Summary
substituting the United States as the defendant in a claim brought against IRS employees
Summary of this case from Ray v. LowderOpinion
CIV F 00-6486 OWW LJO
January 9, 2001
MEMORANDUM OPINION AND ORDER RE: DEFENDANT'S MOTION TO DISMISS PLAINTIFF'S COMPLAINT I. INTRODUCTION
Pursuant to Federal Rules of Civil Procedure 12(b)(1) and 12(b) (6), Defendant, UNITED STATES OF AMERICA, moves to dismiss Plaintiff, RAYMOND E. BILGER's complaint. Plaintiff is proceeding pro se. See Doc. 1. Oral argument was held January 8, 2001.
On September 14, 2000, Plaintiff filed this action with the United States District Court, Eastern District of California. See Doc. 1. Plaintiff first amended his complaint on October 2, 2000. See Doc. 5. On November 22, 2000, Plaintiff filed a second-amended complaint. See Doc. 24. Jurisdiction is invoked under Title 26, United States Code sections 7432 and 7433. On November 29, 2000, Defendant filed their motion to dismiss Plaintiff's complaint under Federal Rules of Civil Procedure 12 (b)(1) and 12(b)(6), for lack of subject matter jurisdiction and for failure to state a claim. See Doc. 30.
II. BACKGROUND
In his second amended complaint, Plaintiff names as defendants: the United States of America; Charles O. Rossotti, Commissioner of the Internal Revenue; Richard R. Orosco, District Director; the Internal Revenue Service; the Chief Special Procedures Function; D.J. Cousin, Revenue Officer and Does 1-100. See Doc. 24.
Plaintiff asserts that on February 14, 1992; March 29, 1993; November 9, 1993; and March 19, 1997; Defendants erroneously filed a federal tax lien against him with the Los Angeles County Recorders Office. See Id. at 7:2-25. Defendants' acts were purportedly under Title 26, United States Code section 6321. See Id. at 3:20-24. Plaintiff asserts that Title 26, United States Code section 6321, may only be applied to businesses dealing in alcohol, tobacco products or firearms. See Id. at 3:25-27, 4:1-4. Plaintiff asserts that he has never been in such a business. See Id. at 4:20-26. Plaintiff also asserts that Title 26 is not positive law, and therefore does not have the effect of law. See Doc. 33, 6:21, 7:1-6. In the alternative, Plaintiff asserts that the Code of Federal Regulations determines the extent to which Section 6321 may be interpreted and to whom it may be applied. See Doc. 24, 3:25-27, 4:1-4.
In April 1994, Plaintiff sought to have two of his federal tax liens released at an Internal Revenue Service Summons Hearing. See Doc. 24, 5:3-6. The Internal Revenue Service has not responded to Plaintiff's request. See Id. at 5:8-9. Plaintiff claims he has constructively exhausted his administrative remedies by such proceedings. See Id. at 9-12. On May 20, 2000, Plaintiff again requested a certificate for a release of lien, pursuant to Title 26, Code of Federal Regulations section 401.6325-1(f). See Id. at 5:25-27. As of November 7, 2000, Plaintiff has not received a response to his request. See Id. at 6:2-3.
Plaintiff contends Defendants' acts are fraudulent and unjustly penalize Plaintiff. See Id. at 6: 9-22. Plaintiff asserts Defendant's acts were reckless, and done with intentional disregard of existing tax laws and regulations. See Id. at 7:2-25. Plaintiff asks for twenty-million dollars ($20,000,000.00) to compensate for his alleged years of suffering and mental anguish. See Id. at 8:3-10.
