(PS) Fristoe v. Anata Management Solutions, LLC et al, No. 2:2015cv02460 - Document 34 (E.D. Cal. 2016)
Court Description: ORDER and FINDINGS and RECOMMENDATIONS signed by Magistrate Judge Gregory G. Hollows on 7/19/16 ORDERING that Plaintiff's 23 motion to prevent the U.S. Department of Justice from representing the IRS and to require the IRS to secure other cou nsel is DENIED. It is RECOMMENDED that Plaintiff's 5 motion for summary judgment, construed as a motion for default judgment, be denied; Anata Management Solutions' 9 motion to dismiss be granted; The United States' 20 mot ion to dismiss be granted; The Clerk be directed to close this case. Matter referred to District Judge Kimberly J. Mueller. Within 14 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. (Kastilahn, A)
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(PS) Fristoe v. Anata Management Solutions, LLC et al Doc. 34 1 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 FOR THE EASTERN DISTRICT OF CALIFORNIA 10 11 HOLLY FRISTOE, 12 Plaintiff, 13 v. ORDER AND FINDINGS AND RECOMMENDATIONS 14 15 No. 2:15-cv-2460 KJM GGH PS ANATA MANAGEMENT, LLC, et al., Defendants. 16 17 Plaintiff is proceeding in this action pro se and has paid the filing fee. Presently pending 18 before the court are various motions, including plaintiff’s “motion for summary judgment,” filed 19 January 15, 2016, Anata Management Solutions’ (“Anata”) motion to dismiss, filed January 20, 20 2016, the United States’ motion to dismiss, filed March 24, 2016, and plaintiff’s motion to 21 prevent the U.S. Attorney from representing the Internal Revenue Service (“IRS”) and to require 22 this entity to secure its own counsel, filed April 8, 2016. Having reviewed all filings in support 23 and in opposition to these motions, the undersigned now issues the following order and findings 24 and recommendations.1 25 BACKGROUND Plaintiff is a taxpayer whose work for her former employer, Anata, based in Utah, was 26 27 1 These motions are decided on the record, no hearing having been held. 28 1 Dockets.Justia.com 1 performed in Eureka California for the years 2010 through 2012.2 The complaint alleges that 2 Anata intentionally, recklessly and fraudulently issued W-2 tax forms which calculated plaintiff’s 3 daily per diem allowance for 2010 and 2012 as gross wages which were taxable. (For whatever 4 reason, plaintiff does not claim any refund is due for tax year 2011). Plaintiff asserts that her per 5 diem should not be taxable, and that she is owed a tax refund from the IRS based on Anata’s 6 misreporting. Plaintiff has attached affidavits and amended tax forms. (ECF No. 1 at 10-23.) 7 She seeks damages from Anata for the hardship and distress caused her by the IRS’ attempts to 8 collect taxes on her allegedly non-taxable daily per diem, and she seeks a tax refund from the IRS 9 for tax years 20103 and 2012, as well as punitive damages. 10 DISCUSSION 11 I. 12 Legal Standards A. Rule 12(b)(1) - Subject Matter Jurisdiction 13 On a Rule12(b)(1) motion to dismiss for lack of subject matter jurisdiction, plaintiff bears 14 the burden of proof that jurisdiction exists. See, e.g., Sopcak v. Northern Mountain Helicopter 15 Serv., 52 F.3d 817, 818 (9th Cir.1995); Thornhill Pub. Co. v. General Tel. & Electronics Corp., 16 594 F.2d 730, 733 (9th Cir. 1979). Different standards apply to a 12(b)(1) motion, depending on 17 the manner in which it is made. See, e.g., Crisp v. U.S., 966 F. Supp. 970, 971-72 (E.D. Cal. 18 1997). 19 First, if the motion attacks the complaint on its face, often referred to as a “facial attack,” 20 the court considers the complaint’s allegations to be true, and plaintiff enjoys “safeguards akin to 21 those applied when a Rule 12(b)(6) motion is made.” Doe v. Schachter, 804 F. Supp. 53, 56 22 (N.D. Cal. 1992). Presuming its factual allegations to be true, the complaint must demonstrate 23 24 25 26 27 2 Plaintiff asserts in her request to file a sur-reply, ECF # 26, p.2 that for the purposes of this case her “tax home” has always been in Sacramento, CA, [or West Sacramento], and that she performed temporary work for Anata in Eureka, CA for the period of time at issue here. No one disputes here that the distance from Sacramento to Eureka is non-commutable. 