Opinion
No. 4:05-cv-00184-JEG.
October 14, 2005
ORDER
This matter comes before the Court on Defendant's Motion to Dismiss (Clerk's No. 22), Defendant's Motion for Imposition of Rule 11 Sanctions (Clerk's No. 23), and Plaintiffs' motion for Rule 37(b) sanctions (Clerk's No. 24). The Israels appear pro se; Commissioner Everson is represented by Joan Stentiford Ulmer of the United States Department of Justice. No party has requested a hearing to resolve the pending motions, and none is necessary as they present questions of law on the basis of the pleadings and motions. The matter is fully submitted and is ready for disposition.
FACTS
This is the latest chapter of an ongoing saga between Kenneth L. and Dee Ann Israel and the Internal Revenue Service (IRS) involving disputes over their income taxes reaching back for more than a decade. The Israels filed this action on March 29, 2005, one day after this Court denied their motion to reconsider a dismissal entered against them in a previous case. Styled as a "Request for Judicial Review of Information Relied Upon in Authorizing and/or Making Purported Assessments and/or Levy and for A Determination of the Rights of the Parties" (Complaint), the Israels have re-filed many of the documents submitted in connection with their prior case.
Previously, the Israels brought an action in this court claiming the IRS failed to afford them a collection due process hearing relating to their delinquent taxes from 1993 through 1998. Israel v. United States, No. 4:04-cv-40172, 2005 WL 1155849, at *1 (S.D. Iowa Mar. 5, 2005). They also claimed that no collection action was permissible against them because they are not subject to federal tax laws. See id. at *1-*2. That action was dismissed on March 1, 2005. Id. at *5. This Court denied the Israels' Motion to Reconsider on March 28, 2005.Israel v. United States, No. 4:04-cv-40172, 2005 WL 1155769, at *2 (S.D. Iowa Mar. 28, 2005). The Israels brought these same claims in an action brought in the United States Tax Court (Docket No. 004056-04L). The Tax Court entered summary judgment against the Israels on September 29, 2004.
The Israels' Complaint was originally captioned as being brought on behalf of the People of the State of Iowa. The Israels have since conceded this was an error and recognize that the action should have been brought on only their own behalf.
The Israels have busied themselves with pleadings, motions, and briefs replete with citations to obscure inapplicable and (in some instances) overruled cases. Their filings include, in one instance, a motion comprising papers reaching three inches in height containing twenty-one "addendums" which primarily consist of photocopied pages from texts discussing the inapplicability of the Internal Revenue Code to United States citizens. The most applicable cases cited by the Israels are discussed infra, but little headway would be garnered by disposing of each of the scores of cases cited in the Israels' tangentially relevant filings. The Israels should rest assured, however, that each of their documents has been read and considered.
This time, the Israels attack a Notice of Intent to Levy sent by the IRS in January 2005 to collect the Israels' delinquent 2002 taxes. They also contest a Notice of Defi-ciency and an accompanying report mailed by the IRS in March 2005, which documents additional assessments against the Israels for deficiencies in their 2000, 2001, and 2003 taxes. At bottom, the Israels wish the Court to review the evidence upon which the IRS relied in making the claims these documents contain. The Israels also ask the Court to enjoin the IRS from engaging in future collection activities against them until the IRS proves they "are persons, within the jurisdiction of [the Internal Revenue Code]." They also ask the Court to remove any liens presently attached to their possessions.
The Israels indicated these documents were "Refused without Dishonor and Cancelled" by writing that information on the face of the documents and returning them to the IRS.
Interlaced with the Israels' claims are allegations that IRS employees have interfered with the Israels' business relations and livelihood, negatively affected their finances by attaching liens to their home, and invaded their privacy by allowing notices of their tax delinquencies to become public record. They claim that the IRS has repeatedly harassed and intimidated them, in one instance by spying on their home from a helicopter. They also complain of harm suffered as a result of the IRS' continual refusal to entertain their claims that they are not subject to its jurisdiction. They point to Fourth Amendment violations stemming from the IRS' contemplated and executed levies on their property, claiming that conduct amounts to an unreasonable interference with their possessory interest in their property. They also claim a Fifth Amendment due process violation because they were not granted a hearing to show they were not within the IRS' jurisdiction before the levies and assessments occurred. They ask the Court to award them damages exceeding $300,000 for these harms.
The Israels have also moved for sanctions under Federal Rule of Civil Procedure 37(b), arguing that because IRS employees have harassed and intimidated them, they are entitled to have the Court declare as "established" certain facts proving the Israels were harassed for the purposes of this litigation.
