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Minda v. United States

United States Court of Appeals, Second Circuit

March 24, 2017

Gary Minda, Plaintiff-Appellant,
v.
United States of America, Defendant-Appellant. Nancy Findlay Frost, Plaintiff,

          Argued: December 2, 2016

         On Appeal from the United States District Court for the Eastern District of New York

         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 Service's 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 taxpayers' 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.

          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.

          Before: Livingston, Chin, and Carney, Circuit Judges.

          Chin, Circuit Judge:

         In this case, the Internal Revenue Service (the "IRS") 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.

         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 "Report") proposing changes to the 2007 federal income tax return filed by Minda and Frost. The Report contained "dozens of items of return information, " 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, "Robert M." On October 21, 2010, Robert M.'s 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).

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 attorney's 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 "IG") made the following findings:

• the Report, which was dated October 5, 2009, was printed the week of September 28, 2009, for review by a ...

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