Ross Massbaum et al v. United States of America

NOTICE OF MOTION AND MOTION to Dismiss Case Notice of Motion and Motion to Dismiss Complaint

C.D. Cal.May 1, 2017

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 SANDRA R. BROWN Acting United States Attorney THOMAS D. COKER Assistant United States Attorney Chief, Tax Division VALERIE L. MAKAREWICZ (Cal. Bar No. 229637) Assistant United States Attorney Federal Building, Suite 7211 300 North Los Angeles Street Los Angeles, California 90012 Telephone: (213) 894-2729 Facsimile: (213) 894-0115 E-mail: Valerie.Makarewicz@usdoj.gov Attorneys for Defendant United States of America UNITED STATES DISTRICT COURT FOR THE CENTRAL DISTRICT OF CALIFORNIA SOUTHERN DIVISION ROSS MASSBAUM; FLORINA MASSBAUM, Plaintiffs, v. UNITED STATES OF AMERICA, Defendant. No. 8:17-cv-00650-DOC-JDE NOTICE OF MOTION AND MOTION TO DISMISS COMPLAINT Hearing Date: June 12, 2017 Hearing Time: 8:30 a.m. Location: Courtroom 9D 411 W. 4th Street Santa Ana, CA 92701 Case 8:17-cv-00650-DOC-JDE Document 5 Filed 05/01/17 Page 1 of 11 Page ID #:20 2 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 PLEASE TAKE NOTICE that on the above captioned date and time, the United States of America will move for to dismiss the Complaint under Rules 12(b)(1) and (b)(2) of the Federal Rules of Civil Procedure for lack of subject-matter jurisdiction and personal jurisdiction. This motion is based upon this notice and the complete files and records of the action and the attached Memorandum of Points and Authorities. This motion is exempt from the requirement for a conference of the parties pursuant to L.R.7-3, as this case was removed from the Superior Court of the State of California, County of Orange, Small Claims Division, by the defendant United States of America on April 10, 2017. Dated: 05/01/2017 Respectfully submitted, SANDRA R. BROWN Acting United States Attorney THOMAS D. COKER Assistant United States Attorney Chief, Tax Division /s/ VALERIE L. MAKAREWICZ Assistant United States Attorney Attorneys for UNITED STATES OF AMERICA Case 8:17-cv-00650-DOC-JDE Document 5 Filed 05/01/17 Page 2 of 11 Page ID #:21 1 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 MEMORANDUM OF POINTS AND AUTHORITIES I. INTRODUCTION Plaintiffs Ross and Florina Massbaum (collectively referred to as defendants Massbaum) filed a complaint in the Small Claims Division of the Superior Court of Los Angeles, County of Orange on February 21, 2017, against the Internal Revenue Service (hereinafter Complaint). Docket No. 1. In such complaint, plaintiffs claim that the IRS owes them $544, which is apparently comprised of a payment they allegedly made to the IRS of $445 in an unidentified year and a $99 refund held from the IRS from another unidentified year. Plaintiffs served the Complaint by certified mail to the Civil Processing Clerk of the U.S. Attorney’s Office in Los Angeles, California. To the extent that plaintiffs’ Complaint is construed as a complaint for a refund of $544, the Court should deny plaintiffs’ request, as plaintiffs’ have not established a waiver of sovereign immunity. Pursuant to 28 U.S.C. § 1346, district courts have jurisdiction over a civil action against the United States for the recovery of any internal revenue tax alleged to have been erroneously or illegally assessed or collected. 28 U.S.C. § 1346(a)(1). However, there are three jurisdictional prerequisites to filing suit. A claim for refund must be timely filed. 26 U.S.C. §§ 6511(a) and 7422(a). More than six months must have elapsed since the filing of the claim for refund, unless the Secretary has disallowed the claim, but not more than two years shall have expired if the Secretary has disallowed the claim. 26 U.S.C. § 6532. Finally, the taxes in dispute must have been “fully paid.” Flora v. United States, 357 U.S. 63, 78 (1958), aff'd on rehearing, 362 U.S. 145, 150-151 (1960). Plaintiffs have not established they have complied with any of the jurisdictional prerequisites to bring this suit. Therefore, this court does not have subject matter jurisdiction over this case pursuant to 28 U.S.C. §1346(a), and this Complaint must be dismissed. To the extent that plaintiffs’ Complaint is construed as a claim pursuant to 26 U.S.C. § 7433 for damages associated with collection actions of the Internal Revenue Case 8:17-cv-00650-DOC-JDE Document 5 Filed 05/01/17 Page 3 of 11 Page ID #:22 2 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Service, again, plaintiffs’ Complaint should be denied, as plaintiffs have not established a waiver of sovereign immunity under this statute. Finally, plaintiffs have not