Opinion
5-.01-CV-1251
September 26, 2003
William H. Dourlain, Manlius, NY, for Plaintiff Glenn T. Suddaby, Charles E. Roberts, Esq., Syracuse, NY, for Defendant
MEMORANDUM-DECISION AND ORDER
I. Introduction
This action, brought pursuant to 42 U.S.C. § 1983, stems from the imposition of civil penalties on plaintiff pro se William Dourlain by the Internal Revenue Service pursuant to 26 U.S.C. § 6702 for filing a frivolous income tax return. Plaintiff seeks a refund of $583.85 plus interest, and an admission from the 1RS that no law or regulation enables it to impose a civil penalty under 26 U.S.C. § 6702. Presently before the Court are the government's motion to dismiss the complaint pursuant to Fed.R.Civ.P. 12(b)(1), (2), and (6); plaintiffs motion for default judgment; and the government's motion to dismiss the amended complaint pursuant to Fed.R.Civ.P. 12(b)(1), (2), and (6).
II. Background
According to the amended complaint, plaintiff brings this action pursuant to 42 U.S.C. § 1983. Plaintiff asserts that the Court has jurisdiction over this action pursuant to 28 U.S.C. § 1331 (federal question jurisdiction); 28 U.S.C. § 1343(3) and (4) (federal court jurisdiction over claims relating to civil rights brought pursuant to, inter alia, 42 U.S.C. § 1983); and 28 U.S.C. § 2201 (Declaratory Judgment Act).
According to the amended complaint, on or about March 23, 1999, plaintiff received a letter from "Ms. Raines" of the Andover, Massachusetts branch of the IRS stating that "Plaintiff had 30 days to change his 1998 return or be billed $500.00 pursuant to 26 U.S.C. § 6702." Plaintiff asserts that because he knew that "the Secretary of the Treasury or delegate as seen in 26 U.S.C. § 6703" carried the burden of proof with regard to the civil penalty provision contained in 26 U.S.C. § 6702, on or about April 7, 1999, plaintiff sent a letter to Ms. Raines requesting to see the "delegation orders and legislative regulations enabling Ms. Raines or the IRS to impose the penalty pursuant to 26 U.S.C. § 6702." Plaintiff avers his request was ignored.
Plaintiff asserts that on May 24, 1999, the IRS sent plaintiff a letter "illegally charging" him with a penalty pursuant to 26 U.S.C. § 6702. In response, plaintiff wrote a letter to "Ms. Klimoski" of the Buffalo, New York IRS office requesting a meeting. In that letter, plaintiff stated that he would "pay the $500.00 penalty upon seeing the proper delegation orders." Plaintiff avers that the IRS has failed to produce delegation orders,
On or about October 4, 1999, the IRS sent plaintiff an unsigned letter threatening to take $514.79 from him pursuant to 26 U.S.C. § 6331(d). In a letter dated October 13, 1999, plaintiff again offered to pay if the IRS produced the proper delegation orders. The IRS "ignored" plaintiffs offer.
On or about October 11, 2000 and May 3, 2001, the IRS "illegally" took money from plaintiff without a court order under the "false pretense that 26 U.S.C. § 6331 gives the IRS the ability to levy." Therefore, plaintiff argues, his due process rights under the Fifth Amendment of the constitution were violated.
In a letter dated July 10, 2001, George E. Smith of the IRS Appeals Office in Syracuse, New York notified plaintiff that "this unsigned letter from the IRS was to serve as a Notice and Demand." Plaintiff asserts in his complaint that 26 U.S.C. § 6303 specifically requires "the Secretary of the Treasury or delegate issue this notice." Thus, plaintiff argues, "[f]or Mr. Smith to think that an unsigned letter serves as a Notice and Demand for tax pursuant to 26 U.S.C. § 6303 is convoluted."
According to the amended complaint, in a letter dated July 10, 2001, Mr. Smith wrote "IRC 6331 provides the authority for the [IRS] to levy and a court order is not required under the law." Plaintiff questions the law Mr. Smith is referring to, and claims § 6331 does not mention the IRS or authorize it to act in opposition to the Fifth Amendment.