3 The exhibits submitted by the parties demonstrate that plaintiff’s per diem was not taxable for part of tax year 2010. On this motion to dismiss the court will simply assume the truth of the complaint’s averments, i.e., that the appropriate part of tax year 2010 is at issue here. 28 2 1 that the court has either diversity jurisdiction or federal question jurisdiction. For diversity 2 jurisdiction pursuant to 28 U.S.C. § 1332, plaintiff and defendant must be residents of different 3 states. For federal question jurisdiction pursuant to 28 U.S.C. § 1331, the complaint must either 4 (1) arise under a federal law or the United States Constitution, (2) allege a “case or controversy” 5 within the meaning of Article III, § 2, or (3) be authorized by a jurisdiction statute. Baker v. Carr, 6 369 U.S. 186, 198, 82 S. Ct. 691, 699-700 (1962). 7 Second, if the motion makes a “factual attack” on subject matter jurisdiction, often 8 referred to as a “speaking motion,” the court does not presume the factual allegations of the 9 complaint to be true. Thornhill, 594 F.2d at 733. In a factual attack, defendant challenges the 10 truth of the jurisdictional facts underlying the complaint. “Faced with a factual attack on subject 11 matter jurisdiction, the trial court may proceed as it never could under Rule 12(b)(6). . . . No 12 presumptive truthfulness attaches to plaintiff’s allegations, and the existence of disputed material 13 facts will not preclude the trial court from evaluating for itself the merits of jurisdictional claims.” 14 Id. (quotations and citation omitted). The court may hear evidence such as declarations or 15 testimony to resolve factual disputes. Id.; McCarthy v. United States, 850 F.2d 558, 560 (9th Cir. 16 1988).4 17 B. Rule 12(b)(6) - Failure to State a Claim 18 A motion to dismiss brought pursuant to Federal Rule of Civil Procedure 12(b)(6) 19 challenges the sufficiency of the pleadings set forth in the complaint. Vega v. JPMorgan Chase 20 Bank, N.A., 654 F. Supp. 2d 1104, 1109 (E.D. Cal. 2009). Under the “notice pleading” standard 21 of the Federal Rules of Civil Procedure, a plaintiff’s complaint must provide, in part, a “short and 22 plain statement” of plaintiff’s claims showing entitlement to relief. Fed. R. Civ. P. 8(a)(2); see 23 also Paulsen v. CNF, Inc., 559 F.3d 1061, 1071 (9th Cir. 2009). “To survive a motion to dismiss, 24 a complaint must contain sufficient factual matter, accepted as true, to ‘state a claim to relief that 25 4 26 27 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). 28 3 1 is plausible on its face.’” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (citing Bell Atl. Corp. v. 2 Twombly, 550 U.S. 544, 570 (2007)). “A claim has facial plausibility when the plaintiff pleads 3 factual content that allows the court to draw the reasonable inference that the defendant is liable 4 for the misconduct alleged.” Id. 5 In considering a motion to dismiss for failure to state a claim, the court accepts all of the 6 facts alleged in the complaint as true and construes them in the light most favorable to the 7 plaintiff. Corrie v. Caterpillar, Inc., 503 F.3d 974, 977 (9th Cir. 2007). The court is “not, 8 however, required to accept as true conclusory allegations that are contradicted by documents 9 referred to in the complaint, and [the court does] not necessarily assume the truth of legal 10 conclusions merely because they are cast in the form of factual allegations.” Paulsen, 559 F.3d at 11 1071. The court must construe a pro se pleading liberally to determine if it states a claim and, 12 prior to dismissal, tell a plaintiff of deficiencies in his complaint and give plaintiff an opportunity 13 to cure them if it appears at all possible that the plaintiff can correct the defect. See Lopez v. 14 Smith, 203 F.3d 1122, 1130-31 (9th Cir. 2000) (en banc); accord Balistreri v. Pacifica Police 15 Dep’t, 901 F.2d 696, 699 (9th Cir. 1990) (stating that “pro se pleadings are liberally construed, 16 particularly where civil rights claims are involved”); see also Hebbe v. Pliler, 627 F.3d 338, 342 17 & n.7 (9th Cir. 2010) (stating that courts continue to construe pro se filings liberally even when 18 evaluating them under the standard announced in Iqbal). 19 In ruling on a motion to dismiss filed pursuant to Rule 12(b)(6), the court “may generally 20 consider only allegations contained in the pleadings, exhibits attached to the complaint, and 21 matters properly subject to judicial notice.” Outdoor Media Group, Inc. v. City of Beaumont, 506 22 F.3d 895, 899 (9th Cir. 2007) (citation and quotation marks omitted). Although the court may not 23 consider a memorandum in opposition to a defendant’s motion to dismiss to determine the 24 propriety of a Rule 12(b)(6) motion, see Schneider v. Cal. Dep’t of Corrections, 151 F.3d 1194, 25 1197 n.1 (9th Cir. 1998), it may consider allegations raised in opposition papers in deciding 26 whether to grant leave to amend, see, e.g., Broam v. Bogan, 320 F.3d 1023, 1026 n.2 (9th Cir. 27 2003). 