Filed: Mar. 24, 2017
Latest Update: Mar. 03, 2020
Summary: 15-3964 Minda v. United States UNITED STATES COURT OF APPEALS FOR THE SECOND CIRCUIT August Term 2016 (Argued: December 2, 2016 Decided: March 24, 2017) Docket No. 15-3964 GARY MINDA, Plaintiff-Appellant, NANCY FINDLAY FROST, Plaintiff, v. UNITED STATES OF AMERICA, Defendant-Appellant. ON APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF NEW YORK Before: LIVINGSTON, CHIN, AND CARNEY, Circuit Judges. Appeal from a judgment of the United States District Court for the Easte
Summary: 15-3964 Minda v. United States UNITED STATES COURT OF APPEALS FOR THE SECOND CIRCUIT August Term 2016 (Argued: December 2, 2016 Decided: March 24, 2017) Docket No. 15-3964 GARY MINDA, Plaintiff-Appellant, NANCY FINDLAY FROST, Plaintiff, v. UNITED STATES OF AMERICA, Defendant-Appellant. ON APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF NEW YORK Before: LIVINGSTON, CHIN, AND CARNEY, Circuit Judges. Appeal from a judgment of the United States District Court for the Easter..
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15‐3964
Minda v. United States
UNITED STATES COURT OF APPEALS
FOR THE SECOND CIRCUIT
August Term 2016
(Argued: December 2, 2016 Decided: March 24, 2017)
Docket No. 15‐3964
GARY MINDA,
Plaintiff‐Appellant,
NANCY FINDLAY FROST,
Plaintiff,
v.
UNITED STATES OF AMERICA,
Defendant‐Appellant.
ON APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF NEW YORK
Before:
LIVINGSTON, CHIN, AND CARNEY, Circuit Judges.
Appeal from a judgment of the United States District Court for the
Eastern District of New York (Gershon, J.), awarding statutory damages of $1,000
to each of the plaintiff taxpayers on account of the Internal Revenue Serviceʹs
unauthorized disclosure of their tax information to an unrelated third party. The
district court granted summary judgment to defendant‐appellee United States of
America, rejecting the taxpayersʹ contentions that they were entitled to statutory
damages of more than $1,000. On appeal, plaintiff‐appellant Gary Minda
contends that the district court erred in (1) limiting the award of statutory
damages to $1,000, and (2) concluding that he was not entitled to punitive
damages as a matter of law.
AFFIRMED.
KATHLEEN PAKENHAM, Cooley LLP, New York, NY, for
Plaintiff‐Appellant Gary Minda.
JENNIFER M. RUBIN (Jonathan S. Cohen, on the brief), for
David A. Hubbert, Acting Assistant Attorney
General, Tax Division, Department of Justice,
Washington, D.C., and Bridget M. Rohde, Acting
United States Attorney for the Eastern District of
New York, Brooklyn, NY, for Defendant‐Appellee
United States of America.
2
CHIN, Circuit Judge:
In this case, the Internal Revenue Service (the ʺIRSʺ) conducted an
examination of the 2007 income tax return of Gary Minda and Nancy Findlay
Frost. The IRS prepared a report proposing changes to the return. Instead of
sending the report to Minda and Frost, however, the IRS sent the report, which
contained their names, social security numbers, and financial information, to the
wrong person ‐‐ an unauthorized, unrelated third party.
Minda and Frost brought this action below pursuant to 26 U.S.C.
§ 7431, which permits a taxpayer whose return or return information has been
unlawfully disclosed to bring a civil action against the United States for
damages. The government conceded liability and acknowledged that Minda and
Frost were entitled to $1,000 each in statutory damages for the disclosure of the
report. Minda and Frost argued, however, that they were entitled to statutory
damages of $1,000 not just for the disclosure of the report but for the disclosure
of each item of information contained in the report. They also sought punitive
damages.
3
The government moved for summary judgment to dismiss these
additional claims. The district court granted the motion and entered judgment
accordingly. For the reasons set forth below, we affirm.
