Schiff v. Internal Revenue Services et al

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF PUERTO RICO
PETER DAVID SCHIFF,
Plaintiff,
v.
INTERNAL REVENUE SERVICE, et al.,
Defendants.
CIVIL NO. 25-1511 (CVR)
OPINION AND ORDER
INTRODUCTION
The present case arises from the closure of Euro Pacific International Bank (“the
Bank”), owned by Plaintiff Peter David Schiff (“Plaintiff”). 	The Bank was subject to
scrutiny by the Internal Revenue Service (“IRS”) and the Puerto Rico Commissioner of
Financial Institutions (“OCIF” per its Spanish-language acronym) as part of a joint tax
enforcement investigation of the Bank conducted by the Joint Chiefs of Global Tax
Enforcement known as “J5” (the “J5 Defendants”). 1
Plaintiff’s grievance stems from his intended sale of the Bank’s stock to a company
called Qenta for $17.5 million. OCIF initially supported the sale but ultimately blocked it
on May 16, 2022. Plaintiff avers this was done at the request of the J5 Defendants. OCIF
instead approved an asset sale to Qenta for $1.25 million after the Bank entered
receivership which resulted in a considerable loss to Plaintiff. 	In June 2022, Former IRS
Chief of Criminal Investigations Jim Lee made statements during a press conference in
1 The J5 combats transnational tax crime through gathering information, sharing intelligence, conducting operations,
and building the capacity of tax crime enforcement.
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Peter David Schiff v. Internal Revenue Service, et al.
Opinion and Order
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Puerto Rico to announce the investigation into the Bank. Plaintiff avers these statements
were false, and that that IRS and the J5 Defendants leaked confidential investigation
information to the media, that then disseminated and published the allegations of tax
evasion and money laundering regarding Plaintiff and the Bank despite knowing these
claims were unsubstantiated. 	As result, Plaintiff's reputation was damaged, and he
suffered significant financial harm.
Plaintiff filed the present case against the New York Times (“NYT”) and Matthew
Goldstein, a NYT reporter (”Goldstein”); The Age, a newspaper in Melbourne, Australia,
as well as Charlotte Grieve (“Grieve”) and Nick McKenzie (“McKenzie”), journalists for
The Age (collectively, the “Media Defendants”) for allegedly colluding with the OCIF, the
IRS and the J5 Defendants and printing unsubstantiated information about Plaintiff and
the Bank in their respective publications, among other defendants. 	Plaintiff brought
claims against the Media Defendants under 42 U.S.C. § 1985(3) (“Section 1985”), tortious
interference with business relations, and defamation under Article 1536 of the Puerto
Rico Civil Code of 2020, 31 P.R. Law Ann. tit. 31, § 10801. 2
Before the Court now is the NYT and Goldstein’s (“NYT Defendants”) Motion to
Dismiss, in which they seek dismissal of all of Plaintiff’s claims against them pursuant to
Federal Rule of Civil Procedure 12(b)(6) for failure to state a claim upon which relief can
be granted. (Docket No. 165). Plaintiff opposed and the NYT Defendants replied. (Docket
2 Plaintiff also brings an independent claim under Bivens v. Six Unknown Named Agents of the Federal Bureau of
Narcotics, 403 U.S. 388 (1971) (“Bivens claim”), and a claim for violation of his due process rights and unlawful seizure
of property under the Fifth Amendment in the alternative to his Bivens claim. He alleges that this alternative claim is
brought against “All Defendants.” However, a Bivens claim cannot be brought against non-government officials. See
Hernández-Cuevas v. Taylor, 836 F.3d 116, 119, n. 1 (1st Cir. 2016) (A Bivens action is a civil action brought against
agents of the United States); Gerena v. P.R. Legal Serv. Inc., 697 F.2d 447, 449 (1st Cir.1983) (the Fifth Amendment
applies only to claims asserted against the federal government, not against private individuals, or states).
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Peter David Schiff v. Internal Revenue Service, et al.
Opinion and Order
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Nos. 177 and 225).
