1:13-cv-01225 #73

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UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF VIRGINIA

Alexandria Division The NATIONAL ORGANIZATION FOR MARRIAGE, INC.,

Plaintiff,

v. The UNITED STATES OF AMERICA, INTERNAL REVENUE SERVICE,

Defendant.

Civ. No. 13-cv-1225-JCC/IDD

PLAINTIFF’S OPPOSITION TO MOTION FOR SUMMARY JUDGMENT

INTRODUCTION

This is an action against the United States of America, Internal Revenue Service

(hereafter, the “Government”) seeking damages pursuant to 26 U.S.C. § 7431 for the unlawful

inspections and disclosures of Plaintiff The National Organization for Marriage’s (“NOM”) tax

return and tax return information by agents of the Internal Revenue Service (“IRS”) in violation

of 26 U.S.C. § 6103.

NOM was founded in 2007 to protect marriage and the faith communities that sustain it

across the United States. (Verified Complaint (“VC”) ¶ 8.) As a tax-exempt organization, NOM

must file a Form 990 annually with the IRS. See 26 U.S.C. § 6033. Schedule B to Form 990

(“Schedule B”) lists donors who have contributed $5,000 or more during the reporting period.

Pursuant to 26 U.S.C. §§ 6103 and 6104(b), the names and addresses of NOM’s donors

on its Schedule B are “confidential” and their inspection and public disclosure is prohibited.

Section 7431 provides taxpayers a cause of action against the United States for knowing or

negligent unauthorized inspection or disclosure of tax return information. For each negligent

Case 1:13-cv-01225-JCC-IDD Document 73 Filed 05/13/14 of 32 PageID# 1086

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disclosure or inspection, a plaintiff may recover statutory damages of $1,000 or, alternatively,

actual damages. If the inspection or disclosure is wilful or grossly negligent, a plaintiff may be

entitled to punitive damages. 26 U.S.C. § 7431(c)(1)(B)(ii).

In March of 2012, NOM’s unredacted 2008 amended Schedule B appeared on the

websites of the Human Rights Campaign (“HRC”) and the Huffington Post. (VC ¶¶ 14-16.) HRC

advocates nationwide for redefining “marriage” to include same-sex couples, a mission directly

opposed to NOM’s. (VC ¶ 73.) On each page of the document were official, internal IRS

markings,1 indicating that the publicly disclosed document originated with the IRS. (VC ¶ 23.)

At NOM’s request, the Treasury Inspector General for Tax Administration (“TIGTA”)

conducted an investigation into the unauthorized disclosure of NOM’s 2008 Schedule B. (VC ¶

51); Plaintiff’s Exhibit (“PEX”) 2 at 8 (Deposition of Chris Chieppa (IRS 30(b)(6)), TIGTA

Inspector, March 11, 2014, 26:5-12) (“TIGTA Investigation”). The results and conclusions of the

TIGTA Investigation were not shared with NOM. (VC ¶ 52.) In order to determine the cause of

the disclosure and prevent future disclosure, NOM undertook significant and costly efforts to

obtain information about the illegal disclosure of its donor information—including the filing and

administrative appeals of five Freedom of Information Act (“FOIA”) requests and one Privacy

Act Request (DEX 15 (NOM Depo 107:6-108:6))—however, TIGTA and the IRS consistently

withheld completely or redacted all information materially relevant to TIGTA’s Investigation.

(VC ¶¶ 53-55.) According to TIGTA, section 6103 prohibited it from disclosing to NOM any

1 The markings on the 2008 Schedule B published by HRC were originally obscured, but NOM was able to uncover the internal IRS markings. (VC ¶ 20.) TIGTA was able to verify NOM’s forensic analysis. PEX 2 at 10 (Deposition of Chris Chieppa (IRS 30(b)(6)), TIGTA Inspector, March 11, 2014, 43:16-19); PEX 3 at 3.


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information about TIGTA’s Investigation, or even disclosing its existence. (VC ¶ 63); PEX 1 at

2.

Not until October 30, 2013—almost a month after this suit was filed—did NOM learn the

identity of the individual to whom its tax information was disclosed. And, still, not from the

Government. As part of its investigation into the targeting of conservative applicants for tax-

exempt status (VC ¶¶ 88-90), the House Ways and Means Committee revealed that the IRS

disclosed the document to Matthew Meisel, a former employee of Bain & Company, the

company where former Republican Presidential Candidate Mitt Romney (associated with one of

the disclosed NOM donors) served as interim CEO in the early 1990s. See Eliana Johnson,

Investigation IDs IRS Leaker, National Review Online, Oct. 30, 2013,

http://www.nationalreview.com/article/362667/investigation-ids-irs-leaker-eliana-johnson. The

House Committee also revealed that Mr. Meisel furnished NOM’s 2008 Schedule B to HRC. Id.

The disputed issues in this case are (1) whether the admittedly unauthorized disclosure of

NOM’s confidential tax return was grossly negligent or merely negligent; (2) whether the

admitted inspections of NOM’s confidential tax returns were authorized, and if not, whether such

inspections were wilful, grossly negligent or merely negligent; (3) whether the significant

expenses NOM incurred investigating the disclosure and preventing further disclosures were

incurred “as a result” of the IRS’s disclosure; and (4) whether NOM is barred from recovering its

actual damages because NOM’s normal and ongoing fundraising activities generated donations

in excess of the damages it suffered and therefore mitigated those damages. As explained more

fully below, these are all issues of material facts that are genuinely in dispute.

STATEMENT OF MATERIAL FACTS THAT ARE IN DISPUTE

The following facts, which the Government asserts are “undisputed,” are in dispute:


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As an initial matter, NOM disputes the Government’s framing of this case as only

involving a “Single, Inadvertent Disclosure.” First, NOM seeks damages for unauthorized

inspections and disclosures in violation of 26 U.S.C. § 6103. (VC ¶¶ 1, 3, 5, 45, 58, 70, 87, 131-

34.) There is evidence of numerous inspections and disclosures. See PEX 2 at 16-18 (56:21-

58:5);2 PEX 3 at 9-11, 37, 40-41 (noting multiple accesses to NOM’s return information without

apparent tax administration purposes); PEX 7 at 35-36. Further, there is evidence that the

disclosure of NOM’s 2008 Schedule B was grossly negligent due to the IRS’s systemic failure to

protect confidential taxpayer information as required by statute, including, as described below,

flawed systems designs, improper security procedures, failure to follow established procedures,

improper training, and other lack of supervision.

Response to Defendant’s Undisputed Material Facts

1. Disputed. The circumstantial evidence suggests that Mr. Meisel submitted a request and

claimed to be a member of the media. DEX 3. But there is no evidence of what Mr. Meisel

requested. PEX 3 at 2 (requests destroyed after 45 days, no record of request being processed);

PEX 6 at 9 (16:9-15). Specifically, there is no evidence that Mr. Meisel requested Schedule B

information. PEX 6 at 26 (57:11-14); PEX 7 at 1. The clerk that allegedly processed Mr.

Meisel’s request does not recall receiving or processing such a request and cannot verify whether

Schedule B information was requested. PEX 8 at 5-7, 10, 16 (Deposition of Wendy Peters, IRS

RAIVS Clerk, Jan. 29, 2014, 36:12-38:3, 41:4-5, 49:6-8). The IRS’s policy is not to include a

2 In response to NOM’s Notice of Deposition pursuant to 30(b)(6) (PEX 4), the Government designated three individuals to speak on specifically delineated deposition topics (subject to the Government’s objections and limitations). See PEX 2 at 4-7 (12:13-15:7) (listing designated topics); PEX 5 at 4-9 (Deposition of David Hamilton (IRS 30(b)(6)), March 11, 2014, 6:25-11:15) (same); and PEX 6 at 4-5 (Deposition of Sherry Whitaker (IRS 30(b)(6)), Director of Government Entity Management Program Staff, March 11, 2014, 6:20-7:14 (same)).


