Hudson Valley Black Press v. I.R.S.

• Citation: 409 F.3d 106
• Decision Date: 27 May 2005
• Docket Number: Docket No. 04-1949-CV.
• Parties: HUDSON VALLEY BLACK PRESS, Plaintiff-Appellant, v. INTERNAL REVENUE SERVICE, William Strugatz & Celestine Richardson, Defendants-Appellees.
• Court: United States Courts of Appeals. United States Court of Appeals (2nd Circuit)

409 F.3d 106

HUDSON VALLEY BLACK PRESS, Plaintiff-Appellant, v. INTERNAL REVENUE SERVICE, William Strugatz & Celestine Richardson, Defendants-Appellees.

Docket No. 04-1949-CV.

United States Court of Appeals, Second Circuit.

Argued: January 13, 2005.

Decided: May 27, 2005.

Stephen Bergstein, Thornton, Bergstein & Ullrich, Chester, New York, for plaintiff-appellant.

Michael R. Holden, Assistant United States Attorney for the Southern District of New York (Edward Scarvalone, Assistant United States Attorney, on the brief), for David N. Kelley, United States Attorney for the Southern District of New York, for defendants-appellees.

Before: CABRANES and KEARSE, Circuit Judges, and KORMAN,^* District Judge.

KORMAN, Chief Judge.

This appeal from a judgment entered in the United States District Court for the Southern District of New York (William C. Conner, Judge) squarely presents the issue whether taxpayers may seek to recover damages against employees of the Internal Revenue Service ("IRS") for undertaking an audit in retaliation for the exercise by a taxpayer of rights protected by the First Amendment. Specifically, in its complaint, the dismissal of which is the subject of this appeal, the Hudson Valley Black Press ("HVBP"), the publisher of a newspaper that focuses on issues of interest to the African-American community, alleges that, after the IRS was found liable for race discrimination and retaliation against an African-American employee in its Poughkeepsie office, see Agonafer v. Rubin, 35 F.Supp.2d 300, 305 (S.D.N.Y.1998), HVBP published an article that was highly critical of the IRS. Two weeks later, Charles A. Stewart, HVBP's sole proprietor, was notified that HVBP would be audited by the IRS. At some time thereafter, an IRS employee, William Strugatz ("Strugatz"), scheduled a meeting at HVBP's offices, and, upon his arrival, made racially offensive remarks about slavery reparation and the name and editorial content of The Black Press.

After concluding his audit, Strugatz made repeated threats, and attempted unsuccessfully to coerce HVBP into signing a fraudulent and false report. Strugatz then filed a false audit report, and after this report was initially rejected by an IRS hearing officer, Strugatz again appeared at HVBP's offices, using threats and coercive tactics in an attempt to make HVBP sign the false report. HVBP again refused to sign. Subsequently, the IRS assigned a second employee, Celestine Richardson ("Richardson"), to take over the audit. Richardson and Strugatz maintained that, because HVBP was delinquent in paying payroll taxes, they continued to audit HVBP even after the IRS hearing officer rejected Strugatz's initial report.

After Richardson replaced Strugatz, the IRS seized all of HVBP's accounting records relating to the period in which delinquent payroll taxes were alleged. The IRS seized not only HVBP's tax returns for the period in question, but also the diskettes which contained the tax records, leaving HVBP with no copies of these returns. HVBP repeatedly requested that copies of the tax returns be made available, but these requests were unsuccessful. Richardson acknowledged that the IRS had plaintiff's tax records, and promised to provide copies of the tax returns in accordance with the Freedom of Information Act, but still failed to do so. Indeed, tax liens were filed against HVBP for the period of allegedly delinquent payroll taxes. An administrative hearing was convened, and plaintiff asked hearing officer Michael Smith ("Smith") for the return of HVBP's records and copies of HVBP's tax returns. Smith denied plaintiff's request, stating "no federal Judge would overrule my decision and I affirm the agent's lien against you."

HVBP contends that, as a result of the retaliatory audit and other misconduct by the defendants, it suffered a loss in earnings, suffered damage to its "good name and reputation," and was rendered unable to publish The Black Press or otherwise operate its business. Accordingly, HVBP brought this action to recover damages, alleging that the defendants' conduct violated plaintiff's rights under the First, Fourth, Fifth and Fourteenth Amendments. HVBP also sought to have the tax liens in question vacated. While the IRS was also named originally as a defendant, it was dropped as a party in plaintiff's Fourth Amended Complaint.