BACKGROUND
A. The Facts
The facts are largely undisputed and may be summarized as follows:
In 2009, an IRS employee prepared an examination report (the
ʺReportʺ) proposing changes to the 2007 federal income tax return filed by Minda
and Frost. The Report contained ʺdozens of items of return information,ʺ
including their names, social security numbers, and detailed financial
information. Compl. ¶ 10.
In or about October 2010, the IRS mailed a copy of the Report to an
unrelated third party in Ohio, ʺRobert M.ʺ On October 21, 2010, Robert M.ʹs
attorney wrote to the IRS advising that the IRS had erroneously sent the Report
to his client:
In the packet sent to my client [Robert M.], there were nine (9) pages,
that dealt with Income Tax Examination changes for a Gary Minda
and T. Nancy Findlay Frost . . . . I assume you will want to re‐send
them to the correct person. We are sending a copy of this letter to
these taxpayers (with any confidential information related to my
client redacted).
4
Compl. ¶ 9. The Report is eleven pages. Hence, it appears that the IRS did not
send the entire Report to Robert M., but only nine of the eleven pages.
On October 26, 2010, Minda and Frost learned of the disclosure of
the Report to Robert M. when they received a copy of the attorneyʹs letter to the
IRS.
Minda complained about the unauthorized disclosure to the IRS,
which then conducted an investigation. After interviewing a number of
individuals, the Treasury Inspector General for Tax Administration (the ʺIGʺ)
made the following findings:
● the Report, which was dated October 5, 2009, was printed the
week of September 28, 2009, for review by a financial technician;
● the Report was ʺlikely co‐mingledʺ with a report for Robert M.
dated September 28, 2009;
● the two reports were generated by different units located in
different departments working different shifts and using different printers; and
● the IRS employee who made the unauthorized disclosure
could not be identified.
5
One IRS employee speculated that the Report had been accidentally
left on a printer and then gotten mixed in with Robert M.ʹs documents. Another
IRS employee hypothesized that a ʺnetwork errorʺ might have caused the Report
to print on the wrong printer.
Minda and Frost did not suffer any actual damages as a result of the
unauthorized disclosure of their return information.
B. The Proceedings Below
Minda and Frost filed this action in the district court on October 24,
2012. The government answered on December 21, 2012, conceding that the IRS
ʺby way of negligence disclosed plaintiffsʹ return information to a third party,ʺ
and requesting that the district court deny all relief other than statutory
damages. App. 13.
On December 8, 2014, the government moved for summary
judgment, contending that Minda and Frost were entitled to only $1,000 each in
statutory damages and that they were not entitled to punitive damages as a
matter of law. Minda and Frost opposed the motion, conceding that the material
facts were undisputed, but arguing that they were entitled to statutory damages
6
for each item of information disclosed in the Report and that punitive damages
were appropriate.
The district court granted the governmentʹs motion. Minda v. United
States, No. 12‐CV‐05339 (NG), 2015 WL 6673198 (E.D.N.Y. Oct. 9, 2015). On
October 9, 2015, the district court entered judgment in favor of Minda and Frost,
awarding them $1,000 each. Minda (but not Frost) appealed.
DISCUSSION
We review de novo a district courtʹs grant of summary judgment,
ʺconstruing the evidence in the light most favorable to the non‐moving party and
drawing all reasonable inferences in its favor.ʺ SCR Joint Venture L.P. v.
Warshawsky, 559 F.3d 133, 137 (2d Cir. 2009). Our task is ʺto determine whether
the district court properly concluded that there was no genuine dispute as to any
material fact, such that the moving party was entitled to judgment as a matter of
law.ʺ Myers v. Patterson, 819 F.3d 625, 632 (2d Cir. 2016).
A. Applicable Law
Section 6103(a) of the Internal Revenue Code provides that ʺno
officer or employee of the United States . . . shall disclose any return or return
7
information,ʺ except to the extent disclosure is authorized under the Code. 26
U.S.C. § 6103(a)(1); see id. § 6103(c)‐(p).
