# Petition for Writ of Certiorari — Judicial Watch, Inc. v. Rossotti

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## Record

- **Collection:** Supreme Court brief
- **Document type:** Petition for Writ of Certiorari
- **Published:** January 1, 2003
- **Citation:** 540 U.S. 825

## Text

(\ ) Supreme Ceurt, U.S.

FILED

In The
Supreme Court of the United States
October 2002 Term
JUDICIAL WATCH, INC.
Petitioner,
Vv.
CHARLES O. ROSSOTTI, et al.,

Respondents.

On Petition for a Wnit of Certiorari to the
United States Court of Appeals
for the Fourth Circuit

PETITION FOR WRIT OF CERTIORARI

Larry Klayman*

Paul J. Orfanedes
JUDICIAL WATCH, INC.
501 School Street, S.W., Suite 500
Washington, DC 20024
(202) 646-5172

Counsel for Petitioner

——Ol—=—~=—====E=IiIICll]ll]l]]ll™I e__—_—_—_—_—_—

* Denotes Counsel of Record

i
QUESTIONS PRESENTED

1. Whether a writ of certiorari should issue because the
Appellate Court’s ruling conflicts with relevant decisions of
this Court on an important question of federal law, namely,
whether a Bivens action is available to remedy a politically-
inspired, retaliatory tax audit?

2. Whether a writ of certiorari should issue to resolve this
important question of federal law that has not been, but
should be, settled by this Court?

3. Whether a writ of certiorari should issue to resolve a
conflict among the United States courts of appeals about this
important question of federal law?

il

LIST OF PARTIES

The following is a list of parties and each corporate
party’s respective parent corporation and subsidiaries, if any.

Petitioner:

1. Judicial Watch, Inc.
Respondents:

1. Charles O. Rossotti

2. Donna Dorsey

3. Peter Breslan

4. Wayne Hampel

3

Steven T. Miller

United States of America

a eens

iii
TABLE OF CONTENTS

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STATUTE AND CONSTITUTIONAL
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STATEMENT OF THE CASE ..................... 2
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B. Statement of Facts ..... are code 3

I.

iv
Page

A WRIT OF CERTIORARI SHOULD ISSUE
BECAUSE THE APPELLATE COURT’S RULING
CONFLICTS WITH RELEVANT DECISIONS OF
THIS COURT ON AN IMPORTANT QUESTION
OF FEDERAL LAW, NAMELY, WHETHER A
BIVENS ACTION IS AVAILABLE TO REMEDY A
POLITICALLY-INSPIRED, RETALIATORY TAX
RETE ok vcs 6 ceweeacbatncstendax eben sntess In the District Court, Respondents conceded that the only
statutory remedies available to Judicial Watch, Inc. through
the Internal Revenue Code consisted of a suit for a refund, if
taxes are ultimately assessed, and a suit for declaratory relief,
if Judicial Watch, Inc. is stripped of its tax-exempt status.

App. 43, n.12.

* — It is logical to conclude that no tax liability would result
in the majority of cases of punitive, retaliatory,
unconstitutional tax audits, because such audits are, by
definition, commenced in bad faith and without a proper basis
in fact or law.

17

audits. Bush, 462 U.S. at 368. As in Chilicky,
although “the creation of a Bivens remedy would
obviously offer the prospect of relief for injuries that
must now go unredressed,” the fact that Congress “has
not failed to provide meaningful safeguards or
remedies for the rights of persons” similarly situated
counsels against any judicial extension of Bivens
liability. Chilicky, 487 U.S. at 425.

App. 27.

Judicial Watch, Inc. respectfully submits that the
Appellate Court’s ruling conflicts with this Court’s rulings in
Bush and Chilicky because the Appellate Court’s ruling read
those cases too broadly. In Chilicky, which concerned the
denial of Social Security Disability Insurance benefits, after
surveying the extensive remedial provisions of the Social
Security Act, this Court determined that “Congress ... has
not failed to provide meaningful safeguards or remedies for
the rights or persons situated as [the plaintiffs] were.”
Chilicky, 487 U.S. at 425. While this Court agreed that the
restoration of back benefits afforded by the statute would not
provide a complete remedy to the plaintiffs, it held that the
relief provided by the statute afforded a sufficient remedy,
and, therefore, declined to authorize a supplemental form of
relief. Chilicky, 487 U.S. at 428-29.

This Court reached a similar conclusion in Bush. In that
case, the plaintiff, a federal employee, alleged that he was
demoted for exercising his First Amendment rights by making
statements to the press that were critical of the government.
Bush, 462 U.S. at 369-70. He exercised his statutory right to
challenge the demotion before the Civil Service Commission,

18

was reinstated to his previous position, and received an award
of back pay. Bush, 462 U.S: at 370-71. He also sought
damages in state court for violation of his First Amendment
rights. Bush, 462 U.S. at 371. On appeal from this state court
action, this Court explained: g

the question is not what remedy the court should
provide for a wrong that would otherwise go
unredressed. It is whether an elaborate remedial
system that had been constructed step by step, with
careful attention to conflicting policy considerations,
should be augmented by the creation of a new judicial
remedy for the constitutional violation at isswe

Bush, 462 U.S. at 388. Answering this question in the
negative, the Court declined to augment the remedy available
to the plaintiff. Bush, 462 U:S. at 390.

In this case, Judicial Watch, Inc. argued that, unlike in
Chilicky and Bush, no meaningful relief at all was available
to remedy the violation of its core First Amendment rights to
criticize the government, and -therefore the serious
constitutional wrong alleged by Judicial Watch, Inc. would go
unredressed in the absence of a Bivens remedy. By contrast,
in Schweiker, the plaintiffs could still recover the denied
social security benefits. Schweiker, 487 U.S. at 428. In Bush,
the plaintiff could still be reinstated and receive an award of
back pay. Bush, 462 U.S. at 370-71. Schweiker and Bush
hold that, when Congress affords a remedy for a particular
harm, a court may not judicially create an additional remedy,
even if the congressionally-created remedy does not afford
complete relief. Those cases do not, however, stand for the
proposition that, when Congress has created no remedy at all
for 2 constitutional violation, a Bivens remedy may not be

19

afforded to those whose constitutional ri ghts have been
violated simply because Congress affords other remedies for
unrelated violations that occur in the course of administering
the government program or activity at issue.

Indeed, this was exactly the conclusion reached in a
concurring opinion by Judge Stephen Reinhardt of the U.S.
Court of Appeals for the Ninth Circuit (“Ninth Circuit”) in
Western Center jor Journalism v. Cederquist, 235 F.3d 1153,
1158-59 (9th Cir. 2000), a substantially similar case
concerning a punitive, retaliatory tax audit that concluded
with a finding of no tax liability, and, hence, none of the
Statutory remedies allowed by the Internal Revenue Code
were available to the plaintiff. Judge Reinhardt determined:

... unlike [cases] in which the Internal Revenue Code
(Code) provides a mechanism for the taxpayer to be
compensated for the wrongful collection of taxes and
the wrongful determination of the amount of taxes
owed, in this case, the Code does not authorize any
relief (other than a declaratory judgment, see 26
U.S.C. § 7428(a)); nor does that Code preclude relief
for the type of injury alleged here -- harassment by
means of a retaliatory audit on account of the
expression of one’s political views.

If the IRS actually conducts audits of organizations to
retaliate against them for exercising their First
Amendment right to criticize government officials,
courts certainly have the authority to intervene. The
Bivens remedy is a powerful tool against such
governmental abuse, and must be available in

appropriate cases.

20

Cederquist, 235 F.3d at 1159.

Judge Reinhardt reached this compelling conclusion by
citing to an equally compelling decision by the U.S. Court of
Appeals for the Tenth Circuit (“Tenth Circuit”) in National
Commodity & Barter Ass'n v. Archer, 31 F.3d 1521 (10th Cir.
1985), in which that Court also determined that a Bivens
remedy was available to a taxpayer subject to a punitive,
retaliatory, unconstitutional tax audit for which the Internal
Revenue Code provided no remedy:

The Tenth Circuit has explained that, in cases in
which the Code does not provide any mechanism for
compensation, IRS officers are not shielded from
liability simply because the Code contains remedies
for other, unrelated violations. National Commodity
& Barter Ass’n, 31 F.3d at 1530 (Bivens remedy
against IRS officials proper to redress injury to First
Amendment rights caused by seizure of organization's
membership lists); cf. id. at 1532 (no Bivens remedy
to redress harm caused by jeopardy assessment,
because the Code provides a mechanism to remedy
wrongful collection of taxes). I agree with the Tenth
Circuit that a Bivens remedy is available in First
Amendment cases involving the type of IRS
harassment alleged here.

Cederquist, 235 F.3d at 1159.

In both National Commodity & Barter Ass'n v. Gibbs, 886
F.2d 1240 (10th Cir. 1989) (NCBA J) and National
Commodity & Barter Ass'n v. Archer, 31 F.3d 1521 (10th Cir.
1994) (NCBA II), the Tenth Circuit allowed a Bivens claim to

21

proceed against IRS officials based upon allegations that the
Officials harassed and retaliated against the plaintiffs for
advocating the abolition of the IRS, but would not allow a
Bivens claim to proceed based upon allegations of unlawful
tax collection practices. Specifically, the plaintiffs in NCBA
I and NCBA II alleged that IRS officials engaged in a pattern
of improper conduct to “demoralize, paralyze, and ultimately
destroy a non-commercial, voluntary, political/educational
association of individuals advocating dissident view as to the

- tax, monetary and fiscal laws and policies of the government”
in violation of their First and Fourth Amendment rights.
NCBA I, 886 F.2d at 1244. The plaintiffs also alleged that
they were improperly subjected to tax penalties known as
jeopardy assessments in violation of their Fifth Amendment
rights.” NCBA I, 886 F.2d at 1248. The Tenth Circuit
expressly declared that the plaintiffs could bring a Bivens
action to remedy violations of their First and Fourth
Amendment rights:

In Pleasant v. Lowell, without directly considering the
issue, this court permitted individuals to proceed in
first and fourth amendment Bivens claims against
agents of the Internal Revenue Service for certain
activities also described in the complaint at issue in
this case. Implicit in our holding in Pleasant is the
recognition that, while the comprehensive scheme of

* Jeopardy assessments allow the IRS to seize assets where
it believes its future ability to collect a tax deficiency will be
harmed by any delay. Jeopardy assessments are specifically
authorized by statute, and Congress has enacted well-defined
procedures for challenging them. 26 U.S.C. §§ 6861, 6862
and 6863.

22

the Internal Revenue Service should not be
indiscriminately disrupted by the creation of new
remedies, certain values, such as those protected by

the first and fourth amendments, may be superior to

the need to protect the integrity of the internal revenue
system. We therefore recognized thatthe NCBA may
bring a Bivens action for violations of the first and
fourth amendments.

NCBA I, 886 F.2d at 1248 (citations omitted); NCBA II, 31
F.3d at 1527-32.

