52 F. Supp. 3d 571
S.D.N.Y.2014Background
- Zherka, a Tea Party organizer and public critic of taxation, sought tax-exempt status for an educational organization and alleges the IRS (via Lois Lerner) subjected his application to excessive scrutiny, causing him to abandon the application.
- Zherka alleges that IRS agent Ashcroft and agent Ryan (an IRS agent) opened a broad investigation into his commercial dealings in 2011, issuing over 75 subpoenas to his business associates and threatening them with prosecution to force cooperation.
- He claims the investigation chilled his political speech, damaged his reputation, caused business losses and emotional harm, and was part of a broader governmental effort to punish Tea Party members for their politics.
- Procedurally, Zherka filed a First Amended Complaint; he served Ryan and Ashcroft but never served Lerner. Lerner moved to dismiss for insufficient service of process under Rule 12(b)(5).
- Ryan and Ashcroft moved to dismiss on sovereign immunity and other grounds; the court treated claims against them as individual-capacity Bivens claims and evaluated their sufficiency on the merits.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Sufficiency of service on Lerner (Rule 12(b)(5)) | Lerner waived defect by appearing through AUSA; plaintiff had attempted to contact AUSA about accepting service | Lerner was never served; AUSA had not been authorized to accept service; Lerner timely asserted lack of service | Court granted Lerner's motion; no personal jurisdiction due to failure to effect service (dismissal without prejudice) |
| Sovereign immunity for Ryan & Ashcroft (official-capacity claims) | Seeks damages; alleges personal liability for retaliatory investigation | Defendants argued immunity for official-capacity claims | Court held official-capacity claims barred by sovereign immunity but construed complaint to raise individual-capacity claims and proceeded to evaluate them |
| Cognizability of Bivens claims for alleged First Amendment retaliation and Fifth Amendment harms | Zherka seeks Bivens relief for retaliatory investigation and related constitutional injuries | Defendants argued Bivens relief is not available (pointing to Hudson Valley Black Press and the limited expansion of Bivens) | Court held Bivens relief cognizable here: no adequate alternative remedy and special factors did not preclude a new Bivens action for these allegations |
| Rule 12(b)(6) adequacy of First Amendment, Equal Protection, and Substantive Due Process claims | Alleged protected political speech, causally connected adverse investigative actions, disparate treatment, prolonged investigatory conduct causing severe business/reputational harm | Defendants challenged plausibility and legal cognizability | Court found the complaint pleaded plausible First Amendment retaliation and equal protection claims and a substantive due process claim (conduct alleged could be "conscience shocking") |
Key Cases Cited
- Omni Capital Int’l, Ltd. v. Rudolf Wolff & Co., 484 U.S. 97 (jurisdiction depends on proper service of process)
- Bivens v. Six Unknown Named Agents, 403 U.S. 388 (implied damages remedy against federal officers for constitutional violations)
- Ashcroft v. Iqbal, 556 U.S. 662 (standards for pleading and discussion of Bivens scope)
- Hartman v. Moore, 547 U.S. 250 (First Amendment retaliatory prosecution context and requirement discussion)
- Hudson Valley Black Press v. I.R.S., 409 F.3d 106 (2d Cir.) (declining to extend Bivens to retaliatory tax audits)
- Wilkie v. Robbins, 551 U.S. 537 (framework for creating new Bivens causes of action)
- Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (plausibility pleading standard)
- County of Sacramento v. Lewis, 523 U.S. 833 ("conscience shocking" standard for substantive due process)
- Davis v. Passman, 442 U.S. 228 (recognition of Bivens-like relief under the Fifth Amendment)