543 F.2d 1290 | Ct. Cl. | 1976
Lead Opinion
delivered the opinion of the court.
In this civilian pay case plaintiffs Margaret Boyce, formerly employed as a career seasonal OS-2 data transcriber, and Minnie Dixon, formerly a GS-'B file clerk, contest their dismissals from employment with the Internal Revenue Service (IRS). Plaintiffs seek both reinstatement and back pay. The IRS removed them from their positions because they had failed to file certain tax returns in a timely manner. We find the penalty of dismissal so disproportionate to plaintiffs’ offenses that defendant’s conduct can only be described as an abuse of discretion. Accordingly, we hold for plaintiffs.
Both Mrs. Boyce and Mrs. Dixon were employed, before their separations, at the IRS Kansas City Service Center. Until their removal, both had performed their duties satisfactorily throughout their careers, Mrs. Dixon for some 13 years and Mrs. Boyce for 12. In the fall of 1972, Mrs. Boyce received notice of a proposed adverse action. After her personal reply, she was removed on December 1,1972. In November 1972, Mrs. Dixon received notice of a proposed adverse action and on February 20,1973, she was removed.
Both plaintiffs appealed their removals to the Civil Service Commission (CSC) Regional Office. In each ease, the OSO Regional Office reversed the removed and the IRS appealed. The CSC Board of Appeals and Review (BAR) held that Mrs. Dixon should be reinstated after a 60-day suspension. Mrs. Boyce was ordered reinstated after a 90-day suspension. While the charges were sustained, the BAR, like the CSC Regional Office, concluded that under the circumstances the penalties of removal were unwarranted as unduly harsh.
The IRS again appealed, requesting that the CSC Commissioners reopen the BAR decisions. Because the cases were similar, the IRS asked the Commissioners to consider them
Plaintiffs then timely brought the present action attacking the CSC decision. Plaintiffs’ assault takes three forms: First, they argue that the IRS did not establish a rational nexus between the conduct complained of and the efficiency of the service. Second, they contend that the penalty of dismissal was so harsh as to be arbitrary and capricious. Third, they charge that the CSC decision embodies various procedural failures including lack of notice and an opportunity for plaintiffs to oppose reopening of the BAR decision and refusal of the Commissioners to provide adequate reasons for overriding the BAR.
Defendant counters that the decision to remove plaintiffs was not arbitrary and capricious, but was supported by substantial evidence. It would have the court find that the penalty of removal was reasonable, and that the CSC decision was not proeedurally defective.
Because we find the penalty of dismissal unduly harsh in the instant fact situation, we hold for plaintiffs.
Initially, we note that there is substantial evidence in the record to find plaintiffs guilty of failing to file tax returns in a timely manner. In fact, both plaintiffs had conceded during the course of the proceedings below that they had not timely filed the tax returns in issue. Our review of administrative determinations is limited to a finding of substantial evidence supporting the decision. See, e.g., Peters v. United States, 187 Ct. Cl. 68, 408 F. 2d 719 (1969); Powers v. United States, 169 Ct. Cl. 626 (1965). In the present situation, there is adequate evidence to show that plaintiffs were guilty of failure to file tax returns in a timely manner. Some punishment was clearly warranted.
However, plaintiffs have more than adequately demonstrated that the penalty of dismissal was in no way warranted given the circumstances of this case.
We start our inquiry into the propriety of the penalties by again stating the standard for review of administrative sanc
In the case at bar, plaintiffs do not allege that dismissal fell outside the range of penalties prescribed for failure to file tax returns in a timely manner. However, they contend that in light of all the facts, the penalty of dismissal was “unconscionably disproportionate.” We agree.
