Annotations- Effect of Honoring Levy Page5

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 ORDER AND JUDGMENT ^*

SEYMOUR, Chief Judge:

This action was brought in state court by Bonneville Distributing, Inc. against Green River Development Associates, Inc. for breach of contract, conversion, breach of fiduciary duty, and fraud arising out of a joint venture agreement for the operation of Westwind Truck Stop in Green River , Utah . The joint venture was originally between Triangle Oil, Inc. and Green River , but Triangle's interest was assigned in 1990 to Bonneville. At the time of the assignment, Triangle's property was subject to tax liens filed by the United States against Triangle. Given these tax liens and a subsequent tax levy filed by the United States against the joint venture, Green River filed a counterclaim in this action naming the United States as an additional defendant and seeking declaratory relief with respect to whether Bonneville or the United States was entitled to receive payments from the joint venture. The district court granted summary judgment in favor of the United States against Triangle and Bonneville and in favor of Green River against Bonneville. Bonneville appeals only the judgment in favor of Green River . We affirm in part and reverse in part.

I

In 1987, the IRS filed a tax lien against Triangle for unpaid excise taxes in the amount of $1,166,206.13. It subsequently assessed this income tax liability against Triangle along with penalty and interest. Doug Allred owned 90 percent of Triangle's stock and his two children owned the remainder. Triangle owned all of the stock in Bonneville. In 1988 while Triangle was in financial difficulty, Allred transferred all of the Bonneville stock from Triangle to his children. On January 1, 1990, Triangle transferred its interest in the joint venture to Bonneville with Green River 's consent. At that time, Doug Allred was the president of Triangle and the general manager of Bonneville, and he was aware of the IRS tax lien filed against Triangle.

In August 1993, the IRS sent notices of tax levy to Green River 's attorney and to the joint venture's attorney. The notices listed Triangle as the taxpayer then owing the total amount $2,746,028.08, and stated: "This levy requires you to turn over to us this person's property and rights to property (such as money, credits, and bank deposits) that you have or which you are already obligated to pay this person." App. at 223, 226. In 1994, Green River asked the IRS whether it considered Bonneville's interest in the joint venture, acquired from Triangle with knowledge of the recorded tax lien, as subject to the liens and levy against Triangle's property. Receiving no response, Green River inquired again in June 1995. In the 1995 letter to the IRS, counsel for Green River stated, "Frankly, at this point our client does not much care which position the Internal Revenue Service takes, just so they take one." Id. at 448.

In response, the IRS informed Green River of its position that the 1993 levy applied to Bonneville's interest in the joint venture. In August 1995, the IRS reiterated its position and informed Green River that if the joint venture were to be dissolved, payment for Bonneville's interest should be made to the IRS. In December 1995, the IRS issued another notice of levy listing Triangle as the taxpayer and the amount due as $3,774,075.27.

In late December 1995, Green River , as the managing partner of the joint venture, adopted a dissolution plan. The plan valued Bonneville's interest in the joint venture at $220,000 and stated it would tender to the IRS the funds to be distributed to Bonneville under the plan. The IRS reviewed the plan and agreed to accept the money in full satisfaction of the levies served on Green River . In April 1996, Green River paid the IRS $92,079.02 as a portion of Bonneville's share, and began making monthly payments of $2,500 to the IRS.

Bonneville filed this action in state court against Green River claiming that it had breached the joint venture contract and had defrauded Bonneville of the full value of its interest. Green River interpleaded the United States and asked the court to declare the value of Triangle's interest in the joint venture and to quiet title to that interest in either Bonneville or the United States . The government removed the case to federal court and subsequently filed a separate complaint against Triangle, Bonneville and Green River asking the court to reduce to judgment its assessment against Triangle, to declare that Bonneville acquired Triangle's interest in the joint venture subject to the tax liens, and to foreclose the liens. It also sought to set aside as fraudulent the transfer of the joint venture interest from Triangle to Bonneville.

The government and Green River both filed motions for summary judgment. Bonneville essentially conceded the government's motion, stating in its response that "Triangle and Bonneville have no objection to the entry of summary judgment in favor of the United States for a judgment against Triangle for the amount of the tax lien and an order determining that Bonneville's joint venture interest is subject to the tax lien." App. at 475. However, Bonneville objected to foreclosing the joint venture interest or ordering a sale of that interest until the court determined whether the tax levy had served to divest Bonneville of its entire joint venture interest. Id.

With respect to Green River 's motion for summary judgment, Bonneville took the position that the tax levy did not divest Bonneville of its interest in the joint venture. It contended that Green River improperly dissolved the joint venture, improperly valued Bonneville's interest therein, and still owed Bonneville money in excess of the $220,000 Green River had agreed to pay the IRS. The district court decided these issues as a matter of law against Bonneville and entered summary judgment for Green River . It held that all of Bonneville's claims against Green River were barred because it had not filed a wrongful levy suit pursuant to 26 U.S.C. §7426 ¹ in response to any of the IRS levies and was therefore precluded from later challenging the service or scope of the levies. Relying on Kane v. Capital Guardian Trust Co. [98-2 USTC ¶50,491], 145 F.3d 1218 (10th Cir. 1998), the court concluded that upon service of a notice of levy the IRS steps into the taxpayer's shoes and acquires the taxpayer's rights to the property in question, here the interest in the joint venture that Bonneville acquired from Triangle subject to the liens. As a result, the court reasoned, the IRS succeeded to Bonneville's right to consent to the dissolution of the joint venture and the valuation of Bonneville's interest therein. The court held that Green River was statutorily obligated by 26 U.S.C. §6332 ² to pay over Bonneville's interest in the joint venture to the IRS. Finally, the court held that there was no evidence Green River acted in bad faith in complying with the levy, and that it was therefore immune from suit by the taxpayer (or Bonneville) pursuant to 26 U.S.C. §6332(e). ³

II

Internal Revenue Code §6331(a) authorizes the IRS to collect the taxes of a delinquent taxpayer "by levy upon all property and rights to property . . . belonging to such person or on which there is a lien." It is undisputed that Bonneville took Triangle's interest in the joint venture subject to the existing tax lien filed against Triangle. Consequently, when the IRS served the levy on counsel for the joint venture for taxes owed by Triangle, the levy attached to the interest of Triangle that had been transferred to Bonneville. Once the levy was served, the IRS effectively stood in the shoes of Bonneville and acquired constructive possession of whatever rights Bonneville had in joint venture assets in the possession of Green River . See United States v. National Bank of Commerce [85-2 USTC ¶9482], 472 U.S. 713, 720, 725-26 (1985); Kane [98-2 USTC ¶50,491], 145 F.3d at 1221; United States v. Bell Credit Union [88-2 USTC ¶9564], 860 F.2d 365, 368 (10th Cir. 1988).

IRC §6332(e) provides that one who honors a levy, as Green River did here, "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." See also Moore v. General Motors Pension Plans [96-2 USTC ¶50,539], 91 F.3d 848, 850-51 (7th Cir. 1996) (§6632 shields third party from claims that levy was defective). The IRS has interpreted this statutory defense very broadly:

[I]f the delinquent taxpayer has an apparent interest in property or rights to property, a person who makes good faith determination that such property or rights to property in his or her possession has been levied upon by the Internal Revenue Service and who surrenders the property to the United States in response to the levy is relieved of liability to a third party who has an interest in the property or rights to the property, even if it is subsequently determined that the property was not properly subject to levy.

26 C.F.R. §301.6332-1(c)(2) (emphasis added). Bonneville admitted when it conceded summary judgment to the IRS that its joint venture interest was subject to the federal tax lien. Green Rivers' persistence in contacting the IRS to determine its position as to whether Bonneville's interest in the joint venture was subject to Triangle's tax lien establishes its good faith. Consequently, Green River is entitled to the protection of section 6332(e).

Having carefully reviewed the record, the briefs of the parties, and the case law, we affirm the judgment of the district court on all issues relating to Green River 's honoring of the federal tax levies by the IRS against Bonneville's interest in the joint venture. However, we reverse the judgment of the district court insofar as it dismissed with prejudice all of Bonneville' state law claims against Green River. The district court did not deal separately with these claims in its summary judgment order. On this record, we are not persuaded that all of Bonneville's state law claims are necessarily subsumed in Green River 's section 6332(e) defense. We therefore remand these claims for further consideration by the district court.

We AFFIRM the judgment of the district court in part, REVERSE in part, and REMAND Bonneville's state law claims for further consideration in light of this opinion.

^* This order and judgment is not binding precedent, except under the doctrines of law of the case, res judicata, and collateral estoppel. The court generally disfavors the citation of orders and judgments; nevertheless, an order and judgment may be cited under the terms and conditions of 10th Cir. R. 36.3.

¹ I.R.C. §7426 provides in relevant part:

(a) Actions permitted.

(1) Wrongful levy.--If a levy has been made on property or property has been sold pursuant to a levy, any person (other than the person against whom is assessed the tax out of which such levy arose) who claims an interest in or lien on such property and that such property was wrongfully levied upon may bring a civil action against the United States in a district court of the United States. Such action may be brought without regard to whether such property has been surrendered to or sold by the Secretary.