28 //// 4 1 II. 2 The United States brings this motion for lack of subject matter jurisdiction and for failure 3 to state a claim in regard to plaintiff’s third, fourth and fifth claims for relief wherein she seeks a 4 tax refund for years 2010 and 2012, and punitive damages against the United States and the IRS. United States’ Motion to Dismiss A. Subject Matter Jurisdiction 5 As set forth in the standard above, if the court has no subject matter jurisdiction, it has no 6 7 authority to hear the case. Here, there is no subject matter jurisdiction in regard to the United 8 States and the IRS. A suit for refund of taxes may only be brought against the United States, 26 U.S.C. § 9 10 7422(f); Wiltgen v. United States, 813 F.Supp. 1387, 1395 (D.Iowa 1992); Brennan v. C.I.R., 581 11 F.Supp. 28, aff'd. 752 F.2d 187 (6th Cir.1984), and then only if the taxpayer has actually paid the 12 disputed tax. Flora v. United States, 362 U.S. 145, 80 S.Ct. 630 (1960); Francis v. United States, 13 715 F.Supp. 973 (D .Nev.1988). The IRS is not a proper party to this action which must be brought against the United 14 15 States. Furthermore, plaintiff has not alleged that she has paid all of the taxes for tax year 2012 16 which is one of the years in dispute. In fact, in seeking punitive damages, the complaint requests 17 “the just amount of what Plaintiff would have to pay to the Defendants, and each of them, if 18 Plaintiff refused to pay her taxes….” The United States has submitted evidence that in fact 19 plaintiff has not paid her 2012 tax bill in full. As of January 1, 2016, an Account Transcript by 20 the IRS indicates that she had a tax liability of $14,112.57 plus interest and penalty for a total 21 balance due of $17,819.28. (ECF No. 20-2 at 1.) The United States’ Exhibit 1 may be considered 22 with its motion to dismiss because the government is mounting a factual attack on jurisdiction. 23 See McCarthy, 850 F.2d at 560. Plaintiff has failed to submit evidence in opposition to satisfy 24 her burden to establish subject matter jurisdiction. See Savage v. Glendale Union High School, 25 343 F.3d 1036, 1039 n. 2 (9th Cir. 2003). Therefore, any refund claim for the 2012 tax year is 26 dismissed for lack of jurisdiction. 27 //// 28 //// 5 1 Nor is there jurisdiction over the United States for damages or punitive damages pursuant 2 to the doctrine of sovereign immunity.5 6 Plaintiff has failed to cite any statute or provision of the 3 Internal Revenue Code in support of her claims against the United States; however, a limited 4 exception to sovereign immunity is contained in the Omnibus Taxpayer's Bill of Rights, 26 5 U.S.C. § 7433, as amended by the Internal Revenue Service Restructuring & Reform Act of 1998, 6 allowing taxpayers to recover civil damages from the United States for unauthorized collection 7 activities, when IRS employees cause the damage through reckless, intentional, or, as recently 8 amended (effective July 22, 1998), negligent disregard of the Internal Revenue Code or 9 regulations. The Taxpayer's Bill of Rights is the exclusive remedy for alleged abuses involved in 10 the collection of taxes (even to the exclusion of FTCA and Bivens claims). 26 U.S.C. § 7433(a). 11 Section 7433 does not permit a suit for damages by a taxpayer for improper assessment of taxes. 12 Shaw v. U.S., 20 F.3d 182, 184 (5th Cir.), cert. denied, 513 U.S. 1041 (1994). The Ninth Circuit 13 is in accord. See Miller v. U.S., 66 F.3d 220, 223 (9th Cir.1995) (“we align ourselves with the 14 Fifth Circuit”). 15 The legislative history of Section 7433 tells us that “an action under this provision may not be based on alleged ... disregard in connection with the determination of tax.” Conf.Rep. No. 1104, 100th Cong., 2d Sess., at 229, reprinted in 1988–3 Internal Revenue Cum.Bull. 473, 719. Taxpayers who wish to challenge the IRS' calculation of their tax liability must file either a petition for redetermination in the Tax Court, 26 U.S.C. §§ 6213, 6214, or a refund action in the district court. 26 U.S.C. § 7422. Section 7433 was not intended to supplement or supersede, or to allow taxpayers to circumvent, these procedures. 16 17 18 19 20 21 Gonsalves v. I.R.S., 975 F.2d 13, 16 (1st Cir. 1992). 22 23 This case does not present a claim of abuse or unauthorized collection by an individual IRS employee. It presents only a grievance requesting a tax refund based on plaintiff’s 24 5 25 26 27 The United States refers to a “Fifth Claim for Relief;” however, the complaint submitted to the court for filing contains no fifth claim. It does nonetheless seek damages and punitive damages in the prayer. (ECF No. 1.) 