Shreiber v. Mastrogiovanni

Opinions of the United

2000 Decisions States Court of Appeals

for the Third Circuit

5-31-2000

Shreiber v. Mastrogiovanni

Precedential or Non-Precedential:

Docket 99-5230

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Filed May 31, 2000

UNITED STATES COURT OF APPEALS

FOR THE THIRD CIRCUIT

No. 99-5230

GERALD B. SHREIBER

v.

ROBERT A. MASTROGIOVANNI;

THE INTERNAL REVENUE SERVICE

GERALD B. SHREIBER,

Appellant

On Appeal from the United States District Court

for the District of New Jersey

(D.C. Civil No. 98-cv-02515)

District Judge: Honorable Joseph E. Irenas

Argued December 9, 1999

Before: NYGAARD, RENDELL, and ROSENN,

Circuit Judges

(Filed: May 31, 2000)

David N. Zeehandelaar, Esq.

(ARGUED)

Blank, Rome, Comisky & McCauley

One Logan Square

Philadelphia, PA 19103

Counsel for Appellant

Kenneth Rosenberg, Esq. (ARGUED)

David I. Pincus, Esq.

U.S. Department of Justice,

Tax Division

P.O. Box 502

Washington, DC 20044

Counsel for Appellees

OPINION OF THE COURT

RENDELL, Circuit Judge.

In this appeal we are called upon to decide whether a

federal cause of action should be implied to permit a

plaintiff to sue an employee of the Internal Revenue Service

("IRS") for damages resulting from a constitutional violation

claimed to have occurred in connection with the

assessment of a tax liability.1 We will affirm the order of the

District Court dismissing Shreiber's complaint for failure to

state a claim. In so doing, we join a number of other courts

of appeals holding that a damages remedy should not be

inferred against an IRS agent pursuant to Bivens v. Six

Unknown Federal Narcotics Agents, 403 U.S. 388 (1971), for

alleged constitutional violations, because Congress has

created an extensive scheme providing remedies to a

plaintiff complaining of the conduct of government officials

in connection with tax assessments and collections.

In 1995 and 1996, IRS agent Mastrogiovanni conducted

_________________________________________________________________

1. We have previously affirmed, without precedential effect, at least

three

district court rulings which have explained that a Bivens remedy should

not be inferred for allegations of unconstitutional actions by IRS agents.

See Barnard v. Pavlish, No. 97-CV-0236, 1998 WL 247768, at *8-9 (M.D.

Pa. Mar. 30, 1998), aff 'd, 187 F.3d 625 (3d Cir. 1999) (table)

(unpublished) (per curiam); Upper v. United States Gov't, No. 93-3596

(JHR), 1994 WL 660738, at *3 (D.N.J. Aug. 11, 1994), aff 'd, 74 F.3d

1229 (3d Cir. 1995) (table) (judgment order); Schiff v. Balas, Civ. A. No.

90-2007, 1991 WL 330204, at *2 (W.D. Pa. Oct. 2, 1991), aff 'd, 961

F.2d 1568 (3d Cir. 1992) (table) (judgment order). We noted, but did not

decide, a similar issue in Lojeski v. Boandl, 788 F.2d 196, 198 (3d Cir.

1986).

2

an audit of the federal income tax liabilities of Shreiber and

his wife for the 1991, 1992 and 1993 tax years. During the

investigation, Shreiber spoke with Mastrogiovanni on

several occasions and became familiar with

Mastrogiovanni's voice. Shreiber alleges that on August 11,

1995, Mastrogiovanni left a voice mail message at his place

of business stating in part: "Hey you Jew bastard piece of

shit. This is White Trash, I am going to get you." Thereafter,

when the audit was completed, the IRS sent a "30-day

letter" to the Shreibers, dated May 31, 1996, proposing

large increases in their tax liabilities for the years 1991,

1992 and 1993. The letter was prepared by J. J. Jennings,

District Director, on the basis of Mastrogiovanni's

recommendation.

