Court Opinion

ID: 8206805
Source: CourtListenerOpinion
Date Created: 2022-09-16 00:00:28.986791+00
Date Added: 2024-06-11T16:41:19.690061
License: Public Domain

Case: 21-11104         Document: 00516473202           Page: 1    Date Filed: 09/15/2022

              United States Court of Appeals
                   for the Fifth Circuit                                 United States Court of Appeals
                                                                                  Fifth Circuit

                                                                                FILED
                                                                       September 15, 2022
                                        No. 21-11104
                                                                           Lyle W. Cayce
                                                                                Clerk
   James Franklin,

                                                                 Plaintiff—Appellant,

                                            versus

   United States; Charles Rettig, in his official capacity as
   Commissioner of Internal Revenue; Antony Blinken, Secretary, U.S.
   Department of State; Janet Yellen, Secretary, U.S. Department of
   Treasury,

                                                             Defendants—Appellees.

                      Appeal from the United States District Court
                          for the Northern District of Texas
                               USDC No. 3:20-CV-1303

   Before King, Elrod, and Southwick, Circuit Judges. *
   King, Circuit Judge:
          James Franklin appeals from the dismissal of his claims challenging
   tax penalties assessed against him, as well as the revocation of his passport
   pursuant to those penalties. He also appeals from the denial of an award of

          *
              Judge Elrod concurs in the judgment.
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                                     No. 21-11104

   attorneys’ fees under the Freedom of Information Act. For the following
   reasons, we AFFIRM.
                                          I.
          The Internal Revenue Service (IRS) found that James Franklin had
   failed to file accurate tax returns and had not reported a foreign trust of which
   he was the beneficial owner, and so it assessed penalties against him. Those
   penalties, assessed under 26 U.S.C. § 6677 on July 18, 2016, totaled
   $421,766. In 2018, the IRS began its collection efforts against Franklin, filing
   a federal tax lien and later levying on Franklin’s Social Security benefits. The
   IRS also certified to the Department of State that Franklin had a “seriously
   delinquent tax debt” per 26 U.S.C. § 7345 (enacted under the Fixing
   America’s Surface Transportation (“FAST”) Act), which led the State
   Department to revoke Franklin’s passport.
          In response to the penalties, Franklin, through counsel, filed a
   Freedom of Information Act (“FOIA”) request seeking: “(1) ‘All relevant
   files and their contents . . . for the tax periods 1998 through 2017, including
   the entire administrative file relating to any auditor investigation’ and
   (2) ‘All relevant files, reports, letters, documents, or workpapers related to
   any penalty assessment under I.R.C. § 6677.’” In response, the IRS provided
   several documents from Franklin’s administrative file and tax records;
   according to Franklin, those documents demonstrate that the IRS did not
   comply with statutory procedural requirements that must be satisfied before
   the assessment of penalties under § 6677.
          Franklin did not file an administrative appeal of the IRS’s response to
   his FOIA request; instead, he took the response at face value and assumed
   that the IRS had not complied with the procedural requirements (namely,
   that the penalties be approved in writing by a supervisor of the determining
   agent under 26 U.S.C. § 6751(b)). Franklin therefore filed an offer-in-

