The opinion of the court was delivered by: Richard Mills, District Judge:
This scenario could be entitled "The Fox Guarding the Hen
House," and is the corollary to a unique case which we decided
a few months ago.
This case and its companion involve the disclosure of tax
return information by an Internal Revenue Service (IRS)
official to an Illinois Department of Revenue (IDR) official.
The taxpayer whose return was the subject of the disclosure
was at that time a high ranking official in the IDR who was
discharged because of his failure to file a return and pay his
This matter is before the Court on Defendants' motions for
At all relevant times, Ira Loeb was the District Director
for the Springfield District of the IRS. As district director,
he was the federal official primarily responsible for the
administration of the federal tax laws in this district.
Plaintiff, Thomas Smith, was employed by the IDR and acted as
the liaison official for the federal-state exchange program
(program). The program facilitates the exchange of
confidential tax information between the IRS and the IDR. As
the liaison official, Smith was the contact point between the
IRS and the IDR. J. Thomas Johnson was Director of the
Illinois Department of Revenue and Kevin Houlihan was an
Executive Deputy Director. William Smith was the Deputy
Director of Audit and Collections, and Richard Dunn was
Inspector in Charge of the Investigation Division.
In mid-October of 1984, information regarding Thomas Smith's
tax delinquencies was brought to the attention of Mr. Loeb.
Subsequently, Mr. Loeb received a memorandum from Eugene
Winston, Chief of the Collection Division for the district,
dated October 29, 1984. This memorandum stated that Mr. Smith
had not filed a federal tax return for the years 1982 and 1983
and that he had outstanding tax liabilities for the years 1980
and 1981. Upon receiving this information, Mr. Loeb determined
that it indicated a potential state tax violation by Mr. Smith
and that this delinquency reflected poorly on Mr. Smith's
ability to carry out his liaison responsibilities. Mr. Loeb
decided that the IRS should request that Mr. Smith be relieved
of his position as the liaison official.
To accomplish his goal, Mr. Loeb determined that the
director of the Illinois Department of Revenue should be
contacted directly. Mr. Loeb initiated this direct contact
because the official who he would normally have contacted
regarding the disclosure of confidential tax information was
Mr. Smith, the very individual whose tax information was
involved! Cognizant of the strict disclosure laws, Mr. Loeb
consulted IRS counsel for an opinion regarding the propriety
of disclosing the information. It was determined by counsel
that the disclosure could be made lawfully under the Internal
Revenue Code. 26 U.S.C. § 6103(d). Counsel further advised Mr.
Loeb on the implications of disclosure in
light of Rueckert v. Gore, 587 F. Supp. 1238 (N.D.Ill. 1984),
aff'd, 775 F.2d 208 (7th Cir. 1985), which involved disclosures
of federal tax return information to the Illinois Department of
Revenue. After receiving clearance from counsel, Mr. Loeb
personally provided Mr. Johnson, the Director of the IDR, with
the Winston memorandum and requested that Mr. Smith be relieved
of his liaison responsibilities.
Mr. Loeb discovered that he had made a mistake in disclosing
this information when this Court — in a prior opinion in a
related case, Smith v. United States, 703 F. Supp. 1344
(C.D.Ill. 1989) — granted summary judgment in favor of Mr.
Smith. Following disclosure of the Winston memorandum, the IDR
conducted an investigation into Mr. Smith's tax filings. This
investigation included requesting further information from the
Shortly before noon on December 7, 1984, Mr. Smith was
advised by William Smith (no relation) that he would be
required to attend a 1:00 p.m. meeting concerning his
discharge from the IDR. Mr. Smith was further advised that he
should have an attorney present. Present at this meeting were
William Cline and William Smith representing the IDR and Mr.
Smith represented by his counsel. Taking the affidavits
submitted by William Cline and Plaintiff together, it is
undisputed that a meeting was held by representatives of the
Illinois Department of Revenue and Mr. Smith and his attorney.
At this meeting, the approved charges were read (and given) to
Mr. Smith and he was asked to respond to them. Mr. Smith,
represented by counsel, responded that his attorney advised
him not to file the returns because of his pending divorce
action. Mr. Smith was then suspended from the IDR pending
discharge for failure to properly file his tax returns.
Mr. Smith appealed his discharge to the Illinois Civil
Service Commission. The Commission reversed the IDR's decision
to terminate Mr. Smith and imposed a 120 day suspension. The
Commission believed that a suspension was more appropriate
based upon past Commission precedent, the circuit court's
ruling in a similar case, and the IDR's action with respect to
another employee who also had failed to properly file tax
returns. The Commission's decision was subsequently affirmed
by the Illinois Appellate Court. See Department of Revenue v.
Smith, 150 Ill. App.3d 1039, 103 Ill.Dec. 832, 501 N.E.2d 1370
(4th Dist. 1986).
Following the Commission's decision, Mr. Smith was returned
to the payroll of the IDR; however, he was not permitted to
return to work and was placed on leave. In April of 1986 when
Mr. Smith came up for reappointment pursuant to the Illinois
Personnel Code, he was not reappointed and was discharged from
his position with the IDR. See Ill.Rev.Stat. ch. 127, ¶
Mr. Smith subsequently brought suit against the United
States for the unauthorized disclosure of the tax return
information. As previously mentioned, Mr. Smith was granted
summary judgment concerning liability and this Court presently
has pending the damages issue. In the instant case, Mr. Smith
has brought suit in a ten count complaint against Ira Loeb and
officials of the IDR. Mr. Smith requests $6 million for his
troubles and believes that each of these individuals should
II — Summary Judgment Standard
Under Fed.R.Civ.P. 56(c), summary judgment should be entered
"if the pleadings, depositions, answers to interrogatories,
and admissions on file, together with the affidavits, if any,
show that there is no genuine issue as to any material fact
and that the moving party is entitled to a judgment as a
matter of law." Unquestionably, in determining whether a
genuine issue of material fact exists, the evidence is to be
taken in the light most favorable to the non-moving party.
Adickes v. S.H. Kress & Co., 398 U.S. 144, 158-59, 90 S.Ct.
1598, 1609, 26 L.Ed.2d 142 (1970). Nevertheless, the rule is
also well established that the mere existence of some factual
dispute will not frustrate an otherwise proper summary
judgment. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247,
106 S.Ct. 2505, 2509, 91 L.Ed.2d 202 (1986). Thus, the
question for the judge [is] not whether there is literally no
evidence, but whether there is any upon which a jury could
properly proceed to find a verdict for the party producing it
upon whom the onus of proof is imposed." Id. at 251, 106 S.Ct.
at 2511 (quoting Improvement Co. v. Munson, 14 Wall. 442, 448,
20 L.Ed. 867 (1872)); see also Celotex Corp. v. Catrett,
477 U.S. 317, 322, 106 S.Ct. 2548, 2552, 91 L.Ed.2d 265 (1986).
Applying this standard, the Court now turns to the case at bar.
Counts I-IV of Plaintiff's second amended complaint allege
pendent state law claims. Counts I-II were initially brought
against Ira Loeb individually. Counts III-IV have been brought
against Ira Loeb, as well as J. Thomas Johnson, Kevin
Houlihan, William Smith, and Richard Dunn (state defendants).
Pursuant to the Federal Torts Claims Act, the ...