MEMORANDUM OPINION GRANTING IN PART AND DENYING IN
PART DEFENDANTS' MOTION FOR PARTIAL DISMISSAL
RUDOLPH CONTRERAS UNITED STATES DISTRICT JUDGE
I.
INTRODUCTION
Plaintiffs
Bancroft Global Development, Michael Stock, and Melissa Bates
Stock seek the return of documents seized during the
execution of a search warrant in 2011, as well as money
damages for the allegedly unlawful disclosure of their
confidential tax return information. In particular,
Plaintiffs allege that employees of several federal agencies
told employees of other federal agencies that Plaintiffs were
being audited, the likely result of the audit, and commented
about Plaintiffs' behavior during the audit.
Additionally, Plaintiffs allege that the government agencies
that had originally seized their confidential tax information
gave a portion of those documents to another undisclosed
government agency without the legal authority to do so. The
Government has moved to dismiss each of Plaintiffs'
unlawful disclosure claims on the grounds that they are
either time-barred or insufficiently pleaded. For the reasons
stated below, the Court dismisses Counts III and VII of
Plaintiffs' Second Amended Complaint for failure to state
a claim and dismisses Mr. and Mrs. Stocks' claims in
Count VI and a portion of Count IV for lack of standing.
II.
FACTUAL BACKGROUND [1]
Plaintiff
Bancroft Global Development (“Bancroft”) is a
nonprofit corporation that “provides education and
training for foreign governments and international
organizations in disciplines such as explosive ordnance
disposal, emergency medicine, and law enforcement, in order
to protect civilians and help such areas recover and develop
economically.” 2d Am. Compl. ¶¶ 13-14, ECF
No. 36. Plaintiff Michael Stock serves as Bancroft's
President and Director, and Plaintiff Melissa Bates Stock
serves as its Secretary and Director. Id.
¶¶ 15-16. Bancroft's work involves a
substantial amount of classified information and material
that it receives from the federal government. Id.
¶ 22. Certain members of Bancroft's staff, including
Mr. and Mrs. Stock, have been granted “clearances for
extremely sensitive classified information, ” which
allows them access to classified material relating to
specific government programs or contracts. Id.
¶¶ 22-23. Additionally, the government has allowed
Bancroft to store and process classified materials in certain
locations in its offices. Id. ¶ 24.
Despite
these clearances and authorizations, in 2011, the Federal
Bureau of Investigation (“FBI”) and Immigration
and Customs Enforcement (“ICE”) began
investigating Bancroft for potential violations of 18 U.S.C.
§ 1924, concerning the unauthorized removal or retention
of classified documents or material. Id. ¶ 25.
In furtherance of that investigation, on November 9, 2011,
the FBI and ICE executed three search warrants: two
authorizing the seizure of property in Bancroft's D.C.
offices and one authorizing the seizure of property in Mr.
and Mrs. Stock's home in McLean, Virginia. Id.
¶ 26. The FBI and ICE seized a multitude of records
belonging to Bancroft and the Stocks, including both hard
copy records and electronic files. See Id.
¶¶ 27-30.
Soon
thereafter, the Internal Revenue Service (“IRS”)
began an audit of Bancroft's 2008, 2009, and 2010 tax
returns. Id. ¶ 31. In furtherance of that
audit, the IRS issued formal Information Document Requests
seeking records that would establish the accuracy of
Bancroft's tax returns during those years. However,
because the FBI and ICE had seized most of Bancroft's
hard copy and electronic records, Bancroft was unable to
comply with the IRS's requests. Id. ¶ 32.
In an attempt to comply with the requests, Bancroft wrote to
Assistant U.S. Attorney Jonathan Malis about the status of
the seized records, explaining that the government's
retention of the documents prevented Bancroft from complying
with the IRS's Information Document Requests. Mr. Malis
did not grant Bancroft access to the relevant materials.
Id. ¶ 33.
Due in
part of Bancroft's inability to comply with the
Information Document Requests, the IRS opened an additional
audit into Mr. and Mrs. Stock's personal tax returns for
the same years. Id. ¶ 34. Again, Mr. and Mrs.
Stock found themselves unable to comply with the requests
because many of the documents they would need to submit in
order to comply remained in government custody. Id.
¶ 35. In April 2013, IRS Revenue Agent Rene Hammett, the
agent assigned to the two audits, contacted Plaintiffs'
counsel inquiring about the status of the IRS's
outstanding Information Document Requests. Id.
¶ 36. She informed Plaintiffs' counsel that she
understood that many of the responsive records remained in
government custody and were now in the possession of the U.S.