III. LEGAL STANDARD
A. Subject Matter Jurisdigtion
A motion to dismiss under Federal Rule of Civil Procedure 12(b)(1) addresses the court's subject matter jurisdiction, derived from the case or controversy clause of Article III of the U.S. Constitution. Federal courts are limited in jurisdiction; it is presumed that a case lies outside the jurisdiction of the federal courts unless Plaintiff proves otherwise. See Kokkonen v. Guardian Life Ins. Co. of America, 511 U.S. 375, 376, 114 S.Ct. 1673, 128 L.Ed.2d 391 (1994); Stock West, Inc. v. Confederated Tribes, 873 F.2d 1221 (9th Cir. 1993); Thornhill Publishing Co. v. General Telephone Electronics Corp., 594 F.2d 730, 733 (9th Cir. 1979). "A motion to dismiss for lack of subject matter jurisdiction may either attack the allegations of the complaint or may be made as a speaking motion' attacking the existence of subject matter jurisdiction in fact." Id. at 733.
In a facial attack on the complaint, "the court must consider the allegations of the complaint as true." Mortensen v. First Federal SL Ass'n, 549 F.2d 884, 891 (3rd Cir. 1977); see also, NL Indus. Inc. v. Kaplan, 792 F.2d 896, 898 (9th Cir. 1986). Unless the allegations appear to be frivolous, the motion will be denied. See Black v. Payne, 591 F.2d 83, 86 n. 1 (9th Cir.), cert. denied, 444 U.S. 867, 100 S.Ct. 139, 62 L.Ed.2d 90 (1979).
A 12(b)(1) motion may also "attack the existence of subject matter jurisdiction in fact, quite apart from any pleading," as a "speaking motion." Mortensen, 549 F.2d at 891; Thornhill Publishing, 594 F.2d at 733, FDIC v. Nicholas, 885 F.2d 633, 635-36 (9th Cir. 1983). Defendant may rely on affidavits or any other evidence properly before the court. " St. Clair v. City of Chico, 880 F.2d 199, 201 (9th Cir.) (citations omitted), cert. denied, 493 U.S. 993, 110 S.Ct. 541, 107 L.Ed.2d 539 (1989). "It then becomes necessary for the party opposing the motion to present affidavits or any other evidence necessary to satisfy its burden of establishing that the court, in fact, possesses subject matter jurisdiction." Id.
"[I]n a factual 12(b)(1) motion . . ., no presumptive truthfulness attaches to plaintiff's allegations, and the existence of disputed material facts will not preclude the trial court from evaluating for itself the merits of jurisdictional claims. More-over, the plaintiff will have the burden of proof that jurisdiction does in fact exist." See Mortensen, 549 2 F.2d at 891.
Although deference is given to a plaintiff's factual allegations in a 12(b)(6) motion, plaintiff's allegations need not be taken as true when considering a Rule 12(b)(1) motion. See Thornhill Publishing, 594 F.2d at 733 ("[N]o presumptive truthfulness attaches to plaintiff's allegations, and the existence of disputed material facts will not preclude the trial court from evaluating for itself the merits of jurisdictional claims."); see also Trentacosta v. Frontier Pacific Aircraft Industries, 813 F.2d 1553, 1557-58 (9th Cir. 1987).
B. Failure to State a Claim
A motion to dismiss for failure to state a claim under Federal Rule of Civil Procedure 12(b)(6) is disfavored and rarely granted: A dismissal for failure to state a claim is appropriate only where it appears, beyond a doubt, that the plaintiff can prove no set of facts that would entitle it to relief. See Morley v. Walker, 175 F.3d 756, 759 (9th Cir. 1999); see also Conley v. Gibson, 355 U.S. 41, 45-46 (1957).
Review is limited to the contents of the complaint. See Enesco Corp. v. Price/Costco, Inc., 146 F.3d 1083, 1085 (9th Cir. 1998); Pareto v. FDIC, 139 F.3d 696, 699 (9th Cir. 1998). Documents attached to the complaint are part of the complaint and may be considered on a motion to dismiss. See Durning v. First Boston Corp., 815 F.2d 1265, 1267 (9th Cir. 1987); see also Branch v. Tunnell, 14 F.3d 449, 453 (9th Cir. 1994) ([A] document is not `outside' the complaint if the complaint specifically refers to the document and if its authenticity is not questioned.).
