Opinion
Civil Action No. 02-2060.
March 9, 2004
MEMORANDUM ORDER
Plaintiffs in this action, Law Offices of Neal Sanders and Neal Sanders ("Sanders"), have filed a two (2) count complaint against the Commissioner of the Internal Revenue Service (the "IRS"). At count one, Plaintiffs allege a deprivation of substantive due process rights under the Fourteenth Amendment to the Constitution of the United States, and at count two, Plaintiffs are seeking judicial review of a collection due process hearing allegedly held in accordance with 26 U.S.C. § 6330(b). The IRS has filed a motion to dismiss count one for lack of subject matter jurisdiction, and has filed a motion for summary judgment on count two. Plaintiffs have responded, and the motions are now before the Court.
At count one of the complaint, Sanders contends that the IRS has damaged his reputation and financial well-being by filing unjustified tax liens against him. Complaint ¶ 17. Sanders alleges that a dispute arose between the Sanders and the IRS regarding deficiencies in income and employment taxes in the mid 1990's. Complaint ¶ 11. He further contends that, because he represents taxpayers against the IRS, he has been subjected to the animosity of employees of the IRS in Butler, Pennsylvania, whose goal is the professional destruction of Sanders. Complaint ¶¶ 12, 18 20. Finally, Sanders argues that the actions of the IRS have resulted in a threatened taking of his business and property in violation of the Due Process Clause of the Fourteenth Amendment to the United States Constitution. Complaint ¶ 21.
It is well settled that the United States enjoys sovereign immunity from suits and, accordingly, may be sued only if it has waived that immunity. United States v. Idaho ex rel. Dep't of Water Resources, 508 U.S. 1, 5-7 (1993); United States v. Nordic Village, Inc., 503 U.S. 30, 112 S.Ct. 1011, 1014, 117 L.Ed.2d 181 (1992); FMC Corp. v. Department of Commerce, 29 F.3d 833, 838-39 (3d Cir. 1994); In re University Med. Ctr. (University Med. Ctr. v. Sullivan), 973 F.2d 1065, 1085 (3d Cir. 1992). The IRS, as an agency of the United States, is thus shielded from private actions unless sovereign immunity has been waived. United States v. Mitchell, 463 U.S. 206, 212 (1983).
Any waiver of federal sovereign immunity must be "unequivocally expressed" in the statutory text and any such waiver "must be strictly construed in favor of the United States." United States v. Idaho ex rel. Dep't of Water Resources, 508 U.S. at 6-7 (citations omitted); In re University Med. Ctr., 973 F.2d at 1085. Accordingly, a claim against the United States is barred for lack of subject matter jurisdiction unless it falls within an applicable waiver of sovereign immunity. United States v. Mitchell, 463 U.S. at 212.
The party asserting federal subject matter jurisdiction bears the burden of demonstrating that the statutory authority exists. See Kokkonen v. Guardian Life Ins. Co. of America, 511 U.S. 375, 377 (1994). Thus, in addition to demonstrating an unequivocal waiver of sovereign immunity, a plaintiff must establish that the basis of his or her federal claim is a substantive right which may be found in a source of law, "such as the Constitution, or an Act of Congress, or any regulation of an executive department." United States v. Mitchell, 463 U.S. at 216. Furthermore, the plaintiff "must demonstrate that the source of the substantive law he relies upon can fairly be interpreted as mandating compensation by the Federal Government for the damages sustained." Id. at 216-217. In the instant action, Plaintiff has not alleged any source of law granting either subject matter jurisdiction or waiving sovereign immunity. Accordingly, the Court will grant the IRS's motion to dismiss for lack of subject matter jurisdiction under Rule 12(b)(1).
Though Plaintiffs assert their claim under the Fourteenth Amendment, such assertion is improper in this instance as there is no state action alleged.
