Opinion
Norman Douglas Diamond, Plaintiff, Pro se, Ome City.
For United States of America, Defendant: James C Hughes, LEAD ATTORNEY, Office of the U.S. Attorney, Tax Division, Los Angeles, CA.
REPORT AND RECOMMENDATION OF UNITED STATES MAGISTRATE JUDGE
ALICIA G. ROSENBERG, United States Magistrate Judge.
The court submits this Report and Recommendation to the Honorable George H. King, United States District Judge, pursuant to 28 U.S.C. § 636 and General Order No. 05-07 of the United States District Court for the Central District of California. For the reasons set forth below, the magistrate judge recommends that Defendant's motion to dismiss the complaint be granted and that Plaintiff's motion for injunctions be denied.
I .
SUMMARY OF PROCEEDINGS
On October 31, 2013, Plaintiff filed a complaint that asserted seven claims for relief. On December 26, 2013, Defendant United States of America (erroneously named as the " Internal Revenue Service" and the " Department of Justice") filed a motion to dismiss (" MTD") for lack of subject matter jurisdiction based on sovereign immunity or, alternatively, for failure to state a claim. On December 30, 2013, Plaintiff filed a preliminary opposition. On January 7, 2014, Plaintiff filed an opposition. On January 21, 2014, Defendant filed a reply. On February 10, 2014, Plaintiff filed a sur-reply.
The Clerk is directed to correct the caption so that the United States of America is the sole defendant. See Krouse v. U.S. Government Treasury Dep't, 380 F.Supp. 219, 221 (C.D. Cal. 1974) (" Department of the Treasury and Internal Revenue Service are not entities subject to suit").
On July 21, 2014, Plaintiff filed a motion for injunctions, which this court construes as a motion for preliminary injunctive relief.
II .
FACTUAL BACKGROUND
A. Plaintiff's Tax-Related Litigations
This court takes judicial notice of the litigations Plaintiff has filed to obtain refunds or other relief from federal taxes. Fed.R.Evid. 201; see Reyn's Pasta Bella, LLC v. Visa USA, Inc., 442 F.3d 741, 746 n.6 (9th Cir. 2006).
On June 5, 2012, Plaintiff filed suit in the Court of Federal Claims challenging the IRS' denial of his claimed refund in the 2005 tax year. Diamond v. United States (Diamond I), 107 Fed.Cl. 702 (2012). The court dismissed Plaintiff's claim for lack of subject matter jurisdiction after finding that the original and amended 2005 tax return did not constitute a proper claim for refund. (Complaint ¶ 201); Diamond I, 107 Fed.Cl. at 705-07. The original return did not include social security numbers or wage and foreign income information, and was not signed under penalty of perjury. Id. at 705-06. The amended return indicated $0 in wages and foreign income " after 2555 exclusion, " but the amended return did not include the form 2555 and cited the Fifth Amendment. The court concluded that the amended return " does not provide sufficient information to calculate tax liability and is unreasonably deficient." Id. at 707. The Federal Circuit affirmed and the Supreme Court denied the petition for certiorari. (Complaint ¶ 201); Diamond v. United States (Diamond II), 530 Fed.Appx. 943 (Fed. Cir. 2013), cert. denied, 134 S.Ct. 1344, 188 L.Ed.2d 309 (2014).
On April 25, 2013, Plaintiff and his wife filed a complaint in the Court of Federal Claims seeking refunds for tax years 2006-2011 and abatement of a fee assessed by the IRS for filing a frivolous tax return for the 2008 tax year pursuant to 26 U.S.C. § 6702. See Diamond v. United States (Diamond III), 115 Fed.Cl. 516, 522 & n.10 (Fed. Cl. Apr. 4, 2014) (collecting cases filed by Plaintiff challenging tax liability). The court held that it did not have subject matter jurisdiction over the claim for abatement of the fee because Plaintiff had not paid it. Id. at 526. The court held that it could not provide relief on Plaintiffs' refund claims. " The IRS has the authority to withhold a tax refund and apply overpayments to a taxpayer's other outstanding liabilities." Id. at 528. The court found that the IRS had applied Plaintiffs' overpayments for 2006-2011 to mitigate their other tax liabilities. Id. The court rejected Plaintiffs' claim that the Government did not abide by stipulated decisions of the United States Tax Court. Id. at 529-30. Plaintiff and his wife have apparently appealed the decision to the Federal Circuit. That appeal remains pending. Diamond, et al. v. United States (Diamond IV), Case No. 2014-5088.
Plaintiff alleges that he has pending cases before the United States Tax Court. (Complaint ¶ 84, 145-46.) The Court of Federal Claims noted that the Tax Court reduced the amount of frivolous filing penalties for the 2005-2007 tax years. Diamond III, 115 Fed.Cl. at 528 n.17.