shown they have served the United States of America in compliance with Fed. R. Civ. P. 4(i). II. STATEMENT OF FACTS On February 21, 2017, plaintiffs filed a Claim in Small Claims Court in the Superior Court of California, County of Orange. Docket No. 1. Plaintiffs named the IRS as defendant. Docket No, 1-1. Plaintiffs claim that the IRS owes them $544, which is allegedly was taken by the IRS on February 13, 2017, and was comprised of two separate payments - a $445 payment paid by plaintiffs in an unidentified year and a $99 refund from a previous year. Id. Plaintiffs allege that they have asked the IRS to pay plaintiffs the requested amount before they filed suit in small claims court. Id. They further allege that they filed a claim with the IRS on February 7, 2017. Id. III. ARGUMENT A. Legal Standard Governing Rule 12(b)(1) Motions to Dismiss. A defendant who seeks a dismissal of a complaint for lack of subject matter jurisdiction under Rule 12(b)(1) can facially challenge the sufficiency of the jurisdictional allegations in the complaint; when this type of attack is mounted, the court must accept as true well-pleaded facts and draw all reasonable inferences in favor of the plaintiff. Association of American Medical Colleges v. United States, 217 F.3d 770, 778-79 (9th Cir. 2000). Alternatively, the party challenging subject matter jurisdiction can proffer evidence extrinsic to the complaint. Safe Air for Everyone v. Meyer, 373 F.3d 1035, 1039 (9th Cir. 2004). Where extrinsic evidence is submitted, the uncontroverted allegations in the complaint must be taken as true, and “conflicts between the facts contained in the parties’ affidavits must be resolved in [plaintiff’s] favor. . .” AT&T Co. v. Compagnie Bruxelles Lambert, 94 F.3d 586, 588 (9th Cir. 1996). In deciding a Rule 12(b)(1) motion that relies upon extrinsic evidence, courts may weigh the evidence presented, and determine the facts in order to evaluate whether they have Case 8:17-cv-00650-DOC-JDE Document 5 Filed 05/01/17 Page 4 of 11 Page ID #:23 3 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 power to hear the case. Roberts v. Corrothers, 812 F.2d 1173, 1177 (9th Cir. 1987); Warren v. Fox Family Worldwide, Inc., 328 F.3d 1136, 1141 n. 5 (9th Cir. 2003). Whatever the nature of the challenge, the party seeking to sue in federal court bears the burden of establishing that the court has subject matter jurisdiction to hear the action. Association of American Medical Colleges, 217 F.3d at 778-79; McNutt v. General Motors Acceptance Corp., 298 U.S. 178, 189, 56 S. Ct. 780 (1936). B. Sovereign Immunity Generally. Federal courts are courts of limited jurisdiction, and may adjudicate only those cases authorized by the Constitution and by Congress. Kokkonen v. Guardian Life Ins. Co. of America, 511 U.S. 375, 377, 114 S. Ct. 1673 (1994); Attorneys Trust v. Videotape Computer Products, Inc., 93 F.3d 593, 594-95 (9th Cir. 1996). The presumption is that a federal court lacks jurisdiction in a particular case until it has been demonstrated that jurisdiction over the subject matter exists. 13 Charles A. Wright, Arthur R. Miller & Edward H. Cooper, Federal Practice & Procedure: Jurisdiction 2d § 3522 (1984). A plaintiff bears the burden of proving that the court has subject matter jurisdiction to hear an action. Sopcak v. Northern Mountain Helicopter Service, 52 F.3d 817, 818 (9th Cir. 1995); Stock West, Inc. v. Confederated Tribes of the Colville Reservation, 873 F.2d 1221, 1225 (9th Cir. 1989). Under the doctrine of sovereign immunity, the United States may not be sued without its consent. United States v. Mitchell, 445 U.S. 535, 538, 100 S. Ct. 1349 (1980). If the United States has not consented to be sued - i.e., waived its immunity - an action is barred, because the court has no subject matter jurisdiction to hear the case. Kaiser v. Blue Cross of California, 347 F.3d 1107, 1117 (9th Cir. 2003); Hodge v. Dalton, 107 F.3d 705, 707 (9th Cir. 1997). Where there has been no waiver of sovereign immunity, the Court must dismiss the action for lack of subject matter jurisdiction. Gilbert v. DaGrossa, 756 F.2d 1455, 1458 (9th Cir. 1985). The burden of establishing that the United States has consented to suit rests on the party suing the United States. Cominotto v. United States, 802 F.2d 1127, 1129 (9th Cir. 1986). When the Case 8:17-cv-00650-DOC-JDE Document 5 Filed 05/01/17 Page 5 of 11 Page ID #:24 4 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Government has waived its immunity and consented to suit, the Court strictly construes any waiver, and the putative plaintiff must abide by the terms of the