Opinion
Case Number C 05-00161 JF.
March 30, 2006
On January 11, 2005, Plaintiffs Brian L. Malzkuhn ("Mr. Malzkuhn") and Virginia A. Malzkuhn, proceeding pro se, filed a complaint pursuant to 42 U.S.C. § 1983 against Defendants R.M. Owens ("Owens") and "All Does." Plaintiffs allege four claims for relief: (1) fraud and conspiracy to commit fraud; (2) unreasonable searches and seizures of their private property in violation of the Fourth Amendment; (3) Fifth and Fourteenth Amendment violations of their due process rights; and (4) violation of 26 U.S.C. § 6331(a) by means of improper issuance of Internal Revenue Service ("IRS") levy form 668-W(c) to private citizens. Plaintiffs allege that they are entitled to compensatory damages, punitive damages, attorney's fees, and declaratory relief. On June 8, 2005, Owens and the United States (collectively "Defendants") move to dismiss for failure to state a claim, lack of subject matter jurisdiction, and insufficiency of service of process, or alternatively for summary judgment. Plaintiffs oppose the motion and move to strike and vacate Defendants' motion to dismiss. Plaintiffs also filed a motion for evidentiary hearing on July 8, 2005, to which Defendants filed opposition on July 11, 2005 . The Court has read the moving and responding papers and considered the oral arguments presented on July 29, 2005. For the reasons set forth below, Defendants' motion to dismiss will be granted, and Plaintiffs' motions to strike, vacate, and for an evidentiary hearing will be denied.
The United States is not named as a defendant in this action. However, as discussed in detail below, the instant action is deemed to be an action against the United States.
I. BACKGROUND
Plaintiffs allege the following: Owens signed and issued fraudulent levies using IRS form 668-W(c) and acting pursuant to 26 U.S.C. § 6331, to collect Mr. Malzkuhn's unpaid tax liabilities for the 2000 tax year. These levies were issued to his employers Ohlone College, on October 28, 2004, and California School for the Deaf, on December 10, 2004, and to his bank, Comerica Bank California, on October 28, 2004. Complaint ("Compl.") ¶¶ 10-18. Only Ohlone College complied with the levy order by delivering Mr. Malzkuhn's paychecks in the amounts of $7,758.24 for November 2004 and $5,584.40 for December 2004 to the IRS. Compl. ¶¶ 9, 14. Plaintiffs allege that Defendants thus unlawfully searched and seized their private property and acted with malice to commit fraud and conspiracy to commit fraud in violation of their Fourth, Fifth, and Fourteenth Amendment rights. Compl. ¶ 19-22. Plaintiffs further allege that because they have never been federal government employees and because the IRS levies under § 6331(a) only apply to federal employees, Defendants are in violation of § 6331(a). Compl. ¶ 23.
Defendants submit evidence showing the following additional facts: on April 5, 2004, the IRS made an assessment against Mr. Malzkuhn for outstanding tax liabilities for the year 2000 in the amount of $23,195.00. Declaration of Emily J. Kingston (hereinafter, "Kingston Decl."), Ex. 1. On June 12 and July 16, 2004, the IRS sent to Plaintiffs computer generated notices of intent to levy. Id. Owens, the Collection Operations Manager for the office from which the computer generated notices were issued, signed each notice with a laser printed signature. Kingston Decl., Ex. 2. Defendants acknowledged that Form 668-W(c) levies were issued to Ohlone College, California School of Deaf, and Comerica Bank, and that only Ohlone College forwarded payments to the IRS. Kingston Decl., Ex. 1.
Plaintiffs filed the instant complaint on January 11, 2005. They have not filed an administrative claim for refund for the 2000 tax year, nor have they requested a hearing with respect to their administrative collection due process rights. Kingston Decl., Ex. 2. Owens has not been served properly with the complaint. Id.
II. Discussion
A. Motion to Dismiss"A court may dismiss a complaint only if it is clear that no relief could be granted under any set of facts that could be proved consistent with the allegations." Hishon v. King Spaulding, 467 U.S. 69, 73 (1984); see also Argabright v. United States, 35 F.3d 472, 474 (9th Cir. 1994). For purposes of a motion to dismiss, the plaintiff's allegations are taken as true, and the Court must construe the complaint in the light most favorable to the plaintiff. Jenkins v. McKeithen, 395 U.S. 411, 421 (1969); Argabright, 35 F.3d at 474. The pleading of a pro se litigant is held to a less stringent standard than a pleading drafted by an attorney, and is to be afforded the benefit of any doubt. Haines v. Kerner, 404 U.S. 519, 520 (1972); Karim-Panahi v. Los Angeles Police Department, 839 F.2d 621, 623 (9th Cir. 1988).
Defendants argue that the present case should be dismissed for failure to state a claim because § 1983 does not apply to federal actors, because Owens is precluded from Bivens liability, because the Internal Revenue Code provides sufficient administrative remedies, and because the IRS in fact has the authority to issue levies to private citizens under 26 U.S.C. § 6331. Defendants also argue that the Court lacks subject matter jurisdiction because the United States is the only proper party to this action and has not waived its sovereign immunity. Finally, Defendants assert that Owens was not properly served with the summons and complaint.
