Opinion
5:21-CV-479-BO
01-06-2022
ROBERT S. BALLARD, Plaintiff, v. US TREASURY DEPARTMENT, et al, Defendants.
MEMORANDUM AND RECOMMENDATION
ROBERT B. JONES, JR., UNITED STATES MAGISTRATE JUDGE
This matter is before the court for frivolity review of the complaint pursuant to 28 U.S.C. § 1915(e)(2)(B). For the reasons that follow, it is recommended that the complaint be dismissed.
I. STANDARD OF REVIEW
Pursuant to 28 U.S.C. § 1915(e)(2)(B), the court shall dismiss the complaint if it is frivolous or malicious, fails to state a claim upon which relief may be granted, or seeks money damages from a defendant immune from such recovery. 28 U.S.C. § 1915(e)(2)(B)(i-iii); see Adams v. Rice, 40 F.3d 72, 74 (4th Cir. 1994) (explaining Congress enacted predecessor statute 28 U.S.C. § 1915(d) "to prevent abuse of the judicial system by parties who bear none of the ordinary financial disincentives to filing meritless claims"). A case is frivolous if it lacks an arguable basis in either law or fact. See Neitzke v. Williams, 490 U.S. 319, 325 (1989); McLean v. United States, 566 F.3d 391, 399 (4th Cir. 2009) ("Examples of frivolous claims include those whose factual allegations are 'so nutty,' 'delusional,' or 'wholly fanciful' as to be simply 'unbelievable.'"). A claim lacks an arguable basis in law when it is "based on an indisputably meritless legal theory." Neitzke, 490 U.S. at 327. A claim lacks an arguable basis in fact when it describes "fantastic or delusional scenarios." Id. at 327-28. 1
In determining whether a complaint is frivolous, "a court is not bound, as it usually is when making a determination based solely on the pleadings, to accept without question the truth of the Plaintiff's allegations." Denton v. Hernandez, 504 U.S. 25, 32 (1992). Rather, the court may find a complaint factually frivolous "when the facts alleged rise to the level of the irrational or the wholly incredible, whether or not there are judicially noticeable facts available to contradict them." Id. "The word 'frivolous' is inherently elastic and not susceptible to categorical definition .... The term's capaciousness directs lower courts to conduct a flexible analysis, in light of the totality of the circumstances, of all factors bearing upon the frivolity of a claim." Nagy v. Fed Med Ctr. Butner, 376 F.3d 252, 256-57 (4th Cir. 2004) (some internal quotation marks omitted). In making its frivolity determination, the court may "apply common sense." Nasim v. Warden., Md House of Correction, 64 F.3d 951, 954 (4th Cir. 1995).
In order to state a claim on which relief may be granted, "a complaint must contain sufficient factual matter, accepted as true, to 'state a claim to relief that is plausible on its face.'" Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)). "Factual allegations must be enough to raise a right to relief above the speculative level . . ." Twombly, 550 U.S. at 555. While a complaint need not contain detailed factual allegations, the plaintiff must allege more than labels and conclusions. Id.
In the present case, Plaintiff is proceeding pro se, and pleadings drafted by a pro se litigant are held to a less stringent standard than those drafted by an attorney. See Haines v. Kerner, 404 U.S. 519, 520 (1972). This court is charged with liberally construing a pleading filed by a pro se litigant to allow for the development of a potentially meritorious claim. See id; Estelle v. Gamble, 429 U.S. 97, 106 (1976); Noble v. Barnett, 24 F.3d 582, 587 n.6 (4th Cir. 1994). However, the principles requiring generous construction of pro se complaints are not without limits; the district 2 courts are not required "to conjure up questions never squarely presented to them." Beaudett v. City of Hampton, 775 F.2d 1274, 1278 (4th Cir. 1985).
II. ANALYSIS
Plaintiff Robert Ballard is an inmate in the custody of the state of North Carolina at Central Prison Hospital in Raleigh, North Carolina. [DE-3-1]. Ballard initiated this case against the Department of Treasury and the Internal Revenue Service because he did not receive stimulus checks in the amount of $1,200 and $600, to which he believes he is entitled based on his filing of tax returns in October 2020. Id. at 4-7.
Plaintiff checked the box on the complaint form indicating the legal basis for his claim is 42 U.S.C. § 1983. Id. at 2. However, § 1983 provides a cause of action for alleged violations of the Constitution and laws of the United States committed by a person "acting under the color of state law." See West v. Atkins, 487 U.S. 42, 48 (1988). Defendants here, the Department of Treasury and the IRS, are federal not state actors. Thus, Ballard has failed to state a claim under § 1983. Nevertheless, as explained above, the court must construe the complaint liberally to allow for the development of a potentially meritorious claim. Having done so, the court finds that Ballard's complaint fails to state a claim for which relief can be granted and should be dismissed.