Shreiber filed a timely protest of the adjustment with the

IRS, and proceeded to contest it through administrative

channels. It appears that he reached a tentative settlement

with the IRS in June of 1999, in which the IRS agreed to

reduce the amount of deductions it would deny and agreed

to an adjusted amount due.

On May 29, 1998, while the administrative appeal was

pending, Shreiber filed a civil rights action against

Mastrogiovanni and the IRS. Shreiber's complaint alleges

that he was "denied his constitutional right to a fair hearing

due to the religious discrimination of the IRS agent,"

evidenced by the voice mail message, and "deprived of

property without due process of law, in violation of his Fifth

Amendment rights." In his appellate briefs, Shreiber

extends his complaint to encompass an equal protection

violation based on religion and grounded in the Fifth

Amendment. He requests damages compensating him for

his attorney's fees and mental anguish as well as punitive

damages. The government filed a motion for summary

judgment, which the District Court actually treated as a

motion to dismiss.

The District Court dismissed the complaint on two

grounds. First, the District Court determined that Shreiber

could not state a claim upon which relief could be granted.

The District Court explained that Shreiber had conceded

that 26 U.S.C. S 7433 was limited to redressing violations of

the Internal Revenue Code and, thus, did not provide him

3

with a cause of action. The Court then considered whether

a Bivens remedy should be inferred. Reviewing the Supreme

Court's decision in Bivens, and its progeny, including

Schweiker v. Chilicky, 487 U.S. 412 (1988), the Court

concluded that a cause of action should not be inferred

because Congress had enacted 26 U.S.C. S 7433 and had

provided a complex structure permitting the challenge of

tax assessments through other means. The Court also

concluded that even if a cause of action should be inferred,

the claim should be dismissed as premature because it

would not accrue until it was determined that the

assessment had, in fact, been incorrect.2

Shreiber contends that we should infer a cause of action

under Bivens precisely because Congress did not provide

one when it enacted 26 U.S.C. S 7433, and because,

without a federal damages action, he will be without a

meaningful remedy in the form of compensatory and

punitive damages and unconstitutional behavior will not be

deterred. At oral argument, Shreiber emphasized that his

case should be distinguished from Schweiker and the other

tax cases resolved in the government's favor by other courts

because he is contending that his constitutional rights were

violated on the basis of religious animus.

An understanding of the applicable statutes and their

history is important to understanding this appeal. In 1988,

as part of the "Taxpayer Bill of Rights," Congress enacted

26 U.S.C. S 7433, providing for a federal cause of action

against an officer or employee of the IRS for actions in

violation of the Internal Revenue Code or regulations "in

connection with any collection of Federal tax." 26 U.S.C.

S 7433(a).3 As enacted,S 7433(a) is the "exclusive remedy

_________________________________________________________________

2. The government does not rely upon this ground of dismissal on

appeal. The government does argue that Shreiber failed to allege a

cognizable constitutional violation, and that Mastrogiovanni is entitled

to

qualified immunity. In light of our disposition, we need not discuss these

points.

3. The statute currently states in full:

(a) In general. If, in connection with any collection of Federal

tax

with respect to a taxpayer, any officer or employee of the Internal

4

for recovering damages resulting from such actions." Id. A

proposed draft of the provision contained broader language.

The draft permitted civil actions "in connection with any

determination or collection of federal tax" and in violation of

"any provisions of federal law." S. 2223, 100th Cong., 2d

Sess. S 123 (1988) (emphasis added). The Conference

Report regarding S 7433 discusses two modifications from

the Senate draft that are relevant to the issue before us.

The Report explains that the final version was:

limited to reckless or intentional disregard in

connection with the collection of tax. An action under

this provision may not be based on alleged reckless or

intentional disregard in connection with the

determination of tax. . . . [T]he provision is limited to

reckless or intentional disregard of the Internal

Revenue Code and the regulations thereunder. An

action may not be brought under this provision based

on an alleged violation of a Federal law other than the

Internal Revenue Code or a regulation promulgated

thereunder.

H.R. Conf. Rep. No. 100-1104, at 229 (1988), reprinted in

1988-3 C.B. 473-479;4 see also Miller v. United States, 66

F.3d 220, 222-23 (9th Cir. 1995) (discussing the legislative

history of S 7433 and finding that it does not permit actions

for the incorrect determinations of tax liability); Shaw v.

