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596 F.Supp. 240
Phillip W. SNYDER, Plaintiff,
INTERNAL REVENUE SERVICE and John A. Dietrich, Agent, Defendants.
Civ. No. F 84-211.
United States District Court,
Fort Wayne Division.
Oct. 18, 1984.
Phillip W. Snyder, pro se.
Peter Sklarew, Civ. Trial Sec., Tax Div., Dept. of Justice,
Washington, D.C., David H. Miller, Asst. U.S. Atty., Fort Wayne, Ind., for
LEE, District Judge.
This matter is before the court on defendants' Motion to Dismiss and for
an Award of Attorneys' Fees and Costs filed August 28, 1984. For the following
reasons, defendants' motion will be granted in its entirety. Plaintiff
proceeding pro se. Pro se pleadings are to be liberally construed. Haines
v. Kerner, 404 U.S. 519, 92 S.Ct. 594, 30 L.Ed.2d 652 (1972). This court
also recognizes that federal courts have historically exercised great tolerance
to insure that an impartial forum remains available to plaintiffs invoking
the jurisdiction of the court without the guidance of trained counsel.
Pro se complaints, such as plaintiff's, are held to less stringent pleading
technical rigor in the examination of such pleadings is inappropriate.
Liberally construing plaintiff's complaint and numerous other filings, as well
comments made at the preliminary pre-trial conference held in Open Court
on August 27, 1984, it appears that the plaintiff is contesting the withholding
of his wages by his employer as part of the statutorily defined scheme
for collecting income taxes. Plaintiff believes that he is not subject to the
Internal Revenue Code of 1954 ("Code"), and that by the assessing
of taxes against him, the assessing of fines for the filing of certain W-4
forms in which plaintiff claimed an "exempt status," and the threat
of a possible levy of his property should he fail to pay the taxes, plaintiff's
constitutional rights have been harmed. The list of the rights allegedly
violated grows with each pleading plaintiff filed in this court. In Open
Court, plaintiff delineated the following: (1) violation of the fourth amendment
because his property was "seized" when money was withheld from
his paycheck; (2) deprivation of due process because plaintiff asked for
appeal and then was told it was denied; (3) violation of the fifth amendment
right of self-incrimination because the Internal Revenue Service ("IRS")
asked for records and information but denied plaintiff's request of being
protected from being a witness against himself. In filings after the hearing,
plaintiff has also claimed violations of the fourth amendment for the assessment
of two separate $500.00 fines for attempting to fill out false W-4 forms,
and that the Final Notice of Tax Deficiency sent to plaintiff constituted
a Bill of Pains and Penalties. Plaintiff seeks an injunction and $900,000
in damages. The complaint was originally filed in state court, and removed
to this court on motion of the defendants. Defendants have responded by filing
a motion to dismiss. The thrust of the motion is two-fold: (1) neither of
the defendants can be sued because they are protected by immunity; and (2)
all allegations in the complaint are without merit, and therefore subject
to dismissal. Defendants have also moved for fees and costs for defending
this action. The court begins with the motion to dismiss.
I. MOTION TO DISMISS
Although the defendants have characterized their motion as a motion to dismiss,
it is clear that the issues presented by this motion are best addressed
after reference is made to the exhibits, pleadings, and statements made in
Court in this case. When matters outside the pleadings are presented to
and not excluded by the court, a motion to dismiss will be converted into a
for summary judgment under Rule 56 of the Federal Rules of Civil Procedure.
See Fed.R.Civ.P. 12(b). Under Rule 56(c) of the Federal Rules of Civil
Procedure, summary judgment may only be granted if "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 judgment as a matter of law." Fed.R.Civ.P.
56(c). Thus, summary judgment serves as a vehicle with which the court "can
determine whether further exploration of the facts is necessary." Hahn
v. Sargent, 523 F.2d 461, 464 (1st Cir.1975). In making this determination,
the court must keep in mind that the entry of summary judgment terminates
the litigation, or an aspect thereof, and must draw all inferences from the
established or asserted facts in favor of the non-moving party. Peoples Outfitting
Co. v. General Electric Credit Corp., 549 F.2d 42 (7th Cir.1977). A party
may not rest on the mere allegations of his pleadings or the bare contentions
that an issue of fact exists. Posey v. Skyline Corp., 702 F.2d 102, 105 (7th
Cir.), cert. denied, --- U.S. ----, 104 S.Ct. 392, 78 L.Ed.2d 336 (1983).
