Patterson v. Oregon Department of Revenue et al

Motion to Dismiss for Lack of Jurisdiction .

D. Or.August 1, 2016

Page 1 - DEFENDANTS’ MOTION TO DISMISS PR3/ssp/7542722-v2 Department of Justice 1162 Court Street NE Salem, OR 97301-4096 (503) 947-4700 / Fax: (503) 947-4791 ELLEN F. ROSENBLUM Attorney General PATTY T. RISSBERGER #871473 Senior Assistant Attorney General Department of Justice 1162 Court Street NE Salem, OR 97301-4096 Telephone: (503) 947-4700 Fax: (503) 947-4791 Email: patty.rissberger@doj.state.or.us Attorneys for Defendant State of Oregon IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF OREGON TAD ALAN PATTERSON, Plaintiff, v. OREGON DEPARTMENT OF REVENUE; STATE OF OREGON; Kris Kautz; Alex Anderson; Revenue Agent Martin, supervisor; Revenue Agent Sandy; DOES 1 through X, Defendants. Case No. 6:16-cv-01344-JR DEFENDANTS’ MOTION TO DISMISS Oral Argument Requested LOCAL RULE 7-1 CERTIFICATION In accordance with LR 7-1, undersigned counsel conferred in good faith with the pro se plaintiff Tad Alan Patterson, but the parties were unable to resolve the dispute herein. Defendants move for an order dismissing plaintiff’s Complaint pursuant to Fed. R. Civ. P. 12(b)(1). This motion is based on the following grounds: (1) The Court lacks subject matter jurisdiction pursuant to 28 U.S.C. § 1341, The Tax Injunction Act. Case 6:16-cv-01344-JR Document 15 Filed 08/01/16 Page 1 of 9 Page 2 - DEFENDANTS’ MOTION TO DISMISS PR3/ssp/7542722-v2 Department of Justice 1162 Court Street NE Salem, OR 97301-4096 (503) 947-4700 / Fax: (503) 947-4791 (2) The Court lacks subject matter jurisdiction pursuant to the sovereign immunity provided under the Eleventh Amendment of the United States Constitution. (3) The Court lacks subject matter jurisdiction on the basis of federal-state comity for the reasons set forth in Levin v Commerce Energy, Inc., ___ US ___, 130 S.Ct. 2323 (2010), or should abstain for the reasons set forth in Brillhart v. Excess Ins. Co. of Am., 316 U.S. 491 (1942) and/or Burford v. Sun Oil Co., 319 U.S. 315 (1943). INTRODUCTION This action appears to stem from plaintiff’s belief that individuals, as opposed to other entities such as corporations or LLC, are by virtue of that status alone, are not subject to tax assessments by the State of Oregon. Appearing pro se, Plaintiff Tad Patterson, seeks monetary damages and injunctive relief from defendants State of Oregon, Oregon Department of Revenue (“ODR”) and individual agents of ODR who issued allegedly unlawful garnishments, liens and levies to collect state income taxes. Complaint ¶ 1-6. Plaintiff brings an action identified as “Verified Action-At-Law for Complete Lack and Want of Standing” based on the assertion that he is a “nontaxpayer,” is not involved in a taxable activity, and is not liable for the assessments of taxes made against him by the ODR. Complaint ¶ 15. By attempting to collect unlawful taxes, he alleges that defendants have deprived him of his rights under the Constitution. He asks this Court for a Declaration that he is a “nontaxpayer” as a matter of law, an Order that the defendants cease all collection activities against him, and return of all property garnished. In addition, he seeks recovery for general damages, punitive damages, and pain and suffering, each in the amount of $10,000. Patterson alleges that this court has jurisdiction under “the Constitution for the United State[s] of America, U.S.C.A Title 42 Section 1983, 1985 & 1998 by virtue of Title 18, Case 6:16-cv-01344-JR Document 15 Filed 08/01/16 Page 2 of 9 Page 3 - DEFENDANTS’ MOTION TO DISMISS PR3/ssp/7542722-v2 Department of Justice 1162 Court Street NE Salem, OR 97301-4096 (503) 947-4700 / Fax: (503) 947-4791 Section 1331, 1367(a) and the Racketeer Influenced and Corrupt Organizations Act (RICO) (18 USCS Sections 1961 et seq.)” Complaint ¶ 11. Defendants move to dismiss on the basis that (1) this court lacks jurisdiction based on the Tax Injunction Act; (2) the Eleventh Amendment bars Patterson’s claims in federal court; and (3) considerations of comity