Snyder & Associates Acquisitions LLC v. United States

FOR PUBLICATION

UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

SNYDER & ASSOCIATES AQUISITIONS No. 15-56011

LLC, a California limited liability

company; TOTAL TAX D.C. No.

PREPARATIONS, INC., a California 8:14-cv-01350-

corporation, CJC-RNB

Plaintiffs-Appellants,

v. OPINION

UNITED STATES OF AMERICA,

Defendant-Appellee.

Appeal from the United States District Court

for the Central District of California

Cormac J. Carney, District Judge, Presiding

Argued and Submitted February 7, 2017

Pasadena, California

Filed June 16, 2017

Before: Susan P. Graber, Jay S. Bybee,

and Morgan Christen, Circuit Judges.

Opinion by Judge Christen;

Concurrence by Judge Bybee

2 SNYDER & ASSOCS. AQUISITION V. UNITED STATES

SUMMARY*

Tax

The panel reversed the district court’s dismissal on

immunity grounds of an action brought by tax preparation

and refund-advance businesses against the IRS under the

Federal Tort Claims Act, and remanded for further

proceedings.

As part of a sting operation aimed at catching people

filing for fraudulent tax refunds, the IRS enlisted the

assistance of plaintiffs’ tax preparation and refund-advance

businesses. The operation involved using millions of

plaintiffs’ dollars as bait under the promise of reimbursement,

which did not happen, and the revocation of one of plaintiffs’

electronic tax filing privileges, which forced plaintiffs into

bankruptcy.

The panel held that 28 U.S.C. § 2680(c) does not confer

absolute immunity on the IRS, and, construing the facts in a

light most favorable to appellees, the sting operation did not

“aris[e] in respect of the assessment or collection of any tax.”

The panel also declined to accept the IRS’s alternative

arguments for affirming the district court’s judgment. The

panel held that § 2680(h) does not bar plaintiffs’ claims for

negligence, conversion, and failure to restore things

wrongfully acquired because plaintiffs did not allege that the

IRS obtained their money through deceit. The panel also held

*

This summary constitutes no part of the opinion of the court. It has

been prepared by court staff for the convenience of the reader.

SNYDER & ASSOCS. AQUISITION V. UNITED STATES 3

that the allegations in plaintiffs’ complaint sufficiently stated

claims for failure to restore things wrongfully acquired, for

conversion, and abuse of process under California law. The

panel did not reach the government’s argument that

§ 2680(a)’s discretionary function exception bars plaintiffs’

claims and, at the very least, some discovery on this issue is

warranted.

Judge Bybee concurred in the judgment. He wrote

separately to address his concern that the majority’s blanket

conclusion—that the IRS was not engaged in “the assessment

or collection of any tax” simply because no refunds were due

to the subjects of the IRS investigation—is an unduly narrow

construction of what constitutes tax assessment and collection

under § 2680(c). Judge Bybee agreed that plaintiffs should

have an opportunity to show why they can maintain their tort

suit against the IRS.

COUNSEL

Jeffrey Adams Robinson (argued) and Gregory E. Robinson,

Robinson & Robinson, Irvine, California, for Plaintiffs-

Appellants.

Gretchen M. Wolfinger (argued) and Joan I. Oppenheimer,

Attorneys; Caroline D. Ciraolo, Acting Assistant Attorney

General; Tax Division, Department of Justice, Washington,

D.C.; for Defendant-Appellee.

4 SNYDER & ASSOCS. AQUISITION V. UNITED STATES

OPINION

CHRISTEN, Circuit Judge:

In 2010, the Internal Revenue Service set a trap to catch

people filing for fraudulent tax refunds. The IRS enlisted the

assistance of plaintiffs’ tax preparation and refund-advance

businesses. It warned that refusal to cooperate would

interfere with a federal criminal investigation, it used millions

of plaintiffs’ dollars as bait, and it promised to reimburse

them for any losses. Plaintiffs cooperated, but the IRS never

returned their money. Instead, at the conclusion of the sting

operation, the IRS subpoenaed more than 5,000 of plaintiffs’

documents to assist with its prosecution efforts and revoked

one plaintiff’s electronic tax filing privileges—at the

beginning of the tax preparation season—forcing both

plaintiffs into bankruptcy.

Plaintiffs sued the IRS under the Federal Tort Claims Act

(FTCA), alleging several causes of action, but the district

court granted the government’s motion to dismiss. The court

ruled that the IRS is immune from liability for its conduct

because 28 U.S.C. § 2680(c) bars claims against the

government “arising in respect of the assessment or collection

of any tax.” We disagree. Because § 2680(c) does not confer

absolute immunity on the IRS, and because, construing the

facts in the light most favorable to plaintiffs, the IRS’s sting

operation did not “aris[e] in respect of the assessment or

collection of any tax,” we reverse the district court’s

judgment and remand for further proceedings.

SNYDER & ASSOCS. AQUISITION V. UNITED STATES 5

I. BACKGROUND1

A. The Tax Fraud Sting

Total Tax Preparation, Inc. (TTP) was a tax return

preparation business. Its affiliate, Snyder & Associates

Aquisitions LLC (SAA) made loans to taxpayers who were

awaiting income tax refunds. TTP prepared its clients’

federal income tax returns and referred clients who wanted

refund advances to SAA. When SAA loaned money based on

anticipated tax refunds, its clients instructed the IRS to send

their refund checks to SAA. Kerry Snyder was TTP’s

president and SAA’s managing member.

In 2010, Nancy Hilton, a tax preparer who worked as an

independent contractor, referred several clients to SAA for

refund anticipation loans. When one of her clients tried to

cash a check issued by SAA, the bank notified Snyder that

Hilton’s client was using fake identification. Snyder asked

the bank to hold the check and immediately contacted Hilton.

Hilton admitted to Snyder that she was working with IRS

Criminal Investigations Special Agent Matt Daniels in an

undercover sting operation, to catch people making fraudulent

claims for tax refunds. Snyder realized that the IRS was

unlikely to issue refunds for the fraudulent tax returns filed

on behalf of Hilton’s clients, and that SAA’s ability to collect

on its refund anticipation loans was in jeopardy. Snyder

1

The government filed a facial attack on the court’s jurisdiction,

based on the four corners of the complaint. We accept as true all facts

alleged in the complaint and draw all reasonable inferences in plaintiffs’

favor. See Leatherman v. Tarrant Cty. Narcotics Intelligence &

Coordination Unit, 507 U.S. 163, 164 (1993); Safe Air for Everyone v.

