Annotations- Effect of Honoring Levy Page2

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  26 U.S.C. §6332(e) (emphasis added). ²

In Moore v. General Motors Pension Plans, 91 F.3d 848 (7th Cir. 1996), the plaintiff contended that his bank improperly turned over $12,540 from his account to the IRS in compliance with a tax levy. In response to the plaintiff's claim against the bank, the court noted:

Furthermore, regardless of whether or not the levy served on [the bank] was valid, [the bank] and the other defendants are immune from liability [under 26 U.S.C. §6332(e)]. . . . There is no question in this case that [plaintiff's] bank account was 'property subject to levy,' that the IRS made a levy (whether valid or not) on that account, and that upon demand of the Secretary--acting through the IRS--[the Bank] surrendered [plaintiff's'] account. By its own terms, then, §6332(e) applies to defendants in this case; that statute is not limited to levies which survive challenges to their validity. . . . [T]he defendants in this suit are immune from liability to [plaintiff].

Id. at 851; see also Melton v. Teachers Ins. & Annuity Ass'n of Am. [97-2 USTC ¶50,492], 114 F.3d 557, 560 (5th Cir. 1997) ("Because [defendant] complied with the levy issued under §6331 and 6332, it is immune from liability to Melton for complying with the levy."); Biegeleisen v. Ross [98-1 USTC ¶50,123], No. 96-1157, 1997 WL 725462, at *3 (S.D.N.Y. Nov. 19, 1997) ("Therefore, [defendant], as an employee of the bank, had a duty to comply with the levy. [Defendant] is protected from liability for complying with this duty by 26 U.S.C. §6332(e). . . ."); Ramos [97-2 USTC ¶50,717], 1997 WL 720826, at *2 (same); Tinsley v. Commissioner of Internal Revenue Serv., 958 F. Supp. 277, 280 (N.D. Tex. 1997) ("[Defendant] correctly asserts that a person to whom a levy has been directed by the IRS is immune for complying with the levy."); Rosenheck & Co., Inc. v. United States, No. 97-28-B, 1997 WL 460259, at *3 (N.D. Okla. Apr. 9, 1997) ("Persons complying with an IRS levy are immune from liability to the delinquent taxpayer and any other person."); Busby v. Internal Revenue Serv., No. 96-6566, 1997 WL 364507, at *4. (S.D. Fla. Feb. 23, 1997) ("Once a third party receives a Notice of Levy, it is obliged to surrender the property to the IRS and, upon surrender, is effectively immune from liability."); Daniels v. Guthrie Clinic Ltd. [97-1 USTC ¶50,275], No. 96-0058, 1996 WL 806634, at *2 (M.D. Pa. Dec. 27, 1996) ("We find that Section 6332 discharges [defendants] from liability to Plaintiffs for the defendants' compliance with the Secretary's levy on the Christmas accounts and salary."); Jerkins v. Internal Revenue Serv., No. 96-260, 1996 WL 604491 (S.D. Ala. Aug. 6, 1996) ("[T]he statute expressly immunizes these defendants from liability for honoring a tax levy, even if the levy itself was defective or otherwise improper."), aff'd mem., 117 F.3d 1432 (11th Cir. 1997); Liebig v. Kelley-Allee, 923 F. Supp. 778, 781 (E.D.N.C. 1996) ("[Section] 6332 grants absolute immunity to the bank for its compliance with the I.R.S. levy."); Schulze v. Legg Mason Wood Walker, Inc., 865 F. Supp. 277 (W.D. Pa. 1994) ("Federal law immunizes Legg Mason for surrendering the levied property in which [plaintiff] had at least a 'modicum' of rights. 26 U.S.C. §6332(e)."); Allstate Fin. Corp. v. United States, 860 F. Supp. 653, 656 (D. Minn. 1994) ("A third party who honors a tax levy and surrenders the property levied upon has no liability arising from its compliance with the levy."). Given the clear statutory language of §6332(e) and the overwhelming authority interpreting that provision, it is clear that Monsanto, Overton and Ide are entitled to immunity from suit in relation to their honoring of the tax levy in this case. Therefore, their motion to dismiss will be granted. ³

B. Request for Injunctive Relief

Barnard also requests that this Court grant him injunctive relief to prevent defendants from collecting further taxes through the use of a levy upon his wages. It is well-settled, however, that federal courts cannot enjoin the collection of taxes. Under the Anti-Injunction Act, "no suit for the purpose or restraining the assessment or collection of any tax shall be maintained in any court by any person." 26 U.S.C. §7421. The Anti-Injunction Act is intended to protect "the Government's need to assess and collect taxes as expeditiously as possible with a minimum of preenforcement judicial interference, 'and to require that the legal right to the disputed sums be determined in a suit for refund.' " Bob Jones Univ. v. Simon [74-1 USTC ¶9438], 416 U.S. 725, 736 (1974) (quoting Enochs v. Williams Packing & Navigation Co. [62-2 USTC ¶9545], 370 U.S. 1, 7 (1962)). Although there are numerous statutory exceptions contained within the Anti-Injunction Act, none of those statutory exceptions applies in this case. ⁴ Courts considering similar taxpayer requests for injunctive relief have concluded that the statutory exceptions within the Anti-Injunction Act were inapplicable. See Jenkins v. Sanchez [97-1 USTC ¶50,454], No. 97-5122, 1997 WL 440933, at *4 (E.D. Cal. May 6, 1997); Wheeler v. O'Hanlon, No. 95-60, 1995 WL 809754, at *8 n. 10 (W.D. Pa. Oct. 31, 1995), aff'd mem., 96 F.3d 1437 (3d Cir. 1996); Dowis [96-2 USTC ¶50,679], 1996 WL 767562, at *2-3; Erickson v. Luke, 878 F. Supp. 1364, 1371 (D. Idaho 1995).

