Rucker v. Secretary of Treasury of US

• Decision Date: 26 February 1986
• Docket Number: Civ. A. No. 82-K-1450.
• Citation: Rucker v. Secretary of Treasury of US, 634 F. Supp. 598 (D. Colo. 1986)
• Parties: Dalleen RUCKER, et al., Plaintiffs, v. The SECRETARY of the TREASURY of the UNITED STATES, and the United States of America, Defendants.
• Court: U.S. District Court — District of Colorado

634 F. Supp. 598

Dalleen RUCKER, et al., Plaintiffs, v.The SECRETARY of the TREASURY of the UNITED STATES, and the United States of America, Defendants.

Civ. A. No. 82-K-1450.

United States District Court, D. Colorado.

February 26, 1986.

Glenn Meyers, Colorado Rural Legal Services, Denver, Colo., Jacquie Higinbotham, Colorado Rural Legal Services, Fort Morgan, Colo., for plaintiffs.

Michael D. Powell, Tax Div., Dept. of Justice, Washington, D.C., Robert N. Miller, U.S. Atty., Denver, Colo., for defendants.

FINDINGS OF FACT, CONCLUSIONS OF LAW, and ORDER

KANE, District Judge.

I.

FACTS

Plaintiff Rucker and husband filed a joint federal income tax return for 1981.The couple expected to receive a refund, partly from monies withheld from plaintiff's wages and partly as a result of an earned income credit.The Internal Revenue Service intercepted the entire tax refund and earned income credit to satisfy plaintiff's husband's past-due child support payments.No notice or opportunity to contest the intercept was given to the plaintiff before the withholding of these funds.The Service claimed authority for such action under 42 U.S.C. § 664.¹

Plaintiff first contacted the Department of Social Services and then the IRS to request the return of her allocable portion of the monies withheld.She was instructed to file an amended return in order to obtain her refund and earned income credit.In October, 1982, having followed these procedures, she received her proportionate share of the earned income credit and the tax refund.

On August 31, 1982, after filing her amended return but before receiving any monies from the IRS, plaintiff filed an action against the Secretary of the Treasury, seeking class certification, and declaratory and injunctive relief.²Plaintiff argued that the government is not authorized to retain funds owed to an individual who has no child support obligation, and that such action constituted the taking of property without notice and violated the Due Process Clause of the Fifth Amendment to the Constitution of the United States.Plaintiff also asserted that 42 U.S.C. § 664 does not apply to the transfer of earned income credits.Two other parties petitioned to intervene in this action pursuant to Rule 24 of the Federal Rules of Civil Procedure, and those motions were granted.

Defendant moved to dismiss the case and plaintiff moved for summary judgment on three issues and to certify a class pursuant to F.R.Civ.P. 23.On February 10, 1983, I granted defendant's motion to dismiss, holding that "(t)he absence of a `caseor controversy' renders this court without jurisdiction."Rucker v. Secretary of the Treasury of the United States,555 F.Supp. 1051, 1053(D.Colo.1983).I held that Rucker's fifth amendment and tax refund claims were moot because she had received her allocable share of the income tax refund.I also ruled that earned income credits are subject to the intercept program and, because plaintiff had received an allocable share of this credit, her earned income credit claim was also moot.

Plaintiff appealed.She claimed that no portion of the earned income credit was subject to the intercept program.The Tenth Circuit reversed and remanded the case to me.Rucker v. Secretary of the Treasury of the United States,751 F.2d 351(10th Cir.1984).The court held that no portion of the earned income credit is subject to the intercept program, and that the case was not moot because the IRS had refunded only a portion of the earned income credit.The court adopted Rucker's argument that the earned income credit is neither a refund nor an overpayment within the meaning of 42 U.S.C. § 664(a) or 26 U.S.C. § 6402(a).³

The Tenth Circuit did not address, however, plaintiff's claim that the IRS's withholding of a portion of the refund attributable to her earnings violated due process or my finding that her claims regarding interception of her share of the income tax refund was moot.

In February, 1985, this case was reopened.Plaintiffs filed an amended motion for certification of class action, wherein they seek to certify two classes:

CLASS I: Residents of Colorado, Wyoming, Utah, New Mexico, Oklahoma, and Kansas who filed or will file individual or joint income tax returns for any one or more years including and subsequent to 1981, and who were entitled to an earned income credit, part or all of which has been withheld by the Internal Revenue Service under the asserted authority of 42 U.S.C. § 664.