Meyer, 373 F.3d 1035, 1039 (9th Cir. 2004).

6 SNYDER & ASSOCS. AQUISITION V. UNITED STATES

requested that the bank stop payment on all checks SAA had

issued to Hilton’s clients.

According to the complaint, Agent Daniels contacted

Snyder and informed him that stopping payment would

interfere with a federal criminal investigation. Agent Daniels

asked Snyder to allow the checks to clear the bank, and

assured Snyder that SAA would be repaid. When Snyder

called an IRS supervisor to confirm Agent Daniels’s

representations, the supervisor vouched for the sting

operation and for Agent Daniels. Snyder authorized SAA to

issue new checks to Hilton’s clients, and Agent Daniels and

another IRS agent made additional assurances that SAA

“would be made whole.”

TTP and SAA quickly began to experience negative

repercussions from their agreement to cooperate with the IRS.

First, TTP’s and SAA’s bank informed them that it was

closing their business accounts because of an inquiry the bank

made to the IRS about the investigation of TTP’s and SAA’s

clients. Plaintiffs allege that the IRS failed to inform the

bank that TTP and SAA were aiding the sting operation at the

IRS’s request. TTP and SAA incurred $12,777 in bank and

attorneys’ fees to keep their bank accounts open. The IRS

ignored TTP’s and SAA’s repeated requests for written

confirmation of its promise to repay SAA, and also ignored

their requests to reimburse the advanced funds and plaintiffs’

bank and attorneys’ fees.

Plaintiffs allege that the IRS responded to their requests

by serving subpoenas for more than 5,000 pages of their tax

return and loan records. TTP and SAA produced the

subpoenaed documents at significant additional expense. The

IRS later notified TTP that it was suspending TTP’s ability to

SNYDER & ASSOCS. AQUISITION V. UNITED STATES 7

file tax returns electronically through the IRS’s “e-filing”

system, because fraudulent returns had been filed using

TTP’s electronic filing identification number. The letter

notifying TTP of the suspension directed all inquiries to

Agent Daniels.

The suspension prevented TTP from filing tax returns

electronically for clients, just as the 2011 tax preparation

season began. Initially, the suspension put TTP at a

significant competitive disadvantage. But on January 1,

2011, the IRS began requiring all paid tax preparers to file all

returns electronically, and at that point, the suspension

effectively put TTP out of business. TTP’s failure deprived

SAA of its most significant source of referrals, and SAA soon

failed as well. TTP successfully appealed the IRS’s

suspension of its e-filing privileges, but the damage already

had been done.

The complaint alleges that the IRS never issued refunds

for Hilton’s clients, never repaid the funds Snyder’s company

advanced for refund anticipation loans, and never

compensated TTP and SAA for any of their other losses.

B. District Court Proceedings

TTP and SAA submitted an administrative claim to the

IRS for $2,608,078, and later filed suit in the United States

District Court for the Central District of California. They

concurrently filed an action in the Court of Federal Claims for

8 SNYDER & ASSOCS. AQUISITION V. UNITED STATES

an uncompensated taking and for breach of contract, pursuant

to the Tucker Act, 28 U.S.C. § 1491.2

In this action, the IRS argued that the district court should

dismiss TTP’s and SAA’s tort claims for four reasons: (1) the

lawsuit is barred by 28 U.S.C. § 2680(c), the tax assessment

and collection exception to the FTCA; (2) claims based on the

IRS’s misrepresentations are barred by the provisions of

28 U.S.C. § 2680(h); (3) plaintiffs failed to state a claim for

things wrongfully acquired, conversion, or abuse of process

under California law; and (4) plaintiffs’ suit is barred by

28 U.S.C. § 2680(a), the discretionary function exception to

the FTCA. The district court granted the government’s

motion and dismissed plaintiffs’ claims pursuant to Federal

Rule of Civil Procedure 12(b)(1). The court accepted the

argument that 28 U.S.C. § 2680(c) shields the IRS from

TTP’s and SAA’s claims. TTP and SAA timely appealed.

II. STANDARD OF REVIEW

We review de novo a district court’s decision to grant a

motion to dismiss for lack of subject matter jurisdiction.

Lacano Invs., LLC v. Balash, 765 F.3d 1068, 1071 (9th Cir.

2014). Because the government’s motion was filed pursuant

to Federal Rules of Civil Procedure 12(b)(1) and 12(b)(6), we

accept as true all facts alleged in the complaint and construe

them in the light most favorable to plaintiffs, the non-moving

party. See Leite v. Crane Co., 749 F.3d 1117, 1121 (9th Cir.

2014) (“The district court resolves a facial attack as it would

2

The Tucker Act grants exclusive jurisdiction to the Court of Federal

Claims for actions sounding in contract against the United States,

28 U.S.C. § 1491(a)(1), while the FTCA grants exclusive jurisdiction to

federal district courts to hear tort claims, 28 U.S.C. § 1346(b)(1).

SNYDER & ASSOCS. AQUISITION V. UNITED STATES 9

a motion to dismiss under Rule 12(b)(6): Accepting the

plaintiff’s allegations as true and drawing all reasonable

inferences in the plaintiff’s favor, the court determines

whether the allegations are sufficient as a legal matter to

invoke the court’s jurisdiction.”). Under 28 U.S.C. § 1291,

we have jurisdiction to review the district court’s order.

III. DISCUSSION

A. TTP’s and SAA’s Claims Do Not Arise in Respect of

the Assessment or Collection of Any Tax.

The FTCA waives the United States’ sovereign immunity

for tort claims against the federal government in cases where

a private individual would have been liable under “the law of

the place where the act or omission occurred.” 28 U.S.C.

§ 1346(b)(1). Section 2680 provides for several exceptions

that “severely limit[]” the FTCA’s waiver of sovereign

immunity. Morris v. United States, 521 F.2d 872, 874 (9th

Cir. 1975). “If a plaintiff’s tort claim falls within one of the

exceptions, the district court lacks subject matter

jurisdiction.” Id. Among § 2680’s several exceptions is

§ 2680(c), which prevents lawsuits against the federal

government for “[a]ny claim arising in respect of the

assessment or collection of any tax.”

We have “broadly construed” § 2680(c) to encompass

actions taken during the scope of the IRS’s tax assessment

and collection efforts. Wright v. United States, 719 F.2d

1032, 1035 (9th Cir. 1983), abrogated on other grounds as

recognized by Gasho v. United States, 39 F.3d 1420 (9th Cir.