Attorney's Office, and explained that Elizabeth Henn,
counsel for the IRS, had contacted the Office in an attempt
to resolve this issue. Id. ¶ 37. Despite these
efforts, it would be another three months before any of
Plaintiffs' seized records would be returned to them.
Id. ¶ 40.
In May
2013, Plaintiffs were informed that the Department of Justice
had closed its criminal investigation of Plaintiffs.
Id. ¶ 41. Jay Bratt, Deputy Chief of the
National Security Section, told Plaintiffs' counsel that
the government would return all unclassified records it had
collected for purposes of the investigation to
Plaintiffs' counsel, but would send all classified
records it had collected to an unidentified government
agency. Id. ¶ 42. However, when Plaintiffs
received a portion of the seized records in July 2013, they
noticed that: (1) “the inventory of returned materials
did not include all of the seized unclassified property, . .
. including critical financial information needed to respond
to the ongoing audits”; (2) “highly classified
material had been commingled with unclassified records while
in Government custody, ” resulting in the transmission
of certain unclassified records to the unidentified
government agency; (3) “the returned materials included
materials clearly marked as classified”; (4) the
government's inventory of items initially seized, and
items returned, contained errors; and (5) “electronic
media had been wiped clean of all its data, and physical
items had been destroyed while in FBI custody.”
Id. ¶ 44. “In light of these problems,
Plaintiffs still did not have access to sizeable amounts of
information needed to respond to the ongoing audits.”
Id. ¶ 49. Indeed, as of the filing of their
Second Amended Complaint, Plaintiffs still had not received
many of the unclassified records and nearly all of the
classified records that the Government had seized. See
Id. ¶ 64.
When
Plaintiffs attempted to obtain the remainder of the seized
documents, the government did not acknowledge that it had
retained or released any documents in error. Id.
¶¶ 50-51. However, two years later, on June 24,
2015, ICE Special Agent John Dietrich delivered two more
boxes of “miscellaneous documents, ” including a
portion of the seized tax returns and return information, to
Bancroft's office. Id. ¶ 52. While Special
Agent Dietrich was returning the boxes, Plaintiffs noticed
that he appeared to be aware of the “existence, status,
scope, and anticipated outcome of the IRS audit.”
Id. ¶ 89.
Plaintiffs
allege that the mishandling of their seized records led to
the improper sharing of their confidential tax information
with unauthorized individuals. Id. ¶ 66. First,
Plaintiffs allege that in May 2016, the IRS informed
Plaintiffs that their missing tax records were no longer in
FBI or ICE custody, but rather “were maintained in a
facility that could have been accessed by IRS personnel with
the proper clearance if the taxpayer had provided
permission.” Id. ¶ 70. Plaintiffs believe
that the referenced facility belongs to an undisclosed
government agency (“Government
Agency”)[2] with whom Bancroft has or had a classified
contractual relationship. Id. ¶ 71. Plaintiffs
argue that this means that the FBI, ICE, and the U.S.
Attorney's Office provided this third-party Government
Agency with documents containing confidential tax return
information “without authorization or any legitimate
purpose.” Id. ¶ 72.
Second,
Plaintiffs allege that beginning on or around July 2012, IRS
counsel Henn told Assistant U.S. Attorney Malis and Deputy
Chief Bratt about: “the existence and status of the
audit”; an IRS agent's “prediction that
Bancroft's tax-exempt status would be revoked”; the
agent's “view that Bancroft was not being
cooperative”; and “specific information about
Plaintiffs' accounts, transactions, and relationships
with third parties.” Id. ¶ 75. While
Plaintiffs were informed in April 2013 that Ms. Henn had been
in contact with the U.S. Attorney's Office, Plaintiffs
were under the impression that this contact was for the
limited purpose of finding out when the IRS would be able to
gain access to the seized records. Id. ¶ 78. It
was not until May 2016 that Plaintiffs learned that Ms. Henn
had disclosed the information listed above to Mr. Malis and
Mr. Bratt. Id.
Third,
Plaintiffs allege that the IRS impermissibly shared tax
information, “including IRS-generated documents and
Bancroft's own return information, ” with
Government Agency. Id. ¶ 79. Plaintiffs also
allege that in 2012, during a meeting at IRS headquarters,
“IRS officials informed Government Agency employees
that the IRS would revoke Bancroft's tax exempt
status.” Id. ¶ 81. Thereafter, Agent
Hammett continued to speak with Government Agency's
employees, including the then-Director of the Agency, about
the audit at various points throughout 2012. Id.