The Government characterizes this action as frivolous and charitably classifies the Israels' filings as "lengthy," "impenetrable," and "replete with repeatedly obtuse arguments." Consequently, the Government has filed a motion to dismiss under Federal Rule of Civil Procedure 12(b)(6), alleging that the Israels' contentions that they are not required to pay federal taxes because they are nonresident aliens fail to support a claim for relief. The Government further alleges the Court lacks jurisdiction to consider the Israels' request for an injunction barring the IRS from attempting to collect taxes from them. The Government has alternatively moved for dismissal under Rule 12(b)(5), arguing that the Israels have failed to comply with the service of process requirements set forth in Rule 4.
The Government has also moved for the imposition of sanctions under Federal Rule of Civil Procedure 11(c)(1). The Government claims sanctions are appropriate because the Israels have made the same arguments they present in this action on previous occasions and lost, and because similar arguments have been rejected numerous times by multiple courts. The Government asks that the Complaint be dismissed, that it be awarded attorney's fees, and that a fine be levied against the Israels to deter them from filing similar actions in the future. The Israels respond by arguing that this action is not frivolous because their action has a foundation in both the federal Constitution and federal statutes and regulations. They also contend this action is not a replication of their prior actions but is instead an enlargement of their previously filed (and dismissed) lawsuit.
DISCUSSION
I. The Government's Motion to Dismiss.
The Government seeks dismissal under Rule 12(b)(6) because (1) the Israels' claim that they are not subject to federal taxes as a result of their status as non-resident aliens does not support a claim for relief, and (2) this Court lacks subject matter jurisdiction to consider a declaratory judgment or injunction against the IRS under principles of sovereign immunity. The Government also seeks dismissal of the Israels' action under Federal Rule of Civil Procedure 12(b)(5), arguing that the Israels have not effected proper service of process.
The Israels do not appear to have sought a declaratory judgment in the instant action. If they did, though, dismissal would be proper because 28 U.S.C. section 2201 specifically bars declaratory judgments in nearly all federal tax cases. See 28 U.S.C. § 2201(a). The sole exception, applying to disputes arising under 26 U.S.C. section 7428, does not arise here.
As a technical matter, the Government's sovereign immunity argument should be couched as a motion to dismiss for lack of subject matter jurisdiction under Rule 12(b)(1).
A. The Government's Motion to Dismiss for Failure to State a Claim and Lack of Subject Matter Jurisdiction.
The Court has a duty to liberally construe the pleadings of pro se litigants. Haines v. Kerner, 404 U.S. 519, 520-21 (1972) (per curiam); Price v. Moody, 677 F.2d 676, 677 (8th Cir. 1982). A motion to dismiss should only be granted where "it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief."Conley v. Gibson, 355 U.S. 41, 45-46 (1957); Price, 677 F.2d at 677. At this stage of the proceedings, the Israels enjoy a presumption that all factual allegations in their pleadings are true. Leatherman v. Tarrant County Narcotics Intelligence Coordination Unit, 507 U.S. 163, 164 (1993); Estelle v. Gamble, 429 U.S. 97, 99 (1976). Nevertheless, their pleadings must still "contain facts which state a claim as a matter of law and must not be conclusory." Frey v. City of Herculaneum, 44 F.3d 667, 671 (8th Cir. 1995) (citing Davis v. Hall, 992 F.2d 151, 152 (8th Cir. 1993) (per curiam)).
1. The Light in Which to View the Israels' Claims.
All of the claims the Israels have attempted to set forth in their Complaint are against Commissioner Everson. The Israels contend that because Everson was "involved" in their unsuccessful Tax Court case, he harassed them. They also allege that Everson is civilly liable for his refusal to respond to the Israels' filings and affidavits. Even though they point to conduct by a lineup of IRS employees, the United States Attorney General, an employee of the United States Small Business Association, and the United States Secretary of the Treasury that, they claim, entitles them to relief, they have not sought to amend their Complaint to add claims against these individuals.
The Government argues that Everson is not a proper party to this action because the Israels have not identified any conduct of his that harmed them, nor do they suggest he had any personal involvement in their disputes with the IRS. Instead, the Government argues, the Israels' action should be treated as one against the United States. The Government then concludes that sovereign immunity precludes each of the species of relief sought by the Israels.
