Venen v. U.S.

• Decision Date: 26 July 1994
• Docket Number: No. 94-3050,94-3050
• Citation: 38 F.3d 100
• Parties: -6680, 63 USLW 2289, 94-2 USTC P 50,536 David P. VENEN, Appellant v. UNITED STATES of America, Appellee. . Submitted pursuant to Third Circuit LAR 34.1(a)
• Court: U.S. Court of Appeals — Third Circuit

Page 100

38 F.3d 100

74 A.F.T.R.2d 94-6680, 63 USLW 2289,

94-2 USTC P 50,536

David P. VENEN, Appellant v. UNITED STATES of America, Appellee.

No. 94-3050.

United States Court of Appeals Third Circuit.

Submitted pursuant to Third Circuit LAR 34.1(a) July 26, 1994.

Decided Oct. 18, 1994.

As Amended Oct. 25, 1994.

Peter M. Suwak, Washington, PA, for appellant.

Loretta C. Argrett, Asst. Atty. Gen., Gary R. Allen, William S. Estabrook, Randolph L. Hutter, Attys. Tax Div., Dept. of Justice, Washington, DC, Bonnie R. Schlueter, Asst. U.S. Atty., Pittsburgh, PA, for appellee.

Before: BECKER and ALITO, Circuit Judges and BRODY, District Judge. ^*

OPINION OF THE COURT

BRODY, District Judge.

Plaintiff, David Venen, appeals from the district court's grant of summary judgment for the defendant United States in this suit for damages Venen claims resulted from unauthorized tax collection actions, failure to release a tax lien, and unauthorized disclosure of tax return information. This appeal presents two issues.

The first issue is whether the plaintiff exhausted his administrative remedies before seeking relief from the district court for damages from unauthorized tax collection actions and failure to release a tax lien. We hold that plaintiff's failure to comply with the regulations constitutes a failure to exhaust and, therefore, the grant of summary judgment on these claims is proper.

The second issue arises in the claim for unauthorized disclosure of tax return information. Although the Tax Code generally prohibits the disclosure of tax return information, it authorizes disclosure when the tax return information relates to collection activity, including a levy on assets to satisfy an outstanding tax liability. Plaintiff contends that the levies against his assets were unlawful and therefore the information relating to the levies was impermissibly disclosed. The question is whether it is relevant that the levy is unlawful. We hold that it is not and, therefore, that the grant of summary judgment on the disclosure claim is proper.

28 U.S.C. Sec. 1291 gives us jurisdiction.

I.

Venen's Amended Complaint asserts claims for unauthorized tax collection actions under 26 U.S.C. Sec. 7433 (Counts I, III and IV); failure to release a tax lien under 26 U.S.C. Sec. 7432 (Counts II and V); and unauthorized disclosure of tax return information under 26 U.S.C. Sec. 7431 (Count VI). The district court granted summary judgment for defendant on Counts I-V on the ground that Venen had failed to exhaust administrative remedies as required by sections 7432 and 7433. The court also granted summary judgment for defendant on Count VI, holding that the disclosures did not give rise to damages under section 7431 because the Internal Revenue Service of the United States (IRS) made the disclosures to obtain information to collect taxes.

The district court's grant of summary judgment is subject to plenary review. American Medical Imaging Corp. v. St. Paul Fire and Marine Ins. Co., 949 F.2d 690, 692 (3d Cir.1991). Summary judgment is appropriate where "the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that 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). Defendants are entitled to summary judgment only if no reasonable resolution of the conflicting evidence and the inferences that could be drawn from that evidence could result in a judgment for plaintiffs. Anderson v. Liberty Lobby Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 2510, 91 L.Ed.2d 202 (1986). "[T]he mere existence of a scintilla of evidence in support of plaintiffs['] position will be insufficient[;] there must be evidence on which the jury could reasonably find for the plaintiff[s]." Id. at 252, 106 S.Ct. at 2512. Since the district court made no findings of fact, we will state the facts from the record viewed in the light most favorable to Venen, the non-moving party.

Venen's claims result from efforts by the IRS to collect the federal income taxes he owed for a ten-year period, from 1977 through 1986. In July 1979, Venen filed his tax returns for years 1977 and 1978. In March 1985, Venen filed federal tax returns for years 1979 through 1983. Shortly thereafter, Venen entered into an agreement with the IRS to pay his taxes in installments. The installment agreement covered tax years 1977 and 1978 as well as 1979 through 1983. ¹

On November 27, 1987, while Venen was complying with the installment agreement, the IRS issued to Venen's employer the first of four disputed Notices of Levy to collect taxes. This Notice of Levy was for the collection of taxes for the years 1980 through 1984 and 1986. After that notice was issued but before the IRS issued a second notice, Venen met with IRS Agent Argento, who placed the account on "non-collectible status." Appendix at 118a (Affidavit of David Venen p 10).