¶ 82. Plaintiffs have also unearthed “a
handwritten note, dated May 6, 2016 and signed by IRS
official Nancy Todd, indicat[ing] that she had shared with a
Government Agency employee . . . information prepared by the
IRS exam in response to Bancroft's taxpayer
protest.” Id. ¶ 83. Overall, Plaintiffs
allege that the IRS has discussed the following with
Government Agency employees: “(i) Bancroft's
accounting system and record-keeping; (ii) whether Bancroft
properly had managed federal funds; (iii) whether Bancroft
used Generally Accepted Accounting Principles; and (iv)
whether the Government Agency would be willing to pressure
Bancroft to relinquish its tax-exempt status.”
Id. ¶ 84.
Fourth,
Plaintiffs allege that the IRS and the FBI disclosed
Bancroft's tax return information to ICE, as evidenced by
their conversation with Special Agent Dietrich on June 24,
2018. See Id. ¶¶ 86-91. And fifth,
Plaintiffs allege that the Government Agency improperly
disclosed Bancroft's tax return information to employees
of its parent agency (“Organization”), as
evidenced by the fact that the Organization refused to
consider Bancroft for a contract in January 2017 because
“the Organization had been made aware of the IRS audit,
that the IRS was going to shut down Bancroft, and that
Bancroft's reputation involved a troublesome history of
audits.” Id. ¶ 96. Additionally, Bancroft
alleges that employees of Government Agency disclosed this
type of information to nine other individuals, such as
“management-level staff in a procurement entity, who
were well-positioned to make decisions about Bancroft's
eligibility to receive government contracts.”
Id. ¶¶ 98-99. Plaintiffs explain that they
learned of these disclosures in May 2016, when they received
Government Agency's list of third-party contacts as part
of the audit. Id. ¶ 100.
Plaintiffs
filed this suit in March 2017 alleging unlawful disclosure of
their tax return information in violation of 26 U.S.C. §
6103. Compl. ¶¶ 13-14, ECF No. 1. Three weeks
later, they filed an amended complaint, filling in some of
the details of their unlawful disclosure claims and adding
requests for a declaratory judgment for spoliation of
property the government destroyed and for replevin of the
documents seized. See generally Am. Compl, ECF No.
9. Defendant John Koskinen, then-Commissioner of the IRS,
moved to dismiss many of the counts in the new complaint on
several grounds, including (1) that Plaintiffs named the
wrong defendants in their unlawful disclosure of their tax
return information claims, (2) that some of the unlawful
disclosure claims were time-barred, (3) that Plaintiffs
provided insufficient details to state cognizable claims for
the unlawful disclosure of their tax information, and (4)
that the claim of spoliation against the Commissioner of the
IRS in his official capacity should be dismissed because
Plaintiffs had not alleged that the IRS had custody of the
documents Plaintiffs sought. See Koskinen Mot.
Dismiss at 2, ECF No. 23. The remaining defendants- ICE, the
Department of Justice, and several of its sub-components-also
moved to dismiss several counts of the amended complaint on
the grounds that (1) the unlawful disclosure claims were
insufficiently pleaded, and (2) that Plaintiffs'
spoliation and replevin claims should have been brought under
the Federal Tort Claims Act, but that even if they had been,
Plaintiffs had failed to exhaust their administrative
remedies in order to bring such claims. See Mem.
Supp. DOJ Mot. Dismiss at 1- 2, ECF No. 24.
Upon
review of the Government's motions, Plaintiffs moved to
amend their complaint to (1) add the United States as a
defendant to all of their claims, and (2) replace the
replevin and spoliation claims with a claim under Federal
Rule of Criminal Procedure 41(g) for the return of property.
See Mot. Amend, ECF No. 29. The Court granted
Plaintiffs' motion and Plaintiffs' Second Amended
Complaint became the operative complaint in this case.
See Mem. Op. (Oct. 27, 2017), ECF No. 35. The United
States has now moved to dismiss Plaintiffs' five unlawful
disclosure claims, and its motion is ripe for decision.
See Defs.' Mot. Dismiss, ECF No. 42.
III.
LEGAL STANDARD
“Absent
a waiver, sovereign immunity shields the Federal Government
and its agencies from suit.” F.D.I.C. v.
Meyer, 510 U.S. 471, 475 (1994). “[T]he existence
of consent is a prerequisite for jurisdiction, ”
United States v. Mitchell, 463 U.S. 206, 212 (1983),
and a “plaintiff must overcome the defense of sovereign
immunity in order to establish the jurisdiction necessary to
survive a Rule 12(b)(1) motion to dismiss.” Jackson
v. Bush, 448 F.Supp.2d 198, 200 (D.D.C. 2006).
