No. 04-12789-B

IN THE UNITED STATES COURT OF APPEALS
FOR THE ELEVENTH CIRCUIT

WARD DEAN, M.D.,

Plaintiff-Appellant,

vs.

UNITED STATES OF AMERICA,

Defendant-Appellee.

ON APPEAL FROM A JUDGMENT
OF THE UNITED STATES DISTRICT COURT
THE HONORABLE M. CASEY RODGERS, JUDGE PRESIDING

REPLY BRIEF OF APPELLANT

WARD DEAN, M.D.
Appellant Pro Se

IN THE UNITED STATES COURT OF APPEALS
FOR THE ELEVENTH CIRCUIT

WARD DEAN, M.D.,

Plaintiff-Appellant,

vs. No. 04-12789-B

UNITED STATES OF AMERICA,

Defendant-Appellee.

 

REPLY BRIEF OF APPELLANT
Ward Dean, M.D., herein replies to the arguments of the United States. For ease of comprehension, these replies are ordered as they appear in the Appellant’s Opening Brief and Appellee’s Response Brief. To the extent arguments of the United States are not addressed herein, they were ad dressed in the Appellant’s Opening Brief.

I. The District Court erred by ruling Special Agent Burgess was
authorized to disclose that the nature of the investigation of Dean
was criminal, whether that disclosure was direct or indirect.

Over the last quarter of a Century, the United States (more specifically and hereinafter, the Internal Revenue Service of the United States – “IRS”) has relentlessly pursued destroying the unauthorized disclosure statutes duly enacted to prevent the very disclosures at issue herein. Should this Court allow the District Court’s holding to stand, the IRS will have succeeded in using the Judicial Branch to destroy yet another statute of Congress specifically designed to protect the rights of Americans.

The admissions by the IRS are that: (1) the statutory scheme proscribes the disclosures that Dean is the subject of a criminal investigation, and (2) Burgess violated the statutes proscribing the disclosures. It does not matter whether the disclosures were direct or indirect, since both are prohibited by the statute. A “disclosure” is defined as “the making known to any person in any manner whatever a return or return information.” 26 U.S.C. § 6103 (b)(8) [emphasis added]. Notwithstanding the clear and unambiguous language of the statute, the IRS argues that its agents can disclose Dean is the subject of a criminal investigation in any manner it desires.

The vast majority of the courts ruling on disclosures by IRS agents that the nature of an investigation is criminal have held that it does not matter whether the disclosures were direct or indirect, which is precisely what the language of the statute states – “making known ... in any manner whatever... .” See, e.g., Diamond v. United States, 944 F.2d 431, 435 (8th Cir. 1991); Payne v. United States, 91 F. Supp.2d 1014 (S.D. Tex. 1999), reversed and remanded on other grounds, Payne v. United States, 289 F.3d 377 (5th Cir. 2002); Gandy v. United States, 83 AFTR2d 99-822 (E.D. Tex. 1999); Schachter v. United States, 866 F.Supp. 1273, 1276 (N.D. Calif. 1994), aff’d, Schachter v. United States, 77 F.3d 490, 1996 U.S. App. LEXIS 8899, 96-1 U.S. Tax Cas. (CCH) P50152 (9th Cir. Cal. 1996); Calhoun v. Wells, 80-2 U.S.T.C. 9643 (D.S.C. 1980).

The IRS argues the disclosure that a criminal investigation was being conducted against Dean was permissible pursuant to 26 U.S.C. 6103(k)(6); the only statute that could possibly provide an exception to the sweeping prohibited disclosures. This requires an examination of precisely what Congress intended with this exception to the unauthorized disclosure legislation.

There are special reasons for keeping return information private, for it may cover such sensitive matters as audits, criminal investigations, and a vast panoply of personal financial information. The overriding purpose of the new Section 6103 was to establish that “returns and return information should generally be treated as confidential.” S. Rep. 94-938, at 319. Either return information is “confidential” or it is not, and it is not confidential if it is released to the population at large at the discretion of an IRS’ agent.