At the same time, the Tenth Circuit in NCBA Jand NCBA
IT would not allow the plaintiffs to maintain claims against
IRS officials under Bivens for the allegedly unlawful jeopardy
assessments:

In further support of their constitutional claims,
plaintiffs allege that wrongful jeopardy assessments
were made against NCBA. .. . In NCBA I, we held
that the NCBA did not state a Bivens claim under the
Fifth Amendment or the Internal Revenue Code for
the wrongful assessments. We reasoned that “the
NCBA has all sorts of rights against overzealous
officialdom, including, most fundamentally, the right
to sue the government for a refund if forced to
overpay taxes, and it would make the collection of
taxes chaotic if a taxpayer could bypass the remedies
provided by Congress simply by bringing a damage
action against [government employees. ]”

This reasoning is equally applicable to the claim
grounded on the allegations of wrongful jeopardy

23

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.

NCBA II, 31 F.3d at 1532 (emphasis added) (citations
omitted).

These holdings are entirely consistent with any fair
reading of Chilicky and Bush. Where Congress has created an
alternative remedy, such as for unlawful tax collection
practices, those remedies render Bivens claims unnecessary.
Where there is no such alternative rémedy, such as in
Cederquist, NCBA I, NCBA II, and in this case, a Bivens
action is the only remedy available to vindicate the important
constitutional rights secured by the First Amendment.

In fact, the District Court also drew this same distinction
and found a Bivens remedy exists where IRS officials retaliate
against citizens for expressing their First Amendment right to
criticize the government, citing Cederquist, NCBA I and
NCBA II, among other authority:

... the United States Supreme Court has restricted the
availability of Bivens actions, by expanding on the
language in Bivens indicating that such relief is
permissible only when there are “no special factors
counseling hesitation in the absence of affirmative
action by Congress.” 403 U.S. at 396. The Court has
found that affirmative action by Congress to create a
Statutory or regulatory remedial scheme, even if the

24

scheme lacks complete remedies for constitutional
violations, is sufficient to bar a Bivens action. See,
e.g., Schweiker v. Chilicky, 487 U.S. 412, 101 L. Ed.
2d 370, 108 S. Ct. 2460 (1988) (remedial scheme in
context of social security system); Chappell v.
Wallace, 462 U.S. 296, 304, 76 L. Ed. 2d 586, 103 S.
Ct. 2362 (1983) (remedial scheme in context of
military justice system); Bush v. Lucas, 462 U.S. 367,
368, 76 L. Ed. 2d 648, 103 S. Ct. 2404 (1983)
(remedial scheme in context of civil service system).
Summing up its approach to these cases, the Court
stated, “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.” Schweiker at 423. —

Circuit courts have applied this reasoning to deny
Bivens claims in lawsuits against I.R.S. employees
where the plaintiffs would have another avenue of
relief through the provisions of the Internal Revenue
Code. See, e.g., Shreiber v. Mastrogiovanni, 214 F.3d
148 (3rd Cir. 2000); Fishburn v. Brown, 125 F.3d
979, 982-83 (6th Cir. 1997); Vennes v. Unknown
Number of Unidentified Agents, 26 F.3d 1448, 1453-
53 (8th Cir. 1994). Im these cases, however, the
harm caused by the alleged constitutional
violations amounted to the illegal assessment or
collection of taxes, which could be cured, at least
for the most part, by refund suits and other similar
statutory remedies. In contrast, where the
constitutional violation is a harm in itself, such as

25

the suppression of political speech or the violation
of Fourth Amendment rights, courts have
recognized the propriety of a Bivens remedy. See,
Nat'l Commodity and Barter Assoc. v. Gibbs, 886
F.2d 1240, 1248 (10th Cir. 1989) (permitting Bivens
action for violations of the First and Fourth
Amendments because “certain values... may be
superior to the need to protect the integrity of the
intemal revenue system”); Western Center for
Journalism v. Cederquist, 235 F.3d 1153, (9th Cir.
2000) (Reinhardt, J., concurring) (observing thata -

' Bivens remedy is appropriate for retaliatory audits

' because Congress has fashioned no remedy for I.R.S.
conduct that punishes political speech); Hurt v. United
States, 889 F. Supp. 248 (S.D. W. Va. 1995) (finding
grounds for a Bivens remedy where plaintiffs sued
LR.S. agents for allegedly retaliatory and harassing >
auditing practices). -

Accordingly, this Court is persuaded that a Bivens
action should be available where, as here, the statutory
remedies provided in the Internal Revenue Code (i.e.,
a refund suit and action for declaratory relief) would
not address the alleged constitutional wrongs of the
.R.S. defendants.

App. 41-43 (emphasis added).

Other courts have allowed Bivens actions to proceed in
order to remedy punitive, retaliatory tax audits. In Hurt v.
United States, 889 F. Supp. 248 (S.D. W.Va. 1996), the
plaintiffs alleged that IRS officials violated their Fourth and
Fifth Amendment rights by harassing them in reialiation for
Mr. Hurt’s legal representation of clients in civil actions filed

26

against the IRS several years earlier. Hurt, 889 F. Supp. at
249. The alleged harassment specifically included retaliatory
tax audits, among other improper conduct. Hurt, 889 F.
Supp. at 249. The Court expressly held that the plaintiffs
could maintain a Bivens action against the IRS officials:

Plaintiffs allege a pattern of retaliatory and harassing
auditing and crediting practices used by the IRS
against them. This is sufficient to withstand a motion
to dismiss the-Bivens claim.

Hurt, 889 F. Supp. at 252.

Courts also have allowed Eivens actions to proceed
against IRS agents in other, non-tax collection contexts. For
example, in Kaufman v. United States, 876 F. Supp. 1044
(E.D. Wis. 1995) the Court sustained a Bivens action against
IRS agents who obtained a warrant to search the plaintiff's
business by making knowingly false or reckless
misrepresentations in an affidavit.

The Appellate Court itself suggested that a Bivens action
should be allowed-to proceed in order to remedy a punitive,
retaliatory tax audit in White v. Boyle, 538 F.2d 1077 (4th Cir.
1976), although Judicial Watch, Inc. recognizes that White
was decided before Bush and Chilicky.

Under a proper reading of Bush and Chilicky, the same
conclusion reached by the Courts in Cederquist, NCBA I, and
NCBA II, as well as the conclusion reached by the Appellate
Court itself in White and the district courts in Hurt and
Kaufman, should have been reached in this action. A writ of
certiorari should issue to resolve the conflict between this

27

Court’s rulings in Bush and Chilicky and the Appellate
Court’s January 24, 2003 ruling in this important matter.

II. A WRIT OF CERTIORARI SHOULD ISSUE TO
RESOLVE THIS IMPORTANT QUESTION OF
FEDERAL LAW THAT HAS NOT BEEN, BUT
SHOULD BE, SETTLED BY THIS COURT

This Court has never ruled on the important question of
federal law raised by Judicial Watch, Inc.’s lawsuit, namely,
whether a Bivens action is available to remedy politically-
inspired and/or retaliatory tax audits. The interests at stake in
this lawsuit -- the right to criticize the government without
punishment or retaliation - lie at the core of the freedoms
protected by the First Amendment. A democratic society
governed by the rule of law demands that a Bivens remedy be
made available to protect this vital interest, and a writ of
certiorari should issue to address this important concern.

Ill. A WRIT OF CERTIORARI SHOULD ISSUE
TO RESOLVE A CONFLICT AMONG THE
UNITED STATES COURTS OF APPEALS
ABOUT THIS IMPORTANT QUESTION OF
FEDERAL LAW

As demonstrated in Section I, above, the Appellate
Court’s January 24, 2003 decision conflicts with the rulings
of at least one other United States court of appeals, namely,
the Tenth Circuit’s decisions in NCBA J and NCBA II. It also
conflicts with the Ninth Circuit concurrence of Judge
Reinhardt in Cederquist. A writ of certiorari should issue to

28

resolve the conflict among the United States courts of appeals
about this important question of federal law.

CONCLUSION

The misuse of the IRS for punitive, retaliatory purposes
has haunted the history of our nation. The Court should take
this opportunity to confirm that a Bivens remedy is available
to victims of politically-inspired, retaliatory tax audits, not
only because the Appellate Court’s decision conflicts with
prior related decisions of this Court concerning when Bivens
claims should be allowed, but also because the Court has not
addressed this particular, obviously important issue and the
_courts of appeals that have addressed the issue are divided.
For these and the other compelling reasons set forth above,
Judicial Watch, Inc. respectfully requests that its petition for
writ of certiorari be granted.

Respectfully submitted,

Larry Klayman*

Paul J. Orfanedes
JUDICIAL WATCH, INC.
501 School Street, S.W.
Suite 500

Washington, DC 20024
(202) 646-5172

Counsel for Petitioner

* Denotes Counsel of Record

one ae 4 3
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“Pas

App..1

APPENDIX A - JANUARY 24, 2003
APPELLATE COURT OPINION

UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
JUDICIAL WATCH, INC.
Appellant,
No. 02-1413, No. 02-1462

V.

CHARLES O. ROSSOTTI
et al.,

)
)
)
)
)
)
)
)
)
Appellees. )
)

Appeals from the United States District Court for
the District of Maryland at Baltimore. William M.
Nickerson, Senior District Judge.
(CA-01-2672-WMN).

317 F.3d 401; 2003 U.S. App. LEXIS 1090;
2003-1 U.S. Tax Cas. (CCH) P50,202;
91 A.F.T.R.2d (RIA) 763

December 3, 2002, Argued

January 24, 2003, Decided

DISPOSITION:
Affirmed.

COUNSEL:

ARGUED: David Barmak, MINTZ, LEVIN, . COHN,
FERRIS, GLOVSKY & POPEO, P.C., Reston, Virginia, for
Appellant. ;

Gretchen M. Wolfinger, Tax Division, UNITED STATES
DEPARTMENT OF JUSTICE, Washington, D.C., for
Appellees.

ON BRIEF: Erica Brown, MINTZ, LEVIN, COHN, FERRIS,
GLOVSKY & POPEO, P.C., Washington, D.C., for
Appellant.

Eileen J. O'Connor, Assistant Attorney General, Jonathan S.
Cohen, Thomas M. DiBiagio, United States Attorney, Tax
Division, UNITED STATES DEPARTMENT OF JUSTICE,
Washington, D.C., for Appellees.

JUDGES:

Before NIEMEYER, LUTTIG, and MOTZ, Circuit Judges.
Judge Motz wrote the opinion, in which Judge Niemeyer and
Judge Luttig joined.

OPINION BY:

DIANA GRIBBON MOTZ

App. 3

OPINION:
DIANA GRIBBON MOTZ, Circuit Judge:.

I.

