Opinion
No. 00-9065-CIV-MIDDLEBROOK/BANDSTRA
July 27, 2001
ORDER GRANTING DEFENDANT'S MOTION TO DISMISS
THIS CAUSE came before the Court upon Defendant United States' Motion to Dismiss (DE 9) (the "Motion"), Plaintiff's Response and Memorandum of Law in Response to Motion to Dismiss Filed by IRS (DE 10), and Defendant's Reply in Support of Motion to Dismiss (DE 11). Upon consideration, Defendant's Motion is granted for the reasons that follow.
I. Legal Standard
A motion to dismiss is appropriate when it is demonstrated "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, 78 S.Ct. 99, 102 (1957). For the purpose of the motion to dismiss, the complaint is construed in the light most favorable to the plaintiff, and all facts alleged by the plaintiff are accepted as true. Hishon v. King Spaulding, 467 U.S. 69, 73, 104 S.Ct. 2229, 2232-33, 81 L.Ed.2d 59 (1984). Regardless of the alleged facts, however, a court may dismiss a complaint on a dispositive issue of law. Marshall County Bd. of Educ. v. Marshall County Gas Dist., 992 F.2d 1171, 1174 (11th Cir. 1993).
II. Background
The following recitation of facts comes from Plaintiff's Complaint (the "Complaint"). Plaintiff was President of a corporation, Northco Construction Company, Inc. ("Northco"). Northco was in the business of staffing carpenters to general contractors and developers. In late 1994, Northco provided carpenters to builders and contractors on an emergency basis in the Miami area for post-Hurricane Andrew assignments. Northco did not timely receive payments from the builders and contractors at that time, and so Northco did not have sufficient assets to pay the withholding taxes due on the salaries it paid its employees. As a result, Northco amassed an unpaid tax liability of $216,442.36 as of December 26, 1994. (Compl. at 2).
The facts alleged in the Complaint are taken to be true for this Motion to Dismiss. Hishon v. King Spaulding, 467 U.S. 69, 73, 104 S.Ct. 2229, 2232-33, 81 L.Ed.2d 59 (1984).
In early 1995, Plaintiff commenced repayment of these unpaid taxes at a rate of $5,000 per week. Those payments continued until Plaintiff had made $80,000 worth of payments. The IRS filed a Notice of Federal Tax Lien against Northco on June 26, 1995. Northco filed for Chapter 11 bankruptcy relief in the United States Bankruptcy Court for the Southern District of Florida on July 24, 1995 (Case No. 95-32250 BKC-PGH). Plaintiff asserts that the IRS agreed to a repayment plan whereby Northco would accept monthly installments of $6,000 for six years until the entire amount owing was paid in full. Plaintiff further alleges that the IRS agreed to refrain from filing any notice of tax lien against Plaintiff Northco had a proposed plan of Arrangement (the "Plan") which provided that it would make said payments. The Plan provided that the interest on the outstanding balance would not exceed one percent (1%) over the one-year treasury bill and that the interest rate would be adjusted monthly. The Plan stated that Northco owed the IRS $232,229.78 plus any statutory allowable additions. Northco dismissed its bankruptcy petition on October 23, 1996.
The Court notes that the Plan also contained a provision that the bankruptcy court was to retain jurisdiction to hear any matter concerning the enforcement or breach of the Plan.
Plaintiff filed this action seeking monetary and injunctive relief against the Internal Revenue Service (IRS) on November 30, 2000 claiming that the IRS had filed a "legally unenforceable" lien against Plaintiff (Compl. at 5). The Internal Revenue Service is a "department or agency" of the United States. See United States v. Fern, 696 F.2d 1269 (11th Cir. 1983). A suit against the IRS is therefore essentially a suit against the United States. See Rosado v. Curtis, 885 F. Supp. 1538, 1542 (M.D. Fla. 1995), aff'd 84 F.2d 437 (11th Cir. 1996). The United States filed a Motion to Dismiss pursuant to FED. R. Civ. PROC. 12(b)(1) and (6). Specifically, Defendant asserts that the United States is immune from this suit under the doctrine of sovereign immunity.
