Modest Needs Foundation et al v. Bianco et al

Filing 38

OPINION AND ORDER re: 31 MOTION to Dismiss the Complaint, filed by Anthony S. Wetmore, Joan M. Casali, Maria Bianco, Cesar Sabando, Kathleen Barker. Defendants' motion to dismiss the complaint is granted. The Clerk of the Court is respectfully requested to mark this matter closed, and as further set forth in this order. (Signed by Magistrate Judge Henry B. Pitman on 7/21/2017) Copies Sent By Chambers. (ras)

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK

-----------------------------------x
MODEST NEEDS FOUNDATION and
KEITH P. TAYLOR,

'USDCSDNY

DOCUMENT
ELECI'RONICALLY FILED
DOC#:
D.ATE FILED: 1f "Lt ft I

Plaintiffs,
16 Civ. 3144

-againstMARIA BIANCO, JOAN M. CASALI,
CESAR SABANDO, ANTHONY S. WETMORE
and KATHLEEN BARKER,

(HBP)

OPINION
AND ORDER

Defendants.

-----------------------------------x
PITMAN, United States Magistrate Judge:

I.

Introduction

Plaintiffs Modest Needs Foundation ("MNF")

and Keith P.

Taylor commenced this action against defendants Maria Bianco,
Joan M. Casali, Cesar Sabando, Anthony S. Wetmore and Kathleen
Barker 1 pursuant to Bivens v. Six Unknown Named Agents of Federal

1

The complaint does not specify in what capacity defendants
are being sued.
A suit against federal officials acting in their official capacities is essentially a suit against the
United States, and is thus barred by sovereign immunity.

Robinson v. Overseas Military Sales Coro.,

21

F.3d 502, 510 (2d Cir. 1994).
However, sovereign
immunity will not shield federal officials from judicial scrutiny where they committed constitutional torts
in their individual capacities.
Bivens v. Six Unknown
(continued ... )

Bureau of Narcotics, supra,
Judgment Act, 28 U.S.C.

§§

403 U.S.

388, and the Declaratory

2201-02, alleging violations of their

right to Due Process 2 and Equal Protection under the Fifth and
Fourteenth Amendments of the United States Constitution.

Plain-

tiffs' claims arise out of a series of examinations of MNF by the
Internal Revenue Service (the "IRS") over a period of more than
five years.

Plaintiffs seek compensatory and punitive damages,

as well as declaratory relief.
28, 2016

(D.I.

By notice of motion dated October

31), defendants move to dismiss plaintiffs' claims

pursuant to Federal Rule of Civil Procedure 12(b) (6).

1

( •••

continued)
Named Agents [of Fed. Bureau of Narcotics], 403 U.S.
388, 397, 91 S. Ct. 1999, 29 L.Ed.2d 619 (1971).
Thus,
claims against federal employees acting in their official capacities will be dismissed outright, but claims
against federal officials acting in their individual
capacities will be evaluated on the merits.
See Robinson, 21 F.3d at 510.

Zherka v. Ryan, 52 F. Supp. 3d 571, 578 (S.D.N.Y. 2014) (Griesa,
D.J.).
For the purposes of this motion, I shall assume that the
defendants are being sued in their individual capacities.
2

It is not clear from the complaint whether plaintiffs are
alleging violations of substantive due process, procedural due
process or both.
In their memorandum of law in opposition to the
motion to dismiss, plaintiffs argue that the complaint alleges
both (Plaintiffs' Memorandum of Law in Opposition to Defendants'
Motion to Dismiss, dated Dec. 2, 2016 (Docket Item ("D.I.") 34)
("Pl.' s Mem. "), at 6-15).
For the purposes of this motion, I
shall assume that the complaint alleges both substantive and
procedural due process violations.
2

The parties have consented to my exercising plenary
jurisdiction over this matter pursuant to 28 U.S.C. § 636(c).
For the reasons set forth below, defendants' motion to dismiss is
granted.

II.

Facts

A.

Background

The complaint alleges the following facts which I
assume to be true for the purposes of resolving this motion.
Ashcroft v.

Iqbal,

556 U.S.

662,

67 8

(2009)

In March 2002, Taylor formed MNF, a non-profit, taxexempt organization, the stated mission of which is to assist
"hard-working,

low-income individuals and families struggling to

overcome the burden of short-term, emergency expenses"

(Com-

plaint, dated Apr. 25,

26).

2016 (D.I.

1)

("Compl.")

<Jl<j[

21,

After garnering national media attention, MNF's revenue exceeded
$500,000 for the first time in fiscal year

("FY")

2005; as a

result, MNF was required to undergo an external audit

3

(Compl. <Jl<Jl

The complaint is not well drafted, lacks continuity and
contains some allegations which appear to be counterintuitive.
To the extent my statement of the facts contains similar flaws,
it is because the flaws exist in the complaint.
I have attempted
to state the facts as coherently as possible without substantively altering plaintiffs' allegations.
3

23-28,

35).

MNF hired Iris Rosken to perform this audit, as well

as the audits in FY 2006 and FY 2007

(Compl.

Beginning in FY 2008, MNF hired Eisner LLP

']['][ 35-37,

39,

43)

("Eisner"), an ac-

counting firm that Rosken supervised, to conduct annual audits
(Compl. '][ 49).

From FY 2005 to FY 2008, the audits found no

irregularities with MNF's bookkeeping, accounting practices,
corporate policies or its leadership (Compl. ']['][ 37,

39,

43,

49)

In FY 2009, Eisner performed an audit of MNF and once
again found no irregularities with respect to MNF's accounting
policies and practices, management or recordkeeping
60) .

(Compl.

'][

However, the audit noted an outstanding "loan" to Taylor;

it accounted for more than fifty percent of the organization's
business expenses incurred in FY 2009 that Taylor had elected to
reimburse pursuant to a longstanding agreement 4 with MNF's Board
of Directors

( Compl. '][ 61) .

In a meeting,

Eisner explained that

because Taylor failed to deliver the reimbursement prior to the
close of business on December 31, 2009, Eisner had no choice but
to carry over the balance into FY 2010 and to show the outstanding amount as a loan to Taylor in FY 2009

(Compl. '][ 61).

Despite

Taylor's insistence that he had delivered the reimbursement

4

Pursuant to this agreement, any expense incurred by MNF at
Taylor's discretion that was determined by Taylor and a board
member to be "'ineffective'" would be reimbursed by Taylor
(Compl. '][ 32).
4

before the end of 2009, MNF's Board of Directors voted to accept
the audit report

(Compl.

err

62).

After the meeting, Taylor asked Rosken why the audit
report would show an outstanding loan to Taylor even though
Taylor had delivered the funds prior to the close of business on
December 31, 2009

Rosken explained that Eisner

(Compl. g[ 62).

noted that Taylor's reimbursement was not deposited until midJanuary 2010; under those circumstances, Eisner determined that
the payment was properly classified as having been received in FY
2010, not FY 2009

(Compl. g[g[ 62-63).

Over the ensuing months, Rosken became increasingly
hostile and had had several disagreements with Taylor
64-68).

(Compl. g[g[

In October 2010, Taylor discovered that Rosken had

systematically allocated hundreds of MNF's expenses to an account
which tracked the business expenses that Taylor would likely
choose to re-pay at the conclusion of the fiscal year
69) .

(Compl. g[

These adjustments suggested that Taylor owed MNF a great

deal of money (Compl.

g[ 70).

Taylor decided to review all of MNF's FY 2009 and FY
2010 books and records, particularly all records pertaining to
the transaction that had resulted in the booking of the "outstanding loan" in FY 2009

(Compl. q[ 70).

In conducting this

review, Taylor discovered that Rosken had accessed MNF's books
5

and records in January 2010 and administratively changed the
"date received" entry for Taylor's reimbursement check from a
date in 2009 to one in 2010

(Compl.

~

Taylor met with

70).

