Scholl v. MnuchinScholl v. Mnuchin
Before the court is plaintiffs Colin Scholl and Lisa Strawn‘s (“plaintiffs“) motion for preliminary injunction, motion for class
BACKGROUND
On August 1, 2020, plaintiffs filed a complaint (“Compl.“) in this putative class action asserting three causes of action: (1) violation of the Administrative Procedure Act (“APA“),
Defendants Steven Mnuchin, Charles Rettig, the U.S. Department of the Treasury, the U.S. Internal Revenue Service (“IRS“), and the United States of America (collectively “defendants“) are generally responsible for administering economic impact payments (“EIP“) to eligible individuals pursuant to the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act” or the “Act“), Pub. L. No. 116-136, 134 Stat. 281 (2020), which was signed into law on March 27, 2020. Compl. ¶¶ 1, 6–11. Plaintiffs are incarcerated and formerly incarcerated persons who did not receive payments (id. ¶¶ 4–5) and seek to certify a nationwide class of all similarly situated persons who are or were incarcerated, otherwise met the criteria to receive an EIP under the CARES Act, but did not receive an EIP, (id. ¶ 33).
In the spring of 2020, the COVID-19 pandemic swept across the United States and the globe causing significant disruptions to the living and working arrangements of virtually everyone. As part of the response to the pandemic, many institutions and businesses closed their doors in an effort to slow or stop the spread of the disease. The secondary and tertiary effects of this response was both widespread and largely unknown at the time. One fairly obvious impact of the pandemic was the loss of employment for millions of Americans; in April 2020 alone more than 20 million Americans lost their jobs. Amador v. Mnuchin, — F. Supp. 3d —, 2020 WL 4547950, at *2 (D. Md. Aug. 5, 2020). In response, Congress passed the CARES Act that included many provisions totaling $2.2 trillion in relief. See id. As part of that relief package, Congress provided for a mechanism to distribute stimulus payments, the EIP, directly to Americans.
The CARES Act, codified in part at section 6428 of the Internal Revenue Code,
“by 5 percent of so much of the taxpayer‘s adjusted gross income” that exceeds $150,000 for joint filers, $112,500 for a head of household, and $75,000 in all other cases.2
The EIP is an advance refund of the subsection (a) tax credit and subsection (f) describes the mechanism for implementing the advance refund. Paragraph (1) of subsection (f) provides that “each individual who was an eligible individual for such individual‘s first taxable year beginning in 2019 shall be treated as having made a payment against the tax imposed by chapter 1 for such taxable year in an amount equal to the advance refund amount for such taxable year.”
Paragraph (3) of subsection (f) requires the IRS to “refund or credit any overpayment attributable to this section as rapidly as possible.”
Three days after the President signed the CARES Act, the IRS issued a news release explaining that the agency would calculate and automatically issue an EIP to eligible individuals. Mtn. at 2; Declaration of Yaman Salahi (“Salahi Decl.“), Dkt. 11, Ex. 1 at 1.3 The IRS also established
On May 6, 2020, the IRS published responses to “Frequently Asked Questions” (“FAQ“) on the IRS.gov website. Mtn. at 3; Salahi Decl., Ex. 4. Question 154 asked “Does someone who is incarcerated qualify for the Payment [i.e., an EIP]?” The IRS responded:
A15. No. A Payment made to someone who is incarcerated should be returned to the IRS by following the instructions about repayments. A person is incarcerated if he or she is described in one or more of clauses (i) through (v) of Section 202(x)(1)(A) of the Social Security Act (
42 U.S.C. § 402 (x)(1)(A)(i) through (v)). For a Payment made with respect to a joint return where only one spouse is incarcerated, you only need to return the portion of the Payment made on account of the incarcerated spouse. This amount will be $1,200 unless adjusted gross income exceeded $150,000.
Salahi Decl., Ex. 4. On June 18, 2020, the IRS updated its internal procedures manual to reflect the policy stated in response to the FAQ.
On June 30, 2020, the Treasury Inspector General for Tax Administration (“TIGTA“) issued a report on the interim results of the 2020 filing season, including results of an audit on the IRS‘s issuance of the EIPs.
TIGTA calculated that the April 10th disbursement sent 84,861 payments totaling approximately $100 million to incarcerated persons.
Plaintiffs seek to certify a class of all individuals who were incarcerated across the United States since March 27, 2020 and meet the eligibility requirements described in the CARES Act. They also seek a preliminary injunction to enjoin defendants from enforcing their policy of excluding both plaintiffs and proposed class members from receiving EIPs based on their incarcerated status alone. Finally, plaintiffs also move the court to appoint them as class representatives and appointing their counsel as class counsel.
DISCUSSION
A. Legal Standard
1. Preliminary Injunction
An injunction is a matter of equitable discretion and is “an extraordinary remedy that may only be awarded upon a clear showing that the plaintiff is entitled to such relief.” Winter v. Nat. Res. Def. Council, Inc., 555 U.S. 7, 22 (2008); see also Munaf v. Geren, 553 U.S. 674, 689–90 (2008). A preliminary injunction “should not be granted unless the movant, by a clear showing, carries the burden of persuasion.” Mazurek v. Armstrong, 520 U.S. 968, 972 (1997) (per curiam). “A plaintiff seeking a preliminary injunction must establish that [1] he is likely to succeed on the merits, that [2] he is likely to suffer irreparable harm in the absence of preliminary relief, that [3] the balance of equities tips in his favor, and that [4] an injunction is in the public interest.” Winter, 555 U.S. at 20.
Alternatively, the Ninth Circuit employs a “sliding scale” approach whereby “‘serious questions going to the merits’ and a hardship balance that tips sharply toward the plaintiff can support issuance of an injunction, assuming the other two elements of the Winter test are also met.” All. for the Wild Rockies v. Cottrell, 632 F.3d 1127, 1132 (9th Cir. 2011). “That is, ‘serious questions going to the merits’ and a balance of hardships that tips sharply towards the plaintiff can support issuance of a preliminary injunction, so long as the plaintiff also shows that there is a likelihood of irreparable injury and that the injunction is in the public interest.” Id. at 1135; see also Ramos v. Wolf, — F.3d —, 2020 WL 5509753, at *10 (9th Cir. Sept. 14, 2020) (describing
If a plaintiff satisfies its burden to demonstrate that a preliminary injunction should issue, “injunctive relief should be no more burdensome to the defendant than necessary to provide complete relief to the plaintiffs.” Califano v. Yamasaki, 442 U.S. 682, 702 (1979).
