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Prisoner Groups Fight Over Stimulus Payments Challenge

Posted on Sep. 9, 2020

Two groups of prisoners each want to bring class actions to challenge the denial of economic impact payments to incarcerated people.

On September 4 one group’s attempt to intervene in the other’s case was denied in Galvan v. Mnuchin.

The Galvan plaintiffs filed their suit, which includes a request to certify the case as a class action, on July 31 in Illinois. The next day, another group of prisoners filed a class action suit in California — in Scholl v. Mnuchin.

Both groups point out that the Coronavirus Aid, Relief, and Economic Security Act (P.L. 116-136) doesn’t deny the section 6428 stimulus payments to prisoners. Instead, it was an IRS FAQ issued in May that did that.

Each complaint includes three counts challenging the IRS policy under the Administrative Procedure Act and the Little Tucker Act, 28 U.S.C. section 1346. Both groups ask for declaratory and injunctive relief from the FAQ.

The government is already fielding several other challenges to the statutory and regulatory limitations on the CARES Act stimulus payments, including a challenge to the use of FAQs as final guidance.

Butting In

The Scholl plaintiffs moved to intervene in Galvan right after the complaint in that case was served. Judge Joan B. Gottschall of the U.S. District Court for the Northern District of Illinois noted that the intervention request was timely because “both cases stand at a very early stage of litigation; the substantive motions that have been filed have yet to be fully briefed; and no discovery has been taken.”

However, while the Scholl plaintiffs’ suit is nearly identical to the Galvan suit, the attempted intervention isn’t for pressing those claims but to present a request to halt the Illinois suit until the California court rules on class certification.

“Rather than identify any claim or defense they wish to advance here or interest they have in the outcome of their motion to stay, the Scholl plaintiffs ‘suggest that the information related to their request for a stay may aid the court with case management, including how this case relates with the Scholl litigation, how developments in one case might affect the other, and how one or both cases should be managed to maximize efficiency and avoid waste,’” Gottschall wrote.

Despite the Scholl plaintiffs’ apparently benevolent desire to improve judicial economy in the handling of the similar cases, that doesn’t give them standing to intervene, Gottschall found. Even if the intervenors had standing, the Galvan plaintiffs have shown they are aware of Scholl “and that they are quite capable of protecting their own interests,” she added, denying the motion to intervene.

Gottschall noted that the Galvan plaintiffs claim they need to have their case addressed before December 31 in order to get their stimulus payments. She said the plaintiffs and defendants disagree about the efficacy of claiming the payments as tax credits on 2020 tax returns filed in 2021 as an alternative to the advance payment the bulk of recipients received.

Because she hasn’t had the benefit of full arguments on that issue, Gottschall demurred but granted the Galvan plaintiffs’ motion to expedite the briefing schedule.

The plaintiffs in Galvan v. Mnuchin, No. 1:20-cv-04511 (N.D. Ill. 2020), are represented by Hagens Berman Sobol Shapiro LLP, the Notre Dame Tax Clinic, and Loevy & Loevy. The plaintiffs in Scholl v. Mnuchin, No. 4:20-cv-05309 (N.D. Cal. 2020), are represented by Lieff Cabraser Heimann & Bernstein LLP and the Equal Justice Society.

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