In Power v. United States, 209 Ct. Cl. 126, 531 F. 2d 505 (1976), plaintiff, a GS-9 ammunition inspector, had been found guilty on two relatively minor charges of submitting false information in connection with claims for travel expense reimbursement. He had been absolved of guilt on a major accusation. Still, the agency dismissed him based on its finding of culpability because of the lesser charges. We reversed, pointing out that the penalty did not fit the crime. Our decision was founded on four factors. First, the evidence supporting guilt was so slim and the de mmirrds nature of the amounts concerned made it extremely doubtful that plaintiff had knowingly and wilfully submitted false information. Second, certain procedural aspects of the case made the penalty appear unduly harsh: the agency had delayed over a year in bringing the charges and by joining the two minor charges with an unsupported serious allegation, it appeared that dismissal for the lesser offense might have been the vehicle for removing plaintiff where the agency was convinced that plaintiff was guilty of the serious act, but could not prove it. Third, defendant attempted but completely failed to demonstrate that the maximum penalty was necessary to deter expense account “padding.” Finally, plaintiff
In sharp contrast stands the case of Rifkin v. United States, 209 Ct. Cl. 566 (Decided April 14, 1976). There, a GrS-12 employee stationed in Germany had deliberately, wil-fully and intentionally altered travel documents to show his appointment as a GS-13 in order to obtain First Class steamship passage on a return trip to the United States. Plaintiff admitted the offense and justified his conduct only by saying that he did it in a moment of weakness. There was no procedural problem with the agency’s handling of the case (no undue delay in bringing the charges; no major charge which was dropped). Under those facts, the court held that the penalty of dismissal was not unconscionably disproportionate (despite the fact of plaintiff’s satisfactory record of 23 years of Government service) and that the agency’s exercise of discretion was proper.
First, on balance, it is extremely doubtful that plaintiffs knowingly, intentionally and wilfully failed to file tax returns in a timely manner. The charges against plaintiffs were for failure to file returns in a timely manner, not for wilful failure to file and not for a wilful attempt to evade taxes. As in the Power case, defendant fails to show that the amount of taxes involved is anything but de minimis. Indeed, it appears that all of Mrs. Dixon’s returns involved refunds. Many, if not most, of Mrs. Boyce’s returns also involved refunds. 'It is incredible to believe that one would intentionally delay filing a tax return in order to delay receipt of a tax refund.
Moreover, both plaintiffs argued and the IRS never rebutted the fact that they delegated their filing responsibility to their husbands. While such reliance obviously cannot be justified, this shortcoming goes to proof of guilt — not to the propriety of the penalty. While plaintiffs cannot evade responsibility for their failure to timely file by reliance on their husbands, such reliance does relate to the wilfulness of their action. In the present circumstances, such reliance demon
Even the Internal Revenue Code demonstrates a leniency for “unsuspecting spouses.” Section 6013(e) of the Internal Revenue Code
In short, while plaintiffs cannot escape responsibility for failure to file tax returns in a timely manner by relying on their spouses, such inadvertent conduct should be reflected in the penalty imposed. Defendant is not justified in imposing the same penalty for an individual who misguidedly relies on his or her spouse to file tax returns 'as it would for an employee who intentionally declines to file or falsely files in order to evade his taxes. Yet the IRS has done so in the instant case by imposing the ultimate sanction of dismissal. Again, the penalties emerge as unconscionably harsh.
In addition, the nature of plaintiffs’ employment presents a clear inference that any shortcomings were not knowing, intentional or wilful. Mrs. Boyce was a seasonal GS-2 data transcriber, and Mrs. Dixon a GS-3 file clerk. One cannot say (as with Mr. Rif kin, a GS-12 who tried to make himself a GS-13) that they knew it was improper to rely upon their husbands to file the tax returns. This is not the case of an audit agent or a managerial employee who intentionally claims deductions or expenses to which he is not entitled. (See, e.g., Hoover v. U.S., 206 Ct. Cl. 640, 513 F. 2d 603 (1975)). This is the case of two low-level IRS employees who improperly, but without intent to hurt the Government, relied on their husbands to file their tax returns.
Second, there are procedural elements in the record of this case which, although not in and of themselves providing a basis for reversal, clearly enter into any justifications of the penalties meted out to plaintiffs. In Power, swpra, two minor charges were joined with a serious and significant accusation. The serious count failed, but the harsh penalty of dismissal for only the minor charges suggested that the Government discharged plaintiff based on its continuing, unsupported belief that he was really guilty of the serious offense. Moreover, in Power, there was a one-year delay in bringing the charges. Such facts had a distinct bearing on the severity of the allowable sanction.
In the case at bar, both the CSC Regional Office and the BAR held specifically that plaintiffs’ conduct did not justify dismissal. However, the CSC Commissioners reopened the case and reversed. Plaintiffs argue that the procedures involved in reopening the BAR decision failed to satisfy the requisites of fundamental fairness mandated by the Constitution. We need not reach the merits of this contention. However, even if the technicalities of due process were properly complied with, we must note that the manner of dealing with plaintiffs’ case of necessity interrelates with the severity of the penalty imposed. Given the unusual nature of the CSC Commissioners’ action in reopening the BAR decision and the narrow situations in which such reopening is justified,
Moreover, balanced against the rather lengthy discussions by the BAR in its opinion (for the decision that dismissal
In making their decision to uphold the removal actions taken in the two cases, the Commissioners determined that the charges which were sustained were of sufficient gravity to warrant the penalties of removal. * * * [CSC letter, May 8,1974].