The Israels do not say whether their claims against Everson are cast in his official or personal capacity, or both. The following direction has been provided for cases where a complaint is unclear:
In many cases, the complaint will not clearly specify whether officials are sued personally, in their official capacity, or both. The course of proceedings in such cases typically will indicate the nature of the liability sought to be imposed.Kentucky v. Graham, 473 U.S. 159, 167 n. 14 (1985) (citingBrandon v. Holt, 469 U.S. 464, 469 (1985) (quotation marks omitted)). Despite the complete absence in their pleadings of the nature of the claims brought against Everson, as many of their claims seek relief from IRS conduct, the Israels should receive the benefit of an inference that they have set forth both personal and official capacity claims, particularly at this embryonic stage of the proceedings.
With respect to any personal capacity claims, giving the Israels every possible inference from their Complaint, as the Court must, the Israels have attempted to allege tortious conduct and conduct amounting to constitutional violations on the part of Everson. Unfortunately, the Israels do not point to facts showing conduct that could amount to a tort on the part of Everson in either their pleadings or their motions. Claiming Everson was "involved" in their Tax Court case is not enough. Conclusory statements that Everson sponsored or allowed conduct amounting to harassment of the Israels to occur and persist is also insufficient. Consequently, the only claims that could exist against Everson in his individual capacity are for harms arising out of the alleged breach of the Israels' constitutional protections.
Private citizens can sue federal officials in their individual capacities for constitutional violations in some cases underBivens v. Six Unknown Named Agents of Federal Bureau of Narcotics, 403 U.S. 388 (1971). Assuming the Israels' Complaint were read so liberally as to find factual support for their alleged constitutional violations, the Israels must point to facts showing Everson was involved in the conduct causing the constitutional harm. The Israels claim Everson failed to acknowledge the Israels' filings and affidavits and was "involved" in their unsuccessful Tax Court case. This conduct does not amount to a constitutional violation. In fact, even if the Israels' claims could be construed as alleging a constitutional violation as a result of the IRS' attempt to collect taxes, no cause of action lies there, either, because of the existence of a statute affording an exclusive mode of redress. See Vennes v. An Unknown Number of Unidentified Agents of the United States, 26 F.3d 1448, 1453-54 (8th Cir. 1994) (agreeing with circuits holding that no Bivens action lies "against IRS agents for tax assessment and collection activities" because of the existence of 26 U.S.C. sections 7432 and 7433, which provide an exclusive remedy). Thus, the Israels' only potential claims are against Everson in his official capacity.
The IRS correctly notes that claims against the Commissioner of the IRS for conduct taken in his official capacity operate as claims against the United States. See 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." (citing Larson v. Domestic Foreign Commerce Corp., 337 U.S. 682, 688 (1949))); Watson v. Chessman, 362 F. Supp. 2d 1190, 1196 (S.D. Cal. 2005) ("[B]ecause Plaintiff's claims against . . . Everson in his official capacity are really claims against the United States, . . . Everson must be dismissed from this action."); Banks v. Rubin, 72 F. Supp. 2d 1198, 1201 (D. Colo. 1999) ("[T]o the extent plaintiff seeks monetary relief against the defendants in their official capacities as agents or employees of the IRS, those claims are construed as claims against the United States."); Escobar v. Comm'r, 967 F. Supp. 214, 214 (W.D. Tex. 1997) ("A suit against the Commissioner of Internal Revenue is a suit against the sovereign."); Rochefort v. Gibbs, 696 F. Supp. 1151, 1152 (W.D. Mich. 1988) (casting a lawsuit against the Commissioner of the IRS "ostensibly relat[ing] to the legality of internal revenue taxes" as one against the United States). Thus, the Israels' action is not against Everson, but against the United States.
At this point, the analysis distills to one of jurisdiction. "Jurisdiction over any suit against the government requires 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 (2003) (citations omitted); see also United States v. Sherwood, 312 U.S. 584, 586-87 (1941) (collecting cases); United States v. Shaw, 309 U.S. 495, 500-01 (1940); United States v. McLemore, 45 U.S. (4 How.) 286, 288 (1846); United States v. Clarke, 33 U.S. (8 Pet.) 436, 443 (1834). "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 (1983). Waiver cannot be implied; it must be expressed unequivocally. United States v. King, 395 U.S. 1, 4 (1969). Thus, absent an express waiver by the United States, the Israels' Complaint must be dismissed because the Court would lack subject matter jurisdiction over the Israels' claims.
Indeed, as a March 3, 2005, letter filed by the Israels indicates, "[t]he question is jurisdiction." Unfortunately, the question is not the IRS' jurisdiction to assess and collect taxes, as the Israels seem to believe, but instead whether this Court has jurisdiction to hear their claims.