consent. Young v. United States, 332 F.3d 893, 895 (6th Cir. 2003). A party bringing a cause of action against the federal government bears the burden of showing an unequivocal waiver of immunity. Holloman v. Watt, 708 F.2d 1399, 1401 (9th Cir.1983), cert. denied, 466 U.S. 958, 104 S.Ct. 2168, 80 L.Ed.2d 552 (1984). “Thus, the United States may not be sued without its consent and the terms of such consent define the court's jurisdiction.” Baker v. United States, 817 F.2d 560, 562 (9th Cir.1987), cert. denied, 487 U.S. 1204, 108 S.Ct. 2845, 101 L.Ed.2d 882 (1988). “The question whether the United States has waived its sovereign immunity against suits for damages is, in the first instance, a question of subject matter jurisdiction.” McCarthy v. United States, 850 F.2d 558, 560 (9th Cir.1988). “Absent consent to sue, dismissal of the action is required.” Hutchinson v. United States, 677 F.2d 1322, 1327 (9th Cir.1982). C. Plaintiffs have not established a waivers of sovereign immunity re: complaint for refund. Pursuant to 28 U.S.C. § 1346, the district courts shall have original jurisdiction of any civil action against the United States for the recovery of any internal-revenue tax alleged to have been erroneously or illegally assessed or collected. 28 U.S.C. § 1346(a)(1). In enacting section 1346, Congress waived the United States' sovereign immunity from suits seeking a federal tax refund, but only if plaintiff satisfies certain prerequisites to filing suit. United States v. Dalm, 494 U.S. 596, 608-10 (1990). First, a claim for refund must be timely filed. 26 U.S.C. §§ 6511(a) and 7422(a); Boyd v. United States, 762 F.2d 1369, 1371 (9th Cir. 1985). Second, more than six months must have elapsed since the filing of the claim for refund, unless the Secretary has disallowed the claim, but not more than two years shall have expired if the Secretary has disallowed the claim. 26 U.S.C. § 6532. Finally, the taxes in dispute must have been “fully paid.” Flora v. United States, 357 U.S. 63, 78 (1958), aff'd on rehearing, 362 U.S. 145, 150-151, (1960). In tax refund suits, the taxpayer must prove that the IRS Case 8:17-cv-00650-DOC-JDE Document 5 Filed 05/01/17 Page 6 of 11 Page ID #:25 5 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 owes the taxpayer a refund and the exact amount of the refund. United States v. Janie, 428 U.S. 433, 440, 96 S.Ct. 3021, 3025 (1976), citing Lewis v. Reynolds, 284 U.S. 281, 52 S.Ct. 145 (1932). Full compliance with the above conditions is the exclusive method for a taxpayer to commence a suit challenging the merits of a tax assessment in District Court. Jones v. Liberty Glass Co., 332 U.S. 524, 68 S. Ct. 229 (1947). The failure to comply with any of the requirements for instituting a tax refund suit is a jurisdictional defect which cannot be cured or waived. Lipsett v. United States, 37 F.R.D. 549, 552 (S.D.N.Y. 1965). In this case, plaintiffs cannot establish that this court has jurisdiction over their complaint for refund under section 1346 for several reasons. Plaintiffs have not established they have fully paid the amount of tax due and owing for which they seek the refund as required under Flora. Further, they have not established they filed an administrative complaint for refund with the IRS, and have waited the required time period before suing the United States as enumerated under 26 U.S.C. §§ 6511(a), 6532, and 7422(a). Plaintiffs need to comply with these requirements before this Court has jurisdiction over the case. As such, the court must dismiss this case as the Court lacks subject matter jurisdiction in this matter as plaintiffs have not shown a waiver of sovereign immunity by the United States. D. Plaintiffs have not established a waivers of sovereign immunity re: suit for damages. Section 7433 of the Internal Revenue Code allows a taxpayer to bring a civil action against the United States to recover damages caused by misconduct on the part of IRS employees. 