B. Claims and Allegations in This Case
The complaint in this case asserts seven claims for relief for (1) fraudulent filing of information returns in violation of 26 U.S.C. § 7434 (Complaint ¶ ¶ 229-34); (2) unauthorized disclosure in violation of the Privacy Act, 5 U.S.C. § 552a(g)(1)(D), and 26 U.S.C. § 7431(a)(1) (Id. ¶ ¶ 235-41); (3) conspiracy to interfere with civil rights in violation of 42 U.S.C. § 1985(2)-(3) (Id. ¶ ¶ 242-50); (4)-(6) imposition of frivolous filing penalties under 26 U.S.C. § 6702(a) in violation of the Constitution (Id. ¶ ¶ 251-55); and (7) perjury by defendant's employees in the Tax Court (Id. ¶ ¶ 256-70). Plaintiff seeks damages in the amount of $2,250,000. (Id. ¶ ¶ 271-78.) Plaintiff's complaint does not seek injunctive relief.
Plaintiff has resided in Tokyo, Japan since 1988. (Complaint ¶ 3.) In 1994, the IRS displayed his social security number next to his name and address on mail that was visible to passersby and postal employees. (Id. ¶ ¶ 18-20.) Plaintiff applied for a replacement social security number and " continued correspondence with the Social Security Administration from 1994 to 2010." (Id. ¶ ¶ 21-22.) Also in 1994, Plaintiff applied for a social security number for his wife. (Id. ¶ 30.) In 2005, the U.S. embassy informed plaintiff that the SSA had no record of an application from Plaintiff's wife. (Id. ¶ 94.) In 2010, the SSA rejected Plaintiff's application for a replacement social security number. (Id. ¶ 95.)
Plaintiff alleges that his marriage is recognized by some federal agencies but not by others. (Complaint ¶ 29.)
Plaintiff and his wife filed joint income tax returns for tax years 1999-2010. (Id. ¶ 32.) Plaintiff wrote either " applied for" instead of social security numbers or else wrote that " defendant instructed plaintiff not to report the status of their applications for social security numbers." (Id. ¶ 33.)
Defendant took the position that Plaintiff's income tax returns for 2002 and 2005-2008 were frivolous and/or fraudulent. (Id. ¶ ¶ 41, 45, 62, 104.) In June 2006, Plaintiff and his wife submitted a Form 1040 U.S. Individual Income Tax Return (" Form 1040") claiming a refund in the amount of $10,645.40. (Complaint, Exh. 23 at 117-34.) Plaintiff did not include social security or taxpayer identification numbers with the return and directed the IRS to " see statement." (Id. at 117.) Plaintiff crossed out the portion of the return jurat which read, " to the best of my knowledge and belief, [these statements] are true, correct, and complete, " writing in its place " see statement." (Id. at 118.) Plaintiff listed both his wages and salary (Line 7 of the return) and " other income" (Line 21 of the return) as $0.00 and directed the reader to the attached statement. (Id. at 117.) Plaintiff claimed he was " not aware of any social security numbers that [he or his wife could] safely use" as a result of the Department of Treasury's " former violations of the Privacy Act of 1974." (Id. at 129.) The figures listed on lines 7 and 21 were computed based upon his Form 2555 Statement of Foreign Income, which he did not file " [i]n accordance with the 5th Amendment to the United States constitution." (Id. at 130; see Complaint ¶ 207.)
On September 15, 2006, the IRS informed Plaintiff that his 2005 tax return had been deemed frivolous. (Complaint, Exh. 29 at 144, 146.) Plaintiff was instructed to file a corrected return within thirty days or else face imposition of a frivolous filing penalty pursuant to 26 U.S.C. § 6702. (Id. at 145.) The IRS deemed frivolous Plaintiff's 2006, 2007 and 2008 returns. (Complaint ¶ 62.)
In 2009, the IRS filed a federal tax lien against Plaintiff and offered him the opportunity to request a Collection Due Process hearing. (Id. ¶ 78.) During the hearing, which took place in 2010, Plaintiff alleges he was instructed to re-file his 2005 and 2006 returns with a social security number " because defendant does not accept 'Applied for.'" (Id. ¶ 80.) Plaintiff challenged the various filing penalties before the United States Tax Court. (Id. ¶ 84, 144-46; Diamond v. Comm'r (Diamond I), No. 14482-10SL (T.C. 2010); Diamond v. Comm'r, No. 5516-12SL (T.C. 2012); Diamond v. Comm'r, No. 5518-12SL (T.C. 2012).) To resolve the Tax Court cases, Plaintiff and the IRS signed stipulated decisions setting certain penalties and fees. (Complaint ¶ ¶ 152-54.) However, Plaintiff, seeking to recover litigation expenses, moved to vacate these decisions and have his Tax Court cases reopened. (Id. ¶ ¶ 166-68.)
