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 the “J5”. 1
Plaintiff’s grievance stems from his intended sale of the Bank’s stock to a company
called Qenta for $17.5 million dollars. OCIF initially supported the sale but on May 16,
2022 blocked it, allegedly at the request of the J5 Defendants. OCIF instead approved an
asset sale to Qenta for much less, $1.25 million, after the Bank entered receivership which
resulted in a considerable loss to Plaintiff. OCIF also rejected Plaintiff’s offer to inject $7
million in capital into the Bank, and assured Plaintiff that the Bank’s capital level, though
1 The J5 combats transnational tax crime through gathering information, sharing intelligence, conducting operations,
and building the capacity of tax crime enforcement, consisting of five individual members (collectively, the “J5
Defendants.”).
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Peter David Schiff v. Internal Revenue Service, et al.
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below the statutory required minimum, was sufficient for the Bank to operate prior to the
completion of the sale to Qenta. OCIF later ordered the Bank’s liquidation. As of June 5,
2025, OCIF’s appointed Trustee had not completed the Bank’s liquidation process.
As part of the investigation, Jim Lee (“Lee”), the former IRS’ Chief of Criminal
Investigations, made statements during a press conference in Puerto Rico to announce
the investigation of the Bank and implied Plaintiff was involved in tax evasion and money
laundering. 	Plaintiff avers these statements were false and, as result of the delay in
completing the Bank’s liquidation, Plaintiff's reputation was damaged, and he has
suffered significant financial harm. Plaintiff asserts he later found out the IRS and the J5
Defendants were allegedly in a conspiracy and leaked confidential and false information
regarding the investigation to the press, which published this false information further
harming Plaintiff.
Plaintiff brought the instant case against many defendants, including the United
States of America (“United States”). 2 	He also sued Lee in his official and personal
capacity,3 as well as IRS’ employees Justin Cole (“Cole”), Matt Line (“Line”), Mike Batdorf
(“Batdorf”) and unnamed IRS employees (collectively the “Individual Defendants”) and
others. 	Plaintiff raised claims under 42 U.S.C. § 1983 (“Section 1983”), 42 U.S.C. §
1985(3) (“Section 1985”), an independent claim under Bivens v. Six Unknown Named
Agents of the Federal Bureau of Narcotics, 403 U.S. 388 (1971) (the “Bivens claim”), as
well as under the Federal Tort Claims Act (“FTCA”) for tortious interference with business
2 Although not directly sued, the United States appeared on behalf of the IRS and the Individual Defendants in their
official capacity only.
3 The claims against Lee in his personal capacity were dismissed on January 22, 2026. See Docket No. 242.
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relations and defamation under Article 1536 of the Puerto Rico Civil Code of 2020, 31 P.R.
Law Ann. tit. 31, § 10801.
Before the Court now is the United States’ “Motion to Dismiss Plaintiff’s Second
Amended Complaint” in which it moves the Court to dismiss all claims against it for lack
of subject matter jurisdiction and failure to state a claim upon which relief can be granted.
(Docket No. 188). Plaintiff opposed said motion (Docket No. 208), and the United States
replied. (Docket No. 222).
The undersigned 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).
On 	February 	6, 	2026, 	Magistrate 	Judge 	López 	issued 	a 	Report 	and
Recommendation (“R&R”) recommending that the claims against the United States be
dismissed. (Docket No. 248).
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
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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 under a Rule 12 motion, the Court must “accept 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 a report and
recommendation. See 28 U.S.C. § 636(b)(1)(B); Fed. R. Civ. P. 72(b). Within fourteen
days of receiving a copy of the report and recommendation, “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.
