Opinion
No. 1:22-cv-01037-RLY-MJD
2023-08-01
George Gaio MANO, Plaintiff, v. Janet YELLEN as Secretary of the United States Department of Treasury, US Department of Treasury, Internal Revenue Service, and United States of America, Defendants.
George Gaio Mano, Bloomington, IN, Pro Se. Benton York, Jeffrey Nathan Nunez, DOJ-Tax, Tax Division, Washington, DC, for Defendants.
George Gaio Mano, Bloomington, IN, Pro Se. Benton York, Jeffrey Nathan Nunez, DOJ-Tax, Tax Division, Washington, DC, for Defendants.
ENTRY GRANTING DEFENDANTS' MOTION TO DISMISS
RICHARD L. YOUNG, JUDGE
The Bank Secrecy Act and its implementing regulations require individuals possessing foreign bank accounts with an aggregate balance of more than $10,000 to file an annual report known as an "FBAR" (or Report of Foreign Bank and Financial Accounts) with the Treasury Department. 31 U.S.C. § 5314; 31 C.F.R. § 1010.350. The Act imposes civil monetary penalties for violations of the reporting requirement. 31 U.S.C. § 5321.
Plaintiff George Gaio Mano, proceeding pro se, initiated this suit on May 18, 2022, seeking an injunction prohibiting Defendants from enforcing the FBAR filing requirement against him. He argues the reporting requirement violates his rights under the Fourth, Fifth, Ninth, and Tenth Amendments of the United States Constitution.
Defendants move to dismiss Plaintiff's Complaint under Federal Rules of Civil Procedure 12(b)(1) (lack of subject-matter jurisdiction), 12(b)(4) (insufficient process), 12(b)(5) (insufficient service of process), and 12(b)(6) (failure to state a claim). For the reasons that follow, the court concludes its subject matter jurisdiction is secure. However, Plaintiff has failed to state a claim upon which relief can be granted. Defendants' motion to dismiss is therefore GRANTED.
The court does not reach the remaining bases for dismissal.
I. Background
Plaintiff is a United States citizen. (Filing No. 1, Compl. at 5). In March 2013, he moved to Japan and began working at Tenri University. (Id.). His monthly salary from that employment never exceeded $10,000 and was first deposited in a foreign bank account. (Id.). Plaintiff generally wired the bulk of his monthly income to a different bank account based in the United States. (Id.). As such, the balance of his foreign bank account remained below $10,000—until 2021. (Id.).
In May 2021, Plaintiff reached the age of sixty, which triggered an "initial retirement" at Tenri University and a lump-sum "severance pay" of $35,042. (Id.). The balance of Plaintiff's foreign bank account thus exceeded $10,000, obligating him—for the first time—to file an FBAR with the Treasury Department. (Id.).
The FBAR requires Plaintiff to reveal, among other things, the foreign financial institutions at which he has an account, the type of account, the account number, and the maximum value of the foreign account. (Filing No. 27-1, Report of Foreign Bank and Financial Accounts).
II. Legal Standard
Under Federal Rule of Civil Procedure 12(b)(6), a defendant may move to dismiss a complaint for failure to state a claim upon which relief can be granted. To survive dismissal, the complaint must contain "enough facts to state a claim to relief that is plausible on its face." Bell Atlantic v. Twombly, 550 U.S. 544, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007). "A claim has facial plausibility when the pleaded factual content allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009). In evaluating a 12(b)(6) motion to dismiss, the court accepts as true all well-pleaded factual allegations and draws all reasonable inferences in favor of the plaintiff. Silha v. ACT, Inc., 807 F.3d 169, 173 (7th Cir. 2015) (citing Apex Dig., Inc. v. Sears, Roebuck & Co., 572 F.3d 440, 443-44 (7th Cir. 2009)).
The same general rules apply when considering a facial challenge to subject matter jurisdiction under Rule 12(b)(1). Apex, 572 F.3d at 443-44. A facial challenge is one where the defendant contends the plaintiff's allegations, even if true, would fail to establish subject matter jurisdiction. Id. In challenging Plaintiff's standing, Defendants mount a facial challenge to the court's subject matter jurisdiction. See Moore v. Wells Fargo Bank, N.A., 908 F.3d 1050, 1057 (7th Cir. 2018) ("Standing is an element of subject-matter jurisdiction in a federal civil action.").
