Norcal Tea Party Patriots v. Internal Revenue Serv.
| Decision Date | 17 July 2014 |
| Docket Number | Case No. 1:13-cv-341 |
| Parties | NorCal Tea Party Patriots, et al., Plaintiffs, v. The Internal Revenue Service, et al., Defendants. |
| Court | U.S. District Court — Southern District of Ohio |
Order Granting Dismissal Motions of
Management Defendants, Line-Level
Employee Defendants, and Carter Hull;
Granting in Part Dismissal Motion of
Federal Defendants; and Denying as
Moot Motion for Leave to Conduct
This matter is before the Court on four dismissal motions and one discovery motion: (1) Motion to Dismiss Claims against Federal Defendants (Doc. 73); (2) Management Defendants' Motion to Dismiss the Second Amended Class Action Complaint (Doc. 77); (3) Line-Level Employee Defendants' Motion to Dismiss Count 2 of the Second Amended Class Action Complaint (Doc. 78); (4) Motion to Dismiss of Individual Defendant Carter Hull (Doc. 79); and (5) Plaintiffs' Motion for Leave to Conduct Limited Discovery Related to Personal Jurisdiction (Doc. 83). For the reasons that follow, the Motions to Dismiss filed by Management Defendants, Line-Level Employee Defendants, and Carter Hull will be granted and the Motion to Dismiss filed by Federal Defendants will be granted in part. Plaintiffs' Motion for Leave to Conduct Limited Discovery will be denied as moot.
Because the pending dismissal motions raise primarily questions of law, and because the Court need not address the disputed factual issues concerning personal jurisdiction, the well-pleaded facts in the 272-paragraph Second Amended Class Action Complaint ("SACAC") (Doc. 71) can be briefly summarized.
This lawsuit was filed by ten Plaintiff Groups,1 organizations "comprised of individual citizens who have joined together to exercise their rights to freedom of speech and expression" and who share a philosophy of "dissent from the policies or ideology of the Executive Branch of the United States Government under its current Administration." (Doc. 71 at PageID 981.) Plaintiff Groups refer to themselves, and the members of the class which they seek to represent, as "dissenting groups." Plaintiff Groups are suing four sets of defendants: Federal Defendants, consisting of the Department of the Treasury, the Internal Revenue Service ("IRS"), and IRS employees sued in their official capacities; Management Defendants of the IRS sued in their individual capacity;2 Line-Level Employee Defendants of the IRS sued in their individual capacities;3 and Defendant Carter Hull, an IRS attorney sued in his individual capacity.
Beginning in 2010, nine of the Plaintiff Groups applied to the IRS for exemption from federal taxation pursuant to Internal Revenue Code, 26 U.S.C. § 501(c)(4). (Id. at PageID 990.)4 Plaintiff Groups applied for § 501(c)(4) status to avoid the burden of double taxation. (Id. at PageID 989-90.)5 Each Plaintiff Group sought advanced recognition of their tax-exempt statusfrom the IRS, instead of acting as a self-declared tax-exempt organization, to avoid the risk of facing a "crippling and unexpected tax and penalty" if the IRS determined upon an audit that the organization was not operating under the tax exemption guidelines. (Id. at PageID 990.)
Plaintiff Groups allege that Defendants subjected them and other dissenting groups, on the basis of their beliefs, to delays and intrusive scrutiny during the tax-exempt status application process. (Id.) Plaintiff Groups allege that Defendants targeted dissenting groups by selecting groups whose names included terms such as "Tea Party," "Patriots," or "912 Project" or by selecting groups focused on issues such as government spending, limited government, or educating the public about the Constitution. (Id. at PageID 991.) Plaintiff Groups allege that Defendants subjected their tax-exempt status applications to "unreasonable delays and often harassing, illegal, and discriminatory demands for private information." (Id. at PageID 982, 994.) Plaintiff Groups allege that Defendants demanded that they disclose "information not authorized by the Internal Revenue Code or any other federal law." (Id. at PageID 1010, 1032.) Plaintiff Groups allege that as a result of the Defendants' conduct they suffered an invasion of their privacy, the administrative costs of responding to burdensome and unlawful requests for information, and the loss of donations and membership fees. (Id. at PageID 982, 1037, 1044.)
Plaintiff Groups filed the Second Amended Class Action Complaint on January 23, 2014. Plaintiff Groups assert three causes of action:
(Doc. 71 at PageID 1032-46.) Plaintiff Groups also seek to certify a class that would include generally "all dissenting groups targeted for additional scrutiny by the IRS from January 20, 2009 through July 15, 2013." (Id. at PageID 1047.)
