Dema v. Feddor

• Decision Date: 30 April 1979
• Docket Number: No. 77 C 3103.,77 C 3103.
• Parties: J. Richard DEMA, Sally Dema, and Tabcor Sales Clearing Inc. (Formerly Tabcor, Inc.), Plaintiffs, v. David J. FEDDOR, Sandra Stevens, Jeanne Hogan, Robert Osborne, United States of America, and Others Unknown or Unnamed, Defendants.
• Court: U.S. District Court — Northern District of Illinois

470 F. Supp. 152

J. Richard DEMA, Sally Dema, and Tabcor Sales Clearing Inc. (Formerly Tabcor, Inc.), Plaintiffs, v. David J. FEDDOR, Sandra Stevens, Jeanne Hogan, Robert Osborne, United States of America, and Others Unknown or Unnamed, Defendants.

No. 77 C 3103.

United States District Court, N. D. Illinois, E. D.

April 30, 1979.

COPYRIGHT MATERIAL OMITTED

Sheldon R. Waxman, Chicago, Ill., for plaintiffs.

M. Carr Ferguson, Asst. Atty. Gen., Tax Div., U. S. Dept. of Justice, Washington, D. C., Thomas P. Sullivan, U. S. Atty., Chicago, Ill., for defendants.

MEMORANDUM OPINION

FLAUM, District Judge:

This matter comes before the court upon plaintiffs' Motion for Leave to File an Amendment to Their Complaint and defendants' Motions to Dismiss. For the reasons set forth below, plaintiffs' Motion is granted, and defendants' Motions are granted in part and continued in part.

Under Rule 15(a), F.R.Civ.P., plaintiffs may amend their Complaint as of right. LaBatt v. Twomey, 513 F.2d 641 (7th Cir. 1975). Consequently, plaintiffs' Motion must be granted, and the arguments presented by way of defendants' Motions must be evaluated in terms of the Complaint as amended (Amended Complaint).

Plaintiffs believe that they have uncovered an Internal Revenue Service (IRS) plot to extort money from the taxpaying public. The Amended Complaint recites a history of alleged IRS harassment of plaintiffs pursuant to this scheme. This law suit is but one of several in which plaintiffs have challenged the legality of the manner in which the IRS has purportedly dealt with them.

The initial task facing this court is the problem of deciding what causes of action plaintiffs seek to raise in this particular litigation. While the Amended Complaint and plaintiffs' brief are replete with references to what plaintiffs assert to be illegal tax assessments made against them for 1970, 1971, 1972, and 1973, plaintiffs' brief in response to defendants' Motions unequivocally states that plaintiffs do not wish to challenge the legality of said assessments in the proceeding. In addition, although plaintiffs' brief contains a suggestion that State personnel may have been involved in the IRS' alleged plot to harass plaintiffs, the Amended Complaint makes no provision for such a possibility.

Having recognized that plaintiffs have chosen not to pursue the above claims in this court, the court will now outline its construction of the Amended Complaint. In Count I, all three plaintiffs claim that the individual defendants, all of whom are IRS employees, violated their constitutional rights by intentionally and maliciously conducting tax investigations prohibited by 26 U.S.C. § 7605(b), defaming them, intentionally inflicting mental distress upon plaintiff J. Richard Dema, and conspiring to do all of these things. In addition, Count I alleges that defendant David Feddor, acting pursuant to this conspiracy, violated the individual plaintiffs' constitutional rights by committing a battery against Sally A. Dema while serving her with an IRS administrative summons. Plaintiffs seek to recover damages for these actions, and they base their claim upon Bivens v. Six Unknown Named Agents of the Federal Bureau of Narcotics, 403 U.S. 388, 91 S.Ct. 1999, 29 L.Ed.2d 619 (1971). In Count II, plaintiffs request relief from the Government, relying on a theory of vicarious liability. Finally, the corporate plaintiff, in Count III, demands that the Government pay for the attorneys fees and costs incurred by it in this case and in United States v. Dema, 74 C 1283 (N.D.Ill. June 20, 1975), rev'd, 544 F.2d 1383 (7th Cir. 1976), cert. denied, 429 U.S. 1093, 97 S.Ct. 1106, 51 L.Ed.2d 539 (1977).

Defendants move to dismiss each count on the grounds that the court has no jurisdiction over its subject matter and that it fails to state a claim upon which relief can be granted.

Plaintiffs invoke a host of statutory provisions in search of a basis for the exercise by this court of jurisdiction over the claims presented in Count I. With two exceptions, the court finds that these statutes fail to provide the court with jurisdiction over said claims. 28 U.S.C. § 1343 is inapplicable here because plaintiffs' claim that the individual defendants violated their right under 42 U.S.C. § 1983 or 42 U.S.C. § 1985(3) is "wholly insubstantial and frivolous," Bell v. Hood, 327 U.S. 678, 682, 66 S.Ct. 773, 90 L.Ed. 939 (1946), since the necessary allegations of state action and appropriate class membership, see Meiners v. Moriarity, 563 F.2d 343, 348 (7th Cir. 1977), are entirely lacking in the Amended Complaint. Nor does 42 U.S.C. § 1988 create a cause of action over which section 1343(4) might give this court jurisdiction. Cannon v. University of Chicago, 559 F.2d 1063, 1077 (7th Cir. 1976) (opinion on rehearing), cert. gr., 438 U.S. 914, 98 S.Ct. 3142, 57 L.Ed.2d 1159 (1978). 28 U.S.C. § 1346 does not constitute a relevant grant of jurisdiction, inasmuch as the United States is not named as defendant in Count I. Morris v. United States, 521 F.2d 872 (9th Cir. 1975).¹