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Schedule B either on mass-distribution DVDs or in response to individual requests unless

specifically requested, in order to “to reduce the risk of inadvertently identifying contributors.”

PEX 7 at 2; see also PEX 9 at 2 (Jan. 1, 2010 IRM), 1 (Jan.1, 2011 IRM). Yet, until at least April

2011, the RAIVS unit had been including the Schedule B when responding to all Form 990

requests. PEX 3 at 6-7, 17-20; PEX 2 at 11-12 (49:25-50:16) (authenticating Interview Activity).

2. Disputed for the same reasons delineated in paragraph 1, above.

3-6. Not Disputed.

7. Disputed for the same reasons delineated in paragraph 1, above. Also disputed as

omitting material facts, specifically that Mr. Meisel indicated that he would use the requested

documents for an Internet blog. PEX 8 at 8-15 (39:23-46:12); PEX 3 at 21-35.

8. Not Disputed.

9. Disputed for the same reasons delineated in paragraph 1, above.

10. Not Disputed.

11. Disputed to the extent the Government asserts that Ms. Peters, or any other IRS

employee, did not apply redactions to the disclosed document. In fact, the Government lacks any

records of the document as it was disclosed and lacks any evidence that IRS agents did not

obscure the watermark. PEX 3 at 2. The record does show that the disclosed document as

provided to HRC was redacted. DEX 14 at 4-13.

12. Not disputed.

13. Disputed to the extent it omits material facts. Although the SEIN system is partitioned

into two sections, a redacted section for public dissemination of Form 990 data and an

unredacted section for private dissemination and internal IRS use, PEX 3 at 12-13, the clerks

who process public requests for Form 990 tax returns have access to both sides of the system.


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PEX 2 at 9 (31:2-13); PEX 5 at 10 (15:11-20); PEX 3 at 2; PEX 7 at 8. Many IRS management

employees were unaware of who had access to confidential materials. PEX 7 at 2-8. Those who

were aware of the problems did not take any action to fix them. PEX 10 at 37-38 (Deposition of

David Hamilton, Systems Administrator for the Statistics of Income Branch, Jan. 29, 2014 at

54:3-55:6) (concerns about access dating from 2004); PEX 5 at 16-17 (50:18-51:8) (access

removed in May 2013); PEX 7 at 11-13. There was no need for such extensive access to the

unredacted side and it was later removed. PEX 7 at 13 (chart of revised access), 14-15; PEX 6 at

24-25 (55:8-56:15).

14. Disputed to the extent it omits material facts. The Government only cites to a portion of

the email exchange between Ms. Peters and Ms. Riley. PEX 3 at 23-35; PEX 11 at 1-4.

15. Disputed to the extent the Government asserts that the 3983C letter printed on January

31, 2011, was in response to a request from Mr. Meisel for NOM’s tax returns. In fact, the IRS

Integrated Data Retrieval System (“IDRS”) does not identify the recipient of a 3983C letter or

the documents attached thereto. PEX 3 at 2, 6 (“He cannot verify if there was a Form 4506-A

…because they destroy that information after 45 days.”); PEX 2 at 14, 21 (53:16-20, 84:3-25).

Because the IRS did not retain a copy of the 3983 transmittal letter, the IRS has no idea whether

1, 2, or all 3 of the tax returns printed on January 21, 2011 were transmitted to Mr. Meisel. The

IRS has maintained that it did not send the unredacted original 2008 tax return, but has provided

no document or other evidence to show that the original 2008 tax return was either not mailed or

that the version that was mailed was properly redacted. PEX 10 at 18-34 (35:17-51:2); PEX 3 at

14-16.

16. Not disputed.


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17. Disputed. The IRS does not maintain mailing logs or copies of the 3983C letters and has

no way to recreate previously issued letters. PEX 3 at 2; PEX 2 at 14, 21 (53:16-20, 84:3-25).

18. Disputed to the extent the IRS believes it is undisputed it was Ms. Peters who failed to

redact the 2008 Schedule B or that the failure to redact was merely negligent. PEX 3 at 2; PEX 8

at 5-7, 16 (36:12-38:3, 49:6-8) (clerk has no recollection of the NOM request). Also, disputed to

the extent it omits material facts, specifically those included in response to paragraph 1, above,

and the fact that Ms. Peters was aware that the return was disclosed to someone for the purpose

of an internet blog. DEX 3 at 1.

19. Disputed to the extent IRS believes it is undisputed whether Ms. Peters was responsible

for sending Mr. Meisel an unredacted copy of NOM’s Schedule B, and when any transmittal

from the IRS to Mr. Meisel occurred. PEX 3 at 2; PEX 8 at 5-7, 16 (36:12-38:3, 49:6-8) (clerk

has no recollection of the NOM request).

20-21. Not disputed.

22. Disputed to the extent it uses the word “demonstrates” when the record evidence merely

indicates that a request may have been made and the original documents are not maintained, as

described in paragraph 1, above.

23-25. Disputed to the extent the Government contends this is a material fact.

26. Disputed to the extent it relies upon lack of evidence to support the assertion that the

present disclosure is the only unauthorized disclosure caused by an IRS RAIVS clerk, especially

since the Government did not maintain permanent records. See PEX 3 at 2.

27. Not disputed.

28. Disputed as omitting necessary material facts. More specifically, it is disputed whether

Mr. Fred Karger would have filed his complaint with the California Fair Political Practices


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Commission (“FPPC”) but for the disclosure of NOM’s 990 by the IRS. PEX 12 at 4, 6-7

(Deposition of Fred Karger, March 12, 2014, 20:5-10; 54:17-55:3). The damages sought are

specific to the necessary steps taken to protect this confidential donor information from misuse,

including steps taken by NOM’s counsel to prepare a lawsuit against the FPPC for the misuse of

its confidential tax return information. The measures taken by NOM resulted in the FPPC

shredding the document on the eve of filing that lawsuit. PEX 13 at 97. Ultimately, NOM was

absolved of any wrongdoing by FPPC and the complaint was dismissed. PEX 13 at 103.

29. Disputed to the extent IRS believes that the timing of the transmittal of NOM’s 2008

Schedule B from the IRS to Mr. Meisel is undisputed. PEX 3 at 2; PEX 8 at 10 (41:4-5).

Disputed to the extent it omits material facts, including those facts included in paragraph 28.

30. Not disputed.

31. Disputed. First, Mr. Karger referenced the disclosure of NOM’s 2008 Schedule B as the

impetus for his original FPPC complaint. PEX 12 at 6-7, 9 (54:17-25; 55:1-3; 57:11-15); DEX

19.3 In fact, Mr. Karger’s original complaint contained a screen shot of portions of the 2008

Schedule B, as posted by HRC. DEX 19 at 3. Second, Mr. Karger’s complaint was filed around

April 14, 2012, just a few days after NOM’s Schedule B was publicly-disseminated. PEX 12 at 3

(19:9-18).

32. Disputed. Mr. Karger’s supplemental complaint not only contained NOM’s entire 2008

Schedule B as disclosed by the IRS, DEX 19 at 14, but it also contained the names of specific

donors that were gleaned from the document, id. at 10-11. There is no record evidence to suggest

3 In his complaint to the FPPC, Mr. Karger referred to the disclosed document as included in “recently unsealed documents by a federal judge.” DEX 19 at 2. But, as he explained in his deposition, he did not correctly characterize the origin of the document and, in fact, the document is the one disclosed by the IRS. PEX 12 at 8-9 (56:19-57:10).