III. DISCUSSION
In general, the United States is immune from suit under the doctrine of sovereign immunity unless it explicitly waives such immunity. United States v. Mitchell, 445 U.S. 535, 538(1980). The Plaintiff has the burden of establishing that the United States has waived sovereign immunity, Baker v. United States, 817 F.2d 560, 562 (9th Cir. 1987), and to identify the specific statutory provision containing such waiver and underlying such suit. See Swofford v. United States, 2000 WL 1039495 (S.D. Ill. 2000). The waiver must be express and will not be implied. Lane v. Pena, 518 U.S. 187, 192 (1996). The scope of a waiver of sovereign immunity is to be strictly construed in favor of the sovereign. Department of the Army v. Blue Fox, Inc., 525 U.S. 255, 261(1999).
Plaintiff's complaint (the "Complaint") premised jurisdiction on 26 U.S.C. § 7432, 7425, 6320 and 6330. At present, Plaintiff premises jurisdiction on Sections 7432 and 7433 Accordingly I will address the sufficiency of both sections to confer jurisdiction upon this Court over the instant matter.
All statutory references contained herein are to the Internal Revenue Code of 1986, 26 U.S.C.
During the briefing of this Motion, Plaintiff apparently abandoned abandoned his position that Sections 7425, 6320 and 6330 contain specific waivers of sovereign immunity applicable to this action, but maintained his position that Section 7432 properly confers jurisdiction on this Court. In his memorandum in opposition to the Motion, Plaintiff for the first time suggests that Section 7433 provides a valid waiver of sovereign immunity and is applicable to the facts in this case. It appears as though Plaintiff is attempting to amend the Complaint by citing Rule 15. Although Plaintiff is correct that the Federal Rules of Civil Procedure are to be applied liberally so as to allow plaintiffs to amend their complaints in the interest of justice, the Court is unaware of any provision which allows for the amendment of complaints via a response to a motion. For the purposes this Motion, however, I will treat the Complaint as amended and address the merits of § 7433 as providing a waiver of sovereign immunity in this case.
26 U.S.C. § 7432 provides, in pertinent part that: "[i]f any officer or employee of the [IRS] knowingly, or by reason of negligence, fails to release a lien under Section 6325 on property of the taxpayer, such taxpayer may bring a civil action. . . against the United States. . . in a district court of the United States." 26 U.S.C. § 7432.
Section 7432 therefore constitutes a valid waiver of sovereign immunity in cases where the IRS has failed to properly release a lien in accordance with § 6235. See Overton v. United States, 925 F.2d 1282, 1284 (10th Cir. 1991). Section 6235 provides as follows:
Foot note #5 marker was in the text , but the foot note definition was not in the hard copy of this file.
(a) Release of Lien. Subject to such regulations as the Secretary may prescribe, the Secretary may issue a certificate of release of any lien imposed with respect to any internal revenue tax not later than 30 days after the day which
(1) Liability Satisfied or Unenforceable. The Secretary finds that the liability for the amount assessed, together with all interest in respect thereof, has been fully satisfied or has become legally unenforceable; or
(2) Bond Accepted. There is furnished to the Secretary and accepted by him a bond that is conditioned upon the payment of the amount assessed, together with all interest in respect thereof, within the time prescribed by law (including any extension of such time), and that is in accordance with such requirements relating to terms, conditions, and form of the bond and sureties thereon, as may be specified by such regulations.
This section thus is applicable in three situations: (1) when the Secretary finds that the liability underlying the lien has been fully satisfied; (2) when the Secretary determines that the liability has become legally unenforceable; or (3) when the Secretary accepts an appropriate bond. Liability for the payment of tax continues until the tax, including all interest is fully satisfied or until expiration of the statutory period for collection. See 26 C.F.R. § 301.6325 1(a)(1). A liability must become unenforceable as a matter of law before a lien is subject to release under § 6325. Id. The Complaint does not allege that the liability underlying the lien is unenforceable or that it had been satisfied. Neither does it allege that Plaintiff posted a bond. Accordingly, § 7432 is ineffective as a statutory basis for jurisdiction in this matter.
