Johnson v. Sawyer

• Decision Date: 04 August 1986
• Docket Number: Civ. No. H-83-2173.
• Citation: 640 F. Supp. 1126
• Parties: Elvis E. JOHNSON, Plaintiff, v. Robert C. SAWYER, Dale V. Braun, Sally Sassen, Robert G. Stone, William J. Kurak, Michael Orth, Charles Peterson, Robert M. McKeever, and the United States of America, Defendants.
• Court: U.S. District Court — Southern District of Texas

640 F. Supp. 1126

Elvis E. JOHNSON, Plaintiff, v. Robert C. SAWYER, Dale V. Braun, Sally Sassen, Robert G. Stone, William J. Kurak, Michael Orth, Charles Peterson, Robert M. McKeever, and the United States of America, Defendants.

Civ. No. H-83-2173.

United States District Court, S.D. Texas, Houston Division.

August 4, 1986.

Larry Campagna, Chamberlain, Hrdlicka, White, Johnson & Williams, Houston, Tex., for plaintiff.

Nancy Pecht, Asst. U.S. Atty., Houston, Tex., John S. Miles, Trial Atty., Tax Div., Dept. of Justice, Washington, D.C., for defendants.

MEMORANDUM AND ORDER

SINGLETON, Chief Judge.

This civil suit revolves around the press release issued by the Internal Revenue Service ("IRS") after Mr. Elvis Johnson pled guilty to tax evasion. This Memorandum And Order resolves various aspects of the parties' cross-motions for summary judgment.

I. FACTUAL BACKGROUND

A. The Criminal Prosecution

A government investigation concluded that Mr. and Mrs. Johnson had evaded income taxes in 1974 and 1975 by altering documents and claiming false deductions on their joint return.¹ The government accordingly decided to prosecute them for tax evasion under 26 U.S.C. § 7201.

Mr. Johnson ("Johnson") and Assistant U.S. Attorney Jim Powers ("Powers") worked out the following plea bargain: if Johnson pled guilty to 1975 tax evasion, the government would (1) not prosecute Johnson concerning the 1974 return, (2) not prosecute Johnson's wife concerning the 1974 or 1975 returns, and (3) not oppose a probated sentence.² Powers accordingly filed a Criminal Information on 10 April 1981 charging Johnson with 1975 tax evasion,³ to which Johnson pled guilty and was given a probated sentence.

The summary judgment evidence submitted in this civil case shows that Powers had also assented to Johnson's efforts to forestall publicity about the conviction. Thus, even though Johnson was commonly known as "Johnny" at American National and throughout the Galveston area in which he resided, Powers agreed to have the court documents identify the criminal defendant as an "Elvis E. Johnson" residing in Houston.⁴ To allay Johnson's fear that observers would witness his plea and sentencing, Powers agreed to file the Criminal Information late Friday afternoon and then proceed to arraignment and sentencing that same day.⁵ Finally, Powers told Johnson's attorney that Powers would not issue a news release about the conviction.⁶

B. The Press Release

At the time of Johnson's conviction, internal IRS guidelines provided that:

In the post-litigation actions, e.g., pleas of nolo contendere or guilty, or verdicts and sentencing, the DPAO District Public Affairs Officer will draft a news release based on information furnished by the investigating Special Agent. The investigating Special Agent will provide the DPAO with the taxpayer's age, occupation, home address, and other pertinent facts. Immediatly after the legal action is completed, the investigating Special Agent will telephone the DPAO with additional information to complete the news release.

The DPAO will coordinate all CID Criminal Investigation Division releases with the Branch Chief, Criminal Investigation Division, and the prosecuting U.S. Attorney.

Austin District Director's 15 October 1980 Memorandum entitled "News Coverage Of Tax Prosecutions", p. 2-3. The special agent assigned to Johnson's criminal case — Robert Stone — accordingly reported Johnson's conviction to a public affairs officer in the Austin District Office. Based upon Stone's information,⁷ that public affairs officer — Sally Sassen — then issued the following press release to 21 media outlets in the Galveston area:⁸

                ----------------------------------------------------------------------------------------------
                NEWS                                   DEPARTMENT OF THE TREASURY
                RELEASE                                INTERNAL REVENUE SERVICE
                                                       FOR ADDITIONAL INFORMATION, CONTACT
                For Release: IMMEDIATE                 SALLY SASSEN
                                                       PUBLIC AFFAIRS OFFICER
                                                       300 EAST 8TH STREET
                                                       AUSTIN, TEXAS 78701
                                                       (512) 397-5315/5314
                                                       81-140-CID
                                                       APRIL 13, 1981
                INSURANCE EXECUTIVE PLEADS
                GUILTY IN TAX CASE
                  GALVESTON, TEXAS — In U.S. District Court here, Apr. 10, Elvis E. "Johnny" Johnson, 59
                plead guilty to a charge of federal tax evasion. Judge Hugh Gibson sentenced Johnson, of 25
                Adler Circle, to a six-month suspended prison term and one year supervised probation
                  Johnson, an executive vice-president for the American National Insurance Corporation, was
                charged in a criminal information with claiming false business deductions and altering documents
                involving his 1974 and 1975 income tax returns
                  In addition to the sentence, Johnson will be required to pay back taxes, plus penalties and
                interest
                                                            END
                --------------------------------------------------------------------------------------------------
                

