[00:00:00] Speaker 03:
Case number 157118, John J. Bowman, Jr., appellant, versus Kimberly Iden et al., Jennifer Clark from Micas Curiae, Jonathan Cohen from Apolize.

[00:00:35] Speaker 04:
May it please the court?

[00:00:36] Speaker 04:
Jennifer Clark is an advocate for the court.

[00:00:39] Speaker 04:
In dismissing Mr. Bowman's Bivens action, the district court erred in treating Mr. Bowman's status as irrelevant and finding a comprehensive remedial scheme by relying on the regulatory regime in place for tax practitioners.

[00:00:54] Speaker 04:
This court in Loving analyzed the statute and regulations at issue and determined that the IRS lacks authority to regulate tax return preparers.

[00:01:05] Speaker 04:
As a result, tax return preparers are wholly outside of the regulatory regime at issue here, and those provisions provide no indication that Congress intended to preclude Bivens relief for tax return preparers.

[00:01:20] Speaker 04:
This is not a case, therefore, where Congress has established a regulatory regime and placed certain individuals within that regime, but carved out certain remedies that are not available to them.

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tax return preparers are wholly outside of the scheme to begin with, and that scheme does not serve as a comprehensive remedial scheme for purposes of displacing Bivens relief.

[00:01:45] Speaker 02:
Do you assume we agreed with you about that, that this was not the kind of remedial scheme that precluded a Bivens remedy here?

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I'm curious about whether we actually even have to decide that.

[00:02:00] Speaker 02:
And the reason I ask you that question is

[00:02:03] Speaker 02:
So since Loving, since the Loving decision, your client's been functioning as a tax preparer, right?

[00:02:12] Speaker 02:
And IRS has given them the green light to do that, correct?

[00:02:17] Speaker 04:
There is nothing in the record at this stage.

[00:02:20] Speaker 04:
This case was dismissed at the 12b6 stage.

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This is a motion to dismiss.

[00:02:24] Speaker 04:
There's nothing in the record that indicates the extent of Mr. Bowman's practice, the extent to which he has been or when he was able to resume as a tax preparer.

[00:02:34] Speaker 02:
Okay, that's a good point.

[00:02:35] Speaker 02:
But in principle, since Loving, there's been no reason why he couldn't practice as a tax preparer, right?

[00:02:40] Speaker 04:
That's right.

[00:02:41] Speaker 04:
As a legal matter, yes.

[00:02:43] Speaker 02:
Right.

[00:02:43] Speaker 02:
And prior to that time,

[00:02:45] Speaker 02:
from the only time he couldn't function as a tax preparer was from 2011 when the IRS amended the circular to bring tax preparers under it, right?

[00:03:01] Speaker 02:
Between then and 11.

[00:03:03] Speaker 02:
Those three years he couldn't practice as a tax preparer, correct?

[00:03:08] Speaker 04:
Well, the IRS regulations, in effect, when they in fact sanctioned him, erroneously sanctioned him as an enrolled agent, he was informed when he finally received notice many years later after he was released from prison and got the FOIA request back.

[00:03:23] Speaker 01:
So while he's in prison, no harm, no foul, right?

[00:03:25] Speaker 04:
Well, actually, that's, again, something that could be developed in terms of whether he had any ability to do anything in prison.

[00:03:32] Speaker 00:
Some of his clients might have hired him in prison.

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Yeah, right.

[00:03:36] Speaker 02:
Good point.

[00:03:37] Speaker 04:
But that hasn't been developed at this stage.

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Can you go back to my question?

[00:03:43] Speaker 02:
OK.

[00:03:43] Speaker 02:
Between the time that the IRS, 2011, amended circular,

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230, to bring tax repairs under it, right, and loving, he could not practice at all, right?

[00:04:05] Speaker 04:
At a minimum during that period, yes.

[00:04:07] Speaker 02:
But during that time, he was part of this comprehensive scheme.

