Edgar v. Inland Steel Co.

• Decision Date: 15 August 1984
• Docket Number: No. 83-2314,83-2314
• Citation: 744 F.2d 1276
• Parties: 84-2 USTC P 9819 Judy EDGAR, et al., Plaintiffs-Appellants, v. INLAND STEEL COMPANY, a corporation, Defendant-Appellee.
• Court: U.S. Court of Appeals — Seventh Circuit

Page 1276

744 F.2d 1276

84-2 USTC P 9819

Judy EDGAR, et al., Plaintiffs-Appellants, v. INLAND STEEL COMPANY, a corporation, Defendant-Appellee.

No. 83-2314.

United States Court of Appeals Seventh Circuit.

Submitted Aug. 15, 1984 ^*.

Decided Sept. 21, 1984.

R. Lawrence Steele, Jr., U.S. Atty., John A. Hyde, Hammond, Ind., for plaintiffs-appellants.

Palmer C. Singleton, Jr., Singleton, Levy, Crist & Johnson, Highland, Ind., Carleton D. Powell, Tax Div., Dept. of Justice, Washington, D.C., for defendant-appellee.

Before CUMMINGS, Chief Judge, and CUDAHY and FLAUM, Circuit Judges.

PER CURIAM.

Taxpayers appeal the dismissal of their civil rights (42 U.S.C. Sec. 1983) and breach of contract claims against their employer, defendant Inland Steel Company, which failed to honor their claims of exemption from withholding of federal income taxes. We affirm.

Taxpayers filed withholding exemption certificates with defendant during the 1981 and 1982 tax years. Pursuant to regulations promulgated by the United States Treasury, defendant forwarded these certificates to the Internal Revenue Service (the "IRS"), which instructed defendant to resume withholding taxpayers' federal income taxes notwithstanding their claims of exemption. Treasury Regulation Sec. 31.3402(4)(2)-1, T.D. 7682. When defendant complied with these instructions, taxpayers brought suit in state court, seeking an injunction barring further withholding of taxes, the return of taxes previously withheld, double wages, compensatory and punitive damages, and costs and legal fees. ¹ Defendant removed the case to federal district court and, on November 2, 1982, moved for dismissal on the grounds that the court lacked jurisdiction to grant the requested relief, and that the complaint failed to state a claim upon which relief could be granted. The district court granted the motion without discussion on June 16, 1983. This appeal followed.

This lawsuit represents yet another disturbing example of a patently frivolous appeal filed by abusers of the tax system merely to delay and harass the collection of public revenues. Employees have no cause of action against employers to recover wages withheld and paid over to the government in satisfaction of federal income tax liability. 26 U.S.C. Sec. 3403. See Pascoe v. Internal Revenue Service, 580 F.Supp. 649, 654 (E.D.Mich.1984); Lonsdale v. Smelser, 553 F.Supp. 259 (N.D.Tex.1982); Chandler v. Perini Power Constructors, Inc., 520 F.Supp. 1152 (D.N.H.1981). ² Even assuming that this statute does not bar plaintiffs' action, which it does, plaintiffs cannot recover under 42 U.S.C. Sec. 1983. Section 1983 creates a remedy to redress deprivations, under color of state law, of any right, privilege or immunity secured by the Constitution of the United States. The statute, by its express terms, is directed only to state wrongdoing. At best, defendant acted under color of federal law when it complied with the IRS instructions; but section 1983 does not protect against such acts. See Hubbert v. U.S. Parole Commission, 585 F.2d 857 (7th Cir.1978); City of Milwaukee v. Saxbe, 546 F.2d 693 (7th Cir.1976); Smith v. U.S. Civil Service Commission, 520 F.2d 731 (7th Cir.1975). See also Zernial v. United States, 714 F.2d 431 (5th Cir.1983) (levying of wages by IRS accomplished pursuant to federal law by federal agents and private parties, and therefore taxpayer failed to state cause of action under 42 U.S.C. Sec. 1983 because this section only provides redress for actions taken under color of state law).

Plaintiffs' claims that defendant breached their employment contracts by withholding taxes from their wages must also fail. The pleadings contain no allegation that the employment contracts contained clauses requiring defendant to refrain from withholding federal taxes from their wages. In the absence of such a provision, the employer discharges its contractual obligations when it pays its employees their wages, less withholding. Stonecipher v. Bray, 653 F.2d 398, 401 (9th Cir.1981), cert. denied, 454 U.S. 1145, 102 S.Ct. 1006, 71 L.Ed.2d 297 (1982). See also United States Fidelity & Guaranty Co. v. United States, 201 F.2d 118, 120 (10th Cir.1952). ³

Defendant requests costs and attorney's fees pursuant to Rule 38 of the Federal Rules of Appellate Procedure. We recently announced that "[a]busers of the tax system have no license to make irresponsible demands on the Courts of Appeals to consider fanciful arguments put forward in bad faith." Granzow v. CIR, 739 F.2d 265, 270 (7th Cir.1984). See also United States v. Ekblad, 732 F.2d 562 (7th Cir.1984). While it is unnecessary to reach plaintiffs' constitutional and statutory arguments, we note that their rambling, one hundred and sixty-one paragraph complaint contains virtually every imaginable time-worn challenge to the federal income-tax withholding system. ⁴ We therefore grant defendant's request for costs...