Opinion
No. C-3-02-559
July 31, 2003
REPORT AND RECOMMENDATIONS
Attached hereto is a NOTICE to the parties regarding objections to this Report and Recommendations.
I.INTRODUCTION
On May 5, 1994, Plaintiff Darrell D. Billheimer wrote to the IRS stating:
I have not filed a Federal Income Tax Return for the year 1992 and have no intention to ever file again. I have removed myself from the income tax system and intend on staying that way.
(Doc. #1, Exhibit C at 3). These forthright statements reveal decisions by Darrell Billheimer that led the United States Government ("the Government") to bring a civil action to reduce to Judgment three Internal Revenue Service ("IRS") tax assessments against Darrell Billheimer. United States v. Billheimer, 197 F. Supp.2d 1051 (S.D. Ohio 2002)(Rice, C.J.). In that prior case, this Court resolved certain issues in favor of the Government and against the Billheimers. United States v. Billheimer, 197 F. Supp.2d 1051 (S.D. Ohio 2002)(Rice, C.J.). In so doing, the Court held in pertinent part:
The Certificates of Assessment for 1992, 1993, and 1994, respectively, are sufficient proof of the principle owed by D. Billheimer for those years, inclusive of penalties and interest that had been assessed as of the date on which the records were generated. Those figures add up to $96,685.69.197 F. Supp.2d at 1055.
The Court held that the Billheimers owed this amount, including penalties and interest up March 27, 1997. 197 F. Supp.2d at 1055. The Court also provided the Government with an opportunity to demonstrate it used acceptable procedures to arrive at the total amount it sought, $144,274.20. Id.
In the instant case, Plaintiffs Darrell D. Billheimer and Joan B. Billheimer ("the Billheimers") seek to turn the tables on the Government. The Billheimers claim that the Government violated numerous federal statutes in connection with its efforts to collect federal taxes. The Billheimers seek an injunction against the IRS preventing it from "any further collection activity until all claims are fully resolved. . .," and the Government has removed its Notices of Federal Tax Liens concerning them. (Doc. #1 at 2, Exh. B).
This case is presently before the Court upon the Government's Motion to Dismiss (Doc. #8), the Billheimers' Motions to Strike (Doc. #s 10, 15), the Government's Memoranda in Opposition (Doc. #s 13, 16), the Billheimers' Objections to the Government's Motion to Dismiss and the Billheimers' Motion for Summary Judgment (Doc. # 17), the Government's Memorandum in Opposition (Doc. # 18), and the Billheimers' Reply (Doc. # 19).
II. THE BILLHEIMERS' COMPLAINT
The Billheimers' Complaint raises four causes of action. First, the Billheimers claim that IRS Agent Michael Louderback violated 26 U.S.C. § 3412 in connection with a "presumed financial audit." (Doc. #1 at 1). Second, the Billheimers claim that Louderback violated 26 U.S.C. § 3432 "by refusing to relax or release the Notice of Federal Tax Lien which has effectively reduced [the Billheimers] to poverty, being unable to obtain steady work." (Doc. #1 at 1). Third, the Billheimers claim that the IRS has violated 26 U.S.C. § 3461 by attempting to collect a tax from them more than ten years after assessment. Fourth, the Billheimers allege that the IRS has violated 26 U.S.C. § 7214(a) by "claiming sums greater than appear on the summary record of assessments for years beginning with 1992. (Doc. #1 at 2).
Attached to the Complaint are numerous documents including copies of two Notices of Federal Tax Liens issued against Plaintiff Darrell Billheimer (Doc. #1 at Exh. B). The documents also include copies of letters written by the Billheimers to the IRS challenging its actions — including Darrell Billheimer's letter of May 5, 1994, wherein he acknowledged that he had no intention of ever filing an income tax return and that he had removed himself from the income tax system. Supra, p. 1. In this letter, Billheimer asked the Government to justify its income tax collection efforts:
If you can show me the Federal Regulation which would require me to file a Federal Tax Return, then I will of course reconsider. If you can not [sic] show me the Federal Regulation, then I would advise you not to bother me again concerning this matter. . . .