“[L]imitations and conditions upon which the Government
consents to be sued must be strictly observed and exceptions
thereto are not to be implied.” Lehman v.
Nakshian, 453 U.S. 156, 160-61 (1981). A court, however,
must accept “the allegations of the complaint as true,
” Banneker Ventures, LLC v. Graham, 798 F.3d
1119, 1129 (D.C. Cir. 2015), and “construe the
complaint ‘liberally,' granting plaintiff
‘the benefit of all inferences that can be derived from
the facts alleged.'” Barr v. Clinton, 370
F.3d 1196, 1199 (D.C. Cir. 2004) (quoting Kowal v. MCI
Communications Corp., 16 F.3d 1271, 1276 (D.C. Cir.
1994)). Where necessary to resolve a jurisdictional
challenge, “the court may consider the complaint
supplemented by undisputed facts evidenced in the record, or
the complaint supplemented by undisputed facts plus the
court's resolution of disputed facts.” Herbert
v. Nat'l Acad. of Scis., 974 F.2d 192, 197 (D.C.
Cir. 1992).
Overall,
“‘the [p]laintiff's factual allegations in
the complaint . . . will bear closer scrutiny in resolving a
12(b)(1) motion' than in resolving a 12(b)(6) motion for
failure to state a claim.” Grand Lodge of Fraternal
Order of Police v. Ashcroft, 185 F.Supp.2d 9, 13-14
(D.D.C. 2001) (citing 5A Charles A. Wright & Arthur R.
Miller, Federal Practice and Procedure § 1350). A motion
to dismiss under Rule 12(b)(6) does not test a
plaintiff's ultimate likelihood of success on the merits;
rather, it tests whether a plaintiff has properly stated a
claim. See Scheuer v. Rhodes, 416 U.S. 232, 236
(1974), abrogated on other grounds by Harlow v.
Fitzgerald, 457 U.S. 800 (1982). A court considering
such a motion presumes that the complaint's factual
allegations are true and construes them liberally in the
plaintiff's favor. See, e.g., United States
v. Philip Morris, Inc., 116 F.Supp.2d 131, 135 (D.D.C.
2000). Nevertheless, “[t]o survive a motion to dismiss,
a complaint must contain sufficient factual matter, accepted
as true, to ‘state a claim to relief that is plausible
on its face.'” Ashcroft v. Iqbal, 556 U.S.
662, 678 (2009) (quoting Bell Atl. Corp. v. Twombly,
550 U.S. 544, 570 (2007)). This means that a plaintiff's
factual allegations “must be enough to raise a right to
relief above the speculative level, on the assumption that
all the allegations in the complaint are true (even if
doubtful in fact).” Twombly, 550 U.S. at
555-56 (citations omitted). “Threadbare recitals of the
elements of a cause of action, supported by mere conclusory
statements, ” are therefore insufficient to withstand a
Rule 12(b)(6) motion to dismiss. Iqbal, 556 U.S. at
678. A court need not accept a plaintiff's legal
conclusions as true, see id., nor must a court
presume the veracity of the legal conclusions that are
couched as factual allegations, see Twombly, 550
U.S. at 555.
IV.
ANALYSIS
The
Government has moved to dismiss Counts III, IV, V, VI, and
VII of Plaintiffs' Second Amended Complaint on several
grounds. First, the Government argues that Plaintiffs have
not shown that they filed suit within the applicable
limitations period for Counts IV, V, VII. Defs.' Mot. at
6-10. This failure to demonstrate timeliness, the Government
argues, deprives the Court of subject matter jurisdiction
over these counts. Second, the Government argues that
Plaintiffs have failed to state viable claims for violations
of § 6103 in all of their unlawful disclosure counts.
See Id. at 10. Plaintiffs respond that all of their
claims are timely and sufficiently pleaded. See
generally Pls.' Opp'n, ECF No. 44. As explained
below, the Court finds that Counts III and VII were
insufficiently pleaded and therefore dismisses those claims.
Additionally, the Court finds that Mr. and Mrs. Stock lack
standing to bring Count VI and a portion of Count IV and
therefore dismisses their claims in those counts as well.
A.
The Statute of Limitations
The
Government contends that several of Plaintiffs' unlawful
disclosure claims were untimely filed, and that because
§ 7431's statute of limitations is jurisdictional,
the Court does not have subject matter jurisdiction over the
untimely claims. See Defs.' Mot. at 6-10. To
support their argument that § 7431's statute of
limitations is jurisdictional, the Government points to
Aloe Vera of Am. v. United States (“Aloe
Vera I”), 580 F.3d 867 (9th Cir. 2009) and
Gandy v. United States, 234 F.3d 281 (5th Cir.
