Opinion
A03-220 CV (JWS), [Re: Motions at Docket 33, 35].
May 5, 2005
ORDER FROM CHAMBERS
I. MOTIONS PRESENTED
At docket 33, Atlas Air, Inc. ("Atlas") moves to dismiss plaintiffs' claims for injunctive relief. At docket 35, plaintiffs oppose the motion. Also at docket 35, plaintiffs move for leave to file an amended complaint. That motion is opposed by Atlas at docket 37. At docket 12, plaintiffs request oral argument on Atlas's motion to dismiss. Because oral argument on that motion would not assist the court, plaintiffs' request is denied. Oral argument has not been requested on plaintiffs' motion for leave to file an amended complaint and would not assist the court.
See D. ALASKA L.R. 7.2(a)(3)[B].
II. BACKGROUND
Plaintiffs work for Atlas, which is in the air cargo business. As part of their job, plaintiffs are assigned to work at four Atlas "gateways" around the country — Anchorage, Alaska; Los Angeles, California; Miami, Florida; and New York, New York. Plaintiffs do not necessarily reside in the gateway cities and, if they live in one gateway city they may work in another. Under plaintiffs' labor agreement with Atlas, Atlas pays the transportation, dining, and lodging expenses associated with plaintiffs' travel to, and work in, the gateway cities.
The dispute between plaintiffs and Atlas arose from Atlas's decision, in June of 2003, to treat expenses associated with plaintiffs' work in gateway cities as wages. As a result of that decision, Atlas began to withhold income and Federal Insurance Contributions Act ("FICA") taxes from plaintiffs' wages to reflect the expenses related to their work in gateway cities. In response, plaintiffs sued Atlas, alleging violations of state and federal law and requesting damages and an injunction prohibiting Atlas from withholding taxes based on those expenses.
26 U.S.C. § 3102 (2002).
After plaintiffs filed suit, Atlas entered bankruptcy. Plaintiffs' action in this court was stayed until the conclusion of the bankruptcy proceedings. When those proceedings ended, the court dismissed plaintiffs' claims for damages and ordered further briefing on whether plaintiffs' claims for injunctive relief also should be dismissed. The parties have fully briefed that issue. In addition, plaintiffs have filed a motion for leave to amend their complaint to add claims against Atlas under the Employee Retirement Income Security Act of 1974 ("ERISA"). That motion also has been fully briefed.
29 U.S.C. §§ 1001- 1461 (1999).
III. STANDARDS OF REVIEW
A. Motion to Dismiss
The party resisting a motion to dismiss for lack of subject matter jurisdiction under Federal Rule of Civil Procedure 12(b)(1) bears the burden of proving that jurisdiction exists.
Tosco Corp. v. Cmtys. for a Better Env't, 236 F.3d 495, 499 (9th Cir. 2001).
B. Leave to Amend
A party may amend its pleading after the opposing party files a responsive pleading "only by leave of court or by written consent of the adverse party." When a party moves for leave to file an amended pleading, ordinarily, the court should grant the motion. But when deciding whether to grant the motion, the court should consider whether the amendment will prejudice the opposing party; is made in bad faith or after undue delay; follows a previous amendment; or is futile. If the amendment will prejudice the opposing party, or if there is a "strong showing" by any of the other factors, the court may deny the motion.
6 CHARLES ALAN WRIGHT, ET AL., FEDERAL PRACTICE AND PROCEDURE § 1487 (2d ed. 1990).
Allen v. City of Beverly Hills, 911 F.2d 367, 373 (9th Cir. 1990) (citations omitted).
Eminence Capital, L.L.C. v. Aspeon, Inc., 316 F.3d 1048, 1052 (9th Cir. 2003).