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   compromise for a nominal sum, asserting a doubt of liability based on the
   purported procedural deficiencies. The IRS returned the offer without
   processing it, sending two separate letters that said respectively that (1) the
   IRS lacked jurisdiction to process the offer because “[i]t is regarding a foreign
   return and/or related issues,” and (2) “[o]ther investigations are pending
   that may affect the liability sought to be compromised or the grounds upon
   which it was submitted,”. Franklin then sent a second offer-in-compromise
   based on the same grounds and offering the same nominal settlement.
          After these offers-in-compromise were unsuccessful, Franklin filed
   this suit. He asserted various claims related to the alleged procedural failure
   under § 6751(b) (collectively, the “§ 6751(b) Claims”); those claims were
   brought under 26 U.S.C. §§ 7345, 7432, and 7433; 28 U.S.C. § 2410; the
   Declaratory Judgment Act; and the Administrative Procedure Act. Franklin
   also challenged the constitutionality of the FAST Act’s passport-revocation
   scheme, asserting that it violated his rights under the Fifth Amendment.
   Franklin later amended his complaint to seek attorneys’ fees under FOIA
   after the Government, in its Motion for Partial Dismissal, attached exhibits
   that had not been produced in response to Franklin’s FOIA request, which
   the Government asserted demonstrated that the penalties had been approved
   by the relevant supervisor. In addition to its assertions that the procedural
   requirements had been satisfied, the Government’s motion also sought
   dismissal of the § 6751(b) Claims for lack of jurisdiction; the Government
   later updated its motion and sought either dismissal or summary judgment
   on Franklin’s constitutional and FOIA claims.
          The district court dismissed all of Franklin’s claims. It first found that
   it lacked jurisdiction over each of the various § 6751(b) claims, finding that
   each was a prohibited collateral attack on the existence or validity of
   Franklin’s tax liability for which the United States had not waived sovereign
   immunity. While the district court found that it did have jurisdiction over

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   Franklin’s Fifth Amendment challenge to the FAST Act’s passport-
   revocation scheme, it also dismissed that claim after finding that the law was
   constitutional under rational-basis review. 1 Lastly, the district court found
   that while Franklin was eligible for attorneys’ fees under FOIA (because his
   lawsuit prompted the IRS to release documents it alleged showed compliance
   with § 6751(b)’s procedural requirements), he was not entitled to an award
   of fees. Franklin timely appeals.
                                             II.
          We first consider whether the district court was correct to find that it
   lacked subject-matter jurisdiction over Franklin’s various claims challenging
   the tax penalties. “We review questions of subject matter jurisdiction,
   including sovereign immunity determinations, de novo.” Daniel v. Univ. of
   Tex. Sw. Med. Ctr., 960 F.3d 253, 256 (5th Cir. 2020). When considering
   whether the United States has waived its default sovereign immunity,
   Franklin “bear[s] the burden of showing Congress’s unequivocal waiver.”
   Freeman v. United States, 556 F.3d 326, 334 (5th Cir. 2009) (quoting St.
   Tammany Parish ex rel. Davis v. Fed. Emergency Mgmt. Agency, 556 F.3d 307,
   315 (5th Cir. 2009)). His claims must be “brought in exact compliance with
   the terms of a statute under which the sovereign has consented to be sued.”
   Lewis v. Hunt, 492 F.3d 565, 571 (5th Cir. 2007) (quoting Hussain v. Bos. Old
   Colony Ins. Co., 311 F.3d 623, 629 (5th Cir. 2002)).
          Franklin’s panoply of claims share a common thread: he asserts he is
   entitled to damages for various IRS actions because they were based on
   penalty assessments that were invalid ab initio due to the IRS’s failure to

          1
            The district court also found that it did not have jurisdiction over a separate
   challenge Franklin raised to the penalties themselves under the Eighth Amendment’s
   Excessive Fines Clause, which Franklin does not appeal.