2. The Israels' Claims.
i. Claims for Judicial Review Under 26 U.S.C. §§ 7421(a) and Injunctive Relief.
The Israels contend that the United States has waived sovereign immunity under 26 U.S.C. section 7421(a). That section reads,
Except as provided in sections 6015(e), 6212(a) and (c), 6213(a), 6225(b), 6246(b), 6330(e)(1), 6331(i), 6672(c), 6694(c), 7426(a) and (b)(1), 7429(b), and 7436, no suit for the purpose of restraining the assessment or collection of any tax shall be maintained in any court by any person, whether or not such person is the person against whom such tax was assessed.26 U.S.C. § 7421(a). The Israels contend that because they are entitled to judicial review under the cross-referenced section 7429(b), this Court should issue an injunction to prevent the IRS from collecting their delinquent taxes.
"The object of § 7421(a) is to withdraw jurisdiction from the state and federal courts to entertain suits seeking injunctions prohibiting the collection of federal taxes." Enochs v. Williams Packaging Naviation Co., 370 U.S. 1, 5 (1962); see also O'Hagan v. United States, 86 F.3d 776, 778 (8th Cir. 1996) (holding that section 7421(a) "prohibits federal courts from entertaining any action filed to restrain the assessment or collection of taxes"). The point is to protect "the Government's need to assess and collect taxes as expeditiously as possible with a minimum of preenforceent judicial interference, 'and to require that the legal right to the disputed sums be determined in a suit for refund.'" Bob Jones Univ. v. Simon, 416 U.S. 725, 737 (1974) (quoting Enochs, 370 U.S. at 7).
There are two types of exceptions to the general bar established by section 7421(a): one is a group of exceptions listed in the statute, see 26 U.S.C. § 7421(a), and the other is a judicially-created exception crafted by the United States Supreme Court in Enochs v. Williams Packaging Navigation Co., see Enochs, 370 U.S. at 6-7. Here, the Israels rely on a statutory exception: 26 U.S.C. section 7429(b).
Title 26 U.S.C. section 7429(b) permits judicial review of jeopardy and termination assessments made by the IRS. See 26 U.S.C. § 7429(b). A termination assessment against an individual may occur if the IRS believes
that a taxpayer designs quickly to depart from the United States or to remove his property therefrom, or to conceal himself or his property therein, or to do any other act . . . tending to prejudice or to render wholly or partially ineffectual proceedings to collect the income tax for the current or the immediately preceding taxable year. . . .Id. § 6851(a)(1). A jeopardy assessment may occur if the IRS believes that the assessment of a deficiency or the collection of taxes will be jeopardized by delay. Id. §§ 6861(a), 6862(a). Jeopardy and termination assessments occur through a summary procedure, so the Internal Revenue Code allows a taxpayer to request judicial review via section 7429(b) after seeking administrative review from the IRS.
Termination assessments may also be made against certain types of tax-exempt organizations making certain political expenditures under 26 U.S.C. § 6852(a). See 26 U.S.C. §§ 501(c)(3), 6852(a)(1).
Here, no jeopardy or termination assessment was made against the Israels. The IRS points out that assessments made against the Israels for the 2000, 2001, and 2003 tax years were the result of an IRS examination. See id. § 6201. Correspondence from the IRS to the Israels indicates assessments made against them relating to their 2002 taxes were made in the same way. These were, as the Government points out, "ordinary" assessments. See id. They were neither "jeopardy" nor "termination" assessments.See id. §§ 6851-6852; 6861-6862. As a result, section 7429(b) does not permit judicial review of the IRS' collection efforts against the Israels. Therefore, an injunction is improper under section 7421(a).
The Government concludes that because assessments made against the Israels were "ordinary assessments," "the provisions of [26 U.S.C.] § 7609 do not apply here." Memo. in Support of Mot. to Dismiss, at 6. Title 26 U.S.C. § 7609 deals third-party summonses. See 26 U.S.C. § 7609(c). While the Government is technically correct by pointing out that this section does not apply, its inapplicability has nothing to do with the propriety of a 26 U.S.C. § 7429(b) judicial review.
It would also be fruitful to examine the Israels' claims under the judicially-created exception to the section 7421(a) bar. Under that exception, an injunction is appropriate only "if it is clear that under no circumstances could the Government ultimately prevail. . . ." Enochs, 370 U.S at 7. That is, the "literal terms of § 7421(a) [could] be avoided [if a plaintiff could show]: first, irreparable injury, the essential prerequisite for injunctive relief in any case; and second, certainty of success on the merits." Simon, 416 U.S. at 737 (citing Enochs, 370 U.S. at 6-7); accord O'Hagan, 86 F.3d at 778 n. 1. Both elements are required.
