Opinion
Case No. 02-CV-102-B
January 27, 2003
ORDER OF DISMISSAL
This action arises from Plaintiffs' apparent challenge to the assessment of federal taxes and the four Notices of Levy against them, sent to the Sundance State Bank ("Sundance" or "Bank") on April 24, 2002. The matter is currently before the Court on Plaintiffs' Notice of Non-Acceptance of Removal and Petition to Remand Case Back to State Jurisdiction ("Second Motion to Remand") and the United States' Motion to Dismiss. Upon reading the briefs, and being fully advised of the premises, the Court FINDS and ORDERS as follows:
Background
On April 24, 2002, the Internal Revenue Service ("IRS") sent four Notices of Levy to Sundance. The IRS levies demanded payment of any of Plaintiffs' property or money held by the Bank. Sundance honored the IRS levies and sent two checks to the IRS totaling $23,597.38.
On May 30, 2002, Plaintiffs Rodger E. Mathis and Jeanette D. Mathis, proceeding pro se, initiated this action by filing a Complaint in the District Court of the Sixth Judicial District, Crook County, Wyoming. The action was removed to the United States District Court, District of Wyoming, by Order of the Court dated May 31, 2002. The Complaint names the four IRS Notices of Levy as the "in rem" subjects of the lawsuit and names IRS employees Fred Skaluba and Richard Hardman, as well as James R. Durfee, President of Sundance, as Defendants.
Plaintiffs' Complaint alleges that the IRS Notices of Levy and underlying income tax and penalty assessments are deficient. Plaintiffs' claim that these levies are not supported by valid law, that IRS levies are "outside the territorial jurisdiction of Congress," and that the IRS levies violate the due process provisions of the Wyoming Constitution.
On June 11, 2002, Plaintiffs filed their first Notice of Non-Acceptance of Removal and Petition to Remand Case Back to State Jurisdiction ("First Motion to Remand"), which this Court denied on July 1, 2002. The United States filed a Motion to Dismiss on July 19, 2002, to which Plaintiffs never responded. On September 4, 2002, Plaintiffs filed their Second Motion to Remand, which is simply a verbatim copy of their First Motion to Remand, except that the second contains a few redactions and spaces left blank.
Legal Standard
The party invoking federal jurisdiction has the burden of proving by a preponderance of the evidence that jurisdiction exists. United States ex. rel. Holmes v. Consumer Ins. Group, 279 F.3d 1245, 1249 (10th Cir. 2002). A motion to dismiss for lack of subject matter jurisdiction pursuant to Fed.R.Civ.P. 12(b)(1) may take two forms. When a defendant makes a facial attack on the complaint's allegations, which challenges the sufficiency of the complaint, the district court will accept the plaintiff's allegations as true. Cal. Cas. Fire Ins. Co. v. Brinkman, 50 F. Supp.2d 1157, 1161 (D. Wyo. 1999). If, however, the defendant goes beyond the allegations contained in the complaint and challenges the facts upon which subject matter jurisdiction depends, the district court will not presume the truthfulness of the plaintiff's allegations and has wide discretion to consider other documents to resolve the jurisdictional question. Id.
Analysis
I. Plaintiffs' Motion to Remand.Although Plaintiffs' Second Motion to Remand merely repeats the First Motion to Remand verbatim, the Court will not respond in like manner by repeating its July 1, 2002 Order verbatim. However, since Plaintiffs have neither presented any new facts, evidence, or arguments, nor explained how the Court erred when it denied the first Motion to Remand, the Court reaffirms its July 1, 2002 Order and incorporates that Order by reference.
II. Defendants' Motion to Dismiss.
In Defendants' Motion to Dismiss, the United States moves the Court to substitute the United States as the proper Defendant and dismiss this action pursuant to Fed.R.Civ.P. 12(b)(1) for lack of subject matter jurisdiction. Plaintiffs failed to respond to this Motion.
A. Substitution of the United States in Place of the Named Federal Defendants.
As the United States points out, a suit against a government employee acting in his official capacity is a suit against the government.Atkinson v. O'Neill, 867 F.2d 589, 590 (10th Cir. 1989) (holding that "[w]hen an action is one against named individual defendants, but the acts complained of consist of actions taken by defendants in their official capacity as agents of the United States, the action is in fact one against the United States"); see also Lonsdale v. United States, 919 F.2d 1440, 1442 n. 1 (10th Cir. 1990). The Court must examine the substance of the allegations, rather than adopting Plaintiffs' labels.Weaver v. United States, 98 F.3d 518, 520 (10th Cir. 1996). A suit is against the government where "the judgment sought would expend itself on the public treasury or domain, or interfere with the public administration, or if the effect of the judgment would be to restrain the Government from acting, or to compel it to act." Dugan v. Rank, 372 U.S. 609, 620 (1963) (internal quotation marks and citations omitted).
The Court finds that Plaintiffs' Complaint, which names IRS employees Fred Skaluba and Richard Hardman as Defendants, is a Complaint against the United States. Plaintiffs do not seek relief against Mr. Skaluba and Mr. Hardman; rather, Plaintiffs' request that the IRS Notices of Levy be vacated, canceled, or voided. (See Compl. at pp. 6-7). The Complaint clearly indicates that Skaluba and Hardman are being sued for actions taken in their official capacities, namely, issuance of the four Notices of Levy. (See id. at pp. 2-3). Therefore, Defendants Skaluba and Hardman should be replaced by the United States, which is the proper Defendant.
B. Subject Matter Jurisdiction.
The United States argues that this Court lacks subject matter jurisdiction over this action because: (1) the United States has not waived its sovereign immunity; and (2) the action is barred by the Anti-Injunction Act.