Founded in 1994, Judicial Watch describes itself as a
"non-partisan legal ‘watchdog’ organization that relies on the
Freedom of Information Act ("FOIA"), the civil discovery

_ attempting, to influence legislation ... or intervening in
(including the publishing or distributing of Statements), any
political campaign on behalf of (or in opposition to) any
candidate for public office"); see also 26 U.S.C.A. § 504
(West 2002) (addressing status of organization that fails to

App. 4

qualify for 501(c)(3) exemption because of substantial
lobbying or political activities); Regan v. Taxation with

Representation for Washington, 461 U.S. 540, 551, 76 L.Ed.
2d 129, 103 S.Ct. 1997 (1983) (affirming § 501(c)(3) ban on

lobbying).

During the late 1990s, Judicial Watch filed a number of
lawsuits against President and Mrs. Clinton. On September
28, 1998, in the midst of the impeachment proceedings
against President Clinton, Judicial Watch submitted a report
entitled "Interim Report: Crimes and Other Offenses
Committed by President Bill Clinton Warranting His
Impeachment and Removal from Elected Office" ("Interim
Report") to members of the House Judiciary Committee. The
Interim Report claimed, inter alia, "that the Clinton
Administration had operated a campaign of retribution and
retaliation against its perceived enemies, using politically
inspired retaliatory tax audits as a major weapon in that
campaign." The Interim Report was subsequently accepted
into the Congressional Record and made an official part of the
impeachment proceedings in Congress.

Several days later, Judicial Watch received a letter from
the IRS, signed by Agent Donna Dorsey, stating that it had
been selected for an audit. The letter was accompanied by an
IRS Form 4564 Information Document Request, which
requested information pertaining to the political affiliations of
Judicial Watch directors. After receiving the audit letter,
Judicial Watch resisted IRS efforts to proceed with the audit
by filing FOIA requests, meeting with IRS officials, refusing
IRS document requests, and asserting throughout that the
audit constituted politically motivated retaliation.

"App. 5

In July 1999, the IRS informed Judicial Watch that the
Service was withdrawing the audit Pending an investigation
by the Treasury Inspector General for Tax Administration, the
independent internal monitor of IRS activities. The IRS
contends, and Judicial Watch does not dispute, that the
Inspector General then conducted two investigations into the
asserted illegitimacy of the audit and found no evidence of
impropriety by the IRS or any of the IRS employees involved
in the decision to audit Judicial Watch. -

January 2002, Judicial Watch filed an amended complaint,
withdrawing its claims against the United States, but adding
the Department of the Treasury and the Internal Revenue
Service as defendants.

The amended complaint alleges that the audit is
"retaliatory, politically-motivated, and unconstitutional,"
violating Judicial Watch's First Amendment free speech
rights, Fifth Amendment due process rights, and Fifth
Amendment right to be free of selective prosecution. The
amended complaint seeks an injunction against all defendants
from proceeding with the audit and compensatory and

individual agents. It also includes claims for relief in
connection with Judicial Watch's FOIA requests.

In support of its constitutional claims, Judicial Watch
alleges that the timing of the audit letter (four days after the

App. 6

Interim Report was made an official part of Congress's
impeachment proceedings), the timing of several subsequent
IRS document requests pursuant to the audit, and the fact that
it received final notice of its exempt status at roughly the
same time that it received the audit letter, create a strong
inference of retaliatory motive. Similarly, Judicial Watch
| cites the "extraordinary demand” contained in the IRS Form
4564 Information Document Request that Judicial Watch
| provide information on the political affiliations ofits directors
and the alleged refusal of the IRS to respond to Judicial
Watch's various FOIA requests as evidence of bad faith and
improper motive.

Finally, Judicial Watch refers to comments by various IRS
agents that, in its view, suggest a retaliatory motive. These
comments include the statement by Agent Dorsey on
November 23, 1998 to counsel for Judicial Watch that the
audit was a "hot potato"; the query by Agent Breslan to
representatives from Judicial Watch at a meeting on January
12, 1999: "What do you expect when you sue the President?";
the asserted concession by Agent Miller that the audit and
IRS's failure to respond to Judicial Watch's FOIA requests
"had created at least the appearance of a problem"; and
| statements made during March and April 2000 by Agent
Hampel that Judicial Watch was still on the IRS "radar
screen."

On January 18, 2002, more than three years after sending
the initial audit letter, the IRS served Judicial Watch with an
administrative summons pursuant to the audit demanding
production of documents within eight business days. judicial
Watch refused to comply with the summons, but instead filed
another action in the district court seeking to stay or enjoin

aaa

OS MH RI NU SREP da te UR aap Fai gTR OE LOMB ree TOT

App. 7

any attempt to enforce the summons. The court subsequently
consolidated the new action with the Original action.

After full briefing, the district court denied Judicial
Watch's motion to stay or enjoin the administrative summons
and eranted the defendants' motion to dismiss all claims.
Because the court did not resolve the FOIA claims, Judicial
Watch moved for certification of the case for immediate
appeal. The district court entered the requested certification
order and we, in turn, granted Judicial Watch's petition for
interlocutory review. See 28 US.C.A. § 1292(a)(1) (West
1993).!

Il.

The districi court denied Judicial Watch's request for
injunctive relief on the ground that the Anti-Injunction Act
(sometimes herein, "the Act"), 26 U.S.C.A. § 7421 (West

Subsequent to the issuance of the district court's opinion,
the Government filed a summons enforcement action in the
District Court for the District of Columbia. On December 1 l,
2002, after extensive briefing and in camera review of "all
documents relating to [IRS's] motivation and purpose for its
proposed audit of Judicial Watch," affidavits from IRS
officials and employees involved in the audit, and the reports
of two investigations of the audit by the Treasury Inspector
General for Tax Administration, the court resolved the action
in favor of the United States, concluding that there was "no
evidence of political vindictiveness or retaliatory motive." See
United States v. Judicial Watch, Inc., 2002 U.S. Dist. LEXIS
25197, Misc. Action No. 02-144 (ESH) (D.D.C. Dec. 11,
2002) slip op. at 3, 9-10. Judicial Watch indicates that it
intends to appeal this Tuling.

App. 8

2002), deprived it of jurisdiction to grant such relief. We
review that decision de novo. Estate of Michael v. M.J. Lullo,
173 F.3d 503, 506 (4th Cir. 1999).

The Anti-Injunction Act provides in relevant part that:

no suit for the purpose of restraining the assessment or

collection of any tax shall be maintained in any court

by any person, whether or not such person is the
_ person against whom such tax was assessed.

26 U.S.C.A. § 7421(a) (West 2002).

As the Supreme Court has emphasized, the language of
the Act "could scarcely be more explicit," reflecting its
overarching objective of protecting "the Government's need
to assess and collect taxes as expeditiously as possible with a
minimum of pre-enforcement judicial interference." Bob
Jones University v. Simon, 416 U.S. 725, 736, 40 L.Ed. 2d
496, 94 S.Ct. 2038 (1974); see also Sigmon Coal Co. v. Apfel,
226 F.3d 291, 299 (4th Cir. 2000) ("The Act has two primary
objectives: ‘efficient and expeditious collection of taxes with
a minimum of preenforcement judicial interference, and
protection of the collector from litigation pending a refund
suit'." (quoting United States v. American Friends Serv.
Comm., 419 U.S. 7, 12, 42 L.Ed. 2d 7, 95 S.Ct. 13 (1974) (per
curiam))), aff'd sub nom. Barnhart v. Sigmon Coal Co., 534
U.S. 438, 151 L.Ed. 2d 908, 122 S.Ct. 941 (2002). The effect
of the Act is simple and obvious: courts lack jurisdiction to
issue injunciive relief in suits seeking to restrain the
assessment or collection of taxes. See, eg., Estate of
Michael, 173 F.3d at 506 ("The Anti-Injunction Act
withdraws all courts' jurisdiction over suits filed ‘for the

App. 9

purpose of restraining the assessment or collection of any
tax'.").

Judicial Watch maintains that the Act does not apply to its
motion to enjoin the audit (and stay or enjoin enforcement of
the administrative summons issued pursuant to the audit)
because an audit conducted for unlawful purposes does not
constitute "assessment or collection" of a tax. Alternatively,
it argues that even if the Act does apply to its request for
injunctive relief, the present action falls within the judicially
crafted exceptions to the Act. Both arguments fail.

A.

First, it is clear that the Anti-Injunction Act extends
beyond the mere assessment and collection of taxes to
embrace other activities, such as an audit to determine tax
liability, that may culminate in the assessment or collection of
taxes.

In Bob Jones, for example, the Supreme Court refused to
enjoin the IRS from revoking the plaintiff's § 501(c)(3)
Status. 416 U.S. at 748-49. Other courts, including this one,
have also held that the Act applies broadly to include
activities that are intended to or may culminate in the
assessment or collection of taxes. See, e.g., Lowrie v. United
States, 824 F.2d 827, 830 (10th Cir. 1987) ("The statute
applies not only to the actual assessment or collection of a
tax, but is equally applicable to activities leading up to, and
culminating in, such assessment and collection."); Dickens v.
United States, 671 F.2d 969, 971 (6th Cir. 1982) (stating that
the Act "is equally applicable to activities which are intended
to or may culminate in the assessment or collection of taxes"

App. 10

(internal quotations marks and citations omitted)); White v.
Boyle, 538 F.2d 1077, 1080 (4th Cir. 1976) (affirming
dismissal of request for injunctive reliefregardless of whether
the taxpayer "sought to restrain the collection of taxes. . . or
to restrain an investigation of his tax liability" (citations
omitted)). Clearly, an audit to determine tax liability fits
squarely within the category of activities that may culminate
in the assessment or collection of taxes.

Judicial Watch attempts to distinguish these cases on the
ground that in them the IRS acted on the basis of good faith
tax enforcement purposes, while the audit at issue here was,
according to Judicial Watch, a product of bad faith non-tax
related motives. Judicial Watch further maintains that
because these bad faith motives assertedly drove the decision
to initiate the audit, enjoining the audit (and any judicial
enforcement of the administrative summons) would not
constitute an interference with the assessment or collection of
taxes.

The initial difficulty with this argument is that, although
the amended complaint contains general allegations of
retaliatory conduct by IRS agents based on the factual
chronology outlined above, the complaint does not allege that
the individual IRS agents even knew that Judicial Watch had
filed various lawsuits, much less its Interim Report, explicitly
targeting the Clinton administration. Nor does Judicial Watch
dispute that the Inspector General conducted two
investigations and twice exonerated the individual IRS
employees involved in the audit decision.

Moreover, the sworn declaration of Agent Dorsey, which
the district court made part of the record after issuance of its

REGAN DEOL EEOC GEES LPN EMER

App. 11

decision in this case at the request of Judicial Watch and
which Judicial Watch urges us to consider, severely
undermines Judicial Watch's general allegations of retaliation.
In her declaration, Dorsey, who signed the initial audit letter,
States that the decision to audit Judicial Watch was made in
December 1997 (more than nine months before the
impeachment proceedings); that when first assigned the
Judicial Watch audit in July 1998 she had never heard of the
organization; that, except for an initial instruction to
coordinate her work on the audit with IRS District Counsel in
Baltimore, she never received any "instructions, directions,
indications, or suggestions from anyone to treat Judicial
Watch, Inc. differently than any other taxpayers" during the
course of her work on the case; that she never had any contact
with then Commissioner Rossotti or his office or with the
President or the Vice President, or their offices; and that she
did not follow and was not aware of any role that Judicial
Watch played in the impeachment of President Clinton.”