"[U]nder the most liberal view of the law and the facts,"Enochs, 370 U.S. at 7, the Israels' position is that because they are non-resident aliens, the IRS cannot collect taxes from them; therefore, the IRS should be enjoined from collection activities. This argument has been uniformly and unequivocally rejected. E.g., United States v. James, 328 F.3d 953, 955 (7th Cir. 2003) (dicta); Wade v. IRS, 208 F.3d 228 (table), 2000 WL 293688, at *1-*2 (10th Cir. 2000); Albers v. IRS, 105 F.3d 662 (table), 1997 WL 2477, at *1 (8th Cir. 1997) (collecting cases); Larue v. United States, 124 F.3d 204 (table), 1997 WL 571974, at *2 (7th Cir. 1997); Larue v. Collector of Internal Revenue, 96 F.3d 1450 (table), 1996 WL 508567, at *1 (7th Cir. 1996); United States v. Hilgeford, 7 F.3d 1340, 1342 (7th Cir. 1993); United States v. Thomas, 13 F.3d 407 (table), 1993 WL 525726, at *2 (10th Cir. 1993); United States v. Jagim, 978 F.2d 1032, 1036 (8th Cir. 1992); United States v. Kettler, 934 F.2d 326 (table), 1991 WL 94457, at *1 (10th Cir. 1991); Lonsdale v. United States, 919 F.2d 1440, 1448 (10th Cir. 1990); Magee v. Boeing-Irving Co., No. Civ.A 3:03-CV-1265, 2004 WL 1515820, at *1-*2 n. 1 (N.D. Tex. July 2, 2004); Depew v. Sec'y of Treasury, No. 94-B-2490, 1995 WL 776925, at *3 (D. Colo. Nov. 8, 1995); Nieman v. Comm'r, 66 T.C.M. (CCH) 1340 (1993). See generally U.S. Dep't of the Treasury, Internal Revenue Serv., The Truth About Frivolous Tax Arguments, available at http://www.irs.gov/pub/irs-utl/friv_tax.pdf (disposing of tax protestor arguments); U.S. Dep't of the Treasury, Internal Revenue Serv., Why Do I Have to Pay Taxes?, available at http://www.irs.gov/pub/irs-pdf/p2105.pdf (same). No intellectual creativity is required to call the Israels' claims "patently frivolous," as the Tenth Circuit has, Kettler, 1991 WL 94457, at *1, or "simply wrong," as the Seventh Circuit has,Hilgeford, 7 F.3d at 1342 (quotation marks omitted). The Israels' tired, Sisyphean argument has run its course. As a result, it cannot be said that the argument adduced by the Israels would, under any set of facts, provide them relief. See Simon, 416 U.S. at 737. Consequently, the judicially-created exception to the section 7421(a) bar does not apply.
It therefore follows that the Israels' filings entitled "Protest and Demand for Abatement" and "Amended Verified Affidavit of Citizenship and Domicile Demand for Proof of Jurisdiction" (as well as any similar documents) wherein they assert they are not subject to federal income taxes because they are not subject to the IRS' jurisdiction do not set forth a claim for relief, and should be dismissed.
Because the IRS has not made a jeopardy or a termination assessment, the section 7429(b) exception to the section 7421(a) bar does not apply. Because the Israels have not shown that the IRS would be unsuccessful in its collection efforts under any set of facts, the judicially-created exception to the section 7421(a) bar does not apply. As a consequence of the unavailability of either a statutory or a judicially-created exception to section 7421(a), they cannot rely on that section to provide them with an antidote to their sovereign immunity problem. As a result, this Court is without jurisdiction to hear the Israels' request for an injunction. Dismissal is compelled.
The Israels could always pay the tax the IRS demands and then sue for a refund. See 26 U.S.C. § 7422.
ii. Other Claims.
The Israels also claim that IRS employees have interfered with their business, negatively affected their finances by attaching liens to their real property, invaded their privacy by allowing notices to become public record, and repeatedly harassed and intimidated them. They claim IRS-sponsored helicopters have spied on their home and that the IRS has conspired with their bank and mortgage holder to rid them of ownership of their home. They do not say which, if any, statute or legal theory affords them relief. In fact, none does.