Eisner to discuss this issue and presented documentation regarding the transaction in question

(Compl.

~

72).

Upon reviewing

Taylor's evidence, Eisner told him that the repayment should have
been classified as occurring in FY 2009 and that no outstanding
loan should have been booked (Compl.

~

73).

Eisner also produced

work papers to Taylor which showed that Rosken had adjusted the
"date received" field prior to Eisner's audit

(Compl.

~

73).

Eisner went on to explain that no provision of generally accepted
accounting principles could have justified Rosken's adjustment
and that Rosken knew, or reasonably ought to have known, that the
adjustment would raise very significant issues with state and
federal regulatory agencies and dramatically increase the probability that MNF would be selected for an audit by the IRS
~

73).

Rosken

(Compl.

After learning this information from Eisner, Taylor fired
(Compl.

~~

76-78).

Immediately after her termination,

Rosken sent a letter

to MNF's Board of Directors accusing Taylor of having founded MNF
primarily to benefit himself and his family and of treating MNF
as his "'personal piggy bank'"

( Compl.

~

7 9) .

Rosken insisted

that the Board of Directors was obligated to hire a forensic
6

accountant to determine the extent of Taylor's alleged malfeasance, to terminate Taylor's employment as President and Executive Director of MNF and to hire her into Taylor's position;
Rosken also demanded that the Board make and inform her of its
decision regarding Taylor's employment within 14 days
7 9) .

(Compl. '!!

Rosken's letter went on to state that if the Board of

Directors did not take the foregoing actions and report back to
her within 14 days,

she would take "'whatever actions were

necessary'" to ensure that MNF and Taylor were held accountable
for Taylor's alleged abuse of his position (Compl. '!! 79).

The

Board of Directors determined that Rosken's allegations were
baseless and sent a note to Rosken indicating that their investigation had been completed and that they had "'taken the action
they deemed appropriate'"

B.

(Compl.

'j[

83).

Examination of MNF's
FY 2008 by Barker and Sabando

Approximately two weeks after the Board of Directors
informed Rosken that their investigation was complete,

Kathleen

Barker, a Revenue Agent working in the IRS's tax-exempt/government entities group,

sent MNF a "certified letter"

indicating that the organization's FY 2008 Form 990 had been

7

selected for an audit

(Compl.

c_rr

When Taylor and Barker met

84)

on or about January 3, 2011, Barker explained that the audit was
the result of a "'referral'
(Comp 1.

c_rr

8 5) .

(£.g.,

a 'complaint' of some kind)"

She also explained that the purpose of the audit

was to determine whether MNF qualified for tax exempt status
( Compl.

c_rr

8 5) .

Finally, Barker explained that the audit would

take "years" to complete, even though she had not even begun to
review any books or records

(Compl.

86)

c_rr

access to all of MNF's books and records

Taylor gave Barker
(Compl.

c_j[

87).

In late March or early April 2011, Taylor received an
Information Document Request

("IDR"),

signed by Barker and

authorized by Cesar Sabando, Barker's direct supervisor, which
requested a minimum of one thousand pages of documentation
regarding MNF's FY 2008 financial transactions

(Compl.

c_rr

91).

This request sought documents for virtually every expense incurred by MNF in that year

(Compl.

c_rr

91).

Plaintiffs claim that

the IDR requested far more documentation from MNF than was
reasonably necessary to account for the "business purpose" of
MNF's FY 2008 expenditures and/or to determine whether MNF served
a bona fide charitable purpose

(Compl.

5

c_rr

94).

The complaint does not explain what plaintiffs mean by a
"certified letter."
8

Taylor received a second IDR from Barker on or about
August 16, 2011

(Compl. 'JI 97).

This IDR focused almost exclu-

sively on travel and meeting expenses incurred by MNF in FY 2008
(Compl. 'JI 98) .

In light of Barker's ongoing examination,

the

second IDR seemed to suggest that Barker was seeking evidence to
support the allegations of self-dealing that Rosken had leveled
against Taylor

(Compl. 'JI 98).

Specifically,

it appeared that

Barker and Sabando were attempting to establish that Taylor
founded MNF for his personal benefit, treated the organization as
his "'personal piggy bank'" and was not fit to serve as MNF's
President and Executive Director (Compl. 'Jig[ 102, 104)

As a

result of their belief that they were being targeted, MNF and
Taylor retained counsel in November 2011
On January 3,

(Compl. 'Jig[ 105-06).

2012, Barker demanded that either Taylor

or his counsel agree to extend by one year the statutory deadline
for the assessment of taxes or penalties
January 11,

2012,

(Compl. 'JI 111).

On

Barker stated that she needed an additional

year to examine MNF's books and records and that if Taylor did
not agree to extend the deadline, Barker would close the audit,
issue a Notice of Deficiency (an "NOD")

against Taylor and

commence an examination of MNF's books and records for additional

9

years

(Compl.

~

113)

Barker explained that these actions would

be easy for her to justify because, notwithstanding her need for
an additional year to complete the examination,

she had already

determined that flights Taylor had taken' were a fringe benefit,
whether or not they were for business purposes,

and the ''Confer-

ence and Meeting" expenses incurred were inappropriate
113) .

(Compl.

~

Taylor agreed to a three-month extension of the deadline

( Compl.

C.

~

11 S) .

Examination of MNF's
FY 2008 by Bianco and Sabando

Maria Bianco replaced Barker in February 2012 and was
assigned to complete the examination of MNF's FY 2008 books and
records

(Compl.

~

117).

In April 2012, Bianco informed Taylor

and his counsel that she identified only one issue with respect
to MNF's books and records, which was that MNF had issued both a
Form W-2 and a Form 1099 to three employees,
Taylor

(Compl. 'TI'TI 122, 124) . 8

one of whom was

On a telephone call, plaintiffs'

clt seems counterintuitive that Barker would seek to expand
the audit when she did not even finish her audit of FY 2008.
For example, Taylor traveled to San Francisco because MNF
was opening an office there (Compl. ~'TI 46, 88).
8

The complaint actually alleges that these employees were
"paid via both a Form W2 and a Form 1099" (Compl. 'TI 122 (emphasis
in original)).
Because neither a W-2 nor a 1099 is a payment
(continued ... )
10

counsel informed Bianco that MNF would remit payment to correct
the delinquency (Compl.

~

125).

However, Sabando joined the call

and informed counsel that he still would not issue a "closing
letter" with respect to the FY 2008 examination, even though no
other deficiencies were identified, because the audit was "ongoing"

(Compl.

~

126).

Sabando explained that the examination

would be ongoing because he personally did not like Taylor
(Compl.

~

126).

Sabando also expressed his belief that Taylor

used MNF as his "personal 'bank account'" and that if MNF's Board
of Directors cared about MNF, they would fire Taylor
12 6) .

(Compl.

~

Finally, Sabando opined that if Taylor cared about MNF, he

would resign because Sabando intended to keep MNF under audit
until either Taylor was removed or resigned from his position or
the cost of responding to the audits forced MNF out of business
(Compl.

~

126).

Upon learning of these statements, Taylor

informed his counsel that the statements closely resembled the
accusations Rosken had made against MNF and Taylor at the time of
her termination (Compl.

~

126).

'' ( ... continued)
instrument, I take this to mean that the employees were issued
both a Form W-2 and a Form 1099 for their wages.
11

In May 2012, Taylor received assessments for the
deficiency Bianco identified, and MNF remitted payment in the
interest of closing the FY 2008 audit

0.

(Compl.

~

127).

Expansion of Examination
by Bianco and Sabando

On the same day that MNF remitted payment in an effort
to close the FY 2008 audit, Taylor received a new IOR from Bianco
(Compl.

~

128).

This IDR indicated that, despite having found no

additional issues with respect to MNF's FY 2008 books and records, the audit was being expanded at Sabando's discretion to
include MNF's Form 990 for FY 2009 and FY 2010

(Compl.