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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
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 specifically found in the R&R that the causes of action in
this case were made against the Individual Defendants in their official, not personal
capacity, with only the Bivens claim alleged against them in their personal capacity. 4 5 As
such, he found the United States, not the IRS or the Individual Defendants in their official
capacity, was the proper party and should be substituted, and that as sovereign, could
only be sued to the extent that it had so consented by statute. 	As there was no evidence
in Section 1983, Section 1985(3) or under Bivens that Congress intended to subject federal
agencies or the United States itself to liability, he recommended these claims be
dismissed. Regarding the defamation and tortious interference with contractual relations
claims, Magistrate Judge López found them to be barred under the FTCA, and as Plaintiff
4 Magistrate Judge López found that, although the Amended Complaint did not specify in what capacity Plaintiff was
suing the Individual Defendants, Plaintiff referred to each IRS defendants by their positions in the agency and the
factual allegations did not allude to any action taken by them that reasonably fell outside their work as IRS agents. As
noted by the Magistrate Judge, however, Plaintiff did provide fair notice of a Bivens claim, which can only be bought
against government officials in their personal capacity, but he was unable to determine whether the Complaint
sufficiently pled such a claim insofar as “no parties have made motions to dismiss the personal capacity Bivens claims
against the Individual Defendants.” Docket No. 248, p. 7. The United States appeared for the Individual Defendants in
their official capacity only, and there are no appearances on the record on their behalf in their personal capacity.
Additionally, the Individual Defendants do not appear to have been properly served in their personal capacity. See
Docket No. 144; Fed.R.Civ.P. 4(e). In fact, the United States mentions, in both its Motion to Dismiss and in its Reply
brief, that Plaintiff has “not personally served the defendants.” The record does not reflect either that Individual
Defendant Line was ever served, in official or personal capacity.
5 As previously mentioned, the personal capacity claims against Lee were dismissed. See Docket No. 242.
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Peter David Schiff v. Internal Revenue Service, et al.
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admitted he had filed no administrative claim prior to filing this lawsuit, his failure to
exhaust administrative remedies as to these two tort claims as required by the FTCA
represented an additional ground for dismissal of those claims.
B. Plaintiff’s Objections to the R&R.
Plaintiff timely filed his Objections to the R&R, on four limited grounds. (Docket
No. 254). First, he argues the R&R is overbroad as to the conclusion that the IRS is not a
proper Defendant and alleges his request for non-monetary relief against the agency is
allowed under the Administrative Procedure Act (the “APA”) and under the Larson-
Dugan doctrine. Second, he avers the R&R improperly recommended dismissal as to all
claims due to sovereign immunity because the R&R did not address the individual
capacity claims. 	Therefore, the R&R should only be read to recommend dismissal of
official capacity claims. Third, Plaintiff objects because the R&R recommends dismissal
of all claims and the Bivens claims should be dismissed solely against the official capacity
Defendants. Lastly, he argues the dismissal of the FTCA claims is improper because the
Court has not yet effected the substitution of the United States as the proper Defendant.
At the outset, the Court notes Plaintiff did not dispute the Magistrate Judge’s
findings that, with the exception of the Bivens claim, the IRS officers were sued in official,
not personal capacity, making the United States the only proper party; that sovereign
immunity attaches and thus bars the claims asserted against the United States because
there has been no waiver; that the FTCA bars the defamation and tortious interference
claims against the United States; or that Plaintiff failed to file an administrative claim.
For this reason and finding no clear error with Magistrate Judge López’ conclusions, the
Court ADOPTS the Magistrate Judge’s findings in the R&R as to these matters.
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The Court now addresses Plaintiff’s limited Objections and, after conducting a de
novo review, finds that they are insufficient to prevent dismissal.
As to the first objection, Plaintiff argues that the suit against the IRS may proceed
under the APA and the Larson-Dugan doctrine, which he fails to provide a citation for and
fails to provide any developed argument as to how these alleged exceptions apply to this
case. 	See United States v. Zannino, 895 F.2d 1, 17 (1st Cir. 1990) (finding that “issues
adverted to in a perfunctory manner, unaccompanied by some effort at developed
argumentation, are deemed waived”). 	More importantly, Plaintiff failed to oppose the
Magistrate Judge’s conclusion that a suit against the IRS and its officials is really a suit
against the United States and thus, sovereign immunity attaches.
To 	this 	effect, 	Plaintiff’s 	second 	objection 	explicitly 	accepts 	that 	sovereign
immunity applies to both the United States and the official capacity Defendants because
there is no express waiver and argues only that that the individual capacity claims should
not be dismissed. (Docket No. 254, p. 5). For this reason, this objection holds no ground.