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that any donations from individuals to NOM “were already publicly reported.” PEX 12 at 5, 10,

28 (50:6-10, 61:8-20) (Karger used the disclosed 2008 Schedule B as his primary source for his

complaint), 129:7-20 (obtained Schedule B from Huffington Post or other website after leak).

33-34. Disputed to the extent the Government contends this is a material fact.

35. Disputed to the extent IRS suggests Karger did not obtain the information needed to file

his complaint from the unlawfully disclosed copy of NOM’s 2008 Schedule B. PEX 12 at 8-9,

11, 12-28 (56:19-57:10; 111:6-22, 113:9-129:20 (testimony foreclosing possibility that document

came from other sources)); DEX 19. Disputed to the extent the record evidence indicates that

Karger knew or should have known that an unredacted Schedule B is not a public document.

PEX 12 at 29-31 (136:22-138:16).

36. Disputed to the extent the Government contends this is a material fact.

37. Disputed for the reasons delineated in the first sentence of paragraph 35, above.

38. Disputed to the extent the Government goes beyond NOM’s counsel’s invoices to

categorize or characterize the legal services obtained. The legal invoices contain

contemporaneous statements regarding the legal service performed. Also disputed for the reasons

delineated in paragraph 28, above.

39. Disputed to the extent the Government goes beyond record evidence to categorize or

characterize the legal services obtained. The legal invoices contain contemporaneous statements

of the legal service performed. DEX 21.

40. Disputed to the extent the Government goes beyond record evidence to categorize or

characterize the legal services obtained. Also disputed to the extent the Government asserts that

NOM was unable to explain the purpose of the invoices. PEX 14 at 3 (Deposition of Brian

Brown (NOM 30(b)(6)), March 14, 2014, 83:20-21) (Dr. Eastman “was involved in the same


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effort to try and find out what had occurred” with regard to the disclosure.)), 4 (87:19-88:2)

(“Again, I believe this was for travel related to investigating how the 990 disclosure occurred.”).)

41. Disputed to the extent the IRS asserts its unlawful disclosure resulted in a net benefit to

NOM. DEX 1; PEX 15 (additional pages of NOM’s Responses to the Government’s First Set of

Discovery Responses); DEX 23; PEX 14 at 9-12 (152:17-153:9, 156:15-157:2) (No donations

were received expressly because of the lawsuit).

42. Disputed to the extent the IRS asserts any donations were made “as a result” of the IRS’s

disclosure. There is no evidence to support such an assertion and, in fact, NOM testified that it

has received no donations expressly because of the lawsuit and that there is no way to know the

intent of a donor. PEX 14 at 10 (153:15-17 (“I cannot recall a single conversation with a donor in

which they said they’re giving to NOM because of the lawsuit.”)), 11 (156:5-6 (“we make very

clear to everyone we will not accept any designated gifts”)), 6 (144:17-19 (“I can’t determine

why people give or what the motivation is and it’s not designated for anything.”)), 7-8 (147:21-

148:2). DEX 23 at Resp. to RFA 19, 26, and 29 (no earmarks).

43-45. Disputed for the same reasons as set forth in paragraph 42, above.

46. Disputed for the same reasons as set forth in paragraphs 41 and 42, above.

Statement of Additional Material Facts

47. The record reflects evidence of extensive processes and quality review procedures in

place for ensuring the correct imaging of documents entered into the Statistics of Income Exempt

Organizations Return Image Network (“SEIN”), PEX 10 at 4-15 (8:8-19:4); PEX 16 at 1-2; PEX

3 at 42, yet the Government acknowledges there was no similar procedure or quality review

regarding the disclosure of confidential information at the time NOM’s 2008 Schedule B was

disclosed. PEX 10 at 35-38 (52:11-55:6). The record evidence demonstrates that there were


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known and expressed concerns as to the breadth of access and potential for unauthorized

disclosure. PEX 10 at 36-37 (53:12-54:23); PEX 7 at 12. Importantly, quality reviews occurred

for only two percent of the responses to Form 4506 Requests. PEX 2 at 19-20 (61:23-62:21)

(quality review Supervisor sees only two out of 100 to 300 responses to 4506-A per week); PEX

3 at 8.

48. The computer system used by RAIVS at the time of the disclosure “ma[de] it possible for

the employee to inadvertently authorize the Form 990 and Schedule B information to be printed

in the CPS site without it being redacted and without the employee realizing that they had

authorized it.” PEX 3 at 6-7; PEX 2 at 14-15 (53:5-54:9).

49. The redaction of confidential information on the Schedule B was done by hand, PEX 3 at

6-7, was not reviewed by supervisors or employees in the mail room before disclosure, PEX 6 at

28-29, 30-31 (61:17-62:12, 83:21-84:13); PEX 3 at 36, and was internally referred to as the

“paper doll” method, PEX 6 at 27-28 (60:15-61:16). See also PEX 2 at 13-14 (52:21-53-4); PEX

8 at 4 (30:11-18); PEX 3 at 17-20, 38; PEX 7 at 17 (“employee cuts out donor list, copies [it] and

sends…to requester”).

50. Despite at least two reviews of the RAIVS unit by Exempt Organization management

prior to the disclosure of NOM’s tax information, neither review identified the improper

application of IRS procedures regarding RAIVS providing a Schedule B even when not

requested. See paragraph 1, above; PEX 6 at 6-7 (13:10-14:1) (“A: We provided a copy of IRM

to W&I, yes. Q: And that was the extent of the training that anybody from Exempt Organizations

provided to W&I? A. That TEGE would provide, yes.”) and 11-14 (18:12-21:15). The IRS

issued a “clarification” on this procedure in April 2011, for reasons that the government refused

to explain. PEX 6 at 8-11 (15:22-18:11) (discussion about IRM 3.20.13—whether or not the


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Schedule B is provided); PEX 9 at 1, 2 (2010 IRM excerpts), 3, 4 (2008 IRM excerpts); PEX 17

at 4, ¶4; PEX 7 at 18-33.577-1592.

51. The IRS had no procedure in place that could prevent unauthorized disclosure before the

fact, PEX 10 at 35-36 (52:23-53:2); only a watermark procedure to “deter” unauthorized

disclosure, id. at 54:3-23; PEX 5 at 14 (38:11-14); PEX 7 at 12 (demonstrating knowledge that

disclosure could occur). Yet, Senior Management was not even aware of the purpose of the

watermark. PEX 5 at 13 (26:7-16); PEX 7 at 12; PEX 3 at 4-5.

52. Once a user is given access to the SEIN database, there is nothing restricting a user from

accessing a wide-range of information the user has no need to access. PEX 10 at 16-17 (29:13-

30:1). Approximately 300-350 users had authorization to the database. PEX 5 at 11 (16:5-10).

53. Ms. Sherry Whitaker was responsible for allowing or disallowing access to SEIN. PEX 5

at 12 (17:15-25). Ms.Whitaker did not know who had access to SEIN, PEX 7 at 5-8, and was

unaware of the existence of audit trials with respect to the system, PEX 5 at 15 (41:3-6).

ARGUMENT I. Whether the Illegal Disclosure of NOM’s 2008 Amended Schedule B Was the Result

of Gross Negligence or Merely of Negligence Is an Inherently Fact-Based Determination. The law is clear: “Whether the IRS acted with the requisite gross negligence for an award

of punitive damages under § 7431 is a factual issue.” Scrimgeour v. IRS, 149 F.3d 318, 324 (4th

Cir. 1998) (emphasis added). The Government’s request to determine this issue “as a matter of

law” must therefore be rejected. See Memorandum of Law in Support of the United States of

America’s Motion for Summary Judgment at 19 (Dkt. 68) (hereafter “SJ Mem.”).

