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Ghaffari v. Internal Revenue Service

United States District Court, N.D. California, San Jose Division

June 10, 2015



PAUL S. GREWAL, Magistrate Judge.

Plaintiff Shahir Ghaffari filed this suit against Defendants Internal Revenue Service, United States Department of Treasury and Elisa Dang. Defendants move to dismiss the complaint in its entirety under Fed.R.Civ.P. 12(b)(1), (5) and (6). Because the court finds that Ghaffari's claims fail as a matter of law, Defendants' motion is GRANTED but with leave to amend.


Ghaffari founded a technology company in 2011 and began claiming operation costs as expenses on his tax return.[1] The IRS subsequently audited Ghaffari, asking Ghaffari for verification.[2] Dang-an agent in the IRS's San Jose office-directed the audit.[3] Dang requested a wealth of information from Ghaffari including bank records, contact information for individuals with whom Ghaffari had business engagements and information about related meetings and events.[4] Ghaffari spent at least 500 hours complying with Dang's requests.[5] His health and company suffered as a result.[6]

This suit followed. Ghaffari alleges Dang and the IRS bombarded him with requests for unnecessary information to harass and intimidate him.[7] He asserts three causes of action: (1) violation of the Privacy Act, [8] (2) violation of his First and Fifth Amendment rights under Bivens v. Six Unknown Named Agents of Fed. Bureau of Narcotics [9] and (3) wrongful inspection and disclosure.


This court has subject matter jurisdiction pursuant to 28 U.S.C. § 1331. The parties further consented to the jurisdiction of the undersigned magistrate judge under 28 U.S.C. § 636(c) and Fed.R.Civ.P. 72(a).

Under Fed.R.Civ.P. 12(b)(1), a case must be dismissed when, considered in its entirety and on its face, the complaint fails to establish subject matter jurisdiction.[10] The plaintiff bears the burden of establishing subject matter jurisdiction.[11]

Under Fed.R.Civ.P. 12(b)(6), "dismissal can be based on the lack of a cognizable legal theory or the absence of sufficient facts alleged under a cognizable legal theory."[12] If a plaintiff fails to proffer "enough facts to state a claim to relief that is plausible on its face, " the complaint may be dismissed for failure to state a claim upon which relief may be granted.[13] A claim is facially plausible "when the pleaded factual content allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged."[14]

At this stage of the case, the court must accept all material allegations in the complaint as true and construe them in the light most favorable to the non-moving party.[15] The court's review is limited to the face of the complaint, materials incorporated into the complaint by reference, and matters of which the court may take judicial notice.[16] However, the court need not accept as true allegations that are conclusory, unwarranted deductions of fact, or unreasonable inferences.[17]


As a preliminary matter, Ghaffari's complaint must be dismissed in its entirety for insufficient service. In an action against a federal agency or employee, a plaintiff also must serve the United States by serving the Attorney General and the United States Attorney for the district in which the action is brought.[18] This Ghaffari failed to do. As a result, his complaint must be dismissed pursuant to Fed.R.Civ.P. 12(b)(5). But Ghaffari's claims suffer from flaws greater than insufficient service alone.

First, Ghaffari's Privacy Act claims fail as a matter of law. Section 522a(g)(1) of the Privacy Act provides civil remedies for federal agencies' failure to comply with Privacy Act provisions.[19] Congress, however, limited Section 552a(g)'s scope with regards to tax-related activity by specifying that "[t]he provision of subsection[] (g) of section 552a... shall not be applied, directly or indirectly, to the determination of the existence or possible existence of liability (or the amount thereof) of any person for any tax."[20] Here, Ghaffari's Privacy Act claims challenge the IRS's investigation of his claimed expenses, which indisputably relates to determination of his tax liability.[21]

Ghaffari's Privacy Act claim against Dang similarly fails. Section 522a(g)(1) only allows plaintiffs to bring civil actions "against the agency." This right of action does not ...

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