Frank E. Vennes, Jr. v. An Unknown Number of Unidentified Agents of the United States of America

26 F.3d 1448, 74 A.F.T.R.2d (RIA) 5144, 1994 U.S. App. LEXIS 14785, 1994 WL 261805

• Court: Court of Appeals for the Eighth Circuit
• Decided: June 16, 1994
• Docket: 93-1737
• Status: Published

Opinions

LOKEN, Circuit Judge.

After pleading guilty and nolo contendere to money laundering, firearm, and drug offenses and serving a lengthy prison sentence, Frank E. Vennes, Jr., commenced this action against unnamed federal agents seeking damages in excess of $10,000,000 under Bivens v. Six Unknown Named Agents of Fed. Bureau of Narcotics, 403 U.S. 388, 91 S.Ct. 1999, 29 L.Ed.2d 619 (1971). Vennes alleged that the agents had conspired to violate his rights under the Fourth; Fifth, Sixth, and Eighth Amendments by coercing and entrapping him into committing the charged crimes, thereby causing “an illegal indictment” to issue, and by seizing his business through an unlawful Internal Revenue Service (“IRS”) jeopardy assessment. The district court¹ dismissed Vennes’s claims against the IRS agents, concluding that his remedies under the Internal Revenue Code preclude this type of Bivens action. The court granted summary judgment in favor of the remaining defendants on the ground that Vennes “has had his day in court, and on that day entered pleas of guilty or nolo contendere to the charges arising in part from the allegedly coerced activity.” Vennes appeals. We affirm.

I.

In August 1986, IRS agents investigating suspected money laundering by certain North Dakota car dealers were told that Vennes, a Bismarck pawnshop owner, had made numerous trips to Switzerland and might have experience in transferring funds to a foreign country. An undercover agent, posing as a Chicago investor, contacted Ven-nes and asked for help in transferring cash abroad. Vennes later admitted that in the next three months he and his codefendants received $370,000 from the undercover agent and transferred it, minus their substantial commissions, to the Bahamas, the Isle of Man, and Switzerland without complying with federal currency transaction reporting laws. In the last transaction, Vennes personally delivered $100,000 to Switzerland, where his associates lost or stole it.

In May 1987, Vennes was charged in three indictments with numerous money laundering, firearm, and drug offenses. Acting on the advice of his attorney, whom he now accuses of ineffective assistance, Vennes entered into a plea agreement under which he pleaded guilty to one count of the money laundering indictment, and also pleaded nolo contendere to one count of illegally selling a firearm in violation of 18 U.S.C. § 922(b)(3) and to an information charging that he used a telephone to facilitate distribution of cocaine in violation of 21 U.S.C. § 843(b).

At the change-of-plea hearing, the district court specifically questioned Vennes and counsel about the unusual nolo contendere pleas. Defense counsel explained that Ven-nes was “prepared to defend himself on the basis of entrapment [and] outrageous government conduct” but wished to plead no contest because those defenses are “extremely difficult” to prove. The Assistant United States Attorney responded that the government had not insisted on a plea of guilty because Ven-nes “could make a fair case” that he entered into the illegal firearm and drug transactions in an attempt to recoup $100,000 for the undercover agent, whom Vennes feared was an organized crime figure. The district court accepted these pleas after confirming that they were knowing and voluntary, that Ven-nes was in fact guilty of the money laundering charge, and that he understood that his nolo pleas would be treated at sentencing as pleas of guilty.

At sentencing, Vennes’s attorney stated that the presentence report was complete, fair, and “thoroughly professional.” He further stated that he was not “in any way indicating that these government agents acted in an improper fashion,” but urged that Vennes be sentenced to only two years in prison because he became “involved in the drugs and the guns” out of fear that he and his family would suffer if he did not recoup the $100,000. After a lengthy hearing, the district court sentenced Vennes to five years in prison, three years for the money laundering offense and one consecutive year for each of the other two offenses.

Vennes did not appeal, but he later sought post-conviction relief under 28 U.S.C. § 2255. His first petition alleged ineffective assistance of counsel because his trial attorney did not seek dismissal of the indictments on the grounds of entrapment and outrageous government conduct. We denied relief, concluding:

Although Vennes now alleges that counsel was ineffective, he has failed to show any prejudice resulting from counsel’s alleged deficiencies. In particular, Vennes does not make any showing that he would have been willing to stand trial on any of the multitudinous charges on which he was indicted. We observe that his plea bargain resulted in the dismissal of many of those charges and in a sentence that is far lighter than the maximum sentence for the crimes to which he pled either guilty or no contest.