Congress posed the question whether return information “should be used for any purposes other than tax administration” (S. Rep. 94-938, at 317), and its answer was that such information should not be used “except in those limited situations delineated in the newly amended section 6103 where the committee decided that disclosure was warranted.” (Id. at 318). Congress was aware that pre-1976 regulations severely restricted the public’s access to return information, and, to the extent it focused on disclosure to the public, Congress decided that such disclosure should be quite limited, largely in accordance with pre-1976 law. See I.R.C. Section 6103(e) (governing disclosure to persons having a material interest); see generally S. Rep. 94-938, at 339-342 (“limited disclosures” allowed only where Congress determined that reasons “outweighed any possible invasion of the taxpayer’s privacy,” and eliminating preexisting authority to disclose whether a person has filed a return). Since Section 6103 on its face bars all disclosure of return information except where expressly permitted, it was hardly necessary for Congress to concern itself at length with disclosure to the general public. Section 6103, after all, is a confidentiality statute, not a government-in-the-sunshine law.

The tax laws authorize the IRS to gather highly confidential information on millions of individuals and businesses. This information, as well as the countless documents that are created and collected by the IRS in connection with it, is for the administration of the revenue laws. Congress has recognized that individuals expect this information to remain confidential. Congress therefore has taken steps to guarantee that confidentiality by statute. Section 6103 of the Code, an extremely detailed and complex provision, prohibits the IRS from disclosing tax “returns” and tax “return information” except in specifically enumerated circumstances. This prohibition was intended to be enforced by civil and criminal penalties. Section 7213 makes unauthorized disclosure of return information a felony, punishable by fine and up to five years’ imprisonment; a federal employee convicted of this offense must be discharged from his employment.

Section 6103's prohibition against the disclosure of tax return information dates back to Section 11 of the Act of July 14, 1870, ch. 255, 16 Stat. 259, which prohibited the publication of “income returns, or any part thereof, except ... general statistics.” Similar nondisclosure provisions were subsequently enacted for other kinds of tax returns. These nondisclosure provisions were carried forward into Section 55 of the Internal Revenue Code of 1939, ch. 2, 53 Stat. 29, and were recodified in Section 6103 of the Internal Revenue Code of 1954, ch. 736, 68A Stat. 753. Prior to its amendment in 1976, Section 6103 provided that tax returns were “public records,” but that they generally were open to inspection only upon order of the President and under regulations prescribed by the Secretary of the Treasury. See 26 U.S.C. (1970 ed.) 6103(a)(1). These regulations greatly restricted public access to tax returns. Inspection of individual returns was limited to the taxpayer himself and to specified persons who had a material interest in the return by virtue of their connection to the taxpayer – his attorney, a receiver if the taxpayer was bankrupt, or a guardian or trustee who stood in his stead for some other reason. Treas. Reg. Section 301.6103(a)-1(c)(1)(ii) (1974). The regulations established procedures regulating the inspection of tax returns by state governments and by various components of the federal government; such requests were typically treated on a case-by-case basis. See generally S. Rep. 94-938, 94th Cong., 2d Sess. 315-316 (1976). Although the regulations made no provision for disclosure of tax returns to interested members of the public, they did provide that return information could be released “in the discretion of the Secretary.” Treas. Reg. Section 301.6103(a)-1(a)(3)(i)(1974).

In 1976, Congress became concerned that tax return information was being transmitted too freely by the IRS to other parts of the government, and that such information had sometimes been used to harass taxpayers for partisan political purposes. Congress therefore acted to expand the statutory protection afforded by Section 6103. In the Tax Reform Act of 1976, Pub. L. No. 94-455, Section 1202(a), 90 Stat. 1667, Congress substituted for the prior statute an enlarged and far more detailed version of Section 6103. The new Section 6103 established statutory confidentiality rules, rather than leaving to regulation and Presidential order the circumstances under which tax return information could be disclosed. These changes were designed to effectuate Congress’s intent that “returns and return information should generally be treated as confidential and not subject to disclosure except in those limited situations delineated in the newly amended section 6103.” (S. Rep. 94-938, at 318).