On or about October 4, 2010, Plaintiff filed a revised Form 1040, seeking a refund for the 2005 taxable year. (Complaint, Exh. 114 at 500-01.) The revised return, which again claimed a refund of $10,645.40, included his social security number and contained an unaltered, signed jurat. (Id.) On March 31, 2011, the IRS issued Plaintiff a letter stating it had disallowed the 2005 return because it had not been submitted within three years of the date the tax had become due. (Complaint at 55 & Exh. 72 at 353-57.)
As a result of Defendant's aforementioned actions, Plaintiff suffered " enormous stress, heart damage and many sleepless nights as [he] could not figure out what he had done wrong[.]" (Complaint ¶ 220). Plaintiff alleges claims of fraudulent filing of information returns, unauthorized disclosure, conspiracy to interfere with civil rights and perjury. (Id. ¶ ¶ 229-50, 256-70.) Plaintiff challenges the constitutionality of the frivolous filing penalty assessed under 26 U.S.C. § 6702. (Id. ¶ ¶ 251-55.) Plaintiff requests $2,250,000 in damages. (Id. ¶ 278.)
III .
LEGAL STANDARDS
A. Lack of Subject Matter Jurisdiction Under Fed.R.Civ.P. 12(b)(1)
Fed. R. Civ. P. 12(b)(1) authorizes a motion to dismiss for lack of subject matter jurisdiction. Although lack of subject matter jurisdiction is an affirmative defense, the burden of proof in a 12(b)(1) motion is on the party asserting jurisdiction, and the court will presume a lack of jurisdiction until the pleader proves otherwise. See Kokkonen v. Guardian Life Ins. Co. of Amer., 511 U.S. 375, 377, 114 S.Ct. 1673, 128 L.Ed.2d 391 (1994); Stock West, Inc. v. Confederated Tribes of the Colville Reservation, 873 F.2d 1221, 1225 (9th Cir. 1989).
When addressing an attack on the existence of subject matter jurisdiction, a court " is not restricted to the face of the pleadings." McCarthy v. U.S., 850 F.2d 558, 560 (9th Cir. 1988). A court may rely on evidence extrinsic to the pleadings and resolve factual disputes relating to jurisdiction. St. Clair v. City of Chico, 880 F.2d 199, 201 (9th Cir. 1989); Roberts v. Corrothers, 812 F.2d 1173, 1177 (9th Cir. 1987). No presumptive truthfulness attaches to plaintiff's allegations, and the existence of disputed material facts does not preclude evaluation of the merits of jurisdictional claims. Thornhill Pub. Co., Inc. v. General Tel. & Elecs. Corp., 594 F.2d 730, 733 (9th Cir. 1979).
B. Sovereign Immunity
Plaintiff's complaint does not seek injunctive relief, which would be barred in any event. 26 U.S.C. § 7421 (" no suit for the purpose of restraining the assessment or collection of any tax shall be maintained in any court by any person" with statutory exceptions).
" Absent a waiver, sovereign immunity shields the Federal Government and its agencies from suit." FDIC v. Meyer, 510 U.S. 471, 475, 114 S.Ct. 996, 127 L.Ed.2d 308 (1994). " It is axiomatic that the United States may not be sued without its consent and that the existence of consent is a prerequisite for jurisdiction." United States v. Mitchell, 463 U.S. 206, 212, 103 S.Ct. 2961, 77 L.Ed.2d 580 (1983) (footnote omitted). Before a federal court may exercise jurisdiction over any suit against the government, it must have " a clear statement from the United States waiving sovereign immunity, together with a claim falling within the terms of the waiver." United States v. White Mountain Apache Tribe, 537 U.S. 465, 472, 123 S.Ct. 1126, 155 L.Ed.2d 40 (2003) (citations omitted). The government's waiver of sovereign immunity cannot be implied, but " must be unequivocally expressed in statutory text." Lane v. Pena, 518 U.S. 187, 192, 116 S.Ct. 2092, 135 L.Ed.2d 486 (1996).
A party bringing a cause of action against the federal government bears the burden of showing an unequivocal waiver of immunity. Holloman v. Watt, 708 F.2d 1399, 1401 (9th Cir. 1983). " Absent consent to sue, dismissal of the action is required." Hutchinson v. U.S., 677 F.2d 1322, 1327 (9th Cir. 1982).
C. Failure to State a Claim Under Fed.R.Civ.P. 12(b)(6)
To survive dismissal, " 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, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009) (citation omitted). " A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged. The plausibility standard is not akin to a 'probability requirement, ' but it asks for more than a sheer possibility that a defendant has acted unlawfully. Where a complaint pleads facts that are 'merely consistent with' a defendant's liability, it 'stops short of the line between possibility and plausibility of " entitlement to relief." '" Id. (citations omitted).
In reviewing a complaint, " the tenet that a court must accept as true all of the allegations contained in a complaint is inapplicable to legal conclusions. Threadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice." Id.; Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007) (" labels and conclusions" or " formulaic recitation of the elements of a cause of action" are insufficient). A " naked assertion" without factual enhancement is insufficient. Id. at 557. " [W]here the well-pleaded facts do not permit the court to infer more than the mere possibility of misconduct, " the complaint is subject to dismissal. Iqbal, 129 S.Ct. at 1950.
