Opinion ID: 596389
Heading Depth: 2
Heading Rank: 1

Heading: Johnson's Claim Under the FTCA

Text: 20 The FTCA constitutes a general waiver of the federal government's sovereign immunity from tort claims. 9 Under the Act, suits against the United States are authorized 21 for injury or loss of property, or personal injury or death caused by negligent or wrongful act or omission of any employee of the Government while acting within the scope of his office or employment, under circumstances where the United States, if a private person, would be liable to the claimant in accordance with the law of the place where the act or omission occurred. 10 22 The Act also provides that the United States will be liable in tort in the same manner and to the same extent as a private individual under like circumstances. 11 23 To recover under the FTCA, Johnson must be able to succeed against the government in a state law tort cause of action. Johnson's theory of state law negligence is: (1) in Texas, violation of a statute is negligence per se when a member of the class of persons protected by the statute is injured by the violation; (2) the government owed him a duty, under 26 U.S.C. § 6103, not to release any of his confidential tax information; (3) through its agents, the government breached its duty to Johnson under § 6103 by issuing protected information in the press release; and (4) the breach of the duty established by § 6103 caused Johnson's injury. 24 The government counters that the breach of a federal statute, here § 6103, cannot establish liability under the FTCA. As far as it goes that statement is irrefutable, but it stops short of addressing the full import of Johnson's position. Johnson does not contend simplistically that the violation of § 6103 ipso facto creates FTCA liability. Rather, he asserts that § 6103 sets a standard of behavior and that, under Texas tort law, the violation of such a statutory standard is negligence per se when one who is afforded protection by the standard is damaged by its violation. 25 The first question this court must answer, then, is whether Johnson's premise that Texas recognizes a tort in this situation is correct. The answer is a resounding yes. The Texas Supreme Court has held repeatedly that [t]he unexcused violation of a statute setting an applicable standard of care constitutes negligence as a matter of law if the statute is designed to prevent an injury to the class of persons to which the injured party belongs. 12 Johnson was clearly a member of the class that the statute was written to protect, 13 and none of the recognized excuses for violation of a protective statute apply in this case. 14 26 Unquestionably, § 6103 creates a duty and in so doing sets an applicable standard of care. It imposes on the government a general duty of confidentiality as to information disclosed made by taxpayers. Section 6103 broadly prohibits public disclosure of such information. That prohibition is subject to but a handful of narrow exceptions. Section 6103 provides: 27 (a) General rule. 28 Returns and return information shall be confidential, and except as authorized by this title-- 29 (1) no officer or employee of the United States ... shall disclose any return or return information obtained by him in any manner in connection with his service as such an officer or employee or otherwise or under the provisions of this section. 30 Return information is defined as a taxpayer's identity, the nature, source, or amount of his income, ... deficiencies, ... whether the taxpayer's return was, is being, or will be examined or subject to other investigation or processing. 15 And taxpayer identity is defined as the name, mailing address, taxpayer identifying number, or any combination thereof. 16 31 Considering this general information, we must answer three specific questions to determine whether Johnson's theory can stand on appeal: (1) Did the agents' conduct violate § 6103?; (2) if so, did that violation amount to negligence under Texas tort law?; and (3) if so, did that negligence proximately cause the Johnsons' injuries? We find positive responses for all of these questions.
32 The threshold question here is whether a violation of § 6103 occurred at all. Johnson asserts that by releasing the protected information about him, the IRS agents clearly violated § 6103. Some of the information released about Johnson had been discussed in his tax evasion proceeding, but other information about him was neither discussed in that proceeding nor otherwise appeared in the record of the court. Although provisions of § 6103 exempt certain disclosures, 17 no provision specifically exempts disclosures such as those made in the instant case. 33 The government urges this court to adopt the rule of the Ninth Circuit that once information is disclosed in open court or is in some other manner stripped of the confidentiality requirement of § 6103, the IRS may release that information with impunity. 18 In Lampert v. United States, the Ninth Circuit stated that Congress sought to prohibit only the disclosure of confidential tax return information and held that [o]nce tax return information is made a part of the public domain, the taxpayer may no longer claim a right of privacy in that information. 19 Thus, that circuit holds that once information is disclosed in a criminal proceeding against a taxpayer, the IRS may release that information to the press without violating § 6103. 34 Johnson counters by urging us not to accept the Ninth Circuit's rule but instead to adopt the view of either the Tenth or the Seventh Circuits on this issue. The Tenth Circuit holds that information protected by § 6103 never loses its confidentiality, even when it is disclosed in a court record. 20 The Seventh Circuit holds that the immediate source of the information, at least in a cases of information being taken from a court opinion or record, might control confidentiality. Specifically, the Seventh Circuit has held that when the facts disclosed are gleaned from court records, no § 6103 violation occurs. 