26 U.S.C. §7426(a)(1).

² I.R.C. §6332 provides in relevant part:

(a) Requirement. Except as otherwise provided in this section, 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 shall, upon demand of the Secretary, surrender such property or rights (or discharge such obligation) to the Secretary, except such part of the property or rights as is, at the time of such demand, subject to an attachment or execution under any judicial process.

* * * *

(d) Enforcement of levy.

(1) Extent of personal liability. Any person who fails or refuses to surrender any property or rights to property, subject to levy, upon demand by the Secretary, shall be liable in his own person and estate to the United States in a sum equal to the value of the property or rights not so surrendered, but not exceeding the amount of taxes for the collection of which such levy has been made, together with costs and interest on such sum at the underpayment rate established under section 6621 from the date of such levy. . . .

26 U.S.C. §6332(a), (d).

³ I.R.C. §6332(e) provides:

(e) Effect of honoring levy.

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 (or who pays a liability under subsection (d)(1)) 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).

 

[2002-1 USTC ¶50,206] United States of America, Plaintiff, Bonneville Distributing, Inc., a Utah corporation, Plaintiff-Counter-Defendant-Appellant v. Triangle Oil, Defendant and Green River Development Associates, Inc., a Utah corporation, William S. Greaves, an individual, Stanley Dewaal, an individual, Defendant-Couter-Claimant-Appellee v. United States Department of Treasury, Internal Revenue Service, Counterclaim-Defendant

(CA-10), U.S. Court of Appeals, 10th Circuit, 01-4033, 1/24/2002, 277 F3d 1251

277 F3d 1251

2002 U.S. App. LEXIS 954. Reversing and remanding an unreported District Court decision. Related case at 2000-1 USTC ¶50,525 .

[Code Sec. 6331 ]

Levy and distraint: Effect of levy: Partnership: Joint venture: State law property rights.--A partner in a joint venture of a truck stop operation had standing to bring its state (Utah) law claims against its partner for improperly dissolving and valuating the joint venture following the IRS's collection of proceeds resulting from dissolution. Although the IRS's administrative levy power provided the IRS with the ability to enforce its tax liens that were greater than those held by private secured creditors, the power did not transfer ownership of the property to the IRS. Thus, the IRS's acceptance of the joint venture's dissolution plan and the subsequent payment of the proceeds to the IRS did not divest the partner of its state-law property rights.
[Code Sec. 6332 ]

Levy and distraint: Effect of levy: Partnership: Joint venture: State law property rights.--A partner in a joint venture of a truck stop operation that had standing to bring its state (Utah) law claims against its partner for improperly dissolving and valuating the joint venture following the IRS's collection of proceeds resulting from dissolution was entitled to immunity under Code Sec. 6332(e) only in relation to its honoring of the federal tax levies. The Tenth Circuit declined to extend immunity to the entire series of events that occurred prior to the actual surrender of dissolution proceeds to the IRS. The court previously held that it was not persuaded that all of the taxpayer's state law claims were subsumed in the partner's immunity defense. Thus, the "law of the case" doctrine did not control resolution of the appeal.
[Code Sec. 7426 ]

Levy and distraint: Effect of levy: Partnership: Joint venture: Immunity: Wrongful levy: State law property rights.--A partner in a joint venture of a truck stop operation that had standing to bring its state (Utah) law claims against its partner for improperly dissolving and valuating the joint venture following the IRS's collection of proceeds resulting from dissolution was not limited to a wrongful levy action against the IRS pursuant to Code Sec. 7426 . Although the IRS reviewed the dissolution plan, it was a right the IRS had by virtue of the levy. In addition, it did not force the partner to implement the plan, and the exercise of the right to review was not wrongful. Thus, the taxpayer had no reason to pursue a wrongful levy action.

Stephen B. Mitchell, Richard D. Burbridge, Burbridge & Mitchell, Salt Lake City, Utah, for plaintiff-appellant. George A. Hunt, Kurt M. Frankenburg, Williams & Hunt, Salt Lake City, Utah, for defendants-appellees.

Before: KELLY, BRORBY and MURPHY, Circuit Judges.

KELLY, Circuit Judge:

Plaintiff-Appellant Bonneville Distributing, Inc. ("Bonneville") appeals the district court's grant of summary judgment to Defendants-Appellees Green River Development Associates, Inc., William S. Greaves, and Stanley DeWaal (collectively, "Green River"). We have jurisdiction pursuant to 28 U.S.C. §1291 and reverse and remand for further proceedings.

Background

This action involves a joint venture between Bonneville and Green River under which the joint venturers operated a truck stop in Green River, Utah. The joint venture began in 1983 with Triangle Oil, Inc. ("Triangle") and Green River as the original joint venturers. Pursuant to the joint venture agreement, Triangle was entitled to receive one-half cent per gallon of motor fuel sold and was also to receive common carrier rates for fuel delivered to the truck stop. In 1990, with Green River's approval, Triangle assigned its interest to Bonneville. At the time of the assignment, Triangle's property was subject to federal tax liens.

In April, 1993, Bonneville commenced a state court action against Green River seeking recovery of an account receivable allegedly owed to Bonneville and for payment for fuel sold and delivered. In August of 1993, the Internal Revenue Service ("IRS") served a Notice of Levy to Green River upon all of Triangle's property and rights to property. After several inquiries, the IRS notified Green River that the Notice of Levy applied to Bonneville's interest in the joint venture and that any payments to Bonneville should go to the IRS. In 1995, Green River notified Bonneville that it was dissolving the joint venture effective December 11, 1995. According to Green River, it was dissolving the joint venture pursuant to a clause in the agreement providing for termination upon the end of the underlying truck stop lease. The IRS reviewed Green River's dissolution plan and agreed to accept payments of Bonneville's liquidated interest.

Bonneville then brought an additional claim of wrongful dissolution that was eventually consolidated with the original action. Due to the levies, Green River filed a counterclaim naming the United States as an additional defendant and sought declaratory relief with respect to whether the United States or Bonneville was entitled to receive payments related to Bonneville's joint venture interest. The United States removed the case to federal court. The district court granted the United States' unopposed motion for summary judgment, thus reducing the tax liens against Triangle to judgment and concluding that Bonneville's joint venture interest was subject to the tax lien. The district court also granted summary judgment to Green River after concluding that 26 U.S.C. §6332(e), which provides immunity to third parties who comply with IRS levies, prevented Bonneville from bringing its state law claims against Green River.

On appeal of that decision, a panel of this Court affirmed the district court "on all issues relating to Green River's honoring of the federal tax levies . . . against Bonneville's interest in the joint venture. " United States v. Triangle Oil Co. [2000-1 USTC ¶50,525], 2000 U.S. App. LEXIS 13672, No. 98-4147 (10th Cir. Jun. 12, 2000), slip op. at 10 (published in table format at 215 F.3d 1338) (Aplt. App. at 517). The panel reversed the district court, however, "insofar as it dismissed with prejudice all of Bonneville's state law claims against Green River," and stated further that "on this record, we are not persuaded that all of Bonneville's state law claims are necessarily subsumed in Green River's section 6332(e) defense." Id.

On remand, the district court again granted summary judgment to Green River. The district court began by quoting the panel in the prior appeal where it stated: "Once the levy was served, the IRS effectively stood in the shoes of Bonneville and acquired constructive possession of whatever rights Bonneville had in joint venture assets in the possession of Green River." See id. at 8-9 (Aplt. App. at 515-16). The district court reasoned that the joint venture assets included Bonneville's state law claims. Thus, according to the district court, the IRS's actions in this case deprived Bonneville of any ownership interest in the joint venture and therefore deprived Bonneville of the ability to bring such claims. In effect, the district court concluded, Bonneville had no standing to bring its state law claims. On appeal, Bonneville contends that it has standing to assert its state law claims because it still owns the joint venture interest.

Standard of Review

We review the grant of summary judgment de novo, applying the same legal standard used by the district court. L&M Enter., Inc. v. BEI Sensors & Sys. Co., 231 F.3d 1284, 1287 (10th Cir. 2000) (citation omitted). Summary judgment is appropriate if "there is no genuine issue as to any material fact" and the moving party is entitled to judgment as a matter of law. Fed. R. Civ. P. 56(c). In reviewing a summary judgment motion, the court views the record "in the light most favorable to the nonmoving party." Thournir v. Meyer, 909 F.2d 408, 409 (10th Cir. 1990) (citation omitted).