By the way, I am not an Employee or Officer of the Government of the United States nor of the Government of the State of Ohio nor any kind of government entity, not an officer or employee of a (domestic) corporation of the 'United States' or a 'State' . . . nor a 'U.S. (alien) resident in Ohio, nor a 'citizen or (and) resident of the United States,' . . . I am a Citizen of Ohio. I am not engaged in any employment, activities, events, occupations which constitute any government granted privilege. . . .
(Doc. #1, Exh. C at 3). Similarly, the Billheimers sent documents titled, "notices and complaint," to the IRS claiming that its actions with regard to them were fraudulent. Through these notices, the Billheimers demanded corrections under various federal statutes and regulations. The notices, at times, contained bitterly antagonistic language such as the following:
You follow no law at all, you just rape the public because you never bother to even read the statutes and their corresponding federal regulations, you do not possess license to practice law, yet you make legal determinations every day of the week and then some, then when we corner you, you then turn the case over to another agent and he pretends that he doesn't know anything about the previous documents that we have submitted. You evade our questions like the plague and then give us special torture for asking the questions. . . . We thought Russia was bad, not on your life, the United States Inc., or should we say the International Monetary Fund has no law except greed, the governments have been over come [sic] by the IMF and the IRS and their agencies are in anarchy, yes, a workman's pride!
(Doc. #1, Exh. Cat 9).
III. THE PARTIES' CONTENTIONS
The Government contends that dismissal is warranted because the Government is shielded by sovereign immunity; because none of the exceptions to the Anti-injunction Act, 26 U.S.C. § 7421(a) — a statute preventing courts from enjoining the assessment or collection of federal taxes — applies to this case; and because the Billheimers' Complaint is moot in light of their Chapter 11 bankruptcy petition, which operates as a stay on the collection efforts of their creditors, including the Government.
The Government also contends that this Court lacks personal jurisdiction over it because the Billheimers failed to properly serve their Complaint. While this was a valid argument at the time of the Government's Motion, it appears that the Billheimers have effected service on the proper individuals under Fed.R.Civ.P. 4(i)(1). Even if the Billheimers had not properly served the Government, the Billheimers should be provided with an opportunity to show good cause for not effecting service. However, even if circumstances warranted this step, it would still be unnecessary in this case, since the Government's Motion to Dismiss is well taken, and since the Billheimers' Motion for Summary Judgment lacks merit.
The Billheimers seek an Order striking the Government's Motion to Dismiss because it is frivolous due to the lack of any supporting basis. The Billheimers further contend that the Government's Motion is not responsive to the Complaint because it is not an Answer as required by Fed.R.Civ.P. 12(a).
The Billheimers also seek summary judgment based on their contentions that the Government has not shown the existence of a genuine dispute as to any material fact and that the Billheimers are entitled to judgment as a matter of law. Reading the Billheimers' Motion liberally in their favor, it appears they contend that summary judgment is warranted because the Government's failure to properly respond to the Complaint has several consequences: First, it requires the Court to accept the Billheimers' allegations as true; second, it means that the Government has failed to create a genuine issue of material fact; and third, it means that the Billheimers claims must be found meritorious. (Doc. #17 at 1-2).
IV. APPLICABLE STANDARDS
A. Motions to Dismiss
In ruling on a Motion to Dismiss, the factual allegations in the Complaint must be taken as true and construed in a light most favorable to the plaintiff. Miller v. Currie, 50 F.3d 373, 377 (6th Cir. 1995). Because the Billheimers bring this case pro se, the Court liberally construes their allegations in their favor. Estelle v. Gamble, 429 U.S. 97, 106 (1976); Williams v. Browman, 981 F.2d 901, 903 (6th Cir. 1992). "A pro se Complaint is held to an especially liberal standard, and should only be dismissed for failure to state a claim if it appears 'beyond a doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief.'" Herron v. Harrison, 203 F.3d 410, 414 (6th Cir. 2000) (quoting in part Estelle, 429 U.S. at 106.
The Court "need not accept as true legal conclusions or unwarranted factual inferences." Mixon v. State of Ohio, 193 F.3d 389, 400 (6th Cir. 1999). Indeed, a Motion to Dismiss is often a proper procedural device for resolving pure questions of law. E.g., Mixon, 193 F.3d at 400 and n. 9.