It is unclear from the amended complaint whether this letter is the same "unsigned" letter plaintiff refers to as purporting to be a "Notice and Demand".
On August 7, 2001, plaintiff filed a complaint seeking "to recover property illegally obtained by the [Internal Revenue Service]." On April 19, 2002, plaintiff requested and received a clerk's entry of default. That same day, United States Magistrate Judge Gustave Di Bianco granted the government's request to extend the answer deadline until May 17, 2002. On April 26, 2002, plaintiff filed a motion for default judgment. On May 17, 2002, the government filed a motion to dismiss in lieu of an answer. On October 2, 2002, plaintiff filed an amended complaint seeking a refund of $583.85 plus interest, and an admission from the IRS that no law or regulation enables it to impose a civil penalty under 26 U.S.C. § 6702.
III. Discussion
A. Motion for Default Judgment and Motion to Dismiss Original Complaint
As an initial matter, plaintiffs motion for default judgment must be denied. The government timely filed a motion to dismiss in lieu of an answer, thus it has appeared in this action and is not in default. Moreover, after moving for default judgment and after the government moved to dismiss the original complaint, plaintiff filed an amended complaint which rendered plaintiffs motion for default judgment on the original complaint, moot. For the same reason, the government's motion to dismiss the original complaint is also moot. Accordingly, plaintiffs motion for default judgment and the government's motion to dismiss the original complaint are denied.
B. Motion to Dismiss pursuant to 12(b)(2)
The government seeks dismissal pursuant to Fed.R.Civ.P. 12(b)(2) for lack of personal jurisdiction on the basis that plaintiff failed to serve the original complaint within 120 days as required by Fed.R.Civ.P. 4(m). In this case, plaintiff filed the original complaint on August 7, 2001. Docket number 3 is a copy of a return receipt from the IRS Appeals office dated August 9, 2001, which plaintiff claims verifies that his summons was received. On December 5, 2001, in a status conference, Judge Di Bianco directed plaintiff to serve the complaint. See Rule 4(i)(1)(A)(B) (requiring service on United States Attorney and Attorney General). That same day, December 5, 2001, 120 days after the filing of the complaint, plaintiff personally served the United States Attorney. Thus, plaintiffs service on the United States Attorney was timely. Plaintiff, however, did not mail the complaint to the Attorney General until the next day, December 6, 2001, one day late. Defendant argues, therefore, that the Court lacks personal jurisdiction over defendant.
It is undisputed that plaintiff timely served the amended complaint.
Rule 4(m) provides, in part:
If service of the summons and complaint is not made upon a defendant within 120 days after the filing of the complaint, the court, upon motion or on its own initiative after notice to the plaintiff, shall dismiss the action without prejudice as to that defendant or direct that service be effected within a specified time; provided that if the plaintiff shows good cause for the failure, the court shall extend the time for service for an appropriate period.
There is no suggestion in the Minute Entry from the December 5, 2001, status conference, that in addition to directing plaintiff to serve the complaint, Magistrate Judge Di Bianco granted plaintiff an extension of time in which to serve the complaint. Plaintiff argues in his memorandum of law in support of opposition to dismiss the amended complaint that his complaint should be deemed timely served because it was not until that status conference, that he learned that "a gentlemen in the Clerks Office . . . unintentionally steered him wrong" and erroneously instructed him that "by sending the IRS the summons and complaint via certified mail that the service requirement would be met". Dkt. n. 32. Plaintiffs memorandum of law is incorporated by reference in an affidavit by plaintiff in which plaintiff swears that the content of his memorandum of law is "the truth based on facts." Dkt. n. 33. Thus, plaintiff has demonstrated good cause for his delay. Even if plaintiff's assertions regarding his late service of the complaint were insufficient. Rule 4(m), nevertheless "authorizes the court to relieve a plaintiff of the consequences of an application of this section even if good cause is not shown." Board of Trustees of Trucking Employees of N. Jersey Welfare Fund, Inc. v. Canny, 876 F. Supp. 14, 16 (N.D.N.Y. 1995). "[S]uch relief might be justified if, for example, the applicable statute of limitations would bar the refiled action." Id. (citing Notes of Advisory Committee on Rules for the 1993 Amendments for Rule 4(m); Wright Miller, 4A Federal Practice and Procedure 2d § 1137 (1987) (Supp. 1994)).