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   follow § 6751(b)’s procedural requirements. The district court was correct to
   find that each of these claims was a prohibited attempt to collaterally attack
   the actual penalties assessed. Under the Anti-Injunction Act, Congress has
   provided that, absent limited exceptions, “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). Thus, when challenging the
   validity of a tax liability, the general rule is that a taxpayer must “pay first and
   litigate later.” Flora v. United States, 362 U.S. 145, 164 (1960). “[O]nce a tax
   has been assessed, [a] taxpayer . . . has no power to prevent the IRS from
   collecting it;” instead, the taxpayer must “pay the tax in full, and then sue
   for a refund.” Jones v. United States, 889 F.2d 1448, 1449–50 (5th Cir. 1989).
   Courts have zealously guarded this rule, recognizing the importance of the
   government’s ability “to assess and collect taxes alleged to be due without
   judicial intervention” so that “the United States is [assured] of prompt
   collection of its lawful revenue.” Enochs v. Williams Packing & Navigation
   Co., 370 U.S. 1, 7 (1962).
          We do not shirk that duty today. Each of Franklin’s claims impliedly
   challenges the validity of the tax assessment itself. It does not matter that the
   procedural deficiency Franklin alleges occurred can technically be construed
   as occurring in a separate examination phase or can be characterized as
   occurring “pre-assessment.” The Supreme Court has clarified these discrete
   steps, see Direct Mktg. Ass’n v. Brohl, 575 U.S. 1, 9–10 (2015), and held that a
   challenge to reporting requirements backed by a tax penalty can proceed, CIC
   Servs., LLC v. IRS, 141 S. Ct. 1582, 1588–89 (2021). But it has reaffirmed that
   a challenge to the assessment or collection of a tax itself is still barred. See Id.
   at 1589.
          Thus, the distinctions of the various phases of the tax process found
   in those cases do not aid Franklin here. This is so because Franklin’s case is
   based on a cascade of inferences that necessarily includes a challenge to the

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   assessment itself: proper procedures were not followed, therefore the IRS
   was not allowed to assess the penalties, therefore the assessed penalties were
   invalid, and therefore the IRS engaged in a cavalcade of actions based on the
   invalid penalties for which Franklin is owed damages. Franklin cannot state
   a claim without following that line of logic, as his challenges are all based on
   the alleged procedural deficiency that rendered the assessment void from the
   start. And that chain of reasoning features a defective link: it is based on an
   assumption that the assessment itself was void. Thus, his claims represent a
   challenge to the validity of the assessment over which the courts do not have
   jurisdiction.
          A look at each of Franklin’s claims confirms that conclusion. His
   § 7432 claim seeks damages for failure to release a lien—because the lien is
   based on penalties he states are invalid. His § 7433 claim seeks damages for
   wrongful collection activities—namely, trying to collect invalidly assessed
   penalties. His § 2410 claim seeks to quiet title to the property subject to the
   IRS’s lien—because the lien stems from allegedly invalid penalties. He seeks
   a declaratory judgment and consideration under the Administrative
   Procedure Act—that the penalty assessments are invalid due to the
   procedural deficiencies. And, in addition to his constitutional challenge to
   the revocation of his passport, he seeks review of the certification that he has
   a “seriously delinquent tax debt”—because the tax debt is based on allegedly
   invalid penalties. At every turn, Franklin seeks to overturn the penalties,
   restrain collection of them, or otherwise cast doubt on the validity of the
   assessment. The government has not waived its sovereign immunity for
   those challenges, and so the district court was correct to dismiss them for lack
   of jurisdiction.

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                                          III.
          We turn to Franklin’s challenge to the constitutionality of the FAST
   Act’s passport-revocation scheme. The district court dismissed that claim
   under Rule 12(b)(6). “We review a district court’s ruling on a motion to
   dismiss de novo, ‘accepting all well-pleaded facts as true and viewing those
   facts in the light most favorable to the plaintiffs.’” Anderson v. Valdez, 845
   F.3d 580, 589 (5th Cir. 2016) (quoting Dorsey v. Portfolio Equities, Inc., 540
   F.3d 333, 338 (5th Cir. 2008)).
          Franklin’s constitutional claim is based on his substantive due process
   rights under the Fifth Amendment. Substantive due process “protects
   individual liberty against ‘certain government actions regardless of the
   fairness of the procedures used to implement them.’” Collins v. City of
   Harker Heights, 503 U.S. 115, 125 (1992) (quoting Daniels v. Williams, 474
   U.S. 327, 331 (1986)).
          Generally, liberty interests protected by the Fifth Amendment are
   considered under one of two standards: strict scrutiny and rational-basis
   review. If a right is fundamental, strict scrutiny applies. Washington v.
   Glucksberg, 521 U.S. 702, 720–21 (1997). To survive strict scrutiny, a
   governmental restriction of a fundamental right must be “narrowly tailored
   to serve a compelling state interest.” Id. at 721 (quoting Reno v. Flores, 507
   U.S. 292, 302 (1993)). If a right is not fundamental, then rational review is
   applied, and the restriction at issue survives as long as it is “rationally related
   to a legitimate government interest.” Reyes v. N. Tex. Tollway Auth., 861 F.3d
   558, 561 (5th Cir. 2017).
          In turn, to decide if the implicated right is fundamental, that right
   must be “carefully describe[d].” Malagon de Fuentes v. Gonzales, 462 F.3d
   498, 505 (5th Cir. 2006). In the instant case, the district court correctly
   defined the right as “the right to international travel.” We next consider