United States, 20 F.3d 182, 184 (5th Cir. 1994).

_________________________________________________________________

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.

26 U.S.C. S 7433(a).

4. Since its enactment in 1988, Congress has amended S 7433. For

instance, in 1998, Congress amended the provision to permit suits based

upon allegations of negligence in the collection of taxes. See Pub. L. No.

105-206, Sec. 3102(a), (c).

5

Even though S 7433 was narrowed in scope during the

drafting process, Congress has provided other methods by

which a taxpayer can challenge an assessment. See 26

C.F.R. S 601.103(c) (explaining options available to a

taxpayer). A taxpayer may pursue an internal appeal with

the IRS, see 26 C.F.R. S 106, sue for a refund in federal

court, see 28 U.S.C. S 1346(a)(1), 26 U.S.C. SS 6511, 7422,

or appeal the assessment to the Tax Court, see 26 U.S.C.

SS 6213, 6214. Attorney's fees may be recovered in certain

circumstances when the taxpayer is successful. See 26

U.S.C. S 7430. As noted, Shreiber utilized the

administrative appeals process.

In determining whether Shreiber's claim can be asserted

against Mastrogiovanni in a civil rights action, we must

consult the relevant precedent beginning with the seminal

case of Bivens v. Six Unknown Federal Narcotics Agents. In

Bivens, the Supreme Court held that an individual

complaining of a Fourth Amendment violation by federal

officers acting under color of their authority may bring a

suit for money damages against the officers in federal court.

See Bivens, 403 U.S. at 397. In so holding, the Court noted

in dicta that "[t]he present case involves no special factors

counseling hesitation in the absence of affirmative action by

Congress," and found "no explicit congressional declaration

that persons injured by a federal officer's violation of the

Fourth Amendment 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

396-97.

Following Bivens, the Supreme Court has considered the

availability of damages remedies under Bivens in a number

of factual settings, and addressed the meaning of"special

factors counseling hesitation."5 The Court's decision in

_________________________________________________________________

5. See Schweiker, 487 U.S. 412 (1988); Chappell v. Wallace, 462 U.S.

296, 304 (1983) (finding that "the unique disciplinary structure of the

Military Establishment and Congress' activity in thefield constitute

`special factors' which dictate that it would be inappropriate to provide

enlisted military personnel a Bivens-type remedy against their superior

officers"); United States v. Stanley, 483 U.S. 669, 683-84 (1987) (holding

that Chappell v. Wallace extends to deny Bivens actions "for injuries that

6

Schweiker is particularly relevant to our discussion here. In

Schweiker, the Supreme Court considered whether a

damages remedy should be implied under Bivens for alleged

due process violations in connection with the denial of

Social Security benefits. See Schweiker, 487 U.S. at 420.

The plaintiffs in Schweiker were three recipients of Social

Security benefits who had been dropped from the rolls after

the defendants adopted policies that the plaintiffs alleged

violated their due process rights. Each plaintiff had either

successfully appealed the determination or applied for

reinstatement, and had either received full retroactive

benefits or had an application for benefits pending. Each

plaintiff, then, sued for additional damages not available

through the congressionally provided measures.

The Supreme Court held that no Bivens remedy should

be implied. Reviewing the teachings of applicable precedent,

the Court reaffirmed that the absence of statutory relief for

a constitutional violation does not necessarily mean that

courts should create a damages remedy against the officer

responsible for the violation. See id. at 421-22. The Court

also referenced the importance of considering Congress's

activities in the area in question even if the remedies

provided did not afford complete relief. See id. at 423-24

(citing Bush v. Lucas, 462 U.S. 367, 368 (1983)). The Court

explained:

In sum, the concept of "special factors counseling

hesitation in the absence of affirmative action by

Congress" has proved to include an appropriate judicial

_________________________________________________________________

`arise out of or are in the course of activity incident to [military]

service' "); Bush v. Lucas, 462 U.S. 367, 368 (1983) (refusing to create a

non-statutory damages remedy for a federal employee whose First

Amendment right to free speech was violated by a superior); Carlson v.

