Hearn v. Internal Revenue Agents
| Decision Date | 15 October 1985 |
| Docket Number | Civ. A. No. 3-84-0820-H. |
| Citation | 623 F. Supp. 263 |
| Parties | James HEARN, et al., Plaintiffs, v. INTERNAL REVENUE AGENTS, et al., Defendants. |
| Court | U.S. District Court — Northern District of Texas |
Merle R. Flagg, Dallas, Tex., Donald W. MacPherson, Phoenix, Ariz., for plaintiffs.
Louise P. Hytken, Atty., Tax Div., Dept. of Justice, Dallas, Tex., for defendants.
This case is before the court on Plaintiffs' Supplemental Allegations Pursuant to the Court's Order Dated April 3, 1985, filed April 24, 1985; Defendants' Response to Plaintiffs' Supplemental Allegations and Renewed Motion to Dismiss or for Summary Judgment, filed May 15, 1985; Defendants' Supplemental Motion for Summary Judgment, filed July 5, 1985; Plaintiffs' Response to Defendants' Renewed Motion to Dismiss or For Summary Judgment (Immunity Issue), filed August 9, 1985; Plaintiffs' Response to Defendants' Supplemental Motion for Summary Judgment (Damages and Standing), filed August 16, 1985; Plaintiffs' Supplemental Response to Defendants' Motion for Summary Judgment Re: Qualified Immunity, filed August 19, 1985; Plaintiffs' Response to "Defendants' Renewed Motion for Partial Summary Judgment with Respect to Plaintiffs' Claims Under the First, Fifth, and Ninth Amendments, filed August 22, 1985; Defendants' Reply to Plaintiffs' Response to Defendants' Supplemental Motion for Summary Judgment (Damages and Standing), filed August 30, 1985; Defendants' Reply to Plaintiffs' Response to Defendants' Renewed Motion to Dismiss or for Summary Judgment and to Plaintiffs' Supplemental Response to Defendants' Motion for Summary Judgment Regarding the Qualified Immunity Issue, filed September 6, 1985; Defendants' Supplement to Motion for Summary Judgment Re Damages and Standing, filed October 3, 1985; and Plaintiffs' Notice of Action to Reinstate Corporate Status of Worldwide Capital Management Corporation, filed October 4, 1985.1
Plaintiffs, a Texas corporation and two Texas residents, assert a variety of constitutional claims in this lawsuit, all of which stem from a search of Plaintiff World Capital Management, Inc.'s ("WCM") offices by Internal Revenue Service ("IRS") agents on May 8, 1984. Fifty to sixty thousand documents were seized during the search by the IRS. (The search and seizure are described in detail in the Court's Opinion of January 29, 1985.) Plaintiffs have named the agents and employees of the IRS connected with that search and seizure as defendants in this Bivens action.2
This action was originally filed on May 22, 1984. At that time, Plaintiffs sought injunctive relief including return of the seized material, and suppression of any information the IRS had seized "in any civil or criminal proceedings against Plaintiffs". On May 23, 1984, the Court required Defendants to furnish Plaintiffs copies of all documents seized. Plaintiffs later amended their complaint to seek damages under an assortment of constitutional tort theories.
On October 9, 1984 the Court denied Plaintiffs' Application for a Preliminary Injunction. Defendants then moved for summary judgment. With respect to all claims except the Fourth Amendment claims, Defendants moved to dismiss for lack of specificity. This motion was denied by the Court; however, the Court directed Plaintiffs to provide a more definite statement of these claims. Since the Court held that "the search of the premises of Worldwide Capital Management was not unreasonable", Order, January 29, 1985, at 6, a conclusion reaffirmed by the Court in its April 3, 1985 Opinion, the Fourth Amendment claims were narrowed to those unrelated to the manner in which the search was conducted. In response to Defendants' assertion of qualified immunity, and in conformity with Elliott v. Perez, 751 F.2d 1472 (5th Cir.1985), the Court directed Plaintiffs to file "a detailed complaint alleging with particularity all material facts ... supporting the contentions that the plea of immunity cannot be sustained." Order, April 3, 1985, at 2, quoting Elliott, supra, at 1482. On April 24, 1985, the Plaintiffs filed their Supplemental Allegations, firing the opening salvo in the paper battle which has produced the weighty materials before the Court today. Defendants renewed their motions for summary judgment, and the Court's files soon bulged with the documents listed above.