All allegations of material fact in the complaint are taken as true and construed in the light most favorable to the plaintiff. See Enesco Corp. v. Price/Costco Inc., 146 F.3d at 1085. Conclusions of law, conclusory allegations, unreasonable inferences, or unwarranted deductions of fact need not be accepted. See Western Mining Council v. Watt, 643 F.2d 618, 624 (9th Cir. 1981). Facts subject to judicial notice may also be considered on a motion to dismiss. See Mullis v. United States Bankruptcy Ct., 828 F.2d 1385, 1388 (9th Cir. 1987). For example, matters of public record may be considered, including pleadings, orders, and other papers filed with the court or records of administrative bodies. See Shaw v. Hahn, 56 F.3d 1128, 1129 n. 1 (9th Cir. 1995).
W. ANALYSIS
A. Plaintiff's "New" Facts
In his opposition brief, Plaintiff states new facts that are not contained in his second-amended complaint. Specifically, Plaintiff states that he first became aware of a possible cause of action in April of 1999 when he attempted to purchase a house. See Doc. 24, 4:7-9.
In ruling on a motion to dismiss under Federal Rule 12(b)(6), review is limited to the contents of the complaint and any exhibits that may be attached. See Enesco Corp. v. Price/Costco, Inc., 146 F.3d 1083, 1085 (9th Cir. 1998); Pareto v. FDIC, 139 F.3d 696, 699 (9th Cir. 1998). "New" facts alleged in a plaintiff's opposition brief may not be considered on a Rule 12(b)(6) motion to dismiss. See Schneider v. California Dept. of Corrections, 151 F.3d 1194, 1197 (9th Cir. 1998). Under Rule 7(a), these additional facts do not constitute pleadings and cannot be considered at this juncture. See 2 Moore's Federal Practice, § 12, 34 (2] (Matthew Bender 3d. ed.); Finn v. Gunter, 722 F.2d 711, 712-713 (11th Cir. 1984). For these reasons, Plaintiff's additional facts in his opposition brief are not considered.
B. Substitution of Defendants
A claim for erroneous assessment and collection of taxes can only be asserted against the United States, and not against an individual IRS officer. To the extent plaintiff alleges taxes were erroneously assessed or collected by defendants, 28 U.S.C. § 1346 provides, in relevant part, the district courts have jurisdiction over
"[a]ny civil action against the United States for the recovery of any internal-revenue tax alleged to have been erroneously or illegally assessed or collected, or any penalty claimed to have been collected without authority or any sum alleged to have been excessive or in any manner wrongfully collected under the internal-revenue laws." 28 U.S.C. § 1346 (a)(1).
Under Title 26, United States Code section 7426, Congress explicitly incorporates employee immunity into the tax code: "No action may be maintained against any officer or employee of the United States . . . with respect to any acts for which an action could be maintained under this section." Section 7426 requires the substitution of the United States as defendant in any claim brought against its employees. See Title 26, U.S.C. § 7426(e); Ferrel v. Brown, 847 F. Supp. 1524, 1526 (W.D. Wash. 1993), aff'd 40 F.3d 1049 (9th Cir. 1994); see also Gilbert v. DaGrossa, 756 F.2d 1455, 1458 (9th Cir. 1985).
A suit against IRS employees in their official capacity is essentially a suit against the United States. See Gilbert v. DaGrossa, 756 F.2d 1455, 1459 (9th Cir. 1985), citing Larson v. Domestic Foreign Commerce Corp., 337 U.S. 682, 688 (1949); Hutchinson v. United States, 677 F.2d 1322, 1327 (9th Cir. 1982). Even where a taxpayer alleges an IRS employee recklessly or intentionally disregards" any provision of the Revenue Code, the statute makes a suit against the United States "the exclusive remedy for recovering damages resulting from such actions." 26 U.S.C. § 7433 (a).
