Shahir Medhi Ghaffari v. Internal Revenue Service
5:14-cv-02927
| N.D. Cal. | Jun 10, 2015Background
- Plaintiff Shahir Ghaffari founded a tech company, claimed operating costs on his tax returns, and was audited by the IRS.
- IRS agent Elisa Dang directed a detailed audit requesting bank records, contacts, and meeting information; Ghaffari alleges he spent ~500 hours complying and suffered health and business harms.
- Ghaffari sued the IRS, the Department of Treasury, and Dang asserting: (1) Privacy Act violations; (2) First and Fifth Amendment violations via Bivens; and (3) wrongful inspection/disclosure under 26 U.S.C. § 7431.
- Defendants moved to dismiss under Fed. R. Civ. P. 12(b)(1), (5) and (6).
- The court found insufficient service on the United States, and concluded each substantive claim fails as a matter of law, but granted dismissal with leave to amend.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Service on the U.S. and federal officials | Service was sufficient as pleaded | Plaintiff failed to serve the Attorney General and U.S. Attorney as required by Rule 4(i) | Dismissal for insufficient service under Rule 12(b)(5); but leave to amend granted |
| Privacy Act liability by IRS and individual employees | Privacy Act claim: IRS retained/used tax and First Amendment-related records unlawfully | Section 552a(g) remedies are not applicable to tax-determination matters; private suits against individual employees are not authorized | Privacy Act claims barred: §7852(e) precludes application to tax-liability determination and §552a(g) provides remedies only against agencies, not individuals |
| Bivens claim for constitutional violations (First/Fifth Amendment) | No statutory remedy exists; Bivens relief appropriate against Dang for constitutional harms | Bivens is unavailable in the tax-audit context and cannot be brought against agencies; IRS has comprehensive remedial scheme; Dang entitled to qualified immunity | Bivens relief unavailable for challenges to IRS officials in tax assessment/collection; claim dismissed and individual entitled to qualified immunity |
| Wrongful inspection/disclosure under §7431 | Dang/IRS inspected/disclosed return information unlawfully; damages sought | §7431 provides a civil action only against the United States, and plaintiff did not name the United States | Claim fails because the only proper defendant under §7431(a)(1) is the United States; dismissal without prevailing on merits but with leave to amend |
Key Cases Cited
- England v. Comm’r, 798 F.2d 350 (9th Cir.) (Privacy Act claims concerning tax-liability records are beyond district court jurisdiction)
- FDIC v. Meyer, 510 U.S. 471 (U.S. 1994) (Bivens does not permit suits against federal agencies)
- Adams v. Johnson, 355 F.3d 1179 (9th Cir.) (comprehensive and exclusive remedial scheme for tax disputes bars Bivens relief against IRS officials)
- Harlow v. Fitzgerald, 457 U.S. 800 (U.S. 1982) (standard for qualified immunity: protection from suit unless officer violates clearly established rights)
- Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (U.S. 2007) (plausibility pleading standard for Rule 12(b)(6))
- Ashcroft v. Iqbal, 556 U.S. 662 (U.S. 2009) (requirement that pleadings include factual content allowing inference of liability)
- Consejo de Desarrollo Econ. de Mexicali v. United States, 482 F.3d 1157 (9th Cir.) (Bivens actions available only against individuals in their personal capacities)
- Warren v. Fox Family Worldwide, Inc., 328 F.3d 1136 (9th Cir.) (plaintiff bears burden to establish subject-matter jurisdiction)
- Balistreri v. Pacifica Police Dep’t, 901 F.2d 696 (9th Cir.) (Rule 12(b)(6) dismissal may rest on lack of cognizable legal theory)
- Sprewell v. Golden State Warriors, 266 F.3d 979 (9th Cir.) (court need not accept conclusory allegations)