Gardner, Bruce E v. United States

United States Court of Appeals

FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued April 13, 2000 Decided June 9, 2000

No. 99-5089

Bruce E. Gardner,
Appellant

v.

United States of America, et al.,
Appellees

Appeal from the United States District Court
for the District of Columbia
(No. 96cv01467)

Bruce E. Gardner, appearing pro se, argued the cause and
filed the briefs for appellant.

Annette M. Wietecha, Attorney, U.S. Department of Jus-
tice, argued the cause for the Federal Appellees. With her
on the brief were Jonathan S. Cohen, Attorney, and Wilma
A. Lewis, U.S. Attorney. R. Craig Lawrence and W. Mark
Nebeker, Assistant U.S. Attorneys, entered appearances.

 Steven J. Green, Dona S. Kahn and Mark D. Silverschotz
were on the brief of appellees State of California and Califor-
nia Franchise Tax Board.

Before: Edwards, Chief Judge, Henderson and Rogers,
Circuit Judges.

Opinion for the Court filed by Circuit Judge Rogers.

Rogers, Circuit Judge: Bruce E. Gardner appearing pro se
appeals the dismissal of his complaint alleging violations of
federal and state law by federal and state authorities, primar-
ily as a result of the disclosure of his tax returns and tax
information, under Fed. R. Civ. P. 12 (b)(1), (2), & (6) and
41(b). For the reasons set forth in a companion case, Gard-
ner v. United States, 2000 WL 562820, No. 99-5065 (D.C. Cir.
May 19, 2000), the dismissal under Rule 41(b) cannot be
affirmed. However, we conclude that the dismissal was
proper under Rule 12(b) essentially for the reasons set forth
in the district court's opinion of January 29, 1999. We need
address only two of Mr. Gardner's contentions for, as the
district court's opinion makes clear, his other contentions fail
under well-settled law. We hold first, that the disclosure of
Mr. Gardner's tax returns and tax information within the
Internal Revenue Service was permissible under the tax
administration exception to the nondisclosure requirements of
26 U.S.C. s 6103 (1994 and Supp. IV 1998), and second, that
Mr. Gardner's exclusive remedy for the disclosures of his tax
records is under the Internal Revenue Code, and not the
Privacy Act, 5 U.S.C. s 552a (1994 and Supp. IV 1998).
Accordingly, we affirm.

I.

As noted in the companion case, Mr. Gardner formerly
worked as an attorney in the Sacramento, California Office of
Chief Counsel to the Internal Revenue Service ("IRS") at the
Treasury Department. His employment was terminated for
alleged failures to comply with federal and state tax laws.
He filed three complaints in the district court, relating to his
compliance with federal and state tax laws, after unsuccess-

fully pursuing state and federal administrative remedies. We
summarize the background to his contentions that the disclo-
sure of his tax returns and tax information violated federal
law and that he is entitled to relief under the Privacy Act as
well as the Internal Revenue Code.

Briefly put, Mr. Gardner's supervisors in Sacramento, Cali-
fornia, suspected as early as 1992 that he was not in full
compliance with federal and state tax laws. When he agreed
in 1994 to provide relevant information and then failed to do
so, his supervisors obtained his federal tax returns and tax
audit directly from IRS offices in Houston, Texas, and Fres-
no, California, and his state returns and tax information from
state agencies in California and Maryland, where he had lived
while working for the IRS in the District of Columbia. Upon
concluding that Mr. Gardner had taken several unsupportable
positions on his federal income tax returns for 1990-92 and
that he had not timely filed his Maryland income tax returns
for 1988-90, his supervisors offered him a chance to resign.
When he refused, they commenced disciplinary proceedings
and his employment was terminated November 26, 1994, for
failure to file proper federal and state income tax returns.
Thereafter, his application for unemployment benefits was
denied by the California Unemployment Insurance Appeals
Board, and his challenge to his termination was rejected by
the Merit Systems Protection Board. He then filed a forty-
four count complaint in the district court alleging, among
other things, that the Treasury Department, the IRS, and
individual IRS employees violated the Internal Revenue Code
and the Privacy Act through intra-IRS disclosures of his tax
return information while he was under investigation by the
IRS and during the state and federal administrative proceed-
ings that he commenced after his employment was terminat-
ed. Following the filing of dispositive motions by the defen-
dants, the district court dismissed the complaint under Fed.
R. Civ. P. 12(b) and 41(b).