6 There is a distinction between subject matter jurisdiction and sovereign immunity. Powelson v. U.S by and through Sec. of Treasury, 150 F.3d 1103, 1104-1105 (9th Cir. 1998). However, dismissal is appropriate whether phrased in terms of jurisdiction or sovereign immunity. Id. 28 6 1 misperception of the law concerning tax deductions for per diem allowance. Since plaintiff is 2 challenging only the determination of the tax, the United States has not waived its sovereign 3 immunity and such a claim is not actionable. 4 5 B. Failure to State a Claim Against the United States Assuming for the sake of argument that the court had subject matter jurisdiction over any 6 of plaintiff’s claims against the United States, plaintiff has failed to state a claim on the merits. 7 This discussion is also warranted to address plaintiff’s claims against Anata. 8 9 10 11 12 26 U.S.C. § 62(a)(2)(A) provides in part that adjusted gross income consists of gross income minus deductions consisting of expenses paid or incurred by the taxpayer for work done as an employee through arrangement with the employer. 26 U.S.C. § 162(a)(2) provides: 13 (a) In general.--There shall be allowed as a deduction all the ordinary and necessary expenses paid or incurred during the taxable year in carrying on any trade or business, including— 14 … 15 (2) traveling expenses (including amounts expended for meals and lodging other than amounts which are lavish or extravagant under the circumstances) while away from home in the pursuit of a trade or business;… 16 17 18 “For purposes of paragraph (2), the taxpayer shall not be treated as being temporarily away from 19 home during any period of employment if such period exceeds 1 year.” Id. The purpose behind 20 this rule is that “the cost of producing income is deductible from a person’s taxable income.” 21 Henderson v. Commissioner, 143 F.3d 497, 499 (9th Cir. 1998), citing Hantzis v. Commissioner, 22 638 F.2d 248, 249 (1st Cir. 1981). 23 Therefore, a per diem may only be excluded from income if it is an expense made while a 24 taxpayer is away from home. The taxpayer’s “tax home” is that residence or abode “within the 25 general area of h[er] employment or as close thereto as is reasonably possible….” Coombs v. 26 Commissioner, 608 F.2d 1269, 1275 (9th Cir. 1979). 27 28 [I]n general, as between various possible ‘abodes,’ the abode or at least the locale of the abode which is located in the vicinity of the taxpayer's principal place of business or employment, 7 1 or as close thereto as possible, will be considered the taxpayer's tax home for purposes of travel 2 expense deduction of section 162(a) (2).” Coombs, 608 F.2d at 1275. An exception to this rule 3 applies, however, where a taxpayer's employment in another area is temporary as opposed to 4 indefinite. See Neal v. Commissioner, 681 F.2d 1157, 1158 (9th Cir. 1982). “Where it appears 5 probable that a taxpayer's employment outside of his regular abode will be for a ‘temporary’ or 6 ‘short’ period of time, then his travel expenses are held to be deductible; conversely, if the 7 prospects are that his work will continue for an ‘indefinite’ or ‘indeterminate’ or ‘substantially’ 8 long period, then the deduction is disallowed.” Wright v. Hartsell, 305 F.2d 221, 224 (9th Cir. 9 1962). “What constitutes ‘a long period of time’ varies with circumstances surrounding each 10 case.” Harvey v. Commissioner, 283 F.2d 491, 495 (9th Cir. 1960).7 11 Once a taxpayer accepts employment for an indefinite time or permanently away from the 12 usual abode, the tax home changes to the new location. Coombs, 608 F.2d at 1275-76, citing 13 Markey v. Commissioner, 490 F.2d 1249,1253 (6th Cir. 1974). “[T]he decision to retain a 14 former residence is a personal choice, and the expenses of traveling to and from that residence are 15 non-deductible personal expenses.” Coombs, 608 F.2d at 1276, citing I.R.C. § 262. 16 17 Here, plaintiff claims that her home remained for all purposes during the time at issue in Sacramento, not Eureka, where she was working for three years from 2010 to 2012.8 Pl’s Oppo., 18 19 20 21 22 23 24 25 26 27 7 The previous 11 lines are taken from Drum v. Commissioner, No. 94-70850, 1995 WL 429050 at *1, 61 F.3d 910 (9th Cir. Jul. 20, 1995) (unpublished). The undersigned does not cite Drum as precedent, but accepts its reasoning as the reasoning of the undersigned. The Drum citation is for attribution purposes only. 8 According to the United States’ reply filed in support of its motion to dismiss, plaintiff’s administrative claim originally alleged that her employer was in Utah, and she worked in California. (ECF No. 25 at 3-4.) The government objects to plaintiff’s opposition which now asserts