Sassen, however, apparently failed to coordinate or even discuss issuing that release with Powers.⁹ And although Stone and Powers had communicated about this case, it is unclear whether they ever discussed a press release.

Johnson's attorney immediately complained to the IRS about the release, specifying for example its inaccurate description of the charges against Johnson.¹⁰ Sassen thereupon had the media outlets told to not use the April 13 release.¹¹ Then on April 16 and 17 she had those 21 outlets informed that the April 13 release's second paragraph should be revised to state that the Criminal Information had charged Johnson with "willful evasion of federal tax by filing a false and fraudulent tax return for 1975" rather than with "claiming false business deductions and altering documents involving his 1974 and 1975 income tax returns."¹² (This Court hereafter refers to the April 13 release and its subsequent revision collectively as the "Release".)

C. This Civil Suit

On 6 April 1983 Johnson filed this civil suit against Sassen and other IRS personnel claiming that the Release disclosed tax return information in violation of 26 U.S.C. § 6103.¹³ Stating inter alia that the Release had forced him to resign from American National, Johnson seeks approximately $54 million in actual and punitive damages under 26 U.S.C. § 7217.

In October 1983 Johnson amended his Complaint to include Federal Tort Claims Act actions against the United States. In August 1984 he amended to include five additional individual defendants.¹⁴

Presently pending are the defendants' motion for summary judgment/dismissal and Johnson's motion for partial summary judgment. Those motions raise the following seven issues:

1. Did the Release constitute an unlawful disclosure of tax return information under 26 U.S.C. § 6103?

2. Can individual defendants other than Sassen be held liable under 26 U.S.C. § 7217?

3. Does the bad faith requirement in § 7217 preclude any individual defendant's liability?

4. Does the statute of limitations bar suit against the five individual defendants added in 1984?

5. What is the proper liquidated damage figure under § 7217(c)?

6. Are punitive damages available against the individual defendants or the United States?

7. Does this Court have jurisdiction over Johnson's claims against the United States?

II. SUMMARY JUDGMENT PRINCIPLES

Although summary judgment is an excellent device by which district courts may expeditiously dispose of issues for which a trial would be fruitless, district courts may grant it only when the moving party has established his right to judgment with such clarity that the nonmoving party cannot prevail under any discernable circumstance. E.g., Jones v. Western Geophysical, 669 F.2d 280, 283 (5th Cir.1982). The unlikelihood of the nonmover's prevailing at trial is irrelevant since the trial court's duty under Fed.R.Civ.P. 56 is not to resolve factual issues, but rather to simply decide whether there is a factual issue for trial. Id.

Summary judgment on an issue is therefore appropriate only if it appears from the pleadings, depositions, and affidavits — considered in the light most favorable to the nonmoving party — that there is no genuine dispute as to any material fact and that the mover is entitled to judgment as a matter of law. E.g., Galindo v. Precision American, 754 F.2d 1212, 1216 (5th Cir.1985); Albertson v. T.J. Stevenson & Co., 749 F.2d 223, 228 (5th Cir.1984).

With those principles in mind, this Court turns to the seven issues on which the parties seek summary judgment.

III. A "DISCLOSURE" UNDER § 6103

Section 6103 of the Internal Revenue Code (the "Code") provides that

returns and return information shall be confidential, and except as authorized by this title, no officer or employee of the United States ... shall disclose any return or return information obtained by him in any manner in connection with his service as such an officer or employee or otherwise or under the provisions of this section.

26 U.S.C. § 6103(a).

The term "return information" is a broad one encompassing any information gathered by the IRS regarding a person's tax liability. Dowd v. Calabrese, 101 F.R.D. 427, 438 (D.D.C.1984). More specifically, the Code defines the term "return information" to include

a taxpayer's identity, the nature, source, or amount of his income, ... deductions, ... liabilities, ... tax liability, ... deficiencies, ... whether the taxpayer's return was, is being, or will be examined or subject to other investigation or processing, or any other data, received by, recorded by, prepared by, furnished to, or collected by the Secretary with respect to a return or with respect to the determination of the existence, or possible existence, of liability ... of any person ... for any tax, penalty,

...