The district court also permitted Judicial Watch to
supplement the record with numerous complaints by citizens
to various elected officials regarding Judicial Watch's political
activities, and referral of those complaints to the IRS. The
citizens assert that based on fundraising materials received
from Judicial Watch, they believe that the organization
engaged in partisan political activity not permitted of a §
501(c)(3) tax-exempt organization. These materials do not
Support Judicial Watch's contentions that the IRS or its agents
acted improperly. They simply evidence constituent service,
which our political system accepts and even applauds.
Judicial Watch places particular emphasis on "an August 14,
1998 e-mail" complaint of this sort "from a purported Clinton
supporter to President Clinton" and documents indicating that

App. 12

Judicial Watch does not dispute any of these assertions.
We also can take judicial notice that in its recent decision
granting the IRS's summons enforcement request, the district
court in the District of Columbia concluded, on the basis of a
"voluminous record," that there was "no evidence of political
vindictiveness or a retaliatory motive." United States v.
Judicial Watch, Inc., 2002 U.S. Dist. LEXIS 25197 at *4,
Misc. Action No. 02-144 (ESH) (D.D.C. Dec. 11, 2002), slip
op. at 2-3. Thus, Judicial Watch's argument that the IRS acted
with bad faith motives unrelated to enforcement of the tax law
finds little support in the record.

More importantly, Judicial Watch misunderstands the
impact of allegations that the IRS acted with bad faith, non-
tax related motives. Such allegations do not render the Anti-
Injunction Act inapplicable. In Bob Jones itself, the taxpayer
contended, when seeking to enjoin the IRS, that "the Service's
threatened action was outside its lawful authority and would
| violate petitioner's rights to the free exercise of religion, to
| free association, and to due process and equal protection of

the laws." Bob Jones, 416 U.S. at 736. The Supreme Court
recognized this "attribution of non-tax-related motives to the

the Office of the President forwarded this e-mail to then IRS-
Commissioner Rossotti's office. Supp. Brief of Appellant at
3-4. However, as noted in text above, regardless of the
lawfulness of this communication by the President or his
office (and Judicial Watch maintains that it violates 26
U.S.C.A. § 7217 (West 2002)) nothing in the record indicates
it had any effect on the IRS's decision to audit Judicial Watch.
Indeed, according to Agent Dorsey's undisputed sworm
statement, the IRS decided to audit Judicial Watch in
December 1997 -- eight months before the date of the e-mail.

a ;

App. 13

Service," but concluded that the attribution "ignored the fact
that the [taxpayer] had not shown that the Service's action was
without an independent basis in the requirements of the
Code." Id. at 740 (emphasis added). The Court explained that
if the IRS action represents "a good-faith effort to enforce the
technical requirements of the tax laws," other additional
motives for its actions do not eliminate the prohibition in the
Anti-Injunction Act. Id. Thus, despite the petitioner’s efforts
to circumvent the restrictions of the Anti-Injunction Act by
attributing a non-tax-related purpose to the IRS's actions, the
Bob Jones Court concluded that the Act did apply and
proceeded to determine if the request for injunctive relief
qualified for an exception to the Act. Jd. at 748-49,

Accordingly, unless Judicial Watch qualifies for one of
two exceptions to the Anti-Injunction Act, the district court
properly concluded that the Act stripped it of jurisdiction
necessary to issue the requested injunctive relief.

B.

The Supreme Court established the first exception to the
Act in Enochs v. Williams Packing & Navigation Co., 370
USS. 1, 8 L.Ed. 2d 292, 82 S.Ct. 1125 (1962), "the capstone
to judicial construction of the Act." Bob Jones, 416 U.S. at
742. In Williams Packing, the taxpayer requested an
injunction to prevent the IRS from collecting past due social
security and unemployment taxes. Although the Supreme
Court reversed a lower court's grant of injunctive relief, the
Court held that such actions could proceed, despite the Anti-
Injunction Act, if, but only if, the plaintiff could show that (1)
"under no circumstances could the Government ultimately
prevail," and (2) "equity jurisdiction otherwise exists."

App. 14

Williams Packing, 370 U.S. at 7. Moreover, the Court
directed that in analyzing the initial factor, a court must
determine, "on the basis of the information available to [the
Government] at the time of the suit," whether, "under the
most liberal view of the law and the facts, the United States
cannot establish its claim." Jd.; see also Estate of Michael,
173 F.3d at 506.

Judicial Watch simply cannot establish that "under no
circumstances could the Government ultimately prevail."
Williams Packing, 370 U.S. at 7. Section 501(c)(3) provides
an explicit basis for the IRS to investigate Judicial Watch's
tax-exempt status and determine if its "political" activities
merit a change in its status. As the district court concluded,
taking the most liberal view of the law and the facts, it is quite
possible (even "plausible") that the IRS initiated and has
continued to pursue the audit because it was "legitimately
suspicious" that Judicial Watch's “earnest efforts to assis? in
the impeachment of President Clinton" constituted the sort of
"prohibited political activity” not permitted any organization
afforded § 501(c)(3) status. As in Bob Jones, therefore,
regardless of any additional, improper non-tax related
purpose, Judicial Watch has not and cannot demonstrate that
the IRS action does not reflect, at least in part, "a good faith
effort to enforce the technical requirements of the tax laws."
Bob Jones, 416 U.S. at 740. Thus, without deciding the
merits of Judicial Watch's claims, we must conclude that its
contentions "are sufficiently debatable to foreclose any notion
that under no circumstances could the Government ultimately
prevail." Jd. at 749.

Nor can Judicial Watch find refuge in the other exception
to the Anti-Injunction Act, that created in South Carolina v.

App. 15

Regan, 465 U.S. 367, 375, 79 L.Ed. 2d 372, 104 S.Ct. 1107
(1984). There, South Carolina sought an injunction against a
tax on the ground that a provision of the Code regarding state-
issued bonds violated the Constitution. The Supreme Court
held that if the Anti-Injunction Act applied, South Carolina
would have had to depend on third parties to raise the State's
constitutional challenge in their tax refund suits. Jd. at 379-
80. The Court reasoned that the Act could not stand as a
barrier to injunctive relief in situations "where ... Congress
has not provided the plaintiff with an alternative legal way to
challenge the validity of the tax." Jd. at 373.3

Of course, the basis of the Regan exception isnot whether
a plaintiff has access to a legal remedy for the precise harm
that it has allegedly suffered, but whether the plaintiff has any
access at all to judicial review. As the Regan Court

* Because of the strong policy animating the Anti-
Injunction Act, and the sympathetic, almost unique, facts in
Regan, courts have construed the Regan exception very
narrowly, undermining Judicial Watch's efforts to fit its own
claims within the confines of this exception. See, e.g.,
American Bicycle Ass'n v. United States (In re American
Bicycle Ass'n), 895 F.2d 1277, 1281 (9th Cir. 1990)
("Promoting the purpose behind the Act requires a strict
construction of any possible exceptions."); Leves v. IRS, 796
F.2d 1433, 1434 (11th Cir. 1986) (refusing to extend the
exception because Regan "involved the rights of third parties
to litigate the tax liability of persons against whom the tax
was assessed"); American Society of Ass'n Executives v.
Bentsen, 848 F. Supp. 245, 250(D.D.C. 1 994) (noting that the
exception announced in Regan "is a narrow one tailored to the
unique factual pattern in that case").

App. 16

explained, "the indicia of congressional intent -- the [Anti-
Injunction] Act's purposes and the circumstances of its
enactment -- demonstrate that Congress did not intend the Act
to apply where an aggrieved party would be required to
depend on the mere possibility of persuading a third party to
assert his claims." 465 U.S. at 381. The Act does apply,
however, whenever Congress has provided "an alternative
avenue for an aggrieved party to litigate its claims on its own
behalf." Jd.

This case differs markedly from Regan. Judicial Watch
does not challenge the validity of any provision of the Code,
but only seeks to avoid an audit to determine its tax liability.
Judicial Watch need not depend on third parties to pursue this
claim, a fact reflected in its efforts to resist the audit in the
summons enforcement proceedings in the District of
Columbia. See supra n.1. Moreover, the Code also provides
that organizations whose exempt status under 501(c)(3) has
been denied or revoked can seek declaratory relief. See 26
U.S.C.A. § 7428 (West 2002). Although Judicial Watch may
not like the avenues Congress has provided for challenging an
audit, it simply cannot maintain that it has no avenue for
doing so.

In sum, the claims for injunctive relief asserted by Judicial
Watch do not fall within the narrow exceptions carved out in
Williams Packing or Regan. Strong policy reasons support
this result. Extending the recognized exceptions to the Anti-
Injunction Act to include requests for injunctive relief like
that of Judicial Watch would threaten a flood of lawsuits
brought against the IRS by those seeking to enjoin an audit
they believed to be wrongful, creating precisely the kind of

App. 17

judicial interference with the assessment and collection of
taxes that the Act was designed to prevent.

Il.

Judicial Watch also contends that the district court erred
in dismissing its Bivens action for money damages against the
individual defendants. See Bivens v. Six Unknown Named
Agents of the Fed. Bureau of Narcotics, 403 U.S. 388, 396-
97, 29 L.Ed. 2d 619, 91 S.Ct. 1999 (1971).*

In Bivens, the Supreme Court found that the Fourth
Amendment contained an implied private cause of action for
damages against federal Narcotics agents who allegedly
conducted an illegal search and seizure. See Bivens, 403 U.S.
at 397. The Court concluded that it could recognize this new
constitutional tort because, although Congress had never
provided for such a private right of action, "no explicit
congressional declaration" prohibited it, and "no special
factors counseled hesitation [by the Court] in the absence of
affirmative action by Congress." Jd. at 396-97.

in the more than thirty years since Bivens, the Court has
been very hesitant to imply other private actions for money
damages. Indeed, the Court has only recognized two other
such actions -- one under the Due Process Clause of the Fifth
Amendment, Davis y. Passman, 442 U.S. 228, 245-49, 60
L.Ed. 2d 846, 99 S.Ct. 2264 (1979) (finding Bivens remedy

* The district court concluded that the individual defendants
were entitled to qualified immunity on the alleged Bivens
claims. Because we find no Bivens action lies in this case, we
do not reach the question of qualified immunity.

