Osterman v. Department of Treasury et al, No. 3:2015cv01495 - Document 19 (S.D. Cal. 2016)
Court Description: ORDER Granting 11 Motion to Dismiss; the Court Denies without prejudice Plaintiff's motion for summary judgment (Doc. 18 ). Plaintiff has 30 days from the filing of this Order to properly serve the United States with the Summons and Complain t and file the proof of service. Failure to do so will result in the dismissal of this action. If Plaintiff properly serves the United States with the Summons and Complaint, Plaintiff may seek leave from the Court to amend his Complaint. Signed by Judge Barry Ted Moskowitz on 7/11/2016. (All non-registered users served via U.S. Mail Service)(rlu)
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1 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 SOUTHERN DISTRICT OF CALIFORNIA 10 11 CHARLES B. OSTERMAN, Plaintiff, 12 13 v. 14 Case No.: 15cv1495 BTM(WVG) ORDER GRANTING MOTION TO DISMISS DEPARTMENT OF THE TREASURY, INTERNAL REVENUE SERVICE, DIRECTOR OF INTERNAL REVENUE SERVICE, AND LAYNE CARTER REVENUE AGENT, 15 16 17 18 Defendants. 19 20 The United States of America has filed a motion to dismiss the Complaint 21 pursuant to Fed. R. Civ. P. 12(b)(5), or, in the alternative, to dismiss the Complaint 22 in part pursuant to Fed. R. Civ. P. 12(b)(1) for lack of subject matter jurisdiction 23 and pursuant to Fed. R. Civ. P. 12(b)(6) for failure to state a claim upon which relief 24 can be granted. For the reasons discussed below, the United States’ motion to 25 dismiss is GRANTED. 26 27 28 1 15cv1495 BTM(WVG) 1 I. BACKGROUND 2 On July 7, 2015, Plaintiff Charles B. Osterman commenced this action. In 3 his Complaint, Plaintiff seeks tax refunds for tax years 2002, 2003, 2008, 2009, 4 2010, and 2011. Plaintiff alleges that he is owed refunds totaling $11,501.00 in 5 addition to interest and penalties. (Compl. at 13-15.) Plaintiff also seeks damages 6 in the amount of $250,000 for “aggravation” and “stress” contributing to health 7 problems. (Compl. at 15.) The Complaint also mentions that Plaintiff is seeking a 8 permanent injunction against Defendants, enjoining Defendants from performing 9 certain acts of harassment. (Compl. at 1.) 10 11 II. DISCUSSION 12 The United States moves to dismiss this action under Rule 12(b)(5) for 13 insufficient service of process. The United States also moves to dismiss the 14 following claims under Rules 12(b)(1) and 12(b)(6): (1) Plaintiff’s refund claims for 15 tax years 2008, 2009, 2010, and 2011; (2) Plaintiff’s claim for injunctive relief; and 16 (3) Plaintiff’s claim for monetary damages against Layne Carver and the other 17 defendants. As discussed below, the Court finds that Plaintiff has not properly 18 served the United States, the proper defendant, as required by Rule 4(i). The 19 Court also finds that dismissal of the claims that are the subject of the United 20 States’ Rule 12(b)(1) and 12(b)(6) motion is warranted. 21 22 A. Sufficiency of Service of Process 23 As an initial matter, the Court determines that the United States is the proper 24 defendant in this action. A suit against IRS employees in their official capacities is 25 essentially a suit against the United States. Gilbert v. DaGrossa, 756 F.2d 1455, 26 1458 (9th Cir. 1985). The Complaint does not allege any specific facts as to the 27 “Director of Internal Revenue Service.” 28 Complaint points to a letter that was sent by Layne Carver, an Operations Manager With respect to “Layne Carter,” the 2 15cv1495 BTM(WVG) 1 with the IRS. This letter [Doc. 1-2 at 150-53] was an official communication 2 cautioning Plaintiff against sending frivolous correspondence and informing 3 Plaintiff of the IRS’s authority to collect taxes that civil penalties for the filing of 4 frivolous income tax returns. Layne Carver was acting in his official capacity in 5 sending the letter, and any claims against Mr. Carver or the Director of Internal 6 Revenue Service are properly brought against the United States. See Lotus Mgmt. 7 LLC v. Shulman, 2013 WL 6157313, at * 4 (N.D. Cal. Nov. 22, 2013) (dismissing 8 IRS employees acting in official capacity and substituting in United States as 9 proper party defendant). 10 Similarly, the IRS and Department of the Treasury are not proper defendants. 11 “It is well established that federal agencies are not subject to suits Eo nomine 12 unless so authorized by Congress in explicit language.” City of Whittier v. United 13 States Dep’t of Justice, 598 F.2d 561, 562 (9th Cir. 1979) (internal quotation and 14 citation omitted). See also Castleberry v. Alcohol, Tobacco & Firearms Div. of 15 Treasury Dep’t, 530 F.2d 672, 673 n. 3 (5th Cir. 1976) (explaining that Congress 16 has not authorized suits against the Department of the Treasury or any of its 17 division or branches). 18 Accordingly, the Court dismisses this action as against the Department of 19 Treasury, the Internal Revenue Service, Director of Internal Revenue Service, and 20 “Layne Carter.” The Court substitutes in as the proper party defendant the United 21 States of America. 