The Anti-Injunction Act also has a limited judicial exception which requires a dual showing: (1) that the government cannot succeed under any circumstances; and (2) there must be an independent basis for equitable jurisdiction. See Enochs v. Williams Packing & Navigation Co. [62-2 USTC ¶9545], 370 U.S. 1, 7 (1962); White v. United States Government Dep't of Treasury-Internal Revenue Serv. [97-2 USTC ¶50,631], 969 F. Supp. 321, 323 n.2 (E.D. Pa.), aff'd mem., 135 F.3d 768 (3d Cir. 1997). Courts which have considered similar claims to those asserted by Barnard have determined that the judicial exception to the Anti-Injunction Act was not satisfied. See Klimek v. Sigmund [97-1 USTC ¶50,281], No. 97-4725, 1997 WL 793600, at *2 (E.D. Pa. Dec. 3, 1997) ("Plaintiff has failed to demonstrate the presence of equity jurisdiction and that there is no chance the government will prevail on the merits."); Jenkins [97-1 USTC ¶50,454], 1997 WL 416347, at *4 (finding that plaintiff could not demonstrate irreparable injury); Ratzesberger, 1997 WL 440697, at *2 (same); Busby, 1997 WL 364507, at *2 (same); White [97-2 USTC ¶50,631], 969 F. Supp. at 323 n.2 (finding that plaintiff could not establish an independent basis for equitable relief because he had an adequate remedy at law in that he could pay the disputed tax and file for a refund); Larue v. Bigelow [97-2 USTC ¶50,818], No. 96-228, 1996 WL 895236, at *2 (D. Ariz. Nov. 15, 1996) (same); Erickson, 878 F. Supp. at 1372 (same); Worst v. Moran, No. 95-907, 1996 WL 196630, at *1 (M.D. Ala. Mar. 5, 1996) ("The narrow exception to the [Anti-Injunction] Act, which provides that a court may exercise equity jurisdiction when it is clear that the government cannot ultimately prevail under any circumstances, is not applicable here."); Short v. Richardson, No. 95-0317, 1995 WL 810023, at *2 (E.D. Wash. Nov. 21, 1995) (same).

Likewise in this case, Barnard has failed to establish that the government will ultimately fail in this matter. As noted earlier, Barnard concedes that the government provided him with notice prior to levying his wages. Thus, it does not appear that the defendants have acted improperly. More importantly, there has been no showing that Barnard lacks an adequate remedy at law or that he will suffer irreparable injury if injunctive relief is denied. In this regard, Barnard may institute a tax refund suit for any amount improperly received by the IRS. 26 U.S.C. §7422; Busby, 1997 WL 364507, at *2. Therefore, Barnard's requests for injunctive relief will be denied.

C. Request for Declaratory Relief

In his complaint, Barnard also requests "declaratory relief." (Complaint (Dkt. Entry 1) ¶39.) The Declaratory Judgment Act provides:

In a case of actual controversy within its jurisdiction, except with respect to Federal taxes . . . any court of the United States , upon the filing of an appropriate pleading, may declare the rights and other legal relations of any interested party seeking such declaration. . . .

28 U.S.C. §2201 (emphasis added). By its very language, the Declaratory Judgement Act prohibits declaratory actions concerning federal taxes. Therefore, this Court cannot entertain a declaratory judgment action relating to the validity of federal tax collection activities. See Alexander v. "Americans United" Inc. [74-1 USTC ¶9439], 416 U.S. 752, 759 n. 10 (1974) ("[I]t is in any event clear that the federal tax exception to the Declaratory Judgment Act is at least as broad as the prohibition of the Anti-Injunction Act."); Del Elmer; Zachay v. Metzger [97-2 USTC ¶50,660], 967 F. Supp. 398, 404 (S.D. Cal. 1997) ("the language of the Declaratory Judgment Act withdraws jurisdiction from federal courts with respect to federal taxes, whether or not the suit would have the effect of restraining the assessment or collection of federal taxes."); Wojcicki v. Internal Revenue Serv. [97-1 USTC ¶50,280], No. 96-328, 1997 WL 151420, at *1 (M.D. Pa. Jan. 29, 1997) ("The [Declaratory Judgement] Act divests this court of jurisdiction over matters pertaining to federal taxes."). Therefore, Barnard's request for declaratory relief will be denied.

D. Claims Against the United States

Although Barnard has named the IRS as a defendant, the proper defendant should have been the United States . See Jerkins, 1996 WL 604491, at *3 ("[T]he Internal Revenue Service is not an entity subject to suit."); see also Ramos [97-2 USTC ¶50,717], 1997 WL 720826, at *3 (examining claim against IRS as a claim against the United States ); Daniels [97-1 USTC ¶50,275], 1996 WL 806634, at *1 (same). Moreover, the claims asserted against Pavlish for actions relating to his official tax assessment and collection duties must be treated as a suit against the United States . Atkinson v. O'Neill, 867 F.2d 589, 590 (10th Cir. 1989); Dowis [97-2 USTC ¶50,679], 1996 WL 767562, at *1 ("A claim against IRS employees acting in their official capacities is treated as an action against the United States."); Jerkins, 1996 WL 604491, at *3 (same); Liebig, 923 F. Supp. at 781-82 (same); Short, 1995 WL 810023, at *2 ("Any civil actions against agents or officers of the United States with respect to actions taken in their official capacity is deemed to be against the United States itself."); Ostheimer v. Commissioner of Internal Revenue [95-2 USTC ¶50,554], No. 91-102, 1995 WL 723224, at *1 (D. Mont. Sept. 18, 1995) ("A suit against the Internal Revenue Service or its officers is essentially a suit against the United States.").