Plaintiffs argue that Owens lacks the delegated authority to issue the levies and did not act within her scope of authority. Plaintiffs further assert that the Commissioner of the IRS (the "Commissioner") does not have authority to administer internal revenue laws within the fifty states and that the United States does not have standing to file a motion to dismiss.
i. Plaintiffs' Failure to State a Claim
a. Plaintiffs' Claim for Relief Under 42 U.S.C. § 1983
Plaintiffs allege that Owens's action violated their Fourth, Fifth, and Fourteenth Amendment rights. 42 U.S.C. § 1983 section provides that a claim for damages may be maintained against "every person who, under color of any statute, ordinance, regulation, custom, or usage, of any State or Territory or the District of Columbia, subjects, or causes to be subjected, any citizen of the United States or other person within the jurisdiction thereof to the deprivation of any rights, privileges, or immunities secured by the Constitution and laws." 42 U.S.C. § 1983. Thus, on the face of the statute itself, plaintiffs are entitled to relief only against state actors. See e.g. Lester v. Mineta, No. C 04-3074 SI (N.D.Cal Feb. 24, 2006). Because Owens is a federal actor who works for the IRS and acted under color of federal law in issuing levies and notices pursuant to 26 U.S.C. § 6331, Plaintiffs have failed to state a claim under § 1983.
b. Preclusion of Bivens Claim
Notwithstanding the above, a federal actor acting under color of federal authority may be held personally liable for violations of a plaintiffs' constitutional rights. Bivens v. Six Unknown Named Agents of Federal Bureau of Narcotics, 403 U.S. 388 (1971). Federal courts have the inherent authority to award damages to plaintiffs for such violations. Id. at 394. However, a citizen's right to sue under Bivens is not absolute. W. Ctr. for Journalism v. Cederquist, 235 F.3d 1153, 1156 (9th Cir. 2000) (" Bivens remedies are not available to compensate plaintiffs for all constitutional torts committed by federal officials"). Because of the comprehensiveness of the Internal Revenue Code, the Ninth Circuit and other Courts of Appeals have held consistently that " Bivens actions are inapplicable for claims arising from federal tax assessment or collection." Adam v. Johnson, 355 F.3d 1179, 1184 (9th Cir. 2004). Further, an IRS revenue officer may assert qualified immunity for civil damages as long as "her conduct does not violate clearly established . . . constitutional rights of which a reasonable person would have known." Bothke v. Fluor Engineers Constructors, Inc. 834 F.2d 804, 810 (9th Cir. 1987). A constitutional violation arising from the collection of taxes by IRS employees has never been recognized. Wages v. I.R.S., 915 F.2d 1230, 1235 (9th Cir. 1990). Plaintiffs' claims arise from Owens's conduct of signing and issuing levies. Compl. ¶¶ 6-23. Because such conduct arises from federal tax assessment and collection, and because Owen is certified as an IRS employee acting within the course and scope of her employment pursuant to 28 U.S.C. § 2679(d), Owens is entitled to qualified immunity. See Certification Pursuant to 28 U.S.C. § 2679(d) by Chief of Tax Division.
c. Plaintiff's Failure to State a Claim under 26 U.S.C. § 7433
Defendants assert that Plaintiffs fail to state a claim for unauthorized tax collection under 26 U.S.C. § 7433, because Plaintiffs have not alleged that Owens or other IRS employees violated any provision of the Internal Revenue Code or Treasury Regulations. A taxpayer may bring "a civil action for damages against the United States in a district court," if an IRS officer or employee "recklessly or intentionally," or by "reason of negligence" disregards any provision of the Internal Revenue Code "in connection with any collection of Federal tax with respect to a taxpayer." 26 U.S.C. § 7433(a). Plaintiffs allege only that the levy procedure is unconstitutional. They do not allege reckless, intentional, or negligent disregard of any provision of the Internal Revenue Code or Treasury Regulations by Owens or other IRS employees. Accordingly, they have failed to state a claim under § 7433.
d. The Authority of the IRS to Issue Levies under 26 U.S.C. § 6331
Plaintiffs next allege that the levy issued by the IRS was fraudulent because 26 U.S.C. § 6331 applies only to federal employees, not private citizens. Section 6331 authorizes the Secretary or his delegate to collect taxes "by levy upon all property and rights to property" belonging to " any person" who "neglects or refuses to pay" any tax "or on which there is a lien . . . for the payment of such tax." 26 U.S.C. § 6331 (emphasis added). See G.M. Leasing Corp. v. United States, 429 U.S. 338, 349-50 (1976) (holding that the IRS can levy under 26 U.S.C. § 6331 on property belonging to taxpayers). Thus, Defendants' issuance of levies to collect Mr. Malzkuhn's tax liabilities for the 2000 tax year does not violate § 6331.