In this case, in view of plaintiff's pro se status, timely service on the United States Attorney, service on the Attorney General only one day past the 120 day limitation, sworn statement regarding the reason for the delay, and because the thirty day time period for bringing an action for judicial review pursuant to 26 U.S.C. § 6330(d), see section III.C.5., infra, would bar plaintiffs refiling of the instant complaint, the Court deems the service effectuated on the Attorney General proper. See id. (deeming the plaintiffs service timely notwithstanding their failure to show good cause where plaintiffs served the defendants "only two days beyond 120 day limitation and because the applicable statute of limitation would bar plaintiffs refiling of the instant action against these two defendants"); see also Mejia v. Castle Hotel, Inc., 164 F.R.D. 343, 345-46 (S.D.N.Y. 1996) (service nine days after the expiration of the 120 day period could be deemed proper without a showing of good cause under Rule 4(m)); Abecasis v. Mr. Chestnut, No. 93 Civ. 4246, 1998 WL 151035, at *3 (S.D.N.Y. Mar. 31, 1998) (exercising discretion and deeming service fourteen days after service deadline proper even though the parties' submissions did not "clearly indicate whether the fourteen day delay was the result of dilatory conduct on the part of Plaintiff, or, the result of difficulties the U.S. Marshals may have encountered in effecting service."). Accordingly, the government's motion to dismiss pursuant to Rule 12(b)(2), is denied.
C. Motion to Dismiss Amended Complaint
The United States moves to dismiss the amended complaint pursuant to Fed.R.Civ.P. 12(b)(1) for lack of subject matter jurisdiction and Fed.R.Civ.P. 12(b)(6) for failure to state a claim upon which relief can be granted. Specifically, the government argues that: (1) 42 U.S.C. § 1983 does not authorize a suit against a federal agency, namely the IRS, for a tax penalty refund and plaintiff fails to state a Bivens claim; (2) the Declaratory Judgment Act, 28 U.S.C. § 2201, prohibits federal courts from hearing almost all proceedings for declaratory relief as to the collection of taxes and the Anti-Injunction Act, 26 U.S.C. § 7421, prohibits suits to restrain the assessment or collection of taxes; (3) to the extent the amended complaint could be construed as an action for a tax refund pursuant to 26 U.S.C. § 7422, plaintiff failed to allege that he filed a claim for a refund with the Secretary of the Treasury, a
prerequisite to suit; (4) the original complaint was untimely served, more than 120 days after filing therefore there is no personal jurisdiction; and (5) the amended complaint fails to articulate a legal basis for why plaintiff is entitled to a $583.85 refund and as a matter of law, there was no violation of plaintiff's Fifth Amendment due process rights. Plaintiff opposes the government's motion on the basis that this case "has always been about how" the IRS illegally charged and collected a penalty pursuant to 26 U.S.C. § 6702. In short, plaintiff contends that a penalty pursuant to § 6702 may only be assessed by the Secretary of the Treasury or delegate and that no delegation order exists that pertains to § 6702. Plaintiff further argues that the penalty was collected pursuant to 26 U.S.C. § 6331, but that § 6331 does not authorize the IRS to take plaintiffs property, and further that there is no regulation that enables the IRS to act pursuant to § 6331. Plaintiff asserts that the IRS took the § 6702 penalty without court order, summons, or hearing, and in violation of the due process clause of the Fifth Amendment.