See Adickes v. S.H. Kress & Co., 398 U.S. 144, 90 S.Ct. 1598, 26 L.Ed.2d
142 (1970). See also Atchison, Topeka & Santa Fe Railway v. United Transportation
Union, 734 F.2d 317 (7th Cir.1984); Korf v. Ball State University, 726 F.2d
1222 (7th Cir.1984). See generally C. Wright, Law of Federal Courts, s 99
(4th ed. 1983); 6 Moore's Federal Practice, s 56.15 (2d ed. 1984).
Thus, the moving party must demonstrate the absence of a genuine issue of
material fact. The court views all evidence submitted in favor of the non-moving
party. Even if there are some disputed facts, where the undisputed facts are
the material facts involved and those facts show one party is entitled to judgment
as a matter of law, summary judgment is appropriate. Egger v. Phillips, 710
F.2d 292, 296-97 (7th Cir.1983); Collins v. American Optometric Assn., 693
F.2d 636, 639 (7th Cir.1982). Further, if the court resolves all factual disputes
in favor of the non-moving party and still finds summary judgment in favor
of the moving party is correct as a matter of law, then the moving party is
entitled to summary judgment in his favor. Egger, 710 F.2d at 297. See also
Bishop v. Wood, 426 U.S. 341, 348, 348 n. 11, 96 S.Ct. 2074, 2079, 2079 n.
11, 48 L.Ed.2d 684 (1976).
Although not raised by the defendants directly in their motion to dismiss,
the court turns first to the issue of whether a proper basis for jurisdiction
exists for hearing this cause. Because of the limited nature of a district
court's jurisdiction, the court may inquire into its jurisdiction sua sponte.
Rice v. Rice Foundation, 610 F.2d 471 (7th Cir.1979).
Plaintiff's original complaint asserted two bases for jurisdiction: the United
States and Indiana constitutions. Under a section entitled "Venue," plaintiff
also cites to 42 U.S.C. ss 1981, 1983, and 1986, the civil rights statutes,
and 18 U.S.C. ss 241, 242, criminal statutes. None of these provisions give
this court adequate jurisdiction to hear this cause.
The civil rights statutes, 42 U.S.C. ss 1981, 1983, and 1986 cannot provide
jurisdiction in actions against the assessment or collection of taxes. Section
1981 is restricted by the import of its language to discrimination based on
race or color. Virginia v. Rives, 100 U.S. (10 Otto) 313, 25 L.Ed. 667 (1880);
Willingham v. Macon Telegraph Publishing Co., 482 F.2d 535, 537 n. 1 (5th Cir.1973).
In fact, the language of s 1981 militates against plaintiff's case, because
the section provides that "all persons" shall be subject to taxes.
Section 1983 prohibits deprivation of rights under color of state law. However,
actions of IRS officials, even if beyond the scope of their official duties,
are acts done under color of federal law and not state law, thus making s 1983
inapplicable. Seibert v. Baptist, 594 F.2d 423 (5th Cir.1979), cert. denied,
446 U.S. 918, 100 S.Ct. 1851, 64 L.Ed.2d 271 (1980); Mack v. Alexander, 575
F.2d 488, 489 (5th Cir.1978). Section 1986 creates a cause of action for failure
or neglect to prevent a s 1985 conspiracy. However, s 1985(1) deals with conspiring
to prevent an official from discharging his duties, while s 1985(2) deals withobstructing
justice, both of which are inapplicable here. Section 1985(3) requires that
there be "some racial, or perhaps otherwise class-based, invidiously discriminating
animus behind the conspirators' action," Griffin v. Breckenridge, 403
U.S. 88, 102, 91 S.Ct. 1790, 1798, 29 L.Ed.2d 338 (1971); Dunn v. State of
Tennessee, 697 F.2d 121 (6th Cir.1982), cert. denied, 460 U.S. 1086, 103 S.Ct.
1778, 76 L.Ed.2d 349 (1983), none of which is present here. It is therefore
obvious that none of these statutory provisions can provide plaintiff with
a basis for suit. A similar conclusion results after analyzing 18 U.S.C. ss
241 and 242, which are also offered by the plaintiff as grounds for "venue." Section
241 makes it a crime for two or more persons to conspire to injure the rights
of a citizen, while s 242 makes it a crime to violate the civil rights of a
person. In short, they are simply the criminal law versions of 42 U.S.C. ss
1985 and 1983. As such, plaintiff's civil action cannot be based on the criminal
statute but must be based on the statutes granting a civil cause of action
(ss 1983 and 1985), which are not present here. Plaintiff seems to admit that
ss 241 and 242 do not give him a private cause of action when he states "Title
18 U.S.C. was quoted in original Complaint in case a grand Jury wished to bring
additional Criminal charges. Also, if the United States of America wished to
police the actions of the defendants." Plaintiff's Answer to the Court
in re of Instruments Submitted by the Defendants, filed September 14, 1984,
P D-2(d), p. 6. Thus, this court gains no jurisdiction over this action by
virtue of 18 U.S.C. ss 241 or 242.