In this case, Plaintiff asserts that the Defendants erroneously filed a tax lien against him, pursuant to Title 26, United States Code section 6321. See Doc. 24, 3:20-24. Plaintiff further contends that such acts were done with intentional disregard of existing tax laws and regulations. See Id., at 7:2-25. Such acts are within the official duties of IRS employees in the assessment or collection of taxes. For these reasons, Defendant UNITED SATES OF AMERICA, is hereby substituted for named defendants, Charles O. Rossotti, Commissioner of the Internal Revenue; Richard R. Orosco, District Director; the Internal Revenue Service; the Chief Special Procedures function; D.J. Cousin, Revenue Officer and Does 1-100.
C. Sovereign Immunity
It is well settled that the United States is a sovereign, and, as such, is immune from suit unless it has expressly waived such immunity and consented to be sued. See Gilbert v. DaGrossa, 756 F.2d 1455, 1458 (9th Cir. 1985), citing to United States v. Shaw, 309 U.S. 495, 500-01 (1940); Hutchinson v. United States, 677 F.2d 1322, 1327 (9th Cir. 1982); Beller v. Middendorf, 632 F.2d 788, 796 (9th Cir. 1980), cert. denied, 452 U.S. 905 (1981). Such waiver cannot be implied, but must be unequivocally expressed. See id.; United States v. King, 395 U.S. 1, 4 (1969). Where a suit has not been consented to by the United States, dismissal of the action is required. See Hutchinson, supra. "It is axiomatic that the United States may not be sued without its consent and that the existence of such consent is a prerequisite for jurisdiction." United States v. Mitchell, 463 U.S. 206 (1983).
In this case, Plaintiff alleges that Defendant's acts constitute common law fraud. See Doc. 24, 6:9-22. The Federal Tort Claims Act is the government's waiver of sovereign immunity in tort actions. See 28 U.S.C. § 2671 et. seq. The United States asserts that Plaintiff's claim is barred by Section 2680(c) of the Federal Torts Claims Act, which retains the Government's sovereign immunity for "any claim arising in respect of the assessment or collection of any tax". See 28 U.S.C. § 2680 (c). Section 2680(c) has been interpreted broadly by the courts to preclude suits for damages arising out of the allegedly tortious activities of IRS agents when those activities were in any way related to the agents' official duties. See Capozzoli v. Tracey, 663 F.2d 654, 658 (5th Cir. 1981).
Here, Plaintiff alleges that Defendant erroneously filed a tax lien against him pursuant to Title 26, United States Code section 6321. See Doc. 24, 3:20-24, 7:2-25. Such acts are within the official duties of IRS agents. See Morris v. United States, 521 F.2d 872, 874 (9th Cir. 1975) (IRS agents alleged to have intentionally and illegally, intimidated and harassed plaintiff, seized plaintiffs' property, and destroyed their business; plaintiffs' claim held to be barred by Section 2680(c)); Hutchinson v. United States, 677 F.2d 1322, 1327 (9th Cir. 1982) (dismissing claims for compensatory and exemplary damages for the alleged wrongful conduct of IRS employees in assessing taxes, in part on the basis of sovereign immunity); Interfirst Bank Dallas N.A. v. United States, 769 F.2d 299, 306-08 (5th Cir. 1985) (sovereign immunity barred claims for damages for alleged wrongful levy); Isaacson v. United Sates, 848 F. Supp. 129, 130-31 (E.D. Cal. 1993) (dismissing suit against United States for tax levies when plaintiffs failed to show a waiver of sovereign immunity).
Plaintiff's claims are DISMISSED for lack of subject matter jurisdiction.
D. Exhaustion of Remedies — Statute of Limitations
Plaintiff brings his complaint under Title 26, United States Code sections 7432 and 7433. For each of these actions, a plaintiff must show an exhaustion of administrative remedies and bring the claim within two years after the date the right of action accrues. See 26 U.S.C. § 7432 (d), 7433(d).
1. Exhaustion of Administrative Remedies
To maintain an action in the district court for an erroneous or illegal assessment or collection of taxes, the plaintiff must first make full payment of the assessment in question and then file a proper claim for refund with the Secretary of Treasury. See 26 U.S.C. § 7422 (a); see United States v. Forma, 42 F.3d 759, 763 (2d Cir. 1995).