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In other words, he had a remedy under the IRS regulations, because he was covered by them during that time.

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So my question then is,

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If he had a Bivens remedy then, during that period of time, then that's kind of off the table.

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And since then, he, at least in principle, I take your point about the record, but in principle, he hasn't suffered any harm since loving, since he's been legally free to practice as a tax preparer.

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Why do we have to decide, even if he has a Bivens remedy, what could he get?

[00:04:54] Speaker 02:
This is all subject to your earlier point, and maybe that's the answer you'll give me now about the record.

[00:05:01] Speaker 04:
Right, so there's a couple of things I think in response to your question first.

[00:05:06] Speaker 04:
whether the IRS was treating Mr. Bowman improperly as subject to the regulatory regime during this time frame from 2011 to, accepting your premise that it would be limited to 2011 to 2014, the fact that they may have treated him or thought that he was subject to their regulations, the IRS actually, in fact, as this court decided, lacked the authority to do that.

[00:05:30] Speaker 02:
And so the inquiry here... But during that time he was subject

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So your view is that...

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Given Loving, looking back, they really did have no authority.

[00:05:43] Speaker 04:
That's correct.

[00:05:44] Speaker 04:
That's what Loving decided.

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So that they may have mistakenly understood their jurisdiction at that point in time says nothing about whether Congress intended, and that's the relevant inquiry here, whether Congress intended this regulatory regime, this comprehensive remedial scheme, to displace Bivens.

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And this court in Loving made clear that Congress did not intend for these regulations to apply to tax return

[00:06:08] Speaker 04:
players at all at this year.

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So that's the main answer, I think, to your question.

[00:06:14] Speaker 04:
To unpack it a little bit further, I do think that there is a question as to whether the time frame would be limited to the 2011 to the 2014 period for several reasons.

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At the time that they sanctioned Mr. Bowman before the 2011 regulations, the sanction was in 2005, at that point in time,

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The regulations did not cover tax return preparers as practitioners.

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They weren't among the list of people who were subject to regulation.

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But once somebody was sanctioned as an enrolled agent, as a practitioner, the notice that was given to Mr. Bowman said, you've been suspended from practice as defined in Circular 230.

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And the definition of practice at that time said,

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practice includes preparing and filing documents.

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So it's at least a question as to whether, as a legal matter or as a practical matter, that would have precluded him from preparing taxes even prior to 2011.

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But even assuming that the time frame is 2011 to 2014, that becomes a question of the extent of any damages that Mr. Bowman suffered, not the existence of a Bivens Revenue, for the reasons that I said, because those regulations simply did not apply to him, regardless of whether the IRS

[00:07:30] Speaker 04:
erroneously thought they did, and therefore do not inform whether Congress intended to displace Bivens.

[00:07:37] Speaker 02:
I just have a factual, well maybe it's a legal question.

[00:07:39] Speaker 02:
So under the old regime, a tax preparer could obtain something called limited practice rights.

[00:07:53] Speaker 02:
Am I right that that's not the case now that the 2011 regulations are no longer in effect?

[00:08:01] Speaker 04:
So that is correct.

[00:08:03] Speaker 04:
Actually, under the 2011 regulations, the limited practice doesn't actually include tax return preparers.

[00:08:10] Speaker 04:
It's limited to a certain number of people who, based on a specific relationship, such as family members, employer employees, I think a general partner of a partnership, can represent another in a limited capacity before the IRS.

[00:08:24] Speaker 04:
Appellees rely heavily on this limited practice idea, but it's really a red herring for multiple reasons.

[00:08:31] Speaker 04:
It's not the basis on which they sanctioned Mr. Bowman.

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They sanctioned him as an enrolled agent.

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Second, limited practice.

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They point to no evidence that Mr. Bowman ever actually engaged in limited practice.

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Third, limited practice says nothing about tax return preparation.

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It's about representing individuals in a limited capacity in interactions with the IRS, not about preparing taxes.