1994). For example, in Morris, we held that 2680(c) barred

not just claims based on literal collection activity, but also a

taxpayer’s claim that IRS agents wrongfully told his creditors

10 SNYDER & ASSOCS. AQUISITION V. UNITED STATES

of his purported tax liability during an audit of his business.

521 F.2d at 874–75. Other circuits also have read § 2680(c)

expansively. See Aetna Cas. & Sur. Co. v. United States,

71 F.3d 475, 478 (2d Cir. 1995) (“We understand the

§ 2680(c) exception to cover claims arising out of the

operation of the government’s mechanism for assessing and

collecting taxes. The payment of refunds when due is an

integral part of that mechanism.”); Capozzoli v. Tracey,

663 F.2d 654 (5th Cir. 1981) (holding that § 2680(c) barred

a lawsuit by taxpayers who alleged that an IRS agent prowled

their property and took photos of their residence without

permission, during an investigation to determine the extent of

damage they claimed as casualty losses on their tax returns).

Section 2680(c) has been read to apply to both civil and

criminal investigations into potential tax liability, see Jones

v. United States, 16 F.3d 979 (8th Cir. 1994), as well as to

suits brought against the IRS by third parties who never had

any tax liability, see Perkins v. United States, 55 F.3d 910

(4th Cir. 1995) (barring a wrongful death claim arising from

the death of a miner hired by the IRS to retrieve mining

equipment to satisfy a federal tax debt); Interfirst Bank

Dallas, N.A. v. United States, 769 F.2d 299, 307 (5th Cir.

1985) (“[Section 2680(c)] gives no indication whatsoever that

the exemption is limited . . . to claims brought by taxpayers

as opposed to third parties.”); Broadway Open Air Theatre,

Inc. v. United States, 208 F.2d 257, 259 (4th Cir. 1953)

(rejecting the plaintiffs’ argument that § 2680(c) does not

apply when the lawsuit “is unrelated to any alleged tax

liability between the parties to the suit” (emphasis added)).

Despite § 2680(c)’s expansive reach, it does not grant the

IRS absolute immunity. We previously have rejected the

invitation to read the statute as encompassing any activities

SNYDER & ASSOCS. AQUISITION V. UNITED STATES 11

that “might serve as a deterrent that will facilitate the

‘assessment or collection’ of taxes generally.” See Wright,

719 F.2d at 1035. Even courts that have applied § 2680(c) to

claims that, at first blush, seem attenuated from assessment

and collection activities have taken pains to emphasize that

they “do not intend to suggest that the government is

insulated from tort liability for any and all transgressions

committed by IRS employees.” Capozzoli, 663 F.2d at 658;

see also Perkins, 55 F.3d at 914 (“[T]he breadth of section

2680(c)’s operation is not unlimited.”).

The government argues that its conduct in this case

involved the assessment or collection of taxes because it was

trying to determine whether taxpayers were claiming bona

fide refunds. This argument overlooks our obligation to

accept as true the allegations in plaintiffs’ complaint. See

Leatherman v. Tarrant Cty. Narcotics Intelligence &

Coordination Unit, 507 U.S. 163, 164 (1993) (“We review

here a decision granting a motion to dismiss, and therefore

must accept as true all the factual allegations in the

complaint.”). TTP and SAA allege that the IRS already

suspected that the individuals under investigation were scam

artists who were not entitled to any bona fide refunds. The

allegation that the IRS’s efforts were aimed at snaring tax

cheats cleanly distinguishes this case from the case on which

the government relies, Aetna Casualty & Surety Co., 71 F.3d

475. There, Aetna Casualty argued that it was entitled to part

of a tax refund that the IRS had paid to a different taxpayer.

Aetna sued the government for tortious conversion, id. at 477,

and the Second Circuit held, unremarkably, that § 2680(c)’s

bar of claims concerning tax assessment and collection efforts

also bars claims based on “payment of refunds when due,”

id. at 478. Here, the payment of refunds when due is not at

issue. Construing the alleged facts in plaintiffs’ favor, the

12 SNYDER & ASSOCS. AQUISITION V. UNITED STATES

complaint includes fraudsters who filed fake returns, so no

refunds were due. Plaintiffs allege that the IRS was not

assessing the amount of taxes the filers owed, nor was it

attempting to collect taxes from them. Instead, it was

conducting a sting operation aimed at snaring tax cheaters

intent on stealing funds from the United States treasury.

At oral argument, the government identified Perkins,

55 F.3d 910, as the case that “comes closest” to the facts of

this case. But Perkins lends no support to the government’s

argument. It is readily distinguishable because it involved a

miner hired by the IRS to retrieve a piece of mining

equipment in an attempt to satisfy a federal tax debt. See id.

at 912. The wrongful death claim in Perkins easily qualified

as a claim arising from the government’s tax collection

efforts. See id. at 912–13.

The government perfunctorily concedes that the IRS is

not entitled to absolute immunity, but goes on to argue that

§ 2680(c) is intended to bar all lawsuits that “hamper the . . .

ability of the IRS to conduct its business,” and stretches the

definition of § 2680(c) so far that we can discern no limit to

its interpretation of the immunity that § 2680(c) affords. In

particular, at oral argument the government refused to

recognize any distinction between the facts of this case and a

hypothetical scenario in which an IRS agent driving a

government car runs a stop sign and hits someone. Under the

government’s reading of § 2680(c), its exposure to liability

for the on-duty auto accident would fall within § 2680(c)’s

exception to the waiver of sovereign immunity. By offering

no real limit to the scope of § 2680(c), the government

essentially seeks absolute immunity for the IRS’s actions.

SNYDER & ASSOCS. AQUISITION V. UNITED STATES 13

The facts alleged in this case describe an elaborate

criminal sting operation little different from law enforcement

and investigative efforts to catch identity thieves who are

stealing bank account information, or cons who are

committing health care fraud. Arguably, when Agent Daniels

asked Snyder to front the money for the IRS’s sting and

cautioned that failing to cooperate would interfere with a

criminal investigation, he was not attempting to assess or

collect taxes, nor issuing duly owed refunds. Nor were the

targets of the sting operation trying to enjoy tax-free income

by fudging on reporting requirements or ginning up fake

deductions. Instead, they were trying to use false

identification to claim “refunds” wholly unconnected to

payment of taxes. The IRS convinced Snyder to use SAA’s

funds as bait to catch the scam artists and, in exchange for his

trouble, Snyder lost both of his businesses.