The only other basis for jurisdiction is 28 U.S.C. s 1331, the federal question
jurisdiction statute. Plaintiff claims that the tax laws do not apply to him
because the laws are unconstitutional. He also claims that certain constitutional
rights were violated by the actions of the defendants. This is sufficient to
give rise to some kind of federal question jurisdiction based on the constitutional
issues involved in such claims. However, not all aspects of the plaintiff's
claims are cognizable under this jurisdiction.
Plaintiff has made clear that he does not seek a tax refund. Rather, he wants
injunctive relief and damages. As to injunctive relief, plaintiff's claim is
barred by 26 U.S.C. s 7421, which provides in pertinent part that "no
suit for the purpose of restraining the assessment or collection of any tax
shall be maintained in any court by any person, whether or not such person
is the person against whom such tax was assessed." Nor does the judicially
created exception to this anti-injunction provision, outlined in Enochs v.
Williams Packing and Navigation Co., 370 U.S. 1, 82 S.Ct. 1125, 8 L.Ed.2d 292
(1962), apply here because neither one of its elements (that government cannot
prevail on the merits and plaintiff has no adequate remedy at law) is present
in this case. Thus, this court has no jurisdiction to grant injunctive relief.
As for damages, the plaintiff must show that he can recover damages for violations
stemming from the defendants' alleged unconstitutional activity. Plaintiff
can obtain damages against the defendants under only one of two theories: a
claim under the Federal Tort Claims Act, 28 U.S.C. ss 2671- 2680; or an implied
cause of action under the principles of Bivens v. Six Unknown Agents, 403 U.S.
388, 91 S.Ct. 1999, 29 L.Ed.2d 619 (1977). As will be more fully discussed
in section I.B. of this order, a claim under the Federal Tort Claims Act will
fail on principles of sovereign immunity. Furthermore, in Seibert v. Baptist,
594 F.2d 423, 429-32 (5th Cir.1979), cert. denied, 446 U.S. 918, 100 S.Ct.
1851, 64 L.Ed.2d 271 (1980), the court refused to recognize a Bivens -type
cause of action against the IRS and IRS officials and agents. The actions of
the present defendants in assessing the taxes and penalties against the plaintiff
and in generally operating under the IRS regulatory framework were not of the
outrageous nature of those found in Bivens. This court agrees with the Seibert
court and refuses to recognize a Bivens -type cause of action against the IRS
or IRS officials and agents for the collection and assessment of taxes.
Thus, while a federal question may exist, it provides no basis for plaintiff
to recover injunctive relief or damages. At the very best, it would allow this
court to declare the Internal Revenue Code unconstitutional (which the court
does not do ) as a prelude to a refund suit, which plaintiff explicitly states
he is not now pursuing. In short, federal question jurisdiction does not support
plaintiff's suit. On the issue of jurisdiction, then, this court finds that
it has no jurisdiction over any of plaintiff's claims with the exception of
extremely limited federal question jurisdiction over the question of the constitutionality
of the Internal Revenue Code. However, out of an abundance of caution and a
desire to give plaintiff a full review of his case, the court continues by
analyzing the other issues in the Motion to Dismiss.
B. The "Suability" of the Defendants
A main thrust of defendants' Motion to Dismiss is that none of the named
defendants can be sued. Plaintiff has named two defendants: the IRS; and John
an IRS agent. Because the defendants' arguments revolve around the status
of these defendants and whether such status allows the particular defendant
to be sued, the court will analyze each defendant separately.
1. The Internal Revenue Service
The core of defendants' argument about the inability of plaintiff to sue
the IRS is the doctrine of sovereign immunity. It is well settled that the
States is a sovereign and, as such, is immune from suit without its prior
consent. United States v. Shaw, 309 U.S. 495, 500-01, 60 S.Ct. 659, 661,
84 L.Ed. 888 (1940); Hutchinson v. United States, 677 F.2d 1322, 1327 (9th
Cir.1982); Akers v. United States, 539 F.Supp. 831, 832 (D.Conn.1982),
aff'd, 718 F.2d 1084 (2d Cir.1983). Absent consent to sue, dismissal of the
is required. Hutchinson, 677 F.2d at 1327. The United States has waived
its immunity with respect to some causes of action in the Federal Tort Claims
Act, 28 U.S.C. ss 1346 and 2671-2680. However, the Act, in s 2680(c), specifically
excluded "any claim arising in respect of the assessment or collection
of any tax or customs duty...." It is thus clear that the United States
has specifically reserved its immunity with respect to claims arising out
of tax collection and assessment. Thus, to the extent that any part of plaintiff's
