46 F.4th 1
1st Cir.2022Background
- Harper opened a Coinbase account (2013–2016) and later used other exchanges; he reported virtual‑currency gains on his tax returns. In 2016 the IRS obtained broad Coinbase records via a judicially authorized John Doe summons; the government later enforced a narrowed summons.
- In August 2019 the IRS sent Harper a letter saying it had information about his virtual‑currency accounts and warned of possible civil or criminal enforcement for misreporting.
- Harper sued the IRS and unnamed IRS agents alleging Fourth and Fifth Amendment and 26 U.S.C. § 7609(f) violations based on the IRS’s acquisition and retention of his exchange account records; he sought injunctive and declaratory relief and money damages.
- The district court dismissed money‑damages claims on sovereign‑immunity/Bivens grounds (Harper did not appeal those rulings) and dismissed the declaratory/injunctive claims for lack of subject‑matter jurisdiction under the Anti‑Injunction Act, 26 U.S.C. § 7421.
- The First Circuit vacated the jurisdictional dismissal, holding § 7421 does not bar Harper’s suit because it challenges IRS information‑gathering and retention—not assessment or collection of taxes—and remanded for the district court to address Rule 12(b)(6) arguments in the first instance.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the Anti‑Injunction Act bars Harper's suit (i.e., whether §702 waives sovereign immunity) | Harper: §702 waives sovereign immunity for non‑monetary APA relief; his suit challenges unlawful acquisition/retention of records (info‑gathering), not a tax assessment. | IRS: The suit effectively restrains assessment/collection because it seeks expungement of records that would be used to determine tax liability; §7421 thus bars the suit. | First Circuit: Anti‑Injunction Act does not apply. This is a challenge to information‑gathering/retention, not assessment/collection (citing CIC Servs. and Direct Mktg.); vacated dismissal and remanded. |
| Whether Harper may recover money damages against the IRS or agents under Bivens | Harper sought damages under Bivens for constitutional violations. | Government: Sovereign immunity bars money claims against the United States; Bivens should not be extended to this new context; special factors counsel against it. | District court dismissed money damages on sovereign‑immunity/Bivens grounds; Harper did not appeal those dismissals. |
| Whether the Larson exception to sovereign immunity applies | Harper invoked Larson to avoid sovereign immunity because IRS acted beyond statutory authority or unconstitutionally. | IRS: Relief sought would interfere with public administration and thus remain a suit against the sovereign. | First Circuit: Larson exception does not apply because the requested remedies are aimed at the IRS and would interfere with government functions. |
| Whether the complaint fails to state a claim under Rule 12(b)(6) | Harper: Complaint alleges Fourth/Fifth Amendment and statutory §7609(f) violations sufficient to survive dismissal. | IRS: (Argued below) complaint fails to state a claim and Bivens should not be extended; special factors. | First Circuit: Did not decide 12(b)(6) merits; remanded so district court may address them in the first instance. |
Key Cases Cited
- CIC Servs., LLC v. IRS, 141 S. Ct. 1582 (2021) (Anti‑Injunction Act targets assessment and collection; suits challenging reporting/information‑gathering generally not barred)
- Direct Mktg. Ass'n v. Brohl, 575 U.S. 1 (2015) (distinguishes information‑gathering/reporting from assessment and collection)
- Bivens v. Six Unknown Named Agents, 403 U.S. 388 (1971) (established implied constitutional damages remedy against federal officers)
- United States v. Dalm, 494 U.S. 596 (1990) (sovereign immunity bars suit absent unequivocal waiver)
- United States v. Testan, 424 U.S. 392 (1976) (terms of consent to suit define jurisdiction)
- Colangelo v. United States, 575 F.2d 994 (1st Cir. 1978) (earlier 1st Cir. precedent on Anti‑Injunction Act scope cited by IRS)
- Larson v. Domestic & Foreign Commerce Corp., 337 U.S. 682 (1949) (narrow exceptions to sovereign immunity where officers act beyond authority)
- Town of Barnstable v. O'Connor, 786 F.3d 130 (1st Cir. 2015) (remand principle: appellate courts may send 12(b)(6) issues back for district court's first consideration)