App. 18

for alleged violation of due process rights because of gender
discrimination by United States Congressman in terminating
petitioner's employment), and one under the Cruel and
Unusual Punishment Clause of the Eighth Amendment,
Carlson v. Green, 446 U.S. 14, 18-23, 64 L.Ed. 2d 15, 100
S.Ct. 1468 (1980) (finding Bivens remedy for federal prisoner
who was allegedly deprived of potentially life-saving

' treatment in violation of his Eighth Amendment rights).
Instead, the Court has directed its attention to cabining the
Bivens doctrine. See Correctional Services Corp. v. Malesko,
534 U.S. 61, 122 S.Ct. 515, 520, 151 L.Ed. 2d 456 (2001)
("Since Carlson we have consistently refused to extend
Bivens liability to any new context or new category of
defendants.").

The Court's refusal to extend Bivens has been especially
apparent in cases involving complex statutory schemes in
which Congress has considered and created meaningful
avenues for redress. Thus, in Bush v. Lucas, 462 U.S. 367, 76
L.Ed. 2d 648, 103 S.Ct. 2404 (1983), the Court refused to
find an implied Bivens remedy for federal employees alleging
that their supervisors violated their First Amendment rights.
Because these claims arose out of a "relationship ... governed
by comprehensive procedural and substantive provisions
giving meaningful remedies against the United States," the
Court concluded that "it would be inappropriate ... to
supplement that regulatory scheme with a new judicial
remedy.” Jd. at 368. |

Similarly, in Schweiker v. Chilicky, 487 U.S. 412, 101
L.Ed. 2d 370, 108 S.Ct. 2460 (1988), the Court declined to
find anew Bivens remedy for claimants whose Social Security
disability benefits had been improperly terminated. Given the

App. 19

"elaborate remedial scheme devised by Congress" to deal with
the improper denial or termination of disability benefits, the
Court saw no reason to tread on congressional prerogatives by
creating a new judicial remedy for the particular harm
suffered by the claimants. Jd. at 414. In reviewing the
development of Bivens jurisprudence, the Court concluded:

the concept of "special factors counseling hesitation in
the absence of affirmative action by Congress” has
proved to include an appropriate judicial 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. Thus, in Chilicky, even though "Congress had
failed to provide for ‘complete relief" for the disability
claimants, the Court refused to create a Bivens remedy
because Congress had provided some "meaningful safeguards
or remedies." Jd. at 425 (emphasis added).

Following these precedents, we too have refused to extend
Bivens. See, e.g., Hall v. Clinton, 235 F.3d 202, 204 (4th Cir.
2000) (declining to create a Fifth Amendment Bivens remedy
for White House employee because Congress had already
established an exclusive Statutory remedy); Zimbelman v.
Savage, 228 F.3d 367, 371 (4th Cir. 2000) (finding that
special factor of federal employment counseled against
creating a Bivens remedy for Air Force personnel alleging
unfair termination of employment based on false accusations).

App. 20

In adjudicating claims requesting the creation of new Bivens
remedies, we have gleaned from the above Supreme Court
precedent a threepart test:

in order for a Bivens remedy to be available, a court
must determine that (1) Congress has not already
| provided an exclusive statutory remedy; (2) there are
no "special factors counseling hesitation in the
absence of affirmative action by Congress"; and (3)
there is no “explicit congressional declaration" that
money damages not be awarded.

Hall, 235 F.3d at 204 (citations omitted). Moreover, we have
noted that "the ‘special factors concept’ includes an
appropriate judicial deference to indications that
congressional inaction has not been inadvertent'." Jd.
(citations omitted). Accordingly, we apply these factors to
this case to determine whether Congress has sufficiently
attended to the rights and remedies available to taxpayers in
the context of the Internal Revenue Code to foreclose judicial
creation of additional remedies.

It would be difficult to conceive of a more comprehensive
statutory scheme, or one that has received more intense
scrutiny from Congress, than the Internal Revenue Code. In
constructing this vast and exceedingly complex statutory
apparatus, moreover, "Congress has given taxpayers all sorts
of rights against an overzealous officialdom." Cameron v.
Internal Revenue Service, 773 F.2d 126, 129 (7th Cir. 1985);
see also McMillen v. United States, 960 F.2d 187, 190 (1st
Cir. 1991). Thus, the Code provides Judicial Watch with a
number of ways to challenge actions of the IRS as well as
those of individual agents.

a

App. 21

As noted above, in response to an audit or other activities
involved in the investigation of its tax liability, Judicial
Watch could simply resist the audit, force the IRS to initiate
a summons enforcement proceeding, and then challenge the
validity of the audit in that forum. See 26 U.S.C.A. § 7604(a)
(West 2002). (Indeed, Judicial Watch has done precisely this
in the District of Columbia.) In the event that_an audit led to
revocation of Judicial Watch's 50] (c)(3) status, the
organization could seek declaratory relief. See 26 U.S.C.A.
§ 7428. Furthermore, to the extent that the audit culminated
in the determination and assessment of a tax deficiency,
Judicial Watch could pursue an internal appeal with the
Service pursuant to 26 C.F.R. § 601.106 (2002); pay the tax
in full and sue for a refund in a federal district court pursuant
to 26 U.S.C.A. § 7422 (West 2002); or contest the deficiency
in Tax Court pursuant to 26 U.S.C.A. § 6213(a) (West 2002).
Finally, Judicial Watch could also contest IRS actions during
the collection process by requesting a hearing before the IRS
Office of Appeals and seeking subsequent judicial review of
any adverse determination pursuant to 26 U.S.C.A. § 6330(b)
(West 2002).

With respect to alleged misconduct by individual IRS
employees, Congress has also provided for a variety of
"safeguards and remedies." Chilicky, 487 U.S. at 425.
Specifically, Congress created the Treasury Inspector General
for Tax Administration, an entity separate and distinct from
the IRS, with responsibility for investigating allegations of
misconduct by IRS employees. See 5 U.S.C.A. App. 3 § 2
(West 1996 and West Supp. 2002). In this case, the Inspector
General conducted not one, but two, investigations -- both of
which found no support for Judicial Watch's allegations that
the IRS initiated the audit for purposes of political retaliation.

App. 22

See United States v. Judicial Watch, Inc., 2002 U.S. Dist.
LEXIS 25197 at *22, Misc. Action No. 02-144 (ESH)
(D.D.C. Dec. 11, 2002) slip op. at 22.

Moreover, Congress has also provided a civil damages
action for misconduct by IRS employees in connection with
the collection of taxes. See 26 U.S.C.A. § 7433 (West 2002).
Originally enacted in 1988 as part of the "Taxpayer Bill of
Rights" (the name itself speaks volumes about Congress's
explicit consideration of the remedies available to taxpayers),
§ 7433 states in pertinent part:

If, in connection with any collection of Federal tax
with respect to a taxpayer, any officer or employee of
the Internal 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.A. § 7433 (West 2002).

To be sure, § 7433 provides for a "civil action" only for
damages arising from the "collection" of taxes, not for
damages arising from the investigation and determination of
tax liability. That Congress chose not to create certain
remedies as part of the complex statutory scheme regulating
the relationship between taxpayers and the IRS lends Judicial

App. 23

Watch little support, however. As the Supreme Court put the
matter,

the question is not what remedy the court should
provide for a wrong that would otherwise go
unredressed. It is whether an elaborate remedial
system that has been constructed step by step, with
careful attention to conflicting policy considerations,
should be augmented by the creation of a new judicial
remedy for the constitutional violation at issue. That
question obviously cannot be answered simply by
noting that existing remedies do not provide complete
relief for the plaintiff.

Bush, 462 U.S. at 388.

The legislative history of § 7433 further suggests that
Congress did not act inadvertently in failing to create an
action for damages allegedly arising from the investigation or
determination of tax liability. As originally introduced into
the Senate, the draft provision that ultimately became § 7433
contained broader language permitting civil damages actions
"in connection with any determination or collection of Federal
tax" and in violation of "any provision of Federal law." S.
2223, 100th Cong., 2d Sess. § 123 (1988). The Conference
Report regarding § 7433 explained 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 a tax. ... The provision is limited to
reckless or intentional disregard of the Internal

App. 24

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, 719. Thus, it appears that Congress has
indeed considered, and rejected, a broader damages remedy
that would have covered wrongful actions by IRS agents in
the course of an audit.

Taken together, therefore, Congress's considerable
attention to the rights and remedies available to taxpayers and
the Supreme Court's hesitancy in creating Bivens remedies in
such circumstances provide strong support for the conclusion
that no Bivens remedy lies in this case. This conclusion
comports with the view of a number of our sister circuits.
See, e.g., Shreiber v. Mastrogiovanni, 214 F.3d 148, 152-53
(3d Cir. 2000) (declining to extend a Bivens remedy to
taxpayer who allegedly suffered violation of constitutional
rights in connection with assessment of tax liabilitv); Dahn v.
United States, 127 F.3d 1249, 1254 (10th Cir. 1997) (stating
that "in light of the comprehensive administrative scheme
created by Congress to resolve tax related disputes, individual
agents of the IRS are also not subject to Bivens actions");
Fishburn vy. Brown, 125 F.3d 979, 982-83 (6th Cir. 1997)
(declining to create Bivens action against IRS agents for
alleged due process violations during property seizure);
Vennes v. An Unknown Number of Unidentified Agents of the
United States, 26 F.3d 1448, 1454 (8th Cir. 1994) (declining
to create Bivens action against IRS agents for alleged

|
|
i
|
|
i

App. 25

violation of due process rights during seizure of business and
jeopardy assessment).

Judicial Watch, however, correctly notes that none of
these 'cases address whether a Bivens action is available for
damages arising from an allegedly retaliatory audit, and
contends that such an audit presents a far stronger claim to
Bivens relief. In support of this contention, Judicial Watch
cites our decision in White v. Boyle, 538 F.2d 1077 (4th Cir.
1976). There, we suggested in dicta that a Bivens remedy
should be available to a taxpayer alleging a retaliatory
investigation of his tax liability. Jd. at 1079 ("Clearly, if [the
taxpayer] can demonstrate an injury consequent upon the
violation by federal agents of his constitutionally protected
rights, absent official immunity, he is entitled to recovery.").
But we decided White more than a decade before Chilicky,
and did not attempt to analyze whether the factors explicated
in Bivens and Chilicky counseled recognition of a Bivens
action for damages assertedly arising from a retaliatory audit.

Indeed, no appellate court has ever reached that question.
Recently, the Ninth Circuit specifically declined to do so
because limitations barred the claim in any event. See
Western Center for Journalism v. Cederquist, 235 F.3d 1153
(9th Cir. 2000). In that case, Judge Reinhardt issued a
concurring opinion explaining that he believed a Bivens
action did lie for damages resulting from a retaliatory audit.
Id. at 1159 (distinguishing Chilicky and Bush because in those
cases Congress afforded some, even if not complete, relief for
constitutional violations, while in the case of an assertedly
discriminatory audit, "Congress has created no remedy at
all"). This view finds some support in National Commodity
& Barter Ass'n v. Archer, 31 F.3d 1521 (10th Cir. 1994),

App. 26

which allowed a Bivens action on claims that harassment by
IRS agents violated the plaintiffs’ First and Fourth
Amendment rights. Employing reasoning similar to that of
Judge Reinhardt, the Tenth Circuit concluded that in
situations where the Code does not provide any mechanism
for compensation, IRS agents are not shielded from liability
simply because the Code contains remedies for other,
unrelated violations. Jd. at 1530-32.

