Opinion
CV-S-02-0375-LRH-LRL
March 10, 2003
ORDER
Pending before the Court is Defendants' motion to dismiss (#10) Plaintiff's complaint pursuant to Fed.R.Civ.P. 12(b)(1) and 12(b)(6), filed on August 15, 2002. The contents of the Plaintiff's opposition to the motion to dismiss, filed on September 16, 2002, and subsequent errata filed two days later prompted the Defendants to file a motion for rule 11 sanctions (#15), on October 22, 2002. Plaintiff filed an opposition to Defendant's motion for sanctions and a counter-motion for sanctions (#16) on November 6, 2002. Plaintiff then filed a motion for oral argument and setting of hearing date on Defendant's motion for sanctions and his counter-motion for sanctions (#17), on the same day, as well as a memorandum in support of this motion. Defendants opposed Plaintiff's counter-motion for sanctions and motion for oral argument on November 21, 2002.
I. Background
On March 18, 2002, Plaintiff filed a 385 paragraph complaint, wherein he set forth 18 claims for relief alleging, inter alia, various violations of the Internal Revenue Code and of his constitutional rights resulting from assessment and collection activity undertaken by the Internal Revenue Service (IRS). It appears from his own exhibits that Plaintiff failed to file federal income tax returns for his 1992 and 1993 tax years. (Compl., vol. 2, ex. 60). In December of 1997, the IRS made assessments against the Plaintiff for income tax, interest, and penalties for both years. Id.
On March 8, 2001, the IRS sent to the Plaintiff a Notice of Federal Tax Lien Filing and Your Right to a Hearing Under IRC 6320. (Compl., vol. 1, ex. 1). The notice informed the Plaintiff that a Notice of Federal Tax Lien with regard to his income tax liabilities assessed for the years 1992 and 1993 had been filed and that he had a right to request a Collection Due Process Hearing. Id. Plaintiff filed a timely request for the hearing. (Compl., vol. 1, ex. 2).
Following the request, Defendant Jerry Johnson, and IRS Appeals Officer, conducted the hearing, and on February 14, 2002, mailed a Notice of Determination to the Plaintiff, which informed the Plaintiff that the tax lien should not be withdrawn. (Compl., vol. 2, ex. 74). The Notice also informed the Plaintiff of his right to dispute the determination in court by filing a petition with the United States Tax Court for a redetermination within 30 days from the date of the notice. Id. Plaintiff, instead chose to file the instant action in this court.
In his prayer for relief, Plaintiff requests that the Court release and expunge the Notice of Federal Tax Lien from public records; reverse the February 14, 2002, Notice of Determination, determine that the February 14, 2002, Notice of Determination violated his right to due process, declare that the 1992 and 1993 federal income tax assessments made against him are void, unlawful and made in violation of existing laws and regulations; declare that the assessment and collection activity used against the Plaintiff with regard to the 1992 and 1993 tax years was unlawful, oppressive and in violation of law; declare that the Plaintiff has no tax liability for 1992 and 1993; declare that the Plaintiff is not required to make any income tax return pertaining to 1992 and 1993; declare that the Gold Reserve Act of 1934, 48 Stat. 337, the Special Drawing Rights Act, 82 Stat. 188, the Articles of Agreement of the International Monetary Fund, and the Multilateral Economic Assistance Act of 1992, 106 Stat. 1633 are unconstitutional and void, or in the alternative, enjoin Congress from appropriating any funds to be used in connection to the acts; hold Defendants liable for any damages that were proximately caused by the alleged unauthorized disclosure of Plaintiff's return information; that the Defendants be turned over to the appropriate prosecuting agency or grand jury for investigation of the alleged disclosure or return information in violation of 26 U.S.C. s 7214; and that Plaintiff be awarded compensatory, punitive and consequential damages. (Compl., p. 80-83, Mot. Dismiss, p. 3).
II. Analysis
Defendants contend that Plaintiff's complaint must be dismissed for lack of jurisdiction and for failure to state a claim upon which relief may be granted. The Court agrees.