~

128)

The IDR also allegedly sought documents that did not exist
(Compl.

~

129).

For example, although the IDR requested board

minutes regarding a list of expenses that were incurred by Taylor
and that the Board of Directors determined were "'unnecessary and
unreasonable,"' Barker, Bianco and Sabando knew that no such
expenses existed (Compl.

~

129) . 3

When plaintiffs' counsel

called Sabando to ask why the examination was expanded when the
FY 2008 examination had not revealed any wrongdoing beyond the

"MNF's Board of Directors did not disallow these expenses;
rather, Taylor had determined that these expenses were not
properly chargeable to MNF and voluntarily reimbursed the organization for the expenses (Compl. ~ 129)
12

manner in which the wages of three employees were reported to the
IRS, Sabando explained that the audit was being expanded because
MNF was unwilling to extend the statutory deadline to assess
taxes or penalties for FY 2008 for the full year,

so Sabando's

office could not "'complete their audit of that year'"

(Compl.

g[g[

130-31) .. J

1.

The Freedom of
Information Act Request

On June 10, 2012, plaintiffs' counsel drafted a Freedom
of Information Act request to the IRS,
audit file concerning MNF (Compl.
December 21, 2012,
(Compl.

g[

137).

g[

requesting a copy of the

135).

On approximately

counsel received a redacted copy of the file

It revealed that prior to Barker's initial

meeting with Taylor in January 2011, Barker and Sabando had
already determined that Taylor used MNF's resources for his
personal benefit and that he should be removed as MNF's President
(Compl. 'll 137) .

Moreover, the file revealed that Bianco and

Sabando intended to continue their examination of MNF for as long

10

Again, it seems counterintuitive to expand the audit to FY
2009 and FY 2010 when Sabando did not even finish his audit of FY
2008.
The complaint later alleges that Sabando expanded the
audit because he did not personally like Taylor and because he
wanted both to force Taylor from his position and to force MNF
into insolvency (Compl. g[ 252).
13

as was necessary to force Taylor's resignation or termination, or
until such time as the cost of responding to the examination
forced MNF into insolvency (Compl.

2.

~

137).

Attempts to Extend
the Statutory Deadline

On March 21,

2013, Taylor and his counsel received

summonses demanding that they deliver the documentation requested
in the 2012 IDR by April 1, 2013

(Compl. 'TI 138).

When counsel

asked for an extension of the deadline to comply with the summons,

Sabando stated that he would consider extending the dead-

line only if MNF agreed to extend the statutory deadline for the
assessment of taxes and penalties for FY 2009 for a minimum of
six months

(Compl.

'TI 140).

extension was unnecessary,

When counsel explained that such an
Sabando ended the conversation and

subsequently failed to return counsel's telephone calls
'TI'TI 140,

(Compl.

143).
On May 3, 2013, Sabando informed counsel that if MNF

did not agree to extend the deadline for a full six months, he
would immediately move for revocation of MNF's tax-exempt status
(Compl. 'TI 144) .

On May 6,

counsel informed Sabando that MNF and

Taylor would agree to a three-month extension, but Sabando
refused the offer (Compl. 'TI 146).

14

On May 8,

Sabando informed

counsel that because Taylor was unwilling to extend the statutory
deadline as Sabando had demanded, Bianco and Sabando would be
issuing a Jeopardy Assessment not against MNF, but against Taylor
personally (Compl. ':!I 149).

Alternatively,

Sabando stated that if

Taylor or his counsel agreed to extend the deadline by six
months, Taylor could avoid the assessment or appeal it
150) .

(Compl. ':!I

Counsel reiterated the offer to extend the deadline by

three months, at which point Sabando ended the conversation
( Compl. ':!I 15 0) .

3.

Jeopardy Assessment
and NOD for FY 2009

On May 15,
and NOD,

2013, Taylor received a Jeopardy Assessment

even though he was never personally under audit and

never had the opportunity to provide documentation with respect
to the accuracy of his own Form 1040 for FY 2009 11
151) .

(Compl. ':!I

The NOD did not contain an itemized list of all expenses

that had been disallowed or an explanation of the disallowances,
as was required;

rather,

the NOD consisted of a list of disal-

11

While personal taxes are normally filed by calendar year,
an individual may "adopt a fiscal year provided that the individual maintains his or her books and records on the basis of the
adopted fiscal year."
I.R.S. Publ'n 538, 2008 WL 713620 at *2,
*5 (Mar. 1, 2008).
15

~~

lowed lump-sum payments that were broadly categorized (Compl.
153-54) .

After receiving the NOD,
several remedies.

Taylor and his counsel pursued

They filed a motion challenging the NOD in the

United States Tax Court

(the "Tax Court")

They

(Compl. '3l 159).

also successfully petitioned Senator Kirsten Gillibrand to
commence an investigation of the ongoing examination (Compl.
162-63).

~'TI

As a result of Senator Gillibrand's investigation,

Sabando was disciplined, placed on administrative leave and
temporarily relieved of his managerial duties

(Compl. '3l 163)

Additionally, the examination of MNF was transferred to a different group, headed by IRS Revenue Manager Joseph Colletti

(Compl.

'31163).l?.

E.

FY 2009 "Re-Audit"

On September 16,

2013,

Colletti informed plaintiffs'

counsel that MNF's FY 2009 books and records would be re-audited
and that the re-audit would be headed by Bianco

(Compl. '3l 165).

aylor and his counsel also sought help from the Office of
the Taxpayer Advocate and the United States Treasury Inspector
General for Tax Administration (Compl. '3l'3l 159-60).
However, both
offices informed Taylor and his counsel that they could not help
( Compl. '3l'3l 15 9-60) .
16

On November 5, 2013,

an IRS Appeals Officer called

plaintiffs' counsel to discuss the possibility of MNF's FY 2009
books and records being reviewed by the IRS Appeals Off ice
("Appeals"), an option which plaintiffs claim should have been
available to them (Compl.

~

167).

The next day, plaintiffs'

counsel spoke by telephone with Joan M. Casali, the IRS Counsel
who had been assigned to defend the NOD (Compl.

~~

167-68).

Casali was adamant that no one in Appeals would be allowed to
review either the NOD or the documentation MNF compiled in
response to the IDR for MNF's FY 2009 books and records
168) .

Rather, Casali informed counsel,

(Compl.

~

she would accept the re-

audit as if it had been completed by Appeals

(Compl.

~

168) . 13

The re-audit of MNF's FY 2009 books and records was
scheduled to begin on February 10, 2014, with Bianco, Casali and
plaintiffs' counsel present

(Compl.

~

175).

At the commencement

of the gathering, Casali announced that she was attending the reaudit not in her capacity as IRS Counsel, but rather on behalf of
Appeals, and that she had been empowered by Appeals to perform

13

Months later, an IRS Appeals Officer
counsel that there was an "obscure element"
Revenue Manual that allowed Casali to force
for any reason she believed was appropriate
an explanation (Compl. ~ 183).
17

informed plaintiffs'
of the Internal
a case into Tax Court
and without providing

the functions of an Appeals

Officer~

4

(Compl.

<JI

175).

However,

after calling Appeals, Taylor's counsel learned that Casali's
statements were false

(Compl.

<JI

175).

Casali then prevented the

re-audit from proceeding and stated that she had already determined that Taylor used MNF as his "personal 'expense account'"
and demanded that plaintiffs' counsel justify certain decisions
by the Board of Directors

(Compl.

'TI 176).

She also insisted that

the re-audit focus solely on the expenses that had been charged
to Taylor by Bianco and Sabando in the FY 2009 NOD (Compl.
1 77) .

<JI

Finally, Casali stated that the next decision in the case

would be hers,

not Appeals', and no re-audit occurred at that

(Compl. 'TI'TI 177-78).

time

On February 20,

2014, Bianco sent plaintiffs' counsel

an itemized list of expenses that had been disallowed on the NOD
previously issued to Taylor

(Compl. 'TI 179).