But neither Cedarquist nor Archer contains any discussion
of § 7433, much less its legislative history evidencing
Congress's considered decision to forego creating a damages
remedy for misconduct by IRS employees in connection with
the determination of taxes. Moreover, circuit precedent
forecloses adoption of the Cedarquist Archer view here. We
have recently held that even though a federal statutory scheme
(the Civil Service Reform Act) provided the plaintiffs with no
remedy (because of a statutory exemption), its
"comprehensiveness" precluded any Bivens claim. See
Zimbelman, 228 F.3d at 370-71.

Our view seems consistent with Supreme Court teaching
in this field. We note that the Court has never required that
the remedies available in the context of a larger statutory
scheme be perfect; just that they be "meaningful." See
Chilicky, 487 U.S. at 428 (recognizing that although
"suffering months of delay in receiving the income on which
one has depended for the very necessities of life cannot be
fully remedied by the belated restoration of back benefits" the
fact that Congress had made compromises involved in
administering a vast and complex government program meant
that there was no basis for judicial intervention (internal
quotation marks omitted)). Even if "Congress has provided

App. 27

a less than complete remedy for the wrong," any decision to
create a new judiciai remedy must be "exercised in the light
of relevant policy determinations made by the Congress."
Bush, 462 U.S. at 373; see also Malesko, 122 S.Ct. at 520
("So long as the plaintiff had an avenue for some redress,
bedrock principles of separation of powers foreclosed judicial
imposition of a new substantive liability." (citations omitted)).
That Judicial Watch considers its existing remedies
insufficient is simply irrelevant. See Zimbelman, 228 F.3d at
371 (“It is not relevant that plaintiffs believe the procedures
governing their employment relationship were insufficient.”).

We conclude, therefore, that in this case "it would be
inappropriate to supplement [the] regulatory scheme with a
new judicial remedy” for alleged retaliatory tax audits. Bush,
462 U.S. at 368. As in Chilicky, although "the creation of a
Bivens remedy would obviously offer the prospect of relief for
injuries that must now go unredressed,” the fact that Congress
“has not failed to provide meaningful safeguards or remedies
for the rights of persons” similarly situated counsels against
any judicial extension of Bivens liability. Chilicky, 487 U.S.
at 425. Indeed, the fact that Congress explicitly considered
allowing damages claims under § 7433 for misconduct in
connection with the determination of taxes but decided to
restrict those actions to the collection of taxes strongly
Suggests "that congressional inaction has not been
inadvertent." Jd. at 423. We thus decline "to create a new
substantive legal liability ... because we are convinced that
Congress is in a better position to decide whether or not the
public interest would be served by creating it." Jd. at 426-27
(quoting Bush, 462 U.S. at 390).

IV.

App. 28

For the reasons set forth within, the judgment of the
district court is AFFIRMED

App. 29

APPENDIX B - MARCH 24, 2003
APPELLATE COURT’S ORDER DENYING
PETITION FOR REHEARING EN BANC

UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
JUDICIAL WATCH, INC.
Appellant,
No. 02-1413, No. 02-1462

V.

CHARLES O. ROSSOTTI

et al.,

)
)
)
)
)
)
)
)
)
Appellees. )
)

Filed March 24, 2003
On Petition for Rehearing En Banc
The appellant’s petition for rehearing en banc was

submitted to this Court. As no member of this Court
requested a poll on the petition for rehearing en banc,

IT IS ORDERED that the petition for rehearing en banc
is denied

App. 30
For the Court,

/s/ Patricia S. Connor

Clerk

App. 31

APPENDIX C - MARCH 27, 2002

DISTRICT COURT MEMORANDUM
OPINION AND ORDER

IN THE UNITED STATES DISTRICT COURT FOR
THE DISTRICT OF MARYLAND
JUDICIAL WATCH, INC.
Plaintiff,
No. WMN-01-2672

V.

CHARLES O. ROSSOTTI
et al.,

)
)
)
)
)
)
)
)
)
Defendants. )
)

217 F. Supp. 2d 618, 2002 U.S. Dist. LEXIS 16193
March 27, 2002 , Decided
COUNSEL:
For JUDICIAL WATCH, INC., plaintiff: David Barmak,
Joanne B Jarquin, Mintz Levin Cohn Ferris Glovsky and
Popeo PC, Reston, VA USA.

For DEPARTMENT OF THE TREASURY, THE
INTERNAL REVENUE SERVICE, defendants: Stuart D

App. 32

Gibson, United States Department of Justice, Washington,
DC USA.

JUDGES: William M. Nickerson, United States District
Judge.

OPINION BY: William M. Nickerson
OPINION:
MEMORANDUM

Before the Court are Plaintiff's Motion to Stay or Enjoin
Enforcement of Administrative Summons (Paper No. 11) and
a Motion to Dismiss filed by Defendants Rossotti, Dorsey,
Breslan, Hampel, and Miller ("Individual Defendants” or
"Defendants") (Paper No. 13). The motions have been
exhaustively briefed and are ripe for decision. Upon review
of the pleadings and applicable case law, the Court
determines that no hearing is necessary (Local Rule 105.6),
and that Plaintiff's motion will be denied and Defendants’
motion will be granted.

I. BACKGROUND

This is a highly unusual case that, at its heart, is about an
organization seeking to stop the Internal Revenue Service
from auditing it. The claims set forth in Plaintiff's Amended
Complaint’ are in the form of a detailed chronology of events,

' Plaintiff's Amended Complaint, filed on January 9, 2002,
contains factual allegations about events that occurred since
Plaintiff filed its initial Complaint in September, 2001.

App. 33

much of which is recited here in order to provide context for
this dispute.

Plaintiff describes itself as a "non-partisan legal
‘watchdog’ organization that relies on the Freedom of
Information Act ("FOIA"), the civil discovery process, and
court litigation, among other tools, to protect the American
people from, and educate them about, corruption in
government and abuses of power, and to enforce the principle
that 'no one is above the law". Amended Complaint at P 2.
Judicial Watch was founded in 1994, and in 1995 obtained a
ruling from the IR.S. that it met the requirements for tax
exemption as an organization described in 26 U.S.C. §
501(c)(3).’ See, Amended Complaint at Exh. B.

Pursuant to Fed. R. Civ. P. 15(d), parties wishing to
supplement their pleadings in such a fashion must file a
motion, and the court must grant leave to file the amended
pleading. Although Plaintiff failed to file a motion for leave
to file, the Court finds that Defendants suffer no prejudice by
the Court's acceptance of the Amended Complaint.

* The 501(c)(3) exemption applies, in pertinent part, to:

corporations, and any community chest, fund, or
foundation, organized and operated exclusively for
religious, charitable, scientific, testing for public
safety, literary, or educational purposes ..., no part of
the net earnings of which inures to the benefit of any
private shareholder or individual, no substantial part
of the activities of which is carrying on propaganda,
or otherwise attempting, to influence legislation ...,

App. 34

In the amended complaint, Plaintiff describes some of its
activities, stating that "Judicial Watch has filed over eighty
public interest lawsuits concerning the President, Mrs.
Clinton, and/ or the Clinton Administration, and other high
government officials of all political parties." Amended
Complaint at P 13. Plaintiff further states that its activities
"are not limited to the Clinton Administration." Jd. at P 14.
The complaint describes an alleged "pattern of abuses of
power" by the Clinton Administration, which Judicial Watch
says it uncovered, including the administration's manipulation
of I.R.S. officials to retaliate against its political enemies by
auditing them. Jd. at PP 15, 16. These alleged abuses were
documented by Judicial Watch in a September, 1998, report
entitled "Crimes and Other Offenses Committed by President
Bill Clinton Warranting His Impeachment and Removal from
Elected Office." Jd. at P 17. Judicial Watch submitted the
report to members of the U.S. House of Representatives
Committee on the Judiciary, during impeachment proceedings
against President Clinton in October, 1998. Jd.

Just a few days later, Judicial Watch received a letter,
signed by Defendant Dorsey, an L.R.S. agent, informing
Plaintiff that it had been selected for an audit. Jd. at P 20.
The letter explains that the purpose of the audit is, inter alia,
"to determine that the organization is operating in the manner
stated and for the purpose set forth in its application for
recognition of exemption." Jd. at Exh. A (October 5, 1998

and which does not participate in, or intervene in
(including the publishing or distributing of
statements), any political campaign on behalf of (or in
opposition to) any candidate for public office.

App. 35

Letter). Plaintiff claims that the document reques¢
accompanying the letter asking Judicial Watch to reveal the
names, addresses, and political affiliations of its directors,
was an “extraordinary demand" evidencing the retaliatory
nature of the audit. Jd. at P21. Plaintiff alleges that the audit
letter was sent at the request of President Clinton's Executive
Office, in retaliation for Judicial Watch's accusations. Jd. at
P 23.

Since the receipt of the audit letter, Plaintiff has resisted
the I.R.S.'s efforts to conduct the audit. On October 14, 1998,
Plaintiff sent comprehensive FOIA requests to the L.R.S.,
seeking access to all documents that "refer or relate" to
Judicial Watch or its founder "in any way." Id. at P 25.
According to Plaintiff, the ILR.S. has not fully responded to
these requests. Jd. Plaintiff also met with various LR.S.
officials, including some of the Defendants, in late 1998 and
early 1999, to discuss the audit. At a November, 1998,
meeting, Plaintiff alleges that Defendant Dorsey said the audit
was "a hot potato" and that she had received phone calls from
.R.S. "higher ups" about it. Jd. at P 26. Plaintiff also claims
that at a January, 1999 meeting, Defendant Breslan, another
LR.S. agent, told Judicial Watch representatives, "What do
you expect when you sue the President?" and commented that
if Judicial Watch scrutinizes the government, the government
will scrutinize Judicial Watch. Jd. at PP 27, 28.

In May, 1999, the LR.S. refused Judicial Watch's request
to meet with then-Commissioner Rossotti. Jd. at P 33.
Plaintiff was also informed that its concerns about the audit
being retaliatory had been forwarded to the Treasury Inspector
General for Tax Administration (TIGTA), the internal
monitor of I.R.S. activities. Jd. At a later meeting with the

App. 36

Acting Director for Exempt Organizations, Defendant Steven
Miller, Plaintiff claims that Mr. Miller "conceded that the
I.R.S.'s conduct had created at least the appearance of a
‘problem'." Jd. at P 35. Approximately one month later, in
July of 1999, Plaintiff was informed by Defendant Agent
Hampel that the audit was being withdrawn pending the
TIGTA investigation.’