2. Class Certification
To maintain a class action, a proposed class must satisfy
The party seeking class certification bears the burden of proof in demonstrating that it has satisfied all four
B. Motion for Preliminary Injunction
1. Subject Matter Jurisdiction
Defendants argue that plaintiffs are not likely to succeed on the merits based on a trio of issues that implicates the court‘s subject matter jurisdiction: standing, ripeness, and sovereign immunity. Because these issues directly implicate the court‘s subject matter jurisdiction to hear the case, the court addresses these threshold questions at the outset.
a. Standing
Federal courts may adjudicate only actual “Cases” and “Controversies,”
The “irreducible constitutional minimum of standing contains three elements.” Lujan, 504 U.S. at 560. “In order to establish Article III standing, a plaintiff must have (1) suffered an injury in fact, (2) that is fairly traceable to the challenged conduct of the defendant, and (3) that is likely to be redressed by a favorable judicial decision.” California v. Trump, 963 F.3d 926, 935 (9th Cir. 2020) (citing Lujan, 504 U.S. at 560–61). “To establish injury in fact, a plaintiff must show that he or she suffered ‘an invasion of a legally protected interest’ that is ‘concrete and particularized’ and ‘actual or imminent, not conjectural or hypothetical.‘” Spokeo Inc. v. Robins, 136 S. Ct. 1540, 1548 (2016) (quoting Lujan, 504 U.S. at 560).
Defendants argue that the CARES Act does not give plaintiffs a legally protected interest in an advance refund. Opp. at 12. Rather, the CARES Act created a refundable credit against an eligible individuals’ 2020 tax return.
As an initial observation, the deprivation of a monetary benefit is precisely the sort of economic injury that normally satisfies the injury in fact requirement. Sierra Club v. Morton, 405 U.S. 727, 733 (1972) (“[P]alpable economic injuries have long been recognized as sufficient to lay the basis for standing . . . .“). Plaintiffs cite Van v. LLR, Inc., for the proposition that “[t]he inability to have and use money to which a party is entitled is a concrete injury.” 962 F.3d 1160, 1161 (9th Cir. 2020) (per curiam) (quoting MSPA Claims 1, LLC v. Tenet Fla., Inc., 918 F.3d 1312, 1318 (11th Cir. 2019)). This case is persuasive and illustrates how wrongfully withheld money constitutes an injury in fact for standing purposes. The rationale behind Van‘s holding is applicable here: “[e]very day that a sum of money is wrongfully withheld, its rightful owner loses the time value of the money.” Id. (quoting Habitat Educ. Ctr. v. U.S. Forest Serv., 607 F.3d 453, 457 (7th Cir. 2010)). Thus, plaintiffs have established a concrete injury.
Defendants’ argument does not contest the concreteness or particularization of the injury, but rather challenges its imminence, i.e., whether the injury is too speculative or conjectural because plaintiffs would not be harmed until the IRS denies their request for a CARES Act tax credit in the future. They cite Coon v. Wood, 160 F. Supp. 3d 246, 251 (D.D.C. 2016), for the proposition that the mere possibility of future tax liability is insufficient to establish standing to sue in federal court. There, the plaintiff alleged that defendants negligently misrepresented the potential tax consequences on a sale of real property but the IRS had not imposed any tax liability and available evidence showed that the plaintiff was unlikely to incur any future tax liability. Id. The court found injury in fact lacking because the mere possibility of future tax liability was insufficient to confer standing. Id.
This case is distinguishable from Coon for the simple fact that plaintiffs allege that the IRS has already decided to deny EIPs to incarcerated persons. Moreover,
Defendants’ argument that plaintiffs do not have a legally protected interest and cannot sustain a cognizable injury until the IRS denies the tax credit is predicated on the assumption that their interpretation of the CARES Act is, in fact, correct. In other words, defendants’ argument goes to the merits of plaintiffs’ claims. If plaintiffs were to prevail on their claims, then the CARES Act‘s advance refund would presumably be owed to them now, not in 2021 when they file their 2020 tax returns. For that reason, plaintiffs easily satisfy the imminence aspect of the injury in fact requirement.
The court also notes that other district courts that have considered similar arguments by the federal government have determined that both standing and ripeness were met by plaintiffs challenging the Act. While those cases involve constitutional challenges to the CARES Act, the federal government argued that the plaintiffs did not have standing and their claims were not ripe because the plaintiffs were first required to file a refund claim with the IRS after first being denied a tax credit on their 2020 tax returns. See Doe v. Trump, 2020 WL 5076999, at *3 (C.D. Cal. July 8, 2020) (“Accepting for this analysis the substantive merits of Plaintiff‘s constitutional claims, she has suffered a ‘concrete and particularized’ injury because she has been treated differently from other citizens similarly situated and has been denied a government benefit (in the form of an immediate advance payment) that she would otherwise be eligible for.“); see also Amador, 2020 WL 4547950, at *11 (finding standing where plaintiffs claimed that “they have not received the impact payment to which they and their children are otherwise entitled“).
The remaining elements of Article III standing, which defendants do not contest, are easily met. The failure to disburse the EIPs to incarcerated persons is directly traceable to a decision made by the IRS and an order for injunctive relief would directly remedy plaintiffs’ injury. In sum, the court finds that plaintiffs meet the Article III standing requirement.
b. Ripeness
“Ripeness is an Article III doctrine designed to ensure that courts adjudicate live cases or controversies and do not ‘issue advisory opinions [or] declare rights in hypothetical cases.’ A proper ripeness inquiry contains a constitutional and a prudential component.” Bishop Paiute Tribe v. Inyo Cty., 863 F.3d 1144, 1153 (9th Cir. 2017) (citations omitted).
“For a case to be ripe, it must present issues that are definite and concrete, not hypothetical or abstract. Constitutional ripeness is often treated under the rubric of standing because ripeness coincides squarely with standing‘s injury in fact prong.” Id. (internal quotation marks and citations omitted); Thomas v. Anchorage Equal Rights Comm‘n, 220 F.3d 1134, 1138–39 (9th Cir. 2000) (en banc) (“Sorting out where standing ends and ripeness begins is not an easy task. . . . [I]n ‘measuring whether the litigant has asserted an injury that is real and concrete rather than speculative and hypothetical, the ripeness inquiry merges almost completely with standing.‘“). Allegations that a “threat” to a “concrete interest is actual and imminent” are sufficient to allege “an injury in fact that meets the requirements of constitutional
“In evaluating the prudential aspects of ripeness, our analysis is guided by two overarching considerations: ‘the fitness of the issues for judicial decision and the hardship to the parties of withholding court consideration.‘” Thomas, 220 F.3d at 1141. When the question presented “is ‘a purely legal one‘” that “constitutes ‘final agency action’ within the meaning of § 10 of the APA,” that suggests the issue is fit for judicial decision. Nat‘l Park Hosp. Ass‘n v. Dep‘t of Interior, 538 U.S. 803, 812 (2003). However, an issue may not be ripe for review if “further factual development would ‘significantly advance our ability to deal with the legal issues presented.‘” Id.