A ʺreturnʺ is:
any tax or information return, declaration of estimated tax, or claim
for refund required by, or provided for or permitted under, the
provisions of this title which is filed with the Secretary by, on behalf
of, or with respect to any person, and any amendment or
supplement thereto, including supporting schedules, attachments,
or lists which are supplemental to, or part of, the return so filed.
26 U.S.C. § 6103(b)(1).
As relevant here, ʺreturn informationʺ is:
a taxpayerʹs identity, the nature, source, or amount of his income,
payments, receipts, deductions, exemptions, credits, assets,
liabilities, net worth, tax liability, tax withheld, deficiencies,
overassessments, or tax payments, . . . or any other data, received by,
recorded by, prepared by, furnished to, or collected by the Secretary
with respect to a return or with respect to the determination of the
existence, or possible existence, of liability (or the amount thereof) of
any person under this title for any tax, penalty, interest, fine,
forfeiture, or other imposition, or offense,
26 U.S.C. § 6103(b)(2)(A).
A ʺdisclosureʺ is ʺthe making known to any person in any manner
whatever a return or return information.ʺ 26 U.S.C. § 6103(b)(8).
If an officer or employee of the United States ʺknowingly, or by
reason of negligence,ʺ discloses a return or return information of a taxpayer,
8
subject to certain exceptions that do not apply here, the taxpayer may bring a
civil action for damages against the United States in district court. 26 U.S.C.
§ 7431(a)(1). Section 7431(c) governs damages:
In any action brought under subsection (a), upon a finding of
liability on the part of the defendant, the defendant shall be liable to
the plaintiff in an amount equal to the sum of ‐‐
(1) the greater of ‐‐
(A) $1,000 for each act of unauthorized inspection or
disclosure of a return or return information with respect
to which such defendant is found liable, or
(B) the sum of ‐‐
(i) the actual damages sustained by the
plaintiff as a result of such unauthorized
inspection or disclosure, plus
(ii) in the case of a willful inspection or
disclosure or an inspection or disclosure which is
the result of gross negligence, punitive damages,
plus
(2) the costs of the action, plus
(3) in the case of a plaintiff which is described in section
7430(c)(4)(A)(ii), reasonable attorneys fees, except that if the
defendant is the United States, reasonable attorneys fees may
be awarded only if the plaintiff is the prevailing party (as
determined under section 7430(c)(4)).
26 U.S.C. § 7431(c).
9
B. Application
As the government concedes, the IRS disclosed Mindaʹs return
information without authorization, in violation of § 6103(a)(1). Likewise, Minda
acknowledges that he did not suffer any actual damages as a result of the
disclosure. Hence, two matters are presented on appeal: first, the calculation of
statutory damages under § 7431(c)(1)(A), which allows ʺ$1,000 for each act of
unauthorized inspection or disclosure of a return or return information,ʺ and,
second, the availability of punitive damages under § 7431(c)(1)(B)(ii), which
allows punitive damages for an inspection or disclosure that is ʺwillfulʺ or ʺthe
result of gross negligence.ʺ
1. Statutory Damages
The district court concluded that Minda was entitled to statutory
damages only for the act of disclosing the Report and not separately for
disclosure of each item of information contained in the Report. We agree.
Section 7431(c)(1)(A) provides that an aggrieved taxpayer is entitled
to statutory damages of $1,000 for ʺeach actʺ of unauthorized inspection or
disclosure. The word ʺactʺ is not defined in the statute, and thus it is presumed
to have its ordinary meaning. Smith v. United States, 507 U.S. 197, 201 (1993); see
10
also Taniguchi v. Kan Pac. Saipan, Ltd., 132 S. Ct. 1997, 2002 (2012) (holding that
ʺ[w]hen a term goes undefined in a statute, we give the term its ordinary
meaning,ʺ and consulting dictionaries to determine ordinary meaning). The
ordinary meaning of the word ʺactʺ is ʺa thing done or being done.ʺ Websterʹs
Third New Intʹl Dict. of the Engl. Lang., at 20 (1961). The ʺthing done or being
doneʺ in the statute here is the act of unauthorized inspection or disclosure ‐‐ in
this case a single act of disclosure, the errant mailing of the Report.