The court has concluded in a companion case that the Rule
41(b) dismissal of Mr. Gardner's complaint must be reversed.
Gardner, 2000 WL 562820, at *1, 3-5. The question remains
whether Mr. Gardner has demonstrated that the district

court erred in dismissing his complaint under Rule 12(b).
Most of his contentions raise issues that are well-settled in
law adversely to him, and we need not repeat the district
court's opinion.1 There are, however, two contentions that
require some explication.

II.

First, Mr. Gardner contends that the district court erred in
ruling that the disclosure of his tax records fell within the
exception to nondisclosure of s 6103(h)(1) for "tax administra-
tion purposes." In making this contention he relies on our
decision in National Treasury Employees Union v. Federal
Labor Relations Board ("NTEU"), 791 F.2d 183 (D.C. Cir.
1986), and therein lies the need for clarification.

The Internal Revenue Code generally prohibits the disclo-
sure of tax returns and tax information. Under 26 U.S.C.
s 6103(a), "return and return information shall be confiden-
tial" and "no officer or employee of the United States ...

__________
1 The district court lacked personal jurisdiction over the individ-
ual IRS employees-appellees, because Mr. Gardner failed to allege
the requisite contacts between these California and Texas residents
and the District of Columbia under the Constitution and the Dis-
trict's long-arm statute. See, e.g., International Shoe Co. v. Wash-
ington, 326 U.S. 310, 316 (1945); D.C. Code Ann. s 13-423 (1995).
Mr. Gardner's defamation claim against the United States is barred,
because suits for libel or slander are prohibited under the Federal
Tort Claims Act. 28 U.S.C. s 2680(h)(1994). The district court
lacked subject matter jurisdiction of Mr. Gardner's claims for
alleged violations of the Family Leave Act and the Whistleblower
Protection Act, because he failed to allege that he had exhausted his
administrative remedies, as required under the Civil Service Re-
form Act. Hubbard v. EPA, 809 F.2d 1, 5 (D.C. Cir. 1987);
Carducci v. Regan, 714 F.2d 171, 174-75 (D.C. Cir. 1983). Mr.
Gardner's claims against the California state defendants were
barred by the Eleventh Amendment, which prohibits suit against a
state or a state agency in federal court absent their consent or clear
congressional abrogation of immunity, neither of which was present
here. See, e.g., Seminole Tribe of Florida v. Florida, 517 U.S. 44,
54-55 (1996).

shall disclose any return or return information" unless autho-
rized by statute. As the court observed in NTEU:

This general ban on disclosure provides essential protec-
tion for the taxpayer; it guarantees that the sometimes
sensitive or otherwise personal information in a return
will be guarded from persons not directly engaged in
processing or inspecting the return for tax administra-
tion purposes. The assurance of privacy secured by
s 6103 is fundamental to a tax system that relies upon
self-reporting.

Id. at 184. In recognition of competing concerns, however,
the Code includes a number of exceptions. Two are relevant
here.

Under s 6103(h)(1), "[r]eturns and return information shall,
without written request, be open to inspection by or disclo-
sure to officers and employees of the Department of the
Treasury whose official duties require such disclosure for tax
administration purposes." 26 U.S.C. s 6103(h)(1). Another
provision, s 6103(h)(4), authorizes disclosure of returns and
return information "in a Federal or State judicial or adminis-
trative proceeding pertaining to tax administration ... if the
taxpayer is a party to the proceeding...."2 If the internal
IRS investigation of Mr. Gardner's tax history, and the
related state and federal administrative proceedings com-
menced by Mr. Gardner were "tax administration" matters,
then the disclosures were proper under s 6103(h)(1) and (4).
We therefore address the scope of the tax administration

__________
2 In the district court, the federal appellees also relied on
s 6103(l )(4)(B), which authorizes the Secretary of the Treasury to
disclose returns and return information to Treasury Department
employees for their use in an "administrative action or proceeding
affecting the personnel rights" of an employee or former employee,
see s 6103(l )(4)(B), (A)(i), and argued that, in addition, the chal-
lenged disclosures were made pursuant to a good faith interpreta-
tion of s 6103. The district court granted the motion to dismiss the
complaint under Rule 12(b) without indicating which provision
applied to which disclosures. In view of our disposition, we do not
address these subjects.

exception of s 6103(h)(1) and (4) with respect to these disclo-
sures.