A pro se complaint is to be liberally construed. Erickson v. Pardus, 551 U.S. 89, 94, 127 S.Ct. 2197, 167 L.Ed.2d 1081 (2007). Before dismissing a pro se complaint for failure to state a claim, the plaintiff should be given a statement of the complaint's deficiencies and an opportunity to cure them unless it is clear the deficiencies cannot be cured by amendment. Eldridge v. Block, 832 F.2d 1132, 1135-36 (9th Cir. 1987).
IV .
DISCUSSION
A. First Claim: 26 U.S.C. § 7434
Plaintiff alleges that IRS employees " altered Forms 1099 to attribute withholding from plaintiff's account at Ameritrade to an unknown party" and " erased records of withholding from plaintiff's account." (Complaint ¶ ¶ 6, 147-48, 230.) Plaintiff also alleges the employees must have altered Forms 1116. (Id.)
" If any person willfully files a fraudulent information return with respect to payments purported to be made to any other person, such other person may bring a civil action for damages against the person so filing such return. 26 U.S.C. § 7434(a). Section 7434 does not contain a waiver of sovereign immunity against the United States. The plain language of § 7434(a) provides a private right of action only against the " person" who " willfully files a fraudulent information return with respect to payments purported to be made to any other person." See Barnhart v. Sigmon Coal Co., 534 U.S. 438, 450, 122 S.Ct. 941, 151 L.Ed.2d 908 (2002) (" As in all statutory construction cases, we begin with the language of the statute. The first step is to determine whether the language at issue has a plain and unambiguous meaning with regard to the particular dispute in the case.") (internal quotation marks omitted). The Government is not the " person" filing the information return. The legislative history indicates that " § 7434 was enacted to address the fact that '[s]ome taxpayers may suffer significant personal loss and inconvenience as the result of the IRS receiving fraudulent information returns, which have been filed by persons intent on either defrauding the IRS or harassing taxpayers.'" Katzman v. Essex Waterfront Owners LLC, 660 F.3d 565, 569 (2d Cir. 2011) (quoting H.R. Rep. 104-506, at 37) (emphasis added). When analyzing sovereign immunity, the statute is strictly construed in favor of the United States and the waiver cannot be enlarged beyond what the language of the statute requires. United States v. Nordic Vill, Inc., 503 U.S. 30, 33, 112 S.Ct. 1011, 117 L.Ed.2d 181 (1992).
Moreover, § 7434 does not apply to a failure to file a required information return. Katzman, 660 F.3d at 568-69. Plaintiff refers to an IRS letter stating the IRS did not receive a third party report of withholding from Ameritrade or anyone else in Plaintiff's name for tax years 2005 and 2006. (Complaint, Exh. 90 at 425-426.)
Plaintiff's argument that the Federal Tort Claims Act (FTCA), 28 U.S.C. § 1346(b)(1), " also makes the United States the defendant for loss of property and personal injury by wrongful acts or omissions of Government employees" is without merit. (Opposition ¶ 64.) Under 28 U.S.C. § 1346(b)(1), federal actions are permitted for " claims against the United States, for money damages . . . for injury or loss of property . . . caused by the negligent or wrongful act or omission of any employee of the Government while acting within the scope of his office or employment." However, the FTCA expressly exempts claims " arising in respect of the assessment or collection of any tax." 28 U.S.C. § 2680(c); Blehm v. McIntyre, 2008 WL 5381305, *3 (S.D. Cal. December 22, 2008) (" [T]he United States revokes consent under the FTCA for '[a]ny claim arising in respect of the assessment or collection of any tax . . . by any officer of customs or excise or any other law enforcement officer.'"). Plaintiff's citation to section 230.20 of the Guide to Judiciary Policy, which merely references the FTCA, does nothing to alter this analysis. (Opposition ¶ 63.) Plaintiff's argument that he has alleged what amounts to " theft" and not the assessment or collection of tax is frivolous and cannot evade the requirements of subject matter jurisdiction. (Id. ¶ 66.)
Accordingly, it is recommended that Plaintiff's fraudulent filing claim should be dismissed for lack of subject matter jurisdiction. Dismissal should be with prejudice because the defect cannot be cured by amendment.
B. Second Claim: Unauthorized Disclosures
Plaintiff alleges that the IRS and Department of Justice publicly disclosed his " already abused social security number" before the United States Tax Court and the Federal Court of Claims in violation of 5 U.S.C. § 552a (" Privacy Act of 1974") and 26 U.S.C. § 7431(a)(1). (Complaint ¶ ¶ 235-36.)
The Privacy Act provides that, with certain exceptions, no government agency may disclose records regarding an individual, without that individual's consent. 5 U.S.C. § 552a(b).