Discussion

The district court's conclusion that Bonneville had no standing to bring claims related to its joint venture interest necessarily involved an interpretation of the effect of the IRS's levy power against that interest. Although there is no question that the IRS properly exercised its levy power in this case, we find it necessary to review the relevant statutory provisions to determine the effect its actions had on Bonneville's joint venture interest. To satisfy a tax deficiency, the IRS may impose a lien on any "property" or "rights to property" belonging to a taxpayer. 26 U.S.C. §6321. To complement this provision, §6331(a) allows "the Secretary to collect such tax . . . by levy upon all property and rights to property . . . on which there is a lien . . . ." Id. §6331(a). "The term 'levy' as used in this title includes the power of distraint and seizure by any means." Id. §6331(b). This administrative levy power is justified by "the need of the government promptly to secure its revenues." United States v. Nat'l Bank of Commerce [85-2 USTC ¶9482], 472 U.S. 713, 721, 86 L.Ed.2d 565, 105 S.Ct. 2919 (1985) (internal quotation omitted). Unlike a lien-foreclosure suit authorized by 26 U.S.C. §7403, however, an administrative levy does not determine priority disputes between the Government and other claimants, but instead protects the Government against diversion or loss while such disputes, if any, are resolved. See id. at 721. Further, an administrative levy does not "transfer ownership of the property to the IRS." United States v. Whiting Pools, Inc. [83-1 USTC ¶9394], 462 U.S. 198, 209-10, 76 L.Ed.2d 515, 103 S.Ct. 2309 (1983).

"We look initially to state law to determine what rights the taxpayer has in the property the Government seeks to reach, then to federal law to determine whether the taxpayer's state-delineated rights qualify as 'property' or 'rights to property.' " Drye v. United States [99-2 USTC ¶51,006; 99-2 USTC ¶60,363], 528 U.S. 49, 58, 145 L.Ed.2d 466, 120 S.Ct. 474 (1999). Pursuant to Utah law, joint ventures are treated under the same statutory provisions as are partnerships. See Utah Code Ann. §48-1-3.1 (1998). Utah law recognizes the following property rights of a partner: (1) the rights in specific partnership property held as a tenant in partnership; (2) the interest in the partnership; and (3) the right to participate in management. Id. §48-1-21. Here, the levy was against Bonneville's "property and rights to property." See 26 U.S.C. §6321. According to Utah law, "[a joint venturer's] interest in the [joint venture] is his share of the profits and surplus, and the same is personal property. " Utah Code Ann. §48-1-23. Federal courts, including this circuit, have long defined a partner's interest in the partnership in a similar manner. See United States v. Kaufman [1 USTC ¶116], 267 U.S. 408, 414, 69 L.Ed. 685, 45 S.Ct. 322 (1925) (lien against a partner owing an individual tax "extends only to his interest in the surplus of the partnership property"); Adler v. Nicholas [48-1 USTC ¶9205], 166 F.2d 674, 678-79 (10th Cir. 1948); see also United States v. Worley [54-1 USTC ¶9427], 213 F.2d 509, 512 (6th Cir. 1954) (citing Kaufman); Economy Plumbing & Heating Co. v. United States [72-1 USTC ¶9344], 197 Ct.Cl. 839, 456 F.2d 713, 716 (Cl.Ct. 1972) (citing Kaufman). The IRS has itself recognized that a partner's interest in a partnership is generally limited to the "right to a proportionate share of the distribution of partnership profits or surplus after the payment of partnership debts." Internal Revenue Man. §5.17.3.5.16 (2001); see also Rev. Rul. 73-24, 1973-1 C.B. 602 (IRS could not seize partnership-owned bank account to satisfy tax deficiency of individual partner).

Given the property and rights to property pertaining to Bonneville's interest in the joint venture, it is clear that the IRS properly accepted the proceeds from the dissolution of the joint venture. Those proceeds represented Bonneville's share of the surplus of joint venture assets over the joint venture's liabilities and the levy attached to that surplus. Kaufman [1 USTC ¶116], 267 U.S. at 414.

Requiring closer scrutiny, however, is the question as to whether the acceptance of the plan of dissolution and the subsequent payment of the proceeds to the IRS divested Bonneville of those state-law property rights other than its economic interest in the joint venture. Even if the IRS had foreclosed on Bonneville's interest in the joint venture, which it did not do, under Utah law Bonneville would still remain a partner and would still be able to exercise management rights and proportionate control over specific partnership property. See Utah Code Ann. §§48-1-24, 48-1-25 (partner retains management rights). As such, the fiduciary duty that Green River owed to Bonneville still remained even subsequent to the dissolution of the joint venture. See Utah Code Ann. §48-1-18 (fiduciary duty of partner to other partners applies to formation, conduct, or liquidation of the partnership). We cannot say that Bonneville's state law claims related to its status as a partner, as opposed to its status as owner of an interest in the partnership, were obliterated with the IRS's collection of the proceeds resulting from the dissolution.

Even were we to assume that Bonneville's state law claims attached only to its interest in the joint venture, the district court's conclusion that Bonneville lacked standing because the IRS divested Bonneville of all interest in the joint venture still could not stand. Although the IRS levy power does provide the IRS with abilities "to enforce its tax liens that are greater than those possessed by private secured creditors," it still does not "transfer ownership of the property to the IRS." Whiting Pools [83-1 USTC ¶9394], 462 U.S. at 209-10. Thus, while the levy power does provide the IRS with rights to property co-extensive with those of the taxpayer, see Nat'l Bank of Commerce [85-2 USTC ¶9482], 472 U.S. at 725 ("The IRS acquires whatever rights the taxpayer himself possesses."); Kane v. Capital Guardian Trust Co. [98-2 USTC ¶50,491], 145 F.3d 1218, 1221 (10th Cir. 1998) (stating that the "IRS steps into the shoes of the taxpayer and acquires whatever rights to the property the taxpayer possessed") (internal quotation omitted), absent a foreclosure or similar action the taxpayer still retains ownership of the property. See United States v. Challenge Air Int'l, Inc. (In re Challenge Air Int'l, Inc.) [92-1 USTC ¶50,090], 952 F.2d 384, 387 (11th Cir. 1992) (stating that an administrative levy does not "transfer ownership of the property" and holding that the IRS's constructive possession of the right to payment did not obliterate all rights of the debtor). Given that Bonneville still retained ownership of whatever remained of its interest in the joint venture, we fail to see why it should be prevented from exercising the rights attached to that property, e.g., a right to an accounting, simply because the IRS has chosen not to exercise any of those related rights.

Green River advances a number of arguments to persuade us that Bonneville has lost its right to bring its state law claims. To begin, Green River relies on the "law of the case" doctrine to establish that: (1) the IRS levy attached to Bonneville's interest in the joint venture and the IRS "stood in the shoes of Bonneville and acquired constructive possession of whatever rights Bonneville had," and (2) the United States succeeded to Bonneville's right to consent to the dissolution of the joint venture and the valuation of its interest. Aplee. Br. at 8. While we agree that the panel decision in the prior appeal established these points, nothing in our present opinion contradicts those two conclusions. We have already recognized that the IRS had every right to agree to the dissolution plan, but have simply not gone so far as to say that the IRS, by accepting the proceeds of the dissolution, wiped out every property right or cause of action Bonneville had in relation to its joint venture participation. Neither case that Green River cites supports its position that the IRS administrative levy subsumed all of Bonneville's joint venture property rights. In United States v. Spurgeon [88-2 USTC ¶9583], 861 F.2d 181 (8th Cir. 1988), the taxpayers transferred their farm to a trust, but the IRS discovered the asset, filed a Notice of Levy, and eventually purchased the farm in a closed-bid sale. Id. at 182. When the taxpayers attempted to challenge the Government's ejectment action, the district court concluded that they had no standing to do so. On appeal, the Eighth Circuit affirmed, holding that the "levy proceedings divested [the taxpayer] of all ownership interests he may have held in the farm." Id. at 183. We are not faced with the same situation as in Spurgeon, however, because in this case the IRS never undertook the statutory actions required to transfer ownership of the joint venture interest. See 26 U.S.C. §6335 (detailing actions necessary for IRS sale of levied property). Green River's other case, Shire Dev. v. Frontier Inv., 799 P.2d 221 (Utah Ct. App. 1990), is also unavailing. In that case, the court simply held that the plaintiffs could not sue on a contract to which they were not a party. See id. at 222-23. Here, there is no question that Bonneville, by virtue of its written assignment from Triangle, was a party to the joint venture agreement.

Green River also relies on an IRS district counsel's internal memorandum for support of its assertion that Bonneville lacks standing. In that memorandum, the district counsel stated,

In effect, the Service levied upon the chose in action. Based upon [Spurgeon and other cases], it appears that Bonneville has no standing in its lawsuit, since it is in the lawsuit only as a successor or transferee of Triangle Oil and the Service seized "all the right, title, and interest of Triangle Oil" in the funds that are the subject of the lawsuit.

Aplt. App. at 521. In addition to Spurgeon, which we have already distinguished, the district counsel also relied on United States v. Geissler [94-1 USTC ¶50,060], 1993 U.S. Dist LEXIS 16692, 1993 WL 625535 (D. Idaho Nov. 8, 1993), where the court held that the taxpayers had no interest in the real property at issue because an administrative levy and sale had occurred. Id. at *5. Geissler, like Spurgeon, is therefore of limited relevance because in this case no sale has occurred. Thus, whatever its value as persuasive authority, the internal memorandum was premised on an assumption with which we disagree, namely, that the administrative levy operates as a transfer of "all right, title, and interest" in the subject property. This contradicts the Supreme Court's statement in Whiting Pools [83-1 USTC ¶9394], 462 U.S. at 209-10, that an administrative levy does not transfer ownership of the subject property and is also contrary to decisions in other circuits. See, e.g., Challenge Air Int'l [92-1 USTC ¶50,090], 952 F.2d at 387; United States v. Sullivan [64-1 USTC ¶9392], 333 F.2d 100, 116 (3d Cir. 1964) (stating that implicit in the administrative levy power is the "principle that the Commissioner acts pursuant to the collection process in the capacity of lienor as distinguished from owner").