Because Plaintiffs' claim can conceivably be based upon 26 U.S.C. § 7433, which permits taxpayers to bring suit if an employee of the IRS recklessly, intentionally or negligently disregards any portion of the Internal Revenue Code with respect to collection matters, the Court will give Plaintiffs an opportunity to amend their complaint to restate their cause of action.
The IRS has also filed a motion for summary judgment with regard to count two of Plaintiffs' complaint, contending that the IRS did not abuse its discretion in determining that certain collection activity was appropriate, and is entitled to judgment as a matter of law.
In July of 2001, the IRS mailed Sanders a Notice of Intent to Levy and Notice of Your Right to Hearing, relating to unpaid employment taxes for periods in 1997 and 2000. Phillip Declaration, ¶ 3. In August of 2001, Sanders requested a collection due process hearing pursuant to 26 U.S.C. § 6330, to contest the appropriateness of the Notice of Intent to Levy. Phillip Declaration, ¶ 4. Appeals Officer Susan Phillip was assigned to conduct Sanders' hearing. Phillip Declaration, ¶ 5. Sanders' hearing was scheduled for January 23, 2002, but was rescheduled at Sanders' request to March 1, 2002. Phillip Declaration, ¶¶ 6, 7 8. Phillip contends that the collection due process hearing scheduled for March 1, 2002, was not held. Phillip Declaration, ¶ 14.
The IRS argues that Sanders was given the opportunity to have a collection due process hearing, but failed to act. Because Sanders failed to raise any issues that justified withdrawal of the Notices of Intent to Levy, Phillip did not abuse her discretion in concluding that issuance of the Notices were appropriate.
Sanders contends, however, that the collection due process conference was held by telephone between Sanders and Susan Phillip. Sanders Declaration ¶ 9. During the conference, Sanders contends that neither he nor the IRS were willing to concede their positions, and agreed to disagree regarding the alleged deficiencies. Sanders Declaration ¶¶ 9 17. Moreover, Sanders contends that the IRS abused its discretion when it unilaterally treated a repayment agreement between the parties herein to be in default. Sanders further contends that he attempted to reinstate the payment schedule but such offer was rejected.
Pursuant to FED. R. CIV. P 56(c), summary judgment shall be granted when there are no genuine issues of material fact in dispute and the movant is entitled to judgment as a matter of law. To support denial of summary judgment, an issue of fact in dispute must be both genuine and material, i.e., one upon which a reasonable fact finder could base a verdict for the non-moving party and one which is essential to establishing the claim. Anderson v. Liberty Lobby, 477 U.S. 242, 248 (1986). When considering a motion for summary judgment, the court is not permitted to weigh the evidence or to make credibility determinations, but is limited to deciding whether there are any disputed issues and, if there are, whether they are both genuine and material. Id. The court's consideration of the facts must be in the light most favorable to the party opposing summary judgment and all reasonable inferences from the facts must be drawn in favor of that party as well. Whiteland Woods, L.P. v. Township of West Whiteland, 193 F.3d 177, 180 (3d Cir. 1999), Tigg Corp. v. Dow Corning Corp., 822 F.2d 358, 361 (3d Cir. 1987).
Though the IRS urges this Court to find as a matter of law that there was no abuse of discretion in this action, the Court is loath to do so on this record. Considering the facts in the light most favorable to Sanders as the party opposing summary judgment and taking all reasonable inferences therefrom, the Court finds that there are genuine issues regarding the actions of the IRS. Plaintiffs will be given a full opportunity to make a complete record before this Court. Therefore, the motion for summary judgment filed on behalf of the IRS must be denied.
Accordingly, based upon the foregoing,
IT IS HEREBY ORDERED that the Motion to Dismiss Count One ( Document No. 7) filed on behalf of the IRS is GRANTED. Count One is hereby dismissed without prejudice, Plaintiffs are permitted to file an amended complaint within thirty (30) days from the date of this Order.
IT IS FURTHER ORDERED that the Motion for Summary Judgment ( Document No. 9) filed on behalf of the IRS is DENIED.