It is well established that the United States cannot be sued in tort for actions relating to the assessment and collection of taxes because it has not waived its sovereign immunity. See 28 U.S.C. §2680(c) (the Federal Tort Claims Act's waiver of sovereign immunity does not apply to "[a]ny claim arising in respect of the assessment or collection of any tax"); Perkins v. United States, 55 F.3d 910, 913 (4th Cir. 1995) (finding United States immune from suit for money damages for claims arising from the assessment or collection of taxes); Crisp v. United States [97-1 USTC ¶50,449], 966 F. Supp. 973, 975 (E.D. Cal. 1997) ("If [the plaintiff's] claim is characterized as a tax collection claim, the Court cannot hear the claim because of the government's sovereign immunity."); Hurt v. United States, 914 F. Supp. 1346, 1349-50 (S.D.W. Va. 1996) (same); Daniels [97-1 USTC ¶50,275], 1996 WL 806634, at *1 (same); Short, 1995 WL 810023, at *2 (same); White v. Commissioners of Internal Revenue, 899 F. Supp. 767, 774 (D. Mass. 1995) (same); Rosado v. Curtis, 885 F. Supp. 1538, 1542 (M.D. Fla. 1995) (same), aff'd mem., 84 F.3d 437 (11th Cir. 1996), cert. denied, 117 S. Ct. 689 (1997); Erickson, 878 F. Supp. at 1370 (same); Stamp, 1995 WL 661247, at *1 (same). Even if it were determined that the Federal Tort Claims Act would allow these claims, Barnard has failed to demonstrate that he has exhausted his administrative remedies as required under the Federal Tort Claims Act. See Porter v. Fox, 99 F.3d 271, 274 (8th Cir. 1996); Jenkins [97-1 USTC ¶50,454], 1997 WL 416347, at *3; Hurt, 914 F. Supp. at 1351; White, 899 F. Supp. at 772; Erickson, 878 F. Supp. at 1370; Ostheimer [95-2 USTC ¶50,554], 1995 WL 723224, at *1.

In the Internal Revenue Code, however, Congress has provided a remedy for the allegedly improper actions of IRS employees. See 26 U.S.C. §§7431 (unauthorized disclosure of returns or return information); 7432 (failure to release a lien); 7433 (unauthorized collection activities). As to the claims in this action, the only relevant provision is §7433 relating to unauthorized collection activities. Even under this provision, however, Barnard's claims cannot succeed.

First, §7433 applies to situations in which an IRS employee or agent "recklessly or intentionally disregards" certain established procedures or regulations. See Klenner v. United States, No. 95-70503, 1996 WL 537861, at *2 (E.D. Mich. Jan. 17, 1996) (finding that §7433 allows an action for civil damages where IRS employee or agent acts with reckless disregard of regulations); White, 899 F. Supp. at 772 ("[§7433] allows taxpayers to recover civil damages for certain unauthorized collection activities by the IRS, but only when IRS employees cause the damage through reckless or intentional disregard of the Internal Revenue Code or regulation during the collection of a federal tax."). Barnard has failed to allege in his complaint that Pavlish recklessly or intentionally disregarded any applicable Internal Revenue Code or regulation. ⁵ As such, Barnard has failed to state a claim under §7433. ⁶

Even if Barnard had asserted sufficient facts to support a §7433 claim, Barnard's claim would still fail because he has not demonstrated that he has exhausted his administrative remedies. See 26 U.S.C. §7433(d)(1) ("A judgment for damages shall not be awarded . . . unless the court determines that the plaintiff has exhausted the administrative remedies available to such plaintiff within the Internal Revenue Code."); Porter, 99 F.3d at 274; Jenkins [97-1 USTC ¶50,454], 1997 WL 416347, at *4 (finding that a precondition to a §7433 claim is the exhaustion of administrative remedies); Hurt, 914 F. Supp. at 1254 (finding that §7433 requires exhaustion of the administrative remedies provided in Code of Federal Regulations); Larue [97-2 USTC ¶50,818], 1996 WL 895236, at *2 (same); Klenner, 1996 WL 537861, at *2 (same); Voelz v. United States, No. 93-154, 1994 WL 780692, at * 3 (S.D. Miss. Dec. 19, 1994) (same). ⁷ Therefore, to the extent that Barnard attempts to assert claims against the United States , defendants' motion to dismiss will be granted. ⁸

E. Claims Against Defendant Pavlish

(1) Criminal Claims

In his complaint, Barnard has asserted that defendant Pavlish, an IRS employee, violated various criminal statutes, i.e., mail fraud, extortion, forgery, kidnaping and conspiracy. (Complaint (Dkt. Entry 1) ¶¶31-37.) Although 18 U.S.C. §1341 makes it a crime to commit a fraud through the use of the United States Postal Service, courts have determined that this penal statute does not provide an injured citizen with a private cause of action for mail fraud. See Ryan v. Ohio Edison Co., 611 F.2d 1170, 1177-79 (6th Cir. 1979); Oppenheim v. Sterling, 368 F.2d 516, 518-519 (10th Cir. 1966), cert. denied, 386 U.S. 1011 (1967); Gellert v. Richardson, No. 95-256, 1995 WL 856715, at *2 (M.D. Fla. July 24, 1995); Ferch v. Butterworth, No. 94-2580, 1994 WL 419602, at *2 (N.D. Ill. Aug. 9, 1994); Barrett v. City of Allentown, 152 F.R.D. 50, 55-56 (E.D. Pa. 1993); Pappas v. Arfaras, No. B-90-326, 1991 WL 218072, at *2 (D. Conn. Aug. 28, 1991); Delta Educ., Inc. v. Langlois, 719 F. Supp. 42, 50 (D.N.H. 1989). Although Barnard also claims violations of 18 U.S.C. §§241 and 242, at least one court has determined that those sections do not provide a private cause of action. See Del Elmer; Zachay [97-2 USTC ¶50,660], 967 F. Supp. at 403. Furthermore, criminal statutes are not normally construed to create private causes of action. Id. ("Civil causes of action, however, do not generally lie under the criminal statutes contained in Title 18 of the United States Code."). Furthermore, the criminal statutes relied upon by Barnard do not explicitly provide for such causes of action. See 18 U.S.C. 495 (forgery); 18 U.S.C. §1201 (kidnaping). In short, Barnard cannot maintain any private cause of action under the criminal statutes that he claims were violated. Therefore, any claims asserted under the various criminal statutes referenced in Barnard's complaint will be dismissed.