Defendants argue that plaintiffs’ claims are not ripe because the CARES Act creates a tax credit for taxable year 2020 and, although many tax credits have been sent out as advance refund payments, the ultimate amount of the tax credit will not be determined until plaintiffs file their 2020 tax returns. Opp. at 10. According to defendants, Congress contemplated that the ultimate amount or even eligibility for the tax credit would not be determined until these tax returns are filed.
With respect to constitutional ripeness, plaintiffs advance the same argument as standing, that they are currently being denied payment of the advance refund. Reply at 8. With regard to prudential ripeness, plaintiffs state they are not challenging the FAQ; rather they are challenging the IRS‘s policy of withholding EIP benefits from incarcerated persons.
Because the court has determined that plaintiffs have standing, their claims are constitutionally ripe for adjudication. See Thomas, 220 F.3d at 1139; Doe, 2020 WL 5076999, at *4 (“The statute is in effect, and Plaintiff has been denied a benefit based on a statutory classification that she alleges to be unconstitutional. The Government‘s ripeness argument is essentially no different from its standing argument and does not bar Plaintiff‘s lawsuit.“). The remaining ripeness issue is whether plaintiffs’ APA claims are prudentially ripe for review.
i. Fitness of Issues for Judicial Decision
When considering whether issues are fit for review, the question should be a “purely legal one” and the agency action in question should constitute a “‘final agency action’ within the meaning of § 10 of the APA.” Nat‘l Park Hosp. Ass‘n, 538 U.S. at 812 (quoting
Here, plaintiffs’ challenge is a purely legal one. Their APA claims depend on whether the Treasury Secretary and the IRS are properly interpreting and implementing the CARES Act. See Abbott Labs., 387 U.S. at 149 (noting that “whether the statute was properly construed by the Commissioner” to be a purely legal challenge).
Next, section 10 of the APA,
The remaining issue is whether the IRS‘s action is final such that it is reviewable or whether it is “preliminary, procedural, or intermediate” and not directly reviewable.
Here, several facts indicate that the IRS‘s decision to withhold or deny EIPs to incarcerated persons is final. After initially disbursing EIPs to incarcerated persons, the IRS reversed its decision and, as described in its FAQs, unequivocally took the position that someone who is incarcerated does not qualify for the EIP and should return any prior payments. Salahi Decl., Ex. 4. Significantly, defendants submitted a declaration stating that the FAQ addressed the question of whether incarcerated persons may receive an advance payment under the CARES Act. Desmond Decl. ¶ 8. Further, the declaration confirms that the IRS decided that individuals deemed to be incarcerated as of April 30, 2020 would not receive advance refund payments.
Buttressing this conclusion is the timing of the CARES Act. The IRS has established a deadline of October 15, 2020 for non-filers to use the non-filer tool to create a 2019 tax return in order to be eligible for an EIP by the end of the year. Salahi Decl., Ex. 3 at 1. Congress requires the IRS to disburse all advance refunds by December 31, 2020.
With regard to whether the agency action is one by which rights or obligations have been determined, the IRS‘s decision has clearly determined a right. In this case, the IRS has determined that incarcerated persons are not eligible to receive an advance refund. Plaintiffs, as incarcerated or formerly incarcerated persons, were demonstrably affected by this decision, alleging they are otherwise eligible to receive the EIP but did not receive the payment. More broadly, the impact of the IRS‘s decision is evidenced by the fact that the IRS initially issued EIPs to incarcerated persons and then, because of its decision, intercepted payments or ordered recipients to return payments. Compl. ¶¶ 16–17; Salahi Decl., Ex. 6 at 5.
For the foregoing reasons, the court finds that the IRS‘s decision to withhold advance refunds to incarcerated persons is a final agency action, that no further factual development is needed, and, therefore, the issue is fit for judicial review.
ii. Hardship to the Parties
The second factor examines “the hardship to the parties of withholding court consideration.” Nat‘l Park Hosp. Ass‘n, 538 U.S. at 808. Generally, a showing of hardship requires demonstrating that the regulation in question creates “adverse effects of a strictly legal kind.” Id. at 809 (quoting Ohio Forestry Ass‘n, Inc. v. Sierra Club, 523 U.S. 726, 733 (1998)). Such adverse effects do not arise if the regulation in question “do[es] not command anyone to do anything or to refrain from doing anything; [it] do[es] not grant, withhold, or modify any formal legal license, power, or authority; [it] do[es] not subject anyone to any civil or criminal liability; [and it] create[s] no legal rights or obligations.” Id. (alterations in original) (quoting Ohio Forestry Ass‘n, 523 U.S. at 733).
Similar to the inquiry whether legal rights or obligations have been determined by the IRS, the agency‘s decision imposes potential adverse effects of a strictly legal kind. As discussed, the IRS‘s decision withholds payment of the advance refund to all incarcerated persons. Plaintiffs contend that they have a legal interest in the advance refund and defendants dispute that point. Whether the CARES Act creates a legal interest in the advance refund goes to the merits of plaintiffs’ claim, but if plaintiffs are likely to succeed on their claims, then they would have established a legal interest in the advance refund.
Finally, defendants suggest that because the CARES Act sunsets payment of the advance refunds for December 31, 2020, plaintiffs’ claims are not ripe until that
In light of the foregoing, the court finds the hardship of withholding judicial review prong met and, therefore, plaintiffs have established that their APA claims are prudentially ripe for review.
c. Sovereign Immunity
“Absent a waiver, sovereign immunity shields the Federal Government and its agencies from suit.” FDIC v. Meyer, 510 U.S. 471, 475 (1994). This immunity also extends to federal officers sued in their official capacity. See Dugan v. Rank, 372 U.S. 609, 620 (1963); Aminoil U.S.A., Inc. v. Cal. State Water Res. Control Bd., 674 F.2d 1227, 1233 (9th Cir.1982). A “waiver of sovereign immunity must be unequivocally expressed in statutory text,” and be “clearly evident from the language of the statute.” FAA v. Cooper, 566 U.S. 284, 290 (2012) (internal quotation marks omitted).
“[T]he Administrative Procedure Act provides a broad waiver of sovereign immunity so long as certain conditions are met.” S. Delta Water Agency v. United States, 767 F.2d 531, 535 (9th Cir. 1985). Section 702 of the APA waives sovereign immunity; however, the Ninth Circuit has held that claims brought pursuant to the APA must also satisfy § 704‘s provisions. Navajo Nation v. Dep‘t of the Interior, 876 F.3d 1144, 1170 (9th Cir. 2017). Because plaintiffs in this case bring two claims under the APA, and move for a preliminary injunction based only on those APA claims, they must meet the requirements of § 704 in order for the court to determine that Congress waived sovereign immunity.