The CSC letter contains no discussion of the offenses, no discussion of the duty performances of plaintiffs, and significantly, no discussion of intent, a factor which caused the BAR to hold the penalty of dismissal too severe.
Recently, in Craft v. United States, 210 Ct. Cl. 170, 180, 544 F. 2d 468, 473-74 (1976), w.e were confronted with a case in which a Physical Review Council reversed a Physical Evaluation Board and failed to provide reasons for its action. In that case, the reviewing agency was required by regulation to give reasons for its action. We noted that where the agency fails to give reasons, the court cannot accord the usual deference to the exercise of administrative discretion. Although in the instant case there is no mandatory requirement for the CSC to give reasons for its reversal of the BAR (thus failure to give reasons is not in and of itself a basis to reverse the CSC), we reemphasize that in order to accord the usual degree of finality to the CSC decision, the reasons for the decision should be enunciated. See, e.g., Kowal v. United States, 188 Ct. Cl. 631, 643, 412 F. 2d 867, 873 (1969).
In short, in the instant case, the CSC reopened the decision of the BAR without affording full participation rights to plaintiffs to argue against the reconsideration. More importantly, the CSC reversed the BAR and found the penalties of dismissal appropriate without providing reasons for its decision. In such a situation, it is impossible to conclude that the CSC properly exercised its discretion because we cannot ascertain the basis for its decision.
Finally, we come to what appears to be the real basis for the CSC’s reversal of the BAR: deterrence and concern with
I believe these two appeal decisions will establish dangerous precedent for us in the important tax area. * * * Neither the employee who knowingly fails in his tax responsibilities nor the employee who is grossly negligent in attending to them belongs in an agency whose mission is the collection of taxes. * * * [Letter from IRS Comm’r. Donald C. Alexander to CSC Chairman Robert E. Hampton, Aug. 23,1973 at 10.]
In the Power case, defendant attempted to justify removal based on a goal of deterrence. We stated that “[d]eterrence can be an effective method of preventing fraud upon the Government.” This is trae. The matter is even more crucial when we are confronted with misconduct by IRS employees. Theirs is a highly visible agency which is “rightly concerned with the image of honesty and integrity.” Birnholz, supra, 199 Ct. Cl. at 537; Hoover, supra, 206 Ct. Cl. at 646, 513 F. 2d at 606. However, as we stated in Power, a penalty can be so harsh as to “effectively rain defendant’s goal of deterrence.”
Should a powerful government agency seek the severe penalty of dismissal for every de minimis offense, not only might the goal of deterrence suffer, but potential employees might equally be deterred from seeking positions with the agency. Further, a reputation for gross unfairness generated by such dismissals could have a much more harmful impact on the public image of the IRS than would carrying a person on the payroll who has failed to file income tax returns.
In addition, imposing the same penalty on two low-level employees who unintentionally fail to file tax returns in a timely manner by relying on their spouses, as on an IRS tax technician who “culpably, for his own benefit” overstates tax deductions creates a dangerous precedent.
In short, an unconscionably disproportionate penalty aids neither the goal of deterrence nor the image of the IRS. “If a penalty is so harsh as to constitute an abuse, rather than an exercise of discretion, it cannot be allowed to stand.” Power, supra; Jacobowitz, supra. In the instant case, like Power, plaintiffs’ offenses in no way justified removal. “Their punishment did not fit their crime.”
Again, we reemphasize that generally, agency penalties will be viewed as a matter within agency discretion. However, in the facts of the instant case such discretion has been abused due to the disproportionate harshness -of the penalty. Contrast Pascal v. United States, post at 183.
Accordingly, plaintiffs’ motion for summary judgment is granted, and defendant’s cross-motion for summary judgment is denied. Judgment is entered for plaintiffs. Pursuant to the authority granted to the court in 28 U.S.C. § 1491, as amended by Pub. L. 92-415, plaintiffs are ordered to be reinstated.
Since our decision is based on the harshness of the penalty, we do not reach plaintiffs’ rational nexus argument. The procedural argument has been considered, infra, in connection with the invalidity of the penalty.
Int. Rev. Code of 1954, $ 6013(e).