Minda argues that § 7431(c) ʺshould be read to impose a penalty for
each item of return information disclosed.ʺ Pl.‐Appellantʹs Br. 7. The argument,
however, ignores the plain words of the statute and would require us to read
words into the statute that are not there. See Dean v. United States, 556 U.S. 568,
572 (2009) (courts must ʺordinarily resist reading words or elements into a statute
that do not appear on its faceʺ) (quoting Bates v. United States, 522 U.S. 23, 29
(1997)). Section 7431(c)(1)(A) provides statutory damages ʺfor each act . . . of
disclosure,ʺ not ʺfor each item of return information disclosed.ʺ The word ʺeachʺ
modifies ʺact,ʺ not ʺinformation.ʺ The phrase ʺeach item of return informationʺ
does not appear.
11
The statute also refers to ʺeach act of . . . disclosure of a return or
return information.ʺ A return, of course, will contain multiple items of
information, and likewise ʺreturn informationʺ clearly encompasses multiple
items of information. Yet, § 7431(c)(1)(A) treats the disclosure of either ‐‐ ʺa
return or return informationʺ ‐‐ as one act subject to one award of statutory
damages of $1,000. Mindaʹs contention that each item of information constitutes
a separate disclosure subject to a separate award of statutory damages
contradicts this language.
Finally, we note that Mindaʹs interpretation simply does not make
sense. The Report arguably contains dozens of items of return information, as
there are more than a hundred different entries. Under Mindaʹs theory, each of
these items would constitute a separate disclosure, and he would be entitled to
more than $100,000 in statutory damages, even though he suffered no actual
damages and the IRS was guilty of only one act of unauthorized disclosure. In
addition, a taxpayer whose name and Social Security number were disclosed, for
example, would receive more in statutory damages than one whose entire return
‐‐ containing his name, Social Security number, and much more ‐‐ was disclosed.
Congress could not have intended such a result.
12
We find no ambiguity in the statute, and hold that the statute clearly
provides an aggrieved taxpayer $1,000 in statutory damages for ʺeach actʺ of
unauthorized disclosure, not for each item of information disclosed. Accord
Rorex v. Traynor, 771 F.2d 383, 388 (8th Cir. 1985) (limiting taxpayers to $1,000 in
statutory damages where IRS employee disclosed multiple items of information
in one communication);1 Marré v. United States, No. H‐88‐1103, 1992 WL 240527,
at *2 (S.D. Tex. June 22, 1992) (holding that statutory damages under
§ 7431(c)(1)(A) would be based on number of actionable communications, and
declining to ʺcarve up each communication into separate, actionable disclosures,
even where we deal, not with reiterated facts, but with distinct, though related,
items of return informationʺ), affʹd in part and vacated in part on other grounds, 38
F.3d 823 (5th Cir. 1994); Smith v. United States, 730 F. Supp. 948, 954 (C.D. Ill.
1990) (holding that taxpayer was entitled to only $1,000 in statutory damages for
disclosure of one memorandum, even though memorandum contained
taxpayerʹs return information for multiple tax years), revʹd on other grounds, 964
1 A subsequent Eighth Circuit case counted the verbal disclosure of six
pieces of return information during an interview as six separate acts of disclosure. See
Snider v. United States, 468 F.3d 500, 506, 509 (8th Cir. 2006). Even assuming arguendo
that Snider was correctly decided, however, the situation here is closer to that in Rorex,
where the act of disclosure was the service of a notice of levy on the taxpayersʹ bank
containing ʺconfidential return information about the taxpayers.ʺ 771 F.2d at 385.
13
F.2d 630 (7th Cir. 1992); cf. Siddiqui v. United States, 359 F.3d 1200, 1202 (9th Cir.
2004) (ʺThe plain meaning of the language used by Congress in § 6103 supports
our focus . . . on the act of disclosure rather than the number of people who
receive unauthorized information.ʺ).