Vennes v. United States, 871 F.2d 1091 (8th Cir.1988). In a second § 2255 petition, Ven-nes claimed that the government breached his plea agreement because information he provided while cooperating with federal investigators found its way into his presen-tence report, which ultimately affected his eligibility for parole. The district court denied this § 2255 petition after an evidentiary hearing, and we affirmed. Vennes v. United States, 915 F.2d 1577 (8th Cir.1990).

Following his release from prison, Vennes commenced this Bivens action, seeking damages from unnamed² agents for entrapment, outrageous conduct, and willful violation of the tax laws. The government appeared and moved to stay discovery — a motion Vennes did not contest — and to dismiss the complaint on grounds of failure to state a claim and qualified immunity. In response, Vennes alleged that he had personally delivered $100,-000 to Switzerland for the undercover agent, where this money was lost or stolen. According to Vennes, the undercover agent then advised that he was not a Chicago investor, but a member of the Chicago underworld, and Vennes must recoup this loss or the Mafia would kill him and his family. Prompted by these threats, Vennes agreed to sell firearms illegally to undercover agents of the Bureau of Alcohol, Tobacco and Firearms, and to sell cocaine to undercover agents of the Drug Enforcement Administration. He claims that, as a result of this outrageous government conduct, he was prosecuted and imprisoned and lost his business, his reputation, and, due to a divorce, his family.

The district court granted summary judgment dismissing the claims against the criminal investigators on the ground that those claims were barred by Vennes’s pleas of guilty and nolo contendere in his criminal case. The court dismissed the claims against the IRS agents involved in the tax levy on the ground that such Bivens claims are precluded by the remedies provided in the Internal Revenue Code. We review both aspects of the district court’s decision de novo. See Concerned Citizens of Neb. v. United States Nuclear Regulatory Comm’n, 970 F.2d 421, 425 (8th Cir.1992). The government also argued to the district court, and asserts on appeal, that all defendants are entitled to qualified immunity because they did not violate “clearly established statutory or constitutional rights of which a reasonable person would have known.” Harlow v. Fitzgerald, 457 U.S. 800, 818, 102 S.Ct. 2727, 2738, 73 L.Ed.2d 396 (1982). The district court did not reach this issue, and neither do we.

II.

The unique issue raised by this appeal is whether the district court erred in granting summary judgment dismissing Vennes’s claim that the undercover agent’s alleged death threats were outrageous government conduct that violated his due process rights. Vennes clearly has no procedural due process claim. In response to the three 1987 indictments, he raised the defenses of entrapment and outrageous conduct and then bargained away those defenses, exchanging guilty and nolo contendere pleas for a relatively light sentence. He never moved to withdraw those pleas and did not appeal his conviction or sentence. His § 2255 petition alleged ineffective assistance of counsel and outrageous government conduct; the district court denied that petition on the merits, and we affirmed.

Vennes instead argues that the agent’s outrageous conduct violated his right to substantive due process, and that this claim survived his guilty plea and unsuccessful § 2255 petition. Vennes relies primarily on our decision in Gunderson v. Schlueter, 904 F.2d 407 (8th Cir.1990). In Gunderson, a resort owner acquitted of criminal charges filed a 42 U.S.C. § 1983 due process claim against a state conservation officer who allegedly contrived the criminal case. We affirmed the grant of summary judgment dismissing this claim but observed that, “we may some day be presented with a situation in which the conduct of law enforcement agents is so outrageous that due process principles [are violated].” 904 F.2d at 410, quoting United States v. Russell, 411 U.S. 423, 431-32, 93 S.Ct. 1637, 1642-43, 36 (1973).³ Vennes argues that this is the “some day” foreshadowed in Gun-derson —if he can prove that “[a]gents of the federal government threatened to kill Frank Vennes and his family if he refused to engage in criminal conduct, so he did,” he will be entitled to damages under Bivens and Gunderson. Like the district court, we disagree. There are a number of factors that persuade us that Vennes cannot establish a right to relief under Bivens.