" Tax returns and tax return information must be kept confidential, unless a statutory exception applies." Aloe Vera of America, Inc. v. United States, 699 F.3d 1153, 1156 (9th Cir. 2012). A taxpayer may bring a civil action for damages against the United States when any federal government officer or employee " knowingly, or by reason of negligence, inspects or discloses any return or return information with respect to a taxpayer in violation of any provision of [26 U.S.C.] section 6103." See 26 U.S.C. § 7431(a)(1).
Section 6103 expressly authorizes disclosure " in a Federal or State judicial or administrative proceeding pertaining to tax administration, but only (A) if the taxpayer is a party to the proceeding, or the proceeding arose out of, or in connection with, determining the taxpayer's civil or criminal liability, or the collection of such civil liability, in respect of any tax imposed under this title; [or] (B) if the treatment of an item reflected on such return is directly related to the resolution of an issue in the proceeding." 26 U.S.C. § 6103(h)(4)(A); Lampert v. United States, 854 F.2d 335, 337 (9th Cir. 1988) (§ 6103(h)(4)(A) " authorizes the disclosure of return information in judicial proceedings involving a taxpayer's civil or criminal tax liability"); see also William E. Schrambling Accountancy Corp. v. United States, 937 F.2d 1485, 1489 (9th Cir. 1991) (§ 6103 applies to any employee of United States, including IRS and United States Attorneys Office).
Plaintiff complains about disclosures that are expressly authorized by § 6103, namely, disclosures in Plaintiff's tax cases in the Tax Court and Court of Federal Claims in 2011 and 2012. (Complaint ¶ ¶ 235-36.) The complaint alleges that Plaintiff is a party to the proceedings in the Tax Court (Id. ¶ ¶ 84, 150-54) and Court of Federal Claims. (Id. ¶ 173); Diamond I, 107 Fed.Cl. 702 (2012); Diamond III, 115 Fed.Cl. 516 (Fed. Cl. Apr. 4, 2014). These proceedings involve the determination of Plaintiff's tax liability. (Complaint ¶ 84, 150-54); See Diamond I, 107 Fed.Cl. at 705-07; Diamond III, 115 Fed.Cl. at 526-30; see also Complaint Exhs. 108, 116, 125, 132.
Plaintiff's complaint attaches filings in the Tax Court that indicate Plaintiff as a petitioner. See Diamond v. Comm'r, Dkt. No. 14482-10S (Complaint, Exhs. 73-74, 76, 85, 91, 93, 95, 97, 132); Diamond, et al. v. Comm'r, Dkt. No. 3033-12SL (Complaint, Exhs. 100, 108); Diamond, et al. v. Comm'r, Dkt. No. 5516-12SL (Complaint, Exhs. 121, 125); Diamond, et al. v. Comm'r, Dkt. No. 5518-12SL (Complaint, Exh. 116). Exhibit 108, issued on March 27, 2012, indicates Plaintiff had " filed at least six cases" in the Tax Court. (Complaint, Exh. 108 at 2.)
Accordingly, Plaintiff cannot state a claim for relief under § 7431. Plaintiff argues that § 6103(h)(4) should apply only when disclosures are made under seal. (Opposition ¶ ¶ 67-68.) " As in all statutory construction cases, we begin with the language of the statute. The first step 'is to determine whether the language at issue has a plain and unambiguous meaning with regard to the particular dispute in the case.'" Barnhart v. Sigmon Coal Co., 534 U.S. 438, 450, 122 S.Ct. 941, 151 L.Ed.2d 908 (2002) (citation omitted). " The inquiry ceases 'if the statutory language is unambiguous and the 'statutory scheme is coherent and consistent.'" Id. (citation omitted). The plain language of § 6103(h)(4) contains explicit requirements for disclosures in judicial or administrative proceedings and does not require any filing under seal.
The absence of a statutory requirement for filing under seal is understandable. In general, a party seeking to file a document under seal in a judicial proceeding must file an application and make the requisite showing as to each document. For dispositive motions and trial, a party must show compelling reasons. Pintos v. Pacific Creditors Ass'n, 565 F.3d 1106, 1115 (9th Cir. 2009). In discovery or nondispositive pretrial proceedings, a party must show good cause. Id. A different standard governs grand jury transcripts and warrant materials in a pre-indictment investigation, but that category is not at issue here. Kamakana v. City & County of Honolulu, 447 F.3d 1172, 1178 (9th Cir. 2006).