Defendants broadly argue that the IRS‘s answer to the FAQ is not a final agency action for which there is no adequate alternative. Opp. at 14. As discussed with regard to prudential ripeness, the court finds that the IRS‘s decision not to disburse EIPs to incarcerated persons constitutes a final agency action. Thus, the only remaining inquiry is whether there are any adequate alternatives to APA review in court. See Hawkes, 136 S. Ct. at 1815 (“Even if final, an agency action is reviewable under the APA only if there are no adequate alternatives to APA review in court.“).
Defendants contend that plaintiffs have such an adequate alternative, which is to bring a refund claim pursuant to
Title
[n]o suit . . . shall be maintained in any court for the recovery of any internal revenue tax alleged to have been erroneously or illegally assessed or collected, or of any penalty claimed to have been collected without authority, or of any sum alleged to have been excessive or in any manner wrongfully collected, until a claim for refund . . . has been duly filed with [the IRS].
Beginning with the text of the statute, plaintiffs’ APA claims do not clearly fall within the ambit of § 7422(a). Plaintiffs are not alleging that a tax was erroneously or illegally assessed or collected, a penalty was collected without authority, or any sum is alleged to be excessive. Instead, they contend that Congress requires the IRS to disburse the Act‘s advance refund without excluding incarcerated persons and the IRS is not faithfully adhering to the statutory command. E.g., Compl. ¶¶ 18, 20.
Next, the nature of plaintiffs’ relief falls outside the relief permitted by § 7422. They seek a preliminary injunction requiring defendants to enjoin the decision to exclude incarcerated persons from those eligible to receive an EIP, amongst other injunctive and declaratory relief. Mtn. at viii; Compl. ¶¶ 43, 48–49. Both the Fourth and D.C. Circuits have concluded that because § 7422(a) references “recovery of any internal revenue tax“, the statute does not explicitly allow for the type of prospective equitable relief requested by plaintiffs. King v. Burwell, 759 F.3d 358, 366 (4th Cir. 2014), aff‘d, 576 U.S. 473 (2015); Cohen v. United States, 650 F.3d 717, 732 (D.C. Cir. 2011) (en banc) (“§ 7422(a) would not provide Appellants the equitable relief they seek. Section 7422(a) provides ‘for the recovery of any internal revenue tax.’ It does not, at least explicitly, allow for prospective relief.” (citation omitted)).
Defendants cite no case in which a court has determined sovereign immunity not to be waived on the grounds that the parties were first required to pursue a tax refund action under
Finally, there is a disconnect between the motivating purpose of the CARES Act on the one hand and the adequate alternative proposed by defendants on the other. The CARES Act instructs the Treasury Secretary to distribute economic stimulus to eligible individuals “as rapidly as possible.”
In sum, the alternative form of relief suggested by defendants is not an adequate alternative for APA review. Plaintiffs do not have an adequate alternative relief and they meet the requirements of sections 702 and 704 of the APA such that Congress has waived sovereign immunity in this case. The court need not reach defendants’ argument concerning the Little Tucker Act, (Opp. at 12–14), because plaintiffs do no not rely on that act as waiving sovereign immunity for their motion for preliminary injunction.
2. Likelihood of Success on the Merits
a. Section 706(2)—Contrary to Law
As an initial matter, it is necessary to determine what deference, if any, is owed to the IRS‘s interpretation of the CARES Act. Defendants advance no argument regarding deference and, in their reply brief, plaintiffs contend that defendants’ interpretation is nothing more than a “litigation position” to which the court owes no deference. Reply at 5.
Whether an agency‘s interpretation of a statute is owed any deference varies with the circumstances surrounding the agency‘s interpretation. “[C]ourts have looked to the degree of the agency‘s care, its consistency, formality, and relative expertness, and to the persuasiveness of the agency‘s position.” United States v. Mead Corp., 533 U.S. 218, 228 (2001) (footnotes omitted) (citing Skidmore v. Swift & Co., 323 U.S. 134, 139–40 (1944)). The CARES Act contains an express authorization to engage in the rulemaking process; section 6428(h) permits the Treasury Secretary to prescribe such regulations or other guidance necessary to carry out the purpose of the CARES Act. The
rulemaking authorization indicates that deference might be required by Chevron, U.S.A. v. Natural Resources Defense Council, Inc., 467 U.S. 837 (1984). See Encino Motorcars, LLC v. Navarro, 136 S. Ct. 2117, 2125 (2016) (“A premise of Chevron is that when Congress grants an agency the authority to administer a statute by issuing regulations with the force of law, it presumes the agency will use that authority to resolve ambiguities in the statutory scheme.” (citations omitted)).
Despite this authorization, defendants readily admit that the IRS has not issued a regulation and did not follow any notice-and-comment procedure in issuing its guidance (i.e., the FAQ response on incarcerated persons) concerning the CARES Act. Opp. at 11. The lack of notice-and-comment rulemaking indicates that Chevron deference is not appropriate here. As Mead teaches, “[a]n agency‘s interpretation of ‘a particular statutory provision’ thus qualifies for Chevron deference only ‘when it appears that Congress delegated authority to the agency generally to make rules carrying the force of law, and that the agency interpretation claiming deference was promulgated in the exercise of that authority.‘” City of Arlington, Tex. v. F.C.C., 569 U.S. 290, 320 (2013) (Roberts, C.J., dissenting) (emphasis added) (quoting Mead, 533 U.S. at 226-27); see also United States v. Trident Seafoods Corp., 60 F.3d 556, 559 (9th Cir. 1995) (“No deference is owed when an agency has not formulated an official interpretation of its regulation, but is merely advancing a litigation position.“).
Starting with the plain language of the statute,
Defendants contend that the CARES Act does not mandate that plaintiffs receive an advance refund of a CARES Act credit. Opp. at 12. They cite no authority for this proposition and do not attempt to explain how the Secretary can ignore the requirement to distribute the refund as rapidly as possible. See Util. Air Regulatory Grp. v. E.P.A., 573 U.S. 302, 327 (2014) (“The power of executing the laws necessarily includes both authority and responsibility to resolve some questions left open by Congress that arise during the law‘s administration. But it does not include a power to revise clear statutory terms that turn out not to work in practice.“). In sum, the language of the statute unambiguously mandates disbursement of the advance refund and requires the Secretary to do so expeditiously.
The second inquiry is whether incarcerated persons are eligible individuals. On this question, the statute is brief and to the point.
For purposes of this section, the term “eligible individual” means any individual other than (1) any nonresident alien individual, (2) any individual with respect to whom a deduction under section 151 is allowable to another taxpayer for a taxable year beginning in the calendar year in which the individual‘s taxable year begins, and (3) an estate or trust.
