Rowley v. U.S., 94-2132

• Decision Date: 27 February 1996
• Docket Number: No. 94-2132,94-2132
• Citation: 76 F.3d 796
• Parties: -1071, 64 USLW 2561, 96-1 USTC P 50,123 William E. ROWLEY and Ellen L. Rowley, Plaintiffs-Appellants, v. UNITED STATES of America, Defendant-Appellee.
• Court: U.S. Court of Appeals — Sixth Circuit

Page 796

76 F.3d 796

77 A.F.T.R.2d 96-1071, 64 USLW 2561,

96-1 USTC P 50,123

William E. ROWLEY and Ellen L. Rowley, Plaintiffs-Appellants, v. UNITED STATES of America, Defendant-Appellee.

No. 94-2132.

United States Court of Appeals Sixth Circuit.

Argued Nov. 30, 1995.

Decided Feb. 27, 1996.

On Appeal from the United States District Court for the Eastern District of Michigan; Avern Cohn, Judge.

Larry A. Smith, Ron S. Kirsch (argued and briefed), Sanford N. Lakin, Lakin, Worsham & Victor, Southfield, MI, for Plaintiffs-Appellants.

Gary R. Allen, Acting Chief (briefed), Jonathan S. Cohen (argued), U.S. Department of Justice, Appellate Section Tax Division, Washington, DC, Mary F. Clark, Brentwood, TN, for Defendant-Appellee.

Before: MARTIN and JONES, Circuit Judges; BELL, District Judge. ^*

BOYCE F. MARTIN, Jr., Circuit Judge.

William E. and Ellen L. Rowley appeal the district court's grant of summary judgment in favor of the United States in this tax case. Specifically, the Rowleys claim the United States is liable for civil damages for the wrongful disclosure of certain tax return information while advertising a public auction of property seized from the Rowleys to pay a tax obligation. The United States argues in part that summary judgment was proper because the only information disclosed by the government was already part of the public record due to the previous filing and recording of federal tax liens, which abrogated the Internal Revenue Code confidentiality requirements and precluded wrongful disclosure liability. It is a question of first impression in this circuit whether, after a federal tax lien is filed and recorded and a taxpayer's return information becomes a matter of public record, republication of that material is exempt from the Internal Revenue Code's confidentiality requirements.

I.

In 1982, the Rowleys filed a tax return with the Internal Revenue Service claiming certain partnership loss deductions. The deductions subsequently were disallowed by the Internal Revenue Service, and a dispute ensued as to the amount of tax owed. On October 13, 1989, the Rowleys petitioned the United States Tax Court for a determination of the amount owed, and a consent decision was entered on December 14, 1990, settling the taxes owing for 1982. After the Rowleys failed to pay the settled amount, the Internal Revenue Service demanded payment from them on four separate occasions. ¹ Finally, on January 7, 1991, the Internal Revenue Service sent the Rowleys a final notice and demand for payment, as well as a notice of intent to levy. The Rowleys later claimed they never received proper notice of the government's intent to levy, and that later disclosures made by the Internal Revenue Service during the course of an attempted sale of their property were unauthorized. ² The government maintained, however, that the notice given to the Rowleys satisfied the requirements of the Internal Revenue Code.

In March 1991, notice of a federal tax lien was filed with the Williams County, Ohio Recorder's office. The notice included and made public the Rowleys' names and address, the kind of tax they owed, the date of assessment, and the unpaid balance. When the balance remained unpaid, Revenue Officer Emily Ebaugh of the Defiance, Ohio duty post was assigned to collect the amount owed. Ebaugh met with the Rowleys on December 23, 1991, and informed them that the Internal Revenue Service was considering seizing and selling the one-half interest they had in a cabin in Oscoda County, Michigan. In January 1992, Revenue Officer Ernie Kozlowski of the Alpena, Michigan duty post was assigned to assist Ebaugh. Kozlowski filed a notice of federal tax lien with the Oscoda County Register of Deeds on February 7. That notice contained the same information disclosed in the first lien notice.

On March 6, Kozlowski seized the Rowleys' interest in the Oscoda cabin and sent a notice of seizure, a notice of levy, and a notice of administrative appeal rights to Ebaugh for service on the Rowleys. Ebaugh personally served the Rowleys on March 17, and on March 27, William Rowley instituted an administrative appeal of the seizure on the ground that the Rowleys did not receive proper notice of the government's intent to levy. While the Rowleys' administrative appeal was pending, Kozlowski placed an ad in the April 5 editions of the Detroit Free Press and Detroit News in an effort to sell the Oscoda cabin. ³ Another ad ran in the Oscoda County Herald on April 7, disclosing the Rowleys' names, the legal description of their property, and the reason for the seizure. As a result of the ads, interested purchasers inquired about the property, and the Internal Revenue Service provided information packets containing the same information included in the Oscoda County Herald.

