Siddiqui v. U.S.
| Decision Date | 10 July 2002 |
| Docket Number | No. CIV.99-1596-PHX-ROS.,CIV.99-1596-PHX-ROS. |
| Citation | 217 F.Supp.2d 985 |
| Parties | Zariq SIDDIQUI, et al., Plaintiffs, v. UNITED STATES of America, Defendant. |
| Court | U.S. District Court — District of Arizona |
A. Jerry Busby, Law Office of A. Jerry Busby, Phoenix, AZ, for Plaintiffs.
Stuart D. Gibson, U.S. Dept. of Justice Tax Division, Washington, DC, for Defendant.
Pending before the Court is Plaintiffs' Motion for Partial Summary Judgment Re: Statutory Damages (Doc. # 46) filed December 21, 2001. Defendant filed its Opposition (Doc. # 48) on January 18, 2002, and Plaintiffs filed a Reply (Doc. # 52) on January 31, 2002. Also pending is Defendant's Motion for Partial Summary Judgment Re: Punitive Damages (Doc. # 56) filed February 12, 2002. Plaintiffs filed a Response (Doc. # 58) on March 15, 2002, and Defendant filed a Reply (Doc. # 61) on April 1, 2002. For the reasons set forth below, Plaintiffs' Motion will be denied, and Defendant's Motion will be granted.
Plaintiffs are various taxpayers, including five individuals and a corporation, who filed a Complaint on September 2, 19991 alleging that the Internal Revenue Service ("IRS") made unauthorized disclosures of Plaintiffs' tax information in violation of 26 U.S.C. § 6103. Plaintiffs also allege that the IRS acted willfully and with gross negligence, entitling Plaintiffs to punitive damages pursuant to 26 U.S.C. § 7431. In its Answer, Defendant admits that Special Agent Greg Heck made an unauthorized disclosure of Plaintiffs' tax information at a retirement party held in Heck's honor on October 24, 1998. It is undisputed that approximately 100 people attended the party, which included a "roast" of Heck. In connection with the roast, Heck made reference to the then-ongoing investigation by the IRS of Plaintiffs' tax practices.2
In their Motion for Partial Summary Judgment, "[e]ach Plaintiff contends that he or she is entitled to $1,000 for the disclosures made to each of the 100 persons at the retirement party." (Mot. at 7). Defendant, however, contends that "each Plaintiff may recover a total of $1,000, as [Heck] committed only one `act.'" (Opp'n at 7). In short, Plaintiffs argue that they are entitled to a total of $600,000 in statutory damages pursuant to § 7431; Defendant argues that Plaintiffs are only entitled to $6,000 as a result of the unauthorized disclosure.
In its Motion for Partial Summary Judgment, Defendant contends that Plaintiffs cannot recover punitive damages pursuant to § 7431(c) because Plaintiffs have neither sustained nor alleged actual damages. Plaintiffs admit that they have not sustained actual damages as a result of Defendant's unlawful disclosure, but contend that they may nevertheless recover punitive damages under § 7431.
This Court may grant summary judgment if it finds there is "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). Where, as here, the parties are in essential agreement about the facts giving rise to their dispute, "a motion for summary judgment is appropriate because [the parties] raise[] questions of law, the resolution of which does not involve disputed `material' facts." Delbon Radiology v. Turlock Diagnostic Ctr., 839 F.Supp. 1388, 1391 (E.D.Cal. 1993); see also Edwards v. Aguillard, 482 U.S. 578, 591, 594, 107 S.Ct. 2573, 96 L.Ed.2d 510 (1987) ().
Section 6103 provides that, with limited exceptions, "no officer or employee of the United States ... shall disclose any [tax] return or return information." 26 U.S.C. § 6103(a)(1). "Return information" includes "whether the taxpayer's return was, is being, or will be examined or subject to other investigation." § 6103(b)(2)(A). In the absence of actual damages, § 7431 provides statutory damages for unauthorized disclosure of tax return information in the amount of "$1,000 for each act of unauthorized disclosure of a return or return information with respect to which [a] defendant is found liable." 26 U.S.C. § 7431(c)(1)(A). "The term `disclosure' means the making known to any person in any manner whatever a return or return information." § 6103(b)(8).
Here, Plaintiffs contend that because Heck disclosed the fact that Plaintiffs were under investigation to a room full of 100 people, Defendant is liable for 100 separate acts of disclosure as to each Plaintiff. Plaintiffs rely on Mallas v. United States, 993 F.2d 1111 (4th Cir.1993), in support of their position.