Plaintiff's reliance on the Federal Privacy Act is unavailing. " To the extent that the Privacy Act would recognize a cause of action for unauthorized disclosure of tax return information even where § 6103 would provide an exception for the particular disclosure, § 6103 trumps the Privacy Act." Hobbs v. United States, 209 F.3d 408, 412 (5th Cir. 2000). " Congress could not have intended the oddity that the IRS properly could make a disclosure of tax return information in a judicial or administrative proceeding 'pertaining to tax administration' in accordance with § 6103(h)(4), but would be exposed to liability under the more general provisions of the Privacy Act. Consequently, we refuse to subject the IRS to such an absurd result." Id.; Gardner v. United States, 213 F.3d 735, 742, 341 U.S.App.D.C. 378 (D.C. Cir. 2000) (same); Cheek v. I.R.S., 703 F.2d 271, 271-72 (7th Cir. 1983) (§ 6103 overrides any inconsistent provisions of Privacy Act).
Plaintiff also argues that Defendant's disclosures violated the rules of the Tax Court and Court of Federal Claims. (Opposition ¶ 67.) Section 7431, however, provides a remedy only for disclosures in violation of 26 U.S.C. § 6103.
Plaintiff's argument that Defendant's disclosures violated 26 U.S.C. § 7213 is also unavailing. (Complaint ¶ ¶ 235-36.) Section § 7213 provides criminal penalties for unlawful disclosure of return information " except as authorized in this title." " There is no authority for the proposition that Plaintiff can bring a civil cause of action based on th[is] criminal statute[]." Valladares v. I.R.S., 2001 WL 670629, *7 (E.D. Cal. May 2, 2001). Accordingly, § 7213 does not contain a waiver of sovereign immunity against the United States and Plaintiff has no private right of action.
It is recommended that Plaintiff's second claim be dismissed for failure to state a claim. Dismissal should be with prejudice because the defect cannot be cured by amendment.
C. Third Claim: 42 U.S.C. § 1985
Plaintiff alleges that the IRS and Department of Justice deprived him of his civil rights by violating his right to equal protection of the laws and his Fifth Amendment right against self-incrimination. (Complaint ¶ ¶ 243-46.)
A waiver of sovereign immunity " must be unequivocally expressed in statutory text." Lane, 518 U.S. at 192. Section 1985 permits individuals to bring suit against " persons" who conspire to deprive them of certain constitutional rights. There is " no evidence . . . that Congress intended to subject federal agencies to . . . § 1985 liability." Jachetta v. United States, 653 F.3d 898, 908 (9th Cir. 2011) Indeed, § 1985 merely imposes liability upon a " person, " and a federal agency is not a " person" within the meaning of this provisions. Id. Accordingly, § 1985 does not waive sovereign immunity for the United States. Id.
Plaintiff's reliance on Davis v. Passman, 442 U.S. 228, 99 S.Ct. 2264, 60 L.Ed.2d 846 (1979), and Carlson v. Green, 446 U.S. 14, 100 S.Ct. 1468, 64 L.Ed.2d 15 (1980), is misplaced. (Opposition ¶ 69.) Both cases involved actions for damages against individual federal government employees pursuant to Bivens v. Six Unknown Fed. Narcotics Agents, 403 U.S. 388, 91 S.Ct. 1999, 29 L.Ed.2d 619 (1971), and not against the federal government. Davis, 442 U.S. at 230; Carlson, 446. U.S. at 17. Bivens relief is unavailable against IRS officials " [b]ecause the Internal Revenue Code gives taxpayers meaningful protections against government transgressions in tax assessment and collection." Adams v. Johnson, 355 F.3d 1179, 1186 (9th Cir. 2004).
It is recommended that Plaintiff's § 1985 claim be dismissed for lack of subject matter jurisdiction. E.g., Gerritsen v. Consulado Gen. De Mexico, 989 F.2d 340, 343 (9th Cir. 1993) (dismissing pro se plaintiff's § 1983 and § 1985 claims because " the FBI is a federal agency and . . . Congress has not revoked its immunity"). Dismissal should be with prejudice because the defect cannot be cured by amendment.
D. Fourth, Fifth and Six Claims: Frivolous Filing Penalty
Section 6702 provides for imposition of civil penalties for filing frivolous tax returns. 26 U.S.C. § 6702. Plaintiff's fourth, fifth and six claims challenge frivolous filing penalties under 26 U.S.C. § 6702 as unconstitutional. (Complaint ¶ ¶ 251-55.)
Plaintiff's complaint does not identify the frivolous filing penalties that he challenges and does not allege that he paid such penalties in full and filed an administrative claim for refund with the IRS. These facts must be pleaded in order to establish subject matter jurisdiction. See 26 U.S.C. § 7422(a). The Supreme Court has construed 28 U.S.C. § 1346(a)(1) to require full payment of the assessment against a taxpayer before a refund suit can be maintained. Flora v. United States, 362 U.S. 145, 177, 80 S.Ct. 630, 4 L.Ed.2d 623, 1960-1 C.B. 660 (1960). The taxpayer must have duly filed a claim for refund with the IRS. United States v. Dalm, 494 U.S. 596, 601, 110 S.Ct. 1361, 108 L.Ed.2d 548 (1990); Boyd v. United States, 762 F.2d 1369, 1371 (9th Cir. 1982).