21 The Seventh Circuit did not speculate, however, as to what the outcome might be in a case in which the immediate source of the information is the confidential records of the taxpayer but the information can also be found in a court record. Neither did that court speculate as to the possible outcome of a case in which the immediate source of the information is the tax records and the information is not to be found in a court record. 22 35 The circumstances of the instant case are such that we are not required to adopt a rule from among those of the several circuits as the one henceforth to be applied in this circuit. Such a choice is unnecessary here because we are faced with a fact pattern unlike any yet ruled on in one of those other circuits. Here, the immediate source of the information was the taxpayer's confidential records and the information was not contained in a court record. Thus, it never lost its entitlement to confidentiality. Although we make no rule selection, we nevertheless observe that even if we were to follow the Ninth Circuit's rule as typified in its Lampert decision (which we do not), the disclosures made by the IRS agents in the instant case would still constitute a violation of § 6103. 36 Both of the press releases about Johnson contained more information than was contained in the official record of his plea and sentencing hearing. True, several items contained in the press releases (Johnson's first and last name, the guilty plea to one count of tax evasion, the sentence imposed, and the fact that he was an executive with American National) were part of the trial record. But several other items contained in those releases (Johnson's middle initial (he was known as E.E. to many people), his age, his home address, and his official job title with American National 23 ) were not discussed at his arraignment or sentencing or placed in any public record. The government concedes that additional information about Johnson had been taken from his confidential taxpayer file or from the IRS investigation of Johnson, and inserted in the press release. 37 The Lampert court held that the fact that the information was contained in a public record, in effect, prevented its release from constituting a violation of § 6103. In the instant case, by contrast, significant portions of the released information were not contained in any public record, so even under Lampert no convincing argument can be made that the entire release was shielded and did not violate § 6103.
38 We find inescapable the conclusion that the IRS agents' violations of the standard of behavior and thus the duty established in § 6103 amounted to negligence under Texas tort law--if not either reckless disregard or deliberate violation of that standard. Even under the relaxed Lampert rule, which again we do not adopt, the IRS agents' activities actionably violated § 6103's standard. After Johnson pleaded guilty, special agent Stone called Powers to ascertain the results of the conviction and plea arrangement. Immediately following that discussion, in which Powers informed Stone of all terms of the plea arrangement, Stone nevertheless took it upon himself to contact Public Affairs Officer Sally Sassen, report Johnson's conviction on his plea and, without mentioning the proscription of publicity, have a news release prepared. Sassen took the information from Stone, wrote up the release, and had it disseminated for publication without ever checking its accuracy or the propriety of the sources of its information. The release was then approved for publication by Stone, who knew better, and by Michael Orth, the Branch Chief for Criminal Investigation, who also knew better or at least should have. 39 Although Stone did not testify in the FTCA case, he stated in a deposition that Powers had approved the publication of the release. But the district court made an explicit finding that Stone lied about obtaining Power's approval. 24 In fact, Powers had told Johnson's attorney in a taped telephone conversation credited by the court that if the news release damaged Johnson, he should sue the hell out of them. 25 40 There is no evidence in the record that any of the IRS personnel involved in creating or authorizing the press release checked to see whether the information contained in it appeared in the record of the tax evasion proceedings. Even if an agent tries to comply only with the relaxed standard of Lampert, he or she must, at a minimum, verify that the information in the release has been disclosed in the court proceedings or in some other public record. 41 At trial, Johnson testified, and the court accepted, that during an early meeting between Johnson and an Agent O'Connell, one of the investigators initially assigned to the case, O'Connell candidly told Johnson thatthe only favorable publicity that the Internal Revenue Service can get is when they bring a big one down and he said your name is a household word to thousands of people and I [Johnson] said do you mean to tell me that you think you can take me to a court of law and get a conviction on me with what you have from my records? He [O'Connell] said, probably not, but I can get your name in the newspapers and that will have accomplished my purpose. 26 42 This trophy hunting mentality is apparent in the actions of special agent Stone in his procuring of the news release through agent Sassen. Although both of them must have been aware of § 6103's stern strictures on disclosure of taxpayer information, they consciously effected the release of information coming directly from Johnson's taxpayer record without attempting to determine whether such information was or was not a part of the public record. 27 The protected information was deliberately publicized despite the obviously extreme and comprehensive efforts of the prosecution to keep such details out of the public record during the judicial proceedings, and thereby out of public view. 43 The acts and omissions of the IRS agents directly and proximately caused the statutorily protected information twice to be released to the public at large--the second time after Johnson's lawyer vigorously alerted the IRS to the problem. Irrespective of what inevitably might have come out in company and shareholder literature, or even publicly, concerning Johnson's case, the pair of widely disseminated news releases were the first public disclosures of his conviction--publicity that immediately decimated Johnson's exemplary business career.
