Johnson v. Department of Treasury, I.R.S.

• Decision Date: 21 March 1983
• Docket Number: No. 81-1501,81-1501
• Citation: 700 F.2d 971
• Parties: Russell T. JOHNSON, Plaintiff-Appellant, v. DEPARTMENT OF TREASURY, INTERNAL REVENUE SERVICE, Defendant-Appellee.
• Court: U.S. Court of Appeals — Fifth Circuit

Page 971

700 F.2d 971

Russell T. JOHNSON, Plaintiff-Appellant, v. DEPARTMENT OF TREASURY, INTERNAL REVENUE SERVICE, Defendant-Appellee.

No. 81-1501.

United States Court of Appeals Fifth Circuit.

March 21, 1983.

John F. Bufe, Washington, D.C., for plaintiff-appellant.

Edward C. Prado, U.S. Atty., San Antonio, Tex., Jeremiah Handy, Asst. U.S. Atty., Robert L. Gordon, Atty., Tax Div., Dept. of Justice, Chevely, Md., Edward J. Snyder, Atty., John F. Murray, Asst. Atty. Gen., Michael L. Paup, Chief, Appellate Section, Glenn L. Archer, Jr., Richard W. Perkins, Mary L. Fahey, Stephen Gray, Tax Div., Dept. of Justice, Washington, D.C., for defendant-appellee.

Appeal from the United States District Court for the Western District of Texas.

Before THORNBERRY, JOHNSON and HIGGINBOTHAM, Circuit Judges.

JOHNSON, Circuit Judge:

Russell T. Johnson appeals from a judgment of the district court under the Privacy Act, 5 U.S.C. Sec. 552a, granting him minimum statutory damages in the amount of $1000, plus his costs and attorney's fees. On appeal Johnson contends that the district court erred in concluding that "actual damages" under the Privacy Act is limited to out-of-pocket expenses, thereby denying him recovery for his proven and substantial physical and mental damage. This Court holds that the term "actual damages" under the Privacy Act does indeed include damages for physical and mental injury for which there is competent evidence in the record, as well as damages for out-of-pocket expenses. We therefore remand to the district court for a determination of the amount of recovery for Johnson's proven physical and mental injuries.

I. Background

Johnson, an attorney, was employed as a revenue officer by the Internal Revenue Service (IRS) from 1962 through 1977. After the Internal Security Division of the IRS received a memorandum from the Internal Audit Division stating that Johnson had received monies in interest from 1969 to 1972, the Internal Security Division opened an investigation of Johnson called a "Special Inquiry Complaint" on October 18, 1974. The inquiry's purpose was to determine whether Johnson's business transactions were proper in view of his employment. On October 24, 1975, this inquiry was converted into a "Conduct Investigation." During both the Special Inquiry Complaint and the Conduct Investigation, defendant IRS engaged in activities that resulted in numerous contacts with persons other than Johnson. It was not until March 18, 1977 (after this suit was filed), when the IRS inspectors first interviewed Johnson himself, that the Internal Security Division collected any information directly from Johnson. Although the Internal Security Division ceased collecting information about Johnson after April 15, 1977, the investigation was not officially discontinued until March 8, 1978. Prior to that latter date, on December 27, 1977, Johnson retired from the IRS on physical disability.

On January 7, 1977, Johnson brought suit under subsection (g)(1)(D) ¹ of the Privacy Act, alleging that the IRS had intentionally violated section 552a(e)(2) ² of the Act by failing to collect information to the greatest extent practicable directly from Johnson himself. On January 15, 1979, in an order ruling on cross-motions for summary judgment, the district court found an intentional violation of section 552a(e)(2). On February 23-26, 1981, a nonjury trial was held on the issue of damages. The court found that the intentional failure of the IRS to comply with section (e)(2) of the Act had an adverse effect on Johnson, causing him to worry obsessively about the investigation, ³ to incur a dramatic increase in the frequency of his attacks of reflux esophagitis ⁴ and to suffer mental anxiety from depressive episodes. ⁵ The court, however, found that the physical injury (the increase in reflux attacks) and the mental anxiety did not result in an increase in Johnson's out-of-pocket medical expenses. Because the court concluded that "actual damages" recoverable under the Privacy Act is limited to out-of-pocket expenses, the court confined Johnson's recovery to the $1000 statutory minimum plus costs and attorneys' fees. ⁶ On appeal Johnson argues that "actual damages" is not confined to out-of-pocket losses.