The IRS revoked TTP’s e-filing privileges despite

knowing that Snyder did the responsible thing by stopping

payment on checks SAA advanced to Hilton’s clients and that

TTP’s e-filing identification number was used in connection

with fraudulent returns at the request of the IRS. The

government’s briefing does not attempt to tie the cancellation

of TTP’s e-filing privileges to any efforts to assess or collect

taxes. The only possible links we can see between tax

assessment and collection and the suspension of the e-filing

privileges is that the e-filing system is part of the IRS’s

general mechanism for collecting taxes, and that the

revocation of TTP’s e-filing privileges was part of a general

effort to deter tax fraud. Neither fact suffices to save the

government’s immunity theory. We have previously rejected

an interpretation of § 2680(c) so expansive that it would

negate 28 U.S.C. § 2680(h), which expressly allows claims

for intentional torts such as malicious prosecution by federal

14 SNYDER & ASSOCS. AQUISITION V. UNITED STATES

investigative or law enforcement officers. See Wright,

719 F.2d at 1035–36.

We are aware of no reported appellate decision that has

addressed facts similar to those here, and the government

offers no persuasive reason why we should be the first circuit

to grant such expansive immunity to the IRS. Granting

immunity in this case would allow the FTCA’s waiver of

sovereign immunity vis-a-vis the IRS to be wholly subsumed

in the § 2680(c) exception. We “read[] no exemptions into

the FTCA beyond those provided.” Id. at 1036. Section

2680(c)’s exception to the waiver of sovereign immunity is

broad, but it is not unlimited, and the government’s all-

encompassing view of it cannot be squared with the statutory

text. By its terms, the exception shields only actions taken in

connection with efforts to assess or to collect taxes, which

were not involved in this case.

B. The Government’s Alternative Arguments Do Not

Provide Grounds for Affirming the District Court’s

Order.

The government also urges us to affirm the district court’s

judgment on four alternative grounds that the district court

did not reach. Although “we can affirm the district court on

any grounds supported by the record,” Weiser v. United

States, 959 F.2d 146, 147 (9th Cir. 1992), none of the

government’s arguments merits dismissal at this early stage

of litigation.

SNYDER & ASSOCS. AQUISITION V. UNITED STATES 15

1. Section 2680(h) Does Not Bar the Claims Because

They Do Not Rest on Alleged Misrepresentations.

The government argues that 28 U.S.C. § 2680(h) bars

TTP’s and SAA’s claims for negligence, conversion, and

failure to restore things wrongfully acquired because they

are premised on misrepresentations by the government.

Section 2680(h) establishes an exception to the waiver of

sovereign immunity for claims that “aris[e] out of . . .

misrepresentation.” This exception includes

misrepresentations made willfully and misrepresentations

made negligently. See United States v. Neustadt, 366 U.S.

696, 702 (1961).

Section 2680(h) bars claims that focus on the

government’s failure to use due care in communicating

information, not actions focused on breach of a different duty.

Block v. Neal, 460 U.S. 289, 297 (1983). The plaintiff in

Block received federal assistance for a house construction

loan, and a federal agency undertook to supervise the

construction. Id. at 291–92. The agency reported to plaintiff

that the construction was satisfactory but, after moving in, she

discovered numerous defects. Id. at 292. She sued for

negligent supervision under the FTCA. The government

argued that § 2680(h) barred her negligence claim. Id. at

293–94. According to the government, plaintiff’s claims

were based on misrepresentations about the condition of the

house. Id. at 294. The Supreme Court held that § 2680(h)

did not except the government’s waiver of sovereign

immunity. Id. at 296–97. It reasoned that the claim for

negligent supervision did not “aris[e] out of

misrepresentation” within the meaning of § 2680(h) because

the plaintiff did not seek to recover on the basis of

misstatements made by the government officials. The duty to

16 SNYDER & ASSOCS. AQUISITION V. UNITED STATES

use due care supervising construction was separate from any

duty the government had to accurately communicate

information to the plaintiff. Id. at 297. “Neither the language

nor history of the [FTCA] suggest[s] that when one aspect of

the [g]overnment’s conduct is not actionable under the

‘misrepresentation’ exception, a claimant is barred from

pursuing a distinct claim arising out of other aspects of the

[g]overnment’s conduct.” Id. at 298. “Any other

interpretation would encourage the [g]overnment to shield

itself completely from tort liability by adding

misrepresentations to whatever otherwise actionable torts it

commits.” Id.

Here, § 2680(h) does not shield the government because

TTP and SAA do not allege that the IRS obtained their

money through deceit. TTP and SAA allege that the IRS

wrongfully obtained use of their money during the sting

operation and failed to return it. As in Block, any alleged

misstatements by the IRS “are not essential to” plaintiffs’

claims, id. at 297, which primarily rely on the government’s

allegedly negligent failure to “take due care to see that

Plaintiff[s] were reimbursed and indemnified for any monies

which they advanced to persons involved in the sting, or

allowed Defendant to use at their request, or which they

otherwise lost.” Any “partial overlap” between plaintiffs’

claims and a potential misrepresentation claim does not bring

the former within the scope of § 2680(h)’s exception. See id.

at 298.

SNYDER & ASSOCS. AQUISITION V. UNITED STATES 17

2. TTP and SAA Have Stated Claims Under

California Law for Failure to Restore Things

Wrongfully Acquired and for Conversion.

The government argues that TTP and SAA failed to state

claims for failure to restore things wrongfully acquired and

for conversion. This defense rests on the government’s

theory that it never had control over property that belonged to

TTP or SAA. But TTP and SAA assert that the IRS coerced

Snyder into reissuing checks to the targets of the IRS’s

investigation. At this early stage, we cannot determine

whether the facts will be as TTP and SAA allege, but if

plaintiffs are able to support their allegations, a fact finder

might be able to decide that the government exerted sufficient

control over their property to support these claims. See Cal.

Civ. Code §§ 654, 1712.

California case law is sparse in these areas, but California

defines “ownership of a thing” as “the right of one or more

persons to possess and use it to the exclusion of others.” Id.

§ 654. Even if consent is initially given, a plaintiff can state

a claim for failure to restore things wrongfully acquired under

§ 1712 if the plaintiff later withdraws consent. Similarly,

conversion is “the unwarranted interference by defendant

with the dominion over the property of the plaintiff from

which injury to the latter results.” Welco Elecs., Inc. v. Mora,

166 Cal. Rptr. 3d 877, 882 (Ct. App. 2014) (internal

quotation marks omitted). “Money may be the subject of

conversion if the claim involves a specific, identifiable sum

. . . .” Id. Here, the complaint alleges specific sums of

money that TTP and SAA allowed the IRS to direct.