Section 6103(a) as amended prohibits disclosure of “returns” and of “return information,” a new term not contained in the prior version of the statute. “Return” and “return information” are defined in excruciating detail in Section 6103(b). Section 6103 (c) through (o) sets forth exceptions to this general rule for situations in which Congress deemed disclosure appropriate, subject to the conditions set forth in the statute. The exceptions encompass disclosures to state tax officials (Section 6103(d)), Congressional committees (Section 6103(f)), and the President (Section 6103(g)), as well as to officials of enumerated federal agencies for tax administration purposes (Section 6103(h)), for statistical purposes, (Section 6103(j)), and for other legitimate purposes, such as criminal investigation (Section 6103(i)). The statute also provides for disclosure to a limited class of persons other than government officials – to the taxpayer, to his designee, and to certain persons connected with the taxpayer, such as shareholders of a corporation or partners in a partnership, who are deemed to have an interest in the data (Section 6103 (c) and (e)). This latter provision closely corresponds to the pre-1976 regulation authorizing disclosure to persons having a material interest. See Treas. Reg. Section 301.6103 (a)-1(c) (1974); S. Rep. 94-938, at 339. Finally, the statute enumerates miscellaneous types of permissible disclosures, including disclosures, both inside and outside the government, for tax investigation purposes (Section 6103(k)(6)), disclosures designed to correct published misstatements of fact about a taxpayer (Section 6103(k) (3)), and disclosures designed to aid in notifying persons entitled to tax refunds (Section 6103(m)(1)).

The focus of this case is on the definition of “return information” contained in Section 6104(b)(2), and whether the disclosure that the nature of the investigation as criminal was necessary to obtain the information the IRS was seeking. That definition enumerates a long list of data protected from disclosure, including a taxpayer’s identity, the nature, source, or amount of his income or assets, that an individual is being criminally investigated, and “any other data” prepared or collected by the Secretary with respect to a return or the possible existence of a tax liability on the part of any person.

The IRS expends a lot of effort to provide judicial definitions of the word “necessary” without effectively arguing the statutory requirement, to wit: necessary to “obtain the information” the IRS was seeking. The attempt by the IRS to change the statutory meaning is without merit. The rationale of the IRS that Section 6103(k)(6) authorized the disclosures would engulf Section 6103 itself, thereby rendering the entire statutory scheme meaningless. This was expressed by strongly by four (4) Justices of the Fifth Circuit:

Seven years later, in the continuing struggle of Dr. Barrett to obtain due process and justice, the Fifth Circuit emphasized that the question was not whether the information sought was necessary; rather, the question was whether the disclosure was necessary to obtain the information.

Congress precisely explained the meaning of the phrase “necessary to obtain the information.” The intent to strictly limit disclosure is reflected by the Senate Report:

S.Rep. pp. 341 42, U.S.Code Cong. & Admin. News 1976, p. 377, Bulletin, pp. 379 80.

The report continues:

S.Rep. p. 342, U.S.Code Cong. & Admin.News 1976, p. 377, Bulletin, p. 380.

It is not a “rare and extraordinary case[]” for an IRS special agent to routinely disclose the nature of an investigation as criminal without any reason that it is necessary to obtain information. The disclosures by Special Agent Burgess must have been necessary to obtain information concerning Dean. The Eighth Circuit held that as a matter of law it was not necessary for an IRS agent such as Burgess to identify herself as a member of the Criminal Investigation Division to secure desired information. Diamond v. United States, 944 F.2d 431, 435 (8th Cir. 1991).

The term “disclosure” means “the making known to any person in any manner whatever a return or return information.” 26 U.S.C. Section 6103 (b)(8) (emphasis added). Given that expansive definition, this Court must hold that stating “criminal investigation” on summonses, return addresses, certified mail receipts, or orally to the public when contacted about Dean “disclosed” return information. Congress made the language of Section 6103 quite clear: Any disclosure of return information is illegal “except as authorized by this title.” 26 U.S.C. Section 6103(a).