Green River also relies on the Kane case to support the district court's decision that Bonneville lacked standing to bring its state law claims. In Kane, the IRS sent a notice of levy to a trust company that was the custodian of the mutual fund shares in the taxpayer's Individual Retirement Account ("IRA"). [98-2 USTC ¶50,491], 145 F.3d at 1220. Upon receipt of the notice, the trust company liquidated the mutual fund shares and transferred the proceeds to the IRS. Id. The taxpayer sued the trust company, claiming that it had transformed the nature of his mutual fund shares into cash and thereby prevented him from exercising his right to redeem the shares. Id. at 1222. As Green River states, the "core issue" in Kane "was whether, after it had levied upon [the] mutual fund . . . , the IRS was entitled to exercise Mr. Kane's rights [to] liquidate the fund and take delivery of the monetary proceeds from the liquidation." Aplee. Br. at 11. The court held that the IRS was indeed entitled to liquidate the fund and therefore concluded that the trust company could not be sued for complying with the levy. Kane [98-2 USTC ¶50,491], 145 F.3d at 1224.

Nothing in our opinion is inconsistent with the Kane decision. Like the court in Kane, we have recognized that the IRS "stepped into the taxpayer's shoes" and exercised the same right the taxpayer had available, viz., the right to receive the proceeds upon dissolution. See Kane [98-2 USTC ¶50,491], 145 F.3d at 1221. Despite Green River's assertion to the contrary, however, Kane is distinguishable and does not compel us to find that the IRS's acceptance of the dissolution proceeds subsumed all of Bonneville's state law claims. First, the court in Kane was not addressing the issue we have before us: whether a party in control of a taxpayer's levied property can be held to answer for claims of fraud, breach of contract, or breach of fiduciary duty that occurred prior to surrender of the property (or rights thereto) to the IRS. Second, a joint venture interest is a fundamentally different asset than mutual fund shares residing in an IRA. As discussed supra, a joint venturer's property rights in a joint venture are comprised of more than a mere financial interest, but include management rights and rights in specific property. Although the Kane court did state that "once Capital Guardian converted the IRA to cash . . . the IRS had nothing to sell, and Kane had nothing to redeem," Kane [98-2 USTC ¶50,491], 145 F.3d at 1223, we do not read that statement as suggesting that ownership was transferred. The statement merely reflects the practical result that, due to the nature of the levied property involved in that case, the liquidation of the IRA left Kane without any property.

Green River has suggested in its brief as well as in oral argument that Bonneville's only avenue for relief in this case is a wrongful levy action pursuant to 26 U.S.C. §7426. That section allows a party claiming an interest in property that has allegedly been "wrongfully levied upon" to bring a civil action against the United States for relief. 26 U.S.C. §7426. In this appeal, however, Bonneville does not challenge any aspect of the IRS's actions in connection with the levy. Instead, Bonneville claims that Green River used the IRS levy as an opportunity to violate the joint venture agreement and avoid liability for any wrongful actions in doing so. Having reviewed the evidence in the light most favorable to Bonneville, as we must, we cannot say that the record reveals anything more than that the IRS simply reviewed Green River's proposed dissolution plan and agreed to accept the liquidation proceeds. See Aplt. App. at 220 (declaration of IRS attorney); id. at 446 (deposition of IRS agent); id. at 54, P 21 (Green River's answer to Bonneville's state court complaint). Given that the IRS did not force Green River to implement a dissolution plan, Bonneville simply had no reason to pursue a wrongful levy action. True, the IRS did review Green River's plan of dissolution, but that was a right that the IRS had by virtue of the levy and its exercise of that right was therefore not wrongful. See Kane [98-2 USTC ¶50,491], 145 F.3d at 1223.

Finally, Green River asserts that Bonneville's state law claims should be dismissed because of the protection afforded by 26 U.S.C. §6332(e). That section provides that an individual who, "upon demand by the Secretary, surrenders . . . property or rights to property . . . shall be discharged from any obligation or liability to the delinquent taxpayer . . . with respect to such property or rights to property arising from such surrender or payment." 26 U.S.C. §6332(e). Although the IRS has interpreted the immunity under that section broadly, see 26 C.F.R. §301.6632-1(c)(2), the language of the statute limits the protection to a party's actions "arising from such surrender or payment." 26 U.S.C. §6332(e). Thus, as the panel concluded in the prior appeal, Green River "is entitled to the protection of section 6332(e)," but only in relation to its "honoring of the federal tax levies." Triangle Oil, slip op. at 10 (Aplt. App. at 517). On these facts, we decline to extend the immunity afforded under §6332(e) to the entire series of events that occurred prior to the actual surrender of the dissolution proceeds to the IRS.

Green River cites the "law of the case" doctrine to support its assertion that §6332(e) immunity applies, but, in this case, we disagree that the doctrine prevents Bonneville from maintaining its state law claims. Courts use "law of the case" to "promote decisional finality" and rely on it to prevent relitigation of an issue already decided in prior proceedings of the same case. Octagon Res., Inc. v. Bonnett Res. Corp. (In re Meridian Reserve, Inc.), 87 F.3d 406, 409 (10th Cir. 1996). Although in the prior appeal the panel stated that Green River "is entitled to the protection of section 6332(e)," it nonetheless reversed because it was "not persuaded that all of Bonneville's state law claims are necessarily subsumed in Green River's section 6332(e) defense." Triangle Oil, slip op. at 10 (Aplt. App. at 517). Given the panel's ultimate disposition of the case in the prior appeal, we do not see our present decision as "abrogating the prior decision" and we therefore decline to allow the law of the case doctrine to control our resolution of this appeal. See In re Meridian, 87 F.3d at 409-410.

At oral argument, counsel for Bonneville conceded that the amount of money it anticipated from this litigation would never reach the current amount of the levy against the joint venture interest. Further, although the IRS did not file a brief in this appeal, it has notified the clerk of this court by letter that any additional amounts that Bonneville recovers should be paid to the United States up to the full amount of the outstanding tax liability. On this record, we express no opinion as to the legal ramifications of these particular circumstances, but leave it to the district court on remand to determine their effect.

Accordingly, we REVERSE the district court's order granting Green River's motion for summary judgment and REMAND to the district court for further proceedings.

 

[2000-2 USTC ¶50,678] Walter J. Lawrence, Plaintiff-Appellant v. United States of America, et al., Defendants-Appellees

(CA-6), U.S. Court of Appeals, 6th Circuit, 99-1926, 8/15/2000, 2000 U.S. App. LEXIS 21287. Affirming an unreported District Court decision

[Code Sec. 7421 ]

Jurisdiction: Suit enjoining assessment or collection: Injunctive relief denied.--The District Court properly dismissed a pro se taxpayer's suit against the IRS, IRS employees, a bank, a bank employee and a General Motors administrator for lack of jurisdiction. The taxpayer, who sought to enjoin the government from collecting back taxes, alleged various tax protester claims. He did not make any valid arguments that he was not liable for the deficiency or that collection would cause him irreparable harm. Therefore, he did not meet the narrow exception to Code Sec. 7421 afforded by William Packing & Nav. Co. (US), 62-2 USTC ¶9545.
[Code Secs. 6331 and 7402 ]

Jurisdiction: Suit enjoining assessment or collection: Damages: IRS employees: Bivens claim unavailable: Private parties: Third party liability lacking.--The District Court properly dismissed a pro se taxpayer's suit against the IRS, IRS employees, a bank, a bank employee and a General Motors administrator for lack of jurisdiction. The taxpayer's Bivens claim against the IRS employees was dismissed because he could not recover damages resulting from the collection activities of the IRS. Likewise, he was not permitted to recover from the private parties because they were simply fulfilling their legal obligation in honoring the IRS levy against him.

[Fed. Rule App. Proced. 38 ]

Suit enjoining assessment or collection: Penalties, civil: Frivolous appeal: Tax protest arguments: Sanctions.--Penalties were imposed against a pro se taxpayer who appealed the trial court's decision to dismiss his suit for damages against the IRS, IRS employees, a bank, a bank employee and a General Motors administrator. The taxpayer, who had a long history of filing frivolous suits, was sanctioned because his contention that the statute of limitations on collection had elapsed was meritless.

Walter J. Lawrence, Eastpointe, Mich., pro se. Gilbert S. Rothenberg, John A. Nolet, Department of Justice, Washington, D.C. 20530, Patricia G. Gaedeke, Office of the U.S. Attorney, Detroit, Mich., for U.S., Jonathan A. Braun, NBD Bank, Detroit, Mich., for National Bank of Detroit.