Although the IRS directed that the money should be allowed

to pass into the hands of individuals under investigation

rather than to the IRS itself, the allegation is that the IRS

18 SNYDER & ASSOCS. AQUISITION V. UNITED STATES

directed the disposition of plaintiffs’ funds. TTP and SAA

did not consent to the IRS’s permanent use of these sums, and

the IRS never reimbursed them. The complaint’s allegations

suffice to state a claim for failure to restore things wrongfully

acquired and conversion.

3. TTP and SAA Have Stated a Claim for Abuse of

Process Under California Law.

The government also argues that TTP and SAA failed to

state a claim for abuse of process. “To establish a cause of

action for abuse of process, a plaintiff must plead two

essential elements: that the defendant (1) entertained an

ulterior motive in using the process and (2) committed a

wilful act in a wrongful manner.” Coleman v. Gulf Ins. Grp.,

718 P.2d 77, 81 (Cal. 1986). The government argues that

plaintiffs cannot satisfy the second prong because they cannot

show that the IRS committed a willful act in a wrongful

manner.

“[G]enerally, an action [for abuse of process] lies only

where the process is used to obtain an unjustifiable collateral

advantage. For this reason, mere vexation or harassment are

not recognized as objectives sufficient to give rise to the tort.”

Younger v. Solomon, 113 Cal. Rptr. 113, 118 (Ct. App. 1974).

TTP and SAA allege that the IRS issued subpoenas and

revoked TTP’s e-filing privileges to intimidate them and

cause them to drop claims for a return of their funds. If TTP

and SAA had dropped their claims, the IRS would have

obtained a collateral advantage—unchallenged conversion of

TTP’s and SAA’s money. These allegations easily amount to

more than “mere vexation or harassment” and survive the

government’s motion to dismiss.

SNYDER & ASSOCS. AQUISITION V. UNITED STATES 19

4. We Do Not Reach the Government’s Argument

That § 2680(a)’s Discretionary Function Exception

Bars the Claims.

The government further argues that, because the alleged

conduct involved the exercise of a discretionary function,

28 U.S.C. § 2680(a) bars TTP’s and SAA’s claims. Section

2680(a) excepts from the FTCA “[a]ny claim . . . based upon

the exercise or performance or the failure to exercise or

perform a discretionary function or duty on the part of a

federal agency or an employee of the [g]overnment, whether

or not the discretion involved be abused.” The discretionary

function exception involves a two-part test. Alfrey v. United

States, 276 F.3d 557, 561 (9th Cir. 2002). First, we ask

“whether the challenged conduct is discretionary, that is,

whether it ‘involv[es] an element of judgment or choice.’”

Id. (alteration in original) (quoting Fang v. United States,

140 F.3d 1238, 1241 (9th Cir. 1998)). This prong “is not met

‘when a federal statute, regulation or policy specifically

prescribes a course of action for an employee to follow.’” Id.

(quoting Fang, 140 F.3d at 1241)). Second, we ask “whether

that judgment is of the kind that the discretionary function

exception was designed to shield.” Id. (quoting Berkovitz v.

United States, 486 U.S. 531, 536 (1988)).

TTP and SAA argue that the Federal Rules of Civil

Procedure require that they have a chance to conduct

discovery on what statutes, regulations, or policies govern an

IRS agent’s use of private property in the course of a tax

fraud investigation. We agree. The government’s

unsupported assertion that it had unfettered discretion to

commandeer TTP’s and SAA’s funds is not sufficient.

Depending on what discovery yields, the government may be

unable to satisfy the first prong of the test for the

20 SNYDER & ASSOCS. AQUISITION V. UNITED STATES

discretionary function exception. At the very least, some

discovery on this issue is warranted. See Fed. R. Civ. P.

56(d).

IV. CONCLUSION

We reverse the district court’s order granting the motion

to dismiss and remand for further proceedings in accordance

with this opinion.

Appellee shall bear costs on appeal.

REVERSED and REMANDED.

BYBEE, Circuit Judge, concurring in the judgment:

I am sympathetic to the majority’s resolution of this case

and ultimately agree that, on the record before us, we should

reverse the district court’s dismissal and remand for further

proceedings. I write separately to address my concern with

the majority’s blanket conclusion that the Internal Revenue

Service (IRS) was not engaged in “the assessment or

collection of any tax,” 28 U.S.C. § 2680(c), simply because

“no refunds were due” to the subjects of the IRS investigation

in this case, Maj. Op. at 11–12. In my opinion, that is an

unduly narrow construction of § 2680(c). But I agree that

Plaintiffs should have an opportunity to show why they can

maintain their tort suit against the IRS.

The Federal Torts Claims Act (FTCA) waives the United

States’ sovereign immunity for tort claims alleging “money

damages . . . for injury or loss of property . . . caused by the

SNYDER & ASSOCS. AQUISITION V. UNITED STATES 21

negligent or wrongful act or omission of any employee of the

Government while acting within the scope of his office or

employment.” Id. § 1346(b)(1). This waiver, however, is

“severely limited” by exceptions listed in § 2680. Morris v.

United States, 521 F.2d 872, 874 (9th Cir. 1975). Relevant

here is the exception in § 2680(c) for “[a]ny claim arising in

respect of the assessment or collection of any tax.”

The FTCA does not define tax “assessment” or

“collection.” But the Internal Revenue Code defines the

scope of the IRS’s assessment and collection authority.

Section 6201, entitled “Assessment authority,” explains that

the IRS “is authorized and required to make the inquiries,

determinations, and assessments of all taxes (including

interest, additional amounts, additions to the tax, and

assessable penalties) imposed by this title.” 26 U.S.C.

§ 6201(a). An assessment is “made by recording the liability

of the taxpayer in the office of the Secretary in accordance

with rules or regulations prescribed by the Secretary.”

26 U.S.C. § 6203. Section 6301, entitled “Collection

authority,” simply provides that “[t]he Secretary shall collect

the taxes imposed by the internal revenue laws.” Thus, in a

literal sense, a tax “assessment” is a recorded determination

of tax liability. And a tax “collection” is an effort to obtain

a tax liability. As explained below, however, we have not

limited the scope of § 2680(c) to literal assessment or

collection.