[00:08:53] Speaker 04:
And fourth, I come back to the same point, which is if the IRS took certain steps as a matter of grace in Mr. Bowman's case, that does nothing to inform the inquiry whether the regulatory regime that Congress established was intended to displace Bivens relief.

[00:09:18] Speaker 02:
You're in your rebuttal time.

[00:09:19] Speaker 02:
Do you want to?

[00:09:20] Speaker 02:
That's correct.

[00:09:20] Speaker 02:
Yeah.

[00:09:21] Speaker 04:
Thank you.

[00:09:22] Speaker 02:
OK.

[00:09:22] Speaker 02:
Thank you.

[00:09:36] Speaker 03:
May it please the court, at the outset, I think that this highly unusual case underscores the wisdom

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of the court's decisions not to create Bivens remedies in situations that do not call for such a remedy.

[00:09:59] Speaker 02:
Is that your strongest argument?

[00:10:02] Speaker 03:
I'm sorry?

[00:10:03] Speaker 02:
Is that your strongest argument that this case is unusual?

[00:10:06] Speaker 03:
No, no, no.

[00:10:07] Speaker 02:
Why don't you go on to that?

[00:10:09] Speaker 03:
My strongest argument is in two parts.

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First is that indeed there was

[00:10:19] Speaker 03:
a remedial administrative scheme in place that was taken advantage of by Mr. Bowman, that indeed restored his limited practice rights, and limited practice does

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cover the preparation and filing of documents, as well as representing certain classes of taxpayers before a certain level of employee of the Internal Revenue Service.

[00:10:51] Speaker 02:
What do you do with the decision in Loving?

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Where we said, this court, we look at the statute carefully.

[00:11:03] Speaker 02:
We examine the definition of the word representative.

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Instead, representative does not include tax preparers, tax return preparers.

[00:11:13] Speaker 02:
So we held that this comprehensive remedy that exists doesn't cover tax preparers.

[00:11:22] Speaker 02:
Not that they were intentionally excluded by Congress, but that they just are outside of that system.

[00:11:30] Speaker 03:
Well, even if Bowman fell outside

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of the scope of, certainly he was not an enrolled agent and he was by his standard only a return preparer.

[00:11:51] Speaker 03:
But then what you have is if you say the remedial scheme provided in the regulations did not apply to him, he still loses because he has not

[00:12:06] Speaker 03:
alleged or established, at least at this stage for purposes of the motion to dismiss, that he sustained a constitutional tort.

[00:12:19] Speaker 03:
If he had received a letter from the Internal Revenue Service saying, we have suspended your practice rights,

[00:12:28] Speaker 02:
It would have been a mix-up if they said, be cut, and that you are no longer... But during the time, between the time of the issuance of the 2011 letter and loving, he could not practice his chosen profession.

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Correct?

[00:12:44] Speaker 03:
He could still, after his... Excuse me, isn't that correct?

[00:12:49] Speaker 03:
His limited practice rights were restored in November 2014.

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But during those years between the issuance of the regulation and loving, he could not practice his chosen profession.

[00:13:02] Speaker 02:
Isn't that factually correct?

[00:13:04] Speaker 02:
No, I think it is not.

[00:13:06] Speaker 02:
I think that

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They told him he couldn't practice.

[00:13:11] Speaker 02:
And at that time, tax preparers were included in the definition of practitioner.

[00:13:17] Speaker 03:
Yeah.

[00:13:17] Speaker 02:
So he could not.

[00:13:18] Speaker 02:
But Loving doesn't have retroactive effect.

[00:13:21] Speaker 02:
Loving said that at that time, Loving said the statute that Congress never intended.

[00:13:28] Speaker 02:
So as counsel said, ab initio.

[00:13:31] Speaker 02:
They never had any authority over tax preparers.

[00:13:35] Speaker 02:
They didn't have legal authority over tax preparers.

[00:13:38] Speaker 03:
Until Loving, they had never had any authority over them.