these new facts, that her home was in Sacramento and she worked in Eureka during the pertinent time period. Plaintiff’s response to this argument is off point and attributes cases to the government’s briefing which the government has not cited. Under the variance doctrine, as pointed out by the government, plaintiff may not vary the factual basis for her claim. See McDonnell v. U.S., 180 F.3d 721, 722 (6th Cir. 1999); Muskat v. U.S., 554 F.3d 183 (1st Cir. 2009). In any event, whether the analysis is based on plaintiff’s original facts or her most recent factual version as stated in her opposition, the result is the same. Plaintiff may not deduct travel expenses where her tax home was not temporary, but was indefinite for the three year period at issue. 28 8 1 ECF No. 22 at 5-6. Where there are two possible abodes, however, the abode which is in the 2 vicinity of the principal place of employment is considered the tax home for purposes of the 3 travel expense deduction in § 162(a)(2). Coombs, 608 F.2d at 1275. 4 As it is undisputed that plaintiff worked at an indefinite assignment that lasted much 5 longer than one year, her tax home became Eureka (or California under the facts in her 6 administrative claim), and her travel expenses were not deductible. See Davis v. United States, 7 861 F.2d 558, 564 n.1 (9th Cir. 1989) (pursuant to Revenue Ruling 83-82, for assignments lasting 8 one year or less, all facts and circumstances are considered; assignments of one to two years 9 length will be assigned rebuttable presumption that stay is indefinite; expected or actual stay of 10 two years or more qualifies as indefinite regardless of circumstances); Hantzis v. Commissioner, 11 638 F.2d 248, 255 (1st Cir. 1981) (law student from Boston who had summer internship in New 12 York had no business reason to maintain home in Boston during that time despite fact her 13 husband lived in Boston and she also lived there during school year; therefore she had no 14 business ties to Boston and was not “away from home”). 15 Plaintiff’s own documents acknowledge these facts as well as the tax guidelines. 16 Attached to her opposition is a letter from her employer congratulating her on one year in the 17 Eureka area: “Happy Anniversary! On 5/26/10 you hit the one year mark at Humboldt.” (Pl.’s 18 Ex. 9, ECF No. 18 at 17.)9 The letter informed plaintiff that since her per diem would become 19 taxable after 365 days on the site, she was entitled to an increase in her per diem allowance. Id. 20 Plaintiff has submitted no argument whatsoever in her opposition, let alone any contradiction of 21 the plain terms of this letter informing her that her per diem becomes taxable after one year, but 22 has merely listed exhibits and makes bald conclusions about some of them, such as that Anata 23 was “starting to steal Plaintiff’s per diem making Plaintiff pay taxes on all of the money.” (ECF 24 No. 18 at 2.) This letter also serves to demonstrate that Anata was following the tax law and did 25 not commit fraud in this respect as plaintiff alleges. 26 9 27 Plaintiff asserts in her request to file a sur-reply, ECF 26 at 2, that she worked for Anata in Eureka commencing on May 25, 2009, “348 miles for her “tax home” in Sacramento. Such assertions are at the very least judicial admissions. 28 9 1 Courts may not usually consider evidence outside the complaint or its exhibits in 2 evaluating a motion to dismiss for failure to state a claim. Marder v. Lopez, 450 F.3d 445, 448 3 (9th Cir. 2006); Outdoor Media Group, Inc., 506 F.3d at 899. Nevertheless, even if the exhibits 4 to plaintiff’s opposition are not considered, her complaint admits as much. In an exhibit to the 5 complaint, plaintiff states that she was a contractor with Anata “from 2010 through and including 6 2012….” (ECF No. 1 at 7.) Based on the length of time, her actual stay of more than two years 7 qualifies as indefinite regardless of the circumstances, and can be determined based on the 8 complaint and the instant motion. Therefore, plaintiff was an indefinite employee with a tax 9 home in the vicinity of her employment (Eureka, California between 2010 and 2012, and her 10 travel expenses were not deductible for this three year period (commencing on or a day after May 11 2010). 12 In sum, plaintiff has failed to state a claim against the United States in regard to the 2010 13 tax year.10 For these same reasons, plaintiff has failed to state a claim for fraud against Anata. 14 See discussion infra. 15 III. 16 Anata’s motion to dismiss is based insufficient process and insufficient service of process Anata’s Motion to Dismiss 17 pursuant to Fed. R. Civ. P. 12(b)(4) and (5) respectively, and on failure to state a claim under Fed. 18 R. Civ. P. 12(b)(6). 