complaint can be construed as a claim against the United States, it is barred
by the doctrine of sovereign immunity. See Hutchinson; Seibert v. Baptist,
594 F.2d 423 (5th Cir.1979), cert. denied, 446 U.S. 918, 100 S.Ct. 1851,
64 L.Ed.2d 271 (1980); White v. Commissioner, 537 F.Supp. 679, 684 (D.Colo.1982).
Plaintiff has attempted to make clear that his claim is not against the United
States, but rather against the IRS. That is of little help to plaintiff because
courts have found that the actions of the IRS or its agents fall under the
Federal Tort Claims Act exception for collection and assessment of taxes. See
Morris v. United States, 521 F.2d 872, 874 (9th Cir.1975); Spilman v. Crebo,
561 F.Supp. 652, 654-55 (D.Mont.1982). It is therefore clear that the IRS is
immune from suit for tax collection or assessment activities.
Plaintiff apparently believes that this conclusion is avoided by his assertion
that the IRS is a "private corporation," and not a part of the United
States. Plaintiff offers two arguments for this conclusion. The first is that
the IRS was never created by "positive law" (i.e., a statute of Congress)
but by fiat of the Secretary of the Treasury in 1952. It is clear, however,
that the Internal Revenue Code of 1954, a statute of Congress, gave the Secretary
of the Treasury full authority to administer and enforce the Code, 26 U.S.C.
s 7801, and the power to create an agency to administer and enforce the tax
laws. See 26 U.S.C. s 7803(a). Pursuant to that legislative grant of authority,
the Secretary created the IRS, 26 C.F.R. s 601.101, so that the IRS is an agency
of the Department of the Treasury, created pursuant to Congressional statute.
As such, the IRS is a creature of "positive law," and an agency of
the federal government, not a private corporation.
The second argument for the IRS being a "private corporation" is
that the IRS deposits the tax revenues in the federal reserve banks, and thus
acts as a "collection agent" for those banks, who use the money to
make loans, and conduct proprietary business, thus removing the cloak of governmental
immunity. This argument is patently false from its first leap of logic. While
the Secretary may authorize federal reserve banks (as well as other financial
institutions) to receive tax payments, 26 U.S.C. s 6302(c), it is clear that
those institutions receive the payments as agents for the United States. In
short, the IRS is the Treasury's collection agent, not the Federal Reserve
Board's. Tax dollars are used for governmental, not proprietary, purposes.
It is thus clear that the IRS acts for the government as a governmental agency,
and is entitled to the sovereign immunity of the United States. Plaintiff's
disingenuous attempts to deny the facts do not change this conclusion. See
Cameron v. IRS, 593 F.Supp. 1540, at 1549 (N.D.Ind.1984); Young v. IRS, 596
F.Supp. 141, at 147 (N.D.Ind. 1984).
2. Agent Dietrich
Plaintiff has also named IRS agent Dietrich as a defendant. None of the allegations
of the complaint specifically describe his allegedly wrongful activities.
However, the thrust of plaintiff's complaint is against the withholding
of taxes from his wages, and so to the extent that Agent Dietrich was involved,
the court assumes that his actions were done within his official capacity
as an IRS agent in enforcing the withholding provisions of the Code. [FN1]
FN1. Additional support for this assumption is found in "Plaintiff's
Answer to the Court in re of Instruments Submitted by the Defendants and/or
their Counsel," in which the plaintiff describes a levy on his wages (P
B- 1(a) through (i)), and then states "it was John A. Dietrich who did
willingly aid and abate [sic] the defendant(s) in their unlawful type of action/actions." This
strongly indicates that defendant Dietrich was named because of the action
taken in his official capacity as an IRS agent.
As was noted earlier, the United States has not waived its sovereign immunity
with respect to claims arising out of tax assessment or collection. One cannot
avoid this sovereign immunity by simply naming officials when the judgment
would impact upon the public treasury. Vishnevsky v. United States, 581 F.2d
1249, 1255 (7th Cir.1978). At least one court has held that a suit against
IRS officials in their official capacity is a suit against the United States,
see Nelson v. Regan, 560 F.Supp. 1101 (D.Conn.1983), so that sovereign immunity
would preclude the suit.
The United States Supreme Court, in Butz v. Economou, 438 U.S. 478, 98 S.Ct.
2894, 57 L.Ed.2d 895 (1978), discussed the extent of the immunity that a federal
executive officer enjoys within the parameters of a federal agency position.