B. Motions for Summary Judgment
The central issue presented by a Motion for Summary Judgment is a threshold issue — whether the case presents a proper jury question. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249-50 (1986). A moving party is entitled to summary judgment in its favor if there is no genuine issue as to any material fact and the moving party is entitled to judgment as a matter of law. Fed.R.Civ.P. 56(c); Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986); Anderson, 477 U.S. at 247.
"The moving party has the burden of showing the absence of genuine factual disputes from which a reasonable jury could return a verdict for the plaintiff . . . In considering whether summary judgment is appropriate, th[e] court must 'look beyond the pleadings and assess the proof to determine whether there is a genuine need for trial.'" Hager v. Pike County Ed. of Education, 286 F.3d 366, 370 (6th Cir. 2002) (citation omitted). Although Rule 56 does not mandate the moving party to support is motion with affidavits or other evidence, "a party seeking summary judgment always bears the initial responsibility of informing the district court of the basis for its motion, and identifying those portions of 'the pleadings, depositions, answers to interrogatories, and admissions on file, together with affidavits, if any,' which it believes demonstrate the absence of a genuine issue of material fact." Celotex, 477 U.S. at 324 (quoting in part Rule 56(c)).
Ultimately, the Court must determine at the summary-judgment stage whether the evidence presents a sufficient disagreement to require submission of a claim to the jury or whether the evidence is so one-sided that the moving party must prevail as a matter of law. Anderson, 477 U.S. at 251-52; Little Caesar Enterprises v. OPPCO, 219 F.3d 547, 551 (6th Cir. 2000).
V. ANALYSIS
A. Sovereign Immunity Bars the Billheimers' Claims
The Government's Motion to Dismiss is well taken because, "[a]bsent a waiver, sovereign immunity shields the Federal Government and its agencies from suit." F.D.I.C. v. Meyer, 510 U.S. 471, 475 (1994). "Sovereign immunity is jurisdictional in nature. Indeed, 'the terms of [the United States'] consent to be sued in any court define that court's jurisdiction to entertain suit.'" Meyer, 510 U.S. at 475 (brackets in original).
The Billheimers have not presented any argument specifically addressing why sovereign immunity does not bar their claims. The Billheimers have therefore failed to demonstrate that the Government has waived its sovereign immunity with regard to any of their claims. This is not surprising because federal agencies like the IRS, and hence the Government, are rarely exposed to liability for civil damages. See Nuclear Transport and Storage, Inc. v. U.S., 890 F.2d 1348, 1352 (6th Cir. 1989) (Government dismissed); see also Selden Apartments v. U.S. Dept. of Housing Urban Development, 785 F.2d 152, 156 (6th Cir. 1986) (claims for civil damages against HUD dismissed); Carelli v. Internal Revenue Service, 668 F.2d 902, 904 (6th Cir. 1982) (claims against IRS barred); Kingman v. United States, 74 F. Supp.2d 753, 759 (S.D. Ohio 1999) (claims against the United States barred). This result should not be unfamiliar to the Billheimers because in a prior suit, their claims against IRS agent Louderback were barred by sovereign immunity. Billheimer v. Louderback, No. C-3000-574 (Doc. #s 19, 23,), 2001 WL 429806, 31367208 (S.D. Ohio 2001).
Accordingly, sovereign immunity bars the Billheimers' claims against the Government, and as a result, their Complaint must be dismissed pursuant to Fed.R.Civ.P. 12(b)(1) for lack of subject matter jurisdiction.
B. The Anti-Injunction Act Bars the Billheimers' Complaint
1.
The Anti-Injunction Act, 26 U.S.C. § 7421, bars the Billheimers' Complaint. This statute states in part:
[N]o suit for the purpose of restraining the assessment or collection of any tax shall be made by any person. . . .26 U.S.C. § 7421(a). The Anti-Injunction Act does not apply if the taxpayer shows both that his or her claims are certain to succeed on the merits and that Government's tax collection would irreparably harm the taxpayer. Enochs v. Williams Packing Navigation Co., 370 U.S. 1, 6-7 (1962); see Lawrence v. United States, 2000 WL 1182452 at **2 (6th Cir. Aug. 15, 2000). As the following demonstrates, the Billheimers have not met this narrow exception.