On September 25, 1990 the IRS issued a second Notice of Levy to Venen's employer for tax years 1977 and 1978. In October 1990, IRS Agent Gregorakis "reviewed the file at Venen's request and told Venen that the levy should not have been issued in view of Venen's 'non-collectible' status, apologized, and said the levy would be released." Appendix at 118a (Venen Affidavit p 12). On January 15, 1991, the IRS issued a third Notice of Levy to Venen's employer for tax years 1977 and 1978, and a fourth on April 17, 1991 to his employer and to his bank, for tax years 1977 through 1984 and 1986.

After "numerous negotiations" between Venen and the IRS to release the fourth levy, Agent Gregorakis told Venen that no further administrative remedies were available. Appendix at 119a (Venen Affidavit pp 16 & 18). On June 27, 1991 Venen's attorney confirmed that representation in a letter to Agent Gregorakis stating "It is my understanding that you stated all administrative remedies have been exhausted and should we wish to pursue the matter further [Venen's] only recourse would be to file a civil suit against the Internal Revenue Service." Appendix at 214a (Letter from Attorney Peter Suwak to Agent Gregorakis). The letter asks Agent Gregorakis to respond if that understanding is incorrect. Id. Agent Gregorakis did not respond and does not recall receiving the letter.

Venen's complaint is based on improper collection activities, including breach of the installment agreement by attempts to levy on Venen's wages and bank account. Count VI is based on improper disclosures relating to those activities, specifically disclosures contained in the notices of levy.

A.

In Counts I through V, Venen asserts claims under 26 U.S.C. Sec. 7432 for failure to release a tax lien and under 26 U.S.C. Sec. 7433 for unauthorized tax collection activities. ² Both Tax Code provisions require a plaintiff to exhaust administrative remedies before filing a civil suit. See 26 U.S.C. Secs. 7432(d) and 7433(d). Failure to exhaust deprives the court of jurisdiction. Information Resources, Inc. v. United States, 950 F.2d 1122 (5th Cir.1992).

Treasury regulations specify the administrative remedies to exhaust. Administrative remedies for section 7432 are set forth in Treasury Regulation Sec. 301.7432-1; remedies for section 7433 are found in Treasury Regulation Sec. 301.7433-1. Both regulations apply to "civil actions ... filed in federal district court after January 30, 1992." Because Venen filed suit September 25, 1992, the regulations apply to this case. See McGarvin v. United States, 93-1 U.S.T.C. p 50,325, 1993 WL 208814 (E.D.Mo.), aff'd 12 F.3d 1102 (8th Cir.1993).

An administrative claim for failure to release a tax lien must include the taxpayer's identifying information, a copy of the notice of lien affecting the property, the grounds for the claim, a description of injuries, and the amount of the claim. See Treas. Reg. Sec. 301.7432-1(f). An administrative claim for unauthorized collection actions also must include identifying information, the grounds for the claim, a description of injuries, and the amount of the claim. See Treas. Reg. Sec. 301.7433-1(e).

Both regulations require a taxpayer to make the claim for relief "in writing to the district director ... in the district in which the taxpayer currently resides." Treas. Reg. Secs. 301.7432-1(f); 301.7433-1(e). The Seventh Circuit has held that a letter addressed to the revenue officer listed on the notice of levy did not comply with a similar treasury regulation requiring a written request "addressed to the district director." Amwest Surety Insurance Co. v. United States, 28 F.3d 690 (7th Cir.1994) (considering Treas. Reg. Sec. 301.6343-1(b)(2)). The failure to comply deprives a court of jurisdiction even though the IRS has received actual notice of the claim and never informs the taxpayer of the proper procedures. Amwest, 28 F.3d at 696.

Venen failed to comply with the regulations under sections 7432 and 7433. He argues that the letter to Agent Gregorakis explaining that he understands he has exhausted his administrative remedies satisfies the regulations. Venen's letter is inadequate to trigger administrative review both because it is addressed to a revenue agent and not to the district director, see Amwest, 28 F.3d at 696, and because it does not specify the grounds for relief, see Treas. Reg. Secs. 301.7432-1(f) and 301.7433-1(e). Agent Gregorakis' alleged failure to respond to the letter does not excuse Venen. As the Seventh Circuit held, a failure to petition the IRS correctly is a failure to exhaust even if the IRS does not inform a taxpayer of proper procedures. Amwest, 28 F.3d at 696.

Finally, Venen argues that he is excused from the exhaustion requirement because exhaustion would be futile. Venen bases his futility argument on Information Resources, Inc. v. United States, 950 F.2d 1122 (5th Cir.1992), in which the Fifth Circuit held that then-applicable administrative remedies...