Opinion
Case No. 05-37386 HCD, Proc. No. 05-3119.
March 28, 2006
Debra Voltz-Miller, Esq., counsel for plaintiffs, 1951 East Fox, South Bend, Indiana 46613; and
Heather L. Richtarcsik, Esq., counsel for defendant Internal Revenue Service, United States Department of Justice, P.O. Box 55, Ben Franklin Station, Washington, D.C. 20044.
MEMORANDUM OF DECISION
Before the court is the United States's Motion to Dismiss, filed by the United States of America on behalf of its agency the Internal Revenue Service ("IRS"). It seeks to dismiss the Complaint for Declaratory Relief filed by the plaintiffs-debtors Christian Heinrich Poehlmann and Nancy Mitchell Poehlmann ("debtors"). For the reasons presented below, the court grants the Motion to Dismiss on both procedural and jurisdictional grounds.
Jurisdiction
Pursuant to 28 U.S.C. § 157(a) and Northern District of Indiana Local Rule 200.1, the United States District Court for the Northern District of Indiana has referred this case to this court for hearing and determination. After reviewing the record, the court determines that the matter before it is a core proceeding within the meaning of § 157(b)(2)(A) over which the court has jurisdiction pursuant to 28 U.S.C. §§ 157(b)(1) and 1334. This entry shall serve as findings of fact and conclusions of law as required by Federal Rule of Civil Procedure 52, made applicable in this proceeding by Federal Rules of Bankruptcy Procedure 7052 and 9014. Any conclusion of law more properly classified as a factual finding shall be deemed a fact, and any finding of fact more properly classified as a legal conclusion shall be deemed a conclusion of law.
Background
In their Complaint, the plaintiffs informed the court that they had borrowed money from their 401(k) plan before they filed their chapter 13 petition. They asked this court to issue an order that would authorize them (a) to stop their repayments to their 401(k) plan while their chapter 13 case was pending, and (b) to resume payments thirty days after their final chapter 13 plan payment. They also asked the court to enjoin (1) the 401(k) plan administrator, TIAA-CREF, from issuing any document indicating the forfeiture of the 401(k) loan, and (2) the IRS from assessing and collecting any tax due on the forfeiture during the pendency of the chapter 13. See R. 1 at 3. The plaintiffs admitted that the suspension of repayments is "contrary to the terms of the Defendants' 401(k) Plan." Id. at 2, ¶ 7. They also conceded that stopping repayment "will subject the Plaintiffs to forfeiture of the loan and repayment options . . . and will trigger a taxable event, namely the entire outstanding balance of the loan will be deemed taxable income and said outstanding loan balance will be subject to a ten percent (10%) penalty." Id. at 2, ¶ 6. They urged the court to declare that the suspension of payments is not deemed to trigger a taxable event. See id. at ¶ 7.
The IRS responded with its Motion to Dismiss. In its Memorandum in support of the motion, the IRS argued that, by requesting that the suspension of their 401(k) repayments not be deemed to trigger a taxable event, the debtors "seek an order from this court to avoid the tax consequences of their actions." R. 9 at 2. The IRS asserted that this court lacks subject-matter jurisdiction to grant the relief sought.
Discussion
The court grants the IRS's request for dismissal for two reasons. First, the motion itself is uncontested. The plaintiffs neither filed a response to the dismissal motion nor requested an extension of time in which to respond. A party opposing a dismissal motion is given thirty days to file a response. See N.D. Ind. L.B.R. B-7007-1. The plaintiffs failed to meet the deadline. See, e.g., Eglinton v. Loyer (In re G.A.D., Inc.), 340 F.3d 331, 335 (6th Cir. 2003) (affirming bankruptcy court's dismissal order after litigant failed to timely respond to dismissal motion on ground that the procedural rules are straightforward and clear). The court deems this lack of response to be a waiver of the opportunity to do so. See N.D. Ind. L.B.R. B-7007-1; see also McGlothlin v. Resolution Trust Corp., 913 F. Supp. 15, 19 (D.C. 1996), aff'd, 111 F.3d 963 (D.C. Cir. 1977) (treating plaintiff's failure to respond as a concession to defendant's motion to dismiss, granting dismissal).
Second, the court must grant the motion on jurisdictional grounds. The plaintiffs want this court to declare that they are authorized to stop their 401(k) repayments without the triggering of a taxable event. However, this court is without jurisdiction, under the Declaratory Judgment Act, to grant declaratory relief in controversies "with respect to Federal taxes." See 28 U.S.C. § 2201; see also Schon v. United States, 759 F.2d 614, 617-18 (7th Cir. 1985); Granse v. United States, 932 F.Supp. 1162, 1165-66 (D. Minn. 1996), aff'd, 112 F.3d 513 (8th Cir. 1997); Votzmeyer v. United States, 202 B.R. 235, 236 (S.D. Tex. 1996). It is true that the Act exempts certain proceedings involving federal taxes in the bankruptcy context under 11 U.S.C. §§ 505 and 1146. The IRS, in its Memorandum, demonstrated to the court that the debtors' complaint does not fall within the scope of either of those provisions; the plaintiffs did not disagree, and neither does this court. The Act is clear and unequivocal, and those limited exceptions to it are not applicable to this case. Accordingly, the court finds that it lacks jurisdiction to issue a declaratory judgment with respect to this tax issue. See Sterling Consulting Corp. v. United States, 245 F.3d 1161, 1165-66 (10th Cir. 2001), cert. denied, 534 U.S. 1114 (2002) (concluding that, if an exception to the statutory prohibition does not apply, then the Declaratory Judgment Act plainly bars a federal court from declaring anything that would impede the government's ability to assess and collect taxes).
The plaintiffs also want an injunction to issue against the 401(k) administrator and the IRS, and the IRS responds that the court is barred from granting an injunction under the Anti-Injunction Act, 26 U.S.C. § 7421(a). It is of course superfluous to determine that the court doubly lacks jurisdiction. See Wiemerslage v. United States, 838 F.2d 899, 901 n. 4 (7th Cir. 1988) (noting that a lack of jurisdiction under one of two statutes is sufficient and that a court need not then address the other Act). Nevertheless, because it is equally clear to the court that it lacks jurisdiction, under the Anti-Injunction Act, to grant an injunction regarding the assessment and collection of any tax, it determines that the remaining requests in the plaintiffs' complaint must fail. See Rappaport v. United States, 583 F.2d 298, 302 (7th Cir. 1978) (per curiam) (holding that a suit to enjoin the collection of a tax was properly dismissed for lack of jurisdiction). The court finds that either the Anti-Injunction Act or the tax exception to the Declaratory Judgment Act prohibits this court from entertaining the complaint herein.
Conclusion
Accordingly, for the reasons stated above, the United States' Motion to Dismiss is granted. The plaintiffs' Complaint for Declaratory Relief is dismissed for lack of jurisdiction.
SO ORDERED.