The Court found that a federal official enjoyed only a qualified immunity,
so that he could be liable individually if he knows or should have known that
he is acting outside the law. Id. at 506-07, 98 S.Ct. at 2911. The Court recognized,
however, that some officials need absolute immunity because it is "essential
for the conduct of the public business." Id. at 507, 98 S.Ct. at 2911.
Some courts have read Butz as giving absolute immunity to IRS officials in
actions for damages. Hutchinson v. United States, 677 F.2d 1322 (9th Cir.1982);
Stankevitz v. IRS, 640 F.2d 205 (9th Cir.1981); Krzyske v. Commissioner, 548
F.Supp. 101 (E.D.Mich.1982); White v. Commissioner, 537 F.Supp. 679, 684 (D.Colo.1982).
If the officials are alleged to have exceeded their authority and to have operated
outside the scope of their official duties, then only the qualified immunity
applies. Hutchinson, 677 F.2d at 1328; Nelson v. Regan, 560 F.Supp. 1101 (D.Conn.1983);
Spilman v. Crebo, 561 F.Supp. 652, 655-56 (D.Mont.1982). In order to present
a situation where only the qualified immunity will apply, the complaint must
contain specific allegations of the unconstitutional conduct by the official,
White, 537 F.Supp. at 684, and must allege the specific statutory provisions
under which the official exceeded his authority. Spilman, 561 F.Supp. at 655-56.
The tenor of plaintiff's complaint is that he seeks damages from Agent Dietrich
for acts done in his official capacity as an IRS agent. The levy on a taxpayer's
wages is clearly within the statutory power of the IRS and its agents, and
the withholding of taxes is sanctioned by the Code. Because such acts are done
within Agent Dietrich's official duties, the absolute immunity applies and
the suit against him must fail. See Cameron v. IRS, 593 F.Supp. 1540, at 1550-1551
(N.D.Ind.1984); Young v. IRS, 596 F.Supp. 141, at 147 - 48 (N.D.Ind. 1984).
Under the principles of summary judgment, the defendants have shown that there
is no genuine issue of material fact in dispute between the parties, and the
immunity of the IRS and Agent Dietrich entitles them to summary judgment as
a matter of law. However, again out of an abundance of caution, this court
now considers the merits of the various claims made by the plaintiff.
C. Merits of the Claim
Plaintiff's case is built around two arguments which plaintiff believes entitle
him to recover: (1) that the tax laws do not apply to him; and (2) that
his fourth amendment, fifth amendment and due process rights were violated.
court will analyze each of these contentions in turn.
1. The Applicability of the Tax Laws
Plaintiff's arguments for the inapplicability of the tax laws to him are
somewhat convoluted. Liberally construed, the arguments rest upon the premise
plaintiff's wages are not income within the meaning of the sixteenth amendment.
The plaintiff argues that only gain or profit can be income for taxation purposes.
To support this claim, plaintiff cites to two Supreme Court cases, Eisner v.
Macomber, 252 U.S. 189, 40 S.Ct. 189, 64 L.Ed. 521 (1919), and Goodrich v.
Edwards, 255 U.S. 527, 41 S.Ct. 390, 65 L.Ed. 758 (1921), which cites the "income
as gain" language of Eisner. Plaintiff also cites several very old lower
federal court decisions as well. However, none of these cases were intended
to be definitive definitions of income; in fact, all involved questions of
specific former tax laws. The Supreme Court rejected an argument, based on
Eisner, that the Code's definition of income is limited to gain in Commissioner
v. Glenshaw Glass Co., 348 U.S. 426, 75 S.Ct. 473, 99 L.Ed. 483 (1955). The
Court specifically stated that the "income as gain" definition of
Eisner "was not meant to provide a touchstone to all future gross income
questions." Id. at 431, 75 S.Ct. at 477. More recently the Court rejected
the assumption that the current statutory definition of income (in 26 U.S.C.
s 61) incorporated the income as gain definition of Eisner. See Commissioner
v. Kowalski, 434 U.S. 77, 94, 98 S.Ct. 315, 325, 54 L.Ed.2d 252 (1977). Thus,
the first assumption behind plaintiff's argument is simply incorrect--income
is not limited to gain or profit.
The second half of plaintiff's argument is that wages are not profit or gain
because they are given in equal exchange for the services he renders for Magnavox.
Whether the economic view of wages as exchange for services is correct, the
Supreme Court has, as noted above, rejected the notion that the income as gain
concept is inherent in the s 61 definition of gross income. In Kowalski, the
Court embraced the s 61 definition, id. at 83, 98 S.Ct. at 319, which defines
the concept as follows: "... gross income means all income from whatever
source derived, including ... (1) compensation for services...." This
analysis has led the Seventh Circuit to declare in the clearest language possible
that "WAGES ARE INCOME." United States v. Koliboski, 732 F.2d 1328,
1328 n. 1 (7th Cir.1984). Many other courts have reached the same conclusion.