26 U.S.C. § 7433(a). “To show such a waiver of sovereign immunity, a taxpayer ‘must have exhausted the administrative remedies available to such plaintiff within the [IRS].” Clark v. United States, 2010 WL 1660110, *6 (E.D. Cal. 2010)(quoting 26 U.S.C. § 7433(d)(1)). An administrative claim must have been filed in accordance with Treas. Reg. 301.7433-1(e).” Neiwald v. IRS, 73 F.3d 373 (10th Cir.1996); Chow v. United States, 73 A.F.T.R.2d 94-2224, *3 n. 5 (9th Cir. 1994) Case 8:17-cv-00650-DOC-JDE Document 5 Filed 05/01/17 Page 7 of 11 Page ID #:26 6 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 (failure to allege that administrative claim satisfied 26 C.F.R. § 301.7433-1(e) doomed section 7433 action). Here, there has been no waiver of sovereign immunity under § 7433 because plaintiffs have not shown they have exhausted their administrative remedies before filing the instant suit. Treas. Reg. 301.7433-1(d)-(e) (setting forth exhaustion requirements). The Court therefore is without jurisdiction under § 7433. See Conforte v. United States, 979 F.2d 1375, 1377 (9th Cir.1992) (affirming dismissal for lack of jurisdiction for failure to exhaust administrative remedies under § 7433); Clark v. United States, 2010 WL at *7 (“Clark's failure to satisfy exhaustion requirements robs this Court of jurisdiction under section 7433”); Allied/Royal Parking L.P. v. United States, 166 F.3d 1000, 1003 (9th Cir.1999) (“[S]ection 7433's limited waiver to the government's sovereign immunity must be read narrowly.”). Therefore, the case should be dismissed. E. Plaintiffs have not established personal jurisdiction over the United States due to improper service of process. To the extent that plaintiffs’ suit is directed against the United States, plaintiffs were required to serve the United States pursuant to Fed. R. Civ. P. 4(i) by: (A)(i) delivering a copy of the summons and of the complaint to the United States attorney for the district where the action is brought (or to an assistant United States attorney or clerical employee whom the United States attorney designates in a writing filed with the court clerk) or (ii) send a copy of each by registered or certified mail to the civil-process clerk at the United States attorney's office; (B) send a copy of each by registered or certified mail to the Attorney General of the United States at Washington, D.C.; and (C) if the action challenges an order of a nonparty agency or officer of the United States, send a copy of each by registered or certified mail to the agency or officer. Fed. R. Civ. P. 4(i)(1). In this case, plaintiffs have not shown they have properly served the United States. Only the United States Attorney’s Office has been served by plaintiffs. As Plaintiffs have failed to properly serve the United States, the Complaint should be dismissed for lack of personal jurisdiction and insufficient service of process. Case 8:17-cv-00650-DOC-JDE Document 5 Filed 05/01/17 Page 8 of 11 Page ID #:27 7 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 IV. CONCLUSION Based on the foregoing, the United States requests that the Court grant this motion, dismiss plaintiffs’ complaint with prejudice, and grant such other relief as may be appropriate. Dated: 05/01/2017 Respectfully submitted, SANDRA R. BROWN Acting United States Attorney THOMAS D. COKER Assistant United States Attorney Chief, Tax Division /s/ VALERIE L. MAKAREWICZ Assistant United States Attorney Attorneys for UNITED STATES OF AMERICA Case 8:17-cv-00650-DOC-JDE Document 5 Filed 05/01/17 Page 9 of 11 Page ID #:28 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 PROOF OF SERVICE BY MAILING I am over the age of 18 and not a party to the within action. I am employed by the Office of the United States Attorney, Central District of California. My business address is 300 North Los Angeles Street, Suite 7211, Los Angeles, California 90012. On May 1, 2017, I served NOTICE OF MOTION AND MOTION TO DISMISS COMPLAINT on each person or entity name below by enclosing a copy in an envelope addressed as shown below and placing the envelope for collection and mailing on the date and at the place shown below following our ordinary office practices. I am readily familiar with the practice of this office for collection and processing correspondence for mailing. On the same day that correspondence is placed for collection and mailing, it is deposited in the ordinary course of business with the United States Postal Service in a sealed envelope with postage fully prepaid. Date of mailing: May 1, 2017 Place of mailing: Los Angeles, California See attached list I declare under penalty of perjury under the laws of the United States of America that the foregoing is true and correct. I declare that I am employed in the office of a member of the bar of this court at whose direction the service was made. Executed on: May 1, 2017, Los Angeles, California. /s/ _______ Barbara Le Case 8:17-cv-00650-DOC-JDE Document 5 Filed 05/01/17 Page 10 of 11 Page ID #:29 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 RE: MASSBAUM, ROSS & FLORINA V. INTERNAL REVENUE SERVICE CASE NO.: 8:17-cv-00650 DOC-JDE Service List Ross Massbaum Florina Massbaum 26701 Quail Creek, #195 Laguna Hills, CA 92656 Case 8:17-cv-00650-DOC-JDE Document 5 Filed 05/01/17 Page 11 of 11 Page ID #:30