2.
The Billheimers first claim that IRS agent Louderback violated a federal statute, likely 26 U.S.C. § 7602(e), prohibiting financial status audits. Section § 7602(e) provides:
Limitation on examination on unreported income. — The Secretary shall not use financial status audits or economic reality examination techniques to determine the existence of unreported income of any taxpayer unless the Secretary has a reasonable indication that there is a likelihood of such unreported income.
The Billheimers cite to a non-existent statute, 26 U.S.C. § 3412. The Government correctly construes this as a probable reference to § 3412 of the IRS Restructuring Act of 1998 — now 26 U.S.C. § 7602. See Doc. #8 at 8
The Billheimers have failed to show that they are certain to succeed in showing that the Government violated § 7602(e), because it did not become effective until July 22, 1998, and was therefore not in effect at the time the IRS presumably conducted financial audits of Plaintiff Darrell Billheimer.
In addition, the IRS had more than a reasonable indication that Plaintiff Darrell Billheimer had unreported income — the Secretary had written confirmation of this fact from him. This is shown by Plaintiff Darrell Billheimer's May 5, 1994 letter to the IRS declaring that he did not file a Federal Income Tax Return for the year 1992, that he had no intention of ever filing a tax return again, and that he had removed himself "from the income tax system and intend[ed] on staying that way." Supra, p. 1.
Accordingly, the Billheimers have not shown that they are certain to prevail on the merits of their first claim.
* * *
The Billheimers' second claim — that IRS agent Louderback violated a federal statute-apparently rests on 26 U.S.C. § 6343, which sets forth circumstances when the Secretary must release a tax levy and return property. These circumstances include, for example, when a taxpayer has satisfied the levy, when release of the levy will facilitate the collection of the unpaid tax, when the taxpayer has entered into an agreement to satisfy the levy. 26 U.S.C. § 6343(a).
The Billheimers cite to a non-existent statute, 26 U.S.C. § 3432. The Government correctly construes this as a probable reference to § 3432(a) of the IRS Restructuring Act of 1998 — now 26 U.S.C. § 6343. See Doc. #8 at 9.
Neither the Billheimers' Complaint nor their opposition to the Government's Motion to Dismiss nor their Motion for Summary Judgment contain any indication of a circumstance listed in § 6343(a) that would require the Secretary to release a levy on Plaintiff Darrell Billheimer's property. Absent some indication of such a circumstance, the Billheimers have failed to show that they are certain to succeed on the merits of their second claim.
* * *
The Billheimers' next claim that the IRS violated their statutory rights by not collecting unpaid taxes within the ten-year limitations period. See 26 U.S.C. § 6502(a)(1). They have not, however, shown a certainty of success on the merits of this claim because the Government initiated a collection action within the ten-year period.
Section 6502(a)(1) sets a ten-year limit on the collection of taxes by levy or court proceeding. The Billheimers incorrectly cite 26 U.S.C. § 3461 as this statute of limitations.
"[T]he Internal Revenue Code's limitation on the IRS's right to collect on the assessment through levy or judicial proceeding begins at the moment the assessment is made, regardless of whether a return was filed." In re Hindenlang, 164 F.3d 1029, 1035 (6th Cir. 1999). The tax assessment regarding Darrell Billheimer's unpaid income taxes occurred March 24, 1997. Billheimer, 197 F. Supp.2d at 1055. Thus, the Government's recent or present collection efforts are well within ten years of the assessment. The Billheimers, therefore, have not shown a certainty of success on their claim that the IRS violated, or is currently violating, § 6502(a) by enforcing it tax liens against Darrell Billheimer.
* * *
The Billheimers lastly claim that the IRS violated 26 U.S.C. § 7214(a) "by claiming sums greater than appear on the summary record of assessments for the years beginning in 1992." (Doc. #1 at 2).