III. Discussion
A. Standing
"Under Article Ill's case and controversy requirement, only parties with a real interest or stake in the litigation have standing to sue in federal court." Gora v. Costa, 971 F.2d 1325, 1328 (7th Cir. 1992). "The irreducible constitutional minimum of standing contains three elements:" (1) a concrete and particularized injury in fact that is "actual or imminent, not conjectural or hypothetical," (2) that is "fairly . . . traceable to the challenged action of the defendant" and (3) will likely be "redressed by a favorable decision." Lujan v. Defs. of Wildlife, 504 U.S. 555, 561, 112 S.Ct. 2130, 119 L.Ed.2d 351 (1992) (cleaned up).
Plaintiff alleges that filing an FBAR will require him to reveal his private bank account information (injury in fact) to Defendants (traceability), and he seeks an injunction prohibiting Defendants from enforcing the filing requirement against him (redressability). That is enough for Article III standing.
Defendants argue Plaintiff has failed to allege an injury in fact because he has no constitutionally protected interest in the foreign banking information at issue. That argument, however, goes to the merits rather than standing. See Protect Our Parks, Inc. v. Chicago Park Dist., 971 F.3d 722, 736 (7th Cir. 2020) ("[W]hen the existence of a protected . . . interest is an element of the claim, deciding whether the interest exists virtually always goes to the merits rather than standing."). "Otherwise every losing suit would be dismissed for lack of jurisdiction." Id. (citation omitted); see also TransUnion LLC v. Ramirez, 594 U.S. 413, 141 S. Ct. 2190, 2205, 210 L.Ed.2d 568 (2021) ("[U]nder Article III, an injury in law is not an injury in fact.").
Because Plaintiff has standing, the court's subject matter jurisdiction is secure.
B. Failure to State a Claim
Plaintiff alleges the FBAR filing requirement violates his rights under the Fourth, Fifth, Ninth, and Tenth Amendments of the Constitution. The court examines each constitutional claim in turn.
1. Fourth Amendment
Plaintiff first alleges the FBAR filing requirement constitutes an unreasonable search and seizure in violation of the Fourth Amendment. Defendants argue Plaintiff's Fourth Amendment claim is foreclosed by Supreme Court precedent. The court agrees with Defendants.
In California Bankers Association v. Shultz, 416 U.S. 21, 94 S.Ct. 1494, 39 L.Ed.2d 812 (1974), a group of bank depositors brought a Fourth Amendment challenge to now superseded regulations under the Bank Secrecy Act that required "United States citizens, residents, and businessmen to file reports of their relationships with foreign financial institutions." Id. at 35, 94 S.Ct. 1494. The Supreme Court rejected the depositors' challenge. In doing so, the Court noted that "the Fourth Amendment does not prohibit all requirements that information be made available to the Government" and emphasized Congress's "plenary authority . . . to regulate foreign commerce, and to delegate significant portions of this power to the Executive." Id. at 59, 61, 94 S.Ct. 1494. The Court observed that "[t]he statutory authorization for the regulations was based upon a conclusion by Congress that . . . foreign financial institutions were being used by residents of the United States to circumvent the enforcement of the laws of the United States." Id. at 63, 94 S.Ct. 1494. It concluded the regulations were "reasonable in the light of that statutory purpose" and found "no reason" to invalidate them "[i]f reporting of income may be required as an aid to enforcement of the federal revenue statutes." Id.
Plaintiff claims a materially identical reporting requirement for foreign financial accounts under current Bank Secrecy Act regulations violates the Fourth Amendment. See 31 C.F.R. § 1010.350(a) ("Each United States person having a financial interest in, or signature or other authority over, a bank, securities, or other financial account in a foreign country shall report such relationship . . . for each year in which such relationship exists and shall provide such information as shall be specified in a reporting form prescribed under 31 U.S.C. 5314 to be filed by such persons," i.e. the FBAR.). The FBAR simply requires Plaintiff to report the foreign financial institution at which he has an account, the type of account, the account number, and the maximum value of the foreign account. Plaintiff's Fourth Amendment challenge to that requirement fails in light of California Bankers.
2. Fifth Amendment
The Fifth Amendment provides that "[n]o Person . . . shall be compelled in any criminal case to be a witness against himself, nor be deprived of life, liberty, or property, without due process of law." Plaintiff alleges in his Complaint that the FBAR filing requirement violates the Due Process Clause of the Fifth Amendment. In his briefing, he further claims that the filing requirement violates his privilege against self-incrimination. Neither claim survives dismissal.