[00:13:43] Speaker 03:
But Your Honor, they do have authority over limited practitioners.

[00:13:47] Speaker 02:
You're missing my point.

[00:13:49] Speaker 02:
My point is, let's just see if we can get agreement on this.

[00:13:53] Speaker 02:
Under Loving, isn't it true

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that the IRS, between the time of the issuance of the regulation and the loving decision, had no authority over the plaintiff.

[00:14:10] Speaker 02:
It had no authority to bar him from practicing.

[00:14:13] Speaker 02:
That is true.

[00:14:14] Speaker 02:
Okay.

[00:14:14] Speaker 02:
So why isn't that sufficient to allege a constitutional tort?

[00:14:19] Speaker 03:
Because what he is alleging is that he was defamed by having his name published in the Federal Register as having been suspended.

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And defamation without more, and I would suggest there is nothing more.

[00:14:36] Speaker 02:
Right, but here he was barred from doing his work.

[00:14:41] Speaker 02:
He was barred from exercising his chosen profession.

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It's not just defamation.

[00:14:46] Speaker 02:
He said I couldn't work for those three years.

[00:14:49] Speaker 03:
Well, he could not work between 2005 and 2010 because he was in prison.

[00:15:00] Speaker 02:
That's not my point.

[00:15:02] Speaker 02:
Telling me about the period 2005 to 2010 is not responsive to my question to you about 2011 to 2014?

[00:15:12] Speaker 03:
He was not reinstated until the fall of 2014, and the reinstatement

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and that's actually an inaccurate right because although he because he never was.

[00:15:27] Speaker 02:
Let me ask you the question this way.

[00:15:29] Speaker 02:
If I'm right, and I'm just asking you to assume this, that in fact he was barred from practicing during those three years.

[00:15:38] Speaker 02:
Isn't that sufficient to allege a constitutional tort?

[00:15:41] Speaker 02:
I don't think so, Your Honor.

[00:15:42] Speaker 02:
And why is that?

[00:15:43] Speaker 03:
Because I think that he would have to establish that he had some kind of constitutionally protected interest.

[00:15:53] Speaker 03:
that was unfairly taken away from him, that was wrongfully taken away from him, that he was denied some constitutional protection that he was otherwise entitled to.

[00:16:04] Speaker 01:
Well, he's claiming it was his liberty interest and his reputation.

[00:16:08] Speaker 03:
Well, reputation without more, the liberty interest would be because he was incarcerated, I wouldn't doubt it.

[00:16:14] Speaker 01:
No, no, simply because of the reputation.

[00:16:16] Speaker 03:
But then this would be pushing

[00:16:21] Speaker 03:
it seems to me, the Supreme Court holdings in cases like Davis v. Paul, beyond their reasonable limits.

[00:16:30] Speaker 01:
Well, why?

[00:16:32] Speaker 03:
If he was deprived of his reputation, stigmatized, driven out of his profession, why isn't that within the range of... Well, because I think that you would need more than the stigma of the suspension of... He does.

[00:16:51] Speaker 02:
He does.

[00:16:51] Speaker 02:
He has the inability to practice his profession.

[00:16:58] Speaker 03:
In the period before he was reinstated, that is true.

[00:17:02] Speaker 03:
But he didn't even ask for reinstatement until well after he was released from prison.

[00:17:09] Speaker 01:
It was a couple of months after Loving.

[00:17:12] Speaker 03:
The IRS restored limited practice rights sometime after Loving.

[00:17:21] Speaker 01:
If I remember correctly, his

[00:17:25] Speaker 01:
The petition to the IRS for reinstatement followed Loving by two months.

[00:17:33] Speaker 03:
Yeah, he asked for reinstatement on November the 23rd of 2012.

[00:17:38] Speaker 03:
Loving came out in February of 2014.

[00:17:44] Speaker 03:
And on November 2014, the IRS said you can have limited practice rights.