(2) Bivens Claim ⁹

Under limited circumstances, federal officials may be held liable for the violation of a person's constitutional rights while acting in an official capacity. Bivens v. Six Unknown Named Agents of the Federal Bureau of Narcotics, 403 U.S. 388, 397 (1971); see also Jaffee v. United States , 663 F.2d 1226, 1230 (3d Cir. 1981), cert. denied, 456 U.S. 972 (1982). ¹⁰ Courts have declined to extend Bivens claims to situations involving the assessment and collection of taxes. See Porter, 99 F.3d at 274; Decker v. Richardson, 920 F. Supp. 141, 144 (D. Or. 1996) ("actions taken in conjunction with federal tax collection will not support a Bivens claim"); Rosado, 885 F. Supp. at 1543 ("[T]o the extent that plaintiffs bring this action against the IRS employees for their tax assessment and collection activities, the court declines to create a Bivens remedy."); Short, 1995 WL 810023, at *4 (same).

Further, a Bivens action will not be recognized if Congress has indicated its intent, either explicitly or implicitly, that a statutory remedy should be the exclusive form of relief. See Bush v. Lucas, 462 U.S. 367, 378 (1983). Where Congress has created a statutory remedy, a plaintiff must seek administrative relief first, and then pursue review of the administrative decision in federal court. Id. at 388. Because Congress has provided explicit statutory remedies for improper conduct during the assessment and collection of income taxes, a Bivens claim cannot be maintained against IRS employees and agents. See Wages v. Internal Revenue Serv., 915 F.2d 1230, 1235 (9th Cir. 1990), cert. denied, 498 U.S. 1096 (1991); Baddour, Inc. v. United States [86-2 USTC ¶9748], 802 F.2d 801, 807-08 (5th Cir. 1986); Cameron v. Internal Revenue Serv. [85-2 USTC ¶9661], 773 F.2d 126, 129 (7th Cir. 1985); Stephenson v. United States, 961 F. Supp. 221, 224 (W.D. Ark. 1996) ("The Court finds the remedies available under sections 7432 and 7433 of the Internal Revenue Code indicate that Congress considered them adequate to remedy potential constitutional violations."); Ostheimer [95-2 USTC ¶50,554], 1995 WL 723224, at *1 ("Agency employees may not be sued in their individual capacities in a Bivens type action."). As one circuit court recently noted:

Congress has provided specific and meaningful remedies for taxpayers who challenge overzealous tax assessment and collection activities. A taxpayer may challenge a jeopardy assessment both administratively and judicially . . . and may sue the government for a tax refund. Since November 10, 1988, 26 U.S.C. §7432 and 7433 have authorized taxpayer actions against the United States to recover limited damages resulting from specific types of misconduct by IRS employees. These carefully crafted legislative remedies confirm that, in the politically sensitive realm of taxation, Congress's refusal to permit unrestricted damage actions by taxpayers has not been inadvertent. Thus, the district court correctly dismissed [plaintiff's] Bivens claims against IRS agents for their tax assessment and collection activities.

Vennes v. An Unknown Number of Unidentified Agents, 26 F.3d 1448, 1454 (8th Cir. 1994) (citations omitted), cert. denied, 513 U.S. 1076 (1995); see also Voelz, 1994 WL 780692, at *2 (outlining the various administrative remedies that must be exhausted before a claim may be asserted in federal court under §§7432 and 7433); cf. Morales v. Haynes [90-2 USTC ¶50,494], 890 F.2d 708, 710 (5th Cir. 1989) (finding no Bivens action against individual IRS agent for wrongful levy because plaintiff could not identify any constitutional violation); Yalkut v. Gemignani, 873 F.2d 31, 35-36 (2d Cir. 1989) (finding no Bivens claim against individual agents because agents entitled to qualified immunity). In short, Barnard has failed to allege a ground upon which an individual claim could be maintained against Pavlish for his alleged misconduct in the assessment and collection of Barnard's past due taxes. For these reasons, the defendants' motion to dismiss will be granted. ¹¹

III. CONCLUSION

Because 26 U.S.C. §6332(e) provides immunity for any third party who complies with an IRS levy, regardless of whether the levy was valid, Barnard cannot assert a claim against Monsanto, Overton and Ide based upon their compliance with the IRS levy. Therefore, the motion to dismiss filed by Monsanto, Overton and Ide will be granted.

Because Barnard has failed to demonstrate that any recognized exception to the Anti-Injunction Act applies in this case, his request for injunctive relief will be denied. Moreover, Barnard's request for declaratory relief will also be denied as the Declaratory Judgment Act withholds jurisdiction over matters pertaining to federal taxation.

In terms of the claims against Pavlish for actions taken in his official capacity as well as claims against the IRS, these claims are properly asserted against the United States . Any claims that Barnard may have against the United States are severely limited by the doctrine of sovereign immunity. The Federal Tort Claims Act explicitly provides that the United States retains its immunity in relation to tort claims based upon tax assessment and collection activities. To the extent that Congress has waived sovereign immunity under 26 U.S.C. §§7422 and 7433, Barnard has failed to demonstrate that he has exhausted his administrative remedies. To the extent that Barnard attempts to assert a civil action based upon Pavlish's alleged violations of various criminal statutes under Title 18 of the United States Code, Barnard has failed to demonstrate that these criminal statutes create a private cause of action for a civil litigant. To the extent that Barnard attempts to assert a Bivens type claim against Pavlish for his tax assessment and collection activities, such a claim must also fail as Congress has explicitly provided a remedial framework for such claims and Barnard has failed to exhaust those administrative remedies. Therefore, the motion to dismiss filed by the IRS and Pavlish will be granted. Barnard's potential claims against the United States under 26 U.S.C. §§7422 and 7433, however, will be dismissed, without prejudice.

