HUDSON VALLEY BLACK PRESS, Plaintiff-Appellant, v. INTERNAL REVENUE SERVICE, Wil╜liam Strugatz & Celestine Richard╜son, Defendants-Appellees., United States Court of Appeals, Second Circuit., 409 F.3d 106, Docket No. 04-1949-CV., May 27, 2005
HUDSON VALLEY BLACK PRESS, Plaintiff-Appellant, v. INTERNAL REVENUE SERVICE, Wil╜liam Strugatz & Celestine Richard╜son, Defendants-Appellees.
United States Court of Appeals, Second Circuit.
409 F.3d 106
Docket No. 04-1949-CV.
May 27, 2005.
Argued: Jan. 13, 2005.
Decided: May 27, 2005.
Stephen Bergstein, Thornton, Bergstein & Ullrich, Chester, New York, for plain╜tiff-appellant.
Michael R. Holden, Assistant United States Attorney for the Southern District of New York (Edward Scarvalone, Assis╜tant United States Attorney, on the brief), for David N. Kelley, United States Attor╜ney for the Southern District of New York, for defendants-appellees.
Before: CABRANES and KEARSE, Circuit Judges, and KORMAN,* District Judge.
* ═ The Honorable Edward R. Korman, Chief Judge of the United States District Court for the Eastern District of New York, sitting by designation.
KORMAN, Chief Judge.
This appeal from a judgment entered in the United States District Court for the Southern District of New York (William C. Conner, Judge ) squarely presents the issue whether taxpayers may seek to re╜cover damages against employees of the Internal Revenue Service ("IRS") for un╜dertaking an audit in retaliation for the exercise by a taxpayer of rights protected by the First Amendment. Specifically, in its complaint, the dismissal of which is the subject of this appeal, the Hudson Valley Black Press ("HVBP"), the publisher of a newspaper that focuses on issues of inter╜est to the African-American community, alleges that, after the IRS was found lia╜ble for race discrimination and retaliation against an African-American employee in its Poughkeepsie office, see Agonafer v. Rubin, 35 F .Supp.2d 300, 305 (S.D.N.Y. 1998), HVBP published an article that was highly critical of the IRS. Two weeks la╜ter, Charles A. Stewart, HVBP's sole pro╜prietor, was notified that HVBP would be audited by the IRS. At some time thereaf╜ter, an IRS employee, William Strugatz ("Strugatz"), scheduled a meeting at HVBP's offices, and, upon his arrival, made racially offensive remarks about slavery reparation and the name and edi╜torial content of The Black Press.
After concluding his audit, Strugatz made repeated threats, and attempted un╜successfully to coerce HVBP into signing a fraudulent and false report. Strugatz then filed a false audit report, and after this report was initially rejected by an IRS hearing officer, Strugatz again appeared at HVBP's offices, using threats and coercive tactics in an attempt to make HVBP sign the false report. HVBP again refused to sign. Subsequently, the IRS assigned a second employee, Celestine Richardson ("Richardson"), to take over the audit. Richardson and Strugatz maintained that, because HVBP was delinquent in paying payroll taxes, they continued to audit HVBP even after the IRS hearing officer rejected Strugatz's initial report.
After Richardson replaced Strugatz, the IRS seized all of HVBP's accounting rec╜ords relating to the period in which delin╜quent payroll taxes were alleged. The IRS seized not only HVBP's tax returns for the period in question, but also the diskettes which contained the tax records, leaving HVBP with no copies of these re╜turns. HVBP repeatedly requested that copies of the tax returns be made avail╜able, but these requests were unsuccessful. Richardson acknowledged that the IRS had plaintiff's tax records, and promised to provide copies of the tax returns in accor╜dance with the Freedom of Information Act, but still failed to do so. Indeed, tax liens were filed against HVBP for the peri╜od of allegedly delinquent payroll taxes. An administrative hearing was convened, and plaintiff asked hearing officer Michael Smith ("Smith") for the return of HVBP's records and copies of HVBP's tax returns. Smith denied plaintiff's request, stating "no federal Judge would overrule my deci╜sion and I affirm the agent's lien against you."