ii. Sovereign Immunity of the United States
Defendants argue that the United States has standing to file this present motion because even though she is not identified as a federal employee in the complaint, Owens in fact acted within the scope of her employment as a federal employee and, thus, the United States is the only real party to this action. "It has long been the rule that the bar of sovereign immunity cannot be avoided by naming officers and employees of the United States as defendants." Gilbert v. DaGrossa, 756 F.2d 1455, 1458 (9th Cir. 1985); See also Larson v. Domestic Foreign Commerce Corp., 337 U.S. 682, 688 (1949). A suit against an IRS employee in his or her official capacity is essentially a suit against the United States. Id. A claim arising out of a negligent or wrongful act or omission of a federal employee acting within the scope of his or her office or employment is deemed to be a claim against the United States. 28 U.S.C. § 2679(d)(1). As discussed above, by signing the levies, Owens was acting within the scope of her employment and thus has qualified immunity. Her status as a federal actor properly may be referred from the allegations with respect to her conduct. Accordingly, any claims must be dismissed as to Owens, and the United States is the real party to this action.
It is well settled that the United States as sovereign may not be sued without its consent. F.D.I.C. v. Meyer, 510 U.S. 471, 475 (1994). A waiver of sovereign immunity "cannot be implied but must be unequivocally expressed," and such waivers must be strictly construed in favor of the United States. Lehman v. Hakshian, 453 U.S. 156, 160-61 (1981). Where the United States has not consented to suit, the court lacks jurisdiction over the subject matter of the action and dismissal is required. United States v. Mitchell, 463 U.S. 206 (1983); Hutchinson v. United States, 677 F.2d 1322, 132 (9th Cir. 1982). Accordingly, absent any express statutory or consent of waiver of sovereign immunity, the Court concludes that Plaintiffs' complaint is dismissed for lack of subject matter jurisdiction.
Having concluded that it lacks subject matter jurisdiction on the basis of sovereign immunity, the Court finds it unnecessary to address Defendants' additional arguments, including that Plaintiffs failed to exhaust their administrative remedies, prohibition of a cause of action under the Federal Tort Claims Act and the Anti-Injunction Act, and the Declaratory Judgment Act bar to declaratory relief with respect to federal taxes.
iii. Improper Service
Because the Court has reached the conclusion that Plaintiffs' action should be dismissed for failure to state a claim and lack of subject matter jurisdiction, it does not reach the issue of whether service was proper under Federal Rule of Civil Procedure 4(i).
B. Motion to Vacate and Strike
In response to Defendants' motion to dismiss, Plaintiffs filed a "motion to vacate and strike United States' motion to dismiss for lack of standing." A motion to vacate appropriately may be brought to vacate an order, judgment, or other decision of that court. A motion to strike is appropriate when a party seeks to strike portions of a pleading. See Fed.R.Civ.P. 12(f). Because Defendants' motion is neither an order, judgment, or other decision of the court, nor a court action or a pleading, the motion to vacate or strike will be denied. However, because it appears that Plaintiffs filed this motion in response to Defendants' motion, the Court will consider it to be a substantive opposition to Defendants' motion. As such, the Court concludes that it lacks merit.
Plaintiffs argue that the because the Commissioner does not have authority to enforce internal revenue laws within the fifty states, Owens does not have delegated power from the Commissioner to issue levies. However, the Commissioner does have such authority. "The [IRS] is a bureau of the Department of the Treasury under the immediate direction of the Commissioner of Internal Revenue. The Commissioner has general superintendence of the assessment and collection of all taxes imposed by any law providing internal revenue. The [IRS] is the agency by which these functions are performed." 26 C.F.R. § 601.101(a). Further, The Secretary of the Treasury's power to collect taxes imposed by the internal revenue laws may be delegated to the Commissioner of Internal Revenue and local IRS employees. See 26 U.S.C. § 6301; 26 C.F.R. § 301.7701-9; Hughs v. United States, 953 F.2d 531, 536 (9th Cir. 1992); IRS Delegation Order 191. Thus, not only does the Commissioner have authority to administer internal revenue laws, but this authority also extends to local IRS employees, such as Owens.
Plaintiffs' assertion that they are not subject to the enforcement of internal revenue laws because they live in "California (state Republic)," not in any "Federal District," also is without merit. An IRS District Director administers the internal revenue laws with regard to taxpayers in different districts in the United States, "taxpayers residing or doing business abroad, and even foreign taxpayers deriving income from sources within the United States" 26 C.F.R. § 601.101(a). Accordingly, Plaintiffs are subject to the internal revenue laws.
C. Motion for Evidentiary Hearing
On July 8, 2005, Plaintiffs filed a motion for an evidentiary hearing, stating generally that "[t]he substance of the Evidentiary Hearing is germane to the Motion to Dismiss and directly addresses the UNITED STATES' standing to even bring forward a Motion to Dismiss and to otherwise trespass on this case." Defendants oppose the motion. As stated above, this Court has concluded from the available and uncontradicted evidence that the United States has standing as a defendant in this action. Additionally, Plaintiffs' short and vague motion does not indicate the substance of the proposed evidentiary hearing. Accordingly, Plaintiffs' motion for an evidentiary hearing will be denied.
III. ORDER
Good cause therefore appearing, Defendants' motion to dismiss is GRANTED. IT IS FURTHER ORDERED that Plaintiffs' motions to strike, vacate, and for an evidentiary hearing are DENIED.