Before: KRUPANSKY, WELLFORD and BOGGS, 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

ORDER

Pro se Michigan resident Walter J. Lawrence appeals a district court judgment that dismissed a civil complaint in which he attempted to enjoin the United States from collecting back taxes. The case has been referred to this panel pursuant to Rule 34(j)(1), Rules of the Sixth Circuit. We unanimously agree that oral argument is not needed. See Fed. R. App. P. 34(a).

Seeking monetary and injunctive relief and purporting to sue each defendant in his official and individual capacities, Lawrence sued the United States , the IRS, three IRS officers, a bank, a bank employee, and the pension plan administrator for General Motors. Lawrence claimed that his suit was authorized by the doctrine announced in Bivens v. Six Unknown Named Agents of the Fed. Bureau of Narcotics, 403 U.S. 388, 29 L.Ed.2d 619, 91 S.Ct. 1999 (1971), and he raised tax-protestor claims of: (1) retaliation, (2) conspiracy, (3) negligence, and (4) defamation.

Upon the defendants' motion, and after a hearing, the district court denied Lawrence 's motion for an injunction and dismissed Lawrence 's suit for lack of subject matter jurisdiction.

In his timely appeal, Lawrence argues that the district court erred by dismissing his suit for want of jurisdiction. The parties have both filed briefs. In addition, the United States moves the court to sanction Lawrence in the amount of $4,000 for filing this appeal, which it contends is frivolous. Lawrence moves the court to take judicial notice of his past tax amounts due and to compel the United States to conduct a pre-levy hearing concerning tax liability.

At the outset, we note that neither of Lawrence 's motions has merit. His request for a pre-levy hearing is denied. No pre-levy hearing, nor any other judicial intervention, is mandated. See United States v. National Bank of Commerce [85-2 USTC ¶9482], 472 U.S. 713, 721, 729, 86 L.Ed.2d 565, 105 S.Ct. 2919 (1985); State Bank of Fraser v. United States [88-2 USTC ¶9592], 861 F.2d 954, 958 (6th Cir. 1988). Lawrence 's motion for this court to take judicial notice of past assessments is also denied. Through judicial notice, Lawrence seeks to freeze assessments at amounts determined at the time they were issued, regardless of accruing interest and penalties. This motion is an affront to logic.

Whether the district court properly dismissed this suit pursuant to Fed. R. Civ. P. 12(b)(1) for want of jurisdiction is a question of law subject to de novo review. See Duncan v. Rolm Mil-Spec Computers, 917 F.2d 261, 263 (6th Cir. 1990). To survive a Rule 12(b)(1) motion, the plaintiff must prove that jurisdiction exists. See id.

The district court properly concluded that it lacked jurisdiction. Federal district courts lack jurisdiction over actions seeking injunctions against the collection of taxes, see 26 U.S.C. §7421(a); however, the statute has narrow exceptions. In Enochs v. Williams Packing & Nav. Co. [62-2 USTC ¶9545], 370 U.S. 1, 6-7, 8 L.Ed.2d 292, 82 S.Ct. 1125 (1962), the Supreme Court held that the statute is not applicable if the taxpayer was certain to succeed on the merits and could demonstrate that the collection would cause him irreparable harm. Although Lawrence has attempted to restrain the IRS from garnishing his pension payments to collect the back taxes, he makes no cognizable argument that would remotely suggest that he is not liable for the deficiency, and he has provided no evidence that the collection would cause him irreparable harm. Lawrence does not satisfy the narrow exception of Williams Packing, and no other exception to the anti-injuction provision applies to Lawrence 's suit.

We further note that, although Lawrence claims that authority for his suit rests in Bivens, no Bivens action is available for a taxpayer who seeks to recover damages resulting from IRS collection activities. See Fishburn v. Brown [97-2 USTC ¶50,742], 125 F.3d 979, 982-83 (6th Cir. 1997). Thus, in addition to all injunctive relief being barred, Lawrence cannot obtain monetary relief under Bivens. His suit against the individual IRS officials is not viable, and it was properly dismissed in all respects. See id.

Finally, we note that the private entities Lawrence sued, i.e., the bank, the bank employee, and the pension administrator, are all immune from suit. Each of these defendants simply fulfilled his obligation pursuant to 26 U.S.C. §§6321, 6322 in honoring the IRS levy against Lawrence 's pension payments. See United States v. General Motors Corp. [91-1 USTC ¶50,158], 929 F.2d 249, 251 (6th Cir. 1991). In so doing, each defendant is absolved of any liability to Lawrence for honoring the levy pursuant to §6332(e) (formerly §6332(d)). See 26 U.S.C. §7402(a); State Bank of Fraser [88-2 USTC ¶9592], 861 F.2d at 958; Edgar v. Inland Steel Co. [84-2 USTC ¶9819], 744 F.2d 1276, 1278 (7th Cir. 1984).

We grant the United States 's motion for sanctions for filing this frivolous appeal. The government moved for sanctions in a timely manner, and Lawrence has responded. See Fed. R. App. P. 38 (requiring notice and an opportunity to respond). Lawrence has a long history of filing frivolous suits and appeals. See Lawrence v. Bucci, No. 98-1788, 1999 WL 617969 (6th Cir. Aug. 12, 1999) (unpublished) (dismissal under Rule 12(b)(1) and (6) under the Rooker-Feldman doctrine and judicial immunity); Lawrence v. United States, No. 95-2284, 1996 WL 325216, **1-2 (6th Cir. June 12, 1996) (unpublished) (raising "patently frivolous" claims in an appeal from the denial of a §2255 motion after Lawrence was jailed for contempt); United States v. Lawrence, No. 94-2309, 1995 WL 302247, at *1 (6th Cir. May 17, 1995) (unpublished) (direct appeal following Lawrence's conviction of contempt for filing multiple bankruptcy petitions in multiple district courts in attempts to stay tax proceedings); Lawrence v. United States, Nos. 92-2434 etc., 1993 WL 360952, at **1-3 (7th Cir. Sept. 14, 1993) (unpublished) (appeal from dismissal of Chapter 7 bankruptcy petitions in which the Seventh Circuit limited Lawrence's right to file future cases); Lawrence v. Remes, No. 92-1103, 1993 WL 141066, at *1 (6th Cir. Apr. 30, 1993) (unpublished) (appeal from the bankruptcy court's conversion of one of Lawrence's Chapter 7 bankruptcies to a Chapter 13 bankruptcy); Lawrence v. Remes, No. 92-1213, 1992 WL 361381, at *1 (6th Cir. Dec. 8, 1992) (unpublished) (affirming a bankruptcy court's sua sponte dismissal of a petition and the court's limited injunction against Lawrence's right to file future bankruptcy petitions); Lawrence v. Fricke, No. 91-1246, 1991 WL 100630, at *1 (6th Cir. June 11, 1991) (unpublished) (affirming a bankruptcy court's $2,175 sanction against Lawrence because of Lawrence's attempted use of the automatic stay for an improper purpose). Lawrence 's track record weighs heavily in favor of sanctions. See Wrenn v. Gould, 808 F.2d 493, 505 (6th Cir. 1987) (a record of previous frivolous litigation in this court is relevant to a sanctions decision).

Tax protestors who assert frivolous claims may be legally assessed damages in the district court and on appeal. See Schoffner v. Commissioner [87-1 USTC ¶9198], 812 F.2d 292, 294 (6th Cir. 1987). This court has indicated its disapproval of frivolous appeals in tax protestor cases and its intention to impose Fed. R. Civ. P. 38 sanctions. See Martin v. Commissioner [85-1 USTC ¶9238], 756 F.2d 38 (6th Cir. 1985); Martin v. Commissioner [85-1 USTC ¶9181], 753 F.2d 1358 (6th Cir. 1985); Perkins v. Commissioner [84-2 USTC ¶9898], 746 F.2d 1187 (6th Cir. 1984). An appeal is properly sanctioned as frivolous under 28 U.S.C. §1912 and Rule 38 when the only issue raised has been clearly resolved against the appellant. See Schoffner [87-1 USTC ¶9198], 812 F.2d at 293-94. An appeal is also frivolous if it is obviously without merit and is prosecuted for delay, harassment, or other improper purposes. See Barney v. Holzer Clinic, Ltd., 110 F.3d 1207, 1212 (6th Cir. 1997). An appeal may be fairly characterized as frivolous when filed out of "sheer obstinancy." Allinder v. Inter-City Prods. Corp. (USA), 152 F.3d 544, 552 (6th Cir. 1998) (citations and internal quotations omitted). A finding that the appeal was filed in "bad faith," however, is not required. See Wilton Corp. v. Ashland Castings Corp., 188 F.3d 670, 677 (6th Cir. 1999).

Upon review, we conclude that this appeal is frivolous under any of the applicable standards. The district court suit was based on Lawrence 's belief that he had legally outfoxed the IRS by ordering his private mail company to reject any mail that required his signature and then claiming a lack of proper notice of the levy. Lawrence maintains this position on appeal. In his appellate brief, Lawrence argues that he has outwitted the IRS by filing multiple bankruptcy petitions that delayed the collection proceedings long enough for the statute of limitations to run against the IRS. He also repeats his frivolous argument that the IRS has engaged in 34 criminal acts by not respecting automatic bankruptcy stays in place since 1986. It is noted that, in the district court, Lawrence also asserted the standard claim that income tax cannot be levied upon wages. Each contention is invalid.