HVBP contends that, as a result of the retaliatory audit and other misconduct by the defendants, it suffered a loss in earn╜ings, suffered damage to its "good name and reputation," and was rendered unable to publish The Black Press or otherwise operate its business. Accordingly, HVBP brought this action to recover damages, alleging that the defendants' conduct vio╜lated plaintiffs rights under the First, Fourth, Fifth and Fourteenth Amend╜ments. HVBP also sought to have the tax liens in question vacated. While the IRS was also named originally as a defendant, it was dropped as a party in plaintiff's Fourth Amended Complaint.
The complaint was dismissed for failure to state a claim. Hudson Valley Black Press v. IRS, 307 F.Supp.2d 543, 553 (S.D.N.Y.2004). This appeal ensued. Be╜cause plaintiffs brief challenges only the district court's dismissal of its First Amendment cause of action, it is the only one we consider. See Feingold v. New York, 366 F.3d 138, 160 (2d Cir.2004); Norton v. Sam's Club, 145 F.3d 114, 117 (2d Cir.1998). The sole question, then, is whether the district court erred by refus╜ing to recognize a remedy against the named employees of the IRS for the First Amendment violations alleged to have been occasioned by the audit of HVBP. In resolving this question we assume the truth of the allegations contained in the complaint. See Conley v. Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99, 2 L.Ed.2d 80 (1957).
In Bivens v. Six Unknown Named Agents of Fed. Bureau of Narcotics, 403 U.S. 388, 91 S.Ct. 1999, 29 L.Ed.2d 619 (1971), a case in which the plaintiff sought damages against federal law enforcement officers arising out of an illegal search and seizure, the Supreme Court held that, while "the Fourth Amendment does not in so many words provide for its enforcement by an award of money damages," id. at 396, 91 S.Ct. 1999, such a remedy was appropriate nonetheless, because Congress had not prohibited such a cause of action and there were "no special factors counsel╜ling hesitation in the absence of affirmative action by Congress." Id. While the plain╜tiff invokes Bivens in seeking damages for the violation of its rights protected by the First Amendment, subsequent cases threshing out "the special factors" alluded to in Bivens make it impossible for plain╜tiff to prevail. Because the legal principles are so well settled, we do not under╜take a case-by-case analysis of the law as it has developed since Bivens was decided. Instead, we focus on two Supreme Court cases that lay out the law as it applies here.
In Bush v. Lucas, 462 U.S. 367, 103 S.Ct. 2404, 76 L.Ed.2d 648 (1983), the Court refused to extend Bivens to create a cause of action for a federal employee who alleged he had been demoted, in violation of the First Amendment, for publicly criti╜cizing his employer. The plaintiff in Bush was an aerospace engineer employed at a flight center operated by the National Aeronautics and Space Administration ("NASA"), who made a number of public statements highly critical of his employer. Id. at 369. After the plaintiff was subse╜quently demoted, he pursued the available administrative remedies, first appealing his demotion to the Federal Employee Ap╜peals Authority and, after an adverse rul╜ing, taking his case to the Civil Service Commission's Appeals Review Board. Id. at 369-70, 103 S.Ct. 2404. The Board reopened the plaintiff's case and ultimately reinstated him with back pay. Id. at 370, 103 S.Ct. 2404. Because the remedial scheme did not provide for the recovery of damages for the emotional distress he suf╜fered, he sought recovery in an action relying on Bivens.
While acknowledging that the adminis╜trative remedies available did not "provide complete relief for the plaintiff," id . at 388, 91 S.Ct. 1999, the Court nonetheless re╜fused to create a Bivens remedy because the plaintiff's allegations implicated policy questions in an area that had received careful attention from Congress, and be╜cause "Congress is in a better position to decide whether or not the public interest would be served by creating" a cause of action for damages. Id. at 390, 91 S.Ct. 1999. As the Court framed the issue, the question was "not what remedy the court should provide for a wrong that would otherwise go unredressed. It is whether an elaborate remedial system that has been constructed step by step, with careful attention to conflicting policy consider╜ations, should be augmented by the cre╜ation of a new judicial remedy for the constitutional violation at issue." Id . at 388, 91 S.Ct. 1999.