22 However, the United States must be properly served with the Summons and 23 Complaint. Plaintiff has attempted to serve Defendants, but it does not appear that 24 he has done so properly. 25 Fed. R. Civ. P. 4(i) governs the service of the United States and its agencies, 26 corporations, officers, or employees. Under Rule 4(i), the plaintiff must serve the 27 United States as follows: 28 3 15cv1495 BTM(WVG) 1 2 3 4 United States. To serve the United States, a party must: (A)(i) deliver 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 5 (ii) send a copy of each by registered or certified mail to the civil-process clerk at the United States attorney's office; 6 7 8 (B) send a copy of each by registered or certified mail to the Attorney General of the United States at Washington, D.C.; and 9 10 11 12 (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). 13 14 15 16 17 18 19 20 21 22 23 24 25 Plaintiff claims that he served the Summons and Complaint on the United States Attorney for the Southern District of California. However, Mary C. Wiggins, the Civil Process Clerk for the Civil Division of the Office of the United States Attorney for the Southern District of California, states that although the office had been served with a Summons and an order denying Plaintiff’s request for entry of default, the office had not been served with the Complaint in this matter. (Wiggins Decl. ¶ 4.) In January 2016, Plaintiff filed a proof of service, which indicates service of the Summons on “Mary Wiggins” on January 13, 2016. [Doc. 10.] But the proof of service does not mention service of the Complaint and does not specify who took receipt of the documents.1 The proofs of service on the Attorney General were signed by Plaintiff himself, who attempted to serve the Attorney General by certified mail. [Doc. 10 26 27 28 1 Apparently, in April 2016, Plaintiff mailed, through regular mail, a copy of five summonses and a partial copy of the Complaint to the United States Attorney’s Office for the Southern District of California. (Opp. at 4:1522.) This does not constitute proper service either. 4 15cv1495 BTM(WVG) 1 at 2-4.] Service must be effected by a person who is at least 18 years old and not 2 a party. Fed. R. Civ. P. 4(c)(2) (emphasis added). Furthermore, it appears that 3 Plaintiff sent his documents to the Attorney General for the District of Columbia 4 instead of the Attorney General for the United States. 5 Because service of process on Defendants was insufficient, the Court 6 quashes the service of process. If Plaintiff wishes to proceed with this case, 7 Plaintiff must serve the United States, the proper party defendant, as required by 8 Rule 4(i). Plaintiff has 30 days from the filing of this Order to properly serve the 9 United States with the Summons and Complaint and file the proof of service. 10 Failure to do so will result in the dismissal of this action. 11 12 B. Lack of Subject Matter Jurisdiction and Failure to State a Claim 13 The United States contends that the following claims should be dismissed 14 for lack of subject matter jurisdiction and failure to state a claim: (1) Plaintiff’s 15 refund claims for tax years 2008, 2009, 2010, and 2011; (2) Plaintiff’s claim for 16 injunctive relief; and (3) Plaintiff’s claim for monetary damages. The Court agrees. 17 The United States is immune from suit except when it consents to be sued. 18 United States v. Dalm, 494 U.S. 596, 608 (1990). A waiver of sovereign immunity 19 cannot be implied, but must be unequivocally expressed. Gilbert v. DaGrossa, 756 20 F.2d 1455, 1458 (9th Cir. 1985). The taxpayer bears the burden of showing an 21 unequivocal waiver of immunity. Baker v. United States, 817 F.2d 560, 562 (9th 22 Cir. 1987). 23 “A taxpayer seeking a refund of taxes erroneously or unlawfully assessed or 24 collected may bring an action against the Government either in United States 25 district court or in the United States Court of Federal Claims.” 26 1346(a)(1). However, before bringing such an action, a claim for refund or credit 27 must have been filed with the IRS in accordance with applicable statutes and 28 regulations. 26 U.S.C. § 7422(a). The administrative claim must be filed within 3 28 U.S.C. § 5 15cv1495 BTM(WVG) 1 years from the time the return was filed or 2 years from the time the tax was paid, 2 whichever of such period expires later. 26 U.S.C. § 6511(a). If a taxpayer fails to 3 file an administrative claim within the prescribed time, the district court is divested 4 of jurisdiction over an action for a refund or credit. Omohundro v. United States, 5 300 F.3d 1065, 1067 (9th Cir. 2002). 6 Although Plaintiff alleges that he sent correspondence to the IRS requesting 7 refunds for the tax years in question, he does not allege that he filed an 8 administrative claim according to IRS procedures. Therefore, the Court dismisses 9 Plaintiff’s refund claims for tax years 2008, 2009, 2010, and 2011. See Del Elmer 10 v. Metzger, 967 F. Supp. 398, 404 (S.D. Cal. 1997) (dismissing claim for refund 11 because, among other things, the plaintiff had not alleged that he had filed a proper 12 administrative claim for refund with the IRS). The Court does not reach the United 13 States’ arguments on the merits for dismissing these refund claims. 