The United States has moved for sanctions to be awarded in the lump sum of $4,000. The United States has presented evidence that it costs an average of $4,900--in attorney salaries and other expenses incurred by the Tax Division of the Department of Justice--to defend frivolous appeals. We have approved past lump-sum awards under Rule 38. See Schoffner [87-1 USTC ¶9198], 812 F.2d at 294 (finding that a sanction of $1,200 was an appropriate award where the IRS Commissioner stated that $1,200 was the average award for the previous two years). A sister circuit has recently approved a $4,000 sanction in a case that mirrors Lawrence 's. See Stafford v. United States [2000-1 USTC ¶50,325], 208 F.3d 1177, 1179 (10th Cir. 2000). We agree that this is a reasonable penalty, and find that imposing a lump sum sanction in lieu of costs conserves both government and judicial resources.

For the foregoing reasons, we deny Lawrence 's miscellaneous motions, grant the United States 's motion for sanctions in the amount of $4,000, and affirm the district court's judgment. Rule 34(j)(2)(C), Rules of the Sixth Circuit.

 

[2001-2 USTC ¶50,460] Robert H. Taylor, Plaintiff v. James E. Gaither, et al., Defendants

U.S. District Court, So. Dist. Ala. , Mobile Div., CIV. 00-360-AH-C, 3/22/2001, 2001 U.S. Dist. LEXIS 6009.

[Code Secs. 6332 and 7402 ]

Sanctions: Garnishment proceedings: Effect of honoring levy: Frivolous claims: Individuals subject to tax: Attorney's fees: Litigation expenses.--An individual who sought to enjoin the garnishment of his wages and the collection of income tax from him was assessed sanctions in the amount of reasonable attorney's fees and litigation expenses incurred by employees of his employer during the course of his frivolous lawsuit. The proper attempts by his employer, through those employees, to comply with the tax laws could not give rise to claims of extortion, racketeering, or mail fraud against the employees. According to the taxpayer's complaint, he was unconvinced that he had to pay income tax to the government. However, the employees were not obligated to convince him that he was subject to the income tax laws. The taxpayer's pro se status did not shield him from liability for the sanctions. His lawsuit, in which he persisted in arguing that he was not subject to taxation, was clearly frivolous.

Robert H. Taylor, Mobile , Ala. , pro se.

ORDER

THOMPSON, District Judge:

This lawsuit is now before the court on the motion of defendants Candice Trahan and Tina Blanchard for sanctions against plaintiff Robert H. Taylor pursuant to Rule 11 of the Federal Rules of Civil Procedure. For the reasons that follow, this motion will be granted.

I. BACKGROUND

Chronologically, the relevant events are as follows.

February 22, 1998: Taylor filed suit in this court seeking to enjoin his employer, Petroleum Helicopters, Inc., and present and former employees of the Internal Revenue Service (IRS) from garnishing his wages or otherwise collecting income tax from him. That case was dismissed by United States District Judge Virgil Pittman on July 31, 1998.

April 20, 2000: Taylor filed this lawsuit against United States District Judges Pittman and Charles Butler, charging them with conspiracy to deprive him of equal protection of the law, in violation of 42 U.S.C.A. §1985; against Trahan and Blanchard (two other employees of Petroleum Helicopters, Inc.) and against former or present employees of the IRS, charging them with violating the Racketeer Influenced and Corrupt Organizations Act, 18 U.S.C.A. §1961 et seq., committing federal mail fraud in contravention of 18 U.S.C.A. §1341, and for common-law extortion.

June 16, 2000: Trahan and Blanchard filed a motion to dismiss with the court, and they served a copy of a motion for Rule 11 sanctions on Taylor . The sanctions motion requested that reasonable attorney's fees be taxed against Taylor for the frivolous prosecution of this suit.

July 7, 2000: Trahan and Blanchard filed their motion for sanctions with the court.

August 24, 2000: The court dismissed Taylor 's claims against Trahan and Blanchard.

II. LIABILITY FOR SANCTIONS

Rule 11 of the Federal Rules of Civil Procedure empowers a court to impose "appropriate sanctions upon [] attorneys, law firms or parties," Fed. R. Civ. P. 11(c), for presenting pleadings, motions, and other papers to the court, for improper purposes, frivolous arguments, or factual allegations that lack evidentiary support. Fed. R. Civ. P. 11(b). The rule also provides a "safe harbor" by requiring the moving party to serve the nonmoving party with the motion, but the motion itself may not be filed with the court "within 21 days after service." Id. 11(c)(1)(A). This gives the nonmoving party ample opportunity to withdraw or remedy the submission to the court or to make clear its non-frivolous nature and thus avoid possible sanction. In this case, there is no doubt that the 21-day notice period required for a motion for sanctions under Rule 11 has been satisfied.

Faced with a motion for sanctions, a court must consider two questions. First, the court must determine whether the claims that are the subject of the motion are objectively frivolous; second, the court must ascertain whether the person responsible should have been aware that the claims were frivolous. See Baker v. Alderman, 158 F.3d 516, 524 (11th Cir. 1998).

Rule 11 sanctions are not appropriate where a claim is brought solely as a result of poor judgment. See Davis v. Carl, 906 F.2d 533, 537 (11th Cir. 1990). However, where there is evidence that a claim is brought in bad faith, Rule 11 sanctions are appropriate. See Nesmith v. Martin Marietta Aerospace, 833 F.2d 1489, 1491 (11th Cir. 1987) (discussing inclination to reverse Rule 11 sanctions where there was insufficient evidence of bad faith).

On the facts of this case, sanctions against Taylor are warranted. His claims are unfounded in law and advance no reasonable argument to change existing law. See Baker, 158 F.3d at 524. It is obvious from Taylor 's complaint that he has already raised substantially the same claim as to his tax liability in a previously dismissed lawsuit. See Complaint at P 28. In this lawsuit, as stated, he has added additional defendants, including Trahan and Blanchard, as well as additional claims. His new claims arise out of the dismissal of his previous suit and relate to the imposition of tax liability on him and attempts to collect taxes from him. As the court explained in its order entered August 24, 2000, the sixteenth amendment to the United States Constitution empowers Congress to "lay and collect taxes on income, from whatever source derived." Title 26 of the United States Code, known as the Internal Revenue Code, is a lawful exercise of that constitutional power. It is legally indisputable that the proper attempts by Taylor 's employer, through Blanchard and Trahan, to comply with the tax cannot give rise to claims for extortion, racketeering, or mail fraud.

It is also manifest that a reasonable person should have been aware of this. This standard is an objective one and does not turn on the individual capabilities of the party against whom sanctions are sought. See Baker, 158 F.3d at 524. As the Eleventh Circuit Court of Appeals has framed this inquiry, the court must ask whether the prosecution of this suit was reasonable under the circumstances at the time the suit was filed. See id. The laws that make this suit objectively unreasonable were firmly established when this case was filed, and, indeed, long before Taylor 's first case was filed in 1998. There was no doubt before this suit was filed that the income tax is a legal exercise of Congress's constitutional power, and that the IRS is legally empowered to collect that tax. Taylor 's claims do not present any colorable arguments that call this into doubt, nor do they present any issue of first impression. Moreover, even were the standard of reasonableness not objective, the pleadings in this case show considerable effort and research, indicating that Taylor is a motivated and capable litigant. The court is satisfied that any reasonable person, especially one of Taylor 's ability and motivation, should have known that his claims against Trahan and Blanchard were frivolous.

Finally, the court is satisfied that the pleadings that Taylor has filed provide evidence that these papers were not submitted for a proper purpose. For example, in his motion for summary judgment, filed on July 9, 2000, Taylor asserts that defendants

"could have prevented this civil suit by providing Plaintiff with a section of law making Plaintiff 'subject' to or 'liable' for a so-called income tax. The latest occasion being December, 1999. . . . The reason they have been unable to do so is because no such sections exist in law or fact."

Although the summary-judgment motion was filed after Trahan and Blanchard filed their motion for sanctions, it is evident from the part of his motion quoted that Taylor is unwilling to recognize existing law, and that he blames this suit on Trahan and Blanchard's inability to convince him otherwise. Trahan and Blanchard are under no obligation to convince Taylor that he is subject to the tax laws.

Taylor 's complaint reveals that he has filed at least two frivolous lawsuits in this court because he is unconvinced that he must pay United States income tax. As Taylor continues to maintain this position after this court has made as plain as possible the unquestionable constitutional and legal basis of the income tax as it applies to him, the court doubts whether it lies within any powers of reason to "convince" Taylor. The court also finds that this is evidence of intent to frustrate Trahan and Blanchard in the lawful exercise of their employment. This is not a proper purpose for bringing suit in this court.