Similarly, in Schweiker v. Chilicky, 487 U.S. 412, 108 S.Ct. 2460, 101 L.Ed.2d 370 (1988), the Court held that Bivens relief was unavailable for Social Security recipi╜ents whose benefits had been terminated improperly in violation of the Due Process Clause. Id. at 428-29, 91 S.Ct. 1999. The plaintiffs in Chilicky were three indi╜viduals whose disability benefits were wrongfully terminated. They appealed the termination of benefits through the administrative process, and had their ben╜efits restored, while also receiving retro╜active benefits. Id. at 417, 108 S.Ct. 2460. Nevertheless, the plaintiffs filed suit, seeking damages for emotional distress and for loss of necessities during the peri╜od they had not received benefits. The Supreme Court agreed that "suffering months of delay in recovering the income on which one has depended for the very necessities of life cannot be fully remedied by the 'belated restoration of back bene╜fits' " -the remedy provided by Congress. Id. at 428, 108 S.Ct. 2460. "The trauma to respondents, and thousands of others like them, must surely have gone beyond what anyone of normal sensibilities would wish to see imposed on innocent disabled citizens." Id. at 428-29, 108 S.Ct. 2460. Nevertheless, because Congress "has ad╜dressed the problems created by . . . wrongful termination of disability bene╜fits" and, because "Congress is the body charged with making the inevitable com╜promises required in the design of a mas╜sive and complex welfare benefits program," the Supreme Court found no legal basis that would allow it to revise the decision Congress made not to include the cause of action for damages plaintiffs sought. Id . at 429, 108 S.Ct. 2460.
Summarizing the lessons of Bush and other cases, the Chilicky Court observed that "the concept of 'special factors coun╜selling hesitation in the absence of affirma╜tive action by Congress' has proved to include an appropriate judicial deference to indications that congressional inaction has not been inadvertent. When the de╜sign of a Government program suggests that Congress has provided what it consid╜ers adequate remedial mechanisms for constitutional violations that may occur in the course of its administration, we have not created additional Bivens remedies." Id. at 423, 91 S.Ct. 1999; see also Corr. Servs. Corp. v. Malesko, 534 U.S. 61, 69, 122 S.Ct. 515, 151 L.Ed.2d 456 (2001) ("[ Chilicky ] rejected the claim that a Bivens remedy should be implied simply for want of any other means for challenging a constitutional deprivation in federal court. It [does] not matter . . . that '[t]he creation of a Bivens remedy would obviously offer the prospect of relief for injuries that must now go unredressed.' " (quoting Chilicky, 487 U.S. at 425, 108 S.Ct. 2460)).
Our own decisions are consistent with Bush and Chilicky. In Sugrue v. Derwin╜ski , 26 F.3d 8 (2d Cir.1994), a veteran brought a claim for damages against em╜ployees of the Department of Veterans Affairs, alleging violations of his right to due process of law. We observed that Congress had created a complex scheme for the review of veterans' benefit claims-albeit one that did not create the specific remedy that plaintiff Sugrue sought. Id. at 10-11. We noted, further, that "Con╜gress has accorded frequent attention to the issue of judicial review of VA benefits determinations," Id. at 12-13, and that "Congress' failure to create a remedy against individual employees of the VA was not an oversight." Id. at 12. Accord╜ingly, we concluded that "Congress has declined to enact the remedy that Sugrue asks us to create against the VA Employ╜ees. Following Bush and Chilicky, we will not create such a remedy when Congress has chosen not to do so." Id. at 13.
