In Bivens, the Supreme Court created a small window by which an individual harmed by the action of a federal agent could personally sue the agent and get past a motion to dismiss based upon the immunities which protect government agents. Only a small number of Bivens cases get filed against IRS employees. A much smaller number make it to trial. On October 29, 2014, the District Court for the Southern District of West Virginia, in Brodnik v. Lanham struck down an attempt to hold an IRS special agent personally liable under the basic theory that the agent had wrongfully pursued prosecution of Mr. Brodnik.
The case caught my eye because the background facts stated that the criminal investigation of Mr. Brodnik went on for six years. Criminal cases move slowly but six years stretched those time frames well beyond the norm. That time period stretches the investigation beyond the statute of limitations for prosecution normally applicable. The opinion does not provide an answer to that riddle but does make clear that Mr. Brodnik was acquitted on all counts. After the acquittal, Mr. Brodnik’s dissatisfaction with the IRS turned into this suit against the special agent and the IRS. While the now dismissed Bivens count will receive attention here, the case lives on as a wrongful disclosure case.read more...
Mr. Brodnik alleged that the special agent testified at trial that “it was debatable that Brodnik had broken the law.” Wow. I never worked with a special agent who had much doubt that the taxpayer under investigation broke the law. I have not seen the transcript but wonder if that quote is similar to the quotes on all of the campaign ads on TV one must endure if trying to watch a TV in the weeks before an election.
In addition Mr. Brodnik alleged that the special agent sent in a third party to illegally access Brodnik’s electronic mail and give it to him. Mr. Brodnik alleged that Ms. Beck illegally accessed Mr. Brodnik’s email and sent print outs of the messages to Mr. Lanham.
Mr. Lanham discussed one such email in his conversation with Mr. Brodnik’s wife, where he told her “that a letter was found in the search warrant records where a client of [Mr. Brodnik’s business partner] had stated he got into the employee leasing program to save taxes through loans. [Mr. Lanham] said the client wrote in the letter that there would be no record of the letter on his computer or in his files. The client also wrote that he was mailing the letter to avoid any electronic trail of it. [Mr. Lanham] explained that an e-mail from the Blenheim Group outlined how the AEL loans worked. [Mr. Lanham] told [Mrs. Brodnik] that the e-mail started out that they usually did not discuss this, but went on in detail using the names of a trust and the name of a client to explain how it was done.”
At issue in the opinion is whether these allegations allow Mr. Brodnik to personally sue a government employee despite the shield of absolute or qualified immunity that exits for such employees. When I worked for Chief Counsel, IRS, I was personally sued a few times. When the plaintiff included federal district court judges as co-defendants with me, I felt especially comfortable with the likely outcome. The plaintiffs in my cases were always individuals who would have been called tax protestors by the IRS prior to 1998.
Special Agent Lanham, however, was not sued by a tax protestor but by an angry defendant who had specific allegations of Mr. Lanham’s wrongdoings. Before getting to the issue of whether these alleged wrongdoings actually occurred, Mr. Brodnik first has to survive a motion to dismiss for failure to state a claim. Because of the immunities given to federal employees, Mr. Brodnik faced a very difficult task.
The District Court states that “a Bivens action is a judicially created damages remedy which is designed to vindicate violations of constitutional rights by federal actors.” The person seeking to recover in a Bivens case must show the “violation of a valid constitutional right by a person acting under color of federal law.” In Saucier v. Katz the Supreme Court mandated a two-step sequence for resolving the qualified immunity claim in these cases. First, do the plaintiff’s claims make out the violation of a constitution right and second, was the right alleged “clearly established” at time of misconduct. The federal official must have violated a clearly established constitutional right.
The Supreme Court looked at the issue again in 2009 in the case of Pearson v. Callahan in which it stated that lower courts have discretion to decide which of the two Saucier prongs to address first. The plaintiff must show that the unlawfulness of the conduct was apparent “in light of preexisting law.” The plaintiff must also show that an objective reasonable federal official in circumstances similar to those facing the defendant in a Bivens case would have known that the conduct violated the law. This knowledge must exist with respect to the specific conduct alleged and not in some abstract way. The District Court found that the actions Brodnik alleged that the special agent committed could have violated several different constitutional rights and it listed several possibilities; however, it determined that Brodnik did not nail down the specific right violated.
The Court declined to speculate on the right Brodnik felt the special agent violated and without knowing that right it could not apply the specific conduct alleged to a right to determine if a Bivens action existed. Still, in dismissing the claim, it gave Brodnik the opportunity to amend the claim. If Brodnik does not take the court up on that opportunity, it will surprise me. Nonetheless, he has a difficult road to success.
IRS agents regularly make mistakes in carrying out their duties as do employees at other federal agencies and in private industry. When an IRS special agent has an individual under investigation for six years, if that allegation proves correct, it would put a serious strain on the individual under investigation. During that period the agent will generally make contact with numerous third parties and will leave the impression that the individual has done something wrong just by virtue of the questions asked. These impressions not only create personal stress but can also have a very negative impact on the individual’s business or employment. In the First Amended Complaint, Mr. Brodnik sets forth the names of at least twenty-three individuals, including Mr. Brodnik’s family, friends, and professional associates, all of whom Mr. Lanham contacted and disclosed that Mr. Brodnik was under investigation. Mr. Brodnik asserted that he suffered a foreclosure of his primary residence, loss of personal income, attorney fees, failure of his enterprise Mountain Haven Skin Center, additional cost for malpractice insurance, consultation fees, and other financial losses.
While Mr. Brodnik was the one who alleged injury from the IRS criminal investigation, Mrs. Brodnik also appears to have suffered from the lengthy investigation. During the investigation, it seems that Mr. and Mrs. Brodnik’s marriage fell apart and Mr. Brodnik requested a divorce. Mrs. Brodnik was also wrapped up in the investigation, although from her conversation with Mr. Lanham, it appears that she had very little, if any, working knowledge of what her husband was doing. Mr. Lanham’s report stated that “[s]he believes now that things may have intentionally been kept from her because of her husband wanting a divorce now.” Mrs. Brodnik repeated several times during her conversation with Mr. Lanham that “her sister’s death had been very hard on her” and she was emotionally overwhelmed after the IRS searched her home. Additionally, after the search, she noticed a pair of diamond and sapphire earrings were missing and she filed a report with the Bluefield Police Department, but she was afraid to contact anyone involved with the investigations because of her fear of retribution. Mrs. Brodnik referred to the situation as “being up to your ass in alligators so you don’t worry about draining the swamp.”
Allegations of loss of business, dissolution of marriage, destruction of business reputation are common themes of those investigated by special agents. Those types of allegations will not form the basis of a successful Bivens action since nothing sounds in constitutional deprivation. I have included more details here than you may want or need to show the types of allegations made and the difficulty an individual will have in holding an IRS official personally liable even where the severe consequences of an investigation resulting in a not guilty determination gravely impact a person’s life. The law must protect agents who make a wrong judgment on the legal consequences of a taxpayer’s actions as long as the agent’s actions do not cross the boundaries of appropriate investigative actions.
Here the special agent, or perhaps the agency, may have a ways to go to get out of the woods. The disclosure violation alleged to have occurred during the investigation appears headed to trial and could result in monetary relief for Mr. Brodnik. This case demonstrates the difficulty in getting past the door with a Bivens case. Getting past the door needs to be difficult. At the same time, if the agent has made mistakes that cry for a remedy, a pathway for relief must exist. This case does not raise significant issues but the outcome of the alleged disclosure violation may bear watching.