First, it is significant that Vennes is asserting this due process claim, not in defending the criminal charges that grew out of his dealings with the undercover agents, but in a civil damage action commenced after he pleaded guilty and served a prison sentence for those crimes. A Bivens action may be brought on due process grounds. See Davis v. Passman, 442 U.S. 228, 245-48, 99 S.Ct. 2264, 2277-79, 60 L.Ed.2d 846 (1979). But courts must always determine that a new type of Bivens claim “involves no special factors counselling hesitation in the absence of affirmative action by Congress.” Bivens, 403 U.S. at 396, 91 S.Ct. at 2005. We conclude there are such special factors here. In Gunderson, we rejected the substantive due process claim in part because, “[fjinding a due process violation here would bring us too close to converting every successful entrapment defense into a section 1983 action for damages.” 904 F.2d at 411. Vennes of course proposes an even greater conversion, for he did not prove his entrapment and outrageous conduct defenses, he pleaded guilty or no contest to some of the allegedly coerced criminal offenses. Expanding Bivens in this fashion would have a chilling effect on law enforcement officers and would flood the federal courts with constitutional damage claims by the many criminal defendants who leave the criminal process convinced that they have been prosecuted and convicted unfairly.

Second, the government argues that this claim should be collaterally estopped by Ven-nes’s pleas of guilty and nolo contendere. We doubt that these pleas may be given such sweeping collateral estoppel effect. See Haring v. Prosise, 462 U.S. 306, 322 n. 11, 103 S.Ct. 2368, 2377, n. 11, 76 L.Ed.2d 595 (1983). However, they are highly relevant to the merits of this due process claim. The alleged deprivation of Vennes’s rights occurred during the criminal investigation and resulted in his being charged with multiple crimes. By pleading guilty, Vennes elected to forego the post-deprivation process best suited to determining whether the agents in fact violated his due process rights — the criminal trial. Any procedural due process claims are therefore barred. See Parratt v. Taylor, 451 U.S. 527, 101 S.Ct. 1908, 68 L.Ed.2d 420 (1981). Although Vennes claims a substantive due process violation, we have held that, when procedural due process claims under § 1983 are barred by Parratt, “claims based on the same actions but alleging denial of substantive due process should be barred as well.” Weimer v. Amen, 870 F.2d 1400, 1406 (8th Cir.1989). The same principle should apply in a Bivens action, the federal law analogous to § 1983.

Third, although we have often noted that “outrageous police conduct” may give rise to a substantive due process defense to a criminal prosecution, in no case have we found government conduct sufficiently outrageous to establish this defense.⁴ We have recognized that law enforcement officers “are required to resort to tactics which might be highly offensive in other contexts ... and agents may go a long way in concert with the individual in question without being deemed to have acted so outrageously as to violate due process.” United States v. Quinn, 543 F.2d 640, 648 (8th Cir.1976). Granted, we would not endorse the use of death threats to coerce a defendant to commit charged offenses, but we are properly skeptical of such claims and may reasonably require that the defendant prove allegations of outrageous coercive conduct in the most timely and relevant proceeding, his criminal trial.

Fourth, we find fundamental, insurmountable flaws in Vennes’s damage claims. Ven-nes seeks damages for the time he spent in prison and the indirect consequences of that imprisonment, his divorce and the failure of his business. Yet Vennes was imprisoned because he pleaded guilty or no contest to serious crimes. And three of his five years in prison were attributable to the money laundering offense that was committed before the alleged threats that form the core of his outrageous conduct claims. To the extent that the alleged outrageous government conduct was not the proximate cause of Ven-nes’s injuries, his damage claims must fail as a matter of law.

In these circumstances, we conclude that the district court properly granted summary judgment dismissing Vennes’s substantive due process claims. We do not condone undercover agents who pose as dangerous criminals and coerce others to commit crimes. But if Vennes was in fact the victim of such threats, he had many opportunities to seek redress before serving five years in prison for the resulting crimes. He could have complained to state or federal authorities about the threats; instead, he committed multiple firearm and drug offenses.⁵ He could have raised entrapment, coercion, and outrageous conduct defenses at his criminal trial; instead, he pleaded guilty or no contest to three different crimes. He raised the outrageous conduct issue in his first § 2255 petition; that petition was dismissed on the merits. Under our decisions in Gunderson and Weimer, a post-conviction Bivens damage action will not lie.

III.

There remains to be considered the district court’s dismissal of Vennes’s vague and eonclusory tax claims, summarized in his brief on appeal as follows:

The agents alleged [that Vennes owed] $250,000 in tax liability, instituted a jeopardy assessment, confiscated his business, forced a total asset sale and put him out of business when in fact he owed not a dime.

