Opinion
Civil No. 02-5808 (JBS)
Filed: July 15, 2003
Mr. Kenneth C. Warren, Blackwood, New Jersey, Plaintiff pro se.
Robert A. Assuncao, Esquire, Carla Duque, Esquire, Piper Rudnick LLP, Edison, New Jersey, Attorneys for the Defendant.
OPINION
Plaintiff Kenneth C. Warren seeks compensatory and punitive damages from defendant Masco Contractor Services East Inc. for "conspiring" with the Internal Revenue Service ("IRS") to garnish his wages pursuant to an allegedly "unauthorized" IRS tax levy, and for failing to provide him with proper notice of levy and obtain his consent to the garnishment. Defendant has filed a motion to dismiss, contending that Plaintiff has failed to allege any viable claims upon which relief can be granted. Plaintiff has also filed a cross-motion for summary judgment. Because the Internal Revenue Code provides immunity to Defendant for any liability arising from compliance with an IRS tax levy, Defendant's motion to dismiss will be granted, and Plaintiff's summary judgment motion will be dismissed.
I. BACKGROUND
Plaintiff's claims arise from a levy of federal tax liens against his wages in September and October 2002, while Plaintiff was an independent contractor working for Defendant as a truck driver. (Compl. at 5; Answer, at 2.) On August 12, 2002, Defendant received a IRS Notice of Levy ordering that Plaintiff's wages be withheld and paid to the IRS in order to satisfy Plaintiff's indebtedness of $5,739.22 in unpaid tax assessments from 1991, 1992, and 1993. (Notice of Levy, Answer Ex. B, at 1.) In compliance with the levy, Defendant forwarded the first withholding on September 12, 2002 in the amount of $1,400. (Answer, at 2.) On September 20, 2002, Steven Budrick, Defendant's Controller, sent a letter notifying Plaintiff of the levy. (Letter, 9/20/02, Answer Ex. C, at 1.) Defendant later withheld, and paid to the IRS, portions of Plaintiff's wages on September 25, 2002, September 30, 2002, October 8, 2002, and October 14, 2002, in the amounts of $1,100.00, $1,200.00, $1,400.00, and $639.22, respectively. (Compl. at ¶ 9; Answer, at 2.) Plaintiff did not provide Defendant with a Release of Levy. (Answer, at 2.)
On December 9, 2002, Plaintiff filed a complaint against Defendant in this Court. Plaintiff alleges several causes of action for violations of 42 U.S.C. § 1983, § 1985, and § 1986, conspiracy, breach of contract, intentional infliction of emotional distress, invasion of privacy, infliction of cruel and unusual punishment in violation of the Eighth Amendment, and denial of due process in violation of the Fifth Amendment. (Compl. at 2-3; Resp. at 1, ¶ 2; 2.). In response, on March 7, 2003 Defendant filed a motion to dismiss the complaint under Federal Rule of Civil Procedure 12(b)(6). [Docket Item 10-1.] On April 11, 2003, Plaintiff filed a motion for summary judgment under Federal Rule of Civil Procedure 56(c). [Docket Item 14-1.] On June 27, 2003, Plaintiff also filed with the court a motion for "emergency relief" in support of his motion for summary judgment. (Mot. for Emergency Relief, 6/27/03.)
The IRS has not been named a defendant in this suit.
II. DISCUSSION
In accordance with the Third Circuit's "general principle of generosity with respect to the reading of pro se pleadings," Edwards v. Boeing Vertol Company, 717 F.2d 761, 764 (3d Cir. 1983), cert. denied, 465 U.S. 1038 (1984) (quoting Haines v. Kerner, 404 U.S. 519, 520 (1972)), this Court must construe Plaintiff's allegations broadly and give him every favorable inference which may reasonably be drawn from them. Plaintiff's complaint arises solely from Defendant's actions in withholding Plaintiff's wages pursuant to a levy issued by the IRS. (Compl. at 2.) Plaintiff argues that the levy was unauthorized, and that Defendant conspired with the IRS to garnish Plaintiff's wages, failed to provide him with proper notice of the levy, and did not obtain his consent to the garnishment. (Compl. at 2.) Plaintiff contends that these allegations give rise to causes of action for violations of 42 U.S.C. § 1983, § 1985, and § 1986, conspiracy, breach of contract, intentional infliction of emotional distress, invasion of privacy, infliction of cruel and unusual punishment in violation of the Eighth Amendment, and denial of due process in violation of the Fifth Amendment. (Compl. at 2-3; Resp. at 1, ¶ 2; 2.). Even giving the broadest construction to Plaintiff's pleadings, the motion to dismiss will be granted because, as maintained by Defendant, the Internal Revenue Code absolves Defendant from liability arising from compliance with an IRS tax levy , for the reasons now explained.
