Lois Lerner Out From Under Freedom Path Lawsuit For Now

This post was originally published on Forbes Mar 2, 2015

Lois Lerner might have had a bit of a breathing spell for a couple of days before the announcements about more e-mails being found.  It was so short that it has largely been missed, but since I am playing catch-up I noticed it.  Lerner's brief reprieve was the work of Judge Sidney Fitzwater, a Reagan appointee, of the District Court for the Northern District of Texas.  Judge Fitzwater's decision in Freedom Path Inc v Lois Lerner et al at least gets Lois Lerner out from under one lawsuit. Freedom Path was suing Lois Lerner, unnamed officials of the IRS, the IRS and the United States.  The suit was about targeting FP due to its conservative views as it was applying for exempt status, illegally releasing information about FP and the general use of a "facts and circumstances" test in the IRS evaluation of political activities. Freedom Path complained in its lawsuit about the slow pace of its application and additional intrusive questions.  Also a copy of its application (Form 1024) was released to ProPublica.  On the application FP had indicated that it would not be engaging in political activity.  ProPublica released a story Controversial Dark Money Group Among Five That Told IRS They Would Stay Out of Politics, Then Didn't that mentioned Freedom Path as one of the five. In April 2013 Freedom Path was asked for further information, which it was hesitant to release because of the disclosure to ProPublica.  The IRS then offered FP the opportunity to enter into a new expedited process, but that did not work for them.

Under this process, Freedom Path could obtain approval of its pending application if it made certain representations regarding the organization's past, current, and future spending on political activities. Freedom Path alleges that it declined to participate in this optional expedited process because it viewed the required representations as unconstitutionally broad and as an IRS attempt to force Freedom Path to relinquish some of its First Amendment rights.

Lois Lerner Not A Texan The reason that Lois Lerner was dismissed from the suit is one that her supporters, if there are any, might not find very satisfying.  Her detractors, who are legion, will probably find it infuriating.  She was dismissed, because she does not have enough connection with Texas which is where the suit was brought (although in a federal court).

Freedom Path maintains that it has made a prima facie showing of in personam jurisdiction based on Lerner's contacts with the state of Texas in connection with the IRS's unconstitutional scheme to target conservative organizations like Freedom Path. Alternatively, Freedom Path requests leave to conduct limited jurisdictional discovery to demonstrate Lerner's contacts with the state of Texas.

In Freedom Path's complaint, its only allegations related to the court's power to exercise personal jurisdiction over Lerner are that she oversaw the IRS's Office of Exempt Organizations, whose Examinations unit was headquartered in Dallas, Compl. ¶ 13, and that she sent an email to the Director of the Examinations unit, located in Dallas, regarding an audit of an organization not involved in the present case, Compl. Ex. 10 at 4; P. Resp. 3–4. These allegations are insufficient to make a prima facie showing of either specific jurisdiction or generalin personam jurisdiction over Lerner. Freedom Path has certainly failed to make a prima facie showing of general jurisdiction, that is, that her affiliations with the state of Texas are so continuous and systematic as to render her essentially at home in Texas. And it has also failed to make a prima facie showing of specific jurisdiction. Freedom Path does not allege that Lerner took any actions in Texas that are relevant to its complaint or that she directed any actions at Texas. In fact, Freedom Path does not even allege that Lerner had any personal involvement with its application for tax-exempt status or was even aware of the application.

Other Counts Dismissed Without Prejudice Because the IRS has not taken final action on Freedom Path's application, its other claims about use of the facts and circumstances test and view point based targeting were also dismissed, although Freedom Path is allowed to refile.

In count IV, Freedom Path challenges as unconstitutional the IRS's use of certain policies and procedures to target conservative organizations for heightened review of applications for tax-exempt status. Although the IRS's adherence to these policies and procedures may ultimately culminate in a final decision regarding Freedom Path's tax-exempt status, the use of these policies and procedures neither marks the consummation of the IRS's decisionmaking process nor determines Freedom Path's rights or obligations or precipitates legal consequences. Therefore, the policies and procedures that Freedom Path challenges in count IV do not constitute final agency actions, as § 704 requires to state a claim for relief under the APA. Because Freedom Path's claims in count IV arise under the APA's general provisions and do not challenge final agency action, the court concludes that count IV does not state a claim on which relief can be granted, and it grants the federal defendants' motion to dismiss count IV under Rule 12(b)(6).

Death By Delay? According to this Politico story  Freedom Path is one of the organizations whose exempt determination is still waiting for word from the IRS on its exempt status.

Nearly two years after the IRS was exposed for improperly sidetracking requests for tax exemptions from tea party groups, POLITICO has learned that at least a half-dozen conservative applicants are still waiting for an answer.

It is likely the lawsuit that is continuing to hang it up. Whether Freedom Path was a dark money group or not to begin with remains undetermined, but apparently the group has gone entirely dark except for the lawsuit.

Without an answer, Freedom Path, currently suing the IRS, stopped operating in late spring of 2012 out of concern that it would be denied tax-exempt status and forced to pay back taxes. It also feared donor information could be revealed to the IRS. Freedom Path exists mostly in name now. It doesn’t even have a website. It’s “six-figures” in debt for legal bills suing the IRS. “We’ve had to reduce all of our expenses, and really we’re in a position now where we’re just struggling with legal bills,” Bensing said. “We’re closer to bankruptcy than to solvency.”

Who is financing the litigation is an interesting question, which this tax blogger will probably not be able to figure out.