Certainly, there are unlimited methods or manners available to the IRS of disclosing return information. These include oral disclosures, summonses, correspondence, the signature block and heading on letters, return envelopes to a letter, business cards, etc. For example, a summons containing “John Smith, Chairman of the Committee Investigating Carriers of the AIDS Virus,” would be no less libelous than a letter which blatantly stated that John Smith suspected John Doe of carrying the AIDS virus. The IRS could not avoid the Section 6103 disclosure rules by creating thousands of specialized audit units, so the business cards would state “Jim Jones, Revenue Agent, Unit to Examine Taxpayers with Gross Income in Excess of $100,000, Itemized Deductions in Excess of $30,000, Five Dependents, Interest Income in Excess of $5,000, Wages of Under $50,000.00, and Tax Sheltered Investments.” And, specifically in this case: “Special Agent Burgess – Criminal Investigation”. Even assuming the phrase “Criminal Investigation” (disclosed orally and on the summonses, envelopes and correspondence) was not developed, with a wink of the eye, toward making an otherwise illegal disclosure legal, it did disclose that Dean is under criminal investigation, and that disclosure is prohibited under the law.
Also, as Dean argued in his opening brief, the disclosure of “Criminal Investigation” on the return address of envelopes and letters is also proscribed by the IRS’ Disclosure Litigation Reference Book. The Handbook for Special Agents, amended on June 12, 1992, provides that “neither the signature block nor the ancillary heading of the letter should contain the words ‘Criminal Investigation Division.’ The heading and return address may contain the necessary symbols for the letter to be returned to the special agent. It is difficult to accept [United States’] argument that the disclosure was therefore “necessary.” Schachter v. United States, 866 F.Supp. 1273, 1276 (N.D. Calif. 1994).

Here, the IRS has branded Dean as a criminal, or at least a criminal suspect, with no criminal charge filed, much less tried and convicted. The statement of criminal investigation was a disclosure of return information. The disclosure was not authorized, and it was a violation of statutorily imposed confidentiality. It cannot be disputed that this return information was unlawfully disclosed.

II. The District Court erred by ruling the disclosures resulted from Burgess’s “Good Faith” (however erroneous) interpretation of I.R.C. § 6103

First, as expressly admitted by the United States, it was purportedly the IRS’s interpretation of the law that Burgess allegedly followed. Burgess’s so called “interpretation” is not an issue herein. It is the IRS’s interpretation that is at issue. Further, and contrary to the assertions of the IRS, the issue is not whether the disclosures by the Special Agent Burgess were necessary to conduct an effective investigation. This simply is not relevant to unauthorized disclosures proscribed by 26 U.S.C. Section 6103. “The questions are whether the disclosures are ‘necessary’ to obtain the information sought and whether the information sought is ‘otherwise reasonably available.’” Barrett v. United States, 795 F.2d 446, 451 (5th Cir. 1986). It is essential to note that Special Agent Burgess’ oral disclosures were in the form of statements, rather than inquiries. This is prima facie evidence that she was providing unnecessary disclosures. The disclosures of “criminal investigation” on the summonses, correspondence and envelopes likewise were not inquiries.

Nothwithstanding more than two decades of contrary case authority, as well as the plain language of Section 6103, the IRS States continues to advance its meritless argument that IRS Special Agents are authorized, pursuant to 26 U.S.C. Section 6103(k)(6), to make the statement (directly or indirectly) that the nature of an investigation is criminal. Throughout these proceedings, the IRS has completely failed to submit any evidence whatsoever to meet the elements required by that statute before making the disclosure. 26 U.S.C. Section 6103(k)(6) permits the disclosure of “return information to the extent that such disclosure is necessary in obtaining information . . . only in such situations and under such conditions as the Secretary may prescribe by regulation.” The Code of Federal Regulations has further implemented this disclosure provision by authorizing disclosure “only if the necessary information cannot, under the facts and circumstances of the particular case, otherwise reasonably be obtained....” 26 CFR Section 301.6103(k)(6)-1.

26 C.F.R. Section 301.6103(k)(6)-1(a).

Such disclosures are permitted under the following restriction:

The statute and underlying regulations, therefore, state an IRS agent may disclose return information during an investigation in order to obtain information, provided three requirements are met: (1) the information sought is “with respect to the correct determination of tax, liability for tax, or the amount to be collected or with respect to the enforcement of any other provision of the [Internal Revenue Code];” (2) the information sought is “not otherwise reasonably available;” and (3) it is necessary to make disclosures of return information in order to obtain the additional information sought. Contrary to the arguments of the IRS, the statute and regulation prohibited Special Agent Burgess from making written or oral statements, directly or indirectly, that Dean was the subject of a criminal investigation.