There is also no indication that Congress intended to exclude incarcerated persons in the same way that the definition of “eligible individual” excludes certain categories of persons or entities. As both parties
The court also finds persuasive the fact that the IRS has asserted three different interpretations of the term “eligible individual” since the enactment of the Act, barely six months ago. Initially, the IRS disbursed nearly 85,000 EIPs to incarcerated persons and, when the TIGTA questioned IRS management about this decision, the IRS “noted that payments to these populations were allowed because the CARES Act does not prohibit them from receiving a payment.” Salahi Decl., Ex. 6 at 5. Then, as reflected in the FAQ, (id., Ex. 4 at 2–3), the IRS‘s internal procedure manual, (id., Ex. 5 at 2), and the TIGTA report, (id., Ex. 6 at 5), the IRS decided that incarcerated individuals are not eligible. Now, the IRS takes the position in this litigation that, subject to generally applicable administrative and judicial rules, the IRS plans to allow otherwise eligible individuals who were only incarcerated for a portion of tax year 2020 to claim a CARES Act tax credit. Desmond Decl. ¶ 8. The shifting interpretation demonstrates that the IRS “went well beyond the ‘bounds of its statutory authority.‘” Utility Air Reg. Grp., 573 U.S. at 326 (quoting Arlington, 569 U.S. at 297).
In sum, the court finds that plaintiffs are likely to succeed on the merits of their APA contrary to law claim. The statute mandates distribution of the advance refund to eligible individuals. Incarcerated persons who otherwise qualify for an advance refund are not excluded as an “eligible individual.” The IRS‘s decision to exclude incarcerated persons from advance refund payments is likely contrary to law.
b. Section 706(2)—Arbitrary & Capricious
“‘[A]rbitrary and capricious’ review under the APA focuses on the reasonableness of an agency‘s decision-making processes.” CHW W. Bay v. Thompson, 246 F.3d 1218, 1223 (9th Cir. 2001) (citations omitted). Agency action is invalid if the agency fails to give adequate reasons for its decisions, fails to examine the relevant data, or offers no “rational connection between the facts found and the choice made.” Motor Vehicle Mfrs. Ass‘n of U.S., Inc. v. State Farm Mut. Auto. Ins. Co., 463 U.S. 29, 43 (1983); see also Encino Motorcars, 136 S. Ct. at 2125. ”Chevron deference is not warranted where the regulation is ‘procedurally defective‘—that is, where the agency errs by failing to follow the correct procedures in issuing the regulation.” Encino Motorcars, 136 S. Ct. at 2125 (quoting Mead, 533 U.S. at 227). A rule is arbitrary and capricious if the agency has “entirely failed to consider an important aspect of the problem, offered an explanation for its decision that runs counter to the evidence before the agency, or is so implausible that it could not be ascribed to a difference in view or the product of agency expertise.” State Farm, 463 U.S. at 43.
Agencies are required to “reflect upon the information contained in the record and grapple with contrary evidence.” Fred Meyer Stores, Inc. v. NLRB, 865 F.3d 630, 638 (D.C. Cir. 2017) (citing Haw. Dredging Constr. Co. v. NLRB, 857 F.3d 877, 881-82 (D.C. Cir. 2017)). Where “the agency has failed to ‘examine the relevant data’ or failed to ‘articulate a rational explanation for its actions,‘” its decision is arbitrary and capricious. Genuine Parts Co. v. EPA, 890 F.3d 304, 311-12 (D.C. Cir. 2018) (quoting Carus Chem. Co. v. EPA, 395 F.3d 434, 441 (D.C. Cir. 2005)). And where an agency is uncertain about the effects of agency action, it may not rely on “‘substantial uncertainty’ as a justification for its actions.” Greater Yellowstone Coal., Inc. v. Servheen, 665 F.3d 1015, 1028 (9th Cir. 2011) (quoting State Farm, 463 U.S. at 52). Instead, it must “rationally explain why the uncertainty” supports the chosen approach. Id. (“Otherwise, we might as well be deferring to a coin flip.“). “[A]n internally inconsistent analysis is arbitrary and capricious.” Nat‘l Parks Conservation Ass‘n v. E.P.A., 788 F.3d 1134, 1141 (9th Cir. 2015) (citing Gen. Chem. Corp. v. United States, 817 F.2d 844, 857 (D.C. Cir. 1987) (per curiam)).
But “[t]he scope of review under the ‘arbitrary and capricious’ standard is narrow and a court is not to substitute its judgment for that of the agency.” State Farm, 463 U.S. at 43; San Luis & Delta-Mendota Water Auth. v. Jewell, 747 F.3d 581, 601 (9th Cir. 2014) (“Although our inquiry must be thorough, the standard of review is highly deferential; the agency‘s decision is ‘entitled to a presumption of regularity,’ and we may not substitute our judgment for that of the agency.” (quoting Citizens to Preserve Overton Park, Inc. v. Volpe, 401 U.S. 402, 415-16 (1971), abrogated in part on other grounds as recognized in Califano v. Sanders, 430 U.S. 99, 105 (1977))).
Here, the IRS has put forward virtually no public explanation concerning its decision to withhold payments to incarcerated persons. On May 6, 2020, the IRS posted the following explanation on its website:
Q15. Does someone who is incarcerated qualify for the Payment?
A15. No. A Payment made to someone who is incarcerated should be returned to the IRS by following the instructions about repayments. A person is incarcerated if he or she is described in one or more of clauses (i) through (v) of Section 202(x)(1)(A) of the Social Security Act (
42 U.S.C. § 402(x)(1)(A)(i) through (v) ). For a Payment made with respect to a joint return where only one spouse is incarcerated, you only need to return the portion of the Payment made on account of the incarcerated spouse. This amount will be $1,200 unless adjusted gross income exceeded $150,000.
Compl. ¶ 15. This answer described who is an incarcerated person and how an incarcerated person should return an EIP. It does not describe why or how the IRS arrived at its decision to deny payments to incarcerated persons. Similarly, defendants appear to have amended their internal procedure manual to add “an incarcerated
For the foregoing reasons, the court finds plaintiffs are likely to succeed on the merits of their APA arbitrary and capricious claim. Because both claims are likely to succeed on the merits, the court does not reach plaintiffs’ claim under
3. Irreparable Harm
“A plaintiff seeking preliminary relief must ‘demonstrate that irreparable injury is likely in the absence of an injunction.‘” California v. Azar, 911 F.3d 558, 581 (9th Cir. 2018) (quoting Winter, 555 U.S. at 22); Boardman v. Pac. Seafood Grp., 822 F.3d 1011, 1023 (9th Cir. 2016) (“A threat of irreparable harm is sufficiently immediate to warrant preliminary injunctive relief if the plaintiff ‘is likely to suffer irreparable harm before a decision on the merits can be rendered.‘” (quoting Winter, 555 U.S. at 22)).
