The opinion of the court was delivered by: D. LOWELL JENSEN
On December 1, 1993, the Court heard defendants' motion to dismiss and plaintiffs' motion for substitution. William Sidney Smith of Smith, Wimer, Scalise of Des Moines, Iowa appeared for plaintiff Karp. Martin A. Schainbaum appeared for plaintiff Schachter and Assistant United States Attorney Thomas F. Carlucci appeared for defendants. Having considered the papers submitted, the arguments of counsel, the applicable law, and the entire record herein, the Court GRANTS plaintiffs' motion for substitution and DENIES defendants' motion for dismissal, for the following reasons.
Plaintiff David S. Karp filed suit on January 20, 1993. The claim was for money damages based upon 26 U.S.C. § 7431 which prohibits certain unauthorized disclosures of taxpayers' tax return information. Karp and his partner, Martin L. Schachter, have alleged that a special agent of the Internal Revenue Service named Thomas Lavin improperly disclosed that they were under criminal investigation.
Plaintiffs alleged that special agent Lavin caused 542 letters to be mailed to customers of a partnership owned by the plaintiffs. It is argued that special agent Lavin improperly hand typed the words "Criminal Investigation Division" at the top of the circular letter.
On May 30, 1993, plaintiff Karp died. On September 8, 1993 a motion for substitution of decedent's estate as plaintiff was filed and on November 2, 1993 the United States filed a motion to dismiss. Defendants oppose substitution by plaintiff and contend that this action must be dismissed because it cannot survive plaintiff's death. Both the substitution and dismissal motions are at issue herein.
Defendants and plaintiffs agree that the law makes no explicit mention of whether an action can survive the death of a taxpayer. U.S. Motion to Dismiss at 2; Plaintiff Mem. in Opposition at 3. Defendants also concede that the "legislative history fails to squarely address this issue." U.S. Motion to Dismiss at 2-3. Plaintiffs contend such an action survives. Defendants argue it should not. The relevant arguments are considered in turn.
A. Applicability of State Survival Rules
Defendants argue that the case can be analogized to the general principles of tort law. Defendants assert that the remedies Congress created in § 7431 "are almost identical" to the tort of "public disclosure of embarrassing private facts about plaintiff." U.S. Motion to Dismiss at 3. As with a personal tort, defendants argue this statute was not intended to survive plaintiff's death. Defendants cite Lugosi v. Universal Pictures, a case decided by the California Supreme Court, for the proposition that a right to privacy is personal and "does not survive but dies with the person." 25 Cal. 3d 813, 821-22, 603 P.2d 425, 160 Cal. Rptr. 323 (1979).
Plaintiffs argue that state common law is not binding on this court in interpreting a federal law. Plaintiffs suggest that a close examination of the language of the statute in question demonstrates that the federal legislature intended an outcome different from that indicated by the standard tort doctrine cited by defendants. A clear demonstration of legislative intent, would of course, control. Accordingly, the Court has examined the evidence that a right of survival can and should be found in the statute.
B. Right of Survival Under § 7431
The Court finds that strict analogies between the common law of tort and the statutory right created in § 7431 are misleading. Plaintiffs accurately note that all taxpayers, not just individuals, can sue under § 7431, while under tort law a corporation or association has no right to privacy. Plaintiff Mem. in Opposition at 5. This qualifies the statutory right as a property interest which should survive death. Plaintiffs note further that the statute provides for "actual" damages, an indication that property rights were to be taken into account. The Court also observes that defendants' position ...