Scholl v. Mnuchin

Background

The plaintiffs brought a class action asserting three claims under the Administrative Procedure Act and the Little Tucker Act. The plaintiffs and class members are incarcerated or formerly incarcerated individuals who would otherwise be eligible for economic impact payments under the Coronavirus Aid, Relief, and Economic Security Act. The payments are advance refunds of a tax credit that taxpayers could otherwise claim on their 2020 tax returns.

The court had previously certified a class and issued a preliminary injunction. That injunction barred the defendants—Steven Mnuchin, Charles Rettig, the U.S. Department of the Treasury, the U.S. Internal Revenue Service, and the United States—from withholding payments from the plaintiffs or class members solely because of their incarcerated status. It also required reconsideration of certain denied payments and claims submitted through the online tool for people who did not file a tax return.

The present order addressed the plaintiffs’ request for notice to class members about the impending deadline to file claims and a request to correct the class definition. It also addressed motions to expedite briefing on the plaintiffs’ summary-judgment motion and the defendants’ emergency motion to stay the preliminary injunction pending appeal.

Notice to Class Members

The plaintiffs argued that public statements by the Internal Revenue Service had led some incarcerated people to believe they were ineligible for payments and to refrain from submitting claims through the online tool. They proposed notice to incarcerated class members and sought an extension of the October 15, 2020 deadline. The defendants argued that the proposed notice method and deadline extension were not authorized by the class-action notice rule, and proposed using existing communications with correctional facilities and the Internal Revenue Service website.

The court held that notice was appropriate under Federal Rule of Civil Procedure 23(d), which allows a court to order procedural measures to protect class members and fairly conduct a class action. Applying the framework from a Supreme Court decision concerning class notice, the court found that the defendants were best positioned to perform the necessary tasks because they had existing communication procedures with correctional facilities, information concerning incarcerated individuals, and control of the Internal Revenue Service website. The court also found that the defendants were best positioned to bear the costs because electronic communication through existing systems would reduce the expense.

The court therefore GRANTED plaintiffs’ motion for notice and ordered the defendants to complete the necessary tasks and pay the costs of preparing and issuing the notice. The court stated that the notice plan should address whether electronic notice could include the plaintiffs’ proposed legal notice, the Internal Revenue Service’s letter to eligible non-filers, and a Form 1040; whether there were other ways to distribute Form 1040 forms; whether the agency had current or last-known addresses for formerly incarcerated class members; and whether the notice language needed technical changes.

Deadline Extension

The court concluded that extending the October 15 deadline would be substantive relief, rather than a procedural notice measure authorized by Rule 23. The plaintiffs raised the All Writs Act as a possible source of authority for an extension for the first time in their reply brief, which deprived the defendants of an opportunity to respond. Because the request was not properly before the court and the parties indicated that an agreement might be possible, the court declined to issue the requested substantive relief.

Instead, the court ORDERED the parties to meet and confer about extending the deadline for non-filers to submit a simplified return, either online or by mail. The plaintiffs could file a later motion for appropriate relief after that discussion and after the parties submitted a joint or separate plan.

Correction to Class Definition

The court agreed that the class-certification order had misstated the income threshold for people exempt from filing a tax return. The order had used $12,000; the court changed it to $12,200, or $24,400 for joint filers. The court GRANTED plaintiffs’ motion with respect to amending the class definition.

The modified definition covered United States citizens and legal permanent residents who met the order’s stated requirements, including qualifying incarceration or certain parole or probation violations between March 27, 2020 and the present; filing a 2018 or 2019 tax return or being exempt from filing because of income below the specified threshold; not being claimed as a dependent; and filing taxes with a valid Social Security Number, with additional Social Security Number requirements for qualifying children or joint filers. The definition excluded judicial officers presiding over the action, their immediate families, and judicial staff.

Motions to Shorten Time and Briefing Schedule

The court GRANTED plaintiffs’ motion to shorten time concerning their summary-judgment motion and GRANTED the parties’ stipulation to shorten time concerning the defendants’ motion to stay the preliminary injunction. The court found expedited briefing appropriate because the motions substantially overlapped.

The defendants’ opposition to summary judgment and the plaintiffs’ opposition to the motion to stay were due October 7, 2020. The plaintiffs’ reply supporting summary judgment and the defendants’ reply supporting the motion to stay were due October 9, 2020. The court stated that it would decide those matters on the written submissions.

Disposition

The court granted the plaintiffs’ motion for notice to class members and to correct the class definition; ordered the parties to meet and confer and file a proposed notice plan or plans; granted the plaintiffs’ motion to shorten time; and granted the parties’ stipulation to shorten time. This order did not decide the underlying claims or extend the October 15 deadline.