“There must be a ‘sufficient causal connection’ between the alleged irreparable harm and the activity to be enjoined, and showing that ‘the requested injunction would forestall’ the irreparable harm qualifies as such a connection.” Nat‘l Wildlife Fed‘n v. Nat‘l Marine Fisheries Serv., 886 F.3d 803, 819 (9th Cir. 2018) (citing Perfect 10, Inc. v. Google, Inc., 653 F.3d 976, 981-82 (9th Cir. 2011)). “However, a plaintiff ‘need not further show that the action sought to be enjoined is the exclusive cause of the injury.‘” Id. (quoting M.R. v. Dreyfus, 697 F.3d 706, 728 (9th Cir. 2012)).
The irreparable harm “analysis focuses on irreparability, ‘irrespective of the magnitude of the injury.‘” Azar, 911 F.3d at 581 (quoting Simula, Inc. v. Autoliv, Inc., 175 F.3d 716, 725 (9th Cir. 1999)). “[T]he temporary loss of income, ultimately to be recovered, does not usually constitute irreparable injury.” Sampson v. Murray, 415 U.S. 61, 90 (1974). But the general rule that “[e]conomic harm is not normally considered irreparable” does not apply where there is no adequate remedy to recover those damages, such as in APA cases. Azar, 911 F.3d at 581 (citing
Whether the temporary loss of income constitutes an irreparable injury varies depending on the facts of the case. For
For others, the temporary loss of income or benefits could seriously impair their ability to procure the basic necessities of life. The Ninth Circuit in Beno v. Shalala, 30 F.3d 1057, 1064 n.10 (9th Cir. 1994), recognized an aspect of this noting that “[n]umerous cases have held that reductions in [Aid to Families with Dependent Children] benefits, even reductions of a relatively small magnitude, impose irreparable harm on recipient families.” In dissent, Justice Marshall summarized the issue as follows:
I cannot accept the majority‘s apparent holding, buried deep in a footnote, that because of the Back Pay Act, a temporary loss in income can never support a finding of irreparable injury, no matter how severely it may affect a particular individual. Many employees may lack substantial savings, and a loss of income for more than a few weeks’ time might seriously impair their ability to provide themselves with the essentials of life—e.g,., to buy food, meet mortgage or rent payments, or procure medical services.
Sampson, 415 U.S. at 101 (Marshall, J., dissenting) (citations omitted). While Justice Marshall‘s statement is non-binding, the Ninth Circuit has held that irreparable harm can exist where a plaintiff lacks the resources to procure the basic necessities of life.
In Jensen v. I.R.S., 835 F.2d 196, 198 (9th Cir. 1987), the plaintiff alleged that he lost an opportunity to challenge a tax deficiency in tax court because the IRS failed to send him a notice of deficiency. There was evidence in the record demonstrating that the plaintiff earned $1,087 a month and the IRS seized $664 of that income leaving him $144 per month to support a family of five. Id. The Ninth Circuit10 reasoned that the levy on the plaintiff‘s wages caused more than monetary harm; “[i]t deprived [the plaintiff] of the ability to
In Lopez v. Heckler, 713 F.2d 1432, 1433 (9th Cir. 1983), the Ninth Circuit held that there was an irreparable injury in a challenge to the policies and procedures in terminating Social Security disability benefits. The court discussed at length the harm at issue:
We also consider it crucial that, because the members of plaintiffs’ class are largely infirm and disabled, their resources and life spans are by definition extremely limited. Deprivation of benefits pending trial might cause economic hardship, suffering or even death. Retroactive restoration of benefits would be inadequate to remedy these hardships.
Before applying the foregoing standards, a brief review of the financial situation of incarcerated persons is warranted. Incarcerated persons stand in a unique position of sorts. On the one hand, the state provides some basic essentials regardless of income such as housing, some food, and medical care. Because they have been sentenced, state prisons need not and do not pay incarcerated persons anywhere near the minimum wage. See
As plaintiffs and amici have demonstrated, prisons do not provide all basic necessities required by incarcerated persons, including food and hygiene. With respect to food, incarcerated people supplement their food with items from the commissary, especially since plaintiffs submit evidence that some institutions have reduced the number of calories or meals provided to inmates. Salahi Decl., Ex. 30 at 369 n.44. Food insecurity is linked to negative health impacts, (Amicus Br. at 16), such that a delay in the ability to purchase adequate food is a harm with immediate consequences. Plaintiffs also present evidence that some penal institutions require inmates to pay for their own soap and personal hygiene items. Salahi Decl., Ex. 25 at 2, Exs. 26–28. Moreover, both individual plaintiffs filed declarations stating that they spend anywhere from $36 to $100 a month on hygiene products. Scholl Decl. ¶ 4; Declaration of Lisa Strawn (“Strawn Decl.“), Dkt. 14, ¶ 9.
Communication is also an issue for incarcerated persons. Prisons charge inmates to use the telephone at an average rate of $5.70 in jail for a 15-minute call and $2.03 in prison for the same time. Brief of Amici Curiae (“Amicus Br.“), Dkt. 40-1 at 8; Salahi Decl., Ex. 19. At the same time, the COVID-19 pandemic has eliminated in person visits, (Salahi Decl., Ex. 17), while infection in prisons dramatically increase. E.g., Strawn Decl. ¶ 4 (over 2,000 people in San Quentin state prison infected). Plaintiff Scholl states that contact helps him mitigate the psychological impacts of social isolation. Scholl Decl. ¶ 4. Plaintiff Strawn states that without contact with friends and family, “it would have been difficult and possibly impossible for us to maintain
Incarcerated persons often cannot bear the entirety of costs associated with acquiring basic necessities in prison—food, hygiene, and communication. The remaining costs often fall on the families of the incarcerated. Amicus Br. at 9; Salahi Decl., Ex. 11; Strawn Decl. ¶ 9. These families are also suffering from the economic effects of the pandemic including loss of jobs or wages. Amicus Br. at 11; Salahi Decl., Ex. 16. Moreover, the cost of supporting incarcerated persons does not end when they are released from prison; family members are often asked to provide housing, employment, and healthcare for formerly incarcerated persons. Amicus Br. at 9.
Individuals released from prison during 2020 who did not receive an advance refund are also suffering harm. Defendants aver that the IRS currently plans to make the CARES Act tax credit available to eligible individuals released from prison during 2020. Desmond Decl. ¶ 7. Yet, the harms felt by recently released individuals is particularly acute. They no longer have the housing and food provided by prison, have uncertain employment, and often have additional financial burdens and other collateral consequences associated with their time in prison. Amicus Br. at 20. Plaintiff Strawn is exemplary of this category. She had one day to prepare for her release and would use the EIP to pay for basic essentials such as food, clothes, and hygiene products. Strawn Decl. ¶¶ 3, 7. In sum, recently released individuals face the same travails as non-incarcerated eligible individuals who received an EIP but must wait until 2021 to receive a tax credit from the IRS.
