terry's sovereign immunity defense, and correctly so. Defendant's argument, that the suit was really against the government because 26 U.S.C. § 7423 authorizes reimbursement of IRS agents for all damages recovered from them for acts done in performance of official duties, was specious. Cf. also United States v. Nunnally Investment Co., 316 U.S. 258, 260, 62 S. Ct. 1064, 1065, 86 L. Ed. 1455 (1942).
The Fifth Circuit's attempt to overrule this case insofar as it may have implied a right of action under the due process clause of the Fifth Amendment was reversed by the Supreme Court. Davis v. Passman, 571 F.2d 793, 801 (5th Cir. 1978), reversed, 442 U.S. 228, 99 S. Ct. 2264, 60 L. Ed. 2d 846 (1979)
One other Ninth Circuit case, in a footnote, cited Bershad v. Wood as an example of a case granting absolute quasi-judicial immunity to some officials other than judges. Pomerantz v. County of Los Angeles, 674 F.2d 1288, 1291 n. 1 (9th Cir. 1982). The immunity in Bershad was not quasi-judicial, but the then-existing absolute official immunity for executive officers. The Pomerantz court did not discuss the intervening changes in the law wrought by Scheuer v. Rhodes, Butz, Mark v. Groff, and related cases. We do not, however, criticize the holding in Pomerantz that jury administrators rendering decisions as to eligibility of prospective jurors were cloaked with quasi-judicial immunity
Terry has in the alternative suggested briefly that the procedure used was proper because no determination of a prior notice of deficiency is required when the assessment is based on the return as filed. The authority offered is Collins v. United States, 45 A.F.T.R.2d 616 (E.D. Mo. Dec. 3, 1979). In that case, the taxpayers had self-assessed the taxes but failed to pay them. Under the facts here, this argument is frivolous. As the magistrate noted, when Terry's counsel suggested this below, "if you read [Bothke's Form 1040] literally it indicates that the $1,100 should come back to him. It doesn't indicate that he owes anything."
Summary collection procedures have been upheld against due process arguments where the taxpayer had an opportunity for a post-seizure notice and hearing. E.g., Phillips v. Commissioner, 283 U.S. 589, 593-601, 51 S. Ct. 608, 610-13, 75 L. Ed. 1289 (1931); Bomher v. Reagan, 522 F.2d 1201, 1202 (9th Cir. 1975); Tavares v. United States, 491 F.2d 725, 726 (9th Cir. 1974), cert. denied, 420 U.S. 925, 95 S. Ct. 1120, 43 L. Ed. 2d 394 (1975); cf. Fuentes v. Shevin, 407 U.S. 67, 91-92 & n. 24, 92 S. Ct. 1983, 2000 & n. 24, 32 L. Ed. 2d 556 (1972) (summary seizure proper when "essential that governmental needs be immediately satisfied") (quoting Phillips, 283 U.S. at 597, 51 S. Ct. at 611) (emphasis by the Shevin Court).
Moreover, the Supreme Court has said that in some instances due process concerns may be implicated in tax seizures. Commissioner v. Shapiro, 424 U.S. 614, 629-32 & nn. 11-12, 96 S. Ct. 1062, 1071-73 & nn. 11-12, 47 L. Ed. 2d 278 (1976).
The Fifth Circuit has held that in circumstances similar to those here, a cause of action could be implied under the due process clause of the Fifth Amendment. 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, 100 S. Ct. 1851, 64 L. Ed. 2d 271 (1980). The Sixth Circuit appears to have done so. Hall v. United States, 704 F.2d at 249 n. 1.
Moreover, several courts have suggested that though federal officials are absolutely immune from liability for state and common-law torts, they should not be absolutely immune if the plaintiff relies on a cause of action under federal law short of a constitutional claim. See, e.g., Lawrence v. Acree, 665 F.2d 1319, 1326 & n. 11 (D.C. Cir. 1981). See also Harlow, 102 S. Ct. at 2738 (good faith immunity in Bivens suits applies insofar as conduct does not violate "clearly established statutory or constitutional rights of which a reasonable person would have known") (emphasis supplied). Bothke alleges violations of federal statutes that accorded him specific rights.
Another issue, raised but not reached below and not argued on appeal, is whether a Bivens action should be barred because Bothke may have had an alternative remedy. Compare Bivens, 403 U.S. at 396-97, 91 S. Ct. at 2004-05, to Bush v. Lucas, --- U.S. ----, 103 S. Ct. 2404, 76 L. Ed. 2d 648 (1983) and Carlson v. Green, 446 U.S. 14, 100 S. Ct. 1468, 64 L. Ed. 2d 15 (1980).
Terry suggested below that Bothke might have been able to get an injunction under an exception to the prohibition on enjoining tax collection, see 26 U.S.C. §§ 6213(a), 6213(b) (2), 7421(a), because the IRS allegedly failed to give him the statutorily required notices. However, cases seem to have limited the preclusion question to whether the plaintiff had available certain alternative retrospective remedies, not whether the plaintiff might have prevented the violation with an injunction sought on the assumption that government officials would act illegally in the future.