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   whether that right is “‘deeply rooted in this Nation’s history and
   tradition’ . . . and ‘implicit in the concept of ordered liberty,’ such that
   ‘neither liberty nor justice would exist if [the right was] sacrificed.’”
   Glucksberg, 521 U.S. at 721 (first quoting Moore v. City of E. Cleveland, 431
   U.S. 494, 503 (1977), then quoting Palko v. Connecticut, 302 U.S. 319, 325,
   326 (1937)). The Supreme Court has cautioned that, because declaring a right
   as fundamental “to a great extent . . . place[s] the matter outside the arena of
   public debate and legislative action,” courts should “exercise the utmost care
   whenever [they] are asked to break new ground in this field.” Id. at 720
   (quoting Collins, 503 U.S. at 125).
          Given the Supreme Court’s guidance on restrictions to international
   travel, we cannot find that it is a fundamental right such that restrictions on
   it merit strict scrutiny. It is true that three of the Supreme Court’s cases
   hinted at the possibility that the right to international travel is fundamental.
   In Kent v. Dulles, the Court stated that “[t]he right to travel is a part of the
   ‘liberty’ of which the citizen cannot be deprived without the due process of
   law under the Fifth Amendment” and that “[f]reedom of movement is basic
   in our scheme of values.” 357 U.S. 116, 125–26 (1958). In Aptheker v. Secretary
   of State, the Court held that a law restricting the grant of passports to
   members of the Communist Party was an unconstitutional violation of the
   petitioner’s rights under the Fifth Amendment. 378 U.S. 500, 504–05 (1964).
   In doing so, the Court stated that the law “swe[pt] too widely and too
   indiscriminately across the liberty guaranteed in the Fifth Amendment” and
   noted that “Congress ha[d] within its power ‘less drastic’ means of achieving
   the congressional objective of safeguarding our national security.” Id. at 512–
   14 (quoting Shelton v. Tucker, 364 U.S. 479, 488 (1960)). And in Zemel v.
   Rusk, the Court seemed to compare the right to international travel favorably
   to the fundamental right of interstate travel; it upheld a ban on travel to Cuba
   based on “the weightiest considerations of national security,” analogizing to

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   the fact that the “freedom [of interstate travel] does not mean that areas
   ravaged by flood, fire or pestilence cannot be quarantined.” 381 U.S. 1, 15–16
   (1965). The Court stated that just as interstate travel can sometimes be
   abridged to protect “the safety and welfare of the area or the Nation as a
   whole[,] [s]o it is with international travel.” Id.
             However, later Supreme Court decisions have consistently and
   decisively refuted these earlier suggestions, going to great pains to separate
   the right to international travel from the fundamental right to interstate
   travel. In Califano v. Aznavorian, the Court noted that its past cases “often
   pointed out the crucial difference between the freedom to travel
   internationally and the right of interstate travel.” 439 U.S. 170, 176 (1978).
   Therefore, the Court made clear that regulations affecting international
   travel are “not to be judged by the same standard applied to laws that penalize
   the right of interstate travel.” Id. at 177. In so holding, the Court further
   explained that “[t]he constitutional right of interstate travel is virtually
   unqualified” while “the ‘right’ of international travel has been considered to
   be no more than an aspect of the ‘liberty’ protected by the Due Process
   Clause of the Fifth Amendment.” Id. at 176 (quoting Califano v. Torres, 435
   U.S. 1, 4 n.6 (1978)). “As such this ‘right,’ the Court has held, can be
   regulated within the bounds of due process.” Id. (quoting Torres, 435 U.S. at
   4 n.6).
             The court reiterated this distinction when considering the revocation
   of the passport of a former CIA officer who threatened to reveal state secrets
   in Haig v. Agee, stating again that “the freedom to travel outside the United
   States must be distinguished from the right to travel within the United
   States.” 453 U.S. 280, 306 (1981). And it hammered home the point in Regan
   v. Wald, explicitly stating that any implication in Kent that the right to
   international travel was concomitant with the right to interstate travel had
   been “rejected in subsequent cases.” 468 U.S. 222, 241 n.25 (1984). The