The Internal Revenue Code defines "tax administration"
fairly broadly, to include "the administration, management,
conduct, direction, and supervision of the execution and appli-
cation of the internal revenue laws or related statutes (or
equivalent laws and statutes of a State)....," id.
s 6104(b)(4)(A)(i), as well as enforcement and litigation under
the tax laws. Id. s 6104(b)(4)(B). While the language of this
exception appears readily applicable to the daily work that
IRS employees do in auditing and otherwise checking taxpay-
er returns and tax information, it is perhaps not as clearly
applicable to internal personnel investigations. Taking the
lead from Congress' broad language, however, courts have
acknowledged that such investigations, where necessary to
maintain the integrity of the tax enforcement authorities, are
"tax administration" matters. Thus, in Rueckert v. IRS, 775
F.2d 208 (7th Cir. 1985), the Seventh Circuit held that the tax
returns of a state employee responsible for investigation of
tax fraud were properly disclosed to persons within the state
tax department who were investigating whether the employee
had engaged in unauthorized outside employment. Id. at 212.
Relying on the "tax administration" exception of s 6104(h)(1),
the Seventh Circuit interpreted "the 'management' and 'su-
pervision' of a state's internal revenue laws [to] include[ ]
ensuring that its employees are free from conflicts of interest
that could undermine the integrity of its system of adminis-
tering the state tax laws." Id. Similarly, the Fifth Circuit
recently held the "tax administration" exception of
s 6103(h)(4) applicable to tax information disclosures made
with regard to an IRS employee's Title VII and Merit Sys-
tems Protection Board challenges to the termination of his
employment for noncompliance with the tax laws. Hobbs v.
United States, 209 F.3d 408 (5th Cir. 2000). The Hobbs
Court observed that the IRS employee's "own compliance
with the federal tax laws was something of key concern to the
IRS; his position required him to examine the accuracy of
corporate and individual tax returns and, in turn, to have a
sophisticated understanding of the tax laws," and concluded

that disclosures made in the context of administrative and
judicial challenges to his termination "unquestionably encom-
passed tax administration". Cf. United States v. Mangan,
575 F.2d 32, 40 (2d Cir. 1978). Given this reasonable con-
struction of the broad language of s 6103(h)(1) and (4), it
would seem that the disclosures of which Mr. Gardner com-
plains were proper for purposes of enabling the IRS to
conduct its internal investigation of his tax history, and to
explain the basis for the termination of his employment in the
subsequent administrative proceedings.

Mr. Gardner contends, however, that our decision in NTEU
not only bars the wholesale disclosures that he alleges oc-
curred here, but holds that the "tax administration" exception
of s 6103(h)(1) is inapplicable to personnel matters, and thus
to his case. Although there is some broad language in NTEU
suggesting Mr. Gardner's point, properly read in context
NTEU does not demonstrate error by the district court. To
the extent that NTEU concluded that an employee grievance
unrelated to the employee's tax compliance history could
entail disclosure only upon proper authorization under
s 6103(l )(4)(A) and thus implicitly concluded that the griev-
ance was not a "tax administration" matter justifying
s 6103(h)(1) disclosure, NTEU is not dispositive of whether
the IRS may, as a matter of tax administration, disclose an
employee's tax records to IRS officials as part of an internal
investigation of the employee's compliance with the tax laws,
or in subsequent proceedings relating to a resulting termi-
nation decision.

In NTEU, the court held that disclosures by two IRS
employees of confidential taxpayer information in the course
of preparing for a grievance proceeding against the IRS
violated the Internal Revenue Code's non-disclosure require-
ment. 791 F.2d at 184. The employees had disclosed to each
other and to their union attorneys their "Revenue Officer
Dailies" while challenging a negative performance evaluation
of one of the employees. The unredacted dailies showed how
each revenue officer spent his time and included the name of
each taxpayer for whose case the officer was responsible, and
a description of any action taken. Id. at 185. The court,

recognizing that for a union to fulfill its duty to represent
federal employees, it must have access to agency records for
bargaining and grievance resolution purposes, concluded that
s 6103(l )(4)(A) provided for such access.3 Id. at 184. Pursu-
ant to that provision, IRS had authorized certain upper level
officers to act on the Treasury Secretary's behalf in approv-
ing disclosures.4 The problem in NTEU was that the em-
ployees had not obtained such authorization, and consequent-
ly, the court held, the disclosures violated s 6103. Id. at 184-
85, 187. The court never addressed the scope of the "tax
administration" exception under s 6103, although it was im-
plicit that the court did not consider the employee grievance
to involve "tax administration," given its reliance on the
authorization procedures of s 6103(l )(4)(A), and its acknowl-
edgment that such procedures would not be necessary for
disclosures made pursuant to "tax administration" matters
under s 6103(h)(1). Id. at 188. Thus, while the court stated
broadly that "disclosures for personnel purposes, whether to
employees or outsiders, are prohibited by statute unless
__________
3 Section 6103(l )(4) provides:

The Secretary may disclose returns and return informa-
tion--

(A) upon written request--

(i) to an employee or former employee of the Department
of the Treasury, or to the duly authorized legal representa-
tive of such employee or former employee, who is or may be
a party to any administrative action or proceeding affecting
the personnel rights of such employee or former employee;
or

(ii) to any person, or to the duly authorized legal represen-
tative of such person, whose rights are or may be affected by
an administrative action or proceeding under section 330 of
title 31, United States Code....
26 U.S.C. s 6103(l )(4).

4 In NTEU the court relied on IRS Delegation Order 184-85
(rev. 2, para. 1(e) (Mar. 21, 1982), which set forth the authorization
procedure under s 6103(4)(A) and allowed only certain upper level
officers to act as the Secretary's designees in granting permission
to disclose tax information. NTEU, 791 F.2d at 184-85.

authorized in the precise manner indicated in
s 6103(l )(4)(A)", id., this statement was not made with re-
gard to the scope of the "tax administration exception" under
s 6104(h)(1) or (h)(4), but merely reiterated the court's con-
clusion that the type of disclosures at issue could not be made
under s 6103(l )(4)(A) absent proper authorization. Id. at
184-85, 187.

Moreover, the court's implicit holding that the grievance
proceeding at issue did not constitute "tax administration"
has no bearing on the instant case. The disclosures in NTEU
occurred in the course of an employee grievance proceeding
against the IRS relating to the quality and quantity of the
employee's work performance. As an adversarial personnel
matter, it did not implicate the IRS' need to guard the
integrity of its operations. By contrast, the disclosures that
Mr. Gardner challenges, as in Rueckert and Hobbs, occurred
in connection with the IRS' legitimate need to protect the
integrity of its tax enforcement operations by ensuring that
its employees were in compliance with the tax laws. Because
the disclosures of Mr. Gardner's tax records were made for
the limited purposes of determining whether he had failed to
comply with the tax laws and in justifying the resulting
decision to terminate his employment, they were integral to
the IRS' need to ensure that its employees' conduct does not
"undermine the integrity of [the IRS'] system of administer-
ing the ... tax laws," Rueckert, 775 F.2d at 212, and thus the
disclosures were proper under the "tax administration" ex-
ception of s 6103(h)(1) and (4). Accordingly, the district
court did not err in dismissing Mr. Gardner's disclosures
claims under Rule 12(b).

III.

Second, Mr. Gardner contends that the district court erred
by dismissing under Rule 12(b)(6) his claims under the Priva-
cy Act, 5 U.S.C. s 552a. In his complaint, Mr. Gardner
raised Privacy Act claims that fall into three primary catego-
ries: disclosure of his tax information, expungement or
amendment of information in his tax records, and disclosure

of non-tax related information. Only the first category merits
more than summary discussion.5 As to this category, the
district court ruled that any claims regarding the disclosure
of tax information are preempted by the Internal Revenue
Code. This is a question of first impression for this court.

In dismissing Mr. Gardner's disclosure claims, the district
court relied on Lake v. Rubin, 162 F.2d 113 (D.C. Cir. 1998).
In Lake, the court held that taxpayers could not rely on the
Privacy Act to obtain access to their tax records because the
more specific provisions of the Internal Revenue Code,
s 6103, controlled. Id. at 115-16. While Lake concerned
access by taxpayers to their own records, the decision is
instructive on whether s 6103 preempts Privacy Act claims
regarding disclosure of taxpayer records by third parties.