This law clearly does not mean all disclosures, specifically non-inquiries, are authorized under 26 U.S.C. Section 6103(k)(6) to obtain necessary information during an investigation. Before Special Agents can rely on the Section 6103(k)(6) exception, they must show the oral statements, disclosures on summonses and correspondence, (that Dean is under criminal investigation) were inquiries necessary to obtain the information sought.

The IRS was not able to show in the trial court below, and now on appeal, that Burgess’ made inquiries rather than statements, nor that the statements made were necessary to obtain information. Because a Special Agent finds it necessary to contact third-parties, it does not then give unlimited authority to disclose all return information to third-parties. A clear reading of the statute limits Special Agent disclosures to inquiries for information, and the return information can only be disclosed in order to obtain the information which is sought. See, e.g., Malis v United States, 87-1 USTC P 9212, 59 AFTR 2d 87-988 (1986, CD Cal) (fact that some disclosures were in form of statements rather than inquiries is evidence that IRS agent was providing unnecessary disclosures.)

In arguing a “Good Faith” interpretation in the instant matter, the IRS has ignored a plethora of federal court decisions over the course of more than 20 years admonishing the IRS that disclosing the nature of an investigation as criminal is unauthorized. Further, the IRS has ignored the legislative history concerning Section 6103.

As early as 1980, the district court in Calhoun v. Wells, 80-2 U.S.T.C. P9643 (D.S.C. 1980), found disclosure in correspondence that the plaintiff was under criminal investigation by the IRS was unauthorized, but the court was persuaded that because the disclosure was the result of a good faith belief it was not prohibited by law. That erroneous, but arguably good faith, belief by the IRS was more than 20 years ago. After all these years, the IRS can not continue to argue it does not understand the law or the decisions of the courts (and therefore their agents have a “Good Faith” belief that their wrongful actions are allowed).

The IRS has ignored the breadth of the Congressional concern shown by the enactment 26 U.S.C. Section 6103, and the widespread evils with which Congress was dealing. The here record is replete with the same evils. Initially, in 1976, Congress recognized this was the first comprehensive review of the whole subject in over 40 years. The Senate Report states:

Next, of importance, was the Congressional goal in reviewing the Internal Revenue Code ("IRC") to give taxpayers greater protection. Congress was aware of the complaints of literally millions of taxpayers concerning abuses by the IRS. One of the problems to be resolved was that the IRS probably has more information about more people than any other agency in the country. Congress expressed the specific intention to discontinue prior practices or regulations. Only regulations specifically interpreting Section 6103 have any validity. In the Summary of the Administrative Provisions, the report stated:
2. It provides definitive rules generally maintaining the confidentiality of tax returns. (Title IX).

S.Rep. p. 6, U.S.Code Cong. & Admin.News 1976, p. 3443, Bulletin, p. 62.

The report indicated:

That Congress deliberately intended to restrict disclosure of these matters relating to the most intimate economic, financial and social facts concerning Americans is shown by the Congressional restrictions imposed on others in the government who, statutorily at least, have had almost unlimited access to information through the disclosure of return information.

Congress prohibited disclosure from the top to the bottom, the President was first. Not only was the President’s access to such information carefully circumscribed, but the request for disclosure called for a written request, signed by the President personally. Section 6103(g). The President, with all of his other manifold duties, is also required to file an annual report with the Joint Committee on the Internal Revenue, showing in detail the persons involved and the reasons the President required return information. S.Rep., p. 323, Bulletin, p. 361.

The prohibitions against disclosure did not just apply to individuals in the executive branch of the government. Whole departments and agencies had restrictions place upon their access to a taxpayer’s information.

The committee decided that, although it is necessary to permit the disclosure of Federal returns and return information to other Federal and State agencies in certain situations for purposes other than the administration of the Federal tax laws, no such disclosure should be made unless the recipient agency complies with the comprehensive system of administrative, technical, and physical safeguards designed to protect the confidentiality of the returns and return information and to make certain they are not used for purposes other than purposes for which they were disclosed. S.Rep., p. 344, U.S.Code Cong. & Admin.News 1976, p. 3774, Bulletin, p. 382.