1. Standard
In contemplating a motion to dismiss for lack of subject matter jurisdiction pursuant to Fed.R.Civ.P. 12(b)(1), the Court must "accept as true all material factual allegations in the complaint["] Atlantic Mut. Ins. Co. v. Balfour MacLaine Int'l Ltd, 968 F.2d 196, 198 (2d Cir. 1992) (citing Scheuer v. Rhodes, 416 U.S. 232, 236 (1974)), though "argumentative inferences favorable to the party asserting jurisdiction should not be drawn." Id. (citing Norton v. Larney, 266 U.S. 511, 515 (1925)). A motion to dismiss pursuant to Rule 12(b)(1) for lack of subject matter jurisdiction may include evidence outside the pleadings, e.g., affidavit(s) or otherwise competent evidence, and cannot be converted to a Rule 56 motion for summary judgment. See Kamen v. American Tel Tel Co., 791 F.2d 1006, 1011 (2d Cir. 1986).
In addressing a motion to dismiss pursuant to Fed.R.Civ.P. 12(b)(6), the Court accepts as true all of the factual allegations in the complaint and draws inferences from those allegations in the light most favorable to the plaintiff. See Albright v. Oliver, 510 U.S. 266, 268 (1994); McEvoy v. Spencer, 124 F.3d 92, 95 (2d Gir. 1997). Dismissal is proper only 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); see Valmonte v. Bane, 18 F.3d 992, 998 (2d Cir. 1994). Plaintiff brings this action pro se, thus his submissions should be held '"to less stringent standards than formal pleadings drafted by lawyers. . . ." Hughes v. Rowe, 449 U.S. 5, 9 (1980) (per curiam) (quoting Haines v. Kerner, 404 U.S. 519, 520 (1972)).
2. 42 U.S.C. § 1983 Bivens Claim
Plaintiff alleges his Fifth Amendment right to due process was violated when the IRS imposed a levy pursuant to 26 U.S.C. § 6331, without a court order or summons. "Section 1983, however, applies only to actions taken under the color of state law that violate constitutional or federal statutory rights." Yalkut v. Gemignani, 873 F.2d 31, 35 (2d Cir. 1989) (emphasis added). Plaintiff makes no allegation of state action in the amended complaint, only federal action by the IRS. Moreover, plaintiff has not asserted a Bivens claim, Bivens v. Six Unknown Fed Narcotics Agents, 403 U.S. 388 (1971), for a constitutional violation arising from the levy, because a Bivens claim can only be maintained against individual agents of the government not the government agency, Correctional Servs. Corp. v. Malesko, 534 U.S. 61, 69 (2001) ("[T]he purpose of Bivens is to deter the officer, 'not the agency.'" (Quoting FDIC v. Meyer, 510 U.S. 471, 485 (1994)). Plaintiffs amended complaint, however, fails to state a claim because plaintiff names only the United States in the caption of the amended complaint.
3. Declaratory Judgment Act and Anti-Injunction Act
In the amended complaint, plaintiff asserts the Court has jurisdiction pursuant to 28 U.S.C. § 2201, the Declaratory Judgment Act. The Declaratory Judgment Act, however, expressly precludes federal courts from granting declaratory relief in cases "with respect to federal taxes." 28 U.S.C. § 2201 (a). 'Thus, whether or not that Act waives the sovereign immunity of the United States with respect to other types of actions, it explicitly excludes from any such waiver the power to declare rights or obligations with respect to federal taxes." S.E.C. v. Credit Bancorp, Ltd, 297 F.3d 127, 137 (2d Cir. 2002). Therefore, the Court lacks jurisdiction to consider plaintiffs amended complaint to the extent it seeks declaratory relief.
The government also contends that plaintiffs claims for injunctive relief are barred by the Anti-Injunction Act, 26 U.S.C. § 7421. The Anti-Injunction Act states, "no suit for the purpose of restraining the assessment or collection of any tax shall be maintained in any court by any person." Id. "The purpose of the Act is to protect 'the Government's need to assess and collect taxes as expeditiously as possible with a minimum of preenforcement judicial interference, and to require that the legal right to the disputed sums be determined in a suit for refund.'" Randell v. United States, 64 F.3d 101, 106 (2d Cir. 1995) (quoting Bob Jones Univ. v. Simon, 416 U.S. 725, 736 (1974)) (additional quotation marks omitted). There is, however, a judicially created exception for taxpayers:
To qualify for this exception a taxpayer must show (1) that "it is clear that under no circumstances could the Government ultimately prevail" on the tax liability and (2) that "equity jurisdiction otherwise exists" because the taxpayer would suffer irreparable injury if collection were effected. A court must "take the view of the facts that is most liberal to the Commissioner, not to the taxpayer seeking injunctive relief."Id. at 106-07 (quoting Enochs v. Williams Packing Navigation Co., 370 U.S. 1, 7 (1962); Laino v. United States, 633 F.2d 626, 632 (2d Cir. 1980)) (internal citation omitted). There is nothing in the amended complaint or plaintiffs opposition papers upon which the Court could find that plaintiff has or could make this showing.