"Since November 10, 1988, 26 U.S.C. §§ 7432 and 7433 have authorized tax-payer actions against the United States to recover limited damages resulting from specific types of misconduct by IRS employees." Vennes, 26 F.3d at 1454. Section 7433 permits a taxpayer to recover if "any officer or employee of the Internal Revenue Service recklessly or intentionally, or by reason of negligence disregards any provision of [Title 26] or any regulation promulgated under [Title 26]." 26 U.S.C. § 7433(a). That section provides a taxpayer with an "exclusive remedy for the reckless or intentional disregard of the Internal Revenue Code with respect to collection activities." Miller v. Sherrill, 146 F.3d 1051, 1052 (8th Cir. 1998). Section 7433 is inapplicable here because, although the Israels have alleged IRS employees have harmed them, they do not claim a violation of the Internal Revenue Code or a regulation promulgated pursuant thereto has occurred. In fact, the crux of the Israels' argument is that the Internal Revenue Code does not apply to them.
Title 26 U.S.C. section 7432 permits a taxpayer to recover if the IRS "fails to release a lien under section 6325 on property of the taxpayer." 26 U.S.C. § 7432(a). The cross-referenced section 6325 does not apply here because the Israels' taxes remain outstanding. See id. § 6235(a). Therefore, section 7432 is unhelpful to the Israels.
To the extent that the Israels' pleadings set forth requests for relief from tortious conduct on the part of the IRS or its employees, the Federal Tort Claims Act precludes those claims. Although the Federal Tort Claims Act provides a limited waiver of sovereign immunity for certain types of actions, claims arising out of the assessment or collection of taxes are specifically excluded from that waiver. See 28 U.S.C. § 2680(c). Thus, to the extent the Israels' action could be construed as one under the Federal Tort Claims Act, it must be dismissed.
Sovereign immunity bars each of the Israels' requests for relief. Therefore, this Court is without jurisdiction to hear their claims. Consequently, their Complaint must be dismissed.
B. The Government's Motion to Dismiss for Insufficiency of Service of Process.
Even if this Court had jurisdiction to entertain the claims contained in the Israels' Complaint, the Israels must still have properly served all necessary parties before their action could proceed. The Government argues that because "neither the United States Attorney nor the Attorney General have been served, nor Mark Everson, Commissioner of Internal Revenue," the Israels' case should be dismissed for lack of proper service under Rule 12(b)(5). The Israels respond by pointing to a group of papers located deep in an appendix to one of their filings (specifically, Addendum P to Document 25) as evidence of proper service. These documents include process service receipts, affidavits of service, returns of service, and a handwritten note by Mrs. Israel containing a list of documents she has mailed.
As noted above, construing the Israels' pleadings as broadly as possible, they have attempted to set forth both individual and official capacity claims against Everson. Rule 4(i)(2) governs service of employees of the federal government, and provides as follows:
(A) Service on . . . an officer or employee of the United States sued only in an official capacity, is effected by serving the United States in the manner prescribed by Rule 4(i)(1) and also by sending a copy of the summons and complaint by registered or certified mail to the officer [or] employee. . . .
(B) Service on an officer or employee of the United States sued in an individual capacity for acts or omissions occurring in connection with the performance of duties on behalf of the United States — whether or not the officer or employee is sued also in an official capacity — is effected by serving the United States in the manner prescribed by Rule 4(i)(1) and by serving the officer or employee in the manner prescribed by Rule 4(e), (f), or (g).
Fed.R.Civ.P. 4(i)(2)(A)-(B). Compliance with Rule 4(i)(1) is required for both types of claims. That rule reads as follows:
Service upon the United States shall be effected
(A) by delivering a copy of the summons and of the complaint to the United States attorney for the district in which the action is brought or to an assistant United States attorney or clerical employee designated by the United States attorney in a writing filed with the clerk of the court or by sending a copy of the summons and of the complaint by registered or certified mail addressed to the civil process clerk at the office of the United States attorney and
(B) by also sending a copy of the summons and of the complaint by registered or certified mail to the Attorney General of the United States. . . .Id. R. 4(i)(1)(A)-(B). Compliance with both sub-parts is required.
Rule 4(i)(1)(B) requires the Israels to mail a copy of the summons and complaint to the Attorney General of the United States. See id. R. 4(i)(1)(B). None of the documents they point to indicate compliance with this provision. Although some documents have been mailed to the United States Attorney General's office,e.g., Doc. No. 24, at 34 (indicating the Israels' motion for Rule 37 sanctions was mailed to the United States Attorney General's Office), a summons and the Complaint are not among them. As a result, the Israels have failed to comply with Rule 4(i)(1)(B), and, consequently Rules 4(i)(2)(A) and (B). Effective service has therefore not occurred.