Plaintiff also argues that Defendant attempted to defraud the court in its Response by incorrectly citing 42 U.S.C. § 1983, 1985, and 1986 as 46 U.S.C. § 1983, 1985, and 1986. This Court, however, finds this to be an unintentional typographical error. Moreover, none of these statutes ( 42 U.S.C. § 1983, 1985, or 1986) can afford Plaintiff the relief he seeks. Section 1983 requires that Defendant be a state actor, that is, a person acting under color of state law. Flagg Bros., Inc. v. Brooks , 436 U.S. 149, 155-56 (1978). In the present case, Defendant is a private actor acting at the direction of a federal agency. Section 1985 requires a conspiracy under color of state law to deprive an individual of federal rights based on invidious, class-based discrimination. See Griffin v. Breckenridge , 403 U.S. 88 (1971). Likewise, section 1986 creates a right to recover damages against individuals who have knowledge of, and power to prevent, a § 1985 conspiracy, but who neglect or refuse to act. Burnett v. Grattan , 468 U.S. 42, 45 n. 5 (1984). Plaintiff's claim fits into none of these areas, and the Complaint as presently pled is defective on this ground. Because Plaintiff is proceeding pro se , this Court has also examined whether any possible amendment to the Complaint could state a cause of action against this Defendant and therefore the defense of statutory immunity under 26 U.S.C. § 6332(d) has been addressed.
A. Motion to Dismiss Standard of Review
Rule 12(b)(6) of the Federal Rules of Civil Procedure provides that a complaint may be dismissed "for failure to state a claim upon which relief can be granted." Rule 12(b)(6), Fed.R.Civ.P. A district court must accept as true all of the well-pleaded allegations in the complaint and any and all reasonable inferences derived from those facts. Glenside West Corp. v. Exxon Co., U.S.A., 761 F. Supp. 1100, 1107 (D.N.J. 1991); Gutman v. Howard Sav. Bank, 748 F. Supp. 254, 260 (D.N.J. 1990). Further, the court must view all allegations in the Complaint in the light most favorable to the plaintiff. See Jordan v. Fox, Rothschild, O'Brien Frankel, 20 F.3d 1250, 1261 (3d Cir. 1994). "Although the Federal Rules of Civil Procedure do not require a claimant to set forth an intricately detailed description of the asserted basis for relief, they do require that the pleadings give the defendant fair notice of what the plaintiff's claim is and the grounds upon which it rests." Baldwin County Welcome Ctr. v. Brown, 466 U.S. 147, 150 n. 3 (quoting Conley v. Gibson, 355 U.S. 41, 47 (1957)), reh'g denied, 467 U.S. 1231 (1984).
The question before this Court is not whether Plaintiff will ultimately prevail; rather, it is whether he can prove any set of facts in support of his claims that would entitle him to relief against this Defendant.Hishon v. King Spalding, 467 U.S. 69, 73 (1984). Therefore, in deciding a motion to dismiss, a court should look to the face of the complaint and decide whether, taking all of the allegations of fact as true and construing them in a light most favorable to the nonmovant, plaintiff's allegations state a legal claim. Markowitz v. Northeast Land Co., 906 F.2d 100, 103 (3d Cir. 1990). Motions to dismiss should be granted "only if, after accepting as true all of the facts alleged in the complaint, and drawing all reasonable inferences in plaintiff's favor, no relief could be granted under any set of facts consistent with the allegations of the complaint." Trump Hotels Casino Resorts, Inc. v. Mirage Resorts, Inc., 140 F.3d 478, 483 (3d Cir. 1998) (citing ALA, Inc. v. CCAIR, Inc., 29 F.3d 855, 859 (3d Cir. 1994)). Only the allegations in the complaint, matters of public record, orders, and exhibits attached to the complaint matter, are taken into consideration.Chester County Intermediate Unit v. Pennsylvania Blue Shield, 896 F.2d 808, 812 (3d Cir. 1990).