Before the Court also is The Age, Grieve and McKenzie’s (“The Age Defendants”)
Motion to Dismiss Plaintiff’s claims under Federal Rule of Civil Procedure 12(b)(2) for
lack of personal jurisdiction, Federal Rule of Civil Procedure 12(b)(5) for insufficiency of
service of process, and Federal Rule of Civil Procedure 12(b)(6) for failure to state a claim.
(Docket No. 167). Plaintiff opposed and The Age Defendants replied. (Docket Nos. 186
and 223).
The undersigned had previously referred this case to Magistrate Judge Marcos E.
López (“Magistrate Judge López”) for full pre-trial management, including ruling on non-
dispositive motions and issuing reports and recommendations for dispositive motions.
(Docket No. 66).
STANDARD
Federal Rule of Civil Procedure 8(a) requires plaintiffs to provide “a short and
plain statement of the claim showing that the pleader is entitled to relief.” Fed. R. Civ. P.
8(a)(2). A “short and plain” statement needs only enough detail to provide a defendant
with “ ‘fair notice of what the ... claim is and the grounds upon which it rests.’ ” Bell Atl.
Corp. v. Twombly, 550 U.S. 544, 555 (2007); see also Erickson v. Pardus, 551 U.S. 89, 93,
(2007) (“Federal Rule of Civil Procedure 8(a)(2) requires only ‘a short and plain
statement....’ Specific facts are not necessary.”). 	To show an entitlement to relief, a
complaint must contain enough factual material “to raise a right to relief above the
speculative level on the assumption that all the allegations in the complaint are true (even
if doubtful in fact).” See Twombly, 550 U.S. at 555.
When evaluating a claim in response to a motion to dismiss, the Court must “accept
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Peter David Schiff v. Internal Revenue Service, et al.
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as true all well-pleaded facts in the complaint and draw all reasonable inferences in favor
of the plaintiffs.” Gargano v. Liberty Int’l Underwriters, Inc., 572 F.3d 45, 48-49 (1st Cir.
2009). Under Twombly, 550 U.S. at 555, however, a plaintiff must “provide the grounds
of his entitlement [with] more than labels and conclusions”; see also, Ocasio-Hernández
v. Fortuño-Burset, 640 F.3d 1, 12 (1st Cir. 2011). Nor does a complaint suffice if it tenders
“naked assertion[s]” devoid of “further factual enhancement.” Ashcroft v. Iqbal, 556 U.S.
557 (2009). Thus, a plaintiff is required to present allegations that “nudge [his] claims
across the line from conceivable to plausible” to comply with the requirements of Rule
8(a). Twombly, 550 U.S. at 570.
The Court may refer dispositive motions to a Magistrate Judge for an R&R. See 28
U.S.C. § 636(b)(1)(B); Fed. R. Civ. P. 72(b). Within fourteen days of receiving a copy of
the R&R, “a party may serve and file specific written objections to the proposed findings
and recommendations.” Id.
Upon filing of a timely objection, a party is entitled to a de novo determination of
“those portions of the report or specified proposed findings or recommendations to which
specific objection is made.” Total Petroleum Puerto Rico Corp. v. Fonseca-Marrero, Civil
No. 16-2436 (PAD), 2018 WL 6131777, at *1 (D.P.R. 2018) (quotation omitted); see also
Ponsa-Rabell v. Santander Securities, LLC, Civil No. 17-2243 (CCC), 2020 WL 4219685,
at *1 (D.P.R. 2022). 	The Court, however, need not “consider frivolous, conclusive, or
general objections.” 	Local Rule 72(d); Fed.R.Civ.P. 72(b)(2); Rodríguez-González v.
Astrue, 854 F.Supp.2d 176, 178 (D.P.R. 2012). And if objections merely repeat arguments
already made to the magistrate judge, a de novo review is unwarranted, and the Court will
review those portions of the R&R for clear error. Id. The Court may “accept, reject, or
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Peter David Schiff v. Internal Revenue Service, et al.
Opinion and Order
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modify, in whole or in part, the findings or recommendations made by the magistrate
judge.” 28 U.S.C. § 636 (b)(1)(C).
ANALYSIS
A. The R&R.
Magistrate 	Judge 	López 	issued 	his 	Report 	and 	Recommendation 	(“R&R”)
recommending that all claims against the Media Defendants be dismissed. (Docket No.