IV. DISCUSSION
A. Motion to Dismiss Claim for Injunctive ReliefThe Anti-Injunction Act, 26 U.S.C. § 7421(a), deprives district courts of subject matter jurisdiction over lawsuits designed to restrain "the assessment or collection of any tax. . . ." The Act applies to lawsuits by employees challenging their employer's withholding of taxes from their paychecks. Although the Act appears to deprive district courts of jurisdiction over all lawsuits challenging withholdings, district courts may entertain those lawsuits if two criteria are satisfied. First, the employees challenging the withholdings must demonstrate that — "under the most liberal view of the law and the facts" — there is no legal justification for the withholdings. Second, they must also show that they will suffer irreparable harm if injunctive relief is denied.
See also Enochs v. Williams Packing Navigation Co., Inc., 370 U.S. 1, 5 (1962).
Bright v. Bechtel Petroleum, Inc., 780 F.2d 766, 770 (9th Cir. 1986) (citing Maxfield v. U.S. Postal Serv., 752 F.2d 433, 434 (9th Cir. 1984)).
Enochs, 370 U.S. at 7.
Maxfield, 752 F.2d at 434 (citing id.).
Id.
Neither condition is satisfied in this case. First, plaintiffs have not shown that Atlas's withholdings are without legal justification. Atlas has a legitimate argument that, even if they are not plaintiffs' residences, gateway cities are plaintiffs' "homes" for tax purposes. Consequently, it is legally defensible for Atlas to treat the expenses related to plaintiffs' work in gateway cities as wages — and not deductible, "away-from-home" expenses — subject to income and FICA tax withholdings. Second, even if no law supported Atlas's withholdings, subject matter jurisdiction over plaintiffs' claims for injunctive relief still would not exist because they cannot show that denying them injunctive relief will irreparably harm them. They will not be irreparably harmed because they can challenge the withholdings' legality in tax refund actions. That remedy's availability is reinforced by the fact that one plaintiff, Marc Jordan, has already filed a tax refund action.
See Doc. 8, Initial Motion to Dismiss, at 6-8; Doc. 16, Initial Reply in Support of Motion to Dismiss, at 2-9.
See Doc. 8, Initial Motion to Dismiss, at 6-8; Doc. 16, Initial Reply in Support of Motion to Dismiss, at 2-9.
Maxfield, 752 F.2d at 434 (citing Enochs, 370 U.S. at 7).
See Doc. 33, Renewed Motion to Dismiss, Marc Jordan's complaint against the United States of America, filed in U.S. District Court for the District of Minnesota.
Plaintiffs argue that further discovery is required before the court can decide whether it has subject matter jurisdiction over their claims for injunctive relief. Although further discovery is appropriate when jurisdictional questions require developing additional facts, the parties have established enough facts to allow the court to resolve the jurisdictional issues presented here. Based on those facts, it is clear that Atlas's withholdings have some support in the law and that plaintiffs will not suffer irreparable harm if injunctive relief is denied.
Laub v. U.S. Dep't of the Interior, 342 F.3d 1080, 1093 (9th Cir. 2003) (quoting Butcher's Union Local No. 498 v. SDC Inv., Inc., 788 F.2d 535, 540 (9th Cir. 1986)).
B. Motion for Leave to File an Amended Complaint
Plaintiffs' motion for leave to file an amended complaint adding ERISA claims must be denied because those claims would be futile. Before filing ERISA claims, plaintiffs must exhaust their administrative remedies, unless those remedies are inadequate or it would be futile to pursue them. Plaintiffs have not exhausted their administrative remedies or shown that conditions excusing exhaustion exist.
Diaz v. United Agric. Employee Welfare Benefit Plan Trust, 50 F.3d 1478, 1483 (9th Cir. 1995) (citing Amato v. Bernard, 618 F.2d 559, 566-68 (9th Cir. 1980)).
Id.
V. CONCLUSION
For the reasons set out above, the motion at docket 33 is GRANTED. Plaintiffs' claims for injunctive relief are DISMISSED. The motion at docket 35 is DENIED.