Irreparable harm does not lie where a plaintiff has an adequate remedy at law. The foregoing evidence demonstrates that plaintiffs and those similarly situated are being deprived basic necessities such as communication with loved ones, food, and hygiene products. Because they often exist on the margins of the economy and struggle to acquire basic necessities, the harm suffered by these individuals11 cannot be adequately remedied with later monetary relief. Indeed, defendants have made clear their position that such relief could only be sought after a taxpayer files a tax return in 2021 (for the year 2020), the IRS denies the tax credit, the taxpayer exhausts all administrative remedies, and then the taxpayer files suit. The evidence demonstrates that plaintiffs are currently suffering harm and such harm is neither speculative nor remote.
To summarize, the irreparable harm “analysis focuses on irreparability, ‘irrespective of the magnitude of the injury.‘” Azar, 911 F.3d at 581. Plaintiffs have established they are likely to be irreparably injured without an injunction.
4. Balance of Equities and Public Interest
“A court must ‘balance the interests of all parties and weigh the damage to each’ in determining the balance of the equities.” CTIA - The Wireless Ass‘n v. City of Berkeley, 928 F.3d 832, 852 (9th Cir. 2019) (quoting Stormans, Inc. v. Selecky, 586 F.3d 1109, 1138 (9th Cir. 2009)). “When the government is a party, the last two factors merge.” Azar, 911 F.3d at 575. Therefore, the public interest analysis is subsumed in the balance of equities.
The potential damage to plaintiffs and putative class members is evident from the court‘s discussion of irreparable harm. Briefly, the harm suffered by incarcerated persons is acute and ongoing. Their interest in injunctive relief is substantial.
Defendants arguments concerning harms to the government are not persuasive. First, defendants argue the IRS would be faced with significant logistical challenges if they are required to issue an additional round of advance refund payments. Opp. at 18. There is some force behind this argument as the IRS has administered a massive stimulus program in a relatively short period while its employees also responded to the burdens imposed by the pandemic response. A few facts mitigate the burden on the IRS. First, the IRS already issued EIP payments to some incarcerated persons in April 2020, that they then intercepted or required to be returned. In that sense, the logistics of issuing payments to incarcerated persons should be at least familiar. Second, as defendants acknowledge, federal law requires the Federal Bureau of Prisons and the head of any State agency charged with administration of prisons to provide the IRS with a variety of information. Id. at 7–8 (citing
Next, defendants cite pending legislation that could specify that incarcerated persons are not eligible for payments under the CARES Act. Opp. at 18. Defendants admit that this is speculative. To add further speculation, defendants concede that there are competing bills in the House and Senate, with the former not discussing incarcerated persons and the latter excluding payments to incarcerated persons. This argument is simply too speculative to credit; trying to predict whether legislation will pass and what it will contain and then assessing the potential logistical impact on the IRS does not overcome the actual harms currently being suffered by plaintiffs and does not permit the IRS from modifying the clear statutory command in the CARES Act.
Finally, defendants cite evidence of fraud and identity theft. Defendants contend that the impetus behind issuing the FAQ concerning incarcerated persons was the IRS‘s concerns regarding fraud. Desmond Decl. ¶ 5. Defendants state that in calendar year 2018, the IRS found 6,799 tax returns filed under the social security numbers of prisoners to be false and fraudulent. Id. ¶ 6. This sample is not an isolated case and reflects progress from earlier years in reducing fraudulent tax activities. Defendants also cite prior TIGTA reports and press releases discussing tax refund fraud among prisoners. Opp. at 7.
Fraud and identity theft are legitimate concerns and constitute a valid burden on the government. Moreover, the CARES Act delegates authority to the Secretary to issue regulations or other guidance to carry out the Act, including any measures to avoid allowing multiple credits or rebates to a taxpayer. It is a short logical leap to determine that Congress delegated authority to take necessary steps to avoid allowing any credit or rebate to those not permitted
Significantly, when plaintiffs establish that the government‘s policy violates federal law, the balance of hardships and public interest tip in their favor. J.L. v. Cissna, 341 F. Supp. 3d 1048, 1070 (N.D. Cal. 2018), (citing Ariz. Dream Act Coal. v. Brewer, 757 F.3d 1053, 1069 (9th Cir. 2014); and Valle del Sol, Inc. v. Whiting, 732 F.3d 1006, 1029 (9th Cir. 2013)); see also League of Women Voters of U.S. v. Newby, 838 F.3d 1, 12 (D.C. Cir. 2016) (“There is generally no public interest in the perpetuation of unlawful agency action. To the contrary, there is a substantial public interest in having governmental agencies abide by the federal laws that govern their existence and operations.” (internal quotations and citations omitted)). Given plaintiffs’ strong likelihood of success on the merits, this principle also points in favor of an injunction.
For the foregoing reasons, the court finds the balance of equities and the public interest tips in plaintiffs’ favor and a preliminary injunction would be in the public interest.
C. Motion for Class Certification
Plaintiffs move to certify a class of incarcerated individuals who were incarcerated at any point from March 27, 2020 to the present and who meet the requirements of the CARES Act for an advance refund. Mtn. at 19. In response, defendants’ opposition does not address the merits of plaintiffs’ motion for class certification and instead requests that if the court does not deny the motion for preliminary injunction, that the parties be allowed further briefing on this issue. Opp. at 2 n.1. Plaintiffs then filed a notice pointing out that defendants’ opposition did not argue against class certification and asking the court to enter an order granting the motion to certify. Dkt. 45. Defendants filed a response stating that they did in fact oppose the motion and arguing that a motion for class certification is premature. Dkt. 46.
The court notes that defendants have been on notice of plaintiffs’ motion for class certification since early August. The Civil Local Rules provide that any opposition to a noticed motion must be filed and served not more than 14 days after the motion was filed. Civ. L.R. 7-3(a). In addition to the minimum time required by the Local Rules, the court granted a two-week extension to the briefing schedule at defendants’ request and stipulated to by plaintiffs. See Dkt. 29. Despite this additional time, defendants’ opposition does not contain any substantive argument opposing plaintiffs’ motion for class certification. Simply put, the court will not countenance a practice whereby one party adopts a “wait and see” approach, testing how it will prevail on the motion for preliminary injunction while delaying resolution of a noticed motion for class certification. Accordingly, the court proceeds to consider plaintiffs’ motion for class certification;
Further, in their separately filed notice, defendants contend that plaintiffs’ motion for class certification is premature and the practice employed in a majority of class actions is to resolve class certification after an appropriate period of discovery. Dkt. 46 at 2. The court is mindful of the concerns raised by defendants, but in many respects, this is not a typical case. The CARES Act places an unambiguous deadline on advance refund payments of December 31, 2020. The IRS has also imposed an October 15, 2020 deadline for non-filers to use the IRS‘s portal to register and file for an EIP. Permitting discovery for purposes of certifying a class followed by additional briefing on a renewed class certification motion will likely moot plaintiffs’ APA claims as related to the EIP.