Four sets of Defendants have filed Motions to Dismiss (Docs. 73, 77, 78, 79). All Defendants assert pursuant to Federal Rule of Civil Procedure 12(b)(6) that Plaintiff Groups have failed to state a claim upon which relief can be granted. Certain Defendants, each a non-Ohio resident, also assert that the Court lacks personal jurisdiction over them. Plaintiff Groups oppose dismissal of their claims and also have filed a Motion for Leave to Conduct Limited Discovery Related to Personal Jurisdiction (Doc. 83). The Motions are ripe for adjudication.
Federal Rule of Civil Procedure 12(b)(6) allows a party to move to dismiss a complaint for "failure to state a claim upon which relief can be granted." Fed. R. Civ. P. 12(b)(6). A district court "must read all well-pleaded allegations of the complaint as true." Weiner v. Klais and Co., Inc., 108 F.3d 86, 88 (6th Cir. 1997). However, this tenet is inapplicable to legal conclusions, or legal conclusions couched as factual allegations, which are not entitled to an assumption of truth. Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009).
A complaint must contain a "short and plain statement of the claim showing that the pleader is entitled to relief." Fed. R. Civ. P. 8(a). To withstand a dismissal motion, a complaint "does not need detailed factual allegations," but it must contain "more than labels and conclusions [or] a formulaic recitation of the elements of a cause of action." Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007). "[T]he complaint must contain either direct or inferential allegations respecting all material elements to sustain a recovery under some viable legal theory." Harvard v. Wayne Cty., 436 F. App'x 451, 457 (6th Cir. 2011) (). "Factual allegations must be enough to raise a right to relief above the speculative level." Twombly, 550 U.S. at 555.6 The Court does not require "heightened fact pleading of specifics, but only enough facts to state a claim for relief that is plausible on its face." Id. at 570. "A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Iqbal, 556 U.S. at 678.
In Count One of the SACAC, Plaintiff Groups allege that Federal Defendants violated the Privacy Act, 5 U.S.C. §§ 552a(e)(1), 552a(e)(3)(A)-(D), 552a(e)(4), 552a(e)(5), 552a(e)(7), and 552a(e)(10). (Doc. 71 at PageID 1032-37.) The Privacy Act "delineates duties and responsibilities for federal agencies that collect, store, and disseminate personal information about individuals." Butler v. U.S. Dep't of Justice, 368 F. Supp. 2d 776, 782 (E.D. Mich. 2005). The Privacy Act creates a private cause of action in favor of "the individual" when an agency "fails to comply with any other provision of this section, or any rule promulgated thereunder, in such a way as to have an adverse effect on [the] individual." 5 U.S.C. § 552a(g)(1)(D) (emphasis added).
Federal Defendants move to dismiss this claim on the grounds that the United States has not waived its sovereign immunity as to claims by the Plaintiff Groups because they are not individuals. The United States is immune from suit except to the extent that Congress has waived the immunity by specific statute. Lehman v. Nakshian, 453 U.S. 156, 160-61 (1981);Center for Bio-Ethical Reform, Inc. v. City of Springboro, 477 F.3d 807, 819-20 (6th Cir. 2007). Plaintiff Groups concede that only "individuals" can sue under the Privacy Act, but they assert that Plaintiff Groups can bring the claims of their individual members pursuant to the doctrine of associational standing. (Doc. 84 at PageID 1433.)
Under the doctrine of associational standing, "an association has standing to bring suit on behalf of its members when: (a) its members would otherwise have standing to sue in their own right; (b) the interests it seeks to protect are germane to the organization's purpose; and (c) neither the claim asserted nor the relief requested requires the participation of individual members in the lawsuit." Hunt v. Wash. State Apple Advertising Comm'n, 432 U.S. 333, 343 (1977). At least one federal district court, the District of Columbia, has refused to allow Privacy Act claims on the basis of associational standing because the statutory language in § 552a(g) creates a cause of action only for individuals, not for groups representing individuals. Committee in Solidarity with the People of El Salvador v. Sessions, 738 F. Supp. 544, 547 (D.D.C. 1990) (), aff'd, 929 F.2d 742 (D.C. Cir. 1991); see also In re Dep't of Veterans Affairs Data Theft Lit., MDL Docket No. 1796, ...
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