and abstention warrant dismissal. LEGAL STANDARD “A complaint should not be dismissed unless it appears beyond doubt that the plaintiff can prove no set of facts in support of the claim that would entitle the plaintiff to relief.” Sprewell v. Golden State Warriors, 266 F3d 979, 988 (9th Cir), opinion amended on denial of rehearing, 275 F3d 1187 (2001) (citations omitted). The court must accept as true, in the light most favorable to the non-moving party, all material, well-pleaded allegations in a complaint, as well as all reasonable inferences from those allegations. Id. Pro se complaints are held to a less strict standard than those drafted by a lawyer. Bonner v. Lewis, 857 F2d 559, 563 (9th Cir 1988), citing Akao v. Shimoda, 832 F2d 119, 120 (9th Cir 1987). Nevertheless, the court may dismiss a pro se complaint outright where it is “absolutely clear that the deficiencies of the complaint could not be cured by amendment.” Broughton v. Cutter Labs., 622 F2d 458, 460 (9th Cir 1980); see also Akao, 32 F2d at 120. The party asserting jurisdiction bears the burden of proving that the court has subject matter jurisdiction over its claims. Kokkonen v Guardian Life Ins. Co. of Am., 511 U.S. 375, 377 (1994). DISCUSSION I. Lack of Subject Matter Jurisdiction under the Tax injunction Act to enjoin or prohibit assessment of taxes by State agency. The Tax Injunction Act, 28 USC § 1341, provides as follows: Case 6:16-cv-01344-JR Document 15 Filed 08/01/16 Page 3 of 9 Page 4 - DEFENDANTS’ MOTION TO DISMISS PR3/ssp/7542722-v2 Department of Justice 1162 Court Street NE Salem, OR 97301-4096 (503) 947-4700 / Fax: (503) 947-4791 The district courts shall not enjoin, suspend or restrain the assessment, levy or collection of any tax under State law where a plain, speedy and efficient remedy may be had in the courts of such State. Accordingly, as long as taxpayers have an adequate remedy available in state court, the principles of comity and federalism underlying the Tax Injunction Act bar them from asserting the invalidity of a state tax in federal court and seeking a remedy in the form of damages or injunctive or declaratory relief. Fair Assessment in Real Estate Ass’n, Inc. v. McNary, 454 US 100, 107 (1981); Patel v. City of San Bernadino, 310 F3d 1138, 1140 (9th Cir 2002). Where the Tax Injunction Act applies, this court lacks subject matter jurisdiction. Air Polynesia, Inc. v. Freitas, 742 F2d 546, 547 (9th Cir 1984). The statutes and administrative acts of the State of Oregon offer remedies to taxpayers in tax disputes that are sufficient to invoke the Tax Injunction Act. Brown v. Graham, 169 F Supp 397, 401 (D Or 1959). Oregon law requires the ODR to “construe the tax and revenue laws of [Oregon] whenever requested by any interested person.” ORS 305.110. Oregon law contains a procedure for claiming a refund of excess taxes paid and an administrative appeal process. ORS 305.270. It also sets forth a procedure of judicial appeals. ORS 305.404 - 575. Subject to the provisions of 305.445 (relating to judicial review by the Supreme Court) and 305.410(2) (which gives concurrent jurisdiction to the circuit courts in limited circumstances), the Oregon Tax Court is the “sole, exclusive and final judicial authority for the hearing and determination of all questions of law and fact arising under the tax laws of [Oregon].” ORS 305.410. If a person is dissatisfied with the determination of the Oregon Tax Court, review may be sought with the Oregon Supreme Court, which has exclusive jurisdiction over final decisions and orders of the Tax Court without regard to the sum involved. ORS 305.445. In short, taxpayers who contest the assessment and collection of Oregon taxes based on interpretation of Oregon’s tax laws can request the ODR to construe the Oregon tax laws, as well as Case 6:16-cv-01344-JR Document 15 Filed 08/01/16 Page 4 of 9 Page 5 - DEFENDANTS’ MOTION TO DISMISS PR3/ssp/7542722-v2 Department of Justice 1162 Court Street NE Salem, OR 97301-4096 (503) 947-4700 / Fax: (503) 947-4791 benefit from two tiers of judicial review