The same reasoning applies to Plaintiff’s fourth objection, that dismissal of all
claims against Defendants of the FTCA claims is improper because the Court has not yet
effected the substitution of the United States as a proper party. As explained above,
Plaintiff failed to object to the portion in the R&R that found the United States was the
only proper party and Plaintiff’s Opposition to the United States’ Motion to Dismiss so
admits as follows: “Moreover, to the extent the IRS and its officials are named in their
official capacities the proper course is substitution of the United States as the defendant
in place of those officials.” (Docket No. 208, p. 2). Thus, this argument is also inapposite.
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The other two objections merely seek to clarify the R&R’s reach and simply ask the
Court to dismiss the official capacity claims asserted against the Individual Defendants
and leave the personal capacity claims alive. But Plaintiff failed to object to the Magistrate
Judge’s initial finding that the Individual Defendants were not being sued in their
personal capacity, except for Defendant Lee whose personal capacity claims were already
dismissed, see fn. 3 and 5. 	Thus, this argument is also a non-starter. 	In other words,
except Bivens, all claims were pled in official capacity, which the Court has found are
barred. Only the Bivens claim was pled in personal capacity, which the Court addresses
below.
The remainder of the Objection asks the Court to once again allow Plaintiff to
amend his pleadings (for a third time) to correct deficiencies and spends a great deal of
time and ink discussing documents attached to the Objection that the Court should
consider in allowing the amendments. However, at this stage considering the Court only
looks at the pleadings to determine whether a party has sufficiently alleged facts so the
case may move forward, the Court declines Plaintiff’s invitation, finding he has had ample
time to amend his allegations and failed to do so. 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.”). Moreover, to the extent
these documents were never before Magistrate Judge López, 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
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to the Magistrate Judge”); Borden v. Secretary of Health & Hum. Servs., 836 F.2d 4, 6 (1st
Cir. 1987).
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 	on 	the 	issues 	and 	objections 	presented 	for 	the 	Court’s
consideration, the Court adopts in full Magistrate Judge López’ findings and legal
conclusions that the United States’ Motion to Dismiss shall be granted and the case
dismissed.
C. The Bivens claim.
Having disposed of the claims against the United States, the Court addresses the
remaining Bivens claim against the Individual Defendants in their personal capacity. As
stated above, Magistrate Judge López found the Amended Complaint provided fair notice
of this claim but was unable to determine whether the Complaint sufficiently or properly
pled such a claim because the Individual Defendants had not appeared in their personal
capacity and no dispositive motions addressed this issue. 	The Court addresses this
matter now for judicial economy not to prolong the inevitable.
The Fourth Amendment states: “The right of the people to be secure in their
persons, houses, papers, and effects, against unreasonable searches and seizures, shall
not be violated, and no Warrants shall issue, but upon probable cause, supported by oath
or affirmation, and particularly describing the place to be searched, and persons and
things to be seized.” U.S. Const. Amend. IV. A warrant issued by an independent judicial
officer, based upon a showing of probable cause, is an essential element of a reasonable
search, and requires that the place to be searched and the items to be seized be described
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“particularly.” U.S. Const. Amend. IV. A particular description of the thing to be seized
precludes general searches and prevents the seizure of one thing under a warrant
describing another. Marron v. United States, 275 U.S. 192, 196 (1927).
The Fifth Amendment, on the other hand, states that no one shall “be deprived of
life, liberty, or property, without due process of law; nor shall private property be taken
for public use, without just compensation”. U.S. Const. Amend. IV.
The Amended Complaint only generally alleges that the Individual Defendants
conspired to close Plaintiff’s Bank in coordination with OCIF and the J5 Defendants, and
that the June 30 th press conference announced the investigation and the Bank’s closure
and falsely implied illegal activity. It further claims that the IRS leaked information to
the media about Plaintiff and the Bank, which they knew to be false, and which caused
Plaintiff great reputational harm. 	The Bivens cause of action simply alleges “unlawful
seizure of property, violating the Fourth and Fifth Amendments.” Plaintiff also brings an
“alternative claim” for “violation of civil rights - due process and Unlawful Seizure of
Property (Fifth Amendment)” alleging he was unlawfully deprived of property without
due process in violation of the Fifth Amendment and citing again to Bivens.