ORDER

NOW, therefore, in accordance with the attached Memorandum, it is hereby ORDERED THAT:

1) The motion to dismiss filed by defendants Monsanto Inc., William Ide and Richard Overton (Dkt. Entry 6) is GRANTED.

2) The motion to dismiss filed by defendants Peter J. Pavlish and the Internal Revenue Service (Dkt. Entry 16) is GRANTED as to plaintiff's claims against the Peter J. Pavlish.

3) To the extent that the United States can be considered a party to this action, defendants' motion to dismiss for lack of jurisdiction (Dkt. Entry 16) is GRANTED. Plaintiffs potential claims for unlawful assessment and collection of taxes under 26 U.S.C. §7433 and for a tax refund under 26 U.S.C. §7422 are DISMISSED, WITHOUT PREJUDICE, as plaintiff has failed to demonstrate that he has exhausted his administrative remedies.

4) Plaintiff's motion to strike defendants' motion to dismiss (Dkt. Entry 10) is DENIED.

5) Plaintiff's motion to correct clerical mistake and to vacate Order for extension of time (Dkt. Entry 13) is DENIED.

6) The Clerk of Court is directed to mark this case as CLOSED.

¹ Barnard also contends that Pavlish forged Barnard's signature on a W-4 and mailed it to Monsanto. ( Id. ¶14.)

² To this extent, the Internal Revenue Code provides that individuals who fail to honor a tax levy are subject to liability to the IRS for the value of the property that was withheld from the IRS, but such liability cannot exceed the amount of the taxes owed under the levy. 26 U.S.C. §6332(d)(1). In addition to being liable for the value of the property withheld, an individual is also subject to a penalty equal to the greater of 50% of the value of the property or 50% of the amount of the tax owed under the levy. Id. §6332(d)(2). Furthermore, the potential defenses available to an employer faced with a levy against an employees earned wages is limited. In this regard, there are only two potential defenses to a levy: (1) the employer is not in possession of any property of the employee in that the employee has no earned wages; or (2) the earned wages are already subject to a prior. judicial restraint. See Moore v. General Motors Pension Plans, 91 F.3d 848, 851 (7th Cir. 1996). Barnard does not allege that Monsanto, Overton or Ide had any of these defenses available to justify a refusal of the IRS levy. Furthermore, Monsanto, Overton and Ide all faced potential liability and penalties for their refusal to honor the tax levy.

³ Barnard has made allegations that Monsanto, Overton and Ide conspired with the IRS and its agents to deprive him of his property. The complaint, however, lacks any factual allegations to support such a claim. It is clear that Monsanto received an IRS tax levy and that it was required to comply with the levy unless it wished to face liability and penalties. In short, Monsanto and its employees acted in accordance with the Internal Revenue Code in their compliance with the tax levy. Such action does not amount to a conspiracy.

⁴ Barnard apparently contends that there was a procedural deficiency in the tax levy in that it was not signed and there was no underlying tax lien to support the levy. (Complaint (Dkt. Entry 1) ¶¶10 & 13.) The closest applicable exception would be 26 U.S.C. §7426(a), which applies to circumstances involving a wrongful levy. This section applies, however, to third persons other than the taxpayer. See McGinness v. United States [96-2 USTC ¶50,434], 90 F.3d 143, 145 (6th Cir. 1996) ("First, the person asserting the wrongful levy claim must not be one against whom the tax is assessed."); Dowis v. Internal Revenue Serv. [96-2 USTC ¶50,679], No. 96-82,1996 WL 767562, at *3 (N.D. Ga. Oct. 8, 1996), aff'd mem., 119 F.3d 12 (11th Cir. 1997); Stamp v. Agents for Int'l Monetary Fund Internal Revenue Serv., No. 95-151, 1995 WL 661247, at *1 (D. Nev. Sept. 1, 1995). Because Barnard is the taxpayer in this action, he cannot rely upon §7426.

Moreover, a taxpayer can also seek review of an assessment determination under 26 U.S.C. §7429(b) and obtain injunctive relief under that section. In order to obtain such judicial review, however, a taxpayer must first request the Secretary of the IRS to review the assessment, whereupon the IRS re-examines the assessment to determine whether it is reasonable. 26 U.S.C. §7429(a)(3). Only after such a request for review is made to the IRS may a taxpayer assert a claim under §7429. Barnard does not contend that he seeks review under §7429. Moreover, he has not alleged that he has followed the procedural review set forth in §7429. Therefore, he cannot rely upon §7429 as a basis to avoid the Anti-Injunction Act. See Ratzesberger v. Bryan , No. 97-77, 1997 WL 440697, at *2 (E.D. Wash. Apr. 16, 1997).

⁵ In his complaint, Barnard claims that Pavlish improperly mailed a W-4 to Monsanto upon which Pavlish allegedly forged Barnard's signature. (Complaint (Dkt. Entry 1) ¶17.) Even assuming that Pavlish improperly forged Barnard's signature upon a W-4, such action, although criminal, does not appear to violate any Internal Revenue Code provisions. In particular, this alleged forged W-4 was not even needed for the collection efforts; rather, the IRS had already issued a levy upon Barnard's wages. In this regard, Barnard's complaint relates to the seizure of his wages which resulted from the IRS levy, not any alleged action by Pavlish with respect to a W-4 forged in Barnard's name. Because Barnard has failed to alleged that Pavlish intentionally or recklessly violated any Internal Revenue Code provision or regulation, he cannot maintain a claim under §7433.