247). 	As to The Age Defendants, Magistrate Judge López found the causes of action
against them should be dismissed for lack of personal jurisdiction as Plaintiff failed to
allege any facts to allow the Court to determine their contacts with Puerto Rico, or
whether The Age Defendants purposefully availed themselves of Puerto Rico’s laws. He
further concluded that Plaintiff had not met his burden under Federal Rule of Civil
Procedure 4(f) for proper service upon The Age Defendants in a foreign country under the
Hague Convention or in the alternative, that proper service was effected upon them under
the laws of Australia. Absent proper service and minimum contacts, the Court lacked
jurisdiction over The Age Defendants, and recommended dismissal of all the claims filed
against them.
As to the merits of the claims, both the NYT and The Age Defendants requested
dismissal under Rule 12(b)(6) for failure to state a claim upon which relief could be
granted, so the Magistrate Judge considered both dismissals jointly. 	Magistrate Judge
López concluded Plaintiff was unable to meet his burden as to the §1985 conspiracy cause
of action, insofar as the Amended Complaint lacked facts showing the relationship or
nature of the alleged conspiracy between the parties, including details as to how the
conspiracy originated. Additionally, he opined the Amended Complaint did not contain
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any allegations that the conspiracy was motivated by racial or other class-based animus.
As to the tortious interference cause of action, it likewise failed to mention the existence
of a contract, an indispensable element of this cause of action under Puerto Rico law, and
even assuming a contract existed, Plaintiff failed to allege any facts showing that the
Media Defendants acted intentionally to interfere with said contractual relationship or
even had knowledge that one existed. Finally, as to defamation, he noted that Plaintiff’s
Amended Complaint merely alleged that the press conference “falsely implied criminal
wrongdoing by Plaintiff” but failed to identify any false statements published by the Media
Defendants or how they acted negligently, or with actual malice, in publishing the same.
Accordingly, Magistrate Judge López recommended dismissal of all claims against the
Media Defendants.
B. Plaintiff’s Objections to the R&R.
Plaintiff timely objected to the Magistrate Judge’s R&R. (Docket No. 253). The
NYT Defendants and The Age Defendants replied to Plaintiff’s Objections. (Docket Nos.
267 and 269). The NYT Defendants also timely filed a limited Objection to the R&R as to
the Magistrate Judge’s finding that the §1985, tortious interference, and defamation
claims would not be time-barred if they survived the Federal Rule of Civil Procedure
12(b)(6) motion. (Docket No. 255).
At the outset, the Court must mention that Plaintiff’s Objections begin with a
“record-based timeline” and cites to “FOIA [Freedom of Information Act] materials the
R&R did not fully credit.” Plaintiff then goes on to discuss numerous facts and dates that
were never mentioned in the Amended Complaint and refers to 198 pages of documents
attached to the Objection to salvage his meager allegations. 	However, Plaintiff was
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Peter David Schiff v. Internal Revenue Service, et al.
Opinion and Order
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already granted two opportunities to amend his Complaint and failed to take advantage
of those opportunities. The Court reminds Plaintiff that its only obligation at this juncture
is to determine whether, accepting as true all well pleaded facts in the Amended
Complaint before the Court now, he has provided “a short and plain statement of the claim
showing that the pleader is entitled to relief” under Fed. R. Civ. P. 8(a)(2) and whether
such relief is plausible on the allegations he made. Consideration of documents outside
the pleadings is allowed in limited circumstances, which are not present here. 	See
Alternative Energy, Inc. v. St. Paul Fire and Marine Ins. Co., 267 F.3d 30, 33-34 (1st Cir.
2001) (noting that while the Court ordinarily may not consider documents beyond the
Complaint in ruling on a motion to dismiss brought under Fed.R.Civ.P. 12, there are
exceptions, including documents over which there is no dispute as to authenticity, official
public records and documents specifically referenced in the complaint.). 	Additionally,
these documents were never before the Magistrate Judge. Thus, to the extent that these
documents are being brought now in a tardy attempt to save the scant allegations Plaintiff
himself supplied in the now-twice Amended Complaint, the Court will not consider them.