Taylor 's pro se status is no shield against sanctions. As the Eleventh Circuit has made plain, "one acting pro se has no license to harass others, clog the judicial machinery with meritless litigation, and abuse already overloaded court dockets." Patterson v. Aiken, 841 F.2d 386, 387 (11th Cir. 1988) (quoting Farguson v. MBank Houston, N.A., 808 F.2d 358, 359 (5th Cir. 1986)). Accordingly the motion for sanctions against Taylor will be granted.

III. ATTORNEYS' FEES & EXPENSES

A. Fees

Trahan and Blanchard have requested attorney's fees and expenses in the amount of $3,681.47 as sanctions against Taylor . Rule 11 specifically contemplates an award of "some or all of the reasonable attorney's fees and other expenses incurred as a direct result of the violation." Fed. R. Civ. P. 11(c)(2). The violation in this instance was the prosecution of this lawsuit. Thus the court must ask what, if any, of Trahan and Blanchard's attorney's fees and expenses in this suit should be allowed as sanctions.

Trahan and Blanchard have submitted detailed billing statements delineating the legal fees and costs of defending the case against them. Although Rule 11 does not provide specific guidance as to what constitutes reasonable fees or expenses, other courts assessing fees and costs as Rule 11 sanctions have used the "lodestar" approach. See, e.g., View Engineering, Inc. v. Robotic Vision Systems, Inc., 208 F.3d 981 (Fed. Cir. 2000); Harsch v. Eisenberg, 956 F.2d 651 (7th Cir. 1992).

The starting point in setting an attorney's fee is determining the "lodestar" figure--that is, the product of the number of hours reasonably expended to prosecute the lawsuit and the reasonable hourly rate for work performed by similarly situated attorneys in the community. After calculating the lodestar fee, the court should then proceed with an analysis of whether this fee should be adjusted upwards or downwards. See Hensley v. Eckerhart, 461 U.S. 424, 433-34, 103 S.Ct. 1933, 1939-40, 76 L.Ed.2d 40 (1983). In making these determinations, the court should be guided by the 12 factors set out in Johnson v. Georgia Highway Express, Inc., 488 F.2d 714, 717-19 (5th Cir. 1974). ¹ See Blanchard v. Bergeron, 489 U.S. 87, 91-92, 109 S.Ct. 939, 943-44, 103 L.Ed.2d 67 (1989). These factors are: (1) the time and labor required; (2) the novelty and difficulty of the questions; (3) the skill required to perform the legal services properly; (4) the preclusion of other employment by the attorney due to the case; (5) the customary fee in the community; (6) whether the fee is fixed or contingent; (7) time limitations imposed by the client or circumstances; (8) the amount involved and the results obtained; (9) the experience, reputation, and ability of the attorneys; (10) the "undesirability" of the case; (11) the nature and length of the professional relationship with the client; and (12) awards in similar cases.

T.J. Woodford, Matthew C. McDonald, and Edward B. Holzwanger represented Trahan and Blanchard in this matter. Woodford seeks compensation for 15.04 hours at a rate of $175.00 per hour; McDonald seeks compensation for 2.88 hours at $205.00 per hour; and Holzwanger seeks compensation for 4.17 hours at a rate of $50.00 per hour.

The court considers three Johnson factors--the time and labor required, the novelty and difficulty of the case, and the customary fee in the community--in assessing the reasonableness of the hours claimed. The court notes that Taylor has not challenged the reasonableness of any of the hours; however, the court itself is obliged to assess independently the reasonableness of the attorney's fees claimed. ² The court, after closely considering the billing records and hours spent, considers that the hours charged were reasonable given the nature of the case. It is also apparent that Woodford, McDonald, and Holzwanger exercised conservative billing judgment by not charging for all their hours. Thus, Trahan and Blanchard are entitled to the following hours: Woodford for 15.04; McDonald for 2.88; and Holzwanger for 4.17.

Next, the court considers the prevailing market rate that should be assessed for these hours. "A reasonable hourly rate is the prevailing market rate in the relevant legal community for similar services by lawyers of reasonably comparable skills, experience, and reputation." Norman v. Housing Authority of Montgomery , 836 F.2d 1292, 1299 (11th Cir. 1988). In civil rights cases in which fees are assessed, the court determines the fee with regard to the remaining Johnson factors. See 488 F.2d at 717-19. However, Johnson factors are only of limited use in this context which does not involve civil rights issues and where the primary consideration is to deter the conduct that is being sanctioned. Nevertheless, the court will consider the following Johnson factors: customary fee; novelty and difficulty of the questions; skill required to perform the legal services properly; experience, reputation, and ability of the attorneys; time limitations; preclusion of other employment; nature and length of the attorneys' relationship with their clients; and awards in similar cases.

Preliminarily, the court notes that there is insufficient evidence to support the Johnson factors of experience and reputation of the attorneys, preclusion of other employment, and the nature and length of the attorneys' relationship with their clients. Moreover, this case did not present any particularly difficult or novel issues, nor was the skill required to defend it beyond that which is usual for competent and experienced lawyers. Nor were there extraordinary time limitations or pressures on the attorneys. However, in the court's experience, the rates requested are reasonably within the mid-range of rates charged in this legal market for this species of civil litigation.

Trahan and Blanchard may recover, therefore, at the following rates: Woodford: $150.00; McDonald $175.00; and Holzwanger: $35.00.

The unadjusted lodestar consists, as stated, of the product of the attorney's compensable hours multiplied by the prevailing market fee. The lodestars for counsel in this case are therefore:

                                     HOURS       RATE          TOTAL

Woodford ........................... 15.04  x  $  150.00  =  $2,256.00

McDonald ...........................  2.88  x     175.00  =     504.00

Holzwanger .........................  4.17  x      35.00  =     145.95

TOTAL ..............................       $2?

The case does not warrant adjusting these lodestars upwards or downwards.

B. Expenses

The defendants seek $75.97 in expenses incurred in connection with this litigation. With the exception of routine overhead office expenses normally absorbed by the practicing attorney, all reasonable expenses incurred in case preparation, during the course of litigation, or as an aspect of settlement of the case, may be taxed as costs. See NAACP v. City of Evergreen , 812 F.2d 1332, 1337 (11th Cir. 1987). Taylor has not specifically objected to any of the items claimed as expenses by Trahan and Blanchard. After independently assessing the expenses, the court finds them generally reasonable with one exception. As stated, there were no extraordinary time limitations on the attorneys in this lawsuit. Consequently, the $10.30 incurred for express delivery is unwarranted. Trahan and Blanchard may therefore recover a total of $65.67 for their expenses.

IV. ABILITY TO PAY

In cases involving violations of Rule 11, "deterrence remains the touchstone" of the court's imposition of sanctions. Baker v. Alderman, 158 F.3d 516, 528 (11th Cir. 1998). Accordingly, the court may consider the ability to pay in assessing sanctions. See id. at 529. In this case, however, Taylor has not raised inability to pay as a defense to the instant motion for sanctions.

V. CONCLUSION

For the foregoing reasons, the court will impose sanctions as follows:

Attorneys Fees .......................................... $2,905.95

Expenses ................................................     65.67

TOTAL ................................................... $2,971.62

 

Accordingly, it is ORDERED as follows:

(1) The motion for sanctions, filed by defendants Candice Trahan and Tina Blanchard on July 7, 2000, is granted.

(2) The amount of $2,971.62 is taxed against plaintiff Robert H. Taylor as a sanction for violating Rule 11 of the Federal Rules of Civil Procedure.

(3) Defendants Trahan and Blanchard shall have and recover $2,971.62 from plaintiff Taylor for their reasonable attorney's fees and expenses.

DONE.

¹ In Bonner v. Prichard, 661 F.2d 1206, 1209 (11th Cir. 1981) (en banc), the Eleventh Circuit Court of Appeals adopted as binding precedent all of the decisions of the former Fifth Circuit handed down prior to the close of business on September 30, 1981.

² Taylor asserts that Trahan and Blanchard have provided no evidence that they themselves paid the fees for their defense. The bills were sent to the their employer, Petroleum Helicopters, Inc. If Trahan and Blanchard have reached an agreement with their employer for their legal fees, this does not infringe on the court's discretion to award fees. There is no reason why Trahan and Blanchard, or anyone who chooses to indemnify them, should bear the expense of defending this litigation. Moreover, Taylor sued Trahan and Blanchard as employees of Petroleum Helicopters, Inc., and, as a result, Petroleum Helicopters, Inc. is also a real party in interest.

 

[2001-2 USTC ¶50,657] Robert H. Taylor, Plaintiff-Appellant v. James C. Gaither, Tina Blanchard, et al., Defendants-Appellees

(CA-11), U.S. Court of Appeals, 11th Circuit, 01-11683, 9/7/2001, Affirming, per curiam, a District Court decision, 2001-2 USTC ¶50,460

[Code Secs. 6332 and 7402 ]

Sanctions: Fed. R. Civ. P. 11: Frivolous arguments: Tax protests: Wages as nontaxable receipts claim.--Sanctions were upheld against an individual who raised patently frivolous tax protest arguments on appeal. The taxpayer's allegations against named employees of his employer of violations of the Racketeer Influenced and Corrupt Organizations Act, federal mail fraud, and extortion were frivolous. His claims that neither he nor his employer were taxable citizens of the United States , and that his wages were nontaxable, also were frivolous. His pro se status did not shield him from liability for sanctions.