The government asserts the Court lacks jurisdiction over any claim plaintiff brings pursuant to 26 U.S.C. § 7422 because plaintiff failed to allege he filed a claim for a refund with the IRS, a prerequisite to the United States' waiver of sovereign immunity. As a sovereign, the United States "may be sued only to the extent that it has waived sovereign immunity by enacting a statute consenting to suit." Kulawy v. United States, 917 F.2d 729, 733 (2d Cir. 1990) (citing United States v. Sherwood, 312 U.S. 584 (1941)). As previously discussed, none of the statutes plaintiff cites confer subject matter jurisdiction and waive the sovereign immunity of the United States. United States v. Alabama, 313 U.S. 274 (1941).
Title 28 U.S.C. § 1346(a)(1) provides, in relevant part, that "[t]he district courts shall have original jurisdiction . . . [of] any civil action against the United States for the recovery of any internal-revenue tax alleged to have been erroneously or illegally assessed or collected or any penalty claimed to have been collected without authority." Civil actions for a tax refund are governed by 26 U.S.C. § 7422, which provides as follows:
No suit or proceeding shall be maintained in any court for the recovery of any internal revenue tax alleged to have been erroneously or illegally assessed or collected, or of any penalty claimed to have been collected without authority, or of any sum alleged to have been excessive or in any manner wrongfully collected, until a claim for refund or credit has been duly filed with the Secretary according to the provisions of law in that regard, and the regulations of the Secretary established in pursuance thereof.26 U.S.C. § 7422 (a).
Here, plaintiff claims that a penalty was illegally charged, assessed, and collected against him pursuant to 26 U.S.C. § 6702. As a result, plaintiff seeks an order directing the IRS to refund $583.85 plus interest and to issue an admission that no law or regulation enables it to impose a civil penalty under 26 U.S.C. § 6702. Thus, filing a claim for a refund with the IRS is a jurisdictional prerequisite to suit in this Court. Plaintiff has not alleged in the amended complaint or in his memorandum of law in opposition to the United States' motion to dismiss the amended complaint, that he has done so. Plaintiff cites 26 U.S.C. § 7422(b), which provides that "[s]uch suit or proceeding may be maintained whether or not such tax, penalty, or sum has been paid under protest or duress", for the erroneous proposition that if the tax or penalty was paid under protest or duress, sovereign immunity is waived, and the taxpayer is excused from filing a claim for refund with the IRS as a prerequisite to filing suit. Section 7422(b), however, merely clarifies that payment of a tax or penalty under protest or duress does not prohibit suit. It does nothing to alter the requirement that a claim for refund be filed.
Section 6702 provides:
(a) Civil penalty. — If — (1) any individual files what purports to be a return of the tax imposed by subtitle A but which — (A) does not contain information on which the substantial correctness of the self-assessment may be judged, or (B) contains information that on its face indicates that the self-assessment is substantially incorrect; and (2) the conduct referred to in paragraph (1) is due to — (A) a position which is frivolous, or (B) a desire (which appears on the purported return) to delay or impede the administration of Federal income tax laws, then such individual shall pay a penalty of $500.
(b) Penalty in addition to other penalties. — The penalty imposed by subsection (a) shall be in addition to any other penalty provided by law.