[00:17:51] Speaker 03:
That's the timeline.

[00:17:53] Speaker 01:
And the limited practice rights were not to act as a tax preparer in general, but only on behalf of family or affiliated companies.

[00:18:05] Speaker 03:
Family, partners, certain other classes of affiliated companies.

[00:18:10] Speaker 01:
Since that wasn't his practice, and that didn't restore him to anything, or restore his practice, why is that helpful?

[00:18:17] Speaker 01:
Why is it relevant?

[00:18:20] Speaker 01:
Well, that's the only relief they could give him, perhaps.

[00:18:24] Speaker 03:
Well, actually, in one significant respect, it's more than what he had before in that merely as a return preparer, he could not actually practice.

[00:18:36] Speaker 03:
And as a limited practice person, he could appear having filed documents with the IRS before revenue agents and certain other people, which only return preparers.

[00:18:53] Speaker 03:
could not.

[00:18:55] Speaker 03:
It was unclear at the time prior to the loving decision whether practice encompassed preparing and filing returns and we know that this court held that it was not and that return preparers didn't represent taxpayers.

[00:19:16] Speaker 03:
But there is this subclass of individuals who can file documents and who can prepare returns and can appear before the IRS.

[00:19:29] Speaker 03:
Now, when you're talking about a constitutional tort, you have an individual who has

[00:19:40] Speaker 03:
five years in federal prison for some 23 counts of financial crimes.

[00:19:48] Speaker 03:
So it's somewhat poorly positioned under those circumstances.

[00:19:55] Speaker 02:
to claim... That would certainly be the case if he was seeking, claiming only damage, or maybe, right, if he's seeking only damage due to his reputation.

[00:20:07] Speaker 02:
But he's also claiming he was unable to practice his chosen profession.

[00:20:12] Speaker 02:
There was nothing in the sentence he served or his terms of relief that prohibited him from doing that.

[00:20:20] Speaker 02:
I think your time is up.

[00:20:22] Speaker 02:
Do you want to answer that and then... Yeah, go ahead.

[00:20:25] Speaker 02:
Go ahead.

[00:20:26] Speaker 03:
Thank you very much.

[00:20:31] Speaker 02:
How much time did Ms.

[00:20:32] Speaker 02:
Clark have?

[00:20:33] Speaker 02:
You can take your minute.

[00:20:38] Speaker 04:
Thank you.

[00:20:39] Speaker 02:
By the way, this doesn't come out of your minute.

[00:20:42] Speaker 02:
He filed a petition for reinstatement, right?

[00:20:48] Speaker 02:
That's correct.

[00:20:48] Speaker 02:
Okay.

[00:20:49] Speaker 02:
Was that before Loving?

[00:20:51] Speaker 04:
It was before Loving, yes.

[00:20:52] Speaker 04:
Okay, thank you.

[00:20:53] Speaker 01:
I think it was the filing in district court that was after Loving.

[00:20:56] Speaker 01:
Is that right?

[00:20:56] Speaker 02:
Two months after Loving.

[00:20:59] Speaker 02:
Now you have your minute.

[00:21:01] Speaker 04:
Okay.

[00:21:03] Speaker 04:
Just to quickly address a couple of points.

[00:21:05] Speaker 04:
In terms of whether Mr. Bowman adequately alleged a constitutional injury, he alleges both the damage to his reputation and

[00:21:13] Speaker 04:
in particular his interest in pursuing his chosen profession.

[00:21:16] Speaker 04:
At JA 31 is his pro se complaint, which as pro se should also be construed liberally in his favor, where he alleges that some processes do, some due processes do because plaintiff had a property interest in avoiding damage to his reputation and business caused by a stigmatizing suspension, the suspension to plaintiff caused by inadequate notice pursuant to 26 USC 6212.

[00:21:43] Speaker 04:
He also later alleges in the complaint, quite similarly, that he had an interest in avoiding deprivation of reputational and economic interests caused by an indefinite suspension.