Bianco and Sabando

had construed virtually all of the business expenses incurred by
MNF in FY 2009 as if they had been salary paid to Taylor by MNF
in FY 2009

(Compl. 'TI'TI 179-80).

The list also included amounts

that Bianco knew, or reasonably should have known, had been
reimbursed by Taylor

(Compl. 'TI 179).

1

~The complaint does not specify what the functions of an
Appeals Officer are.

18

A second re-audit was scheduled to take place on
February 26,

2014

(Compl. en 181).

Casali attended the re-audit

and used the meeting to review documentation which,
circumstances,

under normal

should not have been available to her and to ask

questions that were apparently aimed at defending the IRS's
position in the matter

Plaintiffs claim that

(Compl. en 181).

these actions were an impermissible form of pre-trial discovery
in the Tax Court proceeding that Taylor had commenced (Compl. en
182) .

She also reiterated that she had already concluded that

Taylor used MNF to fund his own expenses
again, no re-audit took place
On March 26,

(Compl.

(Compl. en 181).

Once

en 181).

2014, an IRS Appeals Officer informed

plaintiffs' counsel that Casali had taken the case with respect
to MNF's FY 2009 books and records from Appeals in order to
prepare for the trial in Tax Court and that Casali would not
allow Appeals to review any of the computations made by Bianco
and Sabando during their audit for possible settlement purposes
( Compl. en 18 3) .
On or about June 23,

2014, Casali wrote to plaintiffs'

counsel stating that she would void Bianco's ultimate findings
with respect to MNF's FY 2009 books and records and would personally re-audit them, even though Bianco and Colletti had previously told plaintiffs' counsel that substantially all questions
19

with respect to the FY 2009 examination and resulting NOD had
been answered satisfactorily (Compl.
Around June 27,

2014,

~~

187-88, 194).

several individuals who are not

specifically identified in the complaint told Taylor that they
had been served with subpoenas issued by Casali, ordering them to
appear at the Tax Court proceeding Taylor had commenced with
respect to the NOD (Compl.

~

196).

The subpoenas did not refer

to MNF and were written in a manner that suggested Taylor was the
defendant in the matter

(Compl.

~

196).

Casali withdrew the

subpoenas after a judge in the Tax Court admonished her for
improperly issuing them (Compl.

F.

~~

202-03).

Jeopardy Assessment
and NOD for FY 2010

In May 2014, Anthony S. Wetmore replaced Bianco as
MNF's examiner (Compl.

~

190).

In order to complete his examina-

tion of MNF's FY 2010 books and records, he prepared a new IDR in
June 2014 requesting voluminous information within 19 days, a
shorter time frame than the 30-day statutory period normally
allotted (Compl.

~

192).

On October 20,

2014, Wetmore informed plaintiffs'

counsel that, at Casali's direction, he would be ceasing his
examination into FY 2010,

closing the case and issuing a second

20

NOD against Taylor

(Compl.

~

210).

"Per Casali, " 15 Wetmore told

counsel that this NOD would treat all travel, meeting, credit
card payments and similar business expenses incurred by MNF in FY
2010 as if they were salary paid to Taylor

(Compl.

~

210).

Wetmore hinted that he would be willing to reconsider his decision if plaintiffs agreed to extend the statutory deadline for
the assessment of taxes and penalties

(Compl.

~

210).

After

plaintiffs' counsel advised Wetmore that plaintiffs would not
agree to an extension, the NOD was issued against Taylor
~~

211-12).

(Compl.

Like the other NOD, this NOD treated business

expenses incurred by MNF as if they had been salary paid to
Taylor

(Compl.

~

212).

Additionally, this NOD did not itemize

the expenses incurred by MNF that had been disallowed (Compl.

~

Finally, the inclusion of a certain sum 16 on the NOD

212) .

clearly indicated that it was really Taylor who had been audited
by Wetmore and Casali, not MNF, despite the fact that Taylor had
never been notified that he was under examination, had never been
asked to provide any records concerning his Form 1040 for FY 2010
and had never been advised of his rights

(Compl.

~

213).

·~r understand the complaint's use of this expression to
mean that Wetmore acted at Casali's direction.
6

This sum, which was also listed on Taylor's Form 1099-T,
was interest purportedly received by Taylor as part of a rental
agreement (Compl. ~ 213).
'

21

G.

FY 2011 Examination
by Wetmore

On or about November 25,

2013, plaintiffs and their

counsel received notice that MNF's FY 2011 Form 990 had been
selected for an audit,
December 2014

(Compl.

and Wetmore commenced the examination in
<Jl<Jl

170, 214).

In January 2015, Wetmore,

in

collaboration with Casali, issued five IDRs for FY 2011 requesting voluminous information from MNF, even though Wetmore either
had, or should have already had, the information (Compl.

<J[<J!

214-

19) .
Wetmore engaged in numerous allegedly inappropriate
activities in connection with this audit.

For example, he

demanded that Taylor provide his personal Form 1040 for FY 2011
and that Taylor consent to an extension of the deadline for the
assessment of taxes and penalties in connection with that Form
1040, even though Taylor was not personally under audit
218) .

(Compl.

<JI

Additionally, at the express direction of Casali and in an

attempt to circumvent discovery, Wetmore telephoned one of MNF's
directors and demanded that she submit to an interview (Compl.
222-23).
On September 2, 2015, Wetmore issued an NOD against
Taylor for FY 2011,

even though Taylor had never been placed

22

<J[<Jl

under audit and even though a bona fide examination of MNF's FY
2011 books and records had allegedly not been completed (Compl.
Like the other NODs in issue,

22 9) .

~

this NOD did not itemize the

business expenses that had been disallowed; rather,
lump sums that were broadly categorized (Compl.

~

it included

230).

The NOD

contained one figure that was not referenced in any part of MNF's
books and records,
FY 2011,
audit

but instead came from Taylor's Form 1099-T for

suggesting that Taylor himself was the target of an

(Compl.

~~

230-31).

Plaintiffs'

counsel petitioned the Tax Court to protest

the NOD and contacted Appeals in an effort to reach a settlement
( Compl.

~

232) .

On December 7,

2015, plaintiffs' counsel re-

ceived notification that Wetmore had refused to forward the files
related to the FY 2011 examination to Appeals for review
~

234).

for trial

H.

(Compl.

The file was instead delivered to Casali in preparation
(Compl.

~

234) .

Proposal to Revoke
MNF's Tax-Exempt Status

On December 8,
supervision of Casali,

2015, Wetmore, working under the direct

authored and filed a proposal that MNF's

tax-exempt status be revoked (Compl.

23

~

236).

Plaintiffs and their counsel were inadvertently provided with an unredacted copy of the proposal on or about December 11, 2015

(Compl. SI 237).

The proposal demonstrated that from

at least 2009, when Sabando had threatened to ruin Taylor professionally and financially if he did not immediately resign,

it was

Taylor, not MNF, who had been the target of the examinations
(Compl.

<JI

238) .

Defendants had completed examinations of Taylor

personally, without authorization and without ever placing him
under formal examination (Compl.

<JI

238).

Defendants also failed

to request documentation from Taylor personally,

issued unwar-

ranted NODs against him and deprived Taylor of access to the
Appeals process

(Compl.

<JI

238).

The proposal also showed that

defendants had disregarded all of the information MNF presented,
particularly that information which would have been advantageous
to the organization,

in the interest of prolonging the examina-

tions of MNF in an effort to render it insolvent
Finally,

(Compl. SI 238).

the proposal contained a series of overt omissions and

misstatements

(Compl.

238-53).

<Jl<Jl

For example, Wetmore failed to

mention that Sabando had expanded MNF's audit to include FY 2009
and FY 2010 because he did not personally like Taylor and because
he wanted both to force Taylor from his position and to force MNF
into insolvency (Compl.

<JI

252).