14 The United States does not seek to dismiss any refund claims for tax years 15 2002 and 2003 at this time.2 Therefore, the Court does not dismiss these claims. 16 Although Plaintiff’s Complaint states that Plaintiff is seeking a preliminary 17 injunction, the Complaint does not specify what actions Plaintiff seeks to enjoin. 18 To the extent that Plaintiff seeks to enjoin the IRS from assessing or collecting any 19 tax liabilities, such relief is barred by the Anti-Injunction Act, 26 U.S.C. § 7421. The 20 Anti-Injunction Act provides that, with limited statutory exceptions not applicable 21 here, “no suit for the purpose of restraining the assessment or collection of any tax 22 shall be maintained in any court by any person, whether or not such person is the 23 24 25 26 27 28 2 Plaintiff seeks refunds in the amount of $180 and $1,392 for withholding overpayment credits for tax years 2008 and 2010 respectively. However, it appears that the IRS applied the overpayments to tax liabilities for years 2002 and 2003. (Morris Decl. ¶¶ 6.a., 6.c.) Plaintiff, who asserts that there were no tax liabilities for 2002 and 2003, may seek a refund for tax years 2002 and 2003 for these amounts if Plaintiff has filed a timely administrative claim. 6 15cv1495 BTM(WVG) 1 person against whom such tax was assessed.” 26 U.S.C. § 7421(a). The Act’s 2 purpose is to permit the government to assess and collect taxes it determines to 3 be owed without judicial intervention. Enochs v. Williams Packing & Navigation 4 Co., 370 U.S. 1, 7 (1962). 5 In Enochs, the Supreme Court construed the Anti-Injunction Act as including 6 an equitable exception under which the plaintiff can file an action where the 7 taxpayer shows that “under no circumstances could the Government ultimately 8 prevail.” 370 U.S. at 7. Plaintiff has not made this showing. Therefore, his 9 preliminary injunction claim is dismissed. 10 Plaintiff seeks monetary damages in the amount of $250,000 for aggravation 11 and stress. It appears that Plaintiff is attempting to bring a civil action against the 12 United States under 26 U.S.C. § 7433. Section 7433(a) provides: 13 If, in connection with any collection of Federal tax with respect to a taxpayer, any officer or employee of the Internal Revenue Service recklessly or intentionally, or by reason of negligence, disregards any provision of this title, or any regulation promulgated under this title, such taxpayer may bring a civil action for damages against the United States in a district court of the United States. Except as provided in section 7432, such civil action shall be the exclusive remedy for recovering damages resulting from such actions. 14 15 16 17 18 19 (Emphasis added.) 20 A plaintiff suing under section 7433 must exhaust administrative remedies. 21 26 U.S.C. § 7433(d)(1); 26 C.F.R. § 301.7433-1. The Complaint does not allege 22 that Plaintiff has exhausted his administrative remedies. Therefore, the Court 23 dismisses Plaintiff’s claim for damages. See Gray v. United States, 723 F.3d 795 24 (7th Cir. 2013) (affirming district court’s dismissal of plaintiff’s suit under 26 U.S.C. 25 § 7433 because the plaintiff had not presented her claims to the IRS prior to filing 26 suit). 27 // 28 // 7 15cv1495 BTM(WVG) 1 III. CONCLUSION 2 For the reasons discussed above, the United States’ motion to dismiss [Doc. 3 11] is GRANTED. The Court quashes the service of process on Defendants. The 4 United States is substituted in as the proper party defendant, and this case is 5 dismissed as against the Department of Treasury, the Internal Revenue Service, 6 Director of Internal Revenue Service, and “Layne Carter.” If Plaintiff wishes to 7 proceed with this case, Plaintiff must serve the United States in conformity with 8 Rule 4(i). Plaintiff has 30 days from the filing of this Order to properly serve the 9 United States with the Summons and Complaint and file the proof of service. 10 Failure to do so will result in the dismissal of this action. 11 The Court also dismisses the following claims: (1) Plaintiff’s refund claims 12 for tax years 2008, 2009, 2010, and 2011; (2) Plaintiff’s claim for injunctive relief; 13 and (3) Plaintiff’s claim for monetary damages. Plaintiff’s refund claims for tax 14 years 2002 and 2003 remain pending. 15 16 If Plaintiff properly serves the United States with the Summons and Complaint, Plaintiff may seek leave from the Court to amend his Complaint. 17 After the United States’ motion to dismiss was submitted on the papers, 18 Plaintiff filed a motion for summary judgment. In light of Plaintiff’s failure to serve 19 the proper defendant, the dismissal of the majority of Plaintiff’s claims, and the 20 potential amendment of the Complaint, the Court DENIES without prejudice 21 Plaintiff’s motion for summary judgment [Doc. 18]. 22 IT IS SO ORDERED. 23 Dated: July 11, 2016 24 25 26 27 28 8 15cv1495 BTM(WVG)
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