Phillip Fry, Susan Fry v. Olin Melaragno, David W. Otto, Mark Barnes, Mark Pendery

Phillip and Susan Fry brought this action against various officials of the Internal Revenue Service (IRS), a Special Assistant United States Attorney and other persons who were not federal officials, alleging violations of constitutional rights. Three IRS attorneys and one IRS revenue agent now appeal from the district court’s denial of their claim of qualified immunity. We reverse and remand with instructions to dismiss the complaint against these defendants insofar as it seeks to impose damage liability.

I

Phillip Fry is a tax accountant and an author. He has written several publications discussing methods of minimizing one’s tax liabilities, has appeared on television and radio programs, has testified against the current gift and estate tax structure in congressional hearings and has marketed a variety of tax shelters. In 1986, Fry was charged in a seventeen-count indictment with conspiracy to defraud the government and other tax-related offenses based on selling illegal tax shelters. Fry pled guilty to one count of conspiracy and received a five-year sentence, which the Sixth Circuit affirmed. See United States v. Fry, 831 F.2d 664 (6th Cir.1987).

While Fry was in jail, the…