Opinion
No. CIV S-01-1131 WBS GGH PS
August 26, 2002
FINDINGS AND RECOMMENDATIONS
This action, in which plaintiff is proceeding pro se on the amended complaint filed March 25, 2002, has been referred to the undersigned pursuant to E.D. Cal. L.R. 72-302(c)(21). Defendant's motion to dismiss for lack of subject matter jurisdiction, pursuant to Fed.R.Civ.P. 12(b)(1). filed May 3, 2002, presently is pending. Having determined that oral argument would not be of material assistance in resolving the motion, the following findings and recommendations are based on the record and briefs on file. E.D. Cal. L.R. 78-230(h).
BACKGROUND
The amended complaint asserts claims for: negligence; undermining the purpose of bankruptcy; violation of corporate code; violation of due process; negligent infliction of emotional distress; and violation of government attorney ethical duty. The action stems from the government's attempts to assess plaintiff a trust fund recovery penalty based on the unpaid payroll tax liability of his former corporation.
The government has assessed plaintiff for unpaid employment taxes of Hess Hess Construction in the amounts of $19,683.99 and $4,248.41 for the respective periods ending September 30, 1992 and December 31, 1992. See Schrock Decl. 2 filed May 3, 2002, Ex. 8, Certificate of Assessments, Payments, and Other Specified Matters (Form 4340), P. A. Supp. Mot. Dism. at 2-3. Another amount, $1,497.78 for the period ending September 30, 1994, was abated. Ex. 9, Schrock Decl. 2 filed May 3, 2002 P. A. Supp. Mot. Dism. at 2-3. As of January 4, 2002, the principal amount due on Mr. Hess' assessed balance was $8,618.89. Ex. 8, Schrock Decl., Defs P A at 3:3-4.
Plaintiff believes the debt should have been discharged in his individual bankruptcy. Moreover, among other claims, he challenges the accuracy of the assessment, whether the government used proper procedures following the bankruptcy in attempting to collect the debt from third parties, and the ethics of the government attorneys. The problem is, as the government argues, this court lacks jurisdiction to hear any of plaintiff's claims.
LEGAL STANDARD FOR MOTION TO DISMISS.
Federal district courts are courts of limited jurisdiction. U.S. Const. Art. III, § 1 provides that the judicial power of the United States is vested in the Supreme Court, "and in such inferior Courts as the Congress may from time to time ordain and establish." Congress therefore confers jurisdiction upon federal district courts, as limited by U.S. Const. Art. III, § 2. See Ankenbrandt v. Richards, 504 U.S. 689, 697-99, 112 S.Ct. 2206, 2212 (1992). Since federal courts are courts of limited jurisdiction, a case presumably lies outside the jurisdiction of the federal courts unless proven otherwise. Kokkonen v. Guardian Life Ins. Co. of America, 511 U.S. 375, 376-78, 114 S.Ct. 1673, 1675, 128 L.Ed.2d 391 (1994). Lack of subject matter jurisdiction may be raised at any time by either party or by the court. See Attorneys Trust v. Videotape Computer Products, Inc., 93 F.3d 593, 594-95 (9th Cir. 1996).
On a Rule 12(b)(1) motion to dismiss for lack of subject matter jurisdiction, plaintiff bears the burden of proof that jurisdiction exists. See e.g., Sopcak v. Northern Mountain Helicopter Serv., 52 F.3d 817, 818 (9th Cir. 1995); Thornhill Pub. Co. v. General Tel. Electronics Corp., 594 F.2d 730, 733 (9th Cir. 1979). Different standards apply to a 12(b)(1) motion, depending on the manner in which it is made. See, e.g., Crisp v. U.S., 966 F. Supp. 970, 971-72 (E.D. Cal. 1997).
First, if the motion attacks the complaint on its face, often referred to as a "facial attack," the court considers the complaint's allegations to be true, and plaintiff enjoys "safeguards akin to those applied when a Rule 12(b)(6) motion is made." Doe v. Schachter, 804 F. Supp. 53, 56 (N.D.Cal. 1992). Presuming its factual allegations to be true, the complaint must demonstrate that the court has either diversity jurisdiction or federal question jurisdiction.