More than that all officials of the government had to report to Congress. In order to assure public review of all discretionary disclosures, there is a stringent requirement, not only on the President, but on the IRS itself to report to Congress all applications for disclosure and actions taken. 26 U.S.C. Section 6103(g).

Further, Congress increased criminal and civil sanctions for violations of these requirements. Congress concluded the current penalties ($1,000 fine, not exceeding one year in confinement) were too lenient. See, S.Rep., p. 347, Bulletin, p. 385. "The committee decided that the present provisions designed to enforce the rules against the improper use or disclosure of returns and return information are inadequate. The committee decided the criminal penalties for unauthorized disclosure should be increased and that the situations to which they apply should be broadened to cover all situations in which return information is treated as confidential." S.Rep., p. 347, U.S.Code Cong. & Admin. News 1976, p. 3777, Bulletin, p. 385.

It has been repeatedly determined that disclosure of a criminal investigation was not necessary. With this stringent code of confidentiality, excused only by similarly stringent exemptions, comes to whether the disclosure of criminal investigation was "necessary in obtaining information," which would "not otherwise [be] available." See Section 6103(k)(6).

To the present day there has been no statement, either from on high in the Solicitor's office or the Department of Justice, or on the lower rungs of the IRS field agents, concerning why it was necessary in any case, specifically this case, to inform the third-party interviewees that a taxpayer is under criminal investigation. That Dean may be facing criminal prosecution would have nothing to do with those inquiries. The requirements of Section 6103(k)(6) have not been met. The disclosures not being exempt, they are explicit violations of Section 6103's demand for confidentiality.

The statements of criminal investigation were disclosures of return information. The disclosures were not authorized. They were a violation of statutorily imposed confidentiality. The IRS has apparently continued to instruct its agents to include these types of statements, while Americans were entitled under the Tax Reform Act of 1976 to have these destructive and unnecessary disclosures forbidden. Based on the legislative history, the federal court opinions beginning with the Calhoun decision in 1980, the IRS and its agents can no longer have a “Good Faith” argument.

III. The District Court erred by failing to defer ruling on the government’s Summary Judgment Motion in order to allow Dean to pursue civil discovery.

Dean had obtained some documents outside of court and there were admissions made by Special Agent Burgess. However, Dean was denied discovery prior to the ruling on the summarry judgment motion. The entire record consists of self serving statements of Burgess.

The party opposing a motion for summary judgment should be permitted an adequate opportunity to complete discovery prior to consideration of the motion. The opposing party has a right to challenge the affidavits and other factual materials submitted in support of the motion. To do so, that party needs to be able to conduct sufficient discovery to determine whether opposing affidavits can be furnised. When the documents or other discovery sought are relevant to the issues presented by the motion for summary judgment, the opposing party should be allowed the opportunity to utilize the discovery process to gain access to the requested materials. Summary judgment is inappropriate when the party opposing the motion has been unable to obtain responses to his discovery requests. Jones v. City of Columbus, 120 F.3d 248 (11th Cir. 1997); ICA Constr. Corp. v. Reich, 60 F.3d 1495 (11th Cir. 1995); Snook v. Trust Co. of Georgia Bank, N.A., 859 F.2d 865 (11th Cir. 1988).
As pointed out by Dean in his opening brief, the failure of a party to formally move under Rule 56(f) is not fatal to a party’s argument that summary judgment was premature. See, e.g., Garrett v. City and County of San Francisco, 818 F.2d 1515, 1518 (9th Cir. 1987) (pending motion to compel discovery sufficient to raise Rule 56(f) consideration).

Accordingly, the District Court abused its discretion or committed plain error by denying Dean the facts he would have obtained during discovery to oppose United States’ summary judgment motion.

CONCLUSION
For all the reasons previously stated, here and in Appellant’s Opening Brief, Dean prays the Court reverse the decision below and remand with instructions for the lower court to afford Dean the due process of obtaining discovery, prior to any hearing on a Motion for Summary Judgment. If this Court agrees the undisputed disclosures violate statutes and that it is long past the time that the IRS can argue a “Good Faith” defense, then Dean prays the Court instruct the lower court to make a determination of the number of violations and award Dean damages therefore.

Respectfully submitted this 22nd day of October 2004.

_________________________
Ward Dean, M.D.

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