Green, 446 U.S. 14, 19 (1980) (permitting a suit for damages directly

under the Eighth Amendment's proscription against cruel and unusual

punishment); Davis v. Passman, 442 U.S. 228, 248-49 (1979) (implying

a damages remedy directly under the Due Process Clause of the Fifth

Amendment against a United States Congressman who allegedly fired the

plaintiff because of her sex); see also FDIC v. Meyer, 510 U.S. 471, 474

(1994) (refusing to imply a Bivens remedy directly against a federal

agency).

7

deference to indications that congressional inaction

has not been inadvertent. When the design of a

Government program suggests that Congress has

provided what it considers adequate remedial

mechanisms for constitutional violations that may

occur in the course of its administration, we have not

created additional Bivens remedies.

Id. at 423.

Proceeding to discuss the merits of the appeal, the Court

noted that the remedial structure did not provide the

plaintiffs with the "complete relief " that would be available

by way of a Bivens suit, see id. at 424-25, 426-27, but

confirmed that this did not require the creation of a Bivens

remedy, see id. at 424-25 (discussing Bush v. Lucas). The

Court explained that Congress "ha[d] not failed to provide

meaningful safeguards or remedies," and deferred to

Congress's competence at balancing issues of governmental

efficiency and individual rights. See id. at 425, 429. The

Court also rejected the argument that a Bivens action

should be inferred in order to provide separate remedies for

those individuals who lost their benefits because of a

constitutional violation rather than a non-constitutional

violation. See id. at 426-27.

Applying these considerations to the case at hand, we

agree with the District Court that a Bivens action should

not be inferred to permit suits against IRS agents accused

of violating a taxpayer's constitutional rights in the course

of making a tax assessment. Rather than supporting

Shreiber's argument, the legislative history of 26 U.S.C.

S 7433(a) indicates that Congress did not inadvertently fail

to codify a cause of action for assessment conduct; rather,

Congress deleted "determinations" -- which would have

included assessments -- in passing the statutory provision.

Moreover, Congress modified what was in draft form a

remedy for violations of "federal law" and enacted instead a

remedy for violations only of the IRS code and regulations.

Congress chose to provide certain remedies, and not others,

as part of the complex statutory scheme which regulates

the relationship between the IRS and taxpayers. We will not

create a remedy where Congress has chosen not to.

8

Although Shreiber correctly argues that without a Bivens

action he cannot recover completely, Schweiker explains

that where Congress has provided meaningful remedies we

should exercise extreme caution in creating additional

relief. As with the administration of welfare benefits, the

organization of the tax system, and the balancing of

governmental efficiency and individual rights, is best left to

Congress. See id. at 429 ("Whether 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.").

We also believe Shreiber's deterrence argument is

similarly misplaced. Although deterrence is one of the aims

of a Bivens action, see FDIC v. Meyer , 510 U.S. 471, 485

(1995) (citing Carlson v. Green, 446 U.S. 14, 21 (1980)), we,

again, should defer to Congress in this regard. Also, this

case is distinguishable from Bagola v. Kindt, 131 F.3d 632

(7th Cir. 1997), relied upon by Shreiber for his argument

regarding deterrence. In Bagola, the Court of Appeals for

the Seventh Circuit permitted a prison inmate to bring a

Bivens action complaining of a violation of his Eighth

Amendment rights based on deliberate indifference to his

safety in a prison factory. Notwithstanding the existence of

the remedy provided by 18 U.S.C. S 4126 and the teachings

of Schweiker and Bush v. Lucas, the Court found that the

limited nature of the remedy and the absence of deterrent

effect suggested that Congress had not intended the

statutory remedy to preclude a Bivens action. See id. at

642-45.6 The Court's analysis was guided by the

consideration of deterrence in Carlson v. Green , 446 U.S.