B. Enforcement of the Collection of Unpaid Taxes Through Administrative Levies
Defendant contends it is immune from liability for complying with its duty to honor the IRS levy on Plaintiff's earned income under 26 U.S.C. § 6332(c) (2003). When a taxpayer is delinquent in paying taxes, the IRS may collect the tax by issuing a lien on the taxpayer's "property and rights to property." 26 U.S.C. § 6321. Specifically, the Internal Revenue Code provides:
If any person liable to pay any tax neglects or refuses to pay the same after demand, the amount . . . shall be a lien in favor of the United States upon all property and rights to property, whether real or personal, belonging to such person.26 U.S.C. § 6321. The statutory language is broad, and is meant to reach every interest in property that a taxpayer might have, including earned wages. United States v. Nat'l Bank of Commerce, 472 U.S. 713, 720 (1985).
A federal tax lien, however, is not self-executing, and affirmative action by the IRS is required to enforce the collection of unpaid taxes.Id. Sections 6331(a)-(b) of the Internal Revenue Code establish the use of an administrative levy to accomplish this purpose, and its constitutionality "has long been settled." Phillips v. Commissioner, 283 U.S. 589, 595 (1931); 26 U.S.C. § 6331(a)-(b). An administrative levy is a provisional remedy that typically "does not require any judicial intervention" or court authorization. United States v. Rodgers, 461 U.S. 677, 682 (1983); Barnard v. Pavlish, 1998 WL 247768 at *2 (M.D.Pa. Mar. 30, 1998), aff'd, 187 F.3d 625 (3d Cir. 1999). The procedure is not designed to "determine whether the Government's rights to the seized property are superior to those of other claimants," but rather, to protect the Government against loss or diversion of the subject property while such claims are being resolved. Nat'l Bank of Commerce, 472 U.S. at 721. Through the administrative levy, the IRS has the power to collect the tax using the power of distraint and seizure by any means. Nat'l Bank of Commerce, 472 U.S. at 720; 26 U.S.C. § 6331(b). The only requirement for this procedure is that the IRS must provide the taxpayer with advance notice. 26 U.S.C. § 6331(a); Barnard, 1998 WL 247768 at *2.
Other than the administrative levy, the Internal Revenue Code also provides for a lien-foreclosure suit to enforce the collection of unpaid taxes. 26 U.S.C. § 7403(a). The code allows for the institution of a civil action in federal district court, in which all persons having an interest in the property are parties to the action, and the court "adjudicate[s] all matters involved therein and finally determine[s] the merits of all claims to and liens upon the property." 26 U.S.C. § 7403(c); United States v. Rodgers , 461 U.S. 677, 680-82 (1983).
When the taxpayer's property is held by another, notice is served on the custodian, such as the present Defendant, pursuant to 26 U.S.C. § 6332(a). "This notice gives the IRS the right to all property levied upon, and creates a custodial relationship between the person holding the property and the IRS so that the property comes into the constructive possession of the Government." Nat'l Bank of Commerce, 472 at 720-21 (citing United States v. Eiland, 223 F.2d 118, 121 (4th Cir. 1955); Phelps v. United States, 421 U.S. 330 (1975)).
Defendant's immunity from liability in this case arises from 26 U.S.C. § 6332(d). If the custodian honors a levy, the custodian is "discharged from any obligation or liability to the delinquent taxpayer with respect to such property or rights to property arising from such surrender or payment." 26 U.S.C. § 6332(d); Nat'l Bank of Commerce, 472 U.S. at 721; Congress v. Talcott Corp. v. Gruber, 993 F.2d 315, 318 (3d Cir. 1993). Even if the levy is determined to be invalid, the custodian is still immune from liability from suits arising from the levy. Barnard, 1998 WL 247768 at *3; Weissman v. U.S. Postal Serv., 19 F. Supp.2d 254 (D.N.J. 1998). See also Moore v. Gen. Motors Pension Plans, 91 F.3d 848 (7th Cir. 1996) (holding immunity to defendants is not limited to levies which survive challenges to their validity).