19 A. Service of Process 20 21 Anata contends that process and service of process were insufficient, as it was served with a summons issued to the IRS with a requirement to answer within sixty days. 22 “[S]ervice of summons is the procedure by which a court having venue and jurisdiction of 23 the subject matter of the suit asserts jurisdiction over the person of the party served.” Mississippi 24 Publishing Corp. v. Murphree, 326 U.S. 438, 444–45, 66 S.Ct. 242 (1946). “Before a federal 25 court may exercise personal jurisdiction over a defendant, the procedural requirement of service 26 10 27 The court need not reach the issue of whether plaintiff has failed to state a claim in regard to tax year 2012 because there is no jurisdiction where plaintiff has failed to pay taxes in full for that year; however, the same analysis and result would issue even if plaintiff had done so. 28 10 1 of summons must be satisfied.” Omni Capital Int'l, Ltd. v. Rudolf Wolff & Co., Ltd., 484 U.S. 2 97, 104, 108 S.Ct. 404 (1987). Accordingly, Rules 12(b)(4) and 12(b)(5) permit a court to 3 dismiss an action for insufficiency of service of process. Fed.R.Civ.P. 12(b)(4)-(5). Rule 12(b) 4 (4) enables the defendant to challenge the substance and form of the summons, and 12(b)(5) 5 allows the defendant to attack the manner in which service was, or was not, attempted. Id. When 6 the validity of service is contested, the burden is on the plaintiff to prove that service was valid 7 under Rule 4. Brockmeyer v. May, 383 F.3d 798, 801 (9th Cir.2004). If the plaintiff is unable to 8 satisfy this burden, the Court has the discretion to either dismiss the action or retain the action and 9 quash the service of process. Stevens v. Sec. Pac. Nat'l Bank, 538 F.2d 1387, 1389 (9th 10 11 Cir.1976). Rule 4(a)(1) sets forth the requirements for the form of a summons, including that it name 12 the court and the parties, be directed to the defendant, state the name and address of plaintiff, be 13 signed by the clerk, and bear the clerk's seal. Fed.R.Civ.P. 4(a)(1). “Dismissals for defects in the 14 form of summons are generally disfavored.” U.S.A. Nutrasource, Inc. v. CNA Ins. Co., 140 15 F.Supp.2d 1049, 1052 (N.D.Cal.2001). “Technical defects in a summons do not justify dismissal 16 unless a party is able to demonstrate actual prejudice.” Chan v. Society Expeditions, 39 F.3d 17 1398, 1404 (9th Cir.1994). In addition, “[e]ven if the summons fails to name all of the defendants 18 ... dismissal is generally not justified absent a showing of prejudice.” United Food & Commercial 19 Workers Union, Locals 197, et al. v. Alpha Beta Co., 736 F.2d 1371, 1382 (9th Cir.1984) 20 (internal citations omitted) (“Rule 4 is a flexible rule that should be liberally construed so long as 21 a party receives sufficient notice of the complaint.”). 22 23 24 25 26 27 Rule 4 also sets forth the requirements for the manner of service. It requires that a defendant corporation be served either: (A) in the manner prescribed by Rule 4(e)(1) for serving an individual; or (B) by delivering a copy of the summons and complaint to an officer, a managing or general agent, or any other agent authorized by appointment or by law to receive service of process and - if the agent is one authorized by statute and the statute so requires - by 28 11 1 2 3 also mailing a copy of each to the defendant.... Fed. R. Civ. P. 4(h). An individual may be served by, inter alia, personally delivering a copy of the summons 4 and a complaint, leaving a copy of each at the individual's usual place of abode, or delivering a 5 copy of each to an agent authorized to receive service. Fed.R.Civ.P. 4(e)(2). California requires 6 service on a person designated as agent for service of process, or other specifically designated 7 corporate officer, where the defendant is a corporation. Cal. Civ. Proc. Code § 416.10. Such 8 individuals include “the president, chief executive officer, or other head of the corporation, a vice 9 president, a secretary or assistant secretary, a treasurer or assistant treasurer, a controller or chief 10 financial officer, a general manager….” Cal. Civ. Proc. Code § 416.10(b). 11 In lieu of personal delivery, Cal. Civ. Proc. Code § 415.20 permits service on a 12 corporation by substituted service which requires leaving the summons and complaint during 13 normal office hours at the office of the defendant with a person “who is apparently in charge” and 14 thereafter mailing a copy of the summons and complaint to the defendant at that same office. 