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   Supreme Court also noted that Kent and Aptheker concerned restrictions on
   travel based on a person’s beliefs and associations; their discussions of the
   purported fundamental right to international travel thus hinged on protecting
   rights derived from the First Amendment that were not implicated in later
   cases (and that are not implicated here). See Haig, 453 U.S. at 304; Regan,
   468 U.S. at 241 (“First Amendment rights . . . controlled in Kent and
   Aptheker.”). Taken together, these decisions of the Supreme Court make
   clear that the right (or, more aptly, freedom) to travel internationally is not
   fundamental, and thus that restrictions on international travel like the FAST
   Act’s passport-revocation scheme are not to be judged under strict scrutiny.
          We note that the above conclusion does not necessarily end the
   analysis. Franklin is correct in his assertion that the right to international
   travel is not a new creation unmoored from our past, but instead can be traced
   through the ages from Magna Carta to Blackstone to the Declaration of
   Independence to the modern Universal Declaration of Human Rights.
   Recognizing that fact, two esteemed members of our sister circuits have
   concluded that the right to international travel holds a place somewhere
   between the two poles that anchor our substantive-due-process
   jurisprudence and should be considered under intermediate scrutiny. Maehr
   v. U.S. Dep’t of State, 5 F.4th 1100, 1115 (10th Cir. 2021) (Lucero, J.,
   concurring in the judgment) (applying intermediate scrutiny to the FAST
   Act’s passport-revocation scheme); Eunique v. Powell, 302 F.3d 971, 978 (9th
   Cir. 2002) (McKeown, J., concurring) (applying intermediate scrutiny to a
   law revoking passports of those seriously in arrears on child-support
   payments). Intermediate scrutiny requires that the challenged restriction
   “must serve important governmental objectives and must be substantially
   related to achievement of those objectives.” Craig v. Boren, 429 U.S. 190, 197
   (1976).

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          However, we need not decide whether restrictions that effectively
   deprive an individual of the ability to travel outside our borders, like the
   passport-revocation scheme before us, should be judged under rational-basis
   review or intermediate scrutiny. Even under the higher standard of
   intermediate scrutiny, the FAST Act’s passport-revocation scheme is
   constitutional. The government’s interest in collecting taxes, which animates
   the FAST Act’s passport-revocation scheme, is undoubtedly an important
   one. See, e.g., Hernandez v. Comm’r, 490 U.S. 680, 699 (1989) (“[E]ven a
   substantial burden would be justified by the ‘broad public interest in
   maintaining a sound tax system’” (quoting United States v. Lee, 455 U.S. 252,
   260 (1982))); Flora, 362 U.S. at 154 (“It is essential to the honor and orderly
   conduct of the government that its taxes should be promptly paid[.]”). The
   passport-revocation scheme is also clearly connected to that goal: delinquent
   taxpayers will be well-incentivized to pay the government what it is owed to
   secure return of their passports, and those same taxpayers will find it much
   more difficult to squirrel away assets in other countries if they are effectively
   not allowed to legally leave the country.
          The FAST Act’s passport-revocation scheme also does not sweep
   beyond what is necessary to achieve Congress’s goal of trying to recoup the
   $5.8 billion or more in delinquent taxes owed to the government. The
   government is not authorized to seize the passport of any person who owes
   any taxes. Instead, the scheme is focused on those with serious tax debts and
   provides several procedural safeguards through both the tax process and,
   ultimately, through a cause of action should the certification itself be
   erroneous. Congress was within its rights to provide the IRS another arrow
   in its quiver to support its efforts to recoup seriously delinquent tax debts.
   And, importantly, what Congress provided was an arrow, not a bazooka. Its
   chosen tool is carefully aimed at the problem, not fired indiscriminately with
   grave risk of collateral damage to the rights of those not covered by the