Section 7214(a)(2) provides taxpayers with a cause of action against any officer of the United States who, "in connection with any revenue law . . . knowingly demands other or greater sums than are authorized by law. . . ." The Billheimers' Complaint and the documents attached to it are silent with regard to facts, which if accepted as true, indicate a violation of § 7412(a)(2). "While . . . 'a complaint need not set down in detail all the particularities of a plaintiff s claim,' the complaint must give the defendant 'fair notice of what the plaintiffs claim is and the grounds upon which it rests.'" Gazette v. City of Pontiac, 41 F.3d 1061, 1064 (6th Cir. 1994) (internal citations omitted). The Billheimers' Complaint fails to meet even these minimal notice pleading standards. Indeed, when read in conjunction with the documents attached to it and the Billheimers' Memoranda and Motions, no direct or inferential factual basis for this claim emerges. Dismissal of this claim is therefore warranted. See id; see also Hahn v. Star Bank, 190 F.3d 708, 718-19 (6th Cir. 1999) (A Complaint must "contain either direct or inferential allegations with respect to all material elements necessary to sustain a recovery under some viable legal theory.")
3.
Accordingly, for the above reasons, the Billheimers have not demonstrated a certainty of success on the merits of their claims, and as a result, they have not shown that the exception to the Anti-Injunction Act applies in this case. Consequently, under the Anti-Injunction Act this Court lacks subject matter jurisdiction over Billheimers' Complaint, which must therefore be dismissed. See 26 U.S.C. § 7421(a); see also Enochs, 370 U.S. at 5-7. C. The Billheimers' Claims Are Not Presently Moot
The Government contends that the Billheimers' claims are moot in light of their Chapter 13 bankruptcy petition filed in the United States Bankruptcy Court on January 28, 2003 (Doc. #8 at 5 and Exhibit A). The Government argues that 11 U.S.C. § 362(a) operates to automatically stay an action to collect the Billheimers' unpaid taxes during the pendency of their bankruptcy proceeding. Although the Government acknowledges that the automatic stay does not permanently enjoin it from collecting unpaid taxes from the Billheimers (Doc. #8 at 5), the Government maintains that the bankruptcy case may resolve the issues related to the Billheimers' federal tax liabilities. Thus, according to the Government, the stay provides the Billheimers with the same relief they seek in their Complaint, and as a result, the Complaint should be dismissed as moot.
Under Article III of the Constitution, this Court only has jurisdiction over actual cases and controversies. McPherson v. Michigan High School Athletic Assc., 119 F.3d 453, 458 (6th Cir. 1997) (citation omitted). The federal courts "have no power to adjudicate disputes which are moot." Id. "The test for mootness is whether the relief sought would, if granted, make a difference to the legal interests of the parties. . . ." Id; I see Diaz v. Kinkela, 253 F.3d 241, 243 (6th Cir. 2001).
The Government's contentions regarding mootness lack merit at this point in the litigation because the Government fails to support its analysis with supporting case law. This is fatal to the Government's argument since it is unclear whether this case is subject to the bankruptcy code's automatic stay provision. Rather than staying the instant case, the language of § 362(a) appears to stay cases against a debtor rather than cases filed by the debtor. See § 362(a)(1)-(8). The Government, moreover, has not pointed to the particular subsection of § 362(a)(1)-(8) that operates to automatically stay this case. See Doc.# 8 at 4-5. Thus, the Government has not shown that the automatic stay provision applies to this case.
This statement does not constitute a holding of whether § 362(a) automatically stays cases of the instant type — a civil action brought pre-bankruptcy against the Government concerning its tax-collection efforts — because the parties have not addressed this issue, The Government asserts in a conclusory manner that the automatic stay applies. The Billheimers have not specifically discussed the issue.
In addition, assuming the automatic stay provision does apply fails to render the instant case moot. This is so because the stay would simply stop this case; it would not simultaneously provide the Billheimers with the relief they seek here, which is at present only a possible result in the Bankruptcy Court. Mootness will not arise in this case until and unless the Bankruptcy Court issues an Order providing the Billheimers with the relief they seek here. Such an Order would moot the instant case because the parties' legal relationship would be altered so as to cause the relief the Billheimers seek in this case, if granted, to make no difference in the parties' legal interests. See McPherson, 119 F.3d at 458; see also Kinkela, 253 F.3d at 243. As this hypothetical situation has not yet occurred, the instant case is not presently moot.