Second, if the motion makes a "factual attack" on subject matter jurisdiction, often referred to as a "speaking motion," the court does not presume the factual allegations of the complaint to be true.Thornhill, 594 F.2d at 733. In a factual attack, defendant challenges the truth of the jurisdictional facts underlying the complaint. "Faced with a factual attack on subject matter jurisdiction, the trial court may proceed as it never could under Rule 12(b)(6). . . . No presumptive truthfulness attaches to plaintiff's allegations, and the existence of disputed material facts will not preclude the trial court from evaluating for itself the merits of jurisdictional claims." Id. (quotations and citation omitted). The court may hear evidence such as declarations or testimony to resolve factual disputes. Id.; McCarthy v. United States, 850 F.2d 558, 560 (9th Cir. 1988). This motion is a speaking motion. Accordingly, the court has considered the evidence and declarations submitted.
If the jurisdictional issue is intertwined with the merits of the case, the trial court cannot determine the jurisdictional issue until such facts are appropriately resolved. See Roberts v. Corrothers, 812 F.2d 1173, 1177-78 (9th Cir. 1987); see also Trentacosta v. Frontier Pac. Aircraft Indus., 813 F.2d 1553, 1558 (9th Cir. 1987) (summary judgment standard applied if motion determines facts where jurisdictional issue and merits are intertwined).
Pro se pleadings are held to a less stringent standard than those drafted by lawyers. Haines v. Kerner, 404 U.S. 519, 520-21, 92 S.Ct. 594, 595-96 (1972). Unless it is clear that no amendment can cure its defects, a pro se litigant is entitled to notice and an opportunity to amend the complaint before dismissal. See Lopez v. Smith, 203 F.3d 1122, 1127-28 (9th Cir. 2000) (en banc); Noll v. Carlson, 809 F.2d 1446, 1448 (9th Cir. 1987). Nevertheless, "[a]lthough courts must construe pro se complaints liberally, courts should not undertake to infer in one cause of action when a complaint clearly states a claim under a different cause of action." Bogovich v. Sandoval, 189 F.3d 999, 1001 (9th Cir. 1999) (citation omitted).
JURISDICTION/SOVEREIGN IMMUNITY
Although the amended complaint names the Commissioner of Internal Revenue as defendant, it asserts claims against the United States, because it does not allege any action the Commissioner took in his individual capacity. A suit against a federal agency which seeks relief against the sovereign is, in effect, a suit against the sovereign. Larson v. Domestic Foreign Commerce Corp., 337 U.S. 682, 687-88, 69 S.Ct. 1457 (1949); Holloman v. Watt, 708 F.2d 1399, 1401 (9th Cir. 1983). Accordingly, the principles of sovereign immunity apply to that agency.Id. The United States, as a sovereign, may not be sued without its consent. See e.g., United States v. Dalm, 494 U.S. 596, 110 S.Ct. 1361, 1368 (1990). Such a waiver cannot be implied and, therefore, must be unequivocally expressed. Id. The sovereign immunity of the United States can be waived only if Congress enacts statutes consenting to suit. See, e.g., United States v. Sherwood, 312 U.S. 584, 61 S.Ct. 767 (1941). Moreover, the government's consent to be sued must be "`construed strictly in favor of the sovereign'" and "`not enlarge[d] . . . beyond what the language requires.'" United States Dept. of Energy v. Ohio, 503 U.S. 607, 112 S.Ct. 1627, 1633 (1992) (citations omitted). Where a suit has not been consented to by the United States, dismissal of the action is required. See, e.g., Elias v. Connett, 908 F.2d 521 (9th Cir. 1990). "Waiver of immunity must be demonstrated by the party suing the United States." Cominotto v. United States, 802 F.2d 1127, 1129 (9th Cir. 1986).
Sovereign immunity applies equally to claims against federal officials acting in their official capacities. See, e.g., Gilbert v. DaGrossa, 756 F.2d 1455, 1458 (9th Cir. 1985). Plaintiff has failed to plead any fact to support defendant's personal liability. The factual allegations in the amended complaint concern only official conduct falling squarely within government employee official functions, and thus provide no basis for imposing personal liability. Further, a claim against defendant in his personal capacity is unavailable to plaintiff because courts have consistently rejected taxpayers' attempts to impose Bivens liability in the context of federal tax collection. Bivens v. Six Unknown Named Agents, 403 U.S. 388, 91 S.Ct. 1999 (1971). See Wages v. Internal Revenue Service, 915 F.2d 1230, 1235 (9th Cir. 1990) (affirming dismissal of taxpayer's Bivens claims against IRS employees holding "we have never recognized a constitutional violation arising from the collection of taxes").