The court finds persuasive the approach taken by the district court in Saravia v. Sessions, 280 F. Supp. 3d 1168 (N.D. Cal. 2017). There, the plaintiffs filed a putative class action challenging the federal government‘s practice of holding previously arrested and released noncitizen minors who were then re-arrested in custody beyond seven days while removal proceedings were pending. Id. at 1177. The plaintiffs sought a preliminary injunction and class certification enjoining the practice of holding minors longer than seven days without providing them a hearing to contest their confinement. Id. Because of the time sensitive nature of the plaintiffs’ requested relief, the court provisionally certified a class for purposes of the preliminary injunction. Id. at 1201–02.
A similar approach is applicable here; if plaintiffs meet the requirements under
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1. Rule 23(a)
a. Numerosity
Plaintiffs argue that numerosity is satisfied because joinder of over 1.4 million incarcerated persons as parties would be impractical. Mtn. at 20. The court agrees with plaintiffs because, at the very least, the IRS initially issued EIPs to nearly 85,000 incarcerated persons before issuing guidance to intercept the payments, repay the EIPs, or void the payment check. Salahi Decl., Ex. 6 at 6. This factor is met.
To that end, the Ninth Circuit has explained that, under this requirement, “plaintiffs need not show that every question in the case, or even a preponderance of questions, is capable of classwide resolution. So long as there is even a single common question, a would-be class can satisfy the commonality requirements of
Plaintiffs argue that common questions include whether the CARES Act authorizes defendants to withhold stimulus payments from incarcerated persons based solely on their status and whether defendants’ policy of refusing to issue CARES Act payments to otherwise eligible incarcerated persons is contrary to law, exceeds statutory authority, or is otherwise arbitrary and capricious, among several other questions. See Mtn. at 20–21.
Plaintiffs meet the commonality requirement. First, plaintiffs and the class are asserting the same legal claim, that defendants’ decision to withhold EIPs to incarcerated persons violates the APA. Second, the facts underlying the class‘s claims are both straightforward and the same: some percentage of incarcerated persons are owed advance refunds under the mechanism established by the CARES Act, the IRS made a decision applicable to all incarcerated persons to exclude them from that payment, and the incarcerated persons did not receive those payments. Third, the legal injury in all cases is the same, incarcerated persons did not receive the EIPs provided for by the CARES Act. Fourth, class members and plaintiffs are all challenging the same IRS policy that excludes them from receiving the advance refund. Fifth, plaintiffs seek the same relief, an injunction enjoining defendants from enforcing their unlawful policy.
In light of the foregoing, plaintiffs’ common questions of law and fact easily satisfy the commonality requirement.
c. Typicality
Plaintiffs contend that their claims arise from the same course of events and
d. Adequacy
Additionally,
Plaintiffs assert there are no conflicts between named plaintiffs and their counsel and the proposed class. Mtn. at 21. They also contend that class counsel12 has significant experience prosecuting class actions. Id. at 22.
With regard to plaintiffs, the court finds no conflict between named plaintiffs and the proposed class. They seek the same injunctive relief as class members: an order enjoining defendants from enforcing an unlawful policy. Based on the filings in the case to date, plaintiffs and their counsel have vigorously prosecuted this action on an abbreviated timeline.
With regard to appointment of class counsel, the court finds plaintiffs’ counsel meet the requirements of
Thus, plaintiffs and their counsel are adequate representatives and counsel meet the requirements of
Having satisfied
declaratory or injunctive.” Ellis, 657 F.3d at 986 (quoting Zinser, 253 F.3d at 1195). The “predominance” and “superiority” requirements of
Plaintiffs assert that
The court agrees with plaintiffs that defendants’ policy is generally applicable to the class as a whole. The IRS has decided that all incarcerated persons are ineligible to receive the advance refund payment. While the IRS currently indicates that it will permit persons incarcerated for a portion of 2020 to claim the tax credit on their 2020 tax returns, no such concession has been made for the advance refunds. Rather, there is a uniform policy applicable to both incarcerated and formerly incarcerated persons.
The court is also persuaded that, even if the proposed injunction results in disbursement of monetary relief, the class may still be certified under
In this case, it is significant that plaintiffs request an injunction relating to a generally applicable policy, but any individual determination of monetary relief is left to the IRS, not the court. See Wit v. United Behavioral Health, 317 F.R.D. 106, 133 (N.D. Cal. 2016) (“What is of particular significance is that even if Plaintiffs prevail on their request for an injunction requiring that all claims decided under the allegedly faulty Guidelines be reprocessed, the Court will not be required to address individualized claims for damages.“). Because this case does not involve individual determinations regarding monetary damages, the procedural protections provided to a
In sum, plaintiffs have met the requirements for class certification under
All United States citizens and legal permanent residents who:
- are or were incarcerated (i.e., confined in a jail, prison, or other penal institution or correctional facility pursuant to their conviction of a criminal offense) in the United States, or have been held to have violated a condition of parole or probation imposed under federal or state law, at any time from March 27, 2020 to the present;
- filed a tax return in 2018 or 2019, or were exempt from a filing obligation because they earned an income below $12,000 (or $24,400 if filing jointly) in the respective tax year;
- were not claimed as a dependent on another person‘s tax return; and
- filed their taxes with a valid Social Security Number, and, if they claimed qualifying children or filed jointly with another person, those individuals also held a valid Social Security Number.
Excluded from the class are estates and trusts; defendants; the officers, directors, or employees of any defendant agency; and, any judicial officer presiding over this action and his/her immediate family and judicial staff.
The court further appoints Colin Scholl and Lisa Strawn as representatives of the class and appoints Kelly M. Dermody of Lieff, Cabraser, Heimann & Bernstein LLP and Eva J. Paterson of the Equal Justice Society as co-lead class counsel.
CONCLUSION
For the foregoing reasons, plaintiffs’ motion for preliminary injunction and motion for class certification is GRANTED.
PRELIMINARY INJUNCTION
Defendants Steven Mnuchin, in his official capacity as the Secretary of the U.S. Department of Treasury; Charles Rettig, in his official capacity as U.S. Commissioner of Internal Revenue; the U.S. Department of the Treasury; the U.S. Internal Revenue Service; and the United States of America, are hereby enjoined from withholding benefits pursuant to
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The
IT IS SO ORDERED.
Dated: September 24, 2020
/s/ Phyllis J. Hamilton
PHYLLIS J. HAMILTON
United States District Judge