Unpublished Disposition, 917 F.2d 566 (9th Cir. 1990)

Annotate this Case
US Court of Appeals for the Ninth Circuit - 917 F.2d 566 (9th Cir. 1990)

Neil T. NORDBROCK; Evelyn R. Nordbrock; Swan BusinessOrganization; Jimmy L. Standley; Sharon Standley; SucabaEnterprises; Lechwe Trust Organization; Aeri TrustOrganization; Mogollon Trust Organization, Mogollon TrustOrganization, et al., Plaintiffs-Appelleesv.Donald I. JENSEN, individually and as Special Agent of theIRS, United States Department of the Treasury,Seattle, Wa, et al., Defendants-Appellants,andFrederick Shaffer; Sharon Bennett individually and asRevenue Agents of the I.R.S., United States Department ofTreasury, Tucson, AZ; and Jack H. Kinsvatter, individuallyand as Trial Attorney, Tax Division, U.S. Dept. of Justice,Wash., D.C., Defendants.Neil T. NORDBROCK; Evelyn R. Nordbrock, Swan BusinessOrganization; Jimmy L. Standley; Sucaba Enterprises;Lechwe Trust Organization; Aeri Trust Organization;Mogollon Trust Organization, Mogollon Trust Organization, etal.; Sharon Standley, Plaintiffs-Appellants,v.Donald I. JENSEN, individually and as Special Agent of theIRS, United States Department of the Treasury, Seattle, Wa,et al.; Frederick Shaffer; Sharon Bennett individually andas Revenue Agents of the I.R.S., United States Department ofthe Treasury, Tucson, Az; and Jack H. Kinsvatter,individually and as Trial Attorney, Tax Division, U.S. Dept.of Justice, Wash., D.C., Defendants-Appellees.

No. 88-2868.

United States Court of Appeals, Ninth Circuit.

Argued and Submitted Oct. 2, 1990.Decided Nov. 1, 1990.

Before CHAMBERS, SCHROEDER and BRUNETTI, Circuit Judges.


Plaintiffs filed this Bivens action against 53 former and present employees of the Internal Revenue Service and Justice Department, alleging violations of their constitutional rights in conjunction with audits of their tax returns. During a grand jury investigation of certain members of the American Law Association ("ALA"), a tax protest group, information was forwarded to the IRS, which enabled it to learn the identities of other members of the organization. Those so identified were selected for audits, pursuant to which large deficiencies were assessed against them. Ultimately, the actual deficiencies were stipulated to be far less than those initially assessed by the IRS.

The district court granted summary judgment for the defendants on all of the claims except plaintiff Nordbrock's due process claim. The plaintiffs appeal from the summary judgment order and the government appeals from the denial of its motion for summary judgment on the Nordbrock claim.

Pursuant to F.R.C.P. 54(b), the district court directed entry of final judgment on the claims as to which it granted summary judgment. Therefore, this court has jurisdiction over the plaintiffs' appeal. This court has jurisdiction over the defendants' appeal from the partial denial of their summary judgment motion under Mitchell v. Forsyth, 472 U.S. 511, 105 S. Ct. 2806 (1985).

In addressing plaintiffs' appeal, the parties do not dispute that, for the plaintiffs to prevail in their Bivens action, they must prove that the defendants violated constitutional rights that were "clearly established." Harlow v. Fitzgerald, 457 U.S. 800, 818, 102 S. Ct. 2727, 2738 (1982). In addition, the parties agree that the defendants are immune from suit if their actions were ones that they could "reasonably have believed ... [were] lawful." Anderson v. Creighton, 107 S. Ct. 3034, 3040 (1987). Finally, all concur that the defendants are entitled to summary judgment "unless the plaintiff [s'] allegations state a claim of violation of clearly established law." Mitchell v. Forsyth, 472 U.S. 511, 526, 105 S. Ct. 2806, 2815 (1985). The dispute thus turns on whether it should have been clear to the defendants that their actions violated established rights of the plaintiffs.

The plaintiffs claim that, by seeking out the identities of ALA members, the defendants violated their first amendment right to association and their fourth amendment right against unlawful search and seizure. The plaintiffs correctly point out that anonymity in one's associations is often essential to the effective exercise of one's freedom to associate. Where such is the case, the right to this anonymity reaches constitutional proportions. See NAACP v. Alabama, 357 U.S. 449, 78 S. Ct. 1163 (1958) (order requiring disclosure of membership lists held to infringe on members' right to associate). Such anonymity is only accorded this level of respect, however, where there is evidence that disclosure will actually affect protected first amendment association activities. See id. at 462-63, 78 S. Ct. at 1172 ("Petitioner has made an uncontroverted showing that on past occasions revelation of the identity of its rank and file members has exposed these members to economic reprisal, loss of employment, threat of physical coercion, and other manifestations of public hostility."). Although their brief contains allegations that members of the ALA left the organization after the defendants undertook the enforcement activities in question, the plaintiffs point to no evidence to support their claim that the defendants' conduct precipitated any actual chilling of association. The district court was thus correct in refusing to find that the defendants' conduct violated any clearly established associational rights.