⁶ Further, §7433 only allows suit against the United States , not against the individual agent or employee. See Larue [97-2 USTC ¶50,818], 1996 WL 895236, at *1; Klenner, 1996 WL 537861, at *2; Hurt, 914 F. Supp. at 1351. Even assuming that Barnard has attempted to assert a §7433 claim, he has improperly named Pavlish, an employee of the Internal Revenue Code, as a defendant, instead of the United States .

⁷ Under 26 C.F.R. §301.7433-1(e)(1) (1997), an administrative claim must be filed with the district director of the district in which the taxpayer resides. Id. Further, any such claim must outline the grounds for the claim, the taxpayer's injuries and the dollar amount of the claim. Id. §301.7433-1(e)(2)(ii)-(iv). Barnard has failed to demonstrate that he filed any such claims with the district director.

⁸ The defendants' motion to dismiss will be granted without prejudice because Barnard may have potential claims which are procedurally barred at this time as a result of Barnard's failure to exhaust his administrative remedies. If Barnard were to assert his claims in the proper administrative channels, he may potentially have a claim against the United States under §7433. Until such exhaustion occurs, however, any factual determination on this issue would be premature.

Likewise, any claim for a tax refund under 26 U.S.C. §7422 would also be barred at this time. A taxpayer must pay the disputed tax in full before instituting an action in federal court for a refund. See Koss v. United States [95-2 USTC ¶50,599], 69 F.3d 705, 708 (3d Cir. 1995), cert. denied, 117 S. Ct. 54 (1996). Likewise, §7422 also requires that a taxpayer exhaust all administrative remedies prior to commencing a tax refund action in district court. See Wojcicki [97-1 USTC ¶50,280], 1997 WL 151420, at *2 ("We also note that 26 U.S.C. §7422 requires exhaustion of administrative remedies before a suit can be maintained in federal district court for the recovery of any tax erroneously assessed or collected."). Barnard has failed to allege that he has either paid the disputed tax in full or that he has exhausted his administrative remedies. As with Barnard's potential §7433 claim, however, his potential §7422 claim will be dismissed, without prejudice, subject to exhaustion of his administrative remedies.

⁹ Although Barnard claims that he is asserting a claim under 42 U.S.C. §1983, he has failed to name any state actors as defendants. Because Pavlish is a federal employee, Barnard's §1983 claim will be considered as a Bivens claim.

¹⁰ As noted earlier, actions taken by an IRS employee which relate to the assessment or collection of taxes are considered to be acts taken within that employee's official capacity as a government employee.

¹¹ Defendants' motion to dismiss will be granted because Barnard cannot assert a Bivens claim against Pavlish for his conduct in relation to tax assessment and collection activities. Rather, Congress has made clear that the proper party in interest for allegedly improper conduct in connection with the assessment and collection of taxes is the United States , not the individual employee.

 

[99-1 USTC ¶50,537] John Warrington Barnard, Appellant v. Peter J. Pavlish, Richard Overton, William Ide, Monsanto Inc., Internal Revenue Service

(CA-3), U.S. Court of Appeals, 3rd Circuit, 98-7262, 4/22/99, 187 F3d 625, Affirming a District Court decision, 98-1 USTC ¶50,366

[Code Sec. 6332 ]

Levy and distraint: Surrender of property: Effect of honoring levy.--An employer was shielded by law from liability for complying with an IRS notice of levy against an employee's wages. The employer's failure to honor the levy would have exposed it to liability for the subject taxes and substantial penalties unless the levied-upon property was already judicially attached or did not belong to the taxpayer. No evidence was offered to suggest that either defense was available to the employer. The employer's compliance with the levy was insufficient to support the taxpayer's allegation that it had conspired with the IRS to deprive him of wages.
[Code Secs. 7402 , 7421 and 7433 ]

Jurisdiction: Declaratory judgment: Injunction: Assessment and collection of taxes: Sovereign immunity: Bivens claims.--A taxpayer's claims for injunctive and declaratory relief against the IRS and its agents in connection with a levy on his wages were properly dismissed for lack of jurisdiction. Since the taxpayer was attempting to prevent the collection of taxes, declaratory relief was unavailable. Also, absent evidence showing that the government would not ultimately prevail in its defense and that equity jurisdiction would otherwise exist, the taxpayer was not entitled to injunctive relief. Moreover, the IRS and its agents were not subject to Bivens actions for money damages since the taxpayer had adequate legal remedies available to him; he could have instituted a refund suit or sued to recover damages for the IRS employees' reckless or intentional disregard of the law. Further, the IRS and its agents were immune from liability to the taxpayer because the doctrine of sovereign immunity had not been waived.

Before: SLOVITER, ROTH and ROSENN, Circuit Judges.

è Caution: This court has designated this opinion as NOT FOR PUBLICATION. Consult the Rules of the Court before citing this case.ç

OPINION

Per Curiam"

EC: John Warrington Barnard appeals from the District Court's dismissal of his complaint against the Internal Revenue Service ("IRS"), one of its employees, his employer, Monsanto Company, and two of its employees. We will affirm.

I. Background

In December 1996, Barnard received from the IRS a Notice of Levy of Wages, Salary and Other Income directing his employer Monsanto to pay a certain percentage of his wages to the IRS to satisfy a federal income tax liability in excess of $30,000. Monsanto also received a copy of the Notice of Levy, as well as a Form W-4, signed by IRS employee Peter Pavlish, directing Monsanto to disregard Barnard's prior instructions concerning the amount of taxes to be withheld from his paycheck. Barnard informed Monsanto that he was exempt from the withholdings and requested that Monsanto disregard the IRS's directions. Despite Barnard's request, Monsanto complied with the IRS's directions beginning January 1, 1997.