The stimulus checks, otherwise known as Economic Impact Payments ("EIP"), to which Ballard refers were established by a provision of the Coronavirus Aid, Relief, and Economic Security Act (the "CARES Act"), which was signed into law on March 27, 2020, and the Consolidated Appropriations Act of 2021 (the "CAA") that was signed into law on December 27, 2020. The CARES Act provided, in relevant part, for a tax credit in the amount of $1,200 to eligible individuals. 26 U.S.C. § 6428(a). An "eligible individual" is defined broadly to include "any individual other than - (1) any nonresident alien individual, (2) any individual with respect 3 to whom a deduction under section 151 is allowable to another taxpayer for a taxable year beginning in the calendar year in which the individual's taxable year begins, and (3) an estate or trust." Id. § 6428(d) (emphasis added). The statue provided for payment in the form of an "advance refund" to be disbursed "as rapidly as possible," but it expressly prohibited any refund or credit after December 31, 2020. Id. § 6428(f)(2), (3). The CAA authorized a $600 payment under a scheme similar to the one established by the CARES Act. 26 U.S.C. § 6428A(a)-(f). Under the CAA, no refund or credit was to be made or allowed after January 15, 2021, except in situations that are not applicable here. Id. § 6428A(f)(A)(ii). On May 6, 2020, the IRS published responses to "Frequently Asked Questions" ("FAQ") on the IRS.gov website indicating that incarcerated persons do not qualify for an EIP. See Scholl v. Mnuchin, 489 F.Supp. 3d 1008, 1022 (N.D. Cal. Sept. 24, 2020) ("Scholl I”), appeal dismissed, No. 20-16915, 2020 WL 9073361 (9th Cir. Nov. 20, 2020). The IRS, on June 18, 2020, updated its internal procedures manual to reflect the policy of excluding incarcerated persons from EIP eligibility. Id.
Ballard contends that he was eligible for the $1,200 and $600 EIPs and requested them from the IRS but never received either payment. In support of his claim, Ballard cites Scholl I, which he claims established a "class action that all prisoners were entitled to receive the $1200 stimulus check if a tax return was filed by Oct. 2020." [DE-3-1 ] at 4. In Scholl I, plaintiffs brought claims for violation of the Administrative Procedure Act ("APA"), 5 U.S.C. § 706(1); violation of the APA, 5 U.S.C. §§ 702, 706(2); and violation of the CARES Act, 26 U.S.C. § 6428, and the Little Tucker Act, 28 U.S.C. § 1346(a)(2). 489 F.Supp.3d at 1020. They sought to certify a class of all individuals who were incarcerated across the United States since March 27, 2020 and met the eligibility requirements described in the CARES Act and to obtain a preliminary injunction to enjoin officials from the Department of Treasury and the IRS from enforcing their policy of 4 excluding both plaintiffs and proposed class members from receiving EIPs based on their incarcerated status alone. Id. at 1023. The court granted the plaintiffs' motion for preliminary injunction and for class certification and provisionally certified a class of:
All United States citizens and legal permanent residents who:
(a) are or were incarcerated (i.e., confined in a jail, prison, or other penal institution or correctional facility pursuant to their conviction of a criminal offense) in the United States, or have been held to have violated a condition of parole or probation imposed under federal or state law, at any time from March 27, 2020 to the present;
(b) filed a tax return in 2018 or 2019, or were exempt from a filing obligation because they earned an income below $12,000 (or $24,400 if filing jointly) in the respective tax year;
(c) were not claimed as a dependent on another person's tax return; and
(d) filed their taxes with a valid Social Security Number, and, if they claimed qualifying children or filed jointly with another person, those individuals also held a valid Social Security Number,
Excluded from the class are estates and trusts; defendants; the officers, directors, or employees of any defendant agency; and, any judicial officer presiding over this action and his/her immediate family and judicial staff.Id. at 1047. The court also enjoined the defendants from:
withholding benefits pursuant to 26 U.S.C. § 6428 from plaintiffs or any class member on the sole basis of their incarcerated status. Within 30 days, defendants shall reconsider advance refund payments to those who are entitled to such payment based on information available in the IRS's records (i.e., 2018 or 2019 tax returns), but from whom benefits have thus far been withheld, intercepted, or returned on the sole basis of their incarcerated status. Within 30 days, defendants shall reconsider any claim filed through the "non-filer" online portal or otherwise that was previously denied solely on the basis of the claimant's incarcerated status. Defendants shall take all necessary steps to effectuate these reconsiderations, including updates to the IRS website and communicating to federal and state correctional facilities. Within 45 days, defendants shall file a declaration confirming these steps have been implemented, including data regarding the number and amount of benefits that have been disbursed.Id. 5
The Scholl defendants subsequently moved for a stay of the preliminary injunction pending appeal and the plaintiffs moved for summary judgment. Scholl v. Mnuchin, 494 F.Supp.3d 661, 669 (N.D. Cal. 2020) ("Scholl II”), appeal dismissed (Dec. 11, 2020). In Scholl II, the court concluded that defendants' policy withholding EIPs from individuals based solely on their incarcerated status violated the APA and vacated the policy. Id. at 692. The court granted final certification of the class and issued a permanent injunction "from withholding benefits pursuant to 26 U.S.C. § 6428 from plaintiffs or any class member on the sole basis of their incarcerated status." Id. at 693. However, the court emphasized that "[a]t its core, this is not a tax refund action; rather, plaintiffs' claims are grounded in the APA and challenge the IRS's interpretation of the CARES Act and the procedures by which the IRS arrived at its interpretation." Id. at 691. The court took "no position on whether plaintiffs or class members are in fact owed advance refund payments or the amount of those payments," and concluded that "[i]t is incumbent on the IRS, as the agency charged by Congress, to make individual determinations whether an individual is an 'eligible individual' and meets the various criteria delineated in the Act." Id.