Only recently in Dotson v. Griesa, 398 F.3d 156 (2d Cir.2005), we reaffirmed the principle that "'it is the overall comprehen╜siveness of the statutory scheme at issue, not the adequacy of the particular reme╜dies afforded, that counsels judicial caution in implying Bivens actions." Id. at 166-67. Dotson involved a former United States probation officer, who sued Judge Griesa and others, claiming that his termination was racially motivated. We affirmed the dismissal of the probation officer's claims under Bivens, because Congress had en╜acted a comprehensive remedial scheme in the Civil Service Reform Act ("CSRA"). As Judge Raggi wrote:
The CSRA represents Congress's com╜prehensive identification of the employ╜ment rights and remedies available to federal civil service personnel . . . . Pre╜cisely because the CSRA reflects a de╜tailed and comprehensive system for dealing with federal employment con╜cerns, federal courts will generally not attempt to supplement the relief afford╜ed by that statute through other actions, including those implied under Bivens or derived from equity.
Id. at 160 (citing United States v. Fausto, 484 U.S. 439, 448-49, 108 S.Ct. 668, 98 L.Ed.2d 830 (1988)). Accordingly, "the re╜medial scheme established by the CSRA precludes federal civil service employees from challenging adverse employment de╜cisions through Bivens actions for money damages." Id. at 168.
We reach a similar conclusion here. Under the comprehensive scheme provided by Congress, a taxpayer may resist an improper request for information by the IRS by refusing to produce the informa╜tion or records. In such a circumstance, the IRS must issue a formal summons to the taxpayer. See 26 U.S.C. ╖ 7602(a)(2). Because the IRS itself has no power of its own to enforce the summons, see United States v. Claes, 747 F.2d 491, 494 (8th Cir.1984), if the taxpayer still resists the summons, the IRS must institute a pro╜ceeding in district court to compel produc╜tion of the requested materials. See 26 U.S.C. ╖ 7604; Judicial Watch, Inc. v. Rossetti, 317 F.3d 401, 410 (4th Cir.2003). While it is true that requiring the IRS to resort to such legal actions may put the resisting taxpayer at risk of contempt or criminal penalties, see 26 U.S.C. ╖ 7604(b); United States v. Rylander, 460 U.S. 752, 761-62, 103 S.Ct. 1548, 75 L.Ed.2d 521 (1983), such penalties will not be imposed if a taxpayer who initially refused to com╜ply "appear[ed] and interpose[d] good faith challenges to the summons." Reisman v. Caplin, 375 U.S. 440, 447-49, 84 S.Ct. 508, 11 L.Ed.2d 459 (1964) (interpreting prede╜cessor to current statute).
A taxpayer may also cooperate with an audit, provide the requested information, and then challenge any alleged tax defi╜ciency. A taxpayer has various avenues by which to do so. As the district court not╜ed, the taxpayer can:
(1) challenge the audit findings in an internal IRS appeal pursuant to 26 C.F.R. ╖ 601.106; (2) request a. hearing before the IRS Office of Appeals pursu╜ant to 26 U.S.C. ╖ 6330(b) and challenge any adverse determination by way of a judicial appeal; (3) appeal directly to the [United States T]ax [C]ourt pursuant to 26 U.S.C. ╖ 6213(a); or (4) pay the al╜leged deficiency and bring suit for a refund in district court pursuant to 26 U.S.C.╖ 7422.
307 F.Supp.2d at 550 (citing Judicial Watch, 317 F.3d at 410). Notably, HVBP availed itself of at least some of these administrative remedies, stating in its complaint that it challenged the allegedly retaliatory audit in at least two administra╜tive hearings.
Congress has also provided a mechanism by which aggrieved taxpayers may bring a civil action for damages against the United States in certain circumstances. See 26 U.S.C. ╖ 7433. Section 7433 was original╜ly enacted in 1988 as part of the "Taxpayer Bill of Rights," Judicial Watch, 317 F.3d at 411, and provides:
If, in connection with any collection of Federal tax with respect to a taxpayer, any officer or employee of the Internal Revenue Service recklessly or intention╜ally, or by reason of negligence disre╜gards any provision of this title, or any regulation promulgated under this title, such taxpayer may bring a civil action for damages against the United States in a district court of the United States. Except as provided in section 7432, such civil action shall be the exclusive remedy for recovering damages resulting from such actions.
26 U.S.C. ╖ 7433(a). The civil damages action authorized by ╖ 7433 complements the other administrative remedies which Congress has provided in regulating the relationship between those who pay taxes and those who collect them.