2000), cases in which courts found § 7431's statute
of limitations to be jurisdictional. In the alternative, the
Government argues that the allegedly untimely counts may be
dismissed for failure to state a claim because
Plaintiffs' “pleadings show that they knew or had
reason to know of the disclosures more than two years before
filing suit.” Defs.' Mot. at 7. Plaintiffs respond
that, Ninth and Fifth Circuit opinions notwithstanding,
“a decade of Supreme Court and D.C. Circuit precedent .
. . mak[es] clear that a limitations period like the one
contained in Section 7431(d) is a non-jurisdictional
affirmative defense on which the Government bears the burden
at all times.” Pls.' Opp'n at 9. And
regardless, Plaintiffs argue, their Second Amended Complaint
makes clear that Plaintiffs discovered each alleged offense
within the limitations period. Id. at 12. As
explained below, the Court finds that § 7431's
statute of limitations is not jurisdictional, but rather is
an affirmative defense. Therefore, viewing the facts alleged
in the Second Amended Complaint in the light most favorable
to Plaintiffs, the Court finds that it cannot at this point
in the proceedings determine whether Counts IV, V, and VII
are time-barred, and therefore denies the Government's
motion to dismiss on this ground.
1.
The Nature of § 7431's Statute of
Limitations
Section
7431 provides, in a subsection called “Period for
bringing action, ” that “[n]otwithstanding any
other provision of law, an action to enforce any liability
created under this section may be brought, without regard to
the amount in controversy, at any time within 2 years after
the date of discovery by the plaintiff of the unauthorized
inspection or disclosure.” 26 U.S.C. 7431(d). This
limitations period applies both to suits against the United
States when employees of the United States violate §
6103, see Id. § 7431(a)(1), and suits against
non-employees when they violate § 6103, see Id.
§ 7431(a)(2).
When
the United States is named as a defendant in a suit, a cause
of action's statute of limitations generally falls into
two major categories. First, there are statutes of
limitations that “seek primarily to protect defendants
against stale or unduly delayed claims.” John R.
Sand & Gravel Co. v. United States, 552 U.S. 130,
133 (2008). These statutes of limitations are
non-jurisdictional and are therefore subject to forfeiture,
waiver, and equitable tolling. Id. Second, there are
statutes of limitations that “seek not so much to
protect a defendant's case-specific interest in
timeliness as to achieve a broader system-related goal, such
as . . . limiting the scope of a governmental waiver of
sovereign immunity.” Id. (citations and
internal quotation marks omitted).
The
question of which category a statute of limitations falls
into “is not merely semantic but one of considerable
practical importance for judges and litigants. Branding a
rule as going to a court's subject-matter jurisdiction
alters the normal operation of our adversarial system.”
Henderson ex rel. Henderson v. Shinseki, 562 U.S.
428, 434 (2011). For example, in overcoming a motion to
dismiss, into which of the two categories a statute of
limitations falls can be critical. When defending against a
Rule 12(b)(1) motion to dismiss for lack of subject matter
jurisdiction, plaintiffs bear the burden of pleading and
eventually proving a court's subject matter jurisdiction.
See Lujan v. Defs. of Wildlife, 504 U.S. 555, 561
(1992). If a plaintiff cannot establish that his claims
“lie within ‘the Judicial Power of the United
States, '” Maxberry v. Dep't of the
Army, 952 F.Supp.2d 48, 50 (D.D.C. 2013) (quoting U.S.
Const. art. III, § 1), and that “a federal statute
grants the court jurisdiction to hear those claims, ”
id. (citing Abdelfattah v. U.S. Dep't of
Homeland Sec., 893 F.Supp.2d 75, 78 (D.D.C. 2012)), the
court must dismiss the claim. Steel Co. v. Citizens for a
Better Env't, 523 U.S. 83, 94 (1998) (citing Ex
parte McCardle, 74 U.S. 506, 514 (1868)).
On the
other hand, when a statute of limitations is
non-jurisdictional, and is therefore an affirmative defense,
a court should grant a motion to dismiss “only if the
complaint on its face is conclusively time-barred.”
Firestone v. Firestone, 76 F.3d 1205, 1209 (D.C.
Cir. 1996); see also Bregman v. Perles, 747 F.3d
873, 875 (D.C. Cir. 2014) (“Because statute of
limitations issues often depend on contested questions of
fact, dismissal is appropriate only if the complaint on its
face is conclusively time-barred.”). Overall,
“although not without exception, the plaintiff
typically bears the burden of proving that the Court has
jurisdiction over the ...