Following the approach in Cheek v. IRS, 703 F.2d 271, 271-
72 (7th Cir. 1983), the court in Lake noted with approval the
conclusion of the Seventh Circuit that s 6103 "overrides any
inconsistent provisions of ... the Privacy Act". Lake, 162
F.3d at 116. That conclusion, the court observed, was sup-
ported by the legislative history, in view of the Senate
Report's statement "that [tax information] should generally
be treated as confidential ... except in those limited situa-
tions delineated in ... section 6103...." Id. at 116, n.3
(citing S. Rep. No. 94-938 at 318 (1976)). In addition, the
Lake court viewed the conclusion of exclusivity to be analo-

__________
5 In view of the plain language of the Internal Revenue Code,
the district court correctly ruled that 26 U.S.C. s 7852(e) stripped
the court of subject matter jurisdiction over Mr. Gardner's Privacy
Act claims for expungement or amendment of his tax records. 26
U.S.C. s 7852(e) (1994). See also, e.g., England v. Commissioner,
798 F.2d 350, 351-52 (9th Cir. 1986). Similarly, the district court
correctly ruled that the alleged disclosures of non-tax information,
including "defamatory statements" made in state and federal ad-
ministrative proceedings by IRS officials and intra-Treasury/IRS
disclosures of Mr. Gardner's wage records, constitute "routine uses"
exempt from Privacy Act protection. See 5 U.S.C. s 552a(b)(3); 57
Fed. Reg. 13900, 14058-59 (1992). Cf. Department of the Air Force
v. Federal Labor Relations Authority, 104 F.3d 1396, 1401-02 (D.C.
Cir. 1997).

gous to its precedent that the Freedom of Information Act
does not govern the disclosure of information when another
statute more specifically addresses the disclosure of that
information through " 'comprehensive, carefully tailored and
detailed' provisions 'designed to protect both the interest of'
those seeking the information and the interest in 'confiden-
tiality.' " Id. at 116 (citing Ricchio v. Kline, 773 F.2d 1389,
1395 (D.C. Cir. 1985)). That precedent is even more directly
analogous to the instant case than it was to Lake, because it
concerns the preemption of statutory provisions regarding
disclosure to third parties by other, more specific provisions.

From the analysis in Lake, the district court could properly
conclude with regard to Mr. Gardner's unauthorized disclo-
sure claims that s 6103, with its detailed framework for
access to and disclosure of tax records, preempts the relative-
ly generic provisions of the Privacy Act. The Fifth Circuit,
citing Lake and Cheek, likewise concluded that s 6103 trumps
Privacy Act claims for unauthorized disclosures where the
disclosures fall within s 6103's "tax administration" exception.
Although declining to opine on whether preemption would
exist absent a direct conflict between the Internal Revenue
Code and the Privacy Act, the Fifth Circuit concluded that
such a conflict did exist, and that the former thus trumped
the latter, where a disclosure that related to "tax administra-
tion" (and thus was exempt from the Internal Revenue Code's
nondisclosure restriction) was the basis for a claim under the
Privacy Act.6 The Fifth Circuit also cited Cheek and Lake for
the broader proposition that the majority of courts to con-
front the issue have concluded that the Internal Revenue
Code preempts the Privacy Act in "provid[ing] the exclusive
remedy for disclosures of tax return information." Hobbs,
209 F.3d at 411. Those circuit courts of appeals allowing
Privacy Act claims based on tax return disclosures neither

__________
6 In Hobbs, the Fifth Circuit cited Sinicki v. United States
Department of the Treasury, No. 97 Civ. 0901, 1998 WL 80188
(S.D.N.Y. Feb. 24, 1998), in which the district court had ruled that
" '[s]ection 6103 should only implicitly repeal the Privacy Act to the
extent it presents an irreconcilable conflict.' " Hobbs, 209 F.3d at
412 (quoting Sinicki, 1998 WL 80188, at *5).

addressed s 6103 preemption directly nor faced a situation in
which the Privacy Act provided a remedy for conduct permis-
sible under the Internal Revenue Code. See Taylor v. Unit-
ed States, 106 F.3d 833, 836-37 (8th Cir. 1997); Long v. IRS,
891 F.2d 222, 224 (9th Cir. 1989).

Because our analysis in Lake, supported by decisions in the
Fifth and Seventh Circuits, leads inexorably to the conclusion
that the Internal Revenue Code preempts the Privacy Act for
remedies for disclosure of tax information, we hold that
s 6103 is the exclusive remedy for a taxpayer claiming unlaw-
ful disclosure of his or her tax returns and tax information.
The district court, therefore, did not err in dismissing under
Rule 12(b)(6) Mr. Gardner's Privacy Act claims based on IRS
disclosures of his tax returns and tax information.

Accordingly, we affirm the judgment of the district court.