This is not the end of the scheme Con╜gress provided. Congress created the Treasury Inspector General for Tax Ad╜ministration, an entity distinct from the IRS, which investigates claims of IRS em╜ployee misconduct, in an effort to deter such misconduct. See 5 U.S.C.App. 3 ╖ 2(B)(ii); Judicial Watch, 317 F.3d at 410-11. Moreover, the Internal Revenue Code itself prohibits unnecessary examina╜tions or investigations, see 26 U.S.C. ╖ 7605(b) ("No taxpayer shall be subjected to unnecessary examination or investiga╜tions . . . . "), and IRS agents are subject to discipline for violations of the Code. In╜deed, the third "Taxpayer Bill of Rights," adopted by Congress in 1998, see Pub.L. No. 105-206, ╖ 1203(b)(6), 112 Stat. 685, 721 (July 22, 1998), provides for termi╜nation of the employment of any IRS em╜ployee for violating the Code or any IRS rules "for the purpose of retaliating against, or harassing, a taxpayer [or] tax╜payer representative . . . ." Congress has also provided for the discharge and crimi╜nal prosecution of IRS employees engaged in certain misconduct, including "mak[ing] or sign[ing] any fraudulent entry in any book, or mak[ing] or sign[ing] any fraudu╜lent certificate, return, or statement." See 26 U.S.C. ╖ 7214(a)(7). Notably, HVBP has alleged conduct on the part of defen╜dant Strugatz which, if proven, would war╜rant Strugatz's dismissal.
Of equal significance is the legislative history of ╖ 7433, which establishes that the failure of Congress to include a dam╜ages action for tax assessment activities was not inadvertent. In 1987, prior to ╖ 7433's enactment, bills were introduced in Congress that would have authorized civil actions against IRS employees for violations of constitutional rights. See S. 579 , 100th Cong., 1st Sess., ╖ 3(a) (1987) ("Any officer or employee of the [IRS] who, under color of any Federal law, sub╜jects . . . any citizen . . . to the deprivation of any rights, privileges, or immunities secured by the Constitution and laws, shall be liable to the party injured in an action at law . . . . "); see also H.R. 634, 100th Cong., 1st Sess., ╖ 9(a) (1987). These broad bills were never enacted, and Con╜gress instead passed ╖ 7433, which allows actions only under certain circumstances, and only against the United States, not against individual IRS agents.
Moreover, before settling on the narrow╜er version of ╖ 7433 that only permits damages actions relating to tax collection, Congress initially considered a broader version of ╖ 7433 that would have author╜ized damages actions arising "in connec╜tion with any determination or collection of Federal tax." S. 2223, 100th Cong., 2d Sess. ╖ 123 (1988) (emphasis added); see also H.R. Conf. Rep. 100-1104 ("Confer╜ence Report"), 100th Cong., 2d Sess., at 228 (Oct. 21, 1988), 1988 U.S.C.C.A.N. 5048, 5288; Judicial Watch, 317 F.3d at 411. Congress rejected this broader ver╜sion of ╖ 7433. The Conference Report on the final version of ╖ 7433 explains that it is
limited to reckless or intentional disre╜gard in connection with the collection of tax. An action under this provision may not be based on alleged reckless or in╜tentional disregard in connection with the determination of a tax . . . . [T]he provision is limited to reckless or inten╜tional disregard of the Internal Revenue Code and the regulations thereunder. An action may not be brought under this provision based on an alleged violation of a Federal law other than the Internal Revenue Code or a regulation promul╜gated thereunder.
Conference Report at 229; see also Judi╜cial Watch , 317 F.3d at 411-12.