The next sequence of events set forth in the Amended
Complaint describes a proceeding in litigation filed by
Judicial Watch, in which a White House employee testified
about the White House's failure to provide incriminating
email evidence in response to subpoenas. Jd. at P 37. Plaintiff
describes the result of this testimony as "a barrage of very
negative press and legal ramifications for President and Mrs.
Clinton and the White House." Jd. at P 39. According to
Plaintiff, Defendant Hampel then "immediately" contacted
Judicial Watch's outside counsel to "remind" him that
Plaintiff was still on the "radar screen" for an audit. Jd. at P
40. Defendant Hampel allegedly issued another reminder a
few months later, shortly after a court in the above-mentioned
proceedings issued a ruling that was adverse to the Clinton
administration. Jd. at P 43.

> According to the Individual Defendants, TIGTA
completed two investigations into the propriety of the Judicial
Watch audit, and exonerated all of the LR.S. employees
involved. See, Defs.' Mot. to Dismiss at 7. Plaintiff does not
dispute this statement.

App. 37

Following more correspondence‘ between Plaintiff and
the LR.S. during 2000, Defendant Miller agreed to further
delay consideration of the audit until President Clinton left
office on January 20, 2001. Jd. at PP 45-48. On January 8,
2001, however, the LR.S. sent Judicial Watch a letter stating
that the audit was continuing, and asking that documents be
submitted to the LR.S. by January 30, 2001. Jd. at Exh. I
(January 8, 2001, Letter). Judicial Watch did not comply with
this request, and proceeded to submit third, fourth, and fifth
FOIA requests to the LR.S., essentially requesting any and all
documents related to Judicial Watch. Id. at PP 51, 52, and 54.
Then, according to Plaintiff, the LR.S. sent another document
request to Judicial Watch in August, 2001, approximately
three weeks after the organization filed suit against then-
Commissioner Rossotti in a Separate action. Jd. at P 56.

In September, 2001, Plaintiff filed the instant action
against then-Commissioner Rossotti, four individual LR.S.
agents (Donna Dorsey, M. Peter Breslan, Wayne Hampel, and
Steven T. Miller), and the LR.S. itself.> The crux of Plaintiffs
claims is that the LR.S. audit is "retaliatory, politically-
motivated, and unconstitutional." Amended Complaint at P
1. Count 1 alleges that the audit violates Plaintiffs freedom
of speech and association guaranteed by the First Amendment
of the United States Constitution, by punishing Plaintiff for its

* On April 14, 2000, Judicial Watch sent a second FOIA
request to the LR.S., and on April 19, 2000, Judicial Watch
received a renewed notice of the planned audit with a
“voluminous document request." Jd. at PP 45, 46.

* The complaint originally also named the United States as
a defendant, but the Amended Complaint does not.

App. 38

political speech. Count 2 asserts a violation of Plaintiff's
Fifth Amendment rights to due process, and Count 3 brings a
selective prosecution claim. These three counts name each of
the Individual Defendants, and in them Plaintiff seeks
monetary and injunctive relief.* More specifically, Plaintiff
requests that "Defendants be preliminarily and permanently
enjoined from pursuing the proposed retaliatory, politically-
motivated audit and their other retaliatory actions." Amended
Complaint, P. 23-24. Plaintiff identifies its damages as
including the loss of staff hours and resources in responding
to the proposed audit. /d.

On January 18, 2002, Judicial Watch was served by the
LR.S. with an administrative summons demanding production
of documents within eight business days. Plaintiff did not
comply with the summons, and has filed the instant motion to
stay or enjoin any attempt by the LR.S. to initiate
administrative enforcement proceedings against Judicial
Watch. A few days later, the Individual Defendants filed the
instant motion to dismiss all claims against them.

II. LEGAL STANDARD FOR MOTION TO DISMISS

When reviewing a motion to dismiss, the court must
assume all of the allegations to be true, must resolve all
doubts and inferences in favor of the plaintiff, and must view
the allegations in a light most favorable to the plaintiff.
Edwards v. City of Goldsboro, 178 F.3d 231, 243-44 (4th Cir.
1999). The complaint should not be dismissed unless it

® Counts 4 and 5 are brought against Defendant LR.S.
pursuant to FOIA, and are not before the Court on the instant
motions.

App. 39

appears beyond doubt that the plaintiff can prove no set of
facts in support of his claim which would entitle him to relief.
Conley v. Gibson, 355 U.S. 41, 45-46, 2 L. Ed. 2d 80, 78 S.
Ct. 99 (1957). Finally, in tuling on the motion, the Court
should consider only the allegations contained in the
complaint, the exhibits to the complaint, matters of public
record, and other similar materials that are subject to judicial
notice. Anheuser-Busch, Inc. v. Schmoke, 63 F.3d 1305, 1312
(4th Cir. 1995), vac. on other grounds, 517 U.S. 1206 (1996).

Ill. DISCUSSION
A. Injunctive Relief

The Individual Defendants argue that the Internal
Revenue Code's Anti-Injunction Act ("the Act"), 26 U.S.C.
§7421(a), precludes this Court from exercising subject matter
jurisdiction over Plaintiff's claims for injunctive relief. The
Act provides that "no suit for the purposes of restraining the
assessment or collection of any tax shall be maintained in any
court by any person, whether or not such person is the person
against whom such tax was assessed." 26 U.S.C. § 7421(a).’

The Supreme Court has noted that although the Act has no
recorded legislative history, "its language could scarcely be
more explicit." Bob Jones University v. Simon, 416 U.S. 725,
736, 40 L. Ed. 2d 496, 94 S.Ct. 2038 (1974). The Court has
observed that the primary purpose of the Act is "the
protection of the Government's need to assess and collect
taxes as expeditiously as possible with a minimum of pre-

’ The Act contains several Statutory exceptions, none of
which is applicable to this case.

App. 40

enforcement judicial interference, 'and to require that the legal
right to the disputed sums be determined in a suit for refund”.
Id. (quoting Enochs v. Williams Packing & Navigation Co.,
370 US. 1, 7, 8 L.Ed. 2d 292, 82 S.Ct. 1125 (1962)).

Plaintiff first argues that this is not a suit "for the purposes
of restraining the assessment or collection of any tax" and
therefore the Act does not apply. Rather, Plaintiff contends
that the purpose of its suit is to block an allegedly
unconstitutional audit. Any taxes that may be assessed as a
result of the audit, Plaintiff claims, are immaterial to the
constitutional issues at hand. The Supreme Court already
considered a similar claim in Bob Jones University, however,
in which it held that the Act barred the plaintiff's
constitutional claims to enjoin the I.R.S. from withdrawing
plaintiff's 501(c)(3) status. 416 U.S. at 748-49. It seems only
logical that if courts cannot enjoin the I.R.S. from revoking an
organization's tax-exempt status, courts similarly cannot
enjoin the LR.S. from conducting an audit to determine
whether or not such a revocation is merited. See, Dickens v.
United States, 671 F.2d 969, 971 (6th Cir. 1982) (observing
that the Act "is equally applicable to activities which are
intended to or may culminate in the assessment or collection
of taxes") (internal citations omitted). Notably, Plaintiff has
not cited a single case in which a federal court enjoined an
LR.S. audit.

In the alternative, Plaintiff argues that its claims fall
within one or both of the two judicially-created exceptions to
the Act. First, under the test announced in Enochs v. Williams
Packing, an action for injunctive relief may proceed,
notwithstanding the Act, if the plaintiff can show: (1) that
"under no circumstances could the Government ultimately

App. 41

prevail," and (2) that "equity jurisdiction otherwise exists."
370 U.S. at 7. Here, Plaintiff cannot Satisfy the first prong of
the test. In considering thi prong, the court must liberally
interpret the law and the ‘acts in favor of Defendants. Jd.
Even without this proviso, however, a plausible reading of the
Amended Complaint is that the LR.S., upon discovery of
Plaintiffs earnest efforts to assist in the impeachment of
President Clinton, became legitimately suspicious as to
whether Judicial Watch was operating within the confines of
§501(c)(3) as it relates to prohibited political activity. See
supra note 2. Plaintiff's chronology of events, while intended
to show a pattern of retaliation, also reveals that from 1998 to
the present, Judicial Watch frequently criticized or sued
members of the Clinton administration, and the LR.S.
continued to pursue the audit by various means.

The second recognized exception to the Act was
announced by the Supreme Court in South Carolina v. Regan,
465 U.S. 367, 79 L. Ed. 2d 372, 104 S.Ct. 1107 (1984). In
that case, the state of South Carolina challenged the
constitutionality, under the Tenth Amendment, ofa provision
in the tax code that set certain requirements for state-issued
bonds. Jd. The Court noted that if the Act were to bar the
State's pre-enforcement lawsuit, South Carolina would itself
incur no tax liability and thus would have to depend on third
parties to pursue post-enforcement refund suits. Jd. at 373.
The Court, in determining that South Carolina's suit could go
forward, held that Congress had intended the Act to bar suits
only when Congress had provided the aggrieved party with
"an alternative legal avenue by which to contest the legality of
a particular tax." Jd.

App. 42

If this language is given the broadest interpretation
possible, Plaintiff's claims for injunctive relief could come
under the South Carolina v. Regan exception. Defendants
concede that the tax code provides no avenue of relief
specifically for targets of allegedly unconstitutional audits.*
Courts construing the exception, however, have strictly
limited its applicability. See, e.g., Spencer v. Brady, 700 F.
Supp. 601, 604 (D.D.C. 1988) (finding that "in Regan, the
Court carved an extremely narrow second exception to the
Anti-Injunction Act"); American Society of Assoc. Executives
v. Bentsen, 848 F. Supp. 245, 250 (D.D.C. 1994) (noting that
the exception "is a narrow one tailored to the unique factual
pattern in that case"); Leves v. Internal Revenue Service, 796
F.2d 1433, 1434 (11th Cir. 1986) (finding the exception
inapplicable because Regan "involved the rights of third
parties to litigate the tax liability of persons against whom the
tax was assessed").

The present case bears virtually no factual resemblance to
South Carolina v. Regan, and Plaintiff has not cited any cases
where the exception was stretched to permit the injunction of
an audit. The burden is on Plaintiff to establish subject matter
jurisdiction. See, Fed. R. Civ. P. 12(b)(1); Adams v. Bain,
697 F.2d 1213, 1219 (4th Cir. 1982). Plaintiff has not
persuaded this Court to break new ground in extending the
recognized exceptions to the Anti-Injunction Act. If this
Court were to do so, the door would swing wide open for
audit targets to haul the LR.S. into court anytime they

* Plaintiff's statutory remedies are limited to a suit for a
refund, if taxes are ultimately assessed, and a suit for
declaratory relief if Judicial Watch is stripped of its tax-
exempt status. See, 26 U.S.C. §§ 7422, 7428.

App. 43

believed the audit to be wrongful.? Such a result seems to
constitute precisely the kind of judicial interference with the
assessment and collection of taxes that the Act was designed
to prevent.

Having found that this Court does not have jurisdiction to
reach Plaintiffs claims for injunctive relief contained in
Counts 1-3 of the Amended Complaint, those claims will be
dismissed.'° For the same reasons, Plaintiff's Motion to Stay
or Enjoin Enforcement of Administrative Summons will also
be dismissed."'