14, 19 (1980), in which the Supreme Court permitted a

Bivens action under the Eighth Amendment despite the

_________________________________________________________________

6. Under the applicable statute and regulations, Bagola received

compensation for his lost wages. See id. at 634. In addition, within

forty-

five days of his release from prison, he could apply for compensation for

his injury in a no-fault proceeding. See id. at 634, 634 n.2. The Seventh

Circuit found the remedy to be lacking in deterrent value because of the

potentially long delay and the possibility that the defendants' alleged

conduct would not be relevant to the claim evaluation process. See id. at

644.

9

remedy provided by the Federal Tort Claims Act, as well as

the particular context of prisoner litigation. See id. at 638-

40, 642-45. Due to the differences in the remedial scheme

as well as the legislative backdrop of the statute we are

examining, Bagola does not inform our analysis.

We note that our holding in this case is supported by the

decisions of a number of other Courts of Appeals that have

concluded that a Bivens action should not be inferred

against IRS agents. See Fishburn v. Brown, 125 F.3d 979,

982-83 (6th Cir. 1997) (refusing to permit a Bivens action

against IRS agents for seizure of property allegedly in

violation of the Fifth Amendment); National Commodity &

Barter Assoc. v. Archer, 31 F.3d 1521, 1532 (10th Cir.

1994) (finding no Bivens action for jeopardy assessments

allegedly in violation of the First and Fourth Amendments);

Vennes v. Unknown Number of Unidentified Agents , 26 F.3d

1448, 1453-54 (8th Cir. 1994) (denying a Bivens action

alleging numerous constitutional violations leading to illegal

tax assessments and collections); McMillen v. United States,

960 F.2d 187, 190-91 (1st Cir. 1991) (dicta) (per curiam)

(finding it unlikely that a Bivens action would exist to

dispute tax liability or demand the lifting of a lien); Wages

v. United States, 915 F.2d 1230, 1235 (9th Cir. 1990)

(dicta) (finding that it would be futile for the plaintiff to

amend her pleadings in part because a Bivens action would

not lie for the constitutionally impermissible collection of

taxes); Cameron v. IRS, 773 F.2d 126, 129-30 (7th Cir.

1985) (considering the issue before S 7433). Although none

of these cases explicitly consider the drafting of 26 U.S.C.

S 7433 in their analysis, and some involve collection actions

rather than tax determinations, many rely explicitly upon

Schweiker to conclude that the Bivens action against IRS

employees is foreclosed by the existence of comprehensive

statutory remedies. See Fishburn, 125 F.3d at 982; National

Commodity & Barter Assoc., 31 F.3d at 1532; Vennes, 26

F.3d at 1453; McMillen, 960 F.2d at 190-91.

Shreiber also argues that this case should be

distinguished from Schweiker, and the other decisions cited

above, because it involves religious animus. However,

Shreiber's pleading complains essentially of a denial of a

fair hearing which resulted in the wrongful assessment of

10

his tax, and of the proximate effects of the IRS agent's

actions. He does not contend that his right to religious

freedom was implicated; rather, he cites the evidence of

religious animus in support of his allegations that he was

denied his Fifth Amendment right to due process and equal

protection.7 As he explained during oral argument, he

would, however, have us hold that the type of

unconstitutional act that leads to the incorrect assessment

can alter the analysis of whether a Bivens action should be

inferred. We do not find this argument convincing. Our

focus at this time is not on the nature of the constitutional

violation that led to the allegedly incorrect assessment --

which the plaintiff must prove on the merits and we

assume at this time -- but whether it is appropriate to

create a damages action to remedy the wrong in light of

what Congress has done. See Schweiker, 487 U.S. at 427;