The relationship between subject matter jurisdiction and sovereign immunity, as the Ninth Circuit recently has commented, "can be a murky one." Powelson v. U.S., By and Through Secretary of Treasury, 150 F.3d 1103, 1104 n. 1 (9th Cir. 1998). "[W]hile sovereign immunity can bar jurisdiction, a statute that purports to create jurisdiction alone does not necessarily eliminate sovereign immunity. . . . Sovereign immunity is grounds for dismissal independent of subject matter jurisdiction." Id. at 1104-05.
As a general grant of jurisdiction, 28 U.S.C. § 1331, the federal question statute, does not waive the government's immunity. Hughes v. United States, 953 F.2d 531, 539 n. 5 (9th Cir. 1992). Such a waiver, if it exists at all, must exist in the statute giving rise to the cause of action. Hughes, 953 F.2d at 539, n. 5 ("a mere assertion that general jurisdictional statutes apply does not suffice to confer jurisdiction when . . . the government did not waive its immunity").
Likewise, 28 U.S.C. § 1340 also is a general jurisdiction statute which does not waive the government's sovereign immunity. See Hughes, 953 F.2d at 539, n. 5. Consequently, § 1340 will not suffice to confer jurisdiction here unless the government specifically has waived its immunity in another statute. Id. ANALYSIS
A. Tort Claims. The amended complaint alleges two common law tort claims, for negligence and intentional infliction of emotional distress.
The Federal Tort Claims Act, 28 U.S.C. § 2671, et. seq. waives sovereign immunity for certain tort actions. The United States, however, has not waived its sovereign immunity to state or common law torts based on assessment or collection of taxes. 28 U.S.C. § 2680 (c) (excepting from waiver "any claim arising in respect of the assessment or collection of any tax . . . .") Accordingly, this court has no jurisdiction to hear claims for state or common law tort claims for negligence or negligent infliction of emotional distress.
B. Due Process Claims. The Fifth, not the Fourteenth Amendment pleaded by plaintiff, has a due process clause applicable to the Federal Government. In the tax context, plaintiff's due process rights ordinarily are protected by post collection rights. The statutory scheme allows him to contest tax liability in tax court prior to paying the tax or to sue for refund in the federal district court or the court of claims Phillips v. Commissioner of Internal Revenue, 283 U.S. 589, 51 S.Ct. 608 (1931);Stonecipher v. Bray, 653 F.2d 398, 403 (9th Cir. 1981)).
Moreover, the record reflects that plaintiff challenged the underlying assessment at the time it was made. Thereafter, he additionally was afforded a collection due process hearing on August 16, 2000. Schrock Decl. 1 at ¶ 3, Ex. 1. The Collection Due Process Hearing was held pursuant to 26 U.S.C. § 6320 (c), following filing of a Notice of Federal Tax Lien, a notice filed in this case on July 27, 2000. Schrock Decl. 1, Ex. 3. A taxpayer can challenge the underlying tax liability in the Collection Due Process Hearing only if there was no previous opportunity to dispute the liability. 26 U.S.C. § 6330 (c)(2)(B). In this case, plaintiff was advised on May 10, 1995 that the IRS intended to assess plaintiff for the unpaid tax liability. Schrock Decl. 2, Ex. 7. Plaintiff challenged that assessment, and the IRS abated a portion of the amount. Schrock Decl. 2, Ex. 9. Accordingly, plaintiff had an opportunity to challenge the validity of the assessment. The validity of the assessment was not at issue in the collection due process hearing, and not properly before this court to review de novo. See, e.g., AJP Management v. United States, 87 A.F.T.R 2d 2001-347 (C.D. Cal. 2000); TTK Management v. United States, 87 A.F.T.R.2d 2001-350 (C.D. Cal. 2000). Plaintiff's due process rights are not properly before the court in this proceeding.