Before: EDMONDSON, BIRCH and WILSON , 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

Per Curiam"

EC: Plaintiff-appellant Robert H. Taylor appeals the district court's order awarding sanctions and costs to defendants-appellees Tina Blanchard and Candace Trahan. We AFFIRM.

Taylor, a pro se plaintiff, filed suit in February of 1998 to enjoin his employer from withholding federal income taxes from his paycheck. That case was dismissed and Taylor 's motion for leave to amend was denied. In April of 2000, Taylor brought the current action, making the same allegations but naming as defendants, inter al, ¹ Blanchard and Trahan, who also work for his employer. Taylor 's complaint alleged violations of the Racketeer Influenced and Corrupt Organizations Act (RICO), federal mail fraud, and extortion. In June of 2000, Blanchard and Trahan filed a motion to dismiss and served Taylor with a copy of a motion for sanctions under Federal Rule of Civil Procedure 11. When Taylor did not respond within the time period available for him to withdraw his complaint, Blanchard and Trahan filed the motion for sanctions. The district court granted both the motion to dismiss and the motion for sanctions. Taylor appeals only the award of sanctions.

While the federal courts do not have jurisdiction over any "suit for the purpose of restraining the assessment or collection of any tax," 26 U.S.C. §7421, we retain jurisdiction over the imposition of Rule 11 sanctions in cases where we lack subject-matter jurisdiction. Willy v. Coastal Corp., 503 U.S. 131, 139, 112 S.Ct. 1076, 1081 (1992). We review the imposition of sanctions for abuse of discretion. CNA Fin. Corp. v. Brown, 162 F.3d 1334, 1338 (11th Cir. 1998).

Rule 11 considers the submission of pleading by any litigant as certification that,

to the best of the person's knowledge, information, and belief, formed after an inquiry reasonable under the circumstances, (1) it is not being presented for any improper purpose, such as to harass or to cause unnecessary delay or needless increase in the cost of litigation; [and] (2) the claims, defenses, and other legal contentions therein are warranted by existing law or by nonfrivolous argument for the extension, modification, or reversal of existing law or the establishment of new law; . . . .

FED. R. CIV. PROC. 11. In order to impose sanctions under Rule 11(c), the district court must first determine that a claim is objectively frivolous and that the plaintiff should have been aware that the claim was frivolous. Baker v. Alderman, 158 F.3d 516, 524 (11th Cir. 1998). Sanctions will not be awarded upon a showing of poor judgment, but are appropriate if the plaintiff shows bad faith in filing the claim. Nesmith v. Martin Marietta Aerospace, 833 F.2d 1489, 1491 (11th Cir. 1987) (per curiam). Rule 11 does apply to pro se plaintiffs, and the court must take a plaintiff's pro se status into account in its analysis. Harris v. Heinrich, 919 F.2d 1515, 1516 (11th Cir. 1990) (per curiam). The district court carefully considered both prongs of the test and Taylor 's pro se status in its order, and must be affirmed.

Taylor claims that he is a citizen of Tennessee but not the United States , and that therefore the federal income tax law does not apply to him. He also argues that his employer is "foreign" to the United States because it is incorporated in Louisiana , rather than being an arm of the federal government, and is therefore not eligible to withhold income tax. Finally, he claims that his wages are not included in the federal income tax system because they are not "income," as they are not "for gain or profit," but rather are mere "compensation."

Taylor 's claims are patently frivolous, and it is clear from the record and the district court's opinion that Taylor should have been aware that his claims were frivolous when he filed suit. Taylor 's claims are an unsubtle attempt at protesting the federal income tax system. We have previously held that, "it is clear beyond peradventure that the law is well established and long settled that wages are includable in taxable income." Waters v. Comm'r, 764 F.2d 1389, 1390 (11th Cir. 1985) (per curiam). Further, we have held that any appeal of this issue is patently frivolous and a cause for sanctions. McNair v. Eggers [86-1 USTC ¶9406], 788 F.2d 1509, 1510 (11th Cir. 1986) (per curiam).

The district court also properly found that Taylor 's claims were brought in bad faith. The district court noted that Taylor 's suit was merely an attempt to "frustrate Trahan and Blanchard in the lawful exercise of their employment," which is "not a proper purpose for bringing suit in this court." R1-46-8. When the district court dismissed his first complaint and denied his motion for leave to amend, Taylor received a clear message from the district court that it would not consider Taylor 's challenge to the federal income tax. His insistence upon wasting the time of the nine defendants, the district court, and this court is convincing evidence of bad faith.

Therefore, because Taylor 's claims were frivolous, Taylor should have known that his claims were frivolous, and because the claim was brought in bad faith; the district court's order imposing sanctions is

AFFIRMED.

¹ Though Blanchard and Trahan are only two of nine named defendants, the other seven were not a part of the motion for sanctions at issue in this appeal. Other named defendants include the federal judges who ruled on his first case and employees of the Internal Revenue Service.

 

[2001-2 USTC ¶50,640] Ralph G. Sachs, Plaintiff v. United States of America, acting through the Internal Revenue Service, and Quick and Reilly, Inc., a New York Corp., Defendants

U.S. District Court, East. Dist. Mich. , So. Div., 00-CV-73070-DT, 8/20/2001

[Code Secs. 6331 and 7433 ]

Suits by taxpayers: Unauthorized collection: Constitutional provisions: Fourth Amendment: Failure to state claim.--An individual's complaint alleging that the IRS violated the United States Code, IRS regulations and his constitutional rights in connection with the collection of his tax through liens and levies was dismissed for failure to state a valid claim. His claims that the IRS violated a revenue ruling and an Internal Revenue Manual provision by not physically seizing his negotiable instruments held by his financial broker, as well as the Fourth Amendment by not obtaining a writ of entry when it "constructively seized" his negotiable instruments were without merit. Because such claims were neither provisions of Title 26 of the U.S. Code nor regulations promulgated under Title 26, they were not relevant to a suit for damages under Code Sec. 7433 .

[Code Sec. 1 ]

Constitutional provisions: Bivens claim.--An individual was not permitted to amend his unauthorized collection complaint so that he could bring a Bivens suit against individual IRS employees. Bivens claims seeking monetary damages for actions arising out of the collection of taxes are not valid.

[Code Sec. 6335 ]

Validity of lien: Expiration of.--IRS levies on negotiable instruments owned by an individual were valid despite the individual's claim that notices of federal tax lien against him had expired before the levies were assessed. Because the individual owned the instruments, a valid lien was not required in order to effectuate the levy.

[Code Sec. 6335 ]

Notices of seizure: Sufficiency of.--A taxpayer's claims that he was not provided with the requisite Notice of Seizure in a collection action and that the notice provided to his financial broker was not sufficiently specific were rejected. Because the broker was the possessor of the securities, the IRS was only obligated to provide notice to the broker. Moreover, the IRS properly specified "various negotiable instruments" and attached a list of property to be seized.
[Code Sec. 6502 ]

Statute of limitations: Collection statute expiration date.--The government timely filed a collection action against a taxpayer within the limitations period. The taxpayer's contention that the collection statute expiration date (CSED) had passed was rejected. The record demonstrated that court proceedings to reduce the tax assessment to judgment began three days prior to the CSED.

[Code Sec. 6332 ]

Compliance with levy: Effect of.--A financial broker did not breach its fiduciary duty when it complied with an IRS levy against a taxpayer's holdings. The broker was legally bound to honor the levy and was not required to make a good faith determination that the property was actually subject to a levy.

ORDER GRANTING UNITED STATES' MOTION TO DISMISS AND GRANTING QUICK AND REILLY'S MOTION TO DISMISS

CLELAND, District Judge:

Pending before the court are two motions for dismissal for failure to state a claim upon which relief can be granted, brought by Defendant United States of America ("the U.S. ") and Defendant Quick and Reilly ("Q & R"), filed on October 19, 2000 and October 11, 2000, respectively. The motions are in response to a complaint filed by Plaintiff Ralph Sachs on July 7, 2000, claiming unauthorized collection action against the U.S. and claiming breach of fiduciary duty against Q&R.

I. HISTORY

Internal Revenue Service ("the IRS") Revenue Officer Jacqueline Zogut was assigned to collection from Mr. Sachs of a tax liability resulting from underpayment of taxes in 1978 and 1979. The collection statute expiration date ("CSED") for the tax liability was July 4, 1999. (Compl. ¶8.) The IRS sent a notice of levy to Q&R on June 1, 1999. ( Id. at ¶1.) On July 1, 1999, the IRS initiated court proceedings to have the tax liability reduced to a judgment. The IRS cashed a check from Q&R in the amount of $251,511.09 to satisfy the tax liability on July 13, 1999. The funds were obtained by levying and then liquidating various negotiable instruments owned by Mr. Sachs and held by Q&R in its capacity as a financial broker. On September 23, 1999, Mr. Sachs filed a claim for refund from the IRS, which was rejected on February