Finally, to the extent there is any doubt, we must resolve the matter
in favor of the government. Where, as here, Congress has waived sovereign
immunity, ʺprecedent teaches ʹthat the [g]overnmentʹs consent to be sued must
be construed strictly in favor of the sovereign, and not enlarged beyond what the
language requires.ʹʺ Adeleke v. United States, 355 F.3d 144, 150 (2d Cir. 2004)
(quoting United States v. Nordic Village, Inc., 503 U.S. 30, 34 (1992)).
2. Punitive Damages
The district court held that Minda was not entitled to punitive
damages as a matter of law because no reasonable jury could find, on the record
presented, that the disclosure resulted from anything other than ordinary
negligence. We agree.2
2 Consequently, we do not reach the governmentʹs argument that, under
§ 7431(c)(1)(B)(ii), a taxpayer may not recover punitive damages unless he sustained
actual damages. Compare Barrett v. United States, 917 F. Supp. 493, 504 (S.D. Tex. 1995)
(ʺThe very language and structure of the statute, the coupling of actual and punitive
damages under subpart (1)(B) and failure of the statutory damages subpart, (1)(A), to
mention punitive damages, would, logically, mean that punitive damages are
14
Under § 7431(c)(1)(B)(ii), punitive damages may be recovered ʺin the
case of a willful inspection or disclosure or an inspection or disclosure which is
the result of gross negligence.ʺ 26 U.S.C. § 7431(c)(1)(B)(ii). Minda argues that
the IRS was guilty of gross negligence. In particular, he contends that ʺ[i]t is
apparent here that the IRS personnel responsible for Mr. Mindaʹs Audit Report
completely disregarded their duty to maintain taxpayer confidentiality.ʺ Pl.‐
Appellantʹs Br. 17.
Gross negligence requires conduct that is ʺhighly unreasonable and
which represents an extreme departure from the standards of ordinary care . . . to
the extent that the danger was either known to the defendant or so obvious the
defendant must have been aware of it,ʺ that is, ʺconduct that evinces a reckless
disregard for the rights of others or smacks of intentional wrongdoing.ʺ AMW
Materials Testing, Inc. v. Town of Babylon, 584 F.3d 436, 454 (2d Cir. 2009) (internal
quotation marks and citations omitted) (discussing common law definitions of
gross negligence and reckless conduct); see also Barrett v. United States, 100 F.3d
35, 40 (5th Cir. 1996) (affirming dismissal of punitive damages claim under
recoverable only when actual damages have been proved.ʺ), affʹd on other grounds, 100
F.3d 35 (5th Cir. 1996), with Mallas v. United States, 993 F.2d 1111, 1126 (4th Cir. 1993)
(holding that, under § 7431(c), ʺa taxpayer may recover punitive damages, even where
his actual damages are zero, provided those damages exceed the amount of the
subsection (1)(A) damagesʺ).
15
§ 7431(c) and noting that ʺ[c]onduct that is grossly negligent is . . . marked by
ʹwanton or reckless disregard of the rights of anotherʹʺ (citation omitted)). To be
grossly negligent, ʺʹthe act or omission must be of an aggravated character, as
distinguished from the failure to exercise ordinary care.ʹʺ Curley v. AMR Corp.,
153 F.3d 5, 13 (2d Cir. 1998) (citation omitted).
Minda has pointed to no evidence of aggravated conduct or the
wanton or reckless disregard of his rights or conduct smacking of intentional
wrongdoing. To be sure, someone at the IRS failed to exercise reasonable care,
sending nine pages of the Report to the wrong person. But there is nothing in the
record to suggest that this was anything other than the result of simple
negligence or carelessness. On the record presented to the district court, a
reasonable factfinder could conclude only that the Report inadvertently became
commingled with Robert M.ʹs documents, and that an IRS employee then sent
the package to Robert M. without realizing it contained materials relating to two
other taxpayers.
The district court correctly granted summary judgment to the
United States on Mindaʹs claim for punitive damages.
16
CONCLUSION
For the reasons set forth above, the judgment of the district court is
AFFIRMED.
17