The Court finds that the scant allegations in the Amended Complaint are
insufficient to meet the threshold requirements of Fed.R.Civ.P. 8, insofar as they are
woefully inadequate to even meet the plausibility standard. “A court does not accept as
true allegations that while not stating ultimate legal conclusions, are nevertheless so
threadbare or speculative that they fail to cross the line between the conclusory and the
factual.” Air Sunshine, Inc. v. Carl, 663 F.3d 27, 33 (1st Cir. 2011). 	Missing from the
Amended Complaint’s threadbare and conclusory statements are any details whatsoever
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as to how Plaintiff’s property was allegedly unlawfully taken by the actions of the
Individual 	Defendants 	or 	details 	as 	to 	how 	they 	violated 	his 	Fifth 	Amendment
constitutional rights. No mention is made, for example, as to any warrantless search
undertaken under the Fourth Amendment and the factual allegations fail to state with
even a modicum of specificity how Plaintiff was allegedly deprived of his property without
due process. The Amended Complaint additionally contains no mention whatsoever as
to how Plaintiff’s civil rights were allegedly violated.
Regarding the conspiracy, Plaintiff must plead (1) a conspiracy; (2) a conspiratorial
purpose to deprive a class of persons of equal protection of the laws; (3) an overt act in
furtherance thereof and; (4) either (a) an injury to person or property, or (b) a deprivation
of a constitutionally protected right or privilege. Stand With US Ctr. for Legal Just. v.
Massachusetts Inst. of Tech., 158 F.4th 1, 24 (1st Cir. 2025).
A review of Plaintiff’s Amended Complaint shows that it only contains one of these
factors, to wit, that a conspiracy existed. 	Nonetheless, it fails to “plead in some detail,
through reference to material facts, the relationship or nature of the cooperation between
the state actors and the private individuals, including how the conspiracy was made or
‘hatched…’”. 	Torres-Rosado v. Rotger-Sabat, 204 F.Supp.2d 252, 267 (D.P.R. 2002)
(citing Slotnick v. Staviskey, 560 F.3d 31, at 33 (1st Cir. 1977)). “For conspiracy purposes,
simply alleging that defendants acted jointly and in concert and under color of law is
insufficient.” Torres-Rosado, 204 F.Supp.2d at 267 (collecting cases); see also Martínez-
Machicote 	v. 	Ramos-Rodríguez, 	553 	F.Supp.2d 	45, 	49-50 	(2007) 	(“A 	complaint
containing only conclusory, vague, or general allegations of conspiracy to deprive a person
of constitutional rights cannot withstand a motion to dismiss.”). This is exactly the type
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of conclusory and insufficient pleading that Plaintiff has made in this case.
In sum, a pleading that offers “labels and conclusions” or “a formulaic recitation of
the elements of a cause of action will not do.” Iqbal, 550 U.S., at 555; see also Zannino,
895 F.2d at 17; Nevor v. Moneypenny Holdings, LLC, 842 F.3d 113, 119 (1st Cir. 2016)
(“robes and gavels, not tea leaves or crystal balls, are the tools of a trial judge’s trade”).
The Courts finds the allegations against Individual Defendants Justin T. Cole, in his
personal capacity; Matt Line, in his personal capacity; and Mike Matdorf, in his personal
capacity, are insufficient to meet the plausibility standard. 	For this reason, they are
DISMISSED.6
CONCLUSION
In view of the foregoing, the R&R (Docket No. 248) is ADOPTED in its entirety.
Accordingly, the United States’ Motion to Dismiss (Docket No. 188) is GRANTED and all
claims filed against the United States are DISMISSED WITH PREJUDICE. 7
In addition, the Court independently finds that all the Bivens claims against the
Individual Defendants are DISMISSED WITH PREJUDICE as they are insufficient to
meet the plausibility standard.
Judgment to be entered accordingly.
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
6 Considering this conclusion, there is no need for the Court to reach the alternate reason for dismissing the claims,
namely, insufficiency of service of process.
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