The opinion of the court was delivered by: HERMAN
The facts surrounding this controversy, as set forth in the 141 paragraphs of the 25-page complaint, the 15-page affidavit of Jack Griffith, and the affidavits of the Defendants are quite extensive and only the relevant and material ones will be summarized in this memorandum. Plaintiff, Jetson Manufacturing Company (Jetson) is a Pennsylvania business corporation and Plaintiff Griffith has served since its incorporation in 1970 as president and treasurer. The Defendants at all times relevant to this action were employees of the Internal Revenue Service (IRS) and they are being sued in their official capacities and as individuals. The principal business of Plaintiff was the manufacture and assembly of electrical components and the business was located at the Harrisburg International Airport, Middletown, Pennsylvania in premises leased from the Commonwealth of Pennsylvania.
On June 22, 1972 the business premises of Jetson were flooded as a result of Hurricane Agnes and all business and payroll withholding records were destroyed. Using reconstructed records a federal withholding tax return was prepared for filing in December of 1972 that showed the withholding tax due, but included no payment. In August of 1972 Jetson applied for a Small Business Administration (SBA) flood disaster loan in the amount of sixty-five thousand dollars and the loan was initially denied because of the lack of reasonable ability to repay. Subsequently, a SBA loan of $ 5,000 was granted to Jetson and the remaining amount sought was scheduled for reconsideration.
On or about February 1973, Defendant Wozniak, the IRS officer assigned to the case, brought invoices for the unpaid withholding tax as shown on the December 1972 return to the attention of Jetson's officers. In April 1973 levies were placed in Jetson's business bank account upon tax assessments of approximately $ 10,000 for failure to make the required federal tax deposits. In July of 1973 the IRS secured a levy and attempted to seize the property of the Plaintiff Jetson, including the accounts receivable. During the course of the seizure, Plaintiff called Congressman Schneebeli who called the IRS office and succeeded in having this first seizure terminated.
The IRS next sent Jetson on September 12, 1973 a communication entitled "Final Notice Before Seizure" and in response to this notice, Jetson's officers again sought the assistance of Congressman Schneebeli. After this notice, Plaintiff Jetson made one $ 500 payment, however, it did not remit all the taxes due at the time or make subsequent monthly deposits and a levy was again placed on Plaintiff Jetson's business property. Plaintiffs allege that Defendants Wozniak and Murphy, Wozniak's group manager, were unwilling to cooperate in implementing an installment payment schedule for the orderly liquidation of the withholding tax liability in the months following the September notice. A meeting was subsequently held on February 25, 1974 at which time Defendant Murphy renewed previous demands for the immediate payment of the delinquent taxes and Plaintiff Griffith refused. On this refusal, Defendant Murphy allegedly called Plaintiff Griffith an "uncooperative crook".
Jetson's attempts to have the IRS action of April 1, 1974 rescinded proved unsuccessful. After this the Plaintiffs on or about April 23, 1974 received a notice from the SBA declining Jetson's request for the flood disaster loan for the reasons stated numerous times before, plus the alleged deterioration of its business to the point of padlocking by the IRS for the nonpayment of taxes. Jetson has not been able to return its operation to production after the IRS abandonment of its seizure because of the Commonwealth's subsequent padlocking of the premises for unpaid rent.
Since the levy and seizure did not produce property to satisfy the tax assessment, the IRS assessed a 100% Penalty against Plaintiff Griffith, as chief corporate officer on July 16, 1974. In the six months following the notice, Plaintiff Griffith allegedly wrote a series of letters to the IRS requesting an appointment with the District Director which were not answered. His purpose was to discuss and seek an agreement upon a plan for the installment payments of Jetson's outstanding tax liability. A conference, however, was granted and held on March 12, 1975 but no arrangement for payments was arrived at. Throughout the remainder of 1975, 1976 and 1977, Plaintiff Griffith wrote to and enlisted the assistance of Senators Schweiker and Heinz, Congressmen Schneebeli and Ertel and President Ford. Plaintiff Griffith contends that Defendants refused his reasonable requests for interviews and appointments.
Count I as previously noted concerns the alleged illegal search and seizure conducted at Plaintiff's business on April 1, 1974. Plaintiff Griffith alleges he suffered humiliation before his employees because of the search and has been subjected to mental suffering. Also, it is alleged that the incidents of April 1, 1974 caused the closing of the business premises and is the reason why they remain closed. This count only seeks money damages against Defendants Murphy and Wozniak and not the other Defendants.
In retrospect, it is now known that if the intrusion of April 1, 1974 involved a warrantless search and seizure, the acts of the revenue officers were unconstitutional. The United States Supreme Court held in G. M. Leasing Corporation v. United States, 429 U.S. 338, 97 S. Ct. 619, 50 L. Ed. 2d 530 (1977), that a warrantless entry into a corporation's business office by Internal Revenue Service agents who seized books, records, and other property in partial satisfaction of jeopardy assessments for a federal income tax deficiency to be an intrusion into privacy that violated the Fourth Amendment. Before this decision, however, over a century of legal precedent permitted warrantless searches and seizures by revenue officers. The crucial time for determining the propriety of Defendants' conduct is, of course, the time of the alleged constitutional infringement. At the time of April 1, 1974, the standard practice of the IRS was to interpret 26 U.S.C. § 6331(b), that authorizes "distraint and seizure by any means", as authorizing seizures without a search warrant. Therefore, at the time of the alleged unconstitutional search and seizure, the acts of Defendants were pursuant to statute and in line with the practice of the IRS and the law as it was interpreted at that date.
In determining whether liability should be placed upon these two Defendants, their conduct and intentions must be determined as of April 1, 1974. It is the law that officials can reasonably rely upon the validity of standard practice which only subsequently is found to be unconstitutional, See e.g., Clarke v. Cady, 358 F. Supp. 1156, 1163 (W.D.Wis.1973); Rios v. Cessna Finance Corporation, 488 F.2d 25, 28 (10th Cir. 1973); Slate v. McFetridge, 484 F.2d 1169 (7th Cir. 1973). Public officials, in this case IRS officers, are not charged with the obligation of ...