15 16 Where a defendant is out-of-state, however, California provides for service by mail subject to the following requirements. 17 A summons may be served on a person outside this state in any manner provided by this article or by sending a copy of the summons and of the complaint to the person to be served by firstclass mail, postage prepaid, requiring a return receipt. Service of a summons by this form of mail is deemed complete on the 10th day after such mailing. 18 19 20 21 22 Cal. Civ. Proc. Code § 415.40. In addition, where the out-of-state defendant is a corporation, the aforementioned service 23 requirements of Cal.Civ. Proc. Code § 416.10 must also be met. Cruz v. Fagor America, Inc., 24 146 Cal.App.4th 488, 496 (2007). In such a case, service is effective by proof of service as 25 follows: 26 27 28 Proof that a summons was served on a person outside this state shall be made: [¶] (a) If served in a manner specified in a statute of this state, as prescribed by Section 417.10, and if service is made by mail pursuant to Section 415.40, proof of service shall include evidence satisfactory to the court establishing actual delivery to the 12 1 2 person to be served, by a signed return receipt or other evidence. Cal. Civ. Proc. Code § 417.20(a). Anata claims that plaintiff has not complied with either the service of process 3 4 requirements or the process requirements. Plaintiff has clearly failed to comply with Rule 5 4(a)(1). The summons did not name defendant Anata and was not directed to this defendant, but 6 named only the IRS. See Fed.R.Civ.P. 4(a)(1). It also provided the incorrect time period in 7 which to answer. Opp’n to Mot. for Summ. J., Exs. A, B, ECF No. 32; Kloeppel Dec. in support 8 of Anata Mot. to Dismiss, Ex. A, ECF No. 10 at 4, 42. Compare Fed. R. Civ. P. 12(a)(B) (party 9 must serve answer within 21 days) and Rule 12(a)(3) (United States must serve answer within 60 10 days). As the summons did not comply with Rule 4(a), Anata claims that it also failed to comply 11 with Rule 4(h), which requires the service of a valid summons. 12 Plaintiff concedes that Anata was served with the wrong summons and seeks to rectify 13 service. (ECF No. 17.) Plaintiff’s request is denied as her complaint will be dismissed on the 14 merits, rendering proper service superfluous. B. Failure to State a Claim 15 16 Anata also moves to dismiss on the basis that plaintiff has failed to state a claim. For the 17 same reasons that plaintiff has failed to state a claim against the United States, plaintiff also fails 18 to state a claim against the Anata.11 Plaintiff’s per diem allowance was taxable income that could 19 not be deducted because she was not away from home from 2010 through 2012, but her tax home 20 changed to Eureka (or California according to the administrative claim) during the three years she 21 lived there. In regard to plaintiff’s claim of fraud against Anata, given the tax laws pertaining to 22 23 plaintiff with her tax home in Eureka or California for the pertinent time period, Anata did not 24 11 25 26 27 Anata requests that the court take judicial notice of IRS Publication 463, entitled “Travel, Entertainment, Gift and Car Expenses,” for use in preparing 2014 Returns. (ECF No. 11.) A court may take judicial notice of court records. See MGIC Indem. Co. v. Weisman, 803 F.2d 500, 505 (9th Cir. 1986); United States v. Wilson, 631 F.2d 118, 119 (9th Cir. 1980). This publication pertains to tax year 2014, which is not at issue in this case. Moreover, it is denied as unnecessary to the previous analysis of the government’s motion to dismiss for failure to state a claim, which applies equally to Anata. 28 13 1 willfully file fraudulent information in regard to her taxes, but correctly reported plaintiff’s per 2 diem allowance as wages. In fact, plaintiff concedes that she was paid all of the monies that 3 Anata reported paying to her pursuant to IRS code and regulations. (ECF No. 1 at 10-12, 17-19.) 4 Furthermore, as pointed out by Anata, although plaintiff alleges fraud, she has failed to 5 plead it with particularity. Any claim sounding in fraud is subject to the requirements of Fed. R. 6 Civ. P. 9. That rule, titled “Pleading Special Matters,” provides as follows with regard to claims 7 of “Fraud or Mistake; Conditions of Mind”: 8 In alleging fraud or mistake, a party must state with particularity the circumstances constituting fraud or mistake. Malice, intent, knowledge, and other conditions of a person’s mind may be alleged generally. 