Sarria Ortega v. Agosto Alicea, Civil No. 02-2038 (PG), 2005 WL 2297540, at *9 (D.P.R.
Sept. 21, 2005) (“The Court will not consider evidence or arguments not presented to the
Magistrate Judge”); Borden v. Secretary of Health & Hum. Servs., 836 F.2d 4, 6 (1st Cir.
1987).
1. 	Jurisdiction and service of process - The Age Defendants.
Plaintiff’s first objection is that the R&R erroneously found that the Court lacked
personal jurisdiction over The Age Defendants because the publication arose from a
Puerto Rico regulatory action and a Puerto Rico press event that was “deliberately staged
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and internationally coordinated.” He refers the Court to the FOIA materials to support
his argument that The Age Defendants had “repeated and direct contacts with Puerto
Rico” due to their online publication. (Docket No. 252, p. 3). But again, the Court must
look at the allegations in the Amended Complaint, not outside documents, and they show
no such thing. At the most, the non-conclusory allegations simply show newspapers in
Australia covering a news conference across the world in Puerto Rico, hardly the
minimum contacts Int’l Shoe Co. v. Washington, 326 U.S. 310, 66 S.Ct. 154 (1945) and its
progeny require. 	Simply covering a story for a publication in Australia, without more,
cannot and does not entail direct contact or purposeful availment of a given forum’s law.
If this were the law, every person who published a story on the internet for example would
be subject to personal jurisdiction in every state. And, although Plaintiff mentions that
Defendants’ actions support the “Calder effects analysis”, he fails to engage in any
discussion whatsoever of how this applies to the Magistrate Judge’s conclusions. 3
Plaintiff’s second objection is that defects in service are curable, and dismissal
is unwarranted because the record shows active service efforts. While this may be true,
Plaintiff did not dispute the Magistrate Judge’s conclusion that he has not effected proper
service upon The Age Defendants, either under the Hague Convention or under the laws
of Australia. Under Fed.R.Civ.P. 4(f), when a defendant is a foreign citizen, the manner
of service of process is exclusively governed by the Hague Service Convention. 	See
Ramírez De Arellano v. Colloides Naturels Int’l, 236 F.R.D. 83, 86 (D.P.R. 2006). In fact,
3 Plaintiff also, for the first time, requests “limited jurisdictional discovery” to ascertain facts allegedly within the
Defendants’ control. To extent this argument is made for the first time in the Objection, it is deemed waived. Bramson
v. Winn, 136 F. App’x 380, 382 (1st Cir. 2005) (“We deem this argument waived, as it was raised for the first time in
Bramson's objections to the magistrate's report and recommendation”); Maine Green Party v. Maine, Sec’y of State, 173
F.3d 1, 4 (1st Cir. 1999).
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Peter David Schiff v. Internal Revenue Service, et al.
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Plaintiff’s Opposition to The Age Defendants’ Motion to Dismiss admitted he has not
effected proper service. 4 As such, the Court lacks jurisdiction over The Age Defendants
because it is black letter law that a court’s jurisdiction over parties is acquired only by
valid service of process or their voluntary appearance. See Omni Capital Int'l v. Rudolf
Wolff & Co., 484 U.S. 97, 104 (1987)( “[S]ervice of summons is the procedure by which a
court having venue and jurisdiction of the subject matter of the suit asserts jurisdiction
over the person of the party served.”); Herndon v. Ridgway, 58 U.S. 424, 425 (1854)
(noting that proper service of process is a prerequisite for litigating in federal court, and
in its absence, a court lacks personal jurisdiction over the defendant unless the defendant
has waived service or otherwise consented to personal jurisdiction); Murphy Bros., Inc.
v. Michetti Pipe Stringing, Inc., 526 U.S. 344, 350 (1999).
Additionally, the Court finds unavailing Plaintiff’s argument that The Age
Defendants have “appeared”5 and because they are now on notice, the core purpose of
service has been fulfilled. 	Before a court may exercise personal jurisdiction over a
defendant, there must be more than “notice” to the defendant and a constitutionally
sufficient relationship between the defendant and the forum. See Omni Capital Int’l., 484
U.S. at 104. 	That “extra” notice and that relationship is lacking here.