The cases on which the Government relies belie its summary judgment request. In each

case, the court made a factual determination regarding gross negligence only after a “bench


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trial.” Scrimgeour, 149 F.3d at 322; Mallas v. United States, 1995 U.S. App. LEXIS 10766, *1

(4th Cir. 1995) (per curiam, unpublished). Those decisions were upheld because the trial court’s

determination that the IRS was merely negligent was not “clearly erroneous.” Scrimgeour, 149

F.3d at 324-25; Mallas, 1995 U.S. App. LEXIS 10766 at *1 (“After a bench trial the trial court…

[held] that Mallas could not recover punitive damages because he did not show that the IRS

acted willfully or with gross negligence”); id. at *2.

Determining gross negligence in Section 7431 cases only after trial is the routine

procedure. See, e.g., id. at *1; Mallas v. United States, 993 F.2d 1111, 1126 (4th Cir. 1993) (“On

remand, the district court should provide Mallas an opportunity to prove that the IRS acted

willfully or with gross negligence”); Messinger v. United States, 769 F. Supp. 935, 940 (D. Md.

1991) (denying summary judgment because whether disclosure “was done either knowingly or

negligently” “are issues which would be better resolved by a finder of fact after fully reviewing

the evidence”); see also Snider v. United States, 468 F.3d 500, 504 (8th Cir. 2006) (“Following a

bench trial, . . . [t]he court awarded actual, statutory, and punitive damages”); Ward v. United

States, 973 F. Supp. 996, 997, 1001 (D. Colo. 1997) (finding gross negligence after “having

heard the evidence of both parties” in “a non-jury trial”); Payne v. United States, 91 F.Supp.2d

1014, 1016, 1029 (S.D. Tex. 1999) (finding gross negligence “[b]ased on the evidence presented

at trial”), rev’d on other grounds, 289 F.3d 377 (5th Cir. 2002). Simply put, whether the conduct

of the IRS was grossly negligent is a question of fact to be determined by this Court at trial.

Even if Scrimgeour and Mallas established some sort of threshold for gross negligence,

which they do not, the factual record in this case easily exceeds that threshold. Scrimgeour

involved a simple failure of an IRS office to notice that the taxpayer’s tax return had been

improperly requested by the taxpayer’s sister, a negligent mistake that continued even after the


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taxpayer requested an investigation because of typical bureaucratic delays at the IRS. 149 F.3d at

321-22. The “record reflect[ed] that the employees who responded to the Forms 4506 were

simply careless.” Id. at 324. The plaintiff in Mallas failed to prove gross negligence because he

offered no evidence at trial to show that the agents who continued to publicize his tax conviction

were aware that it had been reversed three years earlier. 1995 U.S. App. LEXIS 10766 at *1, *3.

In other words, each case was decided on evidence presented (or not presented) by each plaintiff.

Under Section 7431 “grossly negligent conduct is ‘that which is … marked by wanton or

reckless disregard of the rights of another.’” Scrimgeour, 149 F.3d at 324 (quoting Barrett v.

United States, 100 F.3d 35, 40 (5th Cir. 1996)). “In contrast, simple negligence is the lack of due

care” id., “or failure to do what a reasonable and ordinarily prudent person would do under the

circumstances,” Zfass v. Comm’r, 118 F.3d 184, 188 (4th Cir. 1997).

Here, the IRS was not “simply careless.” Scrimgeour, 149 F.3d at 321-22. Rather, the

record evidence demonstrates a systemic failure by the Government marked by “reckless

disregard” of its statutorily mandated duty to protect the confidential donor information of

exempt organizations. 26 U.S.C. § 6104(b). (“Nothing in this subsection shall authorize the

Secretary to disclose the name or address of any contributor to any organization…which is

required to furnish such information.”). While the actual disclosure may have been inadvertent, it

was brought about by, among other things: (1) overbroad access to non-public return information

(Statement of Material Facts that Are in Dispute (“SoDF”) 13, 52); (2) lack of checks and

balances in disclosure process (SoDF 47, 51); (3) lack of understanding by senior management

as to who had access (SoDF 53); (4) lack of basic training as to confidentiality procedures (SoDF

50); (5) lack of supervision as to confidentiality procedures (SoDF 47, 51); and (6) failure to

heed senior administrators’ concerns (SoDF 47).


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Clearly, this presents more egregious factual circumstances than Scrimgeour and Mallas.

See Ward, 973 F.Supp. at 1001 (“in light of his prior training and IRS regulations,” agent’s

disclosure of tax payer information was “in reckless disregard of the law and rights of others”);

Snider, 468 F.3d at 505 (finding disclosures grossly negligent where IRS agent that had received

“extensive training and written instructions … repeatedly and intentionally engaged in conduct

outside the standard of conduct for IRS special agents”); see also Miller v. United States, 66 F.3d

220, 222, 224 (9th Cir. 1995) (“[W]e believe that the disclosure of information to a person who

is likely to publish that information is relevant in determining the degree of negligence or

recklessness involved….”), see SoDF 18.

The presence or absence of gross negligence is a question of fact.

II. Whether the Government’s Inspections of NOM’s Tax Return Information Were Authorized, or Were Done Willfully or as a Result of Gross Negligence or Merely Negligent Is an Inherently Fact-Based Determination.

NOM is also entitled to statutory and actual damages, or punitive damages, if its return

information was unlawfully inspected. 26 U.S.C. § 7431(a)(1); see also id. (c)(1)(B)(ii). The

record evidence demonstrates that various IRS agents inspected NOM’s 2008 Schedule B

(original and amended versions) prior to and immediately after the unlawful disclosure was

publicized. Whether these inspections were authorized or whether each inspection was willful,

grossly negligent or merely negligent is a question of disputed fact. Scrimgeour, 149 F.3d at 324.

A. Whether Wendy Peters’ Inspections of NOM’s Amended and Original 2008 Schedule Bs Were Authorized is a Question of Fact. .

IRS policy since at least 2007 was that an organization’s Schedule B was not to be

included in response to a Form 4506-A request. See, e.g., PEX 9 at 4 (2008 IRM manual

explaining, “To reduce the risk of inadvertently identifying contributors, Exempt Organizations

(EO) of TEGE has established the policy to not include Form 990 Schedule B, which lists


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contributors and the amounts of contributions, with copies of 990s for mass distribution, such as

DVD sets or other public media, and will not include the schedules in individual requests for

copies of Form 990s”) (emphasis added)); see also PEX 9 at 2 (GOV- PROD-00001160 (Jan. 1,

2010 IRM explaining same policy)); PEX 9 at 1 (Jan. 1, 2011 IRM explaining same policy).)

IRS policy further provided that only when the requestor specifically requested a copy of the

organization’s Schedule B was one provided to the requestor (with donor names redacted). See,

e.g., PEX 9 at 4 (2007 IRM). Yet, until at least April 2011—after the illegal disclosure at issue

here occurred—the RAIVS unit continued to include an organization’s Schedule B when

responding to all Form 990 requests. PEX 3 at 6-7 (RAIVS unit manager explained RAIVS

“would send…a redacted copy of the Schedule B” to a requestor “even if the Schedule B was not

requested”), 17-18 (Schedule B “is not provided unless a requestor specifically requests a

copy”), 19-20; see also PEX 6 at 8-14 (15:14-21:15).

The Government claims that in response to the Form 4506-A request from Mr. Meisel,

Ms. Peters accessed and printed copies of NOM’s amended and original 2008 Schedule B. Defs.’