CLASS II: Residents of Colorado, Wyoming, Utah, New Mexico, Oklahoma, and Kansas, who filed or will file joint federal income tax returns for any one or more years including and subsequent to 1981, whose spouses owe money to any state of the United States, and who are/were entitled to a refund or tax withheld, exclusive of their spouses earnings, part or all of which has been held by the Internal Revenue Service under the asserted authority of 42 U.S.C. § 664.

The parties also rebriefed the issues initially raised by plaintiff in her motion for summary judgment.Defendant argues that all three issues are moot at this time.Plaintiff argues that the class should be broadened and that I should rule on the class certification issue as well as whether plaintiff's due process rights have been violated by the lack of notice given by the IRS in holding onto her tax refund.

The time for defendants to have petitioned for certiorari before the United States Supreme Court in this case has run and the defendants have not so petitioned.The defendants have not requested a stay of any proceedings before this court at this time.I am aware that Sorenson v. Secretary of the Treasury,⁴ is on certiorari to the Supreme Court of the United States, but I am not addressing the issue before the Supreme Court concerning the earned income credit in this order.That matter has been determined by the Tenth Circuit.I need only determine if class certification is appropriate on that question.

III.

Certification of Class I

Plaintiff claims, and the IRS does not dispute, that she is still owed $405 of the earned income credit.I am herein ordering the IRS to return the remainder of the earned income credit to the Ruckers, if it has not done so already.

Plaintiff still requests that I certify a class of persons similarly situated in all the states now bound by the Tenth Circuit's Rucker opinion.The prerequisites to a class action, seeRule 23(a), may have been met here.Rule 23(b), however, provides that even if those prerequisites are met, a class action may be maintained only under certain conditions.⁵I find that plaintiff's request does not fall within Rule 23(b).

First, Rule 23(b)(1)(A) or (B) is not applicable.Any further adjudications brought by members of the proposed class would be bound by the Tenth Circuit's opinion in Rucker.There is no risk of incompatible standards being set because the law already has been determined.All I am doing in this order, with respect to the earned income credit issue, is requiring the IRS to return plaintiff's earned income credit to her.There is no indication that individual adjudications would impair other members' ability to protect their interests.

It may be that the IRS previously has refused to act on grounds generally applicable to the class, but I have no evidence that the IRS is now not abiding by the Tenth Circuit's ruling.Thus, plaintiff does not fall within Rule 23(b)(2).

With regard to Rule 23(b)(3), I simply do not believe that a class action is "superior to other available methods for the fair and efficient adjudication of the controversy."In fact, the controversy has been resolved by the Tenth Circuit.This order simply directs the IRS to return $405 to the Ruckers, if it has not done so already, and return any outstanding earned income credits to plaintiff-intervenors.

My decision is consistent with this circuit's holding that class certification determination is within the sound discretion of the trial court, and that its conclusions will not be disturbed absent showing of abuse of discretion.Milonas v. Williams,691 F.2d 931(10th Cir.1982), cert. denied,460 U.S. 1069, 103 S.Ct. 1524, 75 L.Ed.2d 947(1983).Thus, plaintiff's motion for class certification of Class I is denied.

IV.

Plaintiff's Due Process Issue

Plaintiff still argues, and seeks summary judgment declaring, that the taking of property (withholding her portion of the tax refund) without notice violates the due process clause of the Fifth Amendment.Although it is unclear whether the Tenth Circuit intended to remand this question to me, or just the earned income credit question, I will address it briefly.My inquiry will focus on whether the procedures followed by the state and federal government in intercepting plaintiff's refund satisfied the constitutional imperative of the Fifth Amendment.

The Supreme Court has provided the framework for determining the requirements of due process under the specific circumstances of this litigation.

Identification of the specific dictates of due process generally requires consideration of three distinct factors: first, the private interest that will be affected by the official action; second, the risk of an erroneous deprivation of such interest through the procedures used, and the probable value, if any, of additional or substitute procedural safeguards; and finally, the Government's interest, including the function involved and the fiscal and administrative burdens that the additional or substitute procedural requirement would entail.

Mathews v. Eldridge,424 U.S. 319, 335, 96 S.Ct. 893, 903, 47 L.Ed.2d 18(1976).⁶

The property interest at issue here is the nonobligated spouse's interest in his or her tax refund.A tax refund is not a subsidy; it is the restoration to a taxpayer of his or her own funds.The interception of the refund is a diversion of the taxpayer's property.See, e.g., Nelson v. Regan,560 F.Supp. 1101, 1108(D.Conn.1983)...