On April 8, after reviewing the Rowleys' administrative appeal, the Internal Revenue Service released its seizure of the Oscoda cabin on the ground that the Rowleys did not receive proper notice of the intended levy. The Rowleys were notified in an April 17 letter that the property had been released and would not be sold. ⁴

On October 12, 1993, the Rowleys brought this action for civil damages against the United States, alleging that the Internal Revenue Service's disclosure of their tax return information during the course of the attempted sale of their property was wrongful because they had not received adequate notice of the government's intent to levy. The United States in turn moved for summary judgment on the following grounds: (1) the Internal Revenue Service's collection activity was proper and satisfied all relevant notice provisions; (2) notwithstanding possible defects in complying with the notice requirements, disclosures made in connection with authorized collection activities do not give rise to liability; (3) because the information the Rowleys complained of was already a matter of public record, the government could not be liable for its disclosure; and (4) even if the disclosures were not authorized, they were made in good faith and liability was thereby precluded.

The district court granted the United States' motion for summary judgment on August 11, 1994 on the ground that the Internal Revenue Service merely republished information that was already in the public domain, and the disclosure was therefore unprotected by Internal Revenue Code confidentiality provisions. ⁵ The district court dismissed the Rowleys' unauthorized disclosure claim and this timely appeal followed.

II.

We review a district court's grant of summary judgment de novo, applying the same test that was used by the district court in its initial review of a motion for summary judgment. Sims v. Memphis Processors, Inc., 926 F.2d 524, 526 (6th Cir.1991). Summary judgment is appropriate if the record discloses "no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Fed.R.Civ.P. 56(c). The issue of whether the Internal Revenue Code confidentiality requirements are abrogated and wrongful disclosure liability is precluded for subsequent disclosures of tax return information when a public record has been created by the filing and recording of a judicial lien is a legal one which we review de novo. United States v. Graves, 60 F.3d 1183, 1185 (6th Cir.1995). This question is also one of first impression in this circuit and one that has divided other circuits.

Under 26 U.S.C. § 6103(a), "federal tax returns and tax return information are, with certain exceptions, confidential." Davidson v. Brady, 732 F.2d 552 (6th Cir.1984). Federal employees may not disclose such information unless an exception is met, and a taxpayer has a "statutory cause of action for damages against any person who knowingly or negligently discloses any return or return information in violation of the Act." Id; See 26 U.S.C. § 7431(a). ⁶ By statute and regulation, the Internal Revenue Service is permitted to disclose tax return information to the extent necessary to locate assets in which a taxpayer has an interest, to effect a lien or levy, or to seize or sell assets to collect taxes due. See 26 U.S.C. §§ 6321 and 6331; Treas. Reg. § 301.6103(k)(6)-1(b)(6) (permitting disclosure of tax return information necessary to establish liens against a taxpayer's assets, or to levy on, seize, or sell assets to satisfy any outstanding liability).

In response to the Rowleys' claims on appeal, the United States argues that the republication of tax return information that has been made a matter of public record in accordance with the provisions of the Internal Revenue Code authorizing the filing of a federal tax lien notice is not subject to Section 6103's confidentiality provisions. The United States urges this court to hold, as the Ninth Circuit has, that once tax return information is part of the public domain, there can be no Section 6103 violation for any subsequent disclosure. The Rowleys, by contrast, argue that this court should limit its review to the propriety of the disclosure at issue, rather than ask whether the confidentiality of tax return information has been lost already. The Rowleys argue that this court should join the Fourth and Tenth Circuits in holding that prior disclosures of tax return information that are a matter of public record do not automatically insulate the United States from liability for later unauthorized disclosures of such information.

The Ninth Circuit has stated its position in Lampert v. United States, 854 F.2d 335 (9th Cir.1988), cert. denied, 490 U.S. 1034, 109 S.Ct. 1931, 104 L.Ed.2d 403 (1989) and Schrambling Accountancy Corp. v. United States, 937 F.2d 1485 (9th Cir.1991), cert. denied, 502 U.S. 1066, 112 S.Ct. 956, 117 L.Ed.2d 123 (1992). In Lampert, the court considered whether "press releases by government officials, relating to public judicial proceedings, constitute[d] unauthorized disclosures of 'tax return information' in...