We have addressed the scope of § 2680(c) on only two

occasions. In Morris, we interpreted the phrase “the

assessment or collection of any tax” to encompass tax

investigations and audits. 521 F.2d at 874. There, the IRS

harassed and intimidated Morris and his wife during the

investigation and, on several occasions, unlawfully seized

22 SNYDER & ASSOCS. AQUISITION V. UNITED STATES

their property. Id. The IRS also told Morris’s creditors that

Morris had a large tax liability and would be insolvent as a

result. Id. At the conclusion of its investigation, the IRS

determined that Morris had no outstanding tax liability and

returned over $6000 in overpaid taxes. Id. Morris and his

wife brought an action under the FTCA. We concluded:

Even assuming arguendo that the Internal

Revenue agents’ collection activity was

beyond the normal scope of authority and

amounted to tortious conduct, we find that the

claim falls squarely within the exempted

group of tort claims arising out of tax

collection efforts.

The alleged conduct of the IRS agents, if

true, would be deplorable; nevertheless, the

district court lacked subject matter jurisdiction

over the claims against them.

Id. at 874 (citations omitted). The takeaway from Morris is

that § 2680(c) covers more than literal tax assessment or

collection; it also covers the IRS’s efforts to investigate

potential tax liability. This holding is in harmony with the

IRS’s assessment authority under 26 U.S.C. § 6201(a), which

includes the authority not only to assess taxes in a literal

sense (i.e. record a tax liability) but also the authority to make

“inquiries” and “determinations” regarding any taxes imposed

in the Internal Revenue Code.

Eight years after Morris, we decided Wright v. United

States, 719 F.2d 1032 (9th Cir. 1983). Wright had been

indicted for failure to file tax returns and for making false

statements in his returns. Id. at 1033. The government

SNYDER & ASSOCS. AQUISITION V. UNITED STATES 23

eventually dismissed the indictments, and Wright filed an

FTCA action alleging that the indictments constituted

malicious prosecution. Id. The government argued that the

indictments were part of “the assessment or collection” of

taxes and were thus barred by § 2680(c). Id. at 1035. We

noted that the indictments were not collection efforts “[i]n the

literal sense” because the prosecution “was an attempt to

impose criminal penalties on Wright, not to collect taxes from

him.” Id. But we also acknowledged that § 2680(c) “has

been broadly construed” and that it would “not strain

precedent to hold that . . . prosecuting Wright fell within the

exception because the prosecution might serve as a deterrent

that will facilitate the ‘assessment or collection’ of taxes

generally.” Id. Ultimately, however, we rejected that broad

construction in light of § 2680(h), which expressly permits

claims for malicious prosecution by federal law enforcement

officers.1 There was no dispute that the IRS agent in question

1

28 U.S.C. § 2680(h) excepts from the United States’ waiver of

sovereign immunity

[a]ny claim arising out of assault, battery, false

imprisonment, false arrest, malicious prosecution,

abuse of process, libel, slander, misrepresentation,

deceit, or interference with contract rights: Provided,

That, with regard to acts or omissions of investigative

or law enforcement officers of the United States

Government, the provisions of this chapter and section

1346(b) of this title shall apply to any claim arising, on

or after the date of the enactment of this proviso, out of

assault, battery, false imprisonment, false arrest, abuse

of process, or malicious prosecution. For the purpose

of this subsection, “investigative or law enforcement

officer” means any officer of the United States who is

empowered by law to execute searches, to seize

evidence, or to make arrests for violations of Federal

law.

24 SNYDER & ASSOCS. AQUISITION V. UNITED STATES

was a federal law enforcement officer, id. at 1034, and we

saw nothing in § 2680(h) suggesting “that malicious tax

prosecutions are to be treated differently from other malicious

prosecutions,” id. at 1036. To avoid encroaching on

§ 2680(h), we interpreted § 2680(c) “not to apply to [the IRS

agent’s] actions in carrying out the criminal prosecution

against plaintiff, insofar as those acts are alleged to constitute

malicious prosecution.” Id. Construing § 2680(c) in this

manner left both § 2680(c) and § 2680(h) “with a great deal

of room to operate.” Id.

Since deciding Wright, we have not had occasion to

further opine on what constitutes “the assessment or

collection of any tax.”2 Other circuits, however, have held

that a wide array of IRS conduct falls within § 2680(c)’s

purview. To say that the statute has been given a broad

construction is an understatement. See, e.g., Perkins v.

2

In Smith v. Brady, 972 F.2d 1095 (9th Cir. 1992), we compared

§ 2680(c) to 26 U.S.C. § 7430. Section 2680(c) was not at issue in that

case, but we observed that cases interpreting § 2680(c) “show that a broad

range of activity by the IRS arises in connection with the determination of

tax liability.” Id. at 1100. In Gasho v. United States, 39 F.3d 1420 (9th

Cir. 1994), we addressed § 2680(c)’s exemption for liability from “any

claim arising in respect of . . . the detention of any goods or merchandise

by any officer of customs.” Relying on Wright, the plaintiffs in Gasho

argued that § 2680(h), which permits claims for various intentional torts

committed by federal law enforcement officers, amended the § 2680(c)

bar. We rejected the notion that § 2680(h) in any way amended § 2680(c)

so as to waive immunity that would otherwise apply. We held that Wright

simply requires “the United States to first demonstrate that the Customs

or IRS agent’s tortious conduct falls within the scope of activities

exempted in § 2680(c). If such a showing is made, the claim is barred.”

Id. at 1433. Because we construed the malicious prosecution in Wright

not to constitute an assessment or a collection of a tax “within the strict

meaning of those words,” the government had failed to demonstrate that

its conduct fell within the scope of § 2680(c). Id.

SNYDER & ASSOCS. AQUISITION V. UNITED STATES 25

United States, 55 F.3d 910, 913 (4th Cir. 1995) (“The

opinions interpreting section 2680(c) clarify that the

exemption applies not only to actions by persons against

whom the tax collection efforts are directed, but also to

actions by third parties injured by tax collection efforts.”);

Interfirst Bank Dallas, N.A. v. United States, 769 F.2d 299,

307 (5th Cir. 1985) (“[Section 2680(c)] gives no indication

whatsoever that the exemption is limited to claims . . .

brought by taxpayers as opposed to third parties. Instead, it

specifically applies to all tax-related claims.”); Capozzoli v.

Tracey, 663 F.2d 654, 658 (5th Cir. 1981) (“This language is

broad enough to encompass any activities of an IRS agent

even remotely related to his or her official duties.”);

Broadway Open Air Theatre v. United States, 208 F.2d 257,

259 (4th Cir. 1953) (rejecting an argument that § 2680(c)

does not apply to conduct “unrelated to any alleged tax

liability between the parties to the suit”). As relevant to this

appeal, the Eighth Circuit held in Jones v. United States that

§ 2680(c) encompasses both civil and criminal tax

investigations. See 16 F.3d 979, 980–81 (8th Cir. 1994). In

Jones, the court dismissed an FTCA claim arising out of an

investigation “that at all relevant times . . . was in a criminal

status, as opposed to being an administrative or civil matter.”

