Snyder & Associates Acquisitions LLC v. United States
859 F.3d 1152
9th Cir.2017Background
- In 2010 the IRS ran an undercover sting targeting fraudulent refund claims; it enlisted tax-preparer Total Tax Preparation, Inc. (TTP) and related lender Snyder & Associates Acquisitions LLC (SAA) to advance funds as bait and promised repayment.
- Plaintiffs allege IRS agents told them stopping payment would interfere with the investigation and repeatedly assured they would be made whole; plaintiffs advanced funds and reissued checks at the IRS’s request.
- After cooperating, plaintiffs claim the IRS never reimbursed the advance funds, served subpoenas for over 5,000 pages of records, and suspended TTP’s e‑file privileges at the start of tax season, driving TTP and then SAA out of business.
- Plaintiffs filed an administrative FTCA claim and sued in district court for conversion, failure to restore things wrongfully acquired, negligence, and abuse of process; they also filed separate Tucker Act claims in the Court of Federal Claims.
- The district court dismissed under Rule 12(b)(1), ruling § 2680(c) (FTCA exemption for claims “arising in respect of the assessment or collection of any tax”) bars the suit; plaintiffs appealed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether § 2680(c) bars plaintiffs’ FTCA tort claims | The sting was a criminal investigation to catch fraudsters, not an IRS tax assessment/collection activity, so § 2680(c) does not apply | § 2680(c) covers broad IRS activity (including investigations to determine refund legitimacy), so federal immunity applies | Reversed district court: on the complaint, § 2680(c) does not categorically bar these claims; remand for further proceedings |
| Whether § 2680(h) (misrepresentation/intentional torts) bars claims based on alleged IRS misstatements | Plaintiffs’ core claims sound in conversion and failure to restore, not solely misrepresentation, so § 2680(h) does not defeat them | Claims rest on IRS misrepresentations and thus fall under § 2680(h) exception | Held § 2680(h) does not bar the tort claims at this stage because plaintiffs plead distinct duties (citing Block) |
| Whether plaintiffs stated California-law claims for conversion and failure to restore | Plaintiffs allege specific sums and coerced reissuance at IRS request; withdrawal of consent and control support those torts | Government says it never exercised control over plaintiffs’ property, so no conversion/failure-to-restore | Held pleadings suffice to state these claims; factual development may prove or disprove control |
| Whether abuse of process is pled | Plaintiffs allege subpoenas and e-file suspension were used to coerce drop of reimbursement claims, a collateral objective | Government argues process use was routine investigation, not wrongful means to obtain collateral advantage | Held allegations plausibly plead abuse of process (ulterior motive + willful wrongful act) and survive dismissal |
Key Cases Cited
- Morris v. United States, 521 F.2d 872 (9th Cir. 1975) (broad construction of § 2680(c) to include tax investigations and collection-related activity)
- Wright v. United States, 719 F.2d 1032 (9th Cir. 1983) (§ 2680(c) broadly construed but limited to avoid swallowing § 2680(h) claims such as malicious prosecution)
- Aetna Cas. & Sur. Co. v. United States, 71 F.3d 475 (2d Cir. 1995) (payment of refunds when due is part of tax assessment/collection mechanism)
- Jones v. United States, 16 F.3d 979 (8th Cir. 1994) (§ 2680(c) covers both civil and criminal tax investigations)
- Perkins v. United States, 55 F.3d 910 (4th Cir. 1995) (§ 2680(c) can bar third‑party claims arising from tax collection efforts)
- Block v. Neal, 460 U.S. 289 (1983) (§ 2680(h) bars misrepresentation‑based claims but does not necessarily bar distinct negligence claims)
- United States v. LaSalle Nat’l Bank, 437 U.S. 298 (1978) (tax investigations commonly have inseparable civil and criminal aspects; criminal status alone is rare)