II. "Actual Damages" Under the Privacy Act

The Privacy Act allows recovery for "actual damages" sustained by an individual as a result of an agency's intentional or willful failure to comply with any provision of the Act which has an adverse effect ⁷ on the individual. Section 552a(g)(4) states:

In any suit brought under the provisions of subsection (g)(1)(C) or (D) of this section in which the court determines that the agency acted in a manner which was intentional or willful, the United States shall be liable to the individual in an amount equal to the sum of--

(A) actual damages sustained by the individual as a result of the refusal or failure, but in no case shall a person entitled to recovery receive less than the sum of $1,000; and

(B) the costs of the action together with reasonable attorney fees as determined by the court.

Johnson argues that the term "actual damages" allowed under the Act encompasses all the ordinary elements of compensatory damages, e.g., mental depression as well as physical injury, if these elements are supported by record evidence. The Government contends that "actual damages" refers only to out-of-pocket or pecuniary losses.

A. Plain Meaning

This Court begins its inquiry with the language of the statute itself. Absent a clearly expressed legislative intent to the contrary, the plain meaning of the language is ordinarily controlling. Johnson and the Government vehemently disagree as to the plain meaning of the term "actual damages." Both parties cite numerous authorities supporting their respective usages of the term. See, e.g., United States v. State Road Department of Florida, 189 F.2d 591, 596 (5th Cir.1951), cert. denied, 342 U.S. 903, 72 S.Ct. 291, 96 L.Ed. 676 (1952); contra Morvant v. Lumbermens Mutual Casualty Co., 429 F.2d 495, 496 (5th Cir.1970). After a review of the cited authorities, this Court concludes that the term "actual damages" has no plain meaning or consistent legal interpretation.

B. Legislative History

Because the plain meaning of the term "actual damages" is uncertain, we seek illumination in the legislative history of the Act. In attempting to discern congressional intent from an examination of the legislative history of a statute, the Court looks to "the purpose the original enactment served, the discussion of statutory meaning in committee reports, the effect of amendments--whether accepted or rejected--and the remarks in debate preceding passage." Rogers v. Frito-Lay, Inc., 611 F.2d 1074, 1080 (5th Cir.), cert. denied, 449 U.S. 889, 101 S.Ct. 246, 66 L.Ed.2d 115 (1980).

1. Purposes of the Act

This Court has not heretofore sought to determine the meaning of "actual damages" in the Privacy Act. In construing a statute, the court's "task is to interpret the words of [the statute] in light of the purposes Congress sought to serve." Chapman v. Houston Welfare Rights Organization, 441 U.S. 600, 99 S.Ct. 1905, 1911, 60 L.Ed.2d 508 (1979). The purpose of the Privacy Act is set forth in its preamble:

(b) The purpose of this Act [enacting this section and notes set out under this section] is to provide certain safeguards for an individual against an invasion of personal privacy by requiring Federal agencies, except as otherwise provided by law, to--

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(6) be subject to civil suit for any damages which occur as a result of willful or intentional action which violates any individual's rights under this Act.

Sec. 2(b), Privacy Act, 5 U.S.C. Sec. 552a note, reprinted in 1974 U.S.Code Cong. & Ad.News 2177, 2178 (emphasis added). Further enlightenment on the congressional purpose in enacting the Privacy Act is found in a report from the Committee on Government Operations which recommended passage of the Senate Bill:

The purpose of S. 3418, as amended, is to promote governmental respect for the privacy of citizens by requiring all departments and agencies of the executive branch and their employees to observe certain constitutional rules in the computerization, collection, management, use, and disclosure of personal information about individuals.

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It is designed to prevent the kind of illegal, unwise, overbroad, [sic] investigation and record surveillance of law-abiding citizens produced in recent years from actions of some over-zealous investigators, and the curiosity of some government administrators, or the wrongful disclosure and use, in some cases, of personal files held by Federal agencies.

It is to prevent the secret gathering of information on people or the creation of secret information systems or data banks on Americans by employees of the departments and agencies of the executive branch.

It is designed to set in motion for long-overdue evaluation of the needs of the Federal Government to acquire and retain personal information on Americans, by requiring stricter review within agencies of criteria for collection and retention.

It is also to promote observance of valued principles of fairness and individual privacy by those who develop, operate, and administer other major institutional and organizational data banks of government and society.

S.Rep. No. 1183, 93rd Cong., 2d Sess. 1-2, reprinted in 1974 U.S.Code Cong. & Ad.News 6916, 6917 (hereinafter USCAN), and in Legislative History of the Privacy Act of 1974, at 154-55 (1976) (hereinafter Sourcebook). The report states that "[t]he premise underlying this legislation is that good government and efficient management require that basic principles of privacy, confidentiality and due process must apply to all personal information programs and practices of the Federal Government ...." Id. at 14, USCAN at 6929, Sourcebook at 167. The report defines the concept of "privacy" as...