See, e.g., Granzow v. Commissioner, 739 F.2d 265, at 267 (7th Cir.1984); Lively
v. Commissioner, 705 F.2d 1017 (8th Cir.1983); Knighten v. Commissioner, 702
F.2d 59, 60 (5th Cir.), cert. denied, --- U.S. ----, 104 S.Ct. 249, 78 L.Ed.2d
237 (1983); United States v. Romero, 640 F.2d 1014, 1016 (9th Cir.1981). In
Romero, the court rejected a "wages are not income" argument, and
underscored its conclusion by noting: "Compensation for labor or services,
paid in the form of wages or salary, has been universally held by the courts
of this republic to be income, subject to the income tax laws currently applicable." Id.
at 1016. This court has also previously held that wages are income. See Cameron
v. IRS, 1552; Young v. IRS, 149.
It is thus unmistakably clear that plaintiff is wrong in concluding that his
wages are not taxable income. The initial assumption behind the argument (that
income is gain or profit) is incorrect because it is not exclusive. True, a
gain or profit is income. That does not, however, mean that all income must
be a gain or profit. Section 61 makes clear that wages are income for taxation
purposes, so that plaintiff's arguments are simply incorrect and without a
basis in law. The tax laws therefore apply with full force to the plaintiff.
2. Fourth Amendment Claims
Plaintiff makes two claims under the fourth amendment. First, plaintiff argues
that the withholding of monies from his wages constitutes an illegal "seizure." However,
plaintiff does not have a fourth amendment interest to protect here. The
Supreme Court has stated that a tax assessment "is given the force of
a judgment, and if the amount assessed is not paid when due, administrative
officials may seize the debtor's property to satisfy the debt." Bull
v. United States, 295 U.S. 247, 260, 55 S.Ct. 695, 699, 79 L.Ed. 1421 (1935).
In Phillips v. Commissioner, 283 U.S. 589, 596-97, 51 S.Ct. 608, 611, 75
L.Ed. 1289 (1931), the Court rejected a due process challenge to the statutory
system of collecting taxes without a pre-seizing hearing. The Phillips Court
held that as long as the taxpayer had an opportunity to have his rights determined
after the seizure, the requirements of due process were satisfied. More recently,
the Court applied this analysis to fourth amendment concerns as well. G.M.
Leasing Corp. v. United States, 429 U.S. 338, 352 n. 18, 97 S.Ct. 619, 628
n. 18, 50 L.Ed.2d 530 (1977). The Court there found that fourth amendment
concerns arise only when there is an invasion of the plaintiff's privacy.
Here, no such invasion took place because the money was withheld when it
was neither in plaintiff's private possession nor subject to his private
control. Of course, this same analysis applies to the levy on plaintiff's
wages described in the "Plaintiff's Answer to the Court in re of Instruments
Submitted by the Defendants and/or their Counsel" as well. With the
ability to sue for a refund, plaintiff's rights can be protected without
the need for fourth amendment causes of action. This court refuses to recognize
a cause of action for the normal withholding of wages on fourth amendment
3. Fifth Amendment Claims
Plaintiff alleges a violation of his fifth amendment right against self-incrimination
in being forced to give information without the assurance that the information
would not be used against him. The Seventh Circuit has specifically stated
that "we have no hesitation in holding that the Fifth Amendment has
no application to the statutory requirement that every citizen must report
his entire income even if a taxpayer is thereby compelled to disclose an
incriminating fact." United States v. Oliver, 505 F.2d 301, 308 (7th
Cir.1974). In short, plaintiff does not have a fifth amendment interest to
protect when he turns information over to the IRS concerning his income.
Therefore, his fifth amendment claim is without basis in the law.
4. Due Process Claims
Plaintiff alleges that his due process rights were violated because he requested
an appeal and was denied. To the extent that plaintiff's allegation means
that the IRS considered plaintiff's appeal and denied it because it was
without merit, there was no violation of due process as plaintiff had an appeal.
To the extent that plaintiff was not granted an appeal, he was not foreclosed
from any reconsideration of his claim. Plaintiff still can sue for a refund,
see 26 U.S.C. s 7422, after all the statutory prerequisites are met, and
thus has not been foreclosed from receiving the process he is due. This
can perceive no harm done to plaintiff's due process rights.