The district court dismissed these claims on the ground that a taxpayer’s remedies under the Internal Revenue Code preclude such a Bivens action. Vennes cites us to no contrary authority, and we have found none. Though the Supreme Court has not addressed this precise question, it has strongly suggested that the district court correctly applied Bivens:

When the design of a Government program suggests that Congress has provided what it considers adequate remedial mechanisms for constitutional violations that may occur in the course of its administration, we have not created additional Bivens remedies.

Schweiker v. Chilicky, 487 U.S. 412, 423, 108 S.Ct. 2460, 2468, 101 L.Ed.2d 370 (1988). See McIntosh v. Turner, 861 F.2d 524, 526 (8th Cir.1988) (“The result [of Chilicky ] is a sort of presumption against judicial recognition of direct actions for violations of the Constitution by federal officials or employees.”). Since Chilicky, at least three circuits have upheld the dismissal of Bivens actions against IRS agents for tax assessment and collection activities. See McMillen v. United States Dep’t of Treasury, 960 F.2d 187, 190-91 (1st Cir.1991); Wages v. Internal Revenue Service, 915 F.2d 1230, 1235 (9th Cir.1990), cert. denied, 498 U.S. 1096, 111 S.Ct. 986, 112 L.Ed.2d 1071 (1991); National Commodity & Barter Ass’n v. Gibbs, 886 F.2d 1240, 1248 (10th Cir.1989). See also Baddour, Inc. v. United States, 802 F.2d 801, 808 (5th Cir.1986); Cameron v. Internal Revenue Service, 773 F.2d 126, 129 (7th Cir.1985). We agree with those decisions.

Congress has provided specific and meaningful remedies for taxpayers who challenge overzealous tax assessment and collection activities. A taxpayer may challenge a jeopardy assessment both administratively and judicially, see 26 U.S.C. § 7429, and may sue the government for a tax refund, see 26 U.S.C. § 7422. Since November 10,1988, 26 U.S.C. §§ 7432 and 7433 have authorized taxpayer actions against the United States to recover limited damages resulting from specific types of misconduct by IRS employees. These carefully crafted legislative remedies confirm that, in the politically sensitive realm of taxation, Congress’s refusal to permit unrestricted damage actions by taxpayers has not been inadvertent. See Cameron, 773 F.2d at 129 (“it would make the collection of taxes chaotic if a taxpayer could bypass the remedies provided by Congress simply by bringing a damage action against [IRS] employees”). Thus, the district court correctly dismissed Vennes’s Bivens claims against IRS agents for their tax assessment and collection activities.

The judgment of the district court is affirmed.

1 . The HONORABLE PATRICK A. CONMY, United States District Judge for the District of North Dakota.

2 . Vennes failed to name or serve any agent, even though many of the undercover investigators were named in his indictments or identified elsewhere in the record of his criminal case. On appeal, the government argues that this is a sham Bivens action, a disguised claim against the United States that should be barred by sovereign immunity. Vennes's conclusory, overbroad complaint lends considerable credence to this contention. However, it was not raised in the district court, so we do not consider it on appeal.

3 . In Hampton v. United States, 425 U.S. 484, 96 S.Ct. 1646, 48 L.Ed.2d 113 (1976), a majority of the Supreme Court adhered to the outrageous-conduct due process principle articulated in Russell.

4 . See United States v. Kummer, 15 F.3d 1455, 1459-60 (8th Cir.1994); United States v. Gleason, 980 F.2d 1183, 1187 (8th Cir.1992); United States v. Huff, 959 F.2d 731, 734-35 (8th Cir.), cert. denied, — U.S. -, 113 S.Ct. 162, 121 L.Ed.2d 110 (1992); Gunderson, 904 F.2d at 410 & n. 8 (collecting cases); United States v. Johnson, 767 F.2d 1259, 1275 (8th Cir.1985); United States v. Reifsteck, 535 F.2d 1030, 1034-35 (8th Cir.1976). Compare United States v. Lard, 734 F.2d 1290, 1296-97 (8th Cir.1984) (agent’s conduct "in conceiving and contriving the crimes” "approached” the boundaries of substantive due process in a criminal prosecution).

5 . The record reveals that at one point, Vennes purchased cocaine from his own source in Florida after haggling with an undercover agent supplier about price and speed of delivery. This is not the conduct of one coerced or entrapped into crime.