On February 14, 1997, Barnard filed in the District Court a complaint against the IRS and its employee Peter Pavlish; and against Monsanto, the director of its tax department Richard Overton, and its general counsel William Ide ("Monsanto defendants"). Barnard alleged that the levy against his wages was invalid because it was imposed without a judicial order. Barnard brought his complaint against all of the defendants under 42 U.S.C. §1983, 42 U.S.C. §1985, and the Fourth Amendment. He additionally alleged that under various federal criminal statutes, the IRS and Pavlish were guilty of fraud and extortion and that Pavlish was guilty of forgery. He also alleged that the Monsanto defendants had violated 26 U.S.C. §§3401(e) and 3402(a), (c), and (f)(2) and (3) by altering his withholding status without authority. Barnard requested declaratory and injunctive relief, as well as compensatory damages, exemplary damages, and punitive damages.

The Monsanto defendants filed a motion to dismiss Barnard's claims against them under Fed. R. Civ. P. 12(b)(6). The IRS and Pavish filed a motion to dismiss all claims against them for lack of subject matter jurisdiction under Fed. R. Civ. P. 12(b)(1) and for failure to state a claim under Fed. R. Civ. P. 12(b)(6). By order entered March 31, 1998, the District Court dismissed all claims against the Monsanto defendants and Pavlish. The District Court also dismissed all claims against the IRS for lack of jurisdiction, but dismissed without prejudice Barnard's potential claims of unlawful assessment and collection of taxes under 26 U.S.C. §7433 and for a tax refund under 26 U.S.C. §7422 because Barnard had not exhausted administrative remedies as to these potential claims.

II. Standard of Review

Before we discuss the merits of Barnard's claims, we first address Barnard's contention on appeal that the District Court "abused its discretion" in dismissing his complaint. Barnard argues in his brief on appeal that the lower court's dismissal denied him due process of law and access to the courts. Specifically, Barnard asserts that dismissal was erroneous because: (1) he was not afforded a hearing; (2) the defendants were not required to file an answer; and (3) he was not allowed discovery.

That Rule 12(b)(6) is an appropriate tool for dismissing complaints which fail to state a claim upon which relief can be granted is beyond question. See Conley v. Gibson, 355 U.S. 41 (1957). The purpose of Rule 12(b)(6) is to "streamline[] litigation by dispensing with needless discovery and factfinding." Neitzke v. Williams, 490 U.S. 319, 326-27 (1989). To fulfill this purpose, a claim must be dismissed under Rule 12(b)(6) "if as a matter of law it is clear that no relief could be granted under any set of facts that could be proved consistent with the allegations." Id. at 327. Likewise, Rule 12(b)(1) requires dismissal of claims over which the District Court lacks jurisdiction. Moravian School Advisory Bd. of St. Thomas , V.I. v. Rawlins, 70 F.3d 270, 276 (3d Cir. 1995).

Accordingly, we exercise plenary review over the District Court's dismissal of Barnard's claims under Rule 12(b)(6). Alexander v. Whitman, 114 F.3d 1392, 1397 (3d Cir.), cert. denied, 118 S. Ct. 367 (1997). In so doing, we assume the truth of the factual allegations of his complaint and will affirm "only if it is clear that no relief could be granted under any set of facts that could be proven consistent with the allegations." Id. at 1398. We also exercise plenary review over the District Court's dismissal of Barnard's claims against the IRS for lack of subject matter jurisdiction under Rule 12(b)(1). See Growth Horizons, Inc. v. Delaware County , Pa. , 983 F.2d 1277, 1280 (3d Cir. 1993).

III. Claims Against the Monsanto Defendants

The District Court committed no error in dismissing all claims against the Monsanto defendants. In essence, Barnard alleges that the Monsanto defendants are liable because they complied with the IRS levy and directives. This claim cannot provide Barnard a basis for relief because the Monsanto defendants are shielded from liability under 26 U.S.C. §6332(e):

Any person in possession of (or obligated with respect to) property or rights to property subject to levy upon which a levy has been made who, upon demand by the Secretary, surrenders such property or rights to property (or discharges such obligation) to the Secretary . . . shall be discharged from any obligation or liability to the delinquent taxpayer and any other person with respect to such property or rights to property arising from such surrender or payment.

26 U.S.C. §6332(e). Thus, a "third party who honors [an IRS] levy and surrenders the property has no liability to the delinquent taxpayer." Congress Talcott Corp. v. Gruber, 993 F.3d 315, 318 (3d Cir. 1993); see also Kane v. Capital Guardian Trust Co. [98-2 USTC ¶50,491], 145 F.3d 1218, 1224 (10th Cir. 1998) (section 6332(e) provides a "complete defense" to taxpayer's claims against trust company for complying with IRS levy); Melton v. Teachers Ins. & Annuity Ass'n of America [97-2 USTC ¶50,492], 114 F.3d 557, 561 (5th Cir. 1997) (party complying with IRS levy "is immune from liability" to delinquent taxpayer under §6332(e)); Moore v. General Motors Pension Plans, 91 F.3d 848, 850 (7th Cir. 1996) (section 6332(e) "immunizes from liability any party who--in response to a levy--turns over to the IRS funds or property belonging to a delinquent taxpayer").

Indeed, the Monsanto defendants were required by law to comply with the IRS's levy, failure to do so would expose them to liability to the United States for the amount of taxes subject to the levy plus substantial penalties if their noncompliance was unreasonable. See 26 U.S.C. §6332(d); Congress Talcott Corp., 993 F.2d at 318. The only defenses available to a third party for failing to comply with an IRS levy are: (1) that the property is already subject to judicial attachment or execution; or (2) that the levied property does not belong to the delinquent taxpayer. Id. at 319 (quoting United States v. National Bank of Commerce [85-2 USTC ¶9482], 472 U.S. 713, 721-22 (1985)). The third party, however, may assert these defenses to claims brought by the United States against it for failing to comply with a levy, not to claims brought by the delinquent taxpayer against the third party for complying with a levy. See Congress Talcott Corp., 993 F.2d at 318. Here, nothing in the record suggests that either of these defenses would have been available to the Monsanto defendants had they refused to comply with the levy. Accordingly, they are shielded from liability to Barnard for complying with the levy in an effort to avoid liability to the United States .