SoF ¶ 9 (citing DEX 8). It is undisputed that Ms. Peters accessed and printed the amended 2008

Schedule B to NOM’s 2008 Form 990. (SJ Mem. at 2.) Record evidence demonstrates also that

Ms. Peters accessed and printed NOM’s entire original 2008 Form 990, which contained a

schedule of contributors. PEX 3 at 13, 16 (Print log showing 37 pages printed by Ms. Peters, the

length of NOM’s original 2008 Form 990 with Schedule B); see also PEX 3 at 6-7 (Schedule B

provided whether requested or not).

The Government’s argument that Ms. Peters’ inspections of NOM’s 2008 Schedule Bs

were authorized depends on its unsubstantiated assumption that Mr. Meisel specifically

requested copies of NOM’s 2008 Schedule Bs. (SJ Mem. at 16.) Yet the Government’s


17

assumption finds no support in the record. In fact, the Government cannot demonstrate whether

Mr. Meisel requested NOM’s 2008 Schedule Bs because it has destroyed whatever request Mr.

Meisel did submit. SoDF 1. Emails from Ms. Peters to Ms. Riley suggest that a Form 4506-A

request was made my Mr. Meisel, but there is nothing in those emails to suggest that Mr. Meisel

also requested the Schedule B information. If Mr. Meisel did not specifically request NOM’s

Schedule Bs, Ms. Peters’ inspection of those documents was knowingly willful, but in violation

of IRS policy prohibiting such inspection. It is thus a disputed question of fact whether Ms.

Peters’ inspection of NOM’s original and amended 2008 Schedule Bs was required for “tax

administration purposes.” 26 U.S.C. § 6103(h)(1).

B. Whether the Various Inspections of NOM’s Amended 2008 Schedule B by IRS Personnel Immediately Following HRC’s Publication Were Authorized is a Question of Fact.

The record evidence demonstrates that shortly after NOM’s Amended 2008 Schedule B

was published on the Internet by HRC and Huffington Post, but before NOM filed a request for

investigation of the disclosure, various IRS officials intentionally inspected NOM’s confidential

donor list. According to IRS audit trails produced in discovery, the following IRS employees

accessed NOM’s Amended 2008 Schedule B on the dates noted below:

• Connie Peek (SPP Analyst) 04/05/12 (twice) • Sherry Whitaker (SPP Manager) 04/13/12 (twice) • Kathi Palmer (SPP Manager) 04/05/12 • W&I Imaging Manager 04/13/12 (twice) • Laurice Ghougasian (EO Division) 04/05/12

PEX 7 at 34-35; PEX 3 at 10. When questioned about these inspections at depositions, the IRS

simply claimed that each inspection was “part of our research in order to ensure we’re providing

the service that we need to provide.” PEX 6 at 22 (Whittaker Depo 50:2-4); PEX 10 at 22 (39:9-

21) (authenticating audit trail). However, IRS e-mails suggest that these inspections were simply


18

“[Tax Exempt & Government Entities] higher-ups taking a look once the disclosure was reported

in the press.” PEX 7 at 36. Casual browsing of taxpayer information, even information of

significant media attention, is strictly forbidden by Section 6103. See Taxpayer Browsing

Protection Act, Pub. L. 105-35, 11 Stat. 1104 (1997), H1466 (statement of Rep. Neal, “This

legislation will provide a deterrent against IRS employees taking a quick look at tax returns for

purposes not related to work”); id. at H1466 (statement of Rep. Neal, “IRS employees should not

act on impulses based upon curiosity”); see also 26 U.S.C. § 6103(b)(7) (“The terms ‘inspected’

and ‘inspection’ mean any examination of a return or return information”) (emphasis added). It is

thus a disputed question of fact whether some, all or none of these inspections were truly for a

“tax administration purpose” or were instead out of mere curiosity.4

III. There is a Genuine Factual Dispute as to Whether the Disclosure of NOM’s Return Information “Caused” Actual Damages.

The Government makes two causation arguments in support of its motion for summary

judgment: 1) None of the damages sustained by NOM were “as a result of” the unauthorized

disclosure of NOM’s tax return because of the intervening actions of third parties; and 2) NOM’s

damages were mitigated or off-set by its solicitation of donations referencing the disclosure and

this lawsuit. These contentions are factually and legally incorrect.

4 The Government’s records also reveal several other inspections of NOM’s original 2008 Form 990 and NOM’s 2009 and 2010 Form 990s that took place shortly after HRC’s publication of NOM’s 2008 Amended Schedule B. PEX 3 at 10. For reasons delineated above, it is disputed also whether these inspections were authorized by Section 6103. PEX 6 at 15-23 (43:20-51:23). The Government has also produced evidence revealing hundreds of inspections by the IRS RAIVS unit of NOM’s tax return information dating back to 2008. E.g., PEX 2 at 16-18 (56:21-58:5). The existence of these records is surprising in light of the IRS’s representation to NOM in response to a FOIA request that no records exist related to requests for NOM’s tax returns. Answer ¶ 57; PEX 18.


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A. Causation is an Issue of Fact that Should not Be Determined on a Motion for Summary Judgment in this Case.

NOM does not dispute that, at trial, it must demonstrate that the disclosure of its amended

2008 Schedule B resulted in actual damages and that those actual damages were caused by and

were the proximate result of the unauthorized disclosure. Thus, it must prove both actual and

proximate causation. Issues of actual and proximate causation, however, “can be decided on

summary judgment only in those instances when there are no causal facts in dispute.” Love-Lane

v. Martin, 355 F.3d 766, 776 (4th Cir. 2004) (citation omitted) (emphasis added), cert. denied,

543 U.S. 813 (2004); see also Goddard v. Protective Life Corp., 82 F. Supp. 2d 545, 554 (E.D.

Va. 2000) (“The question of proximate cause is generally a question for determination by a jury.

Such a determination becomes a matter of law if undisputed facts are susceptible of only one

inference”) (applying Virginia law) (citations and quotations omitted); Smith v. United States,

730 F. Supp. 948, 952 (C.D. Ill. 1990) (applying state law to proximate cause analysis in Section

7431 case); see also Olds v. United States, 473 Fed. Appx. 183, 185 (4th Cir. 2012)

(unpublished) (“Proximate cause is an inference of fact to be drawn from other facts and

circumstances. Only when the facts are all admitted and only one inference may be drawn from

them will the court declare whether an act was the proximate cause of an injury or not”)

(applying North Carolina law).

The Government’s own authority—Barrett v. United States, 100 F.3d 35 (5th Cir.

1996)—confirms that matters of causation and damages are issues of fact best suited for

resolution at trial. Barrett v. United States, 917 F. Supp. 493, 501-502 (S.D. Tex. 1995)

(describing testimony and evidence regarding causation presented at trial). The plaintiff in

Barrett alleged that the IRS’s unlawful disclosure to his patients of the fact that he was being

investigated by the IRS caused his business to fail. Barrett, 100 F.3d at 40. The mere existence


20

of causes independent of the disclosure did not preclude actual damages as a matter of law as the

Government suggests. (SJ Mem. at 26.) Rather, it was Barrett’s “fail[ure] to offer a scintilla of

evidence connecting his loss of business with the unlawful disclosures” and his failure to

“distinguish among different possible causes” for his loss. Id. In other words, the court’s

determination came only after weighing the evidence and testimony at trial.

The Government’s facts concerning actual and proximate causation are disputed. See

SoDF 28-29, 31-46. Those facts are also not “susceptible of only one inference.” Goddard, 82

F.Supp.2d at 554. In fact, the most reasonable inference to be drawn from the facts, is that the

unlawful disclosure of NOM’s amended 2008 Schedule B was the actual and proximate cause of

its injuries. At minimum, these are issues of fact that must await presentation at trial.

