Hrubec v. National Railroad Passenger Corp., 91 C 4447.

• Decision Date: 17 August 1993
• Docket Number: No. 91 C 4447.,91 C 4447.
• Citation: 829 F. Supp. 1502
• Court: U.S. District Court — Northern District of Illinois
• Parties: Ronald HRUBEC, Nijole Hrubec, Kim M. Golden, Ronald C. Hrubec and Stephen N. Hrubec, Plaintiffs, v. NATIONAL RAILROAD PASSENGER CORPORATION, a/k/a Amtrak, Robin Zarbo, Ernest R. Frazier, Michael Higdon and John Doe, Defendants.

829 F. Supp. 1502

Ronald HRUBEC, Nijole Hrubec, Kim M. Golden, Ronald C. Hrubec and Stephen N. Hrubec, Plaintiffs, v. NATIONAL RAILROAD PASSENGER CORPORATION, a/k/a Amtrak, Robin Zarbo, Ernest R. Frazier, Michael Higdon and John Doe, Defendants.

No. 91 C 4447.

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

August 17, 1993.

Edward Arthur Voci, Leadership Council, Chicago, IL, for plaintiffs.

Carl Roy Peterson, Nancy Shaw, Lord, Bissell & Brook, Chicago, IL, for defendants.

MEMORANDUM OPINION AND ORDER

ASPEN, District Judge:

Plaintiffs Ronald Hrubec, Nijole Hrubec, Kim M. Golden, Ronald C. Hrubec, and Stephen N. Hrubec bring this two-count complaint against National Railroad Passenger Corporation a/k/a Amtrak ("Amtrak"), Robin Zarbo, Ernest R. Frazier, Michael Higdon, and John Doe¹ seeking damages, pursuant to 26 U.S.C. § 7431(a)(2) and under the common law tort of invasion of privacy, for unauthorized income tax disclosure. Presently before this Court are (1) Amtrak's motion to strike or dismiss paragraph 18 of the complaint, which delineates the damages sought by Hrubec under 26 U.S.C. § 7431(a)(2), and (2) Hrubec's motion to strike Amtrak's motion to strike or dismiss paragraph 18 and the memorandum in support of the motion and for Rule 11 sanctions. For the reasons set forth below, we deny both plaintiffs' and defendant's motions.

I. Factual Background²

All of the parties to this case have some connection to Amtrak. Ronald Hrubec is currently employed as a police officer by Amtrak, and his wife, Nijole Hrubec, is a former Amtrak employee. Zarbo was a police officer for the rail company, Frazier was Amtrak's Deputy Chief of Police, and Higdon was the company's claims adjuster.

On or about August 10, 1989, Ronald and Nijole discovered that someone had forged Ronald's signature on an IRS request form (form 4506) asking for a copy of the Hrubec's 1988 and 1989 federal income tax returns. According to the Hrubecs, Zarbo, Frazier, Higdon, and Doe conspired to obtain the returns without the Hrubec's consent or knowledge. Ronald and Nijole now seek compensatory and punitive damages for the alleged violations of 26 U.S.C. § 7431(a)(2).

Defendants have moved to strike or dismiss the Hrubec's request for damages, claiming they exceed the relief authorized by statute. In response, plaintiffs have filed a motion to strike the defendants' motion to strike or dismiss and the memorandum in support, as well as a motion for Rule 11 sanctions.

II. Discussion

A. Motion to Strike Paragraph 18 of Plaintiffs' Complaint

The Hrubecs are entitled to file suit for damages against defendants under 26 U.S.C. § 7341(a)(2), which permits recovery against non-governmental persons who "knowingly or negligently discloses any return or return information in violation of any provision of 26 U.S.C. § 6103." Section 7431(c) provides that a successful plaintiff may recover

(1) the greater of —

(A) $1,000 for each act of unauthorized disclosure of a return or return information with respect to which such defendant is found liable, or

(B) the sum of —

(i) the actual damages sustained by the plaintiff as a result of such unauthorized disclosure, plus

(ii) in the case of willful disclosure or a disclosure which is the result of gross negligence, punitive damages, plus

(2) the costs of the action.

26 U.S.C. § 7431(c). Amtrak contends that because § 7431(c) does not permit recovery for mental or emotional distress, and because the Hrubecs failed to allege willfulness by the defendants, the Hrubecs cannot seek more than $1,000 under the statute. Accordingly, they ask us to strike or dismiss paragraph 18 of the complaint, which contains the delineation of damages.

Section 7431(c) clearly allows recovery of all "actual damages." However, the question of whether actual damages under § 7431 may include compensation for mental and emotional anguish is one of first impression in this Court and in this District. In addition to the lack of direct precedent, there is little in the way of case law or legislative history to guide us. Nonetheless, there is enough to persuade us that Congress intended "actual damages" under § 7431 to include compensation for emotional distress.

In determining whether Congress intended to allow damages for emotional and mental distress, we first look to the interests Congress sought to protect. In Carey v. Piphus, 435 U.S. 247, 259, 98 S.Ct. 1042, 1050, 55 L.Ed.2d 252 (1978), the Supreme Court observed that:

The rules governing compensation for injuries caused by the deprivation of constitutional rights should be tailored to the interests protected by the particular right in question — just as the common law rules of damages themselves were defined by the interests protected in various branches of tort law.

Accordingly, discovery of the interests Congress set out to safeguard will help point us to the relief they likely intended to make available.