Although Rule 4(i)(3) requires the Court to "allow a reasonable time to serve process" if a defect in service is shown, see Fed R. Civ. P. 4(i)(3), because the Court does not have jurisdiction to hear the Israels' claims, their action must be dismissed.
II. The Israels' Motion for Rule 37 Sanctions.
The Israels have moved under Federal Rule of Civil Procedure 37(b)(2) for an order prohibiting the IRS from opposing certain factual contentions made by the Israels and for relief from certain conduct allegedly amounting to harassment, intimidation, and extortion.
Federal Rule of Civil Procedure 37(b)(2) provides, in pertinent part,
If a party . . . fails to obey an order to provide or permit discovery, including an order made under subdivision (a) of this rule or Rule 35, or if a party fails to obey an order entered under Rule 26(f), the court in which the action is pending may make such orders in regard to the failure as are just, and among others the following:
(A) An order that the matters regarding which the order was made or any other designated facts shall be taken to be established for the purposes of the action in accordance with the claim of the party obtaining the order;
(B) An order refusing to allow the disobedient party to support or oppose designated claims or defenses, or prohibiting that party from introducing designated matters in evidence. . . .
Fed.R.Civ.P. 37(b)(2)(A)-(B).
The gist of the Israels' motion is that because IRS agents have allegedly harassed and intimidated them, the IRS violated the Fair Debt Collection Practices Act. Therefore, the Israels argue, the Court should rule that a bevy of facts have been "established" and then prevent the IRS from contesting the truth of those facts. The Government responds by stating that Rule 37 sanctions are only available when a party refuses to cooperate in discovery matters. As no discovery has occurred or been requested, the Government concludes, the Israels' motion should be denied.
Allegations of violations of the Fair Debt Collection Practices Act appear for the first time in the Israels' Rule 37 motion. Nonetheless, to the extent the Israels' pleadings may have set forth a claim under the Fair Debt Collection Practices Act, that claim is dismissed because the Israels' tax deficiencies do not qualify as a "debt," nor do the IRS or its agents constitute "debt collectors" for the purposes of that Act.See 15 U.S.C. §§ 1692a(5) (classifying a "debt" as "any obligation or alleged obligation of a consumer to pay money arising out of a transaction in which the money, property, insurance, or services which are the subject of the transaction are primarily for personal, family, or household purposes"); 1692a(6)(C) (noting that only a "person" can qualify as a "debt collector," then exempting "any officer or employee of the United States or any State to the extent that collecting or attempting to collect any debt is in the performance of his official duties").
Rule 37(b) sanctions are available where a party has failed to comply with a court order to provide or permit discovery, including orders issued under Rules 26(f), 35, or 37(a). See id. R. 37(b)(2). The rule is designed to "deal with sanctions for failure to comply with a court order." Fed.R.Civ.P. 37 Advisory Committee's Notes. The Israels have not pointed to a court order with which the IRS has failed to comply.
Moreover, Rule 37 "provides generally for sanctions against parties who unjustifiably resist discovery." Fonseca v. Regan, 734 F.2d 944, 947 (2d Cir. 1984) (emphasis added). Rule 37 does not, however, address matters arising before discovery has begun. See Maynard v. Nygren, 332 F.3d 462, 467 (7th Cir. 2003) (contrasting Rule 41 sanctions, available as a remedy for failure to comply with a generic court order, with sanctions available under the more specific Rule 37, which are available only for misfeasance in discovery matters); Comiskey v. JFTJ Corp., 989 F.2d 1007, 1009 (8th Cir. 1993) (stating that Rule 37 sanctions are "appropriate when a party's 'failure to comply [with discovery] has been due to . . . willfulness, bad faith, or any fault of [the party]'" and upholding sanctions following a party's failure to comply with court orders (quoting Societe Internationale Pour Participations Industrielles et Commerciales, S.A. v. Rogers, 357 U.S. 197, 212 (1958) (omission and alterations by the Comiskey court))); cf. Capellupo v. FMC Corp., 126 F.R.D. 545, 551 n. 14 (D. Minn. 1989) ("Rule 37 does not, by its terms, address sanctions for destruction of evidence prior to the initiation of a lawsuit or discovery request"). In this case, neither the Israels nor the IRS has requested or begun discovery. Thus, Rule 37 does not apply.
Federal Rule of Civil Procedure 37 affords the Israels no relief at this stage of the proceedings. Consequently, the Israels' motion must be denied.