Given the statutory language of 26 U.S.C. § 6332(e), the authority interpreting the provision, and the fact that all of Plaintiff's claims arise from Defendant's withholding of Plaintiff's wages pursuant to the IRS levy, it is clear Defendant is entitled to immunity from suit in relation to honoring the tax levy in this case. An administrative levy was issued on Plaintiff's earned income, and pursuant 26 U.S.C. § 6332(a), Defendant received a Notice of Levy. (Notice of Levy, Answer Ex. B, at 1.) Plaintiff asserts that he was never notified of the levy in advance, and it is unknown whether Plaintiff received proper notice from the IRS regarding the administrative levy instituted against his wages. See Pl. Br. at 3. However, as case law demonstrates, regardless of whether the levy was valid, Defendant is immune from liability with respect to the levied property or rights to property. Moreover, while Plaintiff argues that Defendant failed to give Plaintiff sufficient notice or ask for his authorization, Defendant was not required to give notice to Plaintiff of the levy nor ask for authorization; it is the IRS' duty to notify Plaintiff of the levy against him, and the IRS has the undoubted power to levy without a delinquent taxpayer's authorization. 26 U.S.C. § 6331(d).
In the case of wrongful levies instituted by the IRS, including levies served with improper notice by the IRS, a person may be able to seek recourse against the IRS in federal court, under 26 U.S.C. § 6343(b) or 26 U.S.C. § 7433. See Hynard v. I.R.S. , 233 F. Supp.2d 502 (S.D.N.Y. 2002) (examining remedies for improper notice under 26 U.S.C. § 6343(b) and 26 U.S.C. § 7433).
Moreover, if an employer, here the defendant, refuses to honor a levy, it is subject to liability to the IRS. 26 U.S.C. § 6332(c)(1). Employers facing a levy against an employee's earned wages have only two available defenses to such liability if they do not comply with the tax levy: (1) the employer is not in possession of any property of the employee in that the employee has no earned wages; or (2) the earned wages are already subject to prior judicial restraint. Nat'l Bank of Commerce, 472 U.S. at 721-722. Plaintiff does not allege that Defendant had any of the defenses available to justify refusal of the IRS levy. Without such a defense, Defendant was required to honor the levy by surrendering Plaintiff's earned wages to the IRS. In short, Defendant had no recourse but to comply with the levy, and is immune from suits arising from such compliance.
Plaintiff has made allegations that Defendant conspired with the IRS and its agents to garnish his wages. The complaint, however, lacks any factual allegations to support such a claim. It is clear that Defendant received an IRS tax levy and that it was required to comply with the levy unless it wished to face liability and penalties. In short, Defendant acted in accordance with the Internal Revenue Code in its compliance with the tax levy. Such action does not amount to a conspiracy, since Defendant is merely following the dictates of federal law.
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Thus, Plaintiff cannot assert a claim against Defendant based on its compliance with the IRS levy, and therefore Defendant's motion to dismiss will be granted. Because Defendant's honoring of the levy is only a "provisional remedy," this Court does not determine whether the IRS made a proper assessment of taxes and penalties due. S ee Nat'l Bank of Commerce, 472 U.S. at 721. Whether Plaintiff has remedies against the IRS to recover the amounts of his income upon which Defendant executed the levy is likewise not determined.
C. Motion for Summary Judgment
In light of the above finding that the motion to dismiss will be granted on the grounds that under 26 U.S.C. § 6332(e), Defendant is immune from suits arising from compliance with an IRS levy, Plaintiff's motion for summary judgment is dismissed as moot.
III. CONCLUSION
For the reasons stated herein, Defendant's motion to dismiss will be granted, and Plaintiff's complaint will be dismissed. Plaintiff's motion for summary judgment will be dismissed as moot. The accompanying Order will be entered.
ORDER
This matter having come before the Court upon the motion of defendant Masco Contractor Services East Inc. to dismiss the claims of plaintiff Kenneth C. Warren, pursuant to Rule 12(b)(6), Fed.R.Civ.P., and upon a motion for summary judgment by plaintiff Kenneth C. Warren pursuant to Rule 56, Fed.R.Civ.P.; and the Court having considered the parties' written submissions, without oral argument, pursuant to Rule 78, Fed.R.Civ.P.; and for the reasons expressed in Opinion of today's date,;
IT IS this 15th day of July, 2003, hereby
ORDERED that the Defendant's motion to dismiss is GRANTED, and Plaintiff's Complaint is hereby DISMISSED; and
IT IS FURTHER ORDERED that the motion for summary judgment by plaintiff Kenneth C. Warren is DISMISSED AS MOOT.