The legislative history of § 6103 indicates that Congress intended to protect taxpayers' right to privacy. One of Congress' concerns at the time of passage was that the level of disclosure between agencies, as it stood in 1976, breached taxpayers' reasonable expectations of privacy. S.Rep. No. 938, 94th Cong., 2d Sess. 19, 317 (1976), U.S.Code Cong. & Admin.News 1976, p. 2897. Available case law corroborates this interpretation of Congressional intent. See, e.g., DiAndre v. United States, 968 F.2d 1049, 1052 (10th Cir.1992) (by amending § 6103, Congress intended to protect the taxpayer's right to privacy and confidentiality in tax return information); Grasso v. I.R.S., 785 F.2d 70, 75 (3rd Cir.1986) (same); Flippo v. United States, 670 F.Supp. 638, 642 (W.D.N.C.1987) (same).

Next, we must establish what damages § 7431 provides to alleviate the invasion of a taxpayer's privacy. In general, courts award damages for emotional and/or mental distress to plaintiffs whose privacy has been invaded. In fact, in Time, Inc. v. Hill, 385 U.S. 374, 384, 87 S.Ct. 534, 540 n. 9, 17 L.Ed.2d 456 (1967), the Supreme Court recognized that the primary damage in "right to privacy" cases is mental distress. At first cut, then, it seem that "actual damages" for unauthorized disclosure of a taxpayer's returns should include recovery for mental or emotional anguish.

Looking further, we discover that courts have interpreted "actual damages" in other federal statutes to include damages for emotional distress, humiliation or mental anguish. Under the Equal Credit Opportunity Act, 15 U.S.C. § 1691e, for example, "actual damages" may include out-of-pocket monetary losses, injury to credit reputation, and mental anguish, humiliation or embarrassment. Fischl v. General Motors Acceptance Corp., 708 F.2d 143, 148 (5th Cir.1983); Anderson v. United Finance Co., 666 F.2d 1274, 1277 (9th Cir.1982). And at least one court has ruled that limiting damages under the Equal Credit Opportunity Act to out-of-pocket losses would undermine Congress' intent to eliminate discriminatory credit denials. Shuman v. Standard Oil Co., 453 F.Supp. 1150, 1154 (N.D.Cal.1978). Under the Fair Credit Reporting Act, 15 U.S.C. § 1681n, the term "actual damages" has been read to include damages for emotional distress and humiliation. Millstone v. O'Hanlon Reports, Inc., 528 F.2d 829, 834-35 (8th Cir.1976); Bryant v. TRW, Inc., 487 F.Supp. 1234, 1240 (E.D.Mich.1980). Likewise, courts have allowed recovery for emotional distress as part of the "actual damages" available under the Fair Housing Act, 42 U.S.C. § 3612(c). United States v. Balistrieri, 981 F.2d 916, 931 (7th Cir.1992); Jeanty v. McKey & Poague, Inc., 496 F.2d 1119, 1121 (7th Cir.1974); Seaton v. Sky Realty Co., 491 F.2d 634, 636-37 (7th Cir.1974); Smith v. Sol D. Adler Realty Co., 436 F.2d 344, 351 (7th Cir.1970). Finally, "actual damages" under 42 U.S.C. § 1983 has been interpreted consistently to include mental distress. Biggs v. Dupo, 892 F.2d 1298, 1304 (7th Cir.1990); Nekolny v. Painter, 653 F.2d 1164, 1172 (7th Cir.1981); Busche v. Burkee, 649 F.d 509, 518-19 (7th Cir.1981).

On the other hand, courts do not agree on what "actual damages" are recoverable under the Privacy Act, 5 U.S.C. § 552a, which specifically deals with an individual's right to privacy in records held by the federal government. The court in Fitzpatrick v. I.R.S., 665 F.2d 327, 331 (11th Cir.1982) awarded damages only for proven pecuniary losses, basing its opinion on the legislative history of the Privacy Act. Noting that the term "general damages" was changed to "actual damages" in a quid pro quo exchange for a provision reducing the standard of proof required for a violation of the Act, the Fitzpatrick court reasoned that actual damages must be more restrictive than general damages, and went on to conclude that "actual damages" could not be synonymous with common law general damages, and must refer only to pecuniary loss. Id. at 330.

In contrast with this interpretation, the Fifth Circuit has held that the Privacy Act cannot protect a right to privacy if mental distress, the primary damage resulting from an invasion of privacy, is not one of the "actual damages" provided for by Congress. Johnson v. Dept. of Treasury, I.R.S., 700 F.2d 971, 977 (5th Cir.1983). The Johnson court likened a violation of privacy under 5 U.S.C. § 552a to a violation of civil rights remedies under 42 U.S.C. § 1983, noting Congress' acknowledgement that "`the right to privacy is a personal and fundamental right protected by the Constitution of the United States.'" Id. at 976, quoting Section 2(a)(4), Privacy Act, 5 U.S.C. § 552a note, reprinted in 1974 U.S.C.C.A.N. 2177, 2178. Additionally, the Fifth Circuit heeded the Supreme Court's admonition in Carey, that compensation for constitutional injuries should be tailored to the interests protected by the right at issue. Id. at 977, citing Carey, 435 U.S. at 259, 98 S.Ct. at 1050. Because mental distress is the normal and typical damage resulting from an invasion of...