Wetmore also wrote that MNF made

indirect payments to Taylor through an entity named 501web, a
24

company that MNF paid to rebuild its website
121, 241).

(Compl.

~~

55-59,

Wetmore allegedly made this allegation despite

possessing documentation that Taylor did not own or control
50lweb (Compl.

~~

208,

242).

On or about January 15,

2016, plaintiffs' counsel sent

a document protesting the proposal to revoke MNF's tax-exempt
status

(Compl.

~

255).

On January 20,

2016, after receiving

correspondence from Wetmore indicating that he and Casali would
not accept the protest, counsel called Wetmore to inform him that
he was protesting the proposal to Appeals, not to Wetmore and
Casali

(Compl.

~

256).

Wetmore informed counsel that he had been

instructed to answer the protest as if he worked in Appeals
( Compl.

I.

~

2 5 6) .

Consequences
to Plaintiffs

Defendants' alleged actions led to serious adverse
consequences for plaintiffs.

Defendants' actions allegedly drove

MNF to the verge of insolvency (Compl.

~

227).

Its income and

grant-making capacity was substantially reduced,

and it has had

to spend significant sums to respond to the IDRs

(Compl.

17

~~

274,

The complaint does not state to whom plaintiffs' counsel
delivered the document.
25

Additionally, Taylor's credit was ruined,

281) .

driven to the verge of bankruptcy (Compl.

III.

and he was also

'TI 298)

Analysis

A.

Plaintiffs' Claims and
Defendants' Arguments

Plaintiffs allege that defendants deprived MNF of its
Fifth and Fourteenth Amendment right to Due Process and Equal
Protection by subjecting it to a series of examinations over five
years in order to force it into insolvency and to remove Taylor
from his position (Compl.

'TI'TI 2,

4,

264-83).

Taylor alleges that

defendants deprived him of his Fifth and Fourteenth Amendment
right to Due Process and Equal Protection by issuing a series of
assessments against Taylor personally for taxes,

interest and

penalties, even though Taylor was never placed under audit,
notified that he was under audit or asked to provide documentation regarding any alleged taxes he may have owed (Compl. 'TI'TI 3,
284-304).

Taylor also alleges that defendants deprived him of

his constitutional rights by denying him the opportunity to
utilize the Appeals process and instead forcing him to litigate
in Tax Court, which would have been prohibitively expensive
(Compl. 'TI'TI 292-94).

Plaintiffs seek more than $9 million in

compensatory and punitive damages, as well as a declaratory
26

judgment that defendants violated their Fifth and Fourteenth
Amendment rights to Due Process and Equal Protection (Compl., at
146-47).
Defendants seek dismissal of the complaint.

First,

they argue that the complaint fails to state a Fourteenth Amendment claim because the defendants are federal -- not state -actors

(Memorandum of Law in Support of Motion to Dismiss the

Complaint, dated Oct. 28,

2016

(D.I.

32)

("Def. 's Mem."), at 18)

Second, they argue that Congress has provided a comprehensive
remedial scheme for plaintiffs' claims and,

therefore,

remedy should not be implied for the conduct in issue
Mem. , at 7 -12) .

a Bivens
(Def. 's

Third, defendants argue that the complaint fails

to state either a Due Process or Equal Protection claim under the
Fifth Amendment

(Def. 's Mem., at 14-18).

Fourth, defendants

argue that they are entitled to qualified immunity (Def. 's Mem.,
at 12-14).

27

B.

Legal
Standards

1.

Standards Applicable to
Defendants' Motion to Dismiss
Pursuant to Rule 12 (b) (6)

The standards applicable to a motion to dismiss pursuant to Rule 12(b) (6)

are well-settled and require only brief

review.
The Supreme Court has established a two-step process
for determining whether a plaintiff has pled sufficient
A court must
facts to overcome a motion to dismiss.
first ignore "mere conclusory statements" or legal
conclusions, which are not entitled to the presumption
of truth.
Ashcroft v. Igbal, 556 U.S. 662, 678, 129 S.
Ct. 1937, 173 L.Ed.2d 868 (2009) (citing Bell Atl.
Corp. v. Twombly, 550 U.S. 544, 555, 127 S. Ct. 1955,
167 L.Ed.2d 929 (2007)).
Then, assuming the veracity
of the remaining facts, "a complaint must contain
sufficient factual matter .
. to 'state a claim [for]
relief that is plausible on its face.'"
Id. (quoting
Twombly, 550 U.S. at 570, 127 S. Ct. 1955).
A claim is
plausible "when the plaintiff pleads factual content
that allows the court to draw the reasonable inference
that the defendant is liable for the misconduct alleged."
Id. (emphasis added) .
While this plausibility
standard is not "akin to a 'probability requirement,'"
it "asks for more than a sheer possibility that a
defendant has acted unlawfully."
Id. (quoting Twombly,
550 U.S. at 556, 127 S. Ct. 1955).
Pleading facts that
are "'merely consistent with' a defendant's liability"
is insufficient.
Id. (quoting Twombly, 550 U.S. at
557, 127 S. Ct. 1955).
Pungitore v. Barbera,
order)

506 F. App'x 40,

42

(2d Cir. 2012)

(alterations and emphasis in original).

28

(summary

2.

Fifth and Fourteenth
Amendments

The Fifth Amendment provides that "[n]o person shall
deprived of life,

be .

liberty, or property, without due

process of law," U.S. Const. amend. V, and is applicable only to
the federal government.
193

Windsor v. United States,

(2d Cir. 2012), aff'd,

133 S. Ct.

2675

(2013); Viteritti v.

Incorporated Village of Bayville, 831 F. Supp.
(E.D.N.Y. 2011).

699 F.3d 169,

2d 583,

592

Although the Fifth Amendment does not contain

an explicit Equal Protection Clause,

"the Due Process Clause of

the Fifth Amendment contains an equal protection component
prohibiting the United States from invidiously discriminating
between individuals or groups."
229, 239

Washington v.

Davis,

(1976), citing Bolling v. Sharpe, 347 U.S.

(1954); see Weinberger v. Wiesenfeld,

420 U.S.

636,

426 U.S.

497,

498-99

638 n.2

( 197 5) .
Conversely,

the Fourteenth Amendment applies only to

the states, not the federal government.
Carter,

409 U.S.

418,

424

(1973)

District of Columbia v.

("[A]ctions of the Federal

Government and its officers are beyond the purview of the
teenth] Amendment."); Hudson Valley Black Press v.
Revenue Serv.,

307 F. Supp. 2d 543,

(Conner, D.J.), aff'd,

545 n.4

Internal

(S.D.N.Y. 2004)

409 F.3d 106 (2d Cir. 2005).
29

[Four-

The Four-

teenth Amendment contains both a Due Process Clause and an Equal
Protection Clause, providing,
"deprive any person of life,

respectively, that no state shall
liberty, or property, without due

process of law" or "deny to any person within its jurisdiction
the equal protection of the laws."

3.

U.S. Const. amend. XIV,

§

1.

Bivens Action

In Bivens v.
of Narcotics, supra,

Six Unknown Named Agents of Federal Bureau

403 U.S.

388,

"the Supreme Court recognized

as implicit in certain constitutionally protected rights a
federal claim for money damages against federal officials,
in their individual capacities,
M.E.S.,

Inc. v. Snell,

sued

for violations of those rights."

712 F.3d 666,

671

(2d Cir. 2013).

A

Bivens claim provides "a judicially-created remedy stemming
directly from the Constitution itself."
F.3d 559,

571

(2d Cir. 2009)

Arar v. Ashcroft,

(en bane), citing Bivens v.

Unknown Named Agents of Federal Bureau of Narcotics,
U.S. at 397.
action.