in state courts. This is exactly the type of “plain, adequate, and complete” remedy which precludes relief in federal court under Fair Assessment. To the degree that Patterson challenges the assessment or collection of a tax by the ODR, his sole remedy is through the state process, not by filing a suit in this court. Thus, this court lacks subject matter jurisdiction over his claims for injunctive relief in the form of a Cease and Desist Order or damages in the form of a refund of taxes. II. Eleventh Amendment Immunity The Eleventh Amendment to the United States Constitution provides: “The Judicial Power of the United States shall not be construed to extend to any suit in law or equity, commenced or prosecuted against one of the United States by Citizens of another State, or by Citizens or Subjects of any Foreign State.” The Amendment bars citizens from bringing suit in federal court against their home state or state agency, unless the state waives, or Congress abrogates, that immunity. Pennhurst State Sch. & Hosp. v. Halderman, 465 US 89, 99 (1984); Micomonaco v. State of Washington, 45 F3d 316, 319 (9th Cir 1995). It is well established that absent waiver, the Eleventh Amendment bars a suit in federal court against either a state or an agency acting under its control. Puerto Rico Aqueduct & Sewer Auth. v. Metcalf & Eddy, Inc., 506 US 139, 144 (1993) (citations omitted); Atascadero State Hosp. v. Scanlon, 473 US 234, 239-41 (1985); Alabama v. Pugh, 438 US 781, 782 (1978). The test for determining whether a state has waived its immunity is stringent. “[W]e will find waiver only where stated ‘by the most express language or by such overwhelming implications from the text as [will] leave no room for any other reasonable construction.’” Edelman v. Jordan, 415 US 651, 673 (1981), citing Murray v. Wilson Distilling Co., 213 US 151, 171 (1909). Oregon has not consented to be sued in federal court or otherwise waived Case 6:16-cv-01344-JR Document 15 Filed 08/01/16 Page 5 of 9 Page 6 - DEFENDANTS’ MOTION TO DISMISS PR3/ssp/7542722-v2 Department of Justice 1162 Court Street NE Salem, OR 97301-4096 (503) 947-4700 / Fax: (503) 947-4791 its immunity. Delong Corp. v. Oregon State Hwy. Comm’n, 343 F2d 911, 912 (9th Cir), cert denied, 382 US 877 (1965). Oregon law contains a general waiver of common law immunity, providing that “[a] suit or action may be maintained against ... the State of Oregon by and through and in the name of the appropriate state agency upon a contract made by ... such agency and within the scope of its authority.” ORS 30.320. However, Oregon did not unequivocally consent to suit in federal court when it enacted ORS 30.320. Drollinger v. Gerber, Case No. 3:09-cv-00134-AC, 2011 WL 7154483 at *5 (D. Or. Sept. 12, 2011) (citing Olson v. Oregon University System ex rel. Pernsteiner, Case No. 3:09-cv-00167-MO, 2009 WL 1270293 at *6 (D. Or. May 6, 2009)), report and recommendation adopted by 2012 WL 381215 (D. Or. Feb. 6, 2012). Consequently, even if Plaintiff's Complaint established subject matter jurisdiction in this Court, Plaintiff cannot state a claim for damages against the State of Oregon Department of Revenue upon which relief may be granted. Defendant State of Oregon enjoys sovereign immunity from a suit for damages in this Court. See Kimel v. Florida Board of Regents, 528 U.S. 62, 73 (2000) (absent consent, the Eleventh Amendment bars suits for damages against a state); Will v. Michigan Dept. of State Police, 491 U.S. 58, 65–71 (1989) (Eleventh Amendment bars suits brought under 42 U.S.C. § 1983 against states and state officials acting in their official capacity); Production & Leasing Ltd. v. Hotel Conquistador, Inc., 709 F.2d 21, 21 (9th Cir.1983) (Eleventh Amendment bars a RICO claim from being brought against a state). As an agency or department of the State of Oregon, the ODR enjoys immunity from suit under the Eleventh Amendment. Thus, Patterson’s claims against the ODR and State of Oregon must be dismissed on this additional basis. The Eleventh Amendment does not bar certain actions