C. Bankruptcy. A debt based on withholding taxes is not discharged in bankruptcy. 11 U.S.C. § 727 (b); Stanmock Inc. v. United States, 65 A.F.T.R.2d 90-331, 103 B.R. 228, 229 (9th Cir. 1989) (responsible person's liability for unpaid withholding taxes is not dischargeable and survives his bankruptcy); see 26 U.S.C. § 3102 (a), 3402(a); 11 U.S.C. § 523 (a)(1); but see United States v. Energy Resources, 495 U.S. 545, 547 (1990) (permitting bankruptcy court in certain cases to allocate payments to trust fund taxes). Accordingly, plaintiff's argument that the debt was discharged in bankruptcy has no merit.
D. Other Claims. Plaintiff's claim that government attorneys violated their ethical duties also fails to present a cognizable claim conferring federal jurisdiction. Likewise, his claims based on unspecified corporate codes fails to establish a federal jurisdictional basis for this action.
E. Other Possible Bases for Jurisdiction. The amended complaint fails to state any federal statutory bases for jurisdiction. Because the court must find that no claim may be stated under the pertinent facts in order to recommend dismissal of a pro se complaint without leave to amend, the court on its own motion has considered other potential bases for jurisdiction and has not discovered any basis on which this action can proceed.
The Administrative Procedure Act ("APA") waives the government's sovereign immunity in certain actions seeking non-monetary relief with respect to federal agency action. 5 U.S.C. § 702. Plaintiff in this action is seeking monetary relief. Am. Compl. at unnumbered p. 3:13-14. Accordingly, the APA is inapplicable. 26 U.S.C. § 7432 and 7433, the Taxpayers Bill of Rights, waive sovereign immunity if administrative remedies have been exhausted. Section 7433 provides a cause of action if any officer or employee of the Service "recklessly or intentionally" disregards any statutory or regulatory provision in connection with the collection of federal tax with respect to a taxpayer. Both these sections, inter alia, require a taxpayer to exhaust administrative remedies. See §§ 7432(d)(1), 7433(d)(1); United States v. Toyota of Visalia, 772 F. Supp. 481, 493 (E.D. Cal. 1991), aff'd, 988 F.2d 126 (9th Cir. 1993); Conforte v. United States, 979 F.2d 1375, 1377 (9th Cir. 1992). Plaintiff is required to present claims for damages to the IRS, including the injuries incurred and the dollar amount. 26 C.F.R. § 301.7433-1 (e); § 301.7432-1(f)(2). Assuming, arguendo, these sections otherwise apply, the amended complaint contains fails because it fails to allege plaintiff has exhausted his administrative remedies. Accordingly, the court finds no basis for an action pursuant to these sections.
Moreover, although the action is not couched as such, to the extent plaintiff wishes to challenge the validity of a tax lien, the APA does not provide jurisdiction to review the propriety of tax liens). E.J. Friedman Co., Inc. v. U.S., 6 F.3d 1355 (9th Cir. 1993).
One other possible basis for jurisdiction exists-that of a taxpayer refund suit. See 26 U.S.C. § 7422; Dudley v. United States, 428 F.2d 1196 (9th Cir. 1970). However, plaintiff does not allege that he actually paid any of the disputed sums, and seeks herein a refund.
At this point, the court cuts off any further sua sponte review of all tax laws. Further speculation of possible claims against the government would place this court in the position of arguing theories when no facts to support such theories have been placed before the court. The undersigned will not abandon his role as an adjudicator and take on the mantle of an advocate.
Having found no cognizable potential bases for jurisdiction, the court has concluded that the amended complaint should be dismissed for lack of jurisdiction, and leave to further amend should not be granted.
CONCLUSION
Accordingly, IT IS HEREBY RECOMMENDED that defendant's motion to dismiss be granted and this action be dismissed.
These findings and recommendations are submitted to the United States District Judge assigned to the case, pursuant to the provisions of Title 28 U.S.C. § 636 (b)(1). Within ten (10) days after being served with these findings and recommendations, any party may file written objections with the court and serve a copy on all parties. Such a document should be captioned "Objections to Magistrate Judge's Findings and Recommendations." Any reply to the objections shall be served and filed within ten (10) days after service of the objections. The parties are advised that failure to file objections within the specified time may waive the right to appeal the District Court's order. Martinez v. Ylst, 951 F.2d 1153 (9th Cir. 1991).