585

Six

supra,

403

Only money damages are available in a Bivens

Higazy v. Templeton,

505 F.3d 161, 169 (2d Cir. 2007)

A Bivens remedy is an "extraordinary thing that should
rarely if ever be applied in 'new contexts.'"
supra,

585 F.3d at 571; Dotson v. Griesa,

Cir. 2005)

Arar v. Ashcroft,

398 F.3d 156, 166 (2d

("Because a Bivens action is a judicially created
30

remedy, however, courts proceed cautiously in extending such
implied relief [.] ") .

Just this year, the Supreme Court has

emphasized that "expanding the Bivens remedy is now a disfavored
judicial activity."
(2017)

Ziglar v. Abbasi,

137 S. Ct. 1843, 1857

(internal quotation marks omitted).

The Supreme Court has

recognized a Bivens action in only three contexts:

(1)

an

unreasonable search and seizure in violation of the Fourth
Amendment, Bivens v.
Narcotics,

supra,

Six Unknown Named Agents of Fed. Bureau of

403 U.S. at 397;

(2)

employment discrimination

in violation of the Due Process Clause of the Fifth Amendment,
Davis v. Passman,

442 U.S. 228, 248-49

(1979), and (3)

failure to

treat an inmate's medical condition in violation of the Eighth
Amendment, Carlson v. Green,
Abbasi,

446 U.S. 14, 19

supra, 137 S. Ct. at 1854-55, 1857

(1980).

Ziglar v.

(collecting cases

where the Supreme Court refused to extend Bivens); see Correctional Servs. Corp. v. Malesko,

534 U.S.

61,

68

(2001)

(since

Carlson, the Supreme Court has "consistently refused to extend
Bivens liability to any new context or category of defendants")
The Supreme Court has noted that "the analysis in the Court's
three Bivens cases might have been different if they were decided
today" and that the Bivens remedy should be retained in the
"common and recurrent sphere" of the "search-and-seizure context

31

in which it arose."

Ziglar v. Abbasi,

supra, 137 S. Ct. at 1856-57.

In determining whether a Bivens action should proceed,
the court must first analyze whether the claim at issue extends
Bivens in a "new context."
563.

Arar v. Ashcroft,

supra,

585 F.3d at

As the Supreme Court explained in Ziglar v. Abbasi,

supra,

137 S. Ct. at 1859-60, 1865,
The proper test for determining whether a case
presents a new Bivens context is as follows.
If the
case is different in a meaningful way from previous
Bivens cases decided by this Court, then the context is
new.
Without endeavoring to create an exhaustive list
of differences that are meaningful enough to make a
given context a new one, some examples might prove
instructive.
A case might differ in a meaningful way
because of the rank of the officers involved; the
constitutional right at issue; the generality or specificity of the official action; the extent of judicial
guidance as to how an officer should respond to the
problem or emergency to be confronted; the statutory or
other legal mandate under which the officer was operating; the risk of disruptive intrusion by the Judiciary
into the functioning of other branches; or the presence
of potential special factors that previous Bivens cases
did not consider
[T]he new-context inquiry is
easily satisfied.
If the plaintiff's claim presents a "new context," the court must
then engage in a two-step inquiry.

First,

"there is the question

whether any alternative, existing process for protecting the
[constitutionally-recognized]

interest amounts to a convincing

reason for the Judicial Branch to ref rain from providing a new
and freestanding remedy in damages."
537,

550

(2007),

citing Bush v. Lucas,
32

Wilkie v. Robbins,
462 U.S.

367,

378

551 U.S.
(1983);

accord Ziglar v. Abbasi,

supra, 137 S. Ct. at 1858.

Second,

"the

federal courts must make the kind of remedial determination that
is appropriate for a common-law tribunal, paying particular
heed .

. to any special factors counselling hesitation before

authorizing a new kind of federal litigation."
bins, supra,

551 U.S. at 550

accord Ziglar v. Abbasi,

Wilkie v. Rob-

(internal quotation marks omitted);

supra,

137 S. Ct. at 1857.

The "special

factors" inquiry
must concentrate on whether the Judiciary is well
suited, absent congressional action or instruction, to
consider and weigh the costs and benefits of allowing a
damages action to proceed .
[I]f there are sound
reasons to think Congress might doubt the efficacy or
necessity of a damages remedy .
., the courts must
refrain from creating the remedy in order to respect
the role of Congress in determining the nature and
extent of federal-court jurisdiction under Article III.
Ziglar v. Abbasi,
Black Press v.

supra, 137 S. Ct. at 1857-58; see Hudson Valley

Internal Revenue Serv., supra,

409 F.3d at 110

("' [T] he concept of "special factors counselling hesitation in
the absence of affirmative action by Congress" has proved to
include an appropriate judicial deference to indications that
congressional inaction has not been inadvertent .
quoting Schweiker v. Chilicky,

487 U.S.

412,

423

'")'
(1988)

Rather

than providing "such remedies as are necessary," the inquiry is
now limited to determining Congress' intent in authorizing a
damages remedy for the particular constitutional interest at
33

issue.

Ziglar v. Abbasi,

supra, 137 S. Ct. at 1855-57

(internal

quotation marks omitted).
One special factor counseling hesitation is "the
comprehensiveness of available statutory schemes" to address the
conduct at issue.

Arar v. Ashcroft,

citing Dotson v. Griesa, supra,

supra,

585 F.3d at 573,

398 F.3d at 166.

"[T]he Supreme

Court has stated that if the conduct at issue already is 'governed by comprehensive procedural and substantive provisions

[of

law] giving meaningful remedies against the United States,' then
it is 'inappropriate'

for courts 'to supplement that regulatory

scheme with a new judicial remedy.'"
supra,

712 F.3d at 671-72

supra,

Inc. v. Snell,

(second alteration in original),

quoting Bush v. Lucas, supra,
Chilicky,

M.E.S.,

462 U.S. at 368; see Schweiker v.

487 U.S. at 423

("When the design of a Govern-

ment program suggests that Congress has provided what it considers adequate remedial mechanisms for constitutional violations
that may occur in the course of its administration, we have not
created additional Bivens remedies.") .

"[I]t is the overall

comprehensiveness of the statutory scheme at issue, not the
adequacy of the particular remedies afforded, that counsels
judicial caution in implying Bivens actions."
supra,

398 F.3d at 166-67.

34

Dotson v. Griesa,

4.

Declaratory Judgment Act

The Declaratory Judgment Act provides that "[i]n a case
any court of

of actual controversy within its jurisdiction,
the United States .

. may declare the rights and other legal

relations of any interested party seeking such declaration,
whether or not further relief is or could be sought."
§

2201 (a).

~R

28

u.s.c.

An "actual controversy" exists when "the facts

alleged, under all the circumstances, show that there is a
substantial controversy, between parties having adverse legal
interests, of sufficient immediacy [and]
issuance of a declaratory judgment."
U.S. 103, 108

(1969)

reality to warrant the

Golden v.

Zwickler,

(internal quotation marks omitted).

394
"' [A]

mere demand for declaratory relief does not by itself establish a
case or controversy necessary to confer subject matter jurisdiction.'

[Rather,]

[w] here 'the remedy sought is a mere declara-

18

The Declaratory Judgment Act bars district courts from
exercising jurisdiction over actual controversies "with respect
to Federal taxes."
28 U.S.C. § 220l(a).
"A controversy is with
respect to federal taxes [i]f it call[s] into question a specific
provision of the Internal Revenue Code or .
. a ruling or
regulation issued under the Code." Jeda Capital-Lenox, LLC v.
Commissioner of Internal Revenue Serv., No. 5:09-CV-0877
(GTS/DEP), 2011 WL 3516290 at *3 (N.D.N.Y. Aug. 11, 2011) (alterations in original; internal quotation marks omitted).
Plaintiffs, however, do not challenge any specific provision of the
Internal Revenue Code or any ruling or regulation issued under
the Code.
35

tion of law without implications for practical enforcement upon
the parties, the case is properly dismissed.'"
Buffalo & Fort Erie Pub. Bridge Auth.,
Cir. 2011)

Mitskovski v.