If 26 U.S.C. § 7605(b) impliedly creates a private cause of action for damages, this court would have jurisdiction, under 28 U.S.C. § 1331, over Count I insofar as it requests the payment of damages by the individual defendants for their breach of that statute. The claim that such a cause of action does exist not being "wholly insubstantial and frivolous," the court concludes that this claim cannot be dismissed for want of subject matter jurisdiction. Bell v. Hood, 327 U.S. 678, 66 S.Ct. 773, 90 L.Ed. 939 (1946). However, as the court concludes that 26 U.S.C. § 7605(b) does not create a private cause of action of the type that plaintiffs seek herein to assert, the court rules that, to the extent that it is premised on the existence of such a cause of action, Count I fails to state a claim.²

The factors relevant to the determination of whether a private remedy is implicit in a statute not expressly providing for one were identified in Cort v. Ash, 422 U.S. 66, 95 S.Ct. 2080, 45 L.Ed.2d 26 (1975). An analysis of 26 U.S.C. § 7605(b) in terms of those four criteria leads the court to conclude that no private action for damages was implicitly created by Congress in enacting section 7605(b).

The legislative history of section 7605(b), which is discussed in some detail in United States v. Powell, 379 U.S. 48, 54-56, 85 S.Ct. 248, 13 L.Ed.2d 112 (1964), contains no indication of any Congressional intent to create such a remedy. And it is this court's opinion that the implication of a private cause of action for damages would be inconsistent with the underlying purpose of the legislative scheme of the Revenue Act of 1921, P.L. 98-67, 42 Stat. 227, et seq., of which it was originally a portion, and of the Internal Revenue Code of 1954, 26 U.S.C. §§ 1 et seq., of which it is currently a section.

The Internal Revenue Code expressly provides a means whereby a person may challenge an IRS examination or investigation as improper under section 7605(b). Reisman v. Caplin, 375 U.S. 440, 84 S.Ct. 508, 11 L.Ed.2d 459 (1964). The Supreme Court has held that this "full opportunity for judicial review before any coercive sanctions may be imposed," 375 U.S. at 450, 84 S.Ct. at 514, "fully" resolved the problem that Congress meant to address by passing section 7605(b). United States v. Powell, 379 U.S. at 55-56, 85 S.Ct. 248, 13 L.Ed.2d 112. Indeed, the Court of Appeals for the Seventh Circuit has recently directed plaintiffs' attention to this very procedure. United States v. Dema, 544 F.2d 1373 (7th Cir. 1976), cert. denied, 429 U.S. 1093, 97 S.Ct. 1106, 51 L.Ed.2d 539 (1977).

It would ill-serve the interest that Congress sought to protect if taxpayers were to be encouraged to allow the IRS to conduct an "unnecessary" investigation and then sue the agents or the IRS for violating their rights. Rather, the court believes that Congress intended to provide taxpayers with a right to prevent such an "unnecessary" investigation from occurring in the first place.³

As any other conclusion would upset the "comprehensive procedure of the Code", Reisman v. Caplin, 375 U.S. at 450, 84 S.Ct. 508, the court rules that section 7605(b) does not impliedly create a private cause of action for damages arising from its violation. Therefore, insofar as it might rely upon such a theory of recovery, Count I fails to state a claim upon which relief can be granted.

Finally, plaintiffs, invoking 28 U.S.C. § 1331 as a basis for subject matter jurisdiction, maintain that Count I states a cognizable cause of action for damages resulting from the individual defendants' multiple violations of plaintiffs' rights under the Constitution of the United States. Specifically, they argue that each of the allegedly tortious acts of the individual defendants constitutes a violation of plaintiffs' Fifth Amendment rights, and that they are entitled to recover damages on account of these unconstitutional acts.

The court does not regard this claim as being so patently lacking in merit as to justify their dismissal for want of subject matter jurisdiction.

Plaintiffs' theory of recovery seems to be as follows: The Federal Government is possessed of enumerated powers only. Each citizen has a constitutional right, a personal right, to insist that, in its dealings with him, the Government confine itself to activities that the law authorizes it to undertake. Any time the Government or one of its agents commits an ultra vires act, it violates the constitutional rights of the persons victimized thereby. And every offended constitutional right is entitled to be vindicated by means of a damage action on the model of the one approved of by the Supreme Court in Bivens v. Six Unknown Named Agents of the Federal Bureau of Narcotics, 403 U.S. 388, 91 S.Ct. 1999, 29 L.Ed.2d 619 (1971).

The notion that an unlawful act committed by an agent of the state is, ipso facto, an unconstitutional act has...