Id. at 980. It did so in spite of the fact that the investigation

did not result in “any attempted assessment or collection of

taxes or penalties.” Id. According to the court, whether an

investigation is civil or criminal in nature “makes no

difference” to § 2680(c)’s bar. Id.; see also Perkins, 55 F.3d

at 916 (summarily rejecting an argument that § 2680(c) does

not apply when the IRS is “conducting a criminal

investigation rather than collecting taxes” as having “no basis

in law”).

26 SNYDER & ASSOCS. AQUISITION V. UNITED STATES

The majority does not dispute Jones’s conclusion that

§ 2680(c) applies to criminal tax investigations as well as

civil tax investigations and, I think, properly so. See Maj. Op.

at 10. In a different context, the Supreme Court has

commented on “the interrelated criminal/civil nature of a tax

fraud inquiry.” United States v. LaSalle Nat’l Bank, 437 U.S.

298, 314 (1978); see also id. at 314 n.15. In LaSalle, the

Court addressed the scope of the IRS’s summons authority

under 26 U.S.C. § 7602. Id. at 305. That provision has since

been modified, but at the time it only permitted the IRS to

issue summonses in connection with civil, not criminal,

investigations. See id. at 301 n.3. The question before the

Court was whether the statute authorized a summons issued

solely for the purpose of building a criminal case. Id. at

307–08. The Court reasoned that “[f]or a fraud investigation

to be solely criminal in nature would require an extraordinary

departure from the normally inseparable goals of examining

whether the basis exists for criminal charges and for the

assessment of civil penalties.” Id. at 314. Committing tax

fraud may subject perpetrators to both criminal and civil

penalties. Id. at 308; see also 26 U.S.C. § 7206 (subjecting

fraudulent taxpayers to criminal penalties of imprisonment,

fines up to $100,000 ($500,000 for corporations), or both,

plus costs of prosecution); id. § 6663(a) (adding seventy-five

percent of any underpayment to a taxpayers’s tax liability

when the underpayment is due to fraud). Those civil

penalties are, by statute, considered part of the taxpayer’s tax

liability. See 26 U.S.C. § 6201 (“The Secretary is authorized

and required to make the inquiries, determinations, and

assessments of all taxes (including interest, additional

amounts, additions to the tax, and assessable penalties)

imposed by this title . . . .” (emphasis added)). It is thus

typically the case that the IRS, when trying to determine

criminal liability, is also trying to determine whether any civil

SNYDER & ASSOCS. AQUISITION V. UNITED STATES 27

penalties should be added to the taxpayer’s liability. Not only

does the IRS have an interest in assessing civil penalties

against fraudulent taxpayers, it also has an interest in

collecting the unpaid taxes. And “[t]he institutional

responsibility of the [IRS] to calculate and to collect civil

fraud penalties and fraudulently reported or unreported taxes

is not necessarily overturned by a single agent who attempts

to build a criminal case.” LaSalle, 437 U.S. at 314. It is

rarely the case that the IRS “abandon[s] . . . the pursuit of

civil tax determination or collection” simply because it also

chooses to investigate potential tax crimes. See id. at 314,

318.

LaSalle lends support to our conclusion in Wright that a

purely criminal prosecution does not constitute tax

assessment or collection, although LaSalle also suggests that

a purely criminal tax investigation will be rare.3 “Only [upon

the recommendation of prosecution] do the criminal and civil

aspects of a tax fraud case begin to diverge.” Id. at 311.

3

There is a good reason for this. Criminal tax evasion is a specific

intent crime. In such cases, the government bears a very high burden

because it must show that the defendant “willfully attempt[ed] in any

manner to evade or defeat any tax.” 26 U.S.C. § 7201. In this context,

“willfullness” means the government must “prove that the law imposed a

duty on the defendant, that the defendant knew of this duty, and the he

voluntarily and intentionally violated that duty.” Cheek v. United States,

498 U.S. 192, 201 (1991). The Court has long “interpreted the statutory

term ‘willfully’ as used in the federal criminal tax statutes as carving out

an exception to the traditional rule [that every person is presumed to know

the law]. This special treatment of criminal tax offenses is largely due to

the complexity of the tax laws.” Id. at 200. The burden of proof in tax

prosecutions is thus greater than it is for other crimes, even where the

government must show the defendant acted “willfully.” See Bryan v.

United States, 524 U.S. 184, 193–95 (1998). Because of the high burden

of proof, most tax investigations will have only civil consequences.

28 SNYDER & ASSOCS. AQUISITION V. UNITED STATES

Although the IRS “does not sacrifice its interest in unpaid

taxes just because a criminal prosecution begins,” id. at

311–12, the imposition of criminal penalties does nothing to

further the IRS’s interest in collecting or assessing taxes aside

from the deterrent effect on the taxpayer and others, see

Wright, 719 F.2d at 1035. The investigation preceding

prosecution, however, generally has both civil and criminal

motives even when the investigation is “in a criminal status”

“at all relevant times.” See Jones, 16 F.3d at 980. But the

Court recognized in LaSalle that there is at least the

possibility that the IRS could carry out an investigation

strictly for the purpose of pressing criminal charges.

437 U.S. at 318. If it turns out that the IRS has “abandon[ed]

in an institutional sense . . . the pursuit of civil tax

determination or collection,” id., then it is no longer carrying

out its tax assessment or collection functions and falls outside

the scope of § 2680(c).

Here, the Government argues that its investigation had a

civil component because it was trying to determine whether

to pay the taxpayers’ claimed refunds. Plaintiffs counter that

the sole purpose of the sting operation was to catch criminals

that the IRS already suspected were committing tax fraud. In

all likelihood, the investigation had both civil and criminal

components. See id. at 314. Specifically, the IRS

investigation was likely an effort to prevent the payment of

fraudulent returns and impose civil and criminal penalties,

with the civil penalties making up part of the taxpayer’s tax

liability. See 26 U.S.C. § 6201. It also seems likely that the

IRS would go after any unpaid taxes the subjects of the

investigation may owe. But the complaint is ambiguous as to

the nature of the investigation. It alleges that the

investigation was designed “to identify instances of

fraudulent tax returns,” which lends support to the IRS’s

SNYDER & ASSOCS. AQUISITION V. UNITED STATES 29

contention that it was trying to determine whether it had to

pay the refunds. The complaint also alleges that the

investigation was an effort to “catch criminals attempting to

defraud the IRS.” This allegation highlights the criminal

nature of the IRS’s investigation, and, construed narrowly in

Plaintiffs’ favor, lends support to the majority’s conclusion

that the IRS’s efforts were solely “aimed at snaring tax

cheats.” Maj. Op. at 11. Although I think the complaint

fairly suggests both civil and criminal motives, I see no harm

in permitting discovery for the purpose of clarifying the

nature of the IRS investigation.