The plaintiffs further maintain that, by obtaining access to records of grand jury proceedings held pursuant to an investigation of certain ALA members, the defendants violated their first and fourth amendment rights. The material here disclosed, however, consisted of bank records, bank statements, canceled checks and deposit slips of the individuals under investigation in those grand jury proceedings. As the district court pointed out, citing United States v. Miller, 425 U.S. 435, 96 S. Ct. 1619 (1976), there is no reasonable expectation of privacy in one's bank records, which are "business records of the bank rather than the account holder's private papers." Even less tenable is the fourth amendment claim asserted here, which asks this court in effect to find that plaintiffs had a protectable interest in the bank account of another. The district court did not err in finding that no such interest existed.1 

The plaintiffs claim that defendants violated clearly established equal protection rights when they labeled the plaintiffs as tax protesters and summarily disallowed the legitimate deductions on plaintiffs' personal tax returns. The plaintiffs also assert that defendants' conduct deprived them of their fifth amendment right to due process by putting them in a position where they would have to contest the deficiencies in tax court. The plaintiffs point out that before making such a disallowance and assessing the resulting deficiency, the Commissioner must make an official determination that the deficiency is bona fide, based upon consideration of the evidence before him. Scar v. C.I.R., 814 F.2d 1363, 1368-69 (9th Cir. 1987).

These claims are effectively foreclosed by this court's decision in Clapp v. C.I.R., 875 F.2d 1396 (9th Cir. 1989), in which we held that the notices of deficiency that these plaintiffs received were issued pursuant to a determination that met the Scar criteria. It is well settled that the procedures followed in Tax Court are not constitutionally infirm. Phillips v. C.I.R., 283 U.S. 589, 51 S. Ct. 608 (1931).

We turn to the government's appeal from the district court's denial of its motion for summary judgment on the Nordbrock claim. The district court found that, in suing to enjoin him from practicing accounting and tax preparation and in levying upon his property to collect unpaid preparer penalties that had been assessed against him, the defendants may have violated Nordbrock's due process rights. The defendants took these actions, however, pursuant to statutory authority. Section 6107(b) (2) required Nordbrock to furnish, upon request, a list of all the names and taxpayer identification numbers of individuals for whom he had prepared tax returns. Nordbrock refused to comply with such a request, furnishing instead a redacted version of this list. Section 6695(d) of the Internal Revenue Code provides that an individual who fails to comply with such requests is subject to a penalty, "unless it is shown that such failure is due to reasonable cause and not due to willful neglect."

Nordbrock asserts that, because the statute authorizes penalties only for conduct "due to willful neglect," due process required that the defendants determine the willfulness of Nordbrock's conduct before assessing any penalty against him or bringing any injunction action against him. There is no basis in existing law for this argument. Due process is not offended by the requirement that Nordbrock's challenge to the willfulness determination wait until a post-assessment suit to challenge the penalty. See Bob Jones University v. Simon, 416 U.S. 744, 746-47, 94 S. Ct. 2038, 2050-51 (1974).

The defendants were entitled to summary judgment because of their immunity from Nordbrock's due process claims.

The judgment of the district court in appeal No. 89-15171 is AFFIRMED. The order denying summary judgment in favor of the government in appeal No. 88-2868 is REVERSED and that matter is REMANDED with instructions for the district court to enter an order granting summary judgment to the defendants.


This disposition is not appropriate for publication and may not be cited to or by the courts of this circuit except as provided by Ninth Circuit Rule 36-3


In United States v. Baggot, 463 U.S. 476, 103 S. Ct. 3164 (1983), the Supreme Court held that Rule 6(e) of the Federal Rules of Criminal Procedure, pursuant to which the IRS had obtained the grand jury material in this case, is not an appropriate avenue for IRS information gathering in audits. After that ruling, the IRS returned the grand jury material that it had previously obtained under Rule 6(e). Since such use of grand jury material was believed to be permissible until the Baggot decision, the plaintiffs cannot complain that the defendants violated any of their clearly established rights in obtaining this information