Plaintiff has since paid the underlying tax liability and the lien has been removed. See Resp. at 5 "Count I seeking injunctive relief is now moot for the taxpayer paid the amount of tax allegedly due and has obtained a release of the tax lien."
The Court notes that in his Response, Plaintiff indicated that he would proceed to prove at trial that the lien was legally unenforceable. Such intention alone, without factual support, is legally insufficient to withstand this Motion. The facts presented by the Complaint do not provide any basis for the Court to find that the Plaintiff's tax liability was at any time legally unenforceable, and is contradictory to the position Plaintiff takes in premising jurisdiction on Section 7433 (claiming that IRS was violating a legal installment agreement for payment of past due taxes).
Additionally, Section 7432 clearly provides that a "judgment for damages shall not be awarded under [this section] unless the court determines that the plaintiff has exhausted the administrative remedies available to such plaintiff within the Internal Revenue Service." 26 U.S.C. § 7432(d)(1). The Complaint provides no facts upon which the Court may conclude that Plaintiff has exhausted his administrative remedies with the IRS. Accordingly, for this reason, and because the Complaint fails to allege the facts necessary to establish a violation of Section 6235, Section 7432 is does not provide a valid waiver of sovereign immunity.
I now consider the merits of Plaintiff' claim that the facts of the Complaint support a finding of a valid waiver of sovereign immunity under Section 7433. Analysis of this argument reveals the same deficiency I determined to exist with Section 7432. Section 7433 also requires Plaintiff to exhaust his administrative remedies. As stated above, the Complaint does not sufficiently allege that Plaintiff has exhausted the administrative remedies of the IRS because the Complaint makes the unsupported assertion that all remedies were exhausted, without providing any specificity. See White v. C.I.R., 899 F. Supp. 767 (D.Mass. 1995). Further, the Court notes that the Complaint also does not sufficiently allege a violation of any IRS rule or regulation so as to trigger Section 7433's waiver of immunity as to Plaintiff.
See supra note 3.
Plaintiff alleges that the IRS violated Sections 6331(k)(2) and 6159. Essentially, Plaintiff's position is that: because he was paying his tax liability in installments, the IRS could not legally make a levy on either him or his property. The problem with Plaintiffs position is twofold. First, Section 6519 requires installment agreements to be in writing in order for Section 6331(k)(2) to apply. See 26 U.S.C. § 6159; 6333; 26 C.F.R. § 301.6159-1. There is no evidence in the record that Plaintiff and the IRS entered into a written installment agreement. Further, Plaintiff's second problem is that even if the Court were to find a valid enforceable agreement for installment payments between Plaintiff and the IRS, Section 6159 still would be inapplicable to the facts of this case.
Section 6331(k)(2) provides that "[n]o levy may be made under [this] section. . . during the period that. . . an installment agreement for payment of such unpaid taxes is in effect."
Section 6159 allows the Secretary of the IRS to "enter into written agreements with [a] taxpayer. . ." There is no evidence of a written agreement with the IRS in the record.
Section 6331(k)(2) prohibits the IRS from placing a levy upon a party making installment payments pursuant to a valid installment agreement. The action complained of in this case is the wrongful placing of a lein, not a levy. Plaintiff has not alleged that the IRS has wrongfully placed a levy upon him, and so, I must find that Section 6433 does not provide a valid waiver of sovereign immunity as applied to the facts of this case.
IV. CONCLUSION
For the reasons stated above, it is hereby
ORDERED AND ADJUDGED that Defendant's Motion To Dismiss (DE 9) be and is GRANTED. Plaintiff's Complaint should be DISMISSED WITH PREJUDICE. It is further ORDERED AND ADJUDGED that the CLERK shall CLOSE THIS CASE and DENY any and all pending motions as MOOT.