The majority reasons that “the targets of the sting

operation [were not] trying to enjoy tax-free income by

fudging on reporting requirements or ginning up fake

deductions” but “were trying to use false identification to

claim ‘refunds’ wholly unconnected to payment of taxes.” Id.

at 13. I have two responses. First, the real crux of my

disagreement with the majority is its apparent conclusion that

IRS efforts to prevent the payment of fraudulently filed

refunds do not fall within the broad array of the IRS’s

assessment and collection activities. See id. at 12 (“Plaintiffs

allege that the IRS was not assessing the amount of taxes the

filers owed, nor was it attempting to collect taxes from them.

Instead, it was conducting a sting operation aimed at snaring

tax cheaters intent on stealing funds from the United States

treasury. ”). The majority distinguishes this case from Aetna

Casualty & Surety Co. v. United States, 71 F.3d 475 (2d Cir.

1995), which reasoned that “[t]he payment of refunds when

due is an integral part of” the “mechanism for assessing and

collecting taxes” and thus within § 2680(c)’s purview. Id. at

478. The majority concludes that “the payment of refunds

when due is not at issue” because “the complaint includes

fraudsters who filed fake returns, so no refunds were due.”

30 SNYDER & ASSOCS. AQUISITION V. UNITED STATES

Maj. Op. at 11–12. I do not read Aetna as drawing a line

between payment and nonpayment of refunds. Rather, the

Second Circuit in Aetna was trying to avoid a narrow

construction of § 2680(c) that excluded refunds from

assessment and collection efforts. Id. at 478–79. To

conclude, as the proposed majority does, that paying duly

owed refunds falls under § 2680(c) while denying refunds

does not strikes me as unduly narrow. It puts the cart before

the horse. If discovery reveals that the IRS was, as it asserts,

attempting to determine whether the refund claims at issue

were bona fide, then it cannot be the case that the IRS is

assessing taxes when it turns out the claims were bona fide

but is not when it turns out the claims were bogus. The

“[a]ssessment authority” given to the IRS in 26 U.S.C. § 6201

includes the ability to make “inquiries, determinations, and

assessments of all taxes.” An inquiry into the validity of a

taxpayers’ Form 1040 falls squarely within that authority.

Second, even assuming we can distinguish between

cheating on the taxes we pay and cheating on the refunds we

claim, the majority’s conclusion that the IRS “was not

attempting to assess or collect taxes” is, at best, premature.

Maj. Op. at 13. The complaint simply alleges that the IRS

was attempting to detect instances of fraudulent tax returns.

There are various ways a taxpayer could commit fraud on a

tax return, including fudging numbers or claiming fake

deductions. The complaint gives an example of one of the

investigated taxpayers using a fake ID, but it is far from clear

what kind of fraud the other subjects of the investigation

might have committed. If discovery reveals that some of the

investigated taxpayers were fudging numbers, then, based on

the majority’s own reasoning, the majority would agree that

the investigation constituted tax assessment. But, in any

event, I’m not sure why it matters whether the fraud involved

SNYDER & ASSOCS. AQUISITION V. UNITED STATES 31

fake IDs or fudged numbers. The IRS’s interest in not paying

a fraudulently claimed return is the same regardless of the

type of fraud at issue. And a taxpayer who has borrowed an

ID from someone else or who has claimed false deductions is

still liable for any unpaid taxes.

In short, the majority’s conclusion that the IRS was not

engaged in tax assessment or collection rests on an unduly

narrow construction of what constitutes tax assessment and

collection. I nonetheless agree that we should reverse the

district court on the record before us. Plaintiffs should at

least get the chance to show that the IRS investigation had no

other purpose than to impose criminal penalties.4

***

If the subjects of the IRS investigation in question were

to bring tort claims against the IRS for conduct related to the

investigation into the validity of their claimed returns, I

wonder whether any of us would have given pause to the

district court’s conclusion that § 2680(c) bars such claims.

What makes this case different from all of the other cases

applying § 2680(c) to bar claims is not so much the nature of

the IRS investigation, but the fact that Plaintiffs are not the

taxpayers at issue and are innocent third parties. We cannot,

however, distinguish this case on that ground without doing

damage to the statute’s text, see § 2680(c) (“The provisions

of this chapter and section 1346(b) of this title shall not apply

to . . . (c) Any claim arising in respect of the assessment or

collection of any tax . . . .” (emphasis added)), or creating an

overt circuit split, see, e.g., Interfirst Bank Dallas, N.A.,

4

Based on the record before us, I would not reach the Government’s

alternative arguments for affirming the dismissal of Plaintiffs’ claims.

32 SNYDER & ASSOCS. AQUISITION V. UNITED STATES

769 F.2d at 307 (“[Section 2680(c)] gives no indication

whatsoever that the exemption is limited to claims . . .

brought by taxpayers as opposed to third parties.”). That

said, I think that our case law fairly gives Plaintiffs a chance

to show that the IRS investigation was purely criminal. But

I can’t agree with the majority’s conclusion that IRS

investigations into the validity of a claimed refund fall

outside the scope of § 2680(c).

Finally, it is worth emphasizing what Plaintiffs are not

alleging in this lawsuit. They are not alleging that the IRS

breached an express or implied contract to make Plaintiffs

whole. Nor are they alleging that the failure to repay

Plaintiffs constituted a government taking. These claims

would fall under the Tucker Act, which specifically waives

immunity for breach of contract and takings claims.

28 U.S.C. § 1491(a)(1). Plaintiffs have raised these claims

before the Court of Federal Claims. Without passing on the

merits of that lawsuit, breach of contract and takings would

seem to be the more natural way of styling Plaintiffs’ claims.

Here, however, Plaintiffs’ tort claims arose during the course

of an IRS investigation. Further discovery may confirm the

Government’s argument that Plaintiffs’ claims arose “in

respect of the assessment or collection of any tax” and are

thus barred by § 2680(c), but the Plaintiffs should get the

opportunity to show otherwise. I don’t think we can conclude

that the Government is wrong on this record.

I concur in the judgment only.