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   scheme. Under even intermediate scrutiny, the passport-revocation scheme
   is constitutional. See Eunique, 302 F.3d at 978 (McKeown, J., concurring)
   (upholding a similar passport-revocation scheme for those in serious arrears
   on child-support payments under intermediate scrutiny). The district court
   was correct to dismiss Franklin’s challenge.

                                              IV.
          We last consider whether the district court correctly denied Franklin
   attorneys’ fees related to his FOIA request. A district court’s decision on
   whether to award attorneys’ fees under FOIA is reviewed for abuse of
   discretion. Batton v. IRS, 718 F.3d 522, 525 (5th Cir. 2013). An award of fees
   under FOIA 2 is considered under a two-pronged test: first considering fee
   eligibility and second considering entitlement to the award of fees. Id. “The
   eligibility prong asks whether a plaintiff has substantially prevailed and thus
   may receive fees. If so, the court proceeds to the entitlement prong and
   considers a variety of factors to determine whether the plaintiff should receive
   fees.” Id. (quoting Brayton v. Office of the U.S. Trade Representative, 641 F.3d
   521, 524 (D.C. Cir. 2011)). When considering entitlement to fees, courts look
   to four factors: “(1) the benefit to the public deriving from the case; (2) the
   commercial benefit to the complainant; (3) the nature of the complainant’s
   interest in the records sought; and (4) whether the government’s
   withholding of the records had a reasonable basis in law.” Id. at 527 (quoting
   Texas v. ICC, 935 F.2d 728, 730 (5th Cir. 1991)).
          The district court did not abuse its discretion in declining to award
   fees. Franklin’s lawsuit is far afield from the purposes for which FOIA, and
   its attorneys’ fees provision, were designed. There is no public value in the
   information, and no value for anyone other than Franklin. Instead, Franklin

          2
              5 U.S.C. § 552(a)(4)(E)(i)

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   only sought the information to aid him in his personal fight with the IRS
   regarding his tax penalties. When considering FOIA attorneys’ fees, we have
   generally looked with disfavor on cases with no public benefit. This is
   especially true when the information seeker was motivated by a private
   commercial interest (such as reversing sizeable tax penalties to avoid paying
   hundreds of thousands of dollars to the government). See, e.g., ICC, 935 F.2d
   at 733 (“We are persuaded that the information ordered disclosed in Texas’s
   suit is so devoid of public benefit that the trial court was within its discretion
   in denying Texas’s request for fees.”); Blue v. Bureau of Prisons, 570 F.2d
   529, 533–34 (5th Cir. 1978) (“Thus the factor of ‘public benefit’ does not
   particularly favor attorneys’ fees where the award would merely subsidize a
   matter of private concern; this factor rather speaks for an award where the
   complainant’s victory is likely to add to the fund of information that citizens
   may use in making vital political choices.”).
          That is the case here. Our collective treasury of knowledge is made no
   richer through knowing whether or not an IRS supervisor signed forms
   authorizing the penalties assessed against Franklin. The public gains no
   benefit from that information; only Franklin could as he seeks to overturn
   those penalties. The district court did not abuse its discretion in deciding not
   to award him attorneys’ fees.

                                          V.
          For the foregoing reasons, we AFFIRM.

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