Even if the Monsanto defendants were not shielded from liability, Barnard's claim against them' could not succeed. Barnard alleges that the Monsanto defendants should not have com plied with the levy because it was unaccompanied by a court order and thus invalid. We disagree. An IRS levy is an administrative remedy which takes effect upon service of the notice of the levy "prior to any adjudication." Resolution Trust Corp. v. Gill [92-1 USTC ¶50,199], 960 F.2d 336, 340 (3d Cir. 1992). See Kane [98-2 USTC ¶50,491], 145 F.3d at 1218 ("the IRS effectuates a levy . . . by the sole act of serving notice of levy upon the third party holding the property"). Plainly, a court order is not required. Moreover, even if the levy were invalid, the Monsanto defendants had no duty to defend Barnard or to expose themselves to liability to the United States . See Moore, 91 F.3d at 850-51 (finding third parties immune from liability regardless of the validity of the levy).

Additionally, Barnard alleges that the Monsanto defendants conspired with the IRS to deprive him of his wages and are liable under 42 U.S.C. §1985. His complaint, however, lacks any factual allegations suggesting a conspiracy. The Monsanto defendants' compliance with the IRS's levy, without more, cannot support Barnard's allegation of a conspiracy.

For these reasons, we affirm the District Court's dismissal of all claims against the Monsanto defendants.

IV. Claims Against the IRS and Pavlish

The District Court did not err in dismissing all claims against the IRS and Pavlish. First, Barnard's request for an injunction to prevent the IRS from levying his wages was properly dismissed because federal courts lack jurisdiction to enjoin the assessment or collection of taxes. See 26 U.S.C. §7421; Bob Jones Univ. v. Simon [74-1 USTC ¶9438], 416 U.S. 725, 736 (1974); Enochs v. Williams Packing & Navigation Co. [62-2 USTC ¶9545], 370 U.S. 1, 7 (1962). Injunctive relief may be available, however, if the taxpayer can show that (1) it is clear that under no circumstances could the United States ultimately prevail in its defense of the challenged action, and (2) equity jurisdiction would otherwise exist. Enochs [62-2 USTC ¶9545], 370 U.S. at 7. Here, Barnard has not alleged any facts which would bring him within this exception. We note that equity jurisdiction would not otherwise exist because Barnard has as available remedies an action for a refund under 26 U.S.C. §7422 and an action to recover damages caused by the reckless or intentional disregard of the law by IRS employees under 26 U.S.C. §7433. Because Barnard has not satisfied either prong of the Enochs' exception, injunctive relief is unavailable.

Similarly, Barnard's request for declaratory relief was properly dismissed because federal courts lack jurisdiction to entertain such requests relating to the validity of federal tax collection activities. 28 U.S.C. §2201(a); Porter v. Fox, 99 F.3d 271, 274 (8th Cir. 1996); Wyoming Trucking Ass'n v. Bentsen, 82 F.3d 930, 932-33 (10th Cir. 1996); Hughes v. United States [92-1 USTC ¶50,086], 953 F.2d 531, 537 (9th Cir. 1992). If, however, the taxpayer "refrains from contesting the merits of the underlying tax assessment," the district court may entertain requests for declaratory relief. Aqua Bar & Lounge v. United States Dep't of Treasury Internal Revenue Serv. [76-2 USTC ¶9554], 539 F.2d 935, 940 (3d Cir. 1976); see also Progressive Consumers Fed. Credit Union [96-1 USTC ¶50,160], 79 F.3d 1228, 1234 (1st Cir. 1996); Hughes [92-1 USTC ¶50,086], 953 F.2d at 537 n.3. Although Barnard has framed his claims in terms of due process, his complaint is plainly an attempt to stop the IRS from collecting taxes through a levy against his wages. Accordingly, declaratory relief is unavailable. See Fostvedt v. United States, 978 F.2d 1201, 1203 (10th Cir. 1992); Hughes, 953 F.2d at 537 n.3.

The District Court also committed no error in dismissing Barnard's claims against the IRS and Pavlish for money damages. As an agency of the United States , the IRS is shielded from private actions unless sovereign immunity has been waived. Beneficial Consumer Discount Co. v. Poltonowicz, 47 F.3d 91, 94 (3d Cir. 1995). Pavlish, as an agent of the IRS acting in his official capacity, also enjoys sovereign immunity unless waived. See Weaver v. United States , 98 F.3d 518, 520 (10th Cir. 1996). Waivers of sovereign immunity must be "unequivocally expressed" in a statute and "strictly construed in favor of the United States ." Id. To the extent Barnard's claims of fraud, extortion, and forgery could arise under the Federal Torts Claims Act, although he has not articulated them as such, sovereign immunity has not been waived, but has been expressly retained, for claims "arising in respect of the assessment or collection of any tax." 28 U.S.C. §2680(c). See Perkins v. United States , 55 F.3d 910, 913 (4th Cir. 1995). The IRS and Pavlish are thus immune from liability as to these claims. To the extent Barnard relies on federal criminal statutes for these claims, there is no private right of action under those statutes.

Finally, Barnard's reliance on 42 U.S.C. §1983 is unavailing. Section 1983 authorizes an action for money damages against state actors, not federal actors, and Barnard named no state actors in his complaint. Even construing Barnard's claims under Bivens v. Six Unknown Named Agents of Fede