A. Fed.R.Civ.P. 12(b)(1): Subject Matter Jurisdiction
Fed.R.Civ.P. 12(b)(1) permits a defendant to bring a motion to dismiss asserting a "lack of subject matter jurisdiction." Where subject matter jurisdiction is challenged under this rule, the plaintiff has the burden of proving jurisdiction in order to survive the defendant's motion. See Tosco v. Comtys. for a Better Env't, 236 F.3d 495, 499 (9th Cir. 2000). A court should not dismiss a claim unless convinced beyond a doubt that the plaintiff can prove no set of facts in support of the claim that would entitled the plaintiff to relief. See Conely v. Gibson, 355 U.S. 41, 45-56 (1957). In deciding a motion to dismiss, the court may consider allegations contained in the complaint, exhibits attached to the complaint, as well as such affidavits and testimony as needed to resolve factual disputes concerning the existence of jurisdiction. See, e.g., Parks Scho. of Bus., Inc. v. Syminton, 51 F.3d 1480, 1484 (9th Cir. 1995); Federal Deposit Insurance Corp. v. Nichols, 885 F.2d 633, 635-36 (9th Cir. 1989). The Court is also cognizant of the fact that the Plaintiff is proceeding pro se, and as such his pleadings are to be liberally construed and held to a less stringent standard than a formal pleading drafted by a lawyer. See Haines v. Kerner, 404 U.S. 519, 520-21 (1972). However, courts should not assume the role of advocate for the pro se litigant. See Hall v. Bellmon, 935 F.2d 1106, 1110 (10th Cir. 1991).
The United States has sovereign immunity from suit unless it expressly waives that immunity by consent to suit. See United States v. Dalm, 494 U.S. 596, 608 (1990). Sovereign immunity cannot be "avoided by naming officers and employees of the United States as defendants." Gilbert v. DaGrossa, 756 F.2d 1455, 1458 (9th Cir. 1985). The burden is on the taxpayer to find and prove an "explicit waiver of sovereign immunity." Lonsdale v. United States, 919 F.2d 1440, 1444 (10th Cir. 1990). Therefore, a suit must be dismissed absent a showing of an express waiver of immunity by the United States to suit.
Entities such as the IRS, are not amenable to suit, as they are not real parties in interest. See Blackmar v. Guerre, 342 U.S. 512, 514 (1952).
Plaintiff bases jurisdiction in this case on 28 U.S.C. § 1331, 2201, 1346, 26 U.S.C. § 6330(d)(1)(B), 7214(a), 7433, and 7431. As a general grant of jurisdiction, 28 U.S.C. § 1331 cannot by itself be construed as constituting a waiver of the government's immunity. Hughes v. United States, 953 F.2d 531, 539 n. 5 (9th Cir. 1992). Plaintiff's reliance on 26 U.S.C. § 6330 as a basis for the Court's subject matter jurisdiction and as a waiver of sovereign immunity is also misplaced. Section 6330(d)(1) provides that within 30 days of the determination by the appeals office, the taxpayer may seek judicial review of the determination by filing a petition with the Tax Court, or, "if the Tax Court does not have jurisdiction of the underlying tax liability," to the appropriate federal district court. Here, it appears from the complaint that the Plaintiff is challenging both his underlying tax liability and the procedure by which the determination was made. However, when the underlying action rests on a plaintiff's "underlying income tax liability, judicial review over a determination made in a Collection Due Process hearing lies in the United States Tax Court, not the district court." Bartschi v. Tracy, 88 A.F.T.R.2d 2001-6223, 2001 WL 1338795, *3 (D. Ariz. Sept. 5, 2001). See also Dimartino v. United States, 87 A.F.T.R.2d 2001-1002, 2001 WL 260042, *2 (D. Nev. Jan. 29, 2001). Since Plaintiff's income tax liability is clearly at issue in this case, to the extent that Plaintiff's complaint contains claims relating to his underlying income tax liability and the Notice of Determination emanating from the Collection Due Process hearing, this Court does not have subject matter jurisdiction over those claims.
Even though Plaintiff filed his complaint in an improper Court, Plaintiff may re-file his complaint as it pertains to his underlying tax liability in Tax Court. See 26 U.S.C. § 6330(d).
Nor can subject matter jurisdiction over Plaintiff's claims be based on 28 U.S.C. § 1346(a)(1). This section requires a full payment of the tax before a refund suit can be maintained in a federal district court. Flora v, United States, 362 U.S. 145 (1960). See also 26 U.S.C. § 7422(a). Plaintiff does not claim that he has paid any of the tax liability at issue here to the IRS, therefore, he may not maintain a refund suit under section 1346 in this court.
Likewise, the Court is without any jurisdiction to grant Plaintiff the injunctive relief he seeks, as the Anti-Injunction Act provides that "[n]o suit for the purpose of restraining the assessment or collection of any tax shall be maintained in any court. . . ." 26 U.S.C. § 7421(a). This act clearly withdraws from the courts jurisdiction the ability to grant injunctive relief despite the possible existence of jurisdiction over the suit in which such relief is sought. Moreover, the Court finds that no statutory or judicial exemptions to the Act are applicable to this case, see Cool Fuel, Inc. v. Connett, 685 F.2d 309, 314 (9th Cir. 1982) (finding a refund action is an adequate remedy of law), and therefore, section 7421 does not provide subject matter jurisdiction for Plaintiff's claims for injunctive relief.