B. Whether the Unlawful Disclosure Was the Cause-in-fact of NOM’s Damages is a Question of Fact to be Resolved at Trial.

“Causation in fact,” or “but-for causation,” requires “pro[of] that the wrongful act in fact

caused the harm; that is, the plaintiff must prove that ‘but for’ the wrongful act, the harm would

not have occurred.” Jones v. United States, 9 F.Supp.2d 1119, 1138 (D. Neb. 1998) (citing Horn

v. B.A.S.S., 92 F.3d 609, 611-12 (8th Cir. 1996)); see also Paroline v. United States, 12-8561,

2014 U.S. LEXIS 2936, *18 (April 23, 2014) (“The concept of actual cause “is not a

metaphysical one but an ordinary, matter-of-fact inquiry into the existence … of a causal relation

as laypeople would view it.”).

The record establishes clearly that “but for” the IRS’s unlawful disclosure, NOM’s “harm

would not have occurred.” Jones, 9 F. Supp. 2d at 1138. The Government concedes that it

unlawfully disclosed NOM’s amended 2008 Schedule B to a third party. (Answer ¶ 78.) But for

that unlawful disclosure, none of the harms of which NOM complains would have occurred.

Paroline, 2014 U.S. LEXIS 2936 at *27 (“The traditional way to prove that one event was a


21

factual cause of another is to show that the latter would not have occurred “but for” the

former.”). The significant expenses incurred by NOM (SoDF 39-40) during its efforts to

determine the source of the disclosure and prevent further disclosures were not only a direct

consequence of the disclosure itself, but of the Government’s deliberate refusal to provide any

useful information to NOM regarding TIGTA’s investigation, or how the disclosure occurred or

to whom it was made, (Answer ¶¶ 53-55), even though it is undisputed that NOM’s efforts were

the impetus for TIGTA’s investigation in the first place. PEX 2 at 8 (26:5-12). Yet, the IRS

intentionally suppressed NOM’s search for the truth by representing to NOM that no records

exist regarding requests to the IRS for copies of NOM’s tax returns (Answer ¶ 57; PEX 18),

though the Government has produced hundreds of such records in discovery that it now claims

are related to such requests. See, e.g., PEX 11 at 1-4. Moreover, the Government concedes that

the document it unlawfully disclosed was posted on the Internet by HRC and Huffington Post.

(SJ Mem. at 7-8, ¶¶ 19-20.) Thus, but for the unlawful disclosure, NOM would not have

expended time and resources to prevent publication and further dissemination by these entities.

Lastly, the Government concedes that Fred Karger’s original complaint to the FPPC contained a

portion of the unlawfully disclosed document (DEX 19), and that his supplemental complaint

included that document in its entirety. PEX 13 at 9-18. But for the unlawful disclosure, NOM

would not have expended time and resources to prevent dissemination of its donor information

by the FPPC.

The Government’s claim that Fred Karger “did not need any of the information from the

2008 Schedule B to make his original complaint to the FPPC,” SJ Mem. at 10, ¶ 31, is not only a

factual matter disputed by Mr. Karger’s testimony (SoDF 28, 31-32, 35), it is also irrelevant.

NOM’s damages related to Mr. Karger’s complaint do not relate to the merits of that complaint,


22

but relate exclusively to efforts to prevent the FPPC from possessing and publicizing the very

document the Government concedes it is responsible for disclosing. See, e.g., PEX 13 at 43-44

(NOM demand letter to FPPC requesting destruction of the 2008 Schedule B attached to Mr.

Karger’s complaint); PEX 13 at 45 (Letter of FPPC stating refusal to comply with NOM’s

demand); PEX 13 at 48-49 (NOM letter to TIGTA requesting investigation of Mr. Karger and

FPPC related to possession and publication of 2008 Schedule B); DEX 20 (describing work on

correspondence with FPPC and lawsuit against FPPC related to possession and publication of

2008 Schedule B). But for the IRS’s unlawful disclosure, Mr. Karger could not have attached

NOM’s 2008 Schedule B (or portions thereof) to his FPPC complaint. It is thus a question of fact

whether the IRS’s unlawful disclosure was the cause-in-fact of NOM’s legal expenses incurred

in response to Mr. Karger’s complaint.

C. The Proximate Cause of NOM’s Actual Damages is a Question of Fact.

Proximate cause “is ‘a flexible concept,’ … that generally ‘refers to the basic requirement

that ... there must be ‘some direct relation between the injury asserted and the injurious conduct

alleged.’” Paroline, 2014 U.S. LEXIS 2936 at *19 (quoting Bridge v. Phoenix Bond & Indemnity

Co., 553 U.S. 639, 654 (2008)) and CSX Transp., Inc. v. McBride, 131 S.Ct. 2630, 2645 (2011)

(Roberts, C.J., dissenting). “Proximate cause is often explicated in terms of foreseeability or the

scope of the risk created by the predicate conduct.” Paroline, 2014 U.S. LEXIS 2936 at *19

(citations omitted). “A requirement of proximate cause thus serves, inter alia, to preclude

liability in situations where the causal link between conduct and result is so attenuated that the

consequence is more aptly described as mere fortuity.” Paroline, 2014 U.S. LEXIS 2936 at *20

(citing Exxon Co., U.S.A. v. Sofec, Inc., 517 U.S. 830, 838–839 (1996)). “Proximate cause,”

requires that the plaintiff “prove that his harm was a “‘reasonable and probable [foreseeable]


23

consequence’” of the wrongful act; that is, the plaintiff must prove that, considering other

potential causes, it is sensible to impose liability upon the defendant.” Jones, 9 F.Supp.2d at

1138 (quoting B.A.S.S., 92 F.3d at 611-12). On these issues, the cases on which the Government

relies not only do not support its position, but are clear authority to deny summary judgment.

The Government’s reliance on Paroline is misplaced. Paroline merely held that the

federal statute providing for restitution to victims of child pornography was limited to harms

“proximately caused” by the defendant’s criminal conduct. The Paroline Court rejected the kind

of cramped reading of causation that the Government urges this Court to adopt: “[C]ourts need

not read phrases like ‘results from’ to require but-for causality where there is a ‘textual or

contextual’ reason to conclude otherwise.” Id. at *16 (quoting Burrage v. United States, 134

S.Ct. 881, 888 (2014)). “It would be unacceptable,” held the Court, “to adopt a causal standard

so strict that it would undermine congressional intent where neither the plain text of the statute

nor legal tradition demands such an approach.” Id. The Court then remanded to the lower court

to assess damages under its relaxed view of causation. Id. at *43-49.

Moreover, in arguing an intervening and superseding cause under Paroline, the

Government ignores relevant proximate causation issues, namely, whether the intervening

actions of third parties were a “reasonable and probable [foreseeable] consequence” of the

unauthorized disclosure, Jones, 9 F.Supp.2d at 1138 (quoting B.A.S.S., 92 F.3d at 611–12), or

whether the proximate causation link is broken because the “causal link between conduct and

result is so attenuated that the consequence is more aptly described as mere fortuity.” Paroline,

2014 U.S. LEXIS 2936 at *19 (citing Exxon Co., U.S.A., 517 U.S. at 838–839).

The harms for which NOM seeks damages were both “foreseeable” and within the “scope

of the risk” of the disclosure of NOM’s confidential list of major donors. SoDF ¶ 7. Though the


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IRC requires entities like NOM to annually make public its Form 990, Congress deliberately

exempted from disclosure the names and addresses of an organization’s donors, 26 U.S.C. §

6104(b), a fact every IRS agent is expected to know. Huckaby v. U.S. Dep’t of Treasury, IRS,

794 F.2d 1041, 1049 (5th Cir. 1986) (“A reasonable IRS agent can be expected to know the

provisions of sections 6103 and 7431, as they may be further clarified by IRS regulations and

other IRS interpretations.”). Congress’s conscious choice demonstrates its understanding—one

that is assumed by the IRS, id.—that such information, if disclosed publicly, could expose an

organization and its donors to a multitude of harms.