5. Other Claims
Although not alleged in the complaint, other claims can be gleaned from plaintiff's
numerous filings, and are addressed briefly here. Plaintiff asserts that
a Final Notice sent to plaintiff (demanding that the plaintiff pay back
taxes or have his wages levied) was a "Bill of Pains and Penalties," a
lesser form of a Bill of Attainder. This court has twice before rejected
the Bill of Attainder/Pains and Penalties argument. Current interpretation
of the Bill of Attainder clause defines a bill of attainder as a legislative
act which determines guilt and punishes an identifiable individual or group
of individuals. See Nixon v. Administrator of General Services, 433 U.S.
425, 468, 97 S.Ct. 2777, 2802, 53 L.Ed.2d 867 (1977). However, none of these
elements are present in tax protestor cases such as this. See Cameron v.
IRS, 1555-1556; Young v. IRS, 150. This argument has been and continues to
be meritless. Plaintiff also briefly mentions the lack of an Office of Management
and Budget ("OMB") number on certain IRS documents. Plaintiff gives
no reason why this fact should matter. However, this court notes that it
has previously held that IRS documents do not need to carry OMB numbers to
be valid under 44 U.S.C. s 3512. Cameron v. IRS, 593 F.Supp. 1540 (N.D.Ind.1984).
That allegation is simply meritless. An analysis of defendants' converted
motion to dismiss reveals that plaintiff has not asserted a competent basis
for jurisdiction, cannot sue any of the defendants because they are immune,
and even if he could overcome these two barriers to recovery, could not prevail
because his complaint contains nothing other than meritless and baseless
claims. It is abundantly clear that there are no genuine issues of material
fact and that the defendants are entitled to judgment as a matter of law.
This court will therefore grant the defendants summary judgment on the entire
II. MOTION FOR FEES AND COSTS
The American Rule is that absent specific statutory or other expressed authorization,
attorney fees are not recoverable by the prevailing party in a lawsuit.
International Union v. J. Pease Construction Co., 541 F.Supp. 1334, 1337 (N.D.Ill.1982).
An exception to this rule has been recognized where a losing party has "acted
in bad faith, vexatiously, wantonly, or for oppressive reasons...." Alyeska
Pipeline Service Co. v. Wilderness Society, 421 U.S. 240, 258-59, 95 S.Ct.
1612, 1622-23, 44 L.Ed.2d 141 (1975). See McCandless v. Great Atlantic and
Pacific Tea Co., 697 F.2d 198 (7th Cir.1983). The Seventh Circuit has made
clear that bad faith can include the pursuit of meritless suits. In Analytica,
Inc. v. NPD Research, Inc., 708 F.2d 1263 (7th Cir.1983), the court held
that insistence on litigating a question in the face of controlling precedents
which removed every colorable basis in law for the litigant's position amounted
to bad faith justifying an award of fees. Id. at 1269-70. In Reid v. United
States, 715 F.2d 1148 (7th Cir.1983), the Seventh Circuit stated that "the
law may be so clear and well established that persistence in a course of
litigation could be evidence of bad faith." Id. at 1154. Thus, this
court has sufficient equitable power to assess sanctions for fees and costs
if it finds that plaintiff's claim is meritless and in bad faith. A second
source of power to impose sanctions is found in the Federal Rules of Civil
Procedure. Rule 11, which governs the signing of pleadings and motions, requires
that each pleading or motion be signed by an attorney or the party (if the
party is proceeding pro se ). The rule then provides: The signature of an
attorney or party constitutes a certificate by him that he has read the pleading,
motion, other other paper; that to the best of his knowledge, information
and belief formed after reasonable inquiry it is well grounded in fact and
is warranted by existing law or a good faith argument for the extension,
modification, or reversal of existing law, and that it is not interposed
for any improper purpose, such as to harass or to cause unnecessary delay
or needless increase in the cost of litigation. If a pleading violates this
rule the court "shall impose" an "appropriate sanction," which
may include the amount of reasonable expenses and attorney's fees incurred
by the other party because of the filing of the pleading or motion.
The Notes of the Advisory Committee on the Federal Rules makes it clear that
Rule 11's provisions are designed to "discourage dilatory or abusive tactics
and [to] help streamline the litigation process by lessening frivolous claims
or defenses." The rule applies to anyone who signs a pleading, motion,
or other paper, and the same standards apply to pro se litigants, although
the concerns of Haines v. Kerner, 404 U.S. 519, 92 S.Ct. 594, 30 L.Ed.2d 652
(1972), can be taken into account. The core of Rule 11 is that the signature
on the pleading certifies that "to the best of his knowledge, information
and belief formed after reasonable inquiry it [the pleading, motion or paper]
is well grounded in fact and is warranted by existing law or a good faith argument
for the extension, modification, or reversal of existing law ..." (emphasis
added). What is important to note is that this language requires more than
just a belief that the law is or should be a certain way; as the Advisory Committee
states, "what constitutes a reasonable
inquiry may depend on ... whether the pleading, motion, or other paper was
based on a plausible view of the law," and is thus a "more stringent" standard
than good faith.