Bush, 462 U.S. at 381 (considering "what legal remedies are

available to him"); Davis v. Passman, 442 U.S. at 245

(separating the potential violation of the constitutional right

from the question "whether a damages remedy is an

appropriate form of relief "). The complaint focuses on

assessment activities asserted to be in violation of

Shreiber's civil rights, and, regardless of the type of illegal

motivation or the particulars of the violation, Congress has

established a statutory scheme providing remedies for

incorrect assessments. Our analysis focusing on the

remedy, rather than the wrong, is consistent with the

analysis used by the Supreme Court in Bush v. Lucas and

endorsed in Schweiker, and also applied by the Court of

Appeals for the Tenth Circuit in National Commodity &

_________________________________________________________________

7. We note that portions of Shreiber's complaint allege injuries caused in

part by the comments left on his voice mail. However, Shreiber candidly

states in his brief that he "does not contend that the telephone message

left by the IRS agent Mastrogiovanni was the violation of Appellant's

constitutional rights, but instead is evidence of the agent's religious

discrimination against Appellant." Appellant's Br. at 8. Even if Shreiber

had alleged the comments as a separate cause of action, the comments

would not necessarily establish a constitutional violation. See, e.g.,

Emmons v. Mclaughlin, 874 F.2d 351, 353 (6th Cir. 1989) (holding that

a police officer's threat did not constitute a constitutional violation

actionable under 42 U.S.C. S 1983); see also McMillen, 960 F.2d at 190;

Cameron, 773 F.2d at 128-29.

11

Barter Association v. Archer. However, our focus on the

remedy at this stage should not be construed as condoning

the alleged wrong.

Bush v. Lucas is particularly relevant to this aspect of

Shreiber's argument. In Bush, the Supreme Court held that

a Bivens action should not be inferred to permit federal

employees to sue their supervisors for alleged violations of

their First Amendment rights "[b]ecause such claims arise

out of an employment relationship that is governed by

comprehensive procedural and substantive provisions

giving meaningful remedies against the United States."

Bush, 462 U.S. at 368. Although the Court presumed that

the plaintiff 's First Amendment rights had been violated,

see id. at 372, the Court explained: "The ultimate question

on the merits in this case may appropriately be

characterized as one of `federal personnel policy.' When a

federal civil servant is the victim of a retaliatory demotion

or discharge because he has exercised his First Amendment

rights, what legal remedies are available to him?" Id. at

380-81.

In Schweiker, the plaintiffs argued that a Bivens action

should be inferred to provide them with additional remedies

because they had been denied benefits for constitutional

reasons. See Schweiker, 487 U.S. at 427. The Court,

however, explained that Bush "drew no distinction between

compensation for a `constitutional wrong' and the

restoration of statutory rights that had been

unconstitutionally taken away," and concluded that "[i]n

light of the comprehensive statutory schemes involved [in

Schweiker and Bush], the harm resulting from the alleged

constitutional violation can in neither case be separated

from the harm resulting from the denial of the statutory

right." Id. at 427-28. Further, in a case dealing with a suit

against IRS agents alleging wrongful "jeopardy"

assessments, the Court of Appeals for the Tenth Circuit

found no distinction between a Bivens action based on

violations of the plaintiff 's First or Fourth Amendment

rights, as compared to one based on alleged violations of

the plaintiff 's due process rights under the Fifth

Amendment. See National Commodity & Barter Assoc., 31

F.3d at 1532. The Court found that a Bivens action should

12

not be inferred for any of the claims because the remedies

for the wrongful jeopardy assessment were afforded by

statute. See id. ("This reasoning [denying a Bivens action

for a violation of the Fifth Amendment] is equally applicable

to the claim grounded on allegations of wrongful jeopardy

assessments here under the First and Fourth Amendments.

In light of the remedies afforded elsewhere, we decline to

recognize a First or Fourth Amendment Bivens remedy

based on the allegations of wrongful jeopardy assessments

made by the instant complaint . . . .").

In sum, Shreiber asks us to infer a federal damages

remedy under Bivens for violation of his Fifth Amendment

protections of due process and equal protection by an IRS

agent charged with auditing his tax returns. We decline to

do so because we believe that Congress's efforts to govern

the relationship between the taxpayer and the taxman

indicate that Congress has provided what it considers to be

adequate remedial mechanisms for wrongs that may occur

in the course of this relationship. See Schweiker, 487 U.S.

at 424. The fact that Shreiber's complaint seeks damages

not otherwise provided for in the legislative scheme and

alleges wrongful religious animus does not alter our

analysis.

For the reasons stated above, we will affirm.

A True Copy:

Teste:

Clerk of the United States Court of Appeals

for the Third Circuit

13