First, Plaintiff put forward no argument in response to Defendants' contention that he failed to state a claim under the Due Process Clause. He has therefore waived the claim. See Bonte v. U.S. Bank, N.A., 624 F.3d 461, 466 (7th Cir. 2010) ("Failure to respond to an argument . . . results in waiver."); County of McHenry v. Ins. Co. of the West, 438 F.3d 813, 818 (7th Cir. 2006) ("When presented with a motion to dismiss, the non-moving party must proffer some legal basis to support his cause of action.").
Second, Plaintiff failed to allege in his Complaint that the FBAR filing requirement violates his privilege against self-incrimination. He improperly asserts the claim for the first time in his response brief. See Thomason v. Nachtrieb, 888 F.2d 1202, 1205 (7th Cir. 1989) ("It is a basic principle that the complaint may not be amended by the briefs in opposition to a motion to dismiss."). In any case, circuit precedent forecloses the claim.
In In re Special Feb. 2011-1 Grand Jury Subpoena Dated Sept. 12, 2011, 691 F.3d 903 (7th Cir. 2012), the Seventh Circuit held that compulsory production of foreign bank account records required to be maintained under the Bank Secrecy Act did not violate an individual's privilege against self-incrimination. There, the target witness in a federal tax evasion investigation moved to quash a subpoena demanding he produce records relating to his foreign financial accounts on the grounds that doing so would violate his privilege against self-incrimination. Id. at 905. The subpoena demanded records reflecting "the name in which each such account is maintained, the number or other designation of such account, the name and address of the foreign bank or other person with whom such account is maintained, the type of such account, and the maximum value of each such account." Id. This was information that the witness—and other individuals possessing foreign bank accounts—were already required to keep and maintain for government inspection under regulations implementing the Bank Secrecy Act. Id.; see 31 C.F.R. § 1010.420.
The Seventh Circuit concluded that the witness could not invoke the privilege against self-incrimination to resist the subpoena because the records sought fell under the Required Records Doctrine. In re Grand Jury Subpoena, 691 F.3d at 905 (explaining that "records required to be kept pursuant to a valid regulatory program fall outside the scope of the Fifth Amendment privilege if certain conditions are met"). Important here, the information sought in the subpoena—and required to be kept by 31 C.F.R. § 1010.420—is identical to the information that must be submitted through the FBAR. Accordingly, Plaintiff cannot resist filing an FBAR by asserting his Fifth Amendment privilege against self-incrimination.
It follows that Plaintiff has failed to state a claim upon which relief can be granted under the Fifth Amendment.
3. Ninth and Tenth Amendments
Finally, Plaintiff alleges the FBAR filing requirement violates his right to privacy under the Ninth and Tenth Amendments. Neither Amendment, however, affords him such a right. See Froehlich v. State, Dep't of Corr., 196 F.3d 800, 801 (7th Cir. 1999) ("The Ninth Amendment is a rule of interpretation rather than a source of rights . . . . Its purpose is to make clear that the enumeration of specific rights in the Bill of Rights is not intended . . . to deny the existence of unenumerated rights."); United States v. Hardy, 120 F.3d 76, 78 (7th Cir. 1997) ("The Tenth Amendment is a tautology that reinforces the fact that Congress can only act according to its enumerated powers."). Thus, Plaintiff has failed to state a claim to relief under the Ninth or Tenth Amendments.
Defendants also argue that Plaintiff has failed to show he is entitled to permanent injunctive relief. Arguments about the propriety of the remedy, however, are premature at this stage. See Bontkowski v. Smith, 305 F.3d 757, 762 (7th Cir. 2002) ("And even if the district court was right that Bontkowski is seeking relief to which he's not entitled, this would not justify dismissal of the suit. Although Rule 8(a)(3) of the civil rules requires that a complaint contain 'a demand for judgment for the relief the pleader seeks,' the demand is not itself a part of the plaintiff's claim . . . and so failure to specify relief to which the plaintiff was entitled would not warrant dismissal under Rule 12(b)(6).").
IV. Conclusion
For the foregoing reasons, Defendants' Motion to Dismiss (Filing No. 26) is GRANTED. Because amendment of the Complaint would be futile, final judgment will enter accordingly. Plaintiff's pending Motion for Declaratory Judgement (Filing No. 29) is DENIED AS MOOT. SO ORDERED this 1st day of August 2023.