Jones v. United States, 9 F.Supp.2d 1119, 1138 (D. Neb. 1998) supports NOM’s position.

Jones, like this case, involved an unauthorized disclosure of tax return information to a third

party, who subsequently disclosed it further in ways that caused harm to the taxpayer. An IRS

agent alerted a confidential informant about an upcoming search warrant raid on a taxpayer that

was under investigation (concededly tax return information). The informant then notified the

media, which was out in full force for the execution of the warrant, causing significant harm to

the taxpayer’s reputation and business. “Following a bench trial,” id. at 1122 (emphasis added),

the court held that both elements of causation were met. The intervention by the third-party

informant and media notification did not prevent the court from finding causation—either “but

for” causation or “proximate” causation. On the latter point, the court held:

While Stennis [the IRS agent] might not have foreseen that Lucchino [the confidential informant] would call McKnight [the media], Stennis (and a reasonable agent in his position) would have foreseen that Lucchino might use the disclosure to harm Jones and that is all the element of “proximate cause” requires. As our Court of Appeals has made clear, “‘the law does not require precision in foreseeing the exact hazard or consequence’ which in fact transpires; it is sufficient ‘if what occurred was one of the kind of consequences which might reasonably be foreseen.’”

Id. at 1144 (quoting Griggs v. Firestone Tire & Rubber Co., 513 F.2d 851, 861 (8th Cir. 1975)).


25

Jones not only illustrates that proximate cause is an issue of fact best suited for trial, but

also that misuse of taxpayer information by third parties is “one of the kind of consequences” of

unauthorized disclosure “which might reasonably be foreseen” by a reasonable an IRS agent. Id.

The IRS admits it disclosed the unredacted 2008 Schedule B to Mr. Meisel. (Answer ¶

78.) Mr. Meisel represented himself to the IRS to be a member of the media. (SJ Mem. at 4, ¶¶ 1-

2.) The IRS also understood Mr Meisel to be an Internet blogger. SoDF ¶ 7. It is clearly a

question of fact whether it was foreseeable to the IRS that Mr Meisel would republish the return

information in the media. Jones, 9 F.Supp.2d at 1144.

It is also a question of fact whether it was “foreseeable” that NOM would utilize

whatever avenues were available to it to identify the source of the leaked information and

prevent further disclosures and resulting harms—from requesting an investigation by TIGTA and

the DOJ, to filing FOIA and Privacy Act requests, to providing testimony to Congress whose

committees were in the midst of investigating IRS misconduct. Indeed, the Internal Revenue

Code’s imposition of severe penalties for unauthorized disclosure demonstrates the IRS’s

recognition of the serious harms caused by unauthorized disclosure. See, e.g., 26 U.S.C. § 7431.

It is certainly foreseeable to the Government that an organization would take whatever steps it

thought necessary to prevent further harm to itself.

It is likewise a question of fact whether it was “foreseeable” that HRC, Huffington Post,

Fred Karger and NOM’s other political enemies would further publish or use NOM’s

confidential donor information in ways harmful to NOM. The Government takes the untenable

position that it is not responsible, as a matter of law, for any subsequent misuse of confidential

taxpayer information that the IRS has illegally inserted into the public sphere. (SJ Mem. at 26-

27.) Unwarranted publicity and abuse of tax information is precisely the harm 26 U.S.C. § 6103


26

is designed to prevent. Congress “feared the public’s confidence in the privacy of returns filed

with IRS would suffer” if sufficient safeguards were not in place to remedy the harms caused by

public disclosure. Stokwitz v. United States, 831 F.2d 893, 894 (9th Cir. 1987) (citing 122 Cong.

Rec. 24013 (1976) (remarks of Sen. Weicker)). The Government’s position is manifestly

inconsistent. The independent actions of Mr. Meisel, HRC, and others do not immunize the IRS

from responsibility here (particularly when it was clear to the IRS that subsequent publication

was likely), and neither does NOM’s entirely predictable efforts to get to the bottom of the

conduct against it, the Government’s “blame the victim” assertion notwithstanding.5

D. The Government’s Mitigation Argument is Misplaced both Legally and Factually.

i. The Cases Cited by the Government Are Not Authority for an Off-set of Damages.

The cases on which the Government relies do not support its argument that NOM’s

damages are subject to mitigation or an off-set against donations. Kittrell v. RRR, L.L.C., 280 F.

Supp. 2d 517, 523 (E.D. Va. 2003), involved a claim for actual damages caused by violations of

the Truth in Lending Act made in a lease executed by a car dealer. The court merely held that the

Plaintiff/lessee could not recover the full amount of her actual damages from both the original

5 The Government also makes two other arguments by way of footnotes that are unsupported by any authority. First, Mr. Meisel potentially committing a felony (SJ Mem. at 27 n.11) does not break the causal chain of damages if his actions were reasonably foreseeable. Jones, 9 F.Supp.2d at 1144. Second, the Government cites no authority for its claim that the permissive FOIA attorneys’ fees provision in Section 552(a)(4)(E) is exclusive, or that legal expenses incurred with regard to NOM’s FOIA and the Privacy Act requests are not recoverable as “actual damages.” See Hrubec v. National R.R. Passenger Corp., 829 F. Supp. 1502, 1504 (N.D. Ill. 1993) (“Section 7431(c) clearly allows recovery of all ‘actual damages’”); Jones, 9 F.Supp.2d at 1149 (“Linguistically, there is no limitation on the reach of ‘actual’ damages, so long as that damage is ‘something that . . . exists in fact’”).


27

car dealer/lessor and the creditor to which the lease was assigned. Id. Kittrell is thus a joint

tortfeasor case not applicable to the present circumstances.

Johnson v. Sawyer, 120 F.3d 1307 (5th Cir. 1997), is also a joint tortfeasor case. Under

Section 7217 (the prior version of Section 7431), unauthorized disclosure suits for civil damages

could be brought not against the United States exclusively, but against any and all of the IRS

employees responsible, in part, for the disclosure. The Fifth Circuit upheld the reading of the

statute that each of those employees could be liable. The court did not address whether that

would lead to multiple awards of the same actual damages, or whether a full award of actual

damages against one of the IRS violators could be mitigated by awards against other IRS

violators. On remand, the court was instructed to consider whether SEC rules would have

required disclosure of the same information that the IRS had improperly disclosed, resulting in

the same loss-of-executive-position the taxpayer suffered, thus “mitigating” against the claim

that the damages resulted from the IRS disclosure. Because Sawyer’s use of the word

“mitigating” has nothing to do with the offset the Government claims here, that case provides no

support for the Government’s argument.

ii. The Collateral Source Doctrine Precludes a Mitigation Argument.

The Government cannot sufficiently demonstrate that NOM’s donors were motivated by

a desire to mitigate against the harm caused by the Government’s unlawful disclosure. But even

if that showing could be made, the Collateral Source Rule would doom the Government’s

argument. “Under this doctrine, when the victim of a tort receives payment for his injuries from a

collateral source, that is, a source independent of the tortfeasor, the payment should not be

deducted from the damages owed by the tortfeasor.” Szedlock v. Tenet, 139 F.Supp.2d 725, 736

(E.D. Va. 2001), aff’d, 61 F. App’x 88 (4th Cir. 2003) (internal citations omitted); Sloas, 616


28

F.3d at 389 (quoting United States v. Price, 288 F.2d 448, 449–50 (4th Cir.1961)). The

doctrine’s underlying rationale is that “a third-party who intends to benefit the injured party

should not be “compelled to benefit the injurer instead.” Id. (citing Hunter v. Allis–Chalmers

Corp., Engine Div., 797 F.2d 1417, 1429 (7th Cir. 1986); see also Diviney v. Vantrease, 2012

U.S. Dist. LEXIS 153159, 20 (N.D. W. Va. Oct. 24, 2012) (holding that charitable donations to a

fund set up to pay an assault victim’s medical expenses “are a collateral source and that evidence

of such is inadmissible” in the victim’s suit against the assailant for damages). In short, NOM’s

donors made not be made to benefit the IRS.