415 F. App'x 264,

(summary order), quoting S. Jackson & Son,

Coffee, Sugar & Cocoa Exch.

Inc.,

24 F.3d 427,

431

267

(2d

Inc. v.

(2d Cir.

1994) .
"[D]istrict courts possess discretion in determining
whether and when to entertain an action under the Declaratory
Judgment Act, even when the suit otherwise satisfies subject
matter jurisdictional prerequisites" because "facts bearing on
the usefulness of the declaratory judgment remedy, and the
fitness of the case for resolution,

are peculiarly within their

grasp."

515 U.S.

Wilton v. Seven Falls Co.,

(1995); accord Jenkins v. United States,

277,

282,

289

386 F.3d 415,

417

(2d

Cir. 2004).

C.

Application of
the Foregoing Principles

1.

Fourteenth
Amendment Claims

Plaintiffs allege that defendants are employed by the
IRS

(Compl.

Burch v.

~~

7-11), which is, of course, a federal agency.

Pioneer Credit Recovery,

36

Inc.,

551 F.3d 122, 123

(2d

Cir. 2008)

(~

Because defendants are employed by the

curiam) .

federal government and are not state actors, the Fourteenth
Amendment is inapplicable to them and, therefore, plaintiffs'
Fourteenth Amendment claims are dismissed.

2.

Fifth Amendment
Claims under Bivens

Plaintiffs' Fifth Amendment Bivens claims arise in a
new context because they are substantially and meaningfully
different from the three types of cases in which the Supreme
Court recognized a Bivens remedy.
III.B.3,

As noted above,

see Section

supra, those cases involved a warrantless arrest and

search that were allegedly executed without probable cause,
Bivens v. Six Unknown Named Agents of Fed. Bureau of Narcotics,
supra, 403 U.S. at 389, a Fifth Amendment claim against a Congressman for firing his female secretary,

Davis v.

Passman,

supra, 442 U.S. at 230, and an Eighth Amendment claim against
prison officials for failure to treat an inmate's medical condition.

Carlson v. Green,

supra,

action, on the other hand,

446 U.S. at 16 & n.l.

This

asserts claims arising out of a series

of examinations and tax assessment activities by IRS employees
conducted over a period of more than five years.

37

However,

"Congress has designed a complex and compre-

hensive administrative scheme that provides various avenues of
relief for aggrieved taxpayers.

Indeed,

[ i] t

would be di ff icul t

to conceive of a more comprehensive statutory scheme, or one that
has received more intense scrutiny from Congress, than the
Internal Revenue Code."
Revenue Serv., supra,

Hudson Valley Black Press v.

409 F.3d at 113

internal quotation marks omitted).

Internal

(alteration in original;

For example, taxpayers may

challenge an improper request for information by refusing to
produce the information or records.
Internal Revenue Serv., supra,

Hudson Valley Black Press v.

409 F.3d at 111.

refuses to produce the materials requested,
formal summons to the taxpayer and,

If the taxpayer

the IRS must issue a

if the taxpayer still refuses

to produce the information sought, the IRS must institute an
action in the district court to compel production of the material.

Hudson Valley Black Press v.

supra, 409 F.3d at 111.

Internal Revenue Serv.,

Alternatively, a taxpayer can cooperate

with the audit and then challenge any alleged tax deficiency
either through an internal IRS appeal, a hearing before Appeals,
a direct appeal to the Tax Court or a subsequent suit in district

38

Hudson Valley

court for a refund if the deficiency is paid.
Black Press v.

Internal Revenue Serv.,

Additionally,

409 F.3d at 111. 19

supra,

"the Internal Revenue Code itself prohib-

its unnecessary examinations or investigations,

and IRS agents

are subject to discipline for violations of the Code."
Valley Black Press v.
111-12

Internal Revenue Serv.,

supra,

(citations omitted); see 26 U.S.C. § 7605(b)

Hudson

409 F.3d at
("No taxpayer

shall be subjected to unnecessary examination or
investigations

."); Internal Revenue Service Restructuring

and Reform Act of 1998,
Stat.

685,

721

(1998)

Pub. L. No. 105-206,

§

1203 (b) (6),

112

(IRS employees must be fired for "viola-

tions of the Internal Revenue Code of 1986, Department of Treasury regulations,

or policies of the Internal Revenue Service

(including the Internal Revenue Manual)

for the purpose of

retaliating against, or harassing, a taxpayer").

Notably,

plaintiffs have alleged conduct on the part of defendants which,
if true,

would require their dismissal.

19

The complaint alleges that plaintiffs were denied access
to Appeals (Compl. ~~ 168-85, 234-35, 238, 252, 256, 261, 278,
290-95, 301).
However, even if this were true, and even if
plaintiffs were not able to pay the deficiency and file suit in
district court for a refund, they were still free to pursue an
appeal to the Tax Court.
Notably, Taylor availed himself of an
appeal to the Tax Court (Compl. ~~ 159, 232).
39

Finally,

in 26 U.S.C.

§

7433(a), Congress authorized

certain civil actions to redress alleged IRS employee misconduct
arising out of the collection of taxes.

Section 7433(a) pro-

vides:
If, in connection with any collection of Federal tax
with respect to a taxpayer, any officer or employee of
the Internal Revenue Service recklessly or intentionally, or by reason of negligence, disregards any provision of this title, or any regulation promulgated under
this title, such taxpayer may bring a civil action for
damages against the United States in a district court
of the United States.
Except as provided in section
7432, such civil action shall be the exclusive remedy
for recovering damages resulting from such actions.
The legislative history of Section 7433 "establishes
that the failure of Congress to include a damages action for tax
assessment activities was not inadvertent."
Press v. Internal Revenue Serv., supra,

Hudson Valley Black

409 F.3d at 112.

Specif-

ically, bills that would have authorized civil actions against
individual IRS employees for constitutional violations committed
in connection with tax assessment activities were never enacted.
Hudson Valley Black Press v.
F.3d at 112.

Internal Revenue Serv.,

supra,

409

Additionally, Congress rejected a version of

Section 7433 that would have authorized civil actions arising "in
connection with any determination or collection of Federal tax."
Hudson Valley Black Press v.
F.3d at 112

Internal Revenue Serv.,

supra,

(emphasis in original; internal quotation marks

40

409

omitted) .

Thus, Congress had "expressly considered broader

remedies -- including civil suits relating to tax assessment and
for violations of any federal laws -- before rejecting them."
Hudson Valley Black Press v.
F.3d at 112.

Internal Revenue Serv., supra,

This is a "sound reason[]

[have] doubt[ed]

409

to think Congress might

the efficacy or necessity of a damages remedy,"

which is a reason to "refrain from creating the [Bivens]
in order to respect the role of Congress."

remedy

Ziglar v. Abbasi,

supra, 137 S. Ct. at 1858.
In light of this comprehensive remedial scheme and the
legislative history of Section 7433,

"every circuit that has

considered the appropriateness of a Bivens remedy in the taxation
context has uniformly declined to permit one."
Black Press v. Internal Revenue Serv.,
see Adams v. Johnson,

supra,

355 F.3d 1179, 1184-85

Hudson Valley
409 F.3d at 113;

(9th Cir. 2004)

("[O]ur sister circuits that have addressed the question are
nearly unanimous in holding that Bivens relief is not available
for alleged constitutional violations by IRS officials involved
in the process of assessing and collecting taxes"; collecting
cases from the First, Third,

Fifth, Sixth, Seventh, Eighth and

Tenth Circuits); Judicial Watch,
412

(4th Cir. 2003).

Inc. v. Rossotti,

317 F.3d 401,

Indeed, with respect to the specific issue

of tax assessment activities, several courts have held that a
41

Bivens remedy is not available for alleged Fifth Amendment
violations by IRS employees in connection with such activities.
See,

~.g.,

Adams v. Johnson,

supra,

355 F.3d at 1181, 1188

("[P]laintiffs may not pursue a Bivens action [for Fifth Amendment substantive and procedural due process violations] with
complaints about the IRS's audits,

assessments,

and collection of

partnership taxes and the obligations of partners."
omitted)); Perry v. Wright,
*8

(S.O.N.Y. Mar.