The legislative history of ╖ 7433 plainly establishes that Congress expressly con╜sidered broader remedies-including civil suits relating to tax assessment and for violations of any federal laws-before re╜jecting them. See Shreiber v. Mastrogiov╜anni, 214 F.3d 148, 152-53 (3d Cir.2000). Congress ultimately enacted a narrower version of ╖ 7433 that allowed damages actions only relating to tax collection, not to tax assessment, and only for violations of the Internal Revenue Code and its im╜plementing regulations, not for violations of all federal law. Id . As one commentator has observed:
The specific language chosen by Con╜gress was not the result of whim, but was enacted after nearly thirty years of consideration, thousands of phone calls and letters from taxpayers throughout the country, and testimony in numerous hearings not only conducted by Senator Pryor in 1988, but in hearings on the same alleged abuses conducted by Sena╜tor Montoya in the 1970s, Senators Lev╜in and Grassley in the 1980s, and the Small Business Committee of the United States House of Representatives . . . . Congress only created a cause of action to remedy collection violations . . . . Con╜gress is indeed aware that it did not provide a damage remedy for assess╜ment errors and the potential hardship imposed on taxpayers. Yet, Congress has not amended ╖ 7433 nor created any other provision to provide a remedy for conduct of the [IRS] in the determina╜tion of a tax.
Christopher M. Pietruszkiewicz, A Consti╜tutional Cause of Action and the Internal Revenue Code: Can You Shoot (Sue) the Messenger?, 54 Syracuse L.Rev. 1, 24-26 (2004) (footnotes omitted).
Because of the complex remedial scheme that Congress has created, and the plain indication that the failure of Congress to provide a remedy for injuries arising from tax assessment was not inadvertent, every circuit that has considered the appropri╜ateness of a Bivens remedy in the taxation context has uniformly declined to permit one. As the Ninth Circuit observed:
Relying on the comprehensiveness of the Internal Revenue Code, and the many explicit remedial provisions that the Code contains, our sister circuits that have addressed the question are nearly unanimous in holding that Bivens relief is not available for alleged constitutional violations by IRS officials involved in the process of assessing and collecting taxes . . . . The First, Third, Fifth, Sixth, Sev╜enth, Eighth and Tenth Circuits have all held Bivens actions inapplicable for claims arising from federal tax assess╜ment or collection.
Adams v. Johnson, 355 F.3d 1179, 1184-85 (9th Cir.2004) (citing Shreiber, 214 F.3d at 152; Dahn v. United States, 127 F.3d 1249, 1254 (10th Cir.1997); Fishburn v. Brown, 125 F.3d 979, 982-83 (6th Cir. 1997); Vennes v. An Unknown Number of Unidentified Agents of the United States, 26 F.3d 1448, 1453-54 (8th Cir.1994); McMillen v. United States Dep't of Trea sury, 960 F.2d 187, 190 (1st Cir.1991); Baddour, Inc. v. United States, 802 F.2d 801, 807-09 (5th Cir.1986); Cameron v. IRS, 773 F.2d 126, 129 (7th Cir.1985)). The Fourth Circuit, too, has rejected a Bivens remedy against IRS officials in the context of a retaliatory tax audit like that alleged in this case. See Judicial Watch, 317 F.3d at 413 (concluding that " 'it would be inappropriate to supplement [the] regulatory scheme with a new judicial remedy' for alleged retaliatory tax audits" (quoting Bush, 462 U.S. at 368, 103 S.Ct. 2404)).
Today we join our sister circuits and hold that Bivens relief is not available to taxpayers who allege First Amendment vi╜olations based on retaliatory tax audits. Congress has designed a complex and comprehensive administrative scheme that provides various avenues of relief for ag╜grieved taxpayers. Indeed, "[i]t would be difficult to conceive of a more comprehen╜sive statutory scheme, or one that has received more intense scrutiny from Con╜gress, than the Internal Revenue Code." Judicial Watch, 317 F.3d at 410. The collection of taxes would become "chaotic if a taxpayer could bypass the remedies provided by Congress simply by bringing a damage action against Treasury employ╜ees. It is hard enough to collect taxes as it is; additional obstructions are not need╜ed." Cameron , 773 F.2d at 129. In sum, Congress is institutionally well positioned to balance the competing interests at issue in the tax system, and to dictate what remedies are available to aggrieved tax╜payers. Congress has done exactly that and we owe deference to the policy choices Congress has made.
The judgment of the district court is affirmed.