Regarding Plaintiff’s argument that his admittedly defective service can be
cured, the Court notes that Plaintiff sued The Age Defendants via its very first complaint
filed on November 4, 2024, almost a year and a half ago, and has still not properly served
4 See Docket No. 186, p. 7. (“Plaintiff acknowledges that formal Hague service has not yet been perfected.”).
5 The filings made by The Age Defendants so far have been by special appearance and without submitting to the Court’s
jurisdiction.
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them. This lackadaisical attitude troubles the Court. 	As candidly noted by Magistrate
Judge López, Plaintiff’s lack of proper service is not a minor technical error but shows
“flagrant disregard of the requirements of the rules” and which justifies dismissal. 4A C.
Wright and A. Miller, Federal Practice & Procedure, Civ.2d § 1088.
After 	conducting 	a 	de 	novo 	review 	and 	considering 	that 	both 	personal
jurisdiction and sufficient service of process as to The Age Defendants are lacking,
dismissal of the claims against them on these grounds is proper.
2. 	Failure to state a claim - the Media Defendants
Plaintiff’s third objection is that the R&R overlooks record materials and that
deficiencies are curable as to the merits of the §1985, tortious interference and defamation
claims. But again, there are no record materials to review, and any argument using the
documents filed in support of the pleadings will not be entertained.
Plaintiff does not dispute the Magistrate Judge’s conclusion that the Amended
Complaint contains no details describing the conspiracy’s formation or the role of parties
in it; contains no class-based discriminatory allegations; does not mention an existing
contract (only “commercial harm”, which is insufficient under Puerto Rico law); contains
no facts evidencing the Media Defendants knew of this contract; or cites to the alleged
defamatory statements made by the Media Defendants. 	Instead, Plaintiff directs the
Court to look at the NYT Defendants’ filings, where the articles published by the NYT
Defendants were filed on the record. But it is Plaintiff who must prove his case and who
must allege specific facts to sustain his claims in his initial pleading. Directing the Court
now to look at another party’s filings while still not discussing what statements were false,
or how Defendants allegedly acted negligently or with actual malice does not remedy the
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Peter David Schiff v. Internal Revenue Service, et al.
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fact that the pleading is deficient. Furthermore, repeatedly asking for leave to amend the
complaint to include more specificity at this late juncture and after twice being granted
the opportunity to do is simply unavailing, after a year and a half has passed since the
filing of this case. See Aponte-Torres v. Univ. of Puerto Rico, 445 F.3d 50, 58 (1st Cir.
2006) (holding that a court “may refuse to allow plaintiffs an endless number of trips to
the well,” particularly where they have already “afforded the plaintiffs an ample
opportunity to put their best foot forward.”).
Consequently, having failed to object to the Magistrate Judge’s findings and
recommendations regarding his claims against the Media Defendants, the Court sees no
error in the R&R’s findings and hereby ADOPTS them.
In sum, upon an independent review of the record and consideration of the
analysis contained in Magistrate Judge López’ R&R and after conducting its own research
and required analysis under the applicable standard on the issues presented for the
Court’s consideration, the Court adopts in full the Magistrate Judge’s findings and legal
conclusions of the R&R that the requests to dismiss filed by the Media Defendants should
be granted and the causes of action against them dismissed.
CONCLUSION
In view of the foregoing, the R&R (Docket No. 247) is ADOPTED in full.
Accordingly, the Motions to Dismiss filed by The Media Defendants (Docket Nos. 165 and
167) are GRANTED. 	All claims against Defendants the New York Times, Matthew
Goldstein, The Age, Charlotte Grieve and Nick McKenzie are DISMISSED WITH
PREJUDICE.
Judgment shall be entered accordingly.
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Peter David Schiff v. Internal Revenue Service, et al.
Opinion and Order
Civil No. 24-1511 (CVR)
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IT IS SO ORDERED.
In San Juan, Puerto Rico, on this 12 th day of March 2026.
S/CAMILLE L. VELEZ-RIVE
CAMILLE L. VELEZ RIVE
UNITED STATES DISTRICT JUDGE
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