“[W]hether a source is collateral… depends upon the purpose and nature of the fund, and

not merely … their source.” Chisholm v. UHP Projects, Inc., 205 F.3d 731, 744 (4th Cir. 2000).

NOM has consistently maintained that the donations it received in response to its ongoing

fundraising program were for its general mission, not because of the IRS disclosure, but even if

some of those donations were “for the purpose” of assisting NOM in its efforts to deal with the

IRS disclosure, using such donations to offset the damages NOM suffered because of the illegal

disclosure is barred by the Collateral Source Doctrine.6

iii. Further, Whether NOM’s Donations Were Made As a Result of the Unlawful Disclosure Is a Question of Fact.

Even assuming that an offset argument was legally viable, there is a factual dispute

whether the contributions were even caused by the illegal disclosure, or to what extent. The

6 The Government’s reliance on a treatise is misplaced. (SJ Mem. at 29 (quoting 22 Am. Jur. 2d Damages §§ 27, 32, 137).) The principles in that treatise “apply if the benefit was conferred by the tortfeasor; benefits received from third parties are governed by the collateral source rule.” 22 Am. Jur. 2d § 397, Observations (citing 22 Am. Jur. 2d §§ 405 et seq.). Specifically, “a payment made to an injured party as compensation for injuries from a source wholly independent of the tortfeasor should not be deducted from the damages that the plaintiff would otherwise collect from the tortfeasor.” Id. § 405 (citing numerous cases).


29

Government’s contention that NOM “successfully raised more as a result of the disclosure than

it claims to have lost in actual damages” is misplaced. (SJ Mem. at 28 (emphasis added).) The

Government asserts that to survive summary judgment, NOM “bears the burden of disproving

that [the ongoing] donations [NOM received after the disclosure] were as a result of the

disclosure or its lawsuit against the United States.” (Id. at 29 n.14.) The Government is wrong.

“The defendant bears the burden of demonstrating that it is entitled to an offset.” Hylind v. Xerox

Corp., 481 Fed. Appx. 819, 824 (4th Cir. 2012) (citing Sloas v. CSX Transp. Inc., 616 F.3d 380,

389 (4th Cir. 2010)). The Government, as “the party seeking summary judgment,” also “bears an

initial burden of demonstrating the absence of a genuine issue of material fact.” Bouchat v. Balt.

Ravens Football Club, 346 F.3d 514, 522 (4th Cir. 2003). The Government has failed in this

regard. The Government asks this Court to simply determine, as an undisputed factual matter,

that every single donation NOM received after the disclosure occurred was “as a result” of the

disclosure. The record reflects that NOM acknowledged that it “received at least $75,000 in

aggregate donations from donors who had never donated to NOM before March 30, 2012” and

that it had received additional contributions of at least $75,000 from “donors who had previously

donated to NOM but did so after March 30, 2012 in a dollar amount … greater that (sic) they had

in any prior calendar year.” (DEX 23 at Resp. to RFA 30-31.) NOM also acknowledged that it

received at least $46,086.37 from solicitations that merely referenced the disclosure or the

lawsuit to varying degrees, among several other topics. (DEX 23 at Resp. to RFA 18.) These

acknowledgements are outcome neutral and do not suggest a causal link between the disclosure

and the donation.7 Moreover, though the Government uses Section 7431’s “as a result” language,

7 Nor does the fact that NOM raised more in 2012 than it did in 2011 suggest a causal link to the disclosure, Def. SoF § 46, Especially in light of record evidence that NOM raised less in 2013


30

the Government employs a causation standard that is radically looser than the one it believes

Section 7431 places on NOM to prove its own damages. The Government cannot have it both

ways. Just as there are questions of fact as to the caution of NOM’s damages, there are questions

of fact as to the cause of NOM’s donations.

NOM’s 30(b)(6) representative clearly testified that it “will not accept any designated

gifts” PEX 14 at 11 (156:5-6), and “can[not] determine why people give or what the motivation

is” behind any particular donation, PEX 14 at 6 (144:17-19). There is no support in the record

that demonstrates the only reason donors made contributions were a result of the unauthorized

disclosure. At trial, the Government must prove causation consistent with the same standard that

NOM must prove its damages.

CONCLUSION

For the foregoing reasons, including the material facts in dispute, the Government’s

Motion should be denied in its entirety.

than 2012. DEX 1 at Resp. to RFA 14.


31

Respectfully submitted this 13th day of May, 2014.

_/s/_______________________ Jason Torchinsky (Va. 47481) Shawn Toomey Sheehy (Va. 82630) Holtzman Vogel Josefiak, PLLC 45 North Hill Drive, Suite 100 Warrenton, VA 20186 (540) 341-8808 (telephone) (540) 341-8809 (fax) [email protected] [email protected] Counsel for Plaintiff John C. Eastman (Cal. 193726)* Anthony T. Caso (Cal. 88561)* Center for Constitutional Jurisprudence c/o Chapman University School of Law One University Drive Orange, CA 92866 (877) 855-3330 x2 (telephone) (714) 844-4817 (fax) [email protected] [email protected] Counsel for Plaintiff

Cleta Mitchell, of counsel (D.C. 433386)* William E. Davis, of counsel (D.C. 280057)* Mathew D. Gutierrez, of counsel (Fla. 0094014)* Kaylan L. Phillips (Ind. 30405-84)* Noel H. Johnson (Wisc. 1068004)* ACTRIGHT LEGAL FOUNDATION 209 West Main Street Plainfield, IN 46168 (317) 203-5599 (telephone) (888) 815-5641 (fax) [email protected] [email protected] [email protected] [email protected] [email protected] Counsel for Plaintiff * Admitted Pro Hac Vice


32

Certificate of Service I hereby certify that on May 13, 2014, I filed the foregoing Plaintiff National Organization for Marriage, Inc’s Response to Government’s Motion for Summary Judgment via ECF which notified the following counsel of record: UNITED STATES OF AMERICA, INTERNAL REVENUE SERVICE Philip M. Schreiber (D.C. 502714)* Benjamin L. Tompkins (D.C. 474906)* Christopher D. Belen (Va. 78281) Trial Attorneys, Tax Division U.S. Department of Justice Post Office Box 14198 Ben Franklin Station Washington, DC 20044 (202) 514-6069 (Mr. Schreiber) (202) 514-5885 (Mr. Tompkins) (202) 307-2089 (Mr. Belen) Fax: 202-514-9868 [email protected] [email protected] [email protected] Dana J. Boente Acting United States Attorney David Moskowitz Assistant U.S. Attorney 2100 Jamieson Avenue Alexandria, Virginia 22314 Telephone: (703) 299-3845 Fax: (703) 299-3983 [email protected] *Admitted Pro Hac Vice

__/s/_______________________ Jason Torchinsky (Va. 47481) Shawn Toomey Sheehy (Va. 82630) Holtzman Vogel Josefiak, PLLC 45 North Hill Drive, Suite 100 Warrenton, VA 20186 (540) 341-8808 (telephone) (540) 341-8809 (fax) [email protected] [email protected]


1:13-cv-01225 #73

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