Despite the apparently objective nature of this standard, two recent Seventh
Circuit opinions have emphasized that Rule 11 requires a finding of subjective
bad faith on the part of the person against whom fees are to be assessed. Suslick
v. Rothschild Securities Corp., 741 F.2d 1000, at 1007 (7th Cir.1984); Badillo
v. Central Steel and Wire Co., 717 F.2d 1160, 1166-67 (7th Cir.1983). What
constitutes subjective bad faith is not completely clear, although the Suslick
court did reemphasize that a claim lacking even a colorable basis in law can
justify the award of fees. At ----. However, it is clear that the Seventh Circuit
has recognized the propriety of assessing fees in cases involving parties who
claim not to owe income taxes or who file frivolous tax appeals. See Granzow
v. Commissioner, 739 F.2d 265, at 269-270 (7th Cir.1984). Other circuits have
also awarded costs for groundless actions involving the tax laws. See Parker
v. Commissioner, 724 F.2d 469 (5th Cir.1984); United States v. Hart, 701 F.2d
749, 750 (8th Cir.1983); McCoy v. Commissioner, 696 F.2d 1234, 1237 (9th Cir.1983).
Under both general equitable principles and the provisions of Rule 11, this
case is clearly one which merits the imposition of sanctions. Here, the plaintiff
has argued that the Internal Revenue Code does not apply to him; yet courts
have consistently ruled that wages are taxable income. Such argument in light
of these clear precedents constitutes insistence on litigating a question in
the face of controlling precedents that remove any colorable basis in law for
the claim. This is precisely the kind of evidence which justifies a finding
of subjective bad faith under the Seventh Circuit standard. Plaintiff's other
meritless arguments are further evidence of bad faith. Even under the principles
of Haines v. Kerner, and the deference to be accorded a pro se litigant's right
to seek redress in court, this court finds that plaintiff's entire suit was
frivolous and brought in bad faith.
In an analogous situation, the Seventh Circuit stated: The doors of this courthouse
are, of course, open to good faith appeals of what are honestly thought to
be errors of the lower courts. But we can no longer tolerate abuse of the judicial
review process by irresponsible taxpayers who press stale and frivolous arguments,
without hope of success on the merits, in order to delay or harass the collection
of public revenues or for other nonworthy purposes.... Abusers of the tax system
have no license to make irresponsible demands on the courts of appeals to consider
fanciful arguments put forward in bad faith. In the future we will deal harshly
with frivolous tax appeals and will not hesitate to impose even greater sanctions
under appropriate circumstances. Granzow v. Commissioner of Internal Revenue,
739 F.2d 265, at 269-270 (7th Cir.1984). Similarly, the doors of this courthouse
are open to good faith litigation, but abuse of the judicial process, as in
this case, will not be tolerated.
Accordingly, the defendants' request for attorney fees, costs and expenses
will be granted. This court finds the reasonable attorney fees to be $500.00.
See Cameron v. IRS, 593 F.Supp. 1540 (N.D.Ind.1984); Young v. IRS, 596 F.Supp.
141, (N.D.Ind. 1984).
This court is concerned not only with compensating the defendants for their
needless expense, but also with discouraging these baseless suits. The greatest
harm inflicted by frivolous tax protestor suits such as this one is the enormous
waste of precious judicial resources they cause. The time needed to dispose
of these suits forces needless delay upon litigants with meritorious claims.
This court refuses to condone further irresponsible uses of the courts. Rule
11 grants this court full power to impose sanctions upon litigants who file
meritless pleadings and arguments, and all future litigants were warned by
this court in footnote 4 of Cameron v. IRS. Although plaintiff was not aware
of the holding in Cameron, he was informed in Open Court of the possibility
that sanctions would be imposed against him. Analysis of the case leads this
court to conclude that plaintiff should be fined $500.00 under Rule 11 for
bringing this meritless suit.
For the foregoing reasons, defendants' Motion to Dismiss is converted into
a motion for summary judgment, and this court hereby GRANTS the defendants
summary judgment on the entire complaint. The court also GRANTS defendants'
motion for fees and costs, and hereby ORDERS plaintiff to pay defendants
$500.00 for having to defend against this meritless action. The court also
hereby ORDERS plaintiff to pay $500.00 to the Clerk of this court as a
Rule 11 sanction for filing this action.
to Tax Protestor Exhibit