The Declaratory Judgment Act, 28 U.S.C. § 2201 also does not grant subject matter jurisdiction for the declaratory relief Plaintiff requests. The statute clearly states that "[i]n a case of actual controversy within its jurisdiction, except with regards to Federal taxes . . . any court of the United States . . . declare the rights and other legal relations of any interested party . . ." (Emphasis added). Plaintiff's request to have the Court review the IRS's actions with respect to the assessment and collection activities regarding the Plaintiff's federal income tax liabilities fall squarely within the exceptions of the Anti-Injunction Act and the Declaratory Judgment Act, and consequently, must be dismissed.
B. Fed.R.Civ.P. 12(b)(6): Failure to State a Claim
To resolve a Rule 12(b)(6) motion, the court must (1) construe the complaint in the light most favorable to the plaintiff; (2) accept all well-pleaded factual allegations as true; and (3) determine whether plaintiff can prove any set of facts to support a claim that would merit relief. See Cahill v. Liberty Mut. Ins. Co., 80 F.3d 336, 337-38 (9th cir. 1996). Further, a claim is sufficient if it shows that the plaintiff is entitled to any relief which the court can grant, even if the complaint asserts the wrong legal theory or asks for improper relief. Haddock v. Bd. of Dental Exam'r, 777 F.2d 462, 464 (9th Cir. 1985).
To the extent that Plaintiff attempts to bring claims against individual Defendants under Bivens v. Six Unknown Named Agents of the Fed. Bureau of Narcotics, 403 U.S. 388 (1971), for violations of his constitutional rights, such claims must also be dismissed. The Ninth Circuit has refused to recognized a constitutional violation arising from the collection of taxes. Wages v. Internal Revenue Service, 915 F.2d 1230, 1235 (9th Cir. 1990). The Court is also aware of Plaintiffs contentions that the individual Defendants are not officers of the IRS, but agents of the International Monetary Fund, and that various statutes allow suit against foreign agents. These arguments have already been addressed and disposed of by another district court in Nevada involving the Plaintiff in this case. See Anderson v. Kahre, 87 A.F.T.R.2d 2001-989, 2001 WL 260081 *2 (D. Nev. Jan. 23, 2001).
Such a suit would also be barred by the statute of limitations for a personal injury claim in Nevada. See Nev. Rev. Stat. 11.190(4)(e).
In counts one through nine and eleven through fourteen, the Plaintiff claims that the assessment and collection actions of the IRS were in violation of the law and he is entitled to damages pursuant to 26 U.S.C. § 7214, 7432, and 7433.
Section 7214 criminalizes certain acts of fraud and extortion committed by revenue officers or agents. As such, there is "no basis for implying a civil cause of action" from this federal statute. Nordbrock v. United States, 96 F. Supp.2d 944, 948 (D. Ariz. 2000) (citing cases). Section 7214 does not grant jurisdiction nor does it waive the government's sovereign immunity. Id. Any claim based on this statute must be dismissed.
Sections 7432 and 7433 of the Internal Revenue Code waive the sovereign immunity of the United States with regard to civil actions for damages where any officer or employee of the IRS knowingly or negligently fails to release a lien on the property of the taxpayer, or recklessly, intentionally or negligently disregards any provision of the Internal Revenue Code in connection with any collection of federal tax with respect to a taxpayer. Both provisions require a plaintiff to exhaust administrative remedies before filing suit. See 26 U.S.C. § 7432(d), and 7433(d). Failure to exhaust deprives the Court of jurisdiction. See Information Resources Inc. v. United States, 950 F.2d 1122 (5th Cir. 1992).
Here, Plaintiff has not plead sufficient facts in his complaint to show he has exhausted his administrative remedies. Berridge v. Heiser, 993 F. Supp. 1136, 1149 (S.D. Ohio 1997) (Plaintiff bears the burden of pleading, production, and proof). The Court will dismiss Plaintiff's claims regarding sections 7432 and 7433 without prejudice. If the Plaintiff has in fact followed the applicable treasury regulations and exhausted his administrative remedies, he may file an amended complaint containing only section 7432 and 7433 claims against the United States.
In count ten of the complaint, Plaintiff alleges that certain actions taken in the course of the assessment and collection of the tax liabilities assessed against him constitute unauthorized disclosures in violation of 26 U.S.C. § 6103 and 7213(a). and he is entitled to damages pursuant to 26 U.S.C. § 7431. This is incorrect, however, as the Ninth Circuit has recently held that section 7433's exclusivity provision bars a suit for unauthorized disclosure of return information when the alleged disclosure occurs in connection with tax collection activity. Schwarz v. United States, 234 F.3d 428, 433 (9th Cir. 2000). As noted above, Plaintiff has not made a showing to the Court that he has exhausted his administrative remedies as required by section 7433, and therefore, like the previous claims, this claim must be dismissed without prejudice.