There is no other basis for subject matter jurisdiction. With exceptions not applicable here, taxpayers cannot bring suit to enjoin the assessment or collection of any tax. 26 U.S.C. § 7421(a). As discussed above, to the extent Plaintiff seeks damages for violations of his constitutional rights (Opposition ¶ 73), there is no waiver of sovereign immunity. Jachetta, 653 F.3d at 904; see also FDIC v. Meyer, 510 U.S. 471, 478, 114 S.Ct. 996, 127 L.Ed.2d 308 (1994) (" [T]he United States simply has not rendered itself liable under [the FTCA] for constitutional tort claims.").
In his opposition, Plaintiff asserts that the frivolous filing penalties at issue are " primarily years 2005 through 2008." (Opposition ¶ 72.) Plaintiff's opposition asserts that the IRS assessed those penalties but does not claim that Plaintiff paid those penalties or filed proper administrative claims for refund of those penalties. In Diamond I, Plaintiff's claim for refund in 2005 was dismissed for lack of subject matter jurisdiction because Plaintiff's original and amended 2005 tax return did not constitute a proper claim for refund. Diamond I, 107 Fed.Cl. at 705-07. In Diamond III, Plaintiff's claim for abatement of the frivolous filing penalty in 2008 was dismissed for lack of subject matter jurisdiction because Plaintiff had not paid it. Diamond III, 115 Fed.Cl. at 526. The same court noted that Plaintiff challenged the frivolous filing penalties for the 2005-2007 tax years in the Tax Court. Id. at 528 n.17; see Exhs. to Complaint listed in footnote 5. Having done so, Plaintiff cannot challenge those same penalties in a United States District Court. 26 U.S.C. § 7422(e) (" If the taxpayer filed a petition with the Tax Court, the district court . . . shall lose jurisdiction of taxpayer's suit to whatever extent jurisdiction is acquired by the Tax Court of the subject matter of taxpayer's suit for refund."); Flora, 362 U.S. at 166 (§ 7422(e) precludes litigation in both Tax Court and District Court over same refund); see Parchan v. United States, 510 Fed.Appx. 666, 667 (9th Cir. 2013) (unpublished) (plaintiff lost right to litigate tax claims in district court after suing in Tax Court).
Plaintiff states that the penalties at issue " might" include 2002. (Opposition ¶ 72.) The complaint alleges that the 2002 tax return is being litigated in Tax Court. (Complaint ¶ ¶ 133, 135, 137.) Therefore, Plaintiff cannot maintain an action here for the reasons discussed below in connection with the 2005-2007 years.
It is recommended that Plaintiff's fourth, fifth and sixth claims be dismissed for lack of subject matter jurisdiction. Dismissal should be with prejudice because the defect cannot be cured by amendment.
E. Seventh Claim: Perjury
Plaintiff argues that although he " cannot find a civil cause of action for perjuries, " he and his spouse are interested parties who were damaged when IRS employees perjured themselves by signing false declarations before the Tax Court. (Complaint ¶ ¶ 256-64.)
There is no civil cause of action for perjury. Therefore, Plaintiff cannot establish subject matter jurisdiction in this court. Plaintiff's claim is not actionable under the FTCA. Love v. United States, 60 F.3d 642, 644 (9th Cir. 1995) (" The breach of a duty created by federal law is not, by itself, actionable under the FTCA.") (citations omitted). The declarations at issue were submitted by IRS employees in the Tax Court and involved the assessment and collection of federal tax liabilities. (Complaint ¶ ¶ 260-70.) The FTCA contains an exception for " [a]ny claim arising in respect of the assessment or collection of any tax." 28 U.S.C. 2680(c).
Accordingly, it is recommended that Plaintiff's perjury claims be dismissed for lack of subject matter jurisdiction. Dismissal should be with prejudice because the defect cannot be cured by amendment.
Moreover, witnesses are absolutely immune from damages liability based on their testimony. See Briscoe v. LaHue, 460 U.S. 325, 326, 103 S.Ct. 1108, 75 L.Ed.2d 96 (1983); Franklin v. Terr, 201 F.3d 1098, 1099 (9th Cir. 2000) (same).
V .