[00:21:53] Speaker 04:
That's HA 33.

[00:21:55] Speaker 04:
So for purposes of stating a claim, Mr. Bowman has adequately stated a constitutional injury here.

[00:22:01] Speaker 04:
I would also just add very quickly that

[00:22:05] Speaker 04:
in terms of the causation argument that the appellees are making.

[00:22:10] Speaker 04:
That is, again, along with their other arguments, really goes to the question of extent of damages, and that can be established

[00:22:17] Speaker 04:
on remand once there's discovery and fact development.

[00:22:20] Speaker 00:
How do you respond to, you know, Stanley, Spagnola, Wilson, other cases that say that even if perhaps the statutory relief isn't complete or comprehensive or perhaps doesn't even really provide any relief doesn't mean that you still are entitled to pursue this as a Bivens Act?

[00:22:44] Speaker 04:
Right, that's correct.

[00:22:44] Speaker 04:
The adequacy of relief is not the key issue.

[00:22:49] Speaker 04:
But in those cases, the individual issue was within the regime to start off with.

[00:22:55] Speaker 04:
And so the unavailability of certain remedies to that person was irrelevant to whether the Bivens action should proceed, and the court has held in those cases that there is no Bivens action.

[00:23:07] Speaker 04:
Here, the regulatory regime at issue is a regime that governs tax practitioners.

[00:23:13] Speaker 04:
Tax return preparers are wholly outside of that regime and therefore the existence or non-existence of a remedy or how adequate the remedy is doesn't even come into play because the regime itself doesn't displace dividends to start off with.

[00:23:28] Speaker 02:
Congress's decision to adopt a remedial scheme limited to practitioners doesn't imply intent to exclude everybody else?

[00:23:37] Speaker 04:
uh... no here that it's at the you have to look at the regulatory regime as a whole regulatory regime it's not just the remedial scheme it's the regulations cut the irs has the right to regulate tax practitioners that involves a whole series of things including a remit remedial portions of the state

[00:23:54] Speaker 04:
Congress gave authority to the IRS to regulate practitioners.

[00:23:59] Speaker 04:
It did not include tax return preparers.

[00:24:01] Speaker 04:
They're wholly outside of that scheme.

[00:24:03] Speaker 02:
Your point is it never would have thought of tax return preparers because it just didn't, right?

[00:24:07] Speaker 02:
That's correct.

[00:24:08] Speaker 02:
What about the government's argument, which I think they're making, is that there are these limited practice rights that they still have a little bit of, right?

[00:24:17] Speaker 02:
they can still appear, someone preparing tax return for, you know, his or her spouse can appear or working for a company, correct?

[00:24:27] Speaker 04:
That's correct.

[00:24:27] Speaker 02:
That's still true.

[00:24:29] Speaker 04:
That's still true.

[00:24:29] Speaker 02:
And why isn't that, the government seems to say that that's sufficient to bring them under this.

[00:24:35] Speaker 04:
Well, first of all, that was not from

[00:24:38] Speaker 04:
That doesn't cover the 2011 to 2014 timeframe at all, because it was not conveyed to Mr. Bowman until 2014, but also point out that limited practice rights, as appellees term them, are available to anyone in the public.

[00:24:52] Speaker 04:
Anyone who has a family member can represent in certain limited capacities that family member before the IRS.

[00:24:59] Speaker 04:
It doesn't have anything to do with being a tax return preparer or whether it was appropriate for the IRS to preclude Mr. Bowman from

[00:25:08] Speaker 04:
practicing as a tax return preparer.

[00:25:11] Speaker 02:
Thank you.

[00:25:12] Speaker 04:
Thank you.

[00:25:13] Speaker 02:
Ms.

[00:25:13] Speaker 02:
Clark, the court appointed you as amicus and we're grateful to you and your colleagues for your help.

[00:25:18] Speaker 02:
Case is submitted.