8,

2013)

12 Civ.

721

(McMahon,

(CM),

D.J.)

(footnote

2013 WL 950921 at

("[A]

Bivens action is

not available against IRS officials to challenge tax collection
and assessment."

(internal quotation marks omitted)); Petitio v.

Hill, No. CV-04-4493
(E.D.N.Y. Mar. 26,
Amendment]

(SJF) (ARL),

2007)

2007 WL 1016890 at *10, *12

(plaintiff "cannot assert viable [Fifth

claims against these [IRS]

employees for any alleged

violations of his constitutional rights as a result of their
alleged tax assessment and collection related activities"),
citing Hudson Valley Black Press v.
supra,

409 F.3d at 106; Roberts v.

Supp. 2d 644,

651

"cannot assert .

(S.D.N.Y. 2006)

Internal Revenue Serv.,
Internal Revenue Serv.,

(Marrero,

. viable claims against

O.J.)

468 F.

(plaintiff

[IRS] employees for

any alleged violations of his constitutional rights as a result
of their tax assessment and collection related activities."

42

(footnote omitted)), aff'd, 297 F. App'x 63
(summary order).

(2d Cir. 2008)

2 1
:

Notwithstanding the foregoing array of authorities,
plaintiffs nevertheless argue that a Bivens remedy should be
available.

They assert that their claims arise "from the alleged

misconduct of the Defendants that clearly and directly had the
effect of depriving Plaintiffs of their Fifth Amendment rights to
due process and equal protection and seeks redress for harm
suffered by Plaintiffs[] as a direct and proximate result of this
specific type of alleged misconduct," not from enforcement of the

2

Jin Zherka v. Ryan, supra, 52 F. Supp. 3d at 575-76, 57881, the Honorable Thomas P. Griesa, United States District Judge,
recognized a Bivens action under the First and Fifth Amendments
based on an IRS investigation of the plaintiff conducted in
retaliation for his political activities.
Zherka is distinguishable from the present case because plaintiffs have not alleged
retaliation on the basis of any constitutionally protected
activity.
Additionally, Zherka has not been followed in cases
arising out of similar facts.
See, ~.g., Buczek v. O'Carroll,
No. 15-CV-273S, 2015 WL 5054184 at *5 (W.D.N.Y. Aug. 25, 2015)
("[I]mproper treatment by IRS employees is not, in light of the
[Internal Revenue] Code's detailed and comprehensive remedial
scheme, a sufficient basis upon which to extend a Bivens cause of
action to [the plaintiffs [sic]] due process claims." (alterations in original; internal quotation marks omitted)); Scheuering v. United States, 14 Civ. 932 (NSR), 2014 WL 6865727 at *5 n.5
(S.D.N.Y. Dec. 4, 2014) (Roman, D.J.) ("[A] tax-based grievance
of th[e] sort [the plaintiff claimed] does not support a Bivens
action.").
Finally, Zherka was decided before Ziglar v. Abbasi,
supra, 137 S. Ct. at 1857-58 (internal quotation marks omitted),
in which the Supreme Court stated that an expansion of the Bivens
remedy is "now a disfavored judicial activity" and suggested that
the remedy should be limited to the search-and-seizure context.
43

tax code (Pl. 's Mem., at 21-22

Plain-

(emphasis in original)).

tiffs also argue that no provision of the comprehensive remedial
scheme established by Congress "is designed to compensate Plaintiffs for the damage that they have suffered as a direct and
proximate result of Defendants' alleged violations of their fifth
amendment rights to due process and equal protection"

(Pl. 's

Mem., at 22).
Plaintiffs' arguments are unavailing.

Plaintiffs

allege that defendants violated their constitutional rights
through examinations, assessments against Taylor and denials of
These

access to Appeals in order to protest the assessments.

alleged constitutional violations occurred in the course of tax
assessment activities and are precisely the same types of activities that the Second Circuit has held do not give rise to a
Bivens claim.
Serv.,

supra,

Hudson Valley Black Press v.
409 F.3d at 107-08, 113

Internal Revenue

(rejecting First Amendment

claim asserted for retaliatory audit, attempts to coerce plaintiff into signing fraudulent audit report and refusal to provide
plaintiff with copies of seized tax records after he requested
them to defend himself in an administrative hearing); see Judicial Watch,

Inc. v. Rossotti,

supra,

317 F.3d at 402-04,

413

(rejecting First and Fifth Amendment claims asserted for retaliatory audit); see also Colon v. Maddalone,
44

95 Civ.

0008

(JGK),

1996 WL 556924 at *6

(S.D.N.Y. Oct. 1, 1996)

(Koeltl,

D.J.)

(declining to find Bivens claim where "[t]here [was] no question"
that allegedly wrongful seizure and levies of property without
notice "were pursuant to IRS tax collection activities") .
Additionally, as noted above,
supra,

see Section III.B.3,

"it is the overall comprehensiveness of the statutory

scheme at issue, not the adequacy of the particular remedies
afforded,
actions."

that counsels judicial caution in implying Bivens
Dotson v. Griesa,

supra,

398 F.3d at 166-67.

Thus,

whether any provision of Congress' comprehensive remedial scheme
wholly compensates plaintiffs for the particular losses they
incurred as a result of the defendants'

alleged misconduct is not

the proper inquiry.
Because of the comprehensive remedial scheme in place
for plaintiffs' constitutionally-recognized interests, along with
a clear indication that Congress did not intend to create a
damages remedy for the conduct at issue,

a new Bivens action

should not be recognized to allow plaintiffs to sue defendants in
their individual capacities for alleged Fifth Amendment violations.

This is consistent with the Supreme Court's recent

admonition that "expanding the Bivens remedy is now a disfavored
judicial activity."

Ziglar v. Abbasi,

45

supra,

137 S. Ct. at 1857

(internal quotation marks omitted)

Therefore, plaintiffs'

Bivens claims are dismissed.

3.

Declaratory Judgment

Although not briefed by the parties, because plaintiffs' action for damages has been dismissed,

their action for a

declaratory judgment that defendants violated their constitutional rights must also be dismissed for lack of subject matter
jurisdiction.n

As noted above,

"[w]here 'the remedy sought is a

mere declaration of law without implications for practical
enforcement upon the parties,

the case is properly dismissed.'"

Mitskovski v. Buffalo & Fort Erie Pub. Bridge Auth.,
F. App'x at 267, quoting S. Jackson & Son,
& Cocoa Exch.

Inc.,

supra,

Because plaintiffs'

"a declaration favorable

to [plaintiffs] would be just that and nothing more."
& Son,

415

Inc. v. Coffee, Sugar

24 F.3d at 431.

claims for damages have been dismissed,

supra,

Inc. v. Coffee, Sugar & Cocoa Exch.

Inc.,

S. Jackson

supra, 24 F.3d

at 431.n
2

~Federal courts have an independent obligation to ascertain
their own jurisdiction.
Local 377, RWDSU, UFCW v. 1864 Tenants
Ass'n, 533 F.3d 98, 99 (2d Cir. 2008) (~ curiam).
"If the
court determines at any time that it lacks subject-matter jurisdiction, the court must dismiss the action."
Fed.R.Civ.P.

12 (h) ( 3) .
22

Because the action has been dismissed,

46

I do not address
(continued ... )

IV.

Conclusion

For the foregoing reasons, defendants' motion to
dismiss the complaint is granted.

The Clerk of the Court is

respectfully requested to mark this matter closed.
Dated:

New York, New York
July 21, 2017
SO ORDERED

H2R~/~

United States Magistrate Judge
Copies sent to:
All Counsel of Record

22

continued)
defendants' remaining arguments.
( •••

47