1. Sovereign Immunity.
The United States may not be sued without its consent, and the terms of its consent define the extent of a federal court's jurisdiction. United States v. Dalm, 494 U.S. 596, 608 (1990); United States v. Sherwood, 312 U.S. 584, 586 (1941); Fostvedt v. United States, 978 F.2d 1201, 1202-03 (10th Cir. 1992). The United States' consent must be expressly stated and narrowly construed in its favor. See Sherwood, 312 U.S. at 590; United States v. Nordic Village, Inc., 503 U.S. 30, 33 (1986);Fostvedt, 978 F.2d at 1203. Thus, Plaintiffs bear the burden of proving an explicit waiver of sovereign immunity. Id. Plaintiffs have not met this burden.
Federal district courts have jurisdiction over civil actions against the United States for the recovery of internal revenue taxes erroneously or illegally assessed or collected. 28 U.S.C. § 1346 (a)(1). However, this waiver of sovereign immunity is limited by other provisions, such as 26 U.S.C. § 7422 (a), which states that as a requirement to jurisdiction, the taxpayer must first file a claim for a refund or credit with the IRS and receive a determination from that agency. See Dalm, 494 U.S. at 601-02. Plaintiffs have not alleged that they filed such a claim with the IRS. Therefore, the jurisdictional requirements have not been met, and 28 U.S.C. § 1346 (a)(1) does not provide a waiver of sovereign immunity in this case.
Another limit is that the claim for a refund or credit must be filed within three years from the time the tax return was filed or within two years from the time the tax was paid, whichever period expires later. 26 U.S.C. § 6511 (a); Dalm, 494 U.S. at 602.
The Internal Revenue Code permits a taxpayer to sue for damages under limited circumstances where an employee of the IRS "in connection with any collection of Federal tax . . . recklessly or intentionally, or by reason of negligence, disregards any provision of this title, or any regulation promulgated under this title." 26 U.S.C. § 7433 (a). Plaintiffs have not alleged that Mr. Skaluba or Mr. Hardman negligently, recklessly, or intentionally disregarded any provision of the Internal Revenue Code. Furthermore, the taxpayer must have exhausted all available IRS administrative remedies in order to sue under this provision. 26 U.S.C. § 7433 (d). However, Plaintiffs have not alleged that they attempted to exhaust administrative remedies. Therefore, the limited waiver provision of 26 U.S.C. § 7433 (a) is inapplicable.
Plaintiffs have not alleged exhaustion of their administrative remedies or applicable waiver of sovereign immunity, nor have they shown the existence of any statute conferring jurisdiction. Therefore, the Court has no subject matter jurisdiction in this case.
2. The Anti-Injunction Act.
The Anti-Injunction Act ("Act") bars any request for injunctive relief against the IRS. The Act provides that "no suit for the purpose of restraining the assessment or collection of any tax shall be maintained in any court by any person." 26 U.S.C. § 7421. In order to ensure that the Government may assess and collect taxes with a minimum of pre-enforcement judicial review, Courts are not given jurisdiction to grant injunctive relief that falls within the scope of the Act. See Bob Jones Univ. v. Simon, 416 U.S. 725, 736 (1974). Where a complaint "is essentially an attempt to prevent the collection of assessed taxes by challenging the underlying tax assessments," it violates the Act on its face. Lonsdale v. United States, 919 F.2d 1440, 1442 (10th Cir. 1990) A federal district court has no jurisdiction unless a party seeking to enjoin the Government demonstrates the applicability of one of the limited exceptions to the Act. See James v. United States, 970 F.2d 750, 756-57 (10th Cir. 1992)
Plaintiffs are asking the Court to issue a protective order preventing Defendants or others from transferring or confiscating any of the Plaintiffs' assets without a court order. (Compl. at p. 5). Such a request is in essence a request for injunctive relief. Plaintiffs have not alleged that any exception to the Act applies. Therefore, to the extent that Plaintiffs' request injunctive relief, their claims are barred by the Anti-Injunction Act.
C. Claim Against Defendant Durfee
Because Sundance has already honored the IRS Notices of Levy, Plaintiffs' request for injunctive relief against Defendant Durfee as president of the Bank is moot.
Furthermore, 26 U.S.C. § 6332 (e) provides that any person who honors an IRS levy "shall be discharged from any obligation or liability to the delinquent taxpayer . . . with respect to such property or rights to property arising from such surrender or payment." Therefore, Defendant Durfee and the Bank are in no way liable to Plaintiffs.
D. Due Process
Plaintiffs' due process challenge to the IRS Notices of Levy does not have merit. As long as there is an adequate opportunity for a post-seizure determination of the taxpayer's rights, the requirements of due process are met, and a pre-seizure hearing is not required before the taxes may be collected. G.M. Leasing Corp. v. United States, 429 U.S. 338, 352 (1977); Phillips v. Comm'r of Internal Revenue, 283 U.S. 589, 596-97 (1931)
CONCLUSION
For all the aforementioned reasons, it is hereby ORDERED that Plaintiffs' Second Motion to Remand (entitled "Notice of Non-Acceptance of Removal and Petition to Remand Case Back to State Jurisdiction") is DENIED, and Defendants' Motion to Dismiss (entitled "United States' Motion to Dismiss") for lack of subject matter jurisdiction pursuant to Fed.R.Civ.P. 12(b)(1) is GRANTED. It is further ORDERED that the United States shall be substituted as the proper federal Defendant, and that the entire above-captioned matter shall be DISMISSED WITH PREJUDICE, EXCEPT insofar as Plaintiffs' claim a tax refund or tax credit, which claim is DISMISSED WITHOUT PREJUDICE. If Plaintiffs do seek such a tax refund or credit, they must first meet all applicable statutory and administrative requirements within the appropriate time period before this Court will entertain any further claims or motions by Plaintiffs.