Accordingly, absent authority supporting the principle that the automatic stay provision, 11 U.S.C. § 362(a), renders moot a taxpayers' challenge to federal tax-collection efforts in the U.S. District Court, the Government's mootness contentions presently lack merit.
D. The Billheimers' Motion for Summary Judgment Lacks Merit
The Billheimers contend that summary judgment in their favor is warranted because the Government has "failed to show that there is a genuine issue as to any material fact in their pleadings and the [Billheimers] are entitled to judgment as a matter of law." (Doc. #17 at 1). In support of this contention, the Billheimers assert that the Government relies on statements of counsel and that such statements are not evidence.
The Billheimers' Motion for Summary Judgment lacks merit because the claims they raise in their Complaint are barred by the doctrine of sovereign immunity and by the Anti-Injunction Act, § 26 U.S.C. § 7421. Supra, at pp. 7-13.
Summary judgment in the Billheimers' favor cannot be granted at this, the pre-discovery, stage of the litigation for two additional reasons. First, the Government has not had an adequate opportunity to conduct discovery, absent which summary judgment in the Billheimers' favor cannot be granted. See Burchett v. Kiefer, 310 F.3d 937, 942 (6th Cir. 2002). Second, the Billheimers have not met their burden under Rule 56 to show "the absence of genuine factual disputes from which a reasonable jury could return a verdict for the plaintiff." Hager, 286 F.3d at 370. To determine if the Billheimers have made this showing, "the court must 'look beyond the pleadings and assess the proof to determine whether there is a genuine need for trial.'" Hager, 286 F.3d at 370 (quoting in part Sowards v. London County, 203 F.3d 426, 431 (6th Cir. 2000)). This they have not done.
In this pre-discovery phase of the case, the Billheimers can only point to the allegations in their Complaint and to the attached documents, which together fail to show that they would be entitled to judgment as a matter of law at trial, even if the Government presented no contrary evidence. Indeed, these documents in part tend to defeat the Billheimers' claims. For example, the Government issued two Notices of Federal Tax Liens against Plaintiff Darrell Billheimer, copies of which are attached to the Complaint. The Billheimers have not pointed to evidence indicating that these Notices are invalid, likely due to the fact that the Government has previously established the validity of these Notices. Billheimer, 197 F. Supp.2d at 1055. In addition, Plaintiff Darrell Billheimer's May 5, 1994 letter to the IRS declaring his intent not to ever again file a tax return and his statement that he has removed himself from the income tax system, do not support and tend to defeat the Billheimers' challenges to the Government's actions in attempting to collect unpaid income tax.
Accordingly, the Billheimers' Motion for Summary Judgment lacks merit.
IT IS THEREFORE RECOMMENDED THAT:
1. The Government's Motion to Dismiss Motion to Dismiss (Doc. #8) be GRANTED;
2. The Billheimers' Motions to Strike (Doc. #s 10, 15) be DENIED;
3. The Billheimers' Motion for Summary Judgment (Doc. # 17) be DENIED; and
4. The Billheimers' Complaint be DISMISSED with prejudice.
NOTICE REGARDING OBJECTIONS
Pursuant to Fed.R.Civ.P. 72(b), any party may serve and file specific, written objections to the proposed findings and recommendations within ten days after being served with this Report and Recommendations. Pursuant to Fed.R.Civ.P. 6(e), this period is extended to thirteen days (excluding intervening Saturdays, Sundays, and legal holidays) because this Report is being served by mail. Such objections shall specify the portions of the Report objected to and shall be accompanied by a memorandum of law in support of the objections. If the Report and Recommendations are based in whole or in part upon matters occurring of record at an oral hearing, the objecting party shall promptly arrange for the transcription of the record, or such portions of it as all parties may agree upon or the Magistrate Judge deems sufficient, unless the assigned District Judge otherwise directs. A party may respond to another party's objections within ten days after being served with a copy thereof.Failure to make objections in accordance with this procedure may forfeit rights on appeal. See United States v. Walters, 638 F.2d 947 (6th Cir. 1981); Thomas v. Arn, 474 U.S. 140 (1985).