” Indeed, it is the rare audited taxpayer who does not
believe that their audit is undeserved.

'° The Court, having found that the Anti-Injunction Act
requires the dismissal of these claims, need not address
Defendants’ argument that the claims are also barred by the
doctrine of sovereign immunity, which disallows claims to
enjoin government actors from performing their statutory
duties. See, Larson v. Domestic and Foreign Commerce
Corp., 337 U.S. 682, 688, 93 L.Ed. 1628, 69 S.Ct. 1457
(1949).

'' If the LR.S. brings an action to enforce the summoas,
Plaintiff will have an opportunity, in a limited evidentiary
hearing in federal district court, to challenge the propriety of
the audit and offer evidence of wrongful conduct. See, Alphin
v. United States, 809 F.2d 236 (4th Cir. 1987).

App. 44
B. Monetary Relief

Under some circumstances, a plaintiff may bring suit for
money damages against individual federal employees for
alleged constitutional torts. Bivens v. Six Unknown Named
Agents of the Federal Bureau of Narcotics, 403 U.S. 388, 29
L.Ed. 2d 619, 91 S.Ct. 1999 (1971). Here, Plaintiff has
asserted claims for monetary relief against each of the
Individual Defendants for their allegedly unconstitutional
conduct. Defendants argue that a Bivens remedy is not
available in a suit against I.R.S..employees for conducting an
allegedly unconstitutional audit.

The Fourth Circuit's position on this matter is somewhat
in question. In a 1976 decision, the Fourth Circuit affirmed
a district court's ruling that, although a Bivens action was
available to a taxpayer who sued LR.S. agents for harassing
him and singling him out for investigation and audit, the
claims failed on summary judgment for lack of evidence.
White v. Boyle, 538 F.2d 1077, 1079 (4th Cir. 1976). In so
deciding, the court stated that, "clearly, if White can
demonstrate an injury consequent upon the violation by
federal agents of his constitutionally protected rights, absent
official immunity, he is entitled to recovery.” Jd.

Since White, however, the United States Supreme Court
has restricted the availability of Bivens actions, by expanding
on language in Bivens indicating that such relief is
permissible only when there are "no special factors counseling
hesitation in the absence of affirmative action by Congress."
403 U.S. at 396. The Court has found that affirmative action
by Congress to create a statutory or regulatory remedial
scheme, even if the scheme lacks complete remedies for

App. 45

constitutional violations, is sufficient to bar a Bivens action.
See, e.g., Schweiker v. Chilicky, 487 U.S. 412, 101 L.Ed. 2d
370, 108 S.Ct. 2460 (1988) (remedial scheme in context of
social security system); Chappell v. Wallace, 462 U.S. 296,
304, 76 L.Ed. 2d 586, 103 S.Ct. 2362 (1983) (remedial
scheme in context of military justice system); Bush v. Lucas,
462 U.S. 367, 368, 76 L.Ed. 2d 648, 103 S.Ct. 2404 (1983)
(remedial scheme in context of civil service system).
Summing up its approach to these cases, the Court stated,
"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." Schweiker at 423.

Circuit courts have applied this reasoning to deny Bivens
claims in lawsuits against LR.S. employees where the
plaintiffs would have another avenue of relief through the
provisions of the Internal Revenue Code. See, e.g., Shreiber
v. Mastrogiovanni, 214 F.3d 148 (3rd Cir. 2000); Fishburn v.
Brown, 125 F.3d 979, 982-83 (6th Cir. 1997); Vennes v.
Unknown Number of Unidentified Agents, 26 F.3d 1448,
1453-53 (8th Cir. 1994). In these cases, however, the harm
caused by the alleged constitutional violations amounted to
the illegal assessment or collection of taxes, which could be
cured, at least for the most part, by refund suits and other
similar statutory remedies. In contrast, where the
constitutional violation is a harm in itself, such as the
suppression of political speech or the violation of Fourth
Amendment rights, courts have recognized the propriety of a
Bivens remedy. See, Nat'l Commodity and Barter Assoc. v.
Gibbs, 886 F.2d 1240, 1248 (10th Cir. 1989) (permitting
Bivens action for violations of the First and Fourth

App. 46

Amendments because "certain values ... may be superior to
the need to protect the integrity of the internal revenue
system"); Western Center for Journalism v. Cederquist, 235
F.3d 1153, (9th Cir. 2000) (Reinhardt, J., concurring)
(observing that a Bivens remedy is appropriate for retaliatory
audits because Congress has fashioned no remedy for LR.S.
conduct that punishes political speech); Hurt v. United States,
889 F. Supp. 248 (S.D. W.Va. 1995) (finding grounds for a
Bivens remedy where plaintiffs sued LR.S. agents for
allegedly retaliatory and harassing auditing practices).

Accordingly, this Court is persuaded that a Bivens action
should be available where, as here, the statutory remedies
provided in the Internal Revenue Code (i.e., a refund suit and
action for declaratory relief) would not address the alleged
constitutional wrongs of the L.R.S. defendants.'? This does
not end the inquiry, however, because the Individual
Defendants argue that they are entitled to qualified immunity
for their actions relating to the Judicial Watch audit.

Government officials performing discretionary functions
are entitled to qualified immunity to the extent that “their
conduct does not violate clearly established statutory or
constitutional rights of which a reasonable person would have
known." Harlow v. Fitzgerald, 457 U.S. 800, 818, 73 L.Ed.
2d 396, 102 S.Ct. 2727 (1982). Qualified immunity is "an

'2 Defendants concede that the only statutory remedies
available to Plaintiffs through the Internal Revenue Code
consist of a suit for a refund, if taxes are ultimately assessed,
and a suit for declaratory relief if Judicial Watch is stripped
of its tax-exempt status. See, 26 U.S.C. §§ 7422, 7428.

App. 47

immunity from suit rather than a mere defense to liability."
Mitchell v. Forsyth, 472 U.S. 511, 526, 86 L.Ed. 2d 41 1, 105
S.Ct. 2806 (1985). Accordingly, courts should resolve a
question of qualified immunity at the earliest possible stage
of the litigation. See, Saucier v. Katz, 533 U.S. 194, 121 S.Ct.
2151, 2155-56, 150 L.Ed. 2d 272 (2001).

The threshold question in a qualified immunity inquiry is,
"taken in the light most favorable to the party asserting the
injury, do the facts alleged show the officer's conduct violated
a constitutional right?" Saucier, 121 S.Ct. at 2156. Ifa
violation could be found on a favorable view of the plaintiff's
facts, the court then considers "whether it would be clear to a
reasonable officer that his conduct“was unlawful in the
situation he confronted." Jd. In this case, Plaintiff alleges
that the audit violates Judicial Watch's First Amendment
rights by punishing the organization's political speech and
freedom of association, and that it violates Plaintiff's Fifth
Amendment due process rights by harassing Judicial Watch
and singling it out for audit without basis in law. Although
the facts alleged in the Amended Complaint, when viewed in
the light most favorable to Plaintiff, might make out these
constitutional violations, they fail to show that reasonable
LR.S. agents in the situation faced by Defendants would have
known they were committing these constitutional violations.

The overriding, insurmountable problem for Plaintiff's
claims is that the political speech for which it claims to be
“punished” and "singled out" is exactly the type of activity
that may legitimately cause it to lose tax-exempt status under
§ 501(c)(3), which requires that organizations "not participate
in, or intervene in (including the publishing or distributing of
statements), any political campaign on behalf of (or in

App. 48

opposition to) any candidate for public office," and that "no
substantial part of [its] activities is carrying on propaganda, or
otherwise attempting, to influence legislation." 26 U.S.C. §
501(c)(3).

As to Defendants Rossotti, Dorsey, and Miller, Plaintiff
contends that they violated Plaintiffs rights by making the
decision to conduct an audit, sending Plaintiff audit notices
and summons, and/ or failing to stop the audit at Plaintiff's
request. These allegations could just as easily be interpreted,
however, as evidence of Defendants’ efforts to enforce I.R.S.
statutes and regulations. In its attempt to show a causal
connection between its actions and the behavior of these
Defendants, Plaintiff presents a chronology of events that
reveals Judicial Watch's persistence in resisting the audit and
the LR.S.'s persistence in pursuing it. On the facts presented
by Plaintiff, therefore, these Defendants are entitled to
qualified immunity.

This Court is confronted with a more difficult decision
regarding Defendants Breslan and Hampel. Taking Plaintiff's
allegations as true, Defendant Breslan's comments at the
November, 1998 meeting, and Defendant Hampel's warnings
that Plaintiff was still on the LR.S. "radar screen," could
constitute evidence of bad faith or retaliation by those agents.
It is equally plausible, however, that their comments reflect
the agents’ reasonable suspicions that Judicial Watch was
operating outside the confines of § 501(c)(3). This Court,
while not condoning the alleged comments, cannot conclude
that Defendants Breslan and Hampel should have known that
their conduct violated Plaintiffs constitutional rights.
Therefore, qualified immunity is appropriate here as well.

App. 49

Certainly, the I.R.S. and its agents are bound by the tenets
of the Constitution in the enforcement of the agency's rules
and regulations. To deny qualified immunity under these
facts, however, would grossly impede the agency's ability to
investigate suspected violations of § 501(c)(3)'s prohibitions
on certain political activity. Any tax exempt organization
engaging in possibly prohibited conduct, which was
subsequently audited or investigated by the LR.S., could
maintain a suit for harassment and suppression of political
speech simply by pointing to the timing of the audit. Agents,
fearing civil liability for their discretionary decision to
conduct an audit, would be hampered in their official duties.
On the facts presented in the Amended Complaint, therefore,

this Court concludes that Defendants Rossotti, Dorsey,
Breslan, Hampel, and Miller are entitled to qualified
immunity on the claims against them for monetary relief.

IV. CONCLUSION

For the foregoing reasons, the Court will deny Plaintiff's
Motion to Stay or Enjoin Enforcement of Administrative
Summons, and will grant Defendants' Motion to Dismiss all
claims against them. A separate order consistent with this
memorandum will issue.

William M. Nickerson
United States District Judge

Dated: March 27, 2002

App. 50
ORDER

Pursuant to the foregoing Memorandum, and for the
reasons stated therein, IT IS this 27th day of March, 2002, by
the United States District Court for the District of Maryland,
ORDERED:

1. That Plaintiffs Motion to Stay or Enjoin Enforcement
of Administrative Summons (Paper No. 11) is hereby
DENIED;

2. That the Motion to Dismiss filed by Defendants
Rossotti, Dorsey, Breslan, Hampel, and Miller (Paper No. 13)
is hereby GRANTED;

3. That the Clerk of the Court shall mail or transmit
copies of this Memorandum and Order to all counsel of
record.

William M. Nickerson
United States District Judge

OES Wea amc eee

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Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40386015_1734%3A1. Public record. Not legal advice.