In Mallas, a confidential IRS report ("RAR") was mailed to thirty-three couples at thirty-three addresses and to seven other individuals in violation of § 6103. Rejecting the defendant's argument that the mailings constituted only forty acts of disclosure (i.e., one for each RAR mailed), the Fourth Circuit calculated seventy-three separate acts of disclosure:
[T]he act to be counted for computing damages is the "making known to any person in any manner whatever" the return information. Each time the Government "makes known" return information to a person in violation of section 6103, it has committed an "act of unauthorized disclosure." ... If the IRS addresses and mails a single RAR to two people, it makes the information known to each of them no differently than if it had decided to use two copies of the RAR, two envelopes, and two stamps. Nothing in the language of the statute suggests that Congress means to reward the IRS, having been found liable for violating section 6103, for the fortuity of having multiple investors living under one roof.
Id. at 1125. Similarly here, according to Plaintiffs, "the IRS should not be rewarded because special agent Heck fortuitously made the wrongful disclosure to 100 persons in the same room instead of making the disclosures to 100 persons in separate rooms." (Reply at 4).
For its part, Defendant primarily relies on Miller v. United States, 66 F.3d 220 (9th Cir.1995), and Ward v. United States, 973 F.Supp. 996 (D.Colo.1997). In Miller, the Ninth Circuit determined that an unauthorized disclosure by an IRS agent to a newspaper reporter, who subsequently published the information, constituted a single "act" of disclosure warranting only $1,000 in statutory damages. The Ninth Circuit rejected the taxpayer's argument that she was entitled to $1,000 in damages for each subscriber of the newspaper. The court noted "the public policy reason for not allowing this form of second party dissemination to be actionable," observing that "one statement on the worldwide computer network or to a television reporter could result in disseminations that could break our nation's treasury." Id. 224-25.
Although factually distinguishable, Miller establishes the principles that govern in the present case. First, Miller emphasizes that public policy considerations, especially the potential drain on "our nation's treasury," militate against the award of high statutory damages. Miller, 66 F.3d at 223-24. Noting that the taxpayer's original claim sought "$1.1 billion in damages representing the paper's total circulation multiplied by $1,000," the court observed that "[i]n a case involving no actual damages, such a prayer gives new meaning to `overreaching,'"3 Miller, 66 F.3d at 224. Second, in rejecting liability for second-party dissemination, the Ninth Circuit implicitly rejected the Fourth Circuit's expansive construction of § 6103, which counts as a discrete "act" of disclosure every instance in which another person learns of a taxpayer's return information. See Mallas, 993 F.2d at 1125 (). The Mallas court's interpretation is thus inconsistent with the Ninth Circuit's rejection of liability for second-party dissemination. Indeed, though the unauthorized disclosure of tax information "to a person who is likely to publish that information" represents a particularly effective means of "making known" confidential tax information, the Ninth Circuit determined that not every instance of disclosure constitutes a discrete "act" for the computation of damages. Miller, 66 F.3d at 223-224. Rather, "the disclosure of information to a person who is likely to publish that information is relevant in determining the degree of negligence or recklessness involved, not the number of disclosures." Id. at 225 (emphasis added).
In Ward, the court similarly rejected an award of damages based on the number of people to whom the tax information was made known, concluding that unauthorized disclosures by two IRS agents during a radio program constituted two acts of disclosure regardless of the size of the listening audience. The court rejected "the position that there was an act of disclosure for each listener," finding that such an argument "improperly focuses on the audience that heard or received the unauthorized disclosure." Ward, 973 F.Supp. at 1003. According to the court, under § 7431, "[i]t is the act of disclosure that triggers and defines liability, not the extent or scope of the disclosure." Id. "To accept Plaintiff's argument would require this Court to give no effect to the word `act' as used in § 7431(c)(1)(A), thus violating a cardinal rule of statutory interpretation." Id. Although the taxpayer attempted to distinguish Miller on the grounds that a radio broadcast does not involve second-party dissemination, the court found "that the medium or manner by which the information is disseminated is immaterial for purposes of determining the `acts' of disclosure pursuant to § 7431." Id.4
In the present case, the Miller principles defeat Plaintiffs' claim for $600,000 in statutory damages. First, like the taxpayer in Miller, Plaintiffs sustained no actual damages. Accordingly,...
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