PLAINTIFF'S MOTION FOR INJUNCTIONS
On July 21, 2014, Plaintiff filed a motion for injunctions. (Dkt. Nos. 44-45.) Although Plaintiff's request is not entirely clear, Plaintiff apparently seeks the following injunctive relief:
1. An order that the IRS perform an audit of Plaintiff's federal tax returns for the 2005 tax year. The IRS would be required to communicate with U.S. payers to confirm Plaintiff's income and withholding amounts. The IRS would have the option of communicating with non-U.S. payers and inspecting the records maintained by Plaintiff and his wife. The IRS would be required to comply with " verbal direction of U.S. Tax Court in its docket number 14482-10SL that certain documents be protected in a manner equivalent to seal." The IRS would be prohibited from requiring Plaintiff or his wife to be witnesses against themselves in a criminal case. (Memorandum at 6 ¶ 3.) 2. An order that the IRS initiate a criminal prosecution if it finds fraud and an order that the United States provide an attorney to Plaintiff and his wife if they become defendants in a criminal case. (Id. at 6-7 ¶ 5.) 3. An order that the IRS prepare a valid return for tax year 2005 on behalf of Plaintiff and his wife that claims a refund of U.S. withholding reported on Forms 1099 and 1042-S. (Id. at 7 ¶ 6.) 4. An order requiring the IRS to conduct a Collection Due Process Hearing " to give plaintiff an opportunity to appeal the penalty." (Id. ¶ 7.) 5. An order that the IRS state accurately what it originally held frivolous in its letters for tax year 2002 (Complaint Exh. 13); 2005 (Id. Exh. 28); 2006 (Id. Exh. 40); 2007 (Id. Exh. 52 at 238-40, Letter dated Aug. 11, 2010); and 2008. (Memorandum at 7 ¶ 8.) 6. An order that the IRS state accurately what corrections should be made by Plaintiff for tax years 2002, 2005, 2006, 2007 and 2008, and provide Plaintiff 30 days to comply. (Id. ¶ 9.) 7. An order that the IRS not seek to exclude rebuttal evidence that rebuts the IRS' statements of what is frivolous. (Id. ¶ 10.) 8. An order that the IRS pay the refund for tax year 2005 without prejudice to Plaintiff's claim for recovery of expenses and compensation for physical injuries. (Id. at 7-8 ¶ 11.) 9. An order that the IRS pay the refund for tax year 2006. (Id. at 8 ¶ 12.) 10. An order that the IRS comply with the settlements entered in Diamond v. Comm'r, Dkt. No. 14482-10S, in the Tax Court (Complaint Exh. 132) and Diamond, et al. v. Comm'r, Dkt. No. 5516-12SL (Id. Exh. 125), and the Order and Decision in Diamond, et al. v. Comm'r, Dkt. No. 5518-12SL (Id. Exh. 116). (Memorandum at 8-9 ¶ ¶ 13-15.) 11. An order the IRS " report the results of its pending alterations to records of tax liability for plaintiff and/or joint co-filer for years 2007 and 2008." (Id. at 9 ¶ 16.) 12. An order that the IRS report names, ranks and locations of employees who altered records of U.S. withholding reported by Ameritrade and engaged in other misconduct, and report whether the IRS' efforts to deprive Plaintiff of money was accidental or intentional. (Id. at 9-10 ¶ 17.) 13. An order that the IRS update Internal Revenue Bulletin 2007-14 to add four kinds of actions that render a tax return frivolous. (Id. at 10-11 ¶ 18.)
The IRS would have the option of performing audits for tax years other than 2005. (Memorandum at 6 ¶ 4.)
Plaintiff repeats the admonition about requiring compliance with the " verbal direction" of the Tax Court regarding information under seal and prohibiting the IRS from requiring Plaintiff and his wife to be witnesses against themselves.
This court construes Plaintiff's motion at this stage of the proceedings as a motion for preliminary injunctive relief. " A plaintiff seeking a preliminary injunction must establish that he is likely to succeed on the merits, that he is likely to suffer irreparable harm in the absence of preliminary injunctive relief, that the balance of equities tips in his favor, and that an injunction is in the public interest." Winter v. NRDC, Inc., 555 U.S. 7, 20, 129 S.Ct. 365, 172 L.Ed.2d 249 (2008).
For the reasons discussed in connection with Defendant's motion to dismiss the complaint, Plaintiff cannot show a likelihood of success on the merits. Nor can Plaintiff show that he is likely to suffer irreparable harm or that the balance of equities tips in his favor. Most, if not all, of the relief Plaintiff seeks has already been litigated in Tax Court Cases ( see footnote 5), Diamond I, 107 Fed.Cl. 702 (2012), aff'd, 530 Fed.Appx. 943 (Fed. Cir. 2013), cert. denied, 134 S.Ct. 1344, 188 L.Ed.2d 309 (2014), and/or Diamond III, 115 Fed.Cl. 516 (Fed. Cl. Apr. 4, 2014) (appeal pending). Finally, Plaintiff makes no showing that an injunction would be in the public interest.
It is recommended that the Plaintiff's motion for injunctions be denied.
VI .
RECOMMENDATION
For the reasons discussed above, it is recommended that the district court issue an order (1) accepting this Report's findings and recommendation; (2) granting Defendant's motion to dismiss; (3) dismissing Plaintiff's first, third, fourth, fifth, sixth and seventh claims with prejudice for lack of subject matter jurisdiction; (4) dismissing Plaintiff's second claim with prejudice for failure to state a claim; and (5) denying Plaintiff's motions for injunctions.