Plaintiff's second-amended complaint fails to allege that Plaintiff paid the taxes assessed or filed a refund claim with the Secretary of Treasury. See Doc. 24. Without such necessary factual allegations, Plaintiff's suit lacks subject matter jurisdiction. Plaintiff's claims are DISMISSED.
2. Statute of Limitations
In cases involving the erroneous or illegal assessment or collection of taxes, a plaintiff must bring their claim within two years after the date the right of action accrues. See 26 U.S.C. § 7432 (d), 7433(d). A cause of action accrues when a person has had a "reasonable opportunity to discover all essential elements of a possible cause of action." See Treas. Reg. Sections 301.7432-1(i)(2), 301.7433-1(g)(2)1 see also Richmond v. TRW Info Services, 97-2 USTC, paragraph 50,939 (S.D. Cal. 1997) (holding that cause of action accrued when plaintiff learned the IRS had reported tax liens to credit bureau, and dismissing a suit brought four years later); Vonderheide v. IRS, et al., 78 A.F.T.R.2d 96-5772 (S.D. Ohio) (holding that the two year statute of limitations under section 7432 accrued upon plaintiff's receipt of notice of lien).
Section 6321 provides that if a person fails to pay any tax, a lien shall arise in favor of the United States with respect to all property owned by the taxpayer. See 26 U.S.C. 6321 (West 2001). Pursuant to California Code of Civil Procedure, notices of federal tax liens are to filed with the county recorder. See Cal. Civ. Pro. § 2101. The filing of the recorded notice acts to give the person against whom the lien is sought, constructive notice of the federal tax lien. Constructive notice implies both inquiry and actual notice. See F.P. Baugh, Inc. v. Little Lake Lumber Company, 297 F.2d 692, 696 (9th Cir. 1962). Such notice gives a person a "reasonable opportunity to discover all essential elements of a possible cause of action". See Treas. Reg. Sections 301.7432-1(i) (2), 301.7433-1(g)(2); see also Richmond, supra; Vonderheide, supra.
In this case, federal tax liens were filed against Plaintiff with the Los Angeles County Recorders Office on February 14, 1992; March 29, 1993; November 9, 1993; and March 19, 1997. See Doc. 24, 7:2-25. For each date, Plaintiff is attributed with implied actual notice of the United States' asserted liens, that any real property in Los Angeles County was subject to such lien, and that he may have had a right to a possible cause of action against Defendant. Plaintiff's most recent claim expired March 19, 1999. Plaintiff brought his suit against Defendant on September 14, 2000. See Doc. 1. Plaintiff's claims are barred by the statute of limitations. Because Plaintiff has failed to state a claim for which relief may be granted, Plaintiff's First and Second claims are DISMISSED WITH PREJUDICE.
E. Injunctive Relief
Plaintiff's third cause of action asks for a preliminary and final injunction against defendants. See Doc. 24, 9:17-27, 10:1-4. Specifically, Plaintiff asks that Defendant be barred from erroneously filing any further federal tax liens against Plaintiff. See id. Defendant asserts that the Anti-Injunction act prevents the Plaintiff from requesting this remedy. See Doc. 30, 4:7-20.
The Anti-Injunction Act states that "no suit for the purpose of restraining the assessment or collection of any tax shall be maintained in any court by any person". See 26 U.S.C. § 7421 (a). The judicial exception to this Act may apply if the taxpayer demonstrates that: (1) under no circumstances can the government ultimately prevail on the merits; and (2) the taxpayer will suffer irreparable injury without injunctive relief. See Bob Jones University v. Simon, 416 U.S. 725, 742-46 (1974); Elias v. Connett, 908 F.2d 521, 525 (9th Cir. 1990); Maxfield v. United States Postal Serv., 752 F.2d 433, 434 (9th Cir. 1984). The taxpayer bears the burden of pleading and proving facts to show that the government cannot ultimately prevail. See Commissioner v. Shapiro, 424 U.S. 614, 628-29 (1976); Elias, 908 F.2d at 525. The government need only have a good faith basis for its claim in order to obtain a dismissal. See Enochs v. Williams Packing and Navigation Co., 370 U.S. 1, 7-8 (1962). Mere allegations of bad faith, harassment or even deprivation of constitutional rights are not sufficient to make such a showing. See Alexander v. "Americans United," Inc., 416 U.S. 752, 759 (1974).