against state officials. In the case of ex parte Young, 209 US 123 (1908), the Supreme Court held that a suit against a state officer acting Case 6:16-cv-01344-JR Document 15 Filed 08/01/16 Page 6 of 9 Page 7 - DEFENDANTS’ MOTION TO DISMISS PR3/ssp/7542722-v2 Department of Justice 1162 Court Street NE Salem, OR 97301-4096 (503) 947-4700 / Fax: (503) 947-4791 unconstitutionally is not a suit against a state because an officer acting unconstitutionally could not be said to be acting lawfully on behalf of the state. The cases following ex parte Young make it clear that “the Eleventh Amendment does not bar actions seeking only prospective declaratory or injunctive relief against state officers in their official capacities.” Los Angeles County Bar Ass’n v. Eu, 979 F2d 697, 704 (9th Cir 1992) (citations omitted). Theoretically, individually named defendants, as a state officers, may be sued for declaratory or injunctive relief in their official capacity. However, Patterson’s claim for declaratory or injunctive relief is barred by the Tax Injunction Act, as discussed above. III. Even if the Tax Injunction Act does not bar this action, the Court should nonetheless dismiss based on principles of comity and abstention. Even if the Tax Injunction Act does not directly bar this action, the State of Oregon respectfully moves the Court to exercise its discretion to decline jurisdiction and to allow plaintiffs’ Oregon Tax Court case to progress unimpeded. First, the Court should decline, under Levin v. Commerce Energy, Inc., ___ U.S. ___, 130 S. Ct. 2323 (2010), to hear plaintiffs’ request for declaratory relief because plaintiffs’ allegations do not give rise to any heightened judicial scrutiny, state taxation is an area in which the State of Oregon is entitled to wide regulatory latitude, and because Oregon’s state courts are better positioned to fashion relief and are more familiar with Oregon tax policy. Second, abstention is appropriate under Brillhart v. Excess Ins. Co. of Am., 316 U.S. 491 (1942), because doing so would avoid needless decisions of state law, discourage forum shopping, and avoid duplicative litigation. Third, abstention is appropriate under Burford v. Sun Oil Co., 319 U.S. 315 (1943), because the resolution of plaintiffs’ claims in federal court has the potential to seriously disrupt the administration of Oregon’s tax laws. For these reasons, the State moves to dismiss, or in the alternative, at least stay plaintiffs’ claims pending resolution of whatever appeal process lends itself to properly dispose of the issues raised in the state forum. Case 6:16-cv-01344-JR Document 15 Filed 08/01/16 Page 7 of 9 Page 8 - DEFENDANTS’ MOTION TO DISMISS PR3/ssp/7542722-v2 Department of Justice 1162 Court Street NE Salem, OR 97301-4096 (503) 947-4700 / Fax: (503) 947-4791 For the foregoing reasons, Defendants’ motion to dismiss should be granted, and the case dismissed with prejudice. DATED August 1 , 2016. Respectfully submitted, ELLEN F. ROSENBLUM Attorney General s/ Patty T. Rissberger PATTY T. RISSBERGER #871473 Senior Assistant Attorney General Trial Attorney Tel (503) 947-4700 patty.rissberger@doj.state.or.us Of Attorneys for Defendant State of Oregon Case 6:16-cv-01344-JR Document 15 Filed 08/01/16 Page 8 of 9 Page 1 - CERTIFICATE OF SERVICE PR3/ssp/7516269-v1 Department of Justice 1162 Court Street NE Salem, OR 97301-4096 (503) 947-4700 / Fax: (503) 947-4791 CERTIFICATE OF SERVICE I certify that on August 1 , 2016, I served the foregoing DEFENDANTS’ MOTION TO DISMISS upon the parties hereto by the method indicated below, and addressed to the following: Tad Alan Patterson 1819 Kingsley Road #20 Eugene, OR 97401 Plaintiff pro se HAND DELIVERY X MAIL DELIVERY OVERNIGHT MAIL TELECOPY (FAX) E-MAIL E-SERVE s/ Patty T. Rissberger PATTY T. RISSBERGER #871473 Senior Assistant Attorney General Trial Attorney Tel (503) 947-4700 Fax (503) 947-4791 patty.rissberger@doj.state.or.us Of Attorneys for Defendant State of Oregon, Oregon Department of Revenue Case 6:16-cv-01344-JR Document 15 Filed 08/01/16 Page 9 of 9