The parties' numerous motions and responses present three groups of issues to the Court. First, have Plaintiffs made sufficient allegations to overcome Defendants' assertion of qualified immunity? Second, do Plaintiffs have standing to make Fourth Amendment claims? Third, have Plaintiffs stated a claim for violation of their First, Fifth, or Ninth Amendment rights?3
The Court, in an order dated April 3, 1985, required Plaintiffs to allege, for each Defendant, the specific acts which violated Plaintiffs' rights. Such allegations were necessary to overcome the Defendants' assertion of qualified immunity. Elliot v. Perez, 751 F.2d 1472 (5th Cir.1985). Plaintiffs admit they have not done so with respect to Defendants Robert E. Kurtz, Glenn Cagle, D. Lawrence, and Ernest Hernandez. Plaintiffs' Response to Defendants' "Renewed Motion to Dismiss or for Summary Judgment" (Immunity Issue) at 2. Accordingly, the complaint should be dismissed as to those four Defendants.
Plaintiff WCM's claims against all Defendants are similarly unsupported. This Court has previously ruled that the search of WCM's offices was conducted in a reasonable and lawful manner. Order, filed January 29, 1985. While Hearn and Williams allege seizure of items outside the scope of the warrant,4 WCM does not allege any seizure of items outside the scope of the warrant. Since WCM has failed to allege a Fourth Amendment violation, Defendants are entitled to dismissal on WCM's Fourth Amendment claims.
Plaintiffs contend that they have alleged sufficient facts to overcome the remaining Defendants' assertion of qualified immunity. Qualified immunity attaches unless the Defendants' "conduct violated clearly established constitutional rights of which a reasonable person should have known." Harlow v. Fitzgerald, 457 U.S. 800, 102 S.Ct. 2727, 2738-39 and n. 32, 73 L.Ed.2d 396 (1982); Rutherford v. United States, 702 F.2d 580, 584 (5th Cir.1983). In order to impose personal liability, therefore, Plaintiffs must show not only that the seizure of specific items was illegal but that it was so illegal as to violate clearly established law. Saldana v. Garza, 684 F.2d 1159, 1163 (5th Cir.1982). Even assuming that the rolodex cards, appointment book, business cards, brochure, envelopes, etc. were, as Plaintiffs allege, illegally seized,5 Plaintiffs have not alleged facts showing that the seizure violated clearly established law. The appointment book, rolodex and business cards were, for example, not so unrelated to identification of clients as to put their seizure outside the scope of clearly established Fourth Amendment law.
It is not the role of the Court to second guess every decision of the IRS agents. "The underlying policy which pervades every qualified immunity analysis is one of protecting the public by permitting its decision-makers to function without fear that an exercise of discretion might in retrospect be found to be error". Cruz v. Beto, 603 F.2d 1178, 1183 (5th Cir.1979). Saldana, 684 F.2d at 1166. Since this Court has already held that the search was conducted in a reasonable and legal manner, Plaintiffs must allege more than the simple fact of seizure to overcome Defendants' qualified immunity. Since Plaintiffs have failed to allege sufficient facts to defeat Defendants' qualified immunity, Defendants are entitled to summary judgment on the Fourth Amendment claims.6
Defendants assert that all three Plaintiffs lack standing to bring this action. Plaintiff WCM is alleged to no longer be a corporation in good standing due to a failure to pay its Texas franchise tax. If true, this would bar WCM from maintaining an action in the Texas courts. V.T.C.A. Tax Code § 171.252 (Vernons 1982). The Texas Tax Code does not bar use of the federal courts in disputes over federal constitutional rights.7 6 Wright & Miller Federal Practice and Procedure: Civil § 1561 (1971).
Defendants contend that Hearn and Williams lack standing to assert Fourth Amendment claims because of their undisputed status as independent contractors.8 Hearn Deposition at 38-40; Williams Deposition at 9.9 The test for standing for Fourth Amendment claims is whether the individual has a "legitimate expectation of privacy". Dickens v. Lewis, 750 F.2d 1251, 1254 (5th Cir.1984); United States v. Renton, 700 F.2d 154 (5th Cir.1983); Rawlings v. Kentucky, 448 U.S. 98, 100 S.Ct. 2556, 65 L.Ed.2d 633 (1980). The central issue is therefore how Plaintiffs' independent contractor status affects the existence of that expectation.
Employees and independent contractors differ in a number of important ways. An employer who hires an independent contractor, rather than an employee, to perform a particular task is able to treat the hired individual differently: the employer is not required to pay or deduct FICA, unemployment, or income taxes for the individual; the contractor is not within a wide variety of federal statutes covering labor relations and wages; workers' compensation statutes are inapplicable; and the employer has reduced tort liability for the acts of the hired individual.
Similarly the independent contractor's relationship with his employer differs from an employee's. Generally, the contractor is not subject to the orders of the employer with respect to the details of the work and he is free to offer his services to the public.
The crucial distinction between independent contractors and employees, with respect to the creation of a legitimate expectation of privacy, is the independence of the...
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