In his opposition, Plaintiff asserts that "Title 26 U.S.C. (including section 6321) has not been enacted into positive law, and is not the `law' but is only prima facie evidence of the law." See Doc. 33, 6:21, 7:1-2. In the alternative, Plaintiff argues that even if section 6321 is controlling law, its applicability is limited by the Code of Federal Regulations to businesses dealing with alcohol, tobacco, or firearms. See id., at 7:7-22, 8:1-16.
1. Positive Law
Congress' failure to enact a title into positive law has only evidentiary significance and does not render the underlying enactment invalid or unenforceable. See 1 U.S.C. § 204 (a). "Like it or not, the Internal Revenue Code is the law". Ryan v. Silty, 764 F.2d 1325, 1328 (9th Cir. 1985), see also United States v. Zuger, 602 F. Supp. 889, 891-92 (D.Conn. 1984) ("holding that the failure of Congress to enact a title as such and in such form into positive law . . . in no way impugns the validity, effect, enforceability, or constitutionality of the laws as contained and set forth in the title"), aff'd. without op., 755 F.2d 915 (2d Cir.), cert. denied, 474 U.S. 805 (1985); Young v. IRS, 596 F. Supp. 141, 149 (N.D.Ind. 1984) (asserting that "even if Title 26 was not itself enacted into positive law, that does not mean that the laws under the title are null and void"). Plaintiff's positive law argument is without merit.
2. Limited Application
Plaintiff asserts that the Code of Federal Regulations determines the extent to which federal tax lien statute section 6321 may be interpreted and to whom it may be applied. See Doc. 24, 3:25-27, 4:1-4. Plaintiff's argument is without merit.
United States Code Service provides a reference to 26 C.F.R. sections 301.6321.1-1 et seq., for all three sections dealing with federal tax liens in their application and interpretation. See Walter v. Internal Revenue Service, 1994 WL 760812, at *3 (E.D.Cal.) (discussing 26 U.S.C. § 6321, 6322, and 6323). Title 26 of the Code of Federal Regulations sections 301.6321-1 et seq. discusses liens for taxes. See id. These statutes are not limited to persons associated with alcohol, tobacco, and firearms. See id. In addition, Chapter 16, section 301, of the Code of Federal Regulations deals with the administrative procedures of the IRS. See 16 C.F.R. § 301.
In this case, Plaintiff has not demonstrated that the government cannot ultimately prevail on the merits; Plaintiff has not pleaded facts showing irreparable injury without injunctive relief. For these reasons, Plaintiff's claim for injunctive relief is DISMISSED.
V. CONCLUSION
The UNITED STATES OF AMERICA is substituted as a defendant for all other named defendants. Plaintiff's claims are DISMISSED on three alternative grounds. First, Plaintiff has failed to demonstrate that the Defendant, UNITED STATES OF AMERICA has waived its sovereign immunity in this action. Plaintiff's First, Second and Fifth claims are DISMISSED for lack of subject matter jurisdiction. Second, Plaintiff has failed to show that he has exhausted his administrative remedies. For this alternative reason, Plaintiff's First, Second, and Fifth claims are DISMISSED for lack of subject matter jurisdiction. Third, Plaintiff's claims are barred by the statute of limitations. Plaintiff's First, Second and Fifth claims are DISMISSED WITH PREJUDICE for failure to state a claim for which relief may be granted.
Because Plaintiff has failed to show that the Anti-Injunction Act's judicial exception should apply, Plaintiff's request for a temporary and final injunction is DENIED.
Plaintiff's request for attorney's fees is DENIED.
SO ORDERED.