Snyder & Associates Acquisitions LLC v. United States, No. 15-56011 (9th Cir. 2017)
Annotate this CasePlaintiffs, tax preparation and refund-advance businesses, filed suit against the IRS under the Federal Tort Claims Act (FTCA), alleging several causes of action stemming from plaintiffs' cooperation in a federal criminal investigation. The district court granted the government's motion to dismiss, concluding that the IRS was immune from liability for its conduct under 28 U.S.C. 2680(c). The Ninth Circuit held that section 2680(c) did not confer absolute immunity on the IRS, and, construing the facts in the light most favorable to plaintiffs, the IRS's sting operation did not arise in respect of the assessment or collection of any tax. Accordingly, the panel reversed and remanded for further proceedings.
Court Description: Tax. The panel reversed the district court’s dismissal on immunity grounds of an action brought by tax preparation and refund-advance businesses against the IRS under the Federal Tort Claims Act, and remanded for further proceedings. As part of a sting operation aimed at catching people filing for fraudulent tax refunds, the IRS enlisted the assistance of plaintiffs’ tax preparation and refund-advance businesses. The operation involved using millions of plaintiffs’ dollars as bait under the promise of reimbursement, which did not happen, and the revocation of one of plaintiffs’ electronic tax filing privileges, which forced plaintiffs into bankruptcy. The panel held that 28 U.S.C. § 2680(c) does not confer absolute immunity on the IRS, and, construing the facts in a light most favorable to appellees, the sting operation did not “aris[e] in respect of the assessment or collection of any tax.” The panel also declined to accept the IRS’s alternative arguments for affirming the district court’s judgment. The panel held that § 2680(h) does not bar plaintiffs’ claims for negligence, conversion, and failure to restore things wrongfully acquired because plaintiffs did not allege that the IRS obtained their money through deceit. The panel also held SNYDER & ASSOCS. AQUISITION V. UNITED STATES 3 that the allegations in plaintiffs’ complaint sufficiently stated claims for failure to restore things wrongfully acquired, for conversion, and abuse of process under California law. The panel did not reach the government’s argument that § 2680(a)’s discretionary function exception bars plaintiffs’ claims and, at the very least, some discovery on this issue is warranted. Judge Bybee concurred in the judgment. He wrote separately to address his concern that the majority’s blanket conclusion—that the IRS was not engaged in “the assessment or collection of any tax” simply because no refunds were due to the subjects of the IRS investigation—is an unduly narrow construction of what constitutes tax assessment and collection under § 2680(c). Judge Bybee agreed that plaintiffs should have an opportunity to show why they can maintain their tort suit against the IRS.
The court issued a subsequent related opinion or order on July 13, 2017.
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