Count ten also alleges that individual Defendants committed unauthorized inspections of his returns and/or return information by preparing, reviewing and signing the Summary Records of Assessments on December 1, 1997, December 8, 1997, and May 3, 1999, respectively. If the individual Defendants did in fact inspect the returns during their preparation of the Summary Records of Assessments, such inspections would be authorized by 26 U.S.C. § 6103(h)(1). Section 6103(h)(1) provides that "[r]eturns and return information shall, without written request, be open to inspection by or disclosure to offers and employees of the Department of the Treasury whose official duties require such inspection or disclosure for tax administration purposes." Tax administration includes assessment, collection, enforcement, litigation, publication, and statistical gathering function under such laws, statutes, or conventions. 26 U.S.C. § 6103(B)(4)(b). Consequently, the allegation of damages pursuant to 7431 for wrongful inspection and/or disclosure of Plaintiff's returns and return information fail to set forth a claim upon which relief may be granted and should be dismissed.
C. Fed.R.Civ.P. 11: Motion for Sanctions
On October 22, 2002, the Defendants filed a motion for Rule 11 sanctions, premised on the contents of Plaintiff's opposition to the Defendant's motion to dismiss. Specifically, Plaintiff attacked the character and professional ethics of Defense Counsel Virginia C. Lowe, describing her as "[b]eing grossly, corrupt, fraudulent, amoral, unethical, and a prostitute. . . . " (Opp'n, p. 25). Plaintiff went on to state that Ms. Lowe "is a known and consummate liar, corrupt, amoral and unethical." Additionally, offensive remarks can be found on pages 4 and 6 of the Plaintiff's opposition as well.
According to Ms. Lowe's declaration, she has complied with the procedural requirements of Fed.R.Civ.P. 11, in submitting the motion. (Lowe Decl., ¶ 2). In response, Plaintiff has filed his own motion for sanctions, and a motion for oral argument on the matter.
Rule 11 empowers federal courts to impose sanctions upon any signer of a paper "when a motion is frivolous, legally unreasonable, or without factual foundation, or brought for an improper purpose." Operating Engineers Pension Trust v. G.C. Wallace, Inc., 159 F.R.D. 536, 540 (D. Nev. 1994). Abusive language toward opposing counsel can constitute harassment and has no place in documents filed before the Court. See Coats v. Pierre, 890 F.2d 728, 734 (5th Cir. 1989).
Plaintiff's decision to include unsubstantiated, vituperative statements with regard to the character and professional ethics of Ms. Lowe plainly constitutes a violation of Rule 11. Id. The question then becomes what is the proper sanction for the Plaintiff's conduct. Monetary sanctions ordinarily are payable to the court because the purpose of Rule 11 is deterrence rather than compensation. See Johnson v. A.W. Chesterton Co., 18 F.3d 1362, 1365 (7th Cir. 1994). However, in certain circumstances, awards of fees and costs to the opposing party are authorized. See Fed.R.Civ.P. 11(c)(1)(A); Margolis v. Ryan, 140 F.3d 850, 854-55 (9th Cir. 1998). In this case, Defendants request that Plaintiff be sanctioned $1,500.00, which would cover Defendants fees and act as a deterrent to future harassment by the Plaintiff. The Court agrees and sanctions Plaintiff in the amount of $1,500.00, and admonishes the Plaintiff to refrain from making personal attacks in any further submissions to the Court.
IT IS THEREFORE ORDERED that Defendants' motion to dismiss (#10) is GRANTED and any and all of Plaintiff's claims for relief other than those claims based on 26 U.S.C. § 7432 and 7433, are DISMISSED WITH PREJUDICE for lack of subject matter jurisdiction and failure to state a claim.
IT IS FURTHER ORDERED that any and all of Plaintiff's claims for relief that state causes of action against the United States of America on the basis of 26 U.S.C. § 7432 and 7433 are DISMISSED WITHOUT PREJUDICE for failure to exhaust administrative remedies. Plaintiff may amend his complaint within 30 days of this order to comply with the contents herein. He may not include the IRS or any individual Defendants in any amended complaint.
IT IS FURTHER ORDERED that Defendants' motion for rule 11 sanctions (#15) is GRANTED and sanctions are imposed upon Plaintiff in the amount of $1,500.00 payable to the Clerk of Court for United States District Court of Nevada.
IT IS FURTHER ORDERED that Plaintiff's counter-motion for sanctions (#16) and motion for oral argument (#17) are both DENIED.