The complaint was dismissed for failure to state a claim. Hudson Valley Black Press v. IRS, 307 F.Supp.2d 543, 553 (S.D.N.Y.2004). This appeal ensued. Because plaintiff's brief challenges only the district court's dismissal of its First Amendment cause of action, it is the only one we consider. See Feingold v. New York, 366 F.3d 138, 160 (2d Cir.2004); Norton v. Sam's Club, 145 F.3d 114, 117 (2d Cir.1998). The sole question, then, is whether the district court erred by refusing to recognize a remedy against the named employees of the IRS for the First Amendment violations alleged to have been occasioned by the audit of HVBP. In resolving this question we assume the truth of the allegations contained in the complaint. See Conley v. Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99, 2 L.Ed.2d 80 (1957).

Discussion

In Bivens v. Six Unknown Named Agents of Fed. Bureau of Narcotics, 403 U.S. 388, 91 S.Ct. 1999, 29 L.Ed.2d 619 (1971), a case in which the plaintiff sought damages against federal law enforcement officers arising out of an illegal search and seizure, the Supreme Court held that, while "the Fourth Amendment does not in so many words provide for its enforcement by an award of money damages," id. at 396, 91 S.Ct. 1999, such a remedy was appropriate nonetheless, because Congress had not prohibited such a cause of action and there were "no special factors counselling hesitation in the absence of affirmative action by Congress." Id. While the plaintiff invokes Bivens in seeking damages for the violation of its rights protected by the First Amendment, subsequent cases threshing out "the special factors" alluded to in Bivens make it impossible for plaintiff to prevail. Because the legal principles are so well settled, we do not undertake a case-by-case analysis of the law as it has developed since Bivens was decided. Instead, we focus on two Supreme Court cases that lay out the law as it applies here.

In Bush v. Lucas, 462 U.S. 367, 103 S.Ct. 2404, 76 L.Ed.2d 648 (1983), the Court refused to extend Bivens to create a cause of action for a federal employee who alleged he had been demoted, in violation of the First Amendment, for publicly criticizing his employer. The plaintiff in Bush was an aerospace engineer employed at a flight center operated by the National Aeronautics and Space Administration ("NASA"), who made a number of public statements highly critical of his employer. Id. at 369. After the plaintiff was subsequently demoted, he pursued the available administrative remedies, first appealing his demotion to the Federal Employee Appeals Authority and, after an adverse ruling, taking his case to the Civil Service Commission's Appeals Review Board. Id. at 369-70, 103 S.Ct. 2404. The Board reopened the plaintiff's case and ultimately reinstated him with back pay. Id. at 370, 103 S.Ct. 2404. Because the remedial scheme did not provide for the recovery of damages for the emotional distress he suffered, he sought recovery in an action relying on Bivens.

While acknowledging that the administrative remedies available did not "provide complete relief for the plaintiff," id. at 388, 91 S.Ct. 1999, the Court nonetheless refused to create a Bivens remedy because the plaintiff's allegations implicated policy questions in an area that had received careful attention from Congress, and because "Congress is in a better position to decide whether or not the public interest would be served by creating" a cause of action for damages. Id. at 390, 91 S.Ct. 1999. As the Court framed the issue, the question was "not what remedy the court should provide for a wrong that would otherwise go unredressed. It is whether an elaborate remedial system that has been constructed step by step, with careful attention to conflicting policy considerations, should be augmented by the creation of a new judicial remedy for the constitutional violation at issue." Id. at 388, 91 S.Ct. 1999.

Similarly, in Schweiker v. Chilicky, 487 U.S. 412, 108 S.Ct. 2460, 101 L.Ed.2d 370 (1988), the Court held that Bivens relief was unavailable for Social Security recipients whose benefits had been terminated improperly in violation of the Due Process Clause. Id. at 428-29, 91 S.Ct. 1999. The plaintiffs in Chilicky were three individuals whose disability benefits were wrongfully terminated. They appealed the termination of benefits through the administrative process, and had their benefits restored, while also receiving retroactive benefits. Id. at 417, 108 S.Ct. 2460. Nevertheless, the plaintiffs filed suit, seeking damages for emotional distress and for loss of necessities during the period they had not received benefits. The Supreme Court agreed that "suffering months of delay in recovering the income on which one has depended for the very necessities of life cannot be fully remedied by the `belated restoration of back benefits'"— the remedy provided by Congress. Id. at 428, 108 S.Ct. 2460. "The trauma to respondents, and thousands of others like them, must surely have gone beyond what anyone of normal sensibilities would wish to see imposed on innocent disabled citizens." Id. at 428-29, 108 S.Ct. 2460. Nevertheless, because Congress "has addressed the problems created by ... wrongful termination of disability benefits" and, because "Congress is the body charged with making the inevitable compromises required in the design of a massive and complex welfare benefits program," the Supreme Court found no legal basis that would allow it to revise the decision Congress made not to include the cause of action for damages plaintiffs sought. Id. at 429, 108 S.Ct. 2460.

Summarizing...