In opposition to dismissal for lack of subject matter jurisdiction, plaintiff points out that the Pro Se Handbook provided to him by the Clerk's Office indicates that the Court has jurisdiction over all actions involving a federal question, and that this action concerns constitutional and federal statutory issues. Plaintiff also states that he based his amended complaint on the model complaints provided by the Clerk's Office and asserts that therefore the Court's dismissal of the amended complaint would "seem to imply a conflict of interest." The latter argument is frivolous and lacks merit. As to the former argument, even if the complaint does involve a federal question, plaintiff must still show that he has filed a claim for a refund with the IRS before sovereign immunity is waived. See Weisman v. Comm'r of IRS, 103 F. Supp.2d 621, 626 (E.D.N.Y. 2000) ("[w]hen a statutory waiver of immunity exists, a plaintiff must strictly comply with the conditions to suit outlined by the statute or corresponding regulation."). Because plaintiff has failed to allege in his amended complaint that he filed a claim for a refund with the IRS prior to bringing this action, he has not met a prerequisite to the United States' waiver of sovereign immunity, thus the Court lacks subject matter jurisdiction. See Soffer v. United States, No. 01 Civ. 0945(KMW)THK, 2002 WL 741653 at *4 (March 20, 2002) ("Failure by the taxpayer to file a proper claim for a refund deprives the district court of subject matter jurisdiction.") (citing United States v. Dalm, 494 U.S. 596, 602, 608-09 (1990)). Accordingly, the United States' motion to dismiss is granted.
As a final matter, in his amended complaint, plaintiff refers to the levy the IRS imposed pursuant to 26 U.S.C. § 6331 for the filing of a frivolous tax return during the 1998 tax year. See 26 U.S.C. § 6702. Plaintiff contends the taking of his property without court order violated his Fifth Amendment due process rights and challenges the notices he received regarding the IRS's intent to levy his property. Attached to plaintiffs correspondence (Dkt. n. 22) and the papers plaintiff filed in opposition to the government's motion to dismiss the original complaint (Dkt. n. 17, Ex. 1), both of which were submitted prior to his filing the amended complaint, is a "Notice of Determination Concerning Collection Collections Action(s) Under 6330" dated July 10, 2001. That Notice advises plaintiff to file a complaint in a United States District Court within thirty days of the date of the Notice for a "redetermination." Plaintiff filed the original complaint with this Court on August 7, 2001.
While 26 U.S.C. § 6330(d) provides, in some instances, for judicial review by a district court of the TRS appeals officer's determination following a collection due process hearing, see e.g., Silver v. Smith, No. 01-CV-6193L, 2002 WL 31367926 at *2 (W.D.N.Y. Sept. 5, 2002), plaintiff has not, in his amended complaint, specifically sought such review. Instead, plaintiff seeks a refund of $583.85 plus interest, and an order from the Court directing the IRS to admit "that no law or legislative regulation enables them to impose a civil penalty under 26 U.S.C. § 6702". Thus, even viewed liberally, the Court does not read the amended complaint as seeking review pursuant to § 6330(d) of the IRS appeals officer's determination in this case. In light of plaintiff's pro se status, however, in dismissing the amended complaint, the Court will afford plaintiff leave to replead within thirty (30) days of the date of this order, and include a claim pursuant to § 6330(d).
Section 6330(d) provides:
(d) Proceeding after hearing. — (1) Judicial review of determination. The person may, within 30 days of a determination under this section, appeal such determination — (A) to the Tax Court (and the Tax Court shall have jurisdiction with respect to such matter); or (B) if the Tax Court does not have jurisdiction of the underlying tax liability, to a district court of the United States. If a court determines that the appeal was to an incorrect court, a person shall have 30 days after the court determination to file such appeal with the correct court.
IV. Conclusion
For the foregoing reasons, it is hereby
ORDERED that plaintiffs motion for default judgment is DENIED as moot; and it is further
ORDERED that the United States' motion to dismiss the original complaint is DENIED as moot; and it is further
ORDERED that the United States' motion to dismiss for lack of personal jurisdiction is DENIED; and it is further
ORDERED that the United States' motion to dismiss the amended complaint is GRANTED and the amended complaint is DISMISSED without prejudice; and it is further
ORDERED that plaintiff may, within thirty (30) days of the date of this order, file an amended pleading that complies fully with the terms of this Order as detailed above.