The Scholl case did not, as Ballard contends, rule that all prisoners were entitled to receive an EIP if a tax return was filed by October 2020; rather, the Scholl court found that the defendants' policy of categorically withholding EIPs from individuals solely on the basis of their incarcerated status violated the APA, enjoined defendants from enforcing the policy, and required defendants to reconsider EIPs to eligible incarcerated individuals based on information available to the IRS. Id. Accordingly, while Ballard may be a member of the class certified in Scholl II, it provides no basis for this court to find that Ballard has a claim for payment against the Department of Treasury or the IRS. 6
The court also finds no provision for a private right of action under the CARES Act or the CAA, and both by their express terms prohibit the distribution of funds after December 31, 2020 and January 15, 2021, respectively, 26 U.S.C. §§ 6428(f)(3), 6428A(f)(A)(ii), which was well before Ballard filed this action on November 17, 2021. See Phelps v. Mnuchin, No. 3:21 -CV-327-JD-MGG, 2021 WL 2138506, at *4 (N.D. Ind. May 26, 2021) (dismissing on frivolity review an action by an incarcerated person seeking to compel EIPs because "there is no suggestion there is a private cause of action under the CARES Act for receipt of specific non-disbursed funds, and '[i]t is not this Court's function to raise up a cause of action where a statute has not created one."'). Additionally, the judge who presided over the Scholl case has subsequently dismissed on frivolity review cases such as this one seeking to compel the IRS to issue EIPs, explaining that the Scholl court "took no position on whether individual incarcerated plaintiffs were owed the EIP .... That responsibility fell to the IRS to make an individual determination. More importantly, funds cannot now be distributed pursuant to the CARES Act." Martinez v. Internal Revenue Serv., No. 21-CV-08886-PJH, 2021 WL 5823525, at *3 (N.D. Cal. Dec. 8, 2021) (Hamilton, J.) (dismissing with prejudice for failure to state a claim a case seeking court intervention to obtain an EIP under the CARES Act); see also Breton v. Mnuchin of IRS, No. 3:21-CV-718 (SRU), 2021 WL 5086400, at *3 (D. Conn. Nov. 2, 2021) ("There is no indication that the CARES Act provides a private cause of action for individuals seeking payment. Even if it did however, the issue whether Breton is owed payments is moot. EIPs are no longer available because the CARES Act imposed a deadline of December 31, 2020 for payments to be made or allowed. That deadline is now passed, and no more funds may be issued.") (citing 26 U.S.C. § 6428(f)(3); Puckett v. U.S. Dep't of Treasury Internal Revenue Serv., 2021 WL 2550995, at *3 (N.D. Ohio June 22, 2021)). 7 Accordingly, because Ballard has failed to state a claim for relief, it is recommended that his complaint be dismissed.
III. CONCLUSION
For the reasons stated herein, it is recommended that the complaint be dismissed.
IT IS DIRECTED that a copy of this Memorandum and Recommendation be served on Plaintiff. You shall have until January 20, 2022, to file written objections to the Memorandum and Recommendation. The presiding district judge must conduct his or her own review (that is, make a de novo determination) of those portions of the Memorandum and Recommendation to which objection is properly made and may accept, reject, or modify the determinations in the Memorandum and Recommendation; receive further evidence; or return the matter to the magistrate judge with instructions. See, e.g., 28 U.S.C. § 636(b)(1); Fed.R.Civ.P. 72(b)(3); Local Civ. R. 1.1 (permitting modification of deadlines specified in local rules), 72.4(b), E.D. N.C.
If you do not file written objections to the Memorandum and Recommendation by the foregoing deadline, you will be giving up the right to review of the Memorandum and Recommendation by the presiding district judge as described above, and the presiding district judge may enter an order or judgment based on the Memorandum and Recommendation without such review. In addition, your failure to file written objections by the foregoing deadline will bar you from appealing to the Court of Appeals from an order or judgment of the presiding district judge based on the Memorandum and Recommendation. See Wright v. Collins, 766 F.2d 841, 846-47 (4th Cir. 1985). 8