9 10 11 Fed. R. Civ. P. 9(b). “Rule 9(b) serves not only to give notice to defendants of the 12 specific fraudulent conduct against which they must defend, but also ‘to deter the filing of 13 complaints as a pretext for the discovery of unknown wrongs, to protect [defendants] from the 14 harm that comes from being subject to fraud charges, and to prohibit plaintiffs from unilaterally 15 imposing upon the court, the parties and society enormous social and economic costs absent some 16 factual basis.’” Bly-Magee v. California, 236 F.3d 1014, 1018 (9th Cir. 2001) (quoting In re Stac 17 Elec. Sec. Litig., 89 F.3d 1399, 1405 (9th Cir. 1996)). Accordingly, pursuant to Rule 9(b), a 18 plaintiff at a minimum must plead evidentiary facts such as the time, place, persons, statements 19 and explanations of why allegedly misleading statements are misleading. See Vess, 317 F.3d 20 1097, 1106 (9th Cir. 2003); Fecht v. Price Co., 70 F.3d 1078, 1082 (9th Cir. 1995). 21 22 Permitting amendment to allow plaintiff to plead fraud with particularity would be futile in this case, because Anata properly reported her correct taxable income. 23 IV. 24 Plaintiff has filed a document styled “motion for summary judgment,” seeking in effect to Plaintiff’s Motion for Summary Judgment 25 enter default judgment against defendant Anata for failing to file an answer to the complaint 26 within twenty-one days. Anata has filed an opposition, to which plaintiff has filed a reply. 27 Plaintiff has failed to effectuate proper service of process on Anata. See Fed. R. Civ. P. 4(a); 28 Opp’n to Mot. for Summ. J., Exs. A, B, ECF No. 32; Kloeppel Dec. in support of Anata Mot. to 14 1 Dismiss, Ex. A, ECF No. 10 at 4, 42. Anata was not required to respond to its receipt of a 2 summons directed to the Internal Revenue Service, and therefore it is not in default for failing to 3 answer the complaint. Plaintiff does not seem to understand that when service is insufficient, 4 there is no duty to respond to the complaint. Based on the findings addressing Anata’s separately 5 filed motion to dismiss based in part on insufficient process and insufficient service of process; 6 see discussion supra; this motion should be denied. 7 8 9 10 Furthermore, plaintiff’s motion is defectively noticed. E.D.L.R. 230(b). See also Fed. R. Civ. P. 55(b)(2) (written notice required at least seven days prior to hearing). V. Plaintiff’s Motion for IRS to Secure Separate Counsel Plaintiff has filed a motion entitled, “motion for my employee, the U.S. Attorney, from 11 representing a non-U.S. governmental entity, the Internal Revenue Service.” (ECF No. 23.) 12 Plaintiff requests either that the IRS be required to secure its own counsel, or that the U.S. 13 Attorney be required to submit documentation showing it is required to represent the IRS. 14 Plaintiff’s motion is denied as frivolous. The U.S. Attorney is charged with prosecuting and 15 defending all matters arising under internal revenue laws, in all courts other than the Tax Court. 16 See 28 C.F.R. § 0.70(a), (c). The IRS is a government bureau under the Department of the 17 Treasury. See 26 C.F.R. § 601.01. 18 CONCLUSION 19 Accordingly, IT IS ORDERED that: Plaintiff’s motion to prevent the U.S. Department of 20 Justice from representing the IRS and to require the IRS to secure other counsel, filed April 8, 21 2016, (ECF No. 23), is denied. 22 23 24 25 26 For the reasons stated herein, IT IS RECOMMENDED that: 1. Plaintiff’s motion for summary judgment, construed as a motion for default judgment, filed January 15, 2016, (ECF No. 5), be denied; 2. Anata Management Solutions’ motion to dismiss, filed January 20, 2016, (ECF No. 9), be granted; 27 3. The United States’ motion to dismiss, filed March 24, 2016, (ECF No. 20), be granted; 28 4. This action be dismissed with prejudice; and 15 1 5. The Clerk of the Court be directed to close this case. 2 These findings and recommendations are submitted to the United States District Judge 3 assigned to the case, pursuant to the provisions of Title 28 U.S.C. § 636(b)(l). Within fourteen 4 (14) days after being served with these findings and recommendations, any party may file written 5 objections with the court and serve a copy on all parties. Such a document should be captioned 6 “Objections to Magistrate Judge’s Findings and Recommendations.” Any reply to the objections 7 shall be served and filed within seven (7) days after service of the objections. The parties are 8 advised that failure to file objections within the specified time may waive the right to appeal the 9 District Court’s order. Martinez v. Ylst, 951 F.2d 1153 (9th Cir. 1991). 10 Dated: July 19, 2016 11 /s/ Gregory G. Hollows 12 UNITED STATES MAGISTRATE JUDGE 13 14 15 16 GGH:076/Fristoe2460.mtns 17 18 19 20 21 22 23 24 25 26 27 28 16
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