III. The Government's Motion for Rule 11 Sanctions.
The Government has moved for sanctions under Federal Rule of Civil Procedure 11(c). Under that rule, sanctions are available to a moving party if its opponent violates Rule 11(b). See Fed.R.Civ.P. 11(c). Relevant here is Rule 11(b)(2), which provides, in pertinent part, that if
a pleading, written motion, or other paper [is presented], an . . . unrepresented party is certifying that to the best of the person's knowledge, information, and belief, formed after an inquiry reasonable under the circumstances . . . [that] the claims, defenses, and other legal contentions therein are warranted by existing law or by a nonfrivolous argument for the extension, modification, or reversal of existing law or the establishment of new law[.]Id. R. 11(b)(2). A violation of this rule results in the availability of sanctions "sufficient to deter repetition of such conduct or comparable conduct by others similarly situated."Id. R. 11(c)(2).
The Government contends that the Israels' argument mirrors those made before this Court and the Tax Court in their prior actions. The Government also points out that the Israels' interpretation of the Internal Revenue Code has been rejected by multiple courts. Thus, the Government concludes, it is impossible for the Israels to have believed that the allegations in their Complaint were "warranted by existing law or by a nonfrivolous argument for the extension, modification, or reversal of existing law or the establishment of new law." Id. R. 11(b)(2). The Government asks the Court to strike the Complaint and other pleadings, award it costs and attorney's fees associated with making its Rule 11 motion, and assess a fine against the Israels.
The Israels respond by arguing that this action is not frivolous because they "have been standing on the truth, the law, the Constitution and the Statutes at Large, as well as other lawful codes or regulations." They also state that because this Court has not ruled on the merits of their claims, their action is not frivolous. They claim the Complaint contains claims similar (but not identical to) their prior actions because they not only request relief from liens attached to their assets, but also damages for harassment and their financial ills caused by the IRS.
As discussed above, arguments like the Israels' have been categorically rejected as frivolous. Sanctions are regularly imposed in cases where claims like the Israels' are made. E.g., Larue, 1996 WL 508567, at *2; United States v. Bryant, 66 F.3d 339 (table), 1995 WL 547806, at *2 (10th Cir. 1995). Nonetheless, the Court is mindful that the Israels appear pro se. Leniency is thus deserved. Cory v. Fahlstrom, No. 05-3010, 2005 WL 1526135, at *2-*3 (10th Cir. June 29, 2005) (noting pro se status of the plaintiff while refusing to impose sanctions despite "frivolous" nature of the appeal); Thomas v. Foster, 138 Fed. App'x 822, 823 (7th Cir. 2005) (noting that a pro se litigant "is entitled to some leniency before being assessed sanctions for frivolous litigation"); Horton v. Trans World Airlines Corp., 169 F.R.D. 11, 16 (E.D.N.Y. 1996) ("Although Rule 11 applies to pro se litigants, pro se litigants are held to a more lenient standard than professional counsel, with Rule 11's application determined on a sliding scale according to the litigant's level of sophistication."). Further, the Israels are correct in noting that this is the first time this Court has ruled on the substance of their claims, and that there are some differences between their previous actions and the present one. Thus, Rule 11 sanctions are found to be inappropriate at this time. Consequently, the Government's motion for Rule 11 sanctions will be denied.
The Israels should be cautioned, however, that additional litigation mimicking the present action will not be well received, will be regarded as a knowing commencement of frivolous claims and a willful waste of judicial resources, and can be expected to result in the imposition of sanctions.
A number of non-technical writings are available detailing why the Israels must pay federal income taxes. E.g., U.S. Dep't of the Treasury, Internal Revenue Serv., The Truth About Frivolous Tax Arguments, available at http://www.irs.gov/pub/irs-utl/ friv_tax.pdf; U.S. Dep't of the Treasury, Internal Revenue Serv., Why Do I Have to Pay Taxes?, available at http://www.irs.gov/pub/irs-pdf/p2105.pdf. This Court cannot, and will not, entertain the Israels' claims (or any variations thereof) that they are not subject to the Internal Revenue Code because they are non-resident aliens, because they are not "persons" for the purposes of federal tax laws, or because they are not within the IRS' jurisdiction. To the extent the Israels have been unclear about this Court's stance on their arguments, that confusion should exist no more.
IV. Conclusion.
The Government's Motion to Dismiss (Clerk's No. 22) must be granted. The Israels' motion for Rule 37 sanctions (Clerk's No. 24) must be denied. The Government's Motion for Imposition of Rule 11 Sanctions (Clerk's No. 23) must be denied. The Israels' action must therefore be dismissed in its entirety.