44 We do not believe that allowing a federal law, such as § 6103, to be used a standard of care is not contrary to the jurisprudence of this circuit. For example, in Moorhead v. Mitsubishi Aircraft International, Inc., 28 the federal procedures found in the FAA Flight Service Handbook were found to set the applicable standard of care under Texas tort law. Also, in Gibson v. Worley Mills, Inc., 29 we provided, in an alternative holding, that under Texas law, the sale of a certain seed mixture was negligence per se because the sale was forbidden by 7 U.S.C. §§ 1561, 1571 (1976). 30 45 Neither are we convinced that this holding is affected by United States v. Smith 31 or Tindall v. United States. 32 In Tindall, we construed Mississippi tort law and found that the government had no duty to warn anticipated users of the potential dangers of certain devices. 33 In footnote eight of that opinion, we rejected the proposition that a federal statute alone could establish a duty to the plaintiff. In the instant case, we remain consistent with Tindall as we do not find that § 6103 itself creates an actionable duty. We do find, though, that Texas tort law recognizes per se negligence when a statute or ordinance meant to protect a class of persons is violated--regardless of whether that statute or ordinance originates with federal, state, county, or city action. Similarly, we are satisfied that the result we reach today is not inconsistent with our decision in Smith, which construed Georgia tort law. 34 46 As we noted above, the government can only be held liable under the FTCA in the same manner and to the same extent as a private individual under like circumstances. 35 We find that there are state law torts analogous to the liability imposed on the government in the instant case. 36 In addition to such analogies, we find that it is possible for a private actor to be held civilly liable under Texas tort law for a violation of § 6103. 47 To grasp the full import of this point, it is necessary to focus on the operational or functional structure of § 6103, which is entitled Confidentiality and disclosure of returns and return information. Subsection (a) states the general rule that returns and return information shall be confidential, then specifies three broad categories of persons who are prohibited from disclosing such confidential information. First, subsection (1) of § 6103(a) prohibits federal officers and employees from making such disclosures Second, subsection (2) of § 6103(a) prohibits disclosure by state officers and employees as well as by those of certain local agencies, who have or had access to returns or return information under § 6103. Third, to complete the picture, subsection (3) of § 6103(a) prohibits disclosure by any person--no mention whatsoever of governmental employment or affiliation at any level--who has access to returns or return information under the aegis of various other subsections of § 6103. 48 Among the subsections listed in the catch-all provision of § 6103(a)(3) is subsection (n). That the reference to subsection (n) in § 6103(a)(3) implicitly if not explicitly covers persons of the private sector is confirmed in its recognition that, in the course of the government's obtaining services from the private sector, returns and return information may be disclosed to any person ... to the extent necessary in connection with the processing, storage, transmission, maintenance, repair, testing, and procurement of equipment, and the providing of other services, for the purpose of tax administration. 37 Obviously, then, § 6103(n) contemplates the likelihood, nay, certainty, that such confidential information will of necessity be disclosed to employees of private sector independent contractors providing goods and services to the Treasury Department and the IRS, and that the express prohibitory language of § 6103(a)(3) is needed to extend its proscription to such private sector employees. 38 49 Thus, for example, if in Texas a non-governmental computer programmer or computer maintenance worker were to be furnished or should otherwise encounter the kind of confidential return information the disclosure of which is prohibited by § 6103(a), his or her wrongful disclosure in violation of the prohibition clearly could subject such a worker to Texas tort liability analogous to subjecting the government to liability in the instant case. 39
50 Causation is the final element of Johnson's tort theory that we must investigate. The government insists that the district court erred in finding that publication of the news releases was the proximate cause of Johnson's damages. We disagree. 51 On uncontradicted evidence, the trial court found that Mr. Clay (the president and CEO of the company) and several other members of the Board of Directors (but not a majority of the Board), had been told by Johnson about his tax troubles and his impending guilty plea. Nevertheless, on the Monday following the Friday on which Johnson's guilty plea was entered, he was told by Clay that in his (Clay's) opinion it would be best if Johnson would remain with American National. But, after the press releases appeared, all of that changed. Clay obviously felt compelled to bring the question of Johnson's continued employment before the full Board of Directors, which in turn requested Johnson's resignation. The district court found that this, along with other evidence, demonstrated conclusively that the news releases were the proximate cause of Johnson's forced resignation and all job-related and personal losses that followed. 52 Findings of proximate cause by a district court, like other findings of fact, are reviewed by this court under the clearly erroneous standard. 40 The district court examined Johnson's record as an American National employee and executive, the nature of his and his wife's tax troubles, the fact that several of the board members had already known about his guilty plea but had not called for his resignation, and the additional fact that Johnson was not asked to resign, even after he pleaded guilty, until the board felt forced to request his resignation following publication of the press releases. 41 Reviewing all of the circumstances leading to Johnson's forced resignation, the district court found that the IRS's releases were the proximate cause of that and all of the disastrous consequences that flowed from it. After our own careful review of the record and of the district court's findings and reasoning, we are not prepared to say that the court's finding of proximate cause is clearly erroneous.