5 C.F.R. § 772.310 (1976) provides the procedure and the instances where a BAR decision may be reopened. In the ease at bar, it appears that plaintiffs’ cases were reopened primarily for the precedential value which would attach to the dismissal of these two ladies. Letter from IRS Comm’r. Donald C. Alexander to CSC Chairman Robert E. Hampton, Aug. 23, 1973. In such instance, the CSC should have been extremely careful to accord plaintiffs’ full participation in its decision to reopen the cases.
Nothing in this opinion is intended to contravene the discretionary authority of the Commissioner of Internal Revenue to administer an appropriate penalty such as that originally proscribed by the BAR.
Concurrence Opinion
concurring:
I join in the decision and in Judge Kunzig’s opinion, except that I take exception in particulars that are stated below, which seem to me important.
2. I am' not much impressed with the fact that plaintiffs relied on their husbands to prepare and file joint tax returns. They had actual notice their husbands could not be relied on to file returns on time. Dixon had a reprimand in her file on this account, though it was not considered in assessing the penalty. The BAR, however, mentions it. The Alexander letter says Boyce was the sole support of her family, for which she assumed full financial responsibility. Though some might read this as an argument for Boyce, it does to some degree undermine her right to rely on Mr. Boyce. She received the W-2’s, the usual signal to prepare a return.
3. Mr. Alexander ignores the fact that so many of the returns were refund returns. In my view, an assessment of the actual and potential loss of revenue would be an indispensable component of an informed and reasoned decision on the penalty in this kind of case.
4. I question the propriety of lumping into the charges, without distinction, delinquencies in filing Federal and State returns. 'It is up to the States to enforce their own tax laws. If state taxes are not paid, taxpayers cannot take deductions for them on Federal returns. The two types of infringements are not the same. To lump them together in the charge makes a superficial impression of utter lawlessness, which a better acquaintance with the State’s assessment and collection procedure perhaps might in large measure dispel.
5. The BAR makes what appears to me a valid point: though employees were warned they must satisfy their tax obligations, and that the agency will discipline them if they don’t, there is no express warning in the involved Bulletins that dismissal will be the automatic penalty, always or in any specified kind of case. The issue is, therefore, not like Heffron
6. The really vital controversy between the BAB and Mr. Alexander is that the former concedes — as all must— the need for a particularly high standard of conformity to tax laws by IBS employees in managing their personal finances, but does not extend it to Boyce and Dixon because they “had no contact with the public.” Presumably, therefore, for them the standards are those which any Government agency might reasonably demand of GS-2 and GS-3 employees. Mr. Alexander says the same rigid standards apply to GS-2 and GS-3 file clerks in the IBS as to GS-11 agents because they work “in a direct support of those employees who do contact the public.”
The “meets the public” canon does not appear to me as reasonably defining the proper line between the high IBS standard and the lower, though still demanding one, applicable to those employed in more neutral activities. Meeting the public is a duty, not a privilege, and there are some high ■ranking persons in the IBS, I believe, who do not normally meet the public in course of doing their jobs. The damage one of these would cause, if he were known to be habitually tax
On the other hand, even in Mr. Alexander’s eyes there are apparently some IRS employees who do not come under the rigid standard because they neither meet the public nor work in support of those who do.
Both contenders appear to me too mechanical and simplistic in the rules they would apply. The public would form an adverse judgment on the entire agency and the program it administers, from the tax malfeasance of an individual, or would not do so, depending on the individual’s rank in the IRS, his pay, his experience, the extent to which the agency relies on his honesty, his performance of discretionary functions, and his exercise of professional judgment. Not just meeting the public, but having transactions on the agency’s behalf with members of the public, would be another factor, no doubt. The public would not draw the same conclusions from the delinquencies of Boyce and Dixon, and from similar ones which, in a purely hypothetical case, might be committed by a couple of deputy commissioners. Mr. Alexander himself, one surmises, would not listen with patience to a deputy commissioner, caught in -flagrante delicto, who might tell him the penalty should not depend on rank, but should be for him the same as for a GS-2 clerk.
7. I recognize our recent holding in Wathen, supra, that “efficiency of the service” is for agency definition, but that case of course does not impair authority of the cases Judge Kunzig relies on, that an extreme disproportion between offense and punishment is an abuse of discretion and will be reversed as illegal. Mr. Alexander’s stated rule requiring disregard of the most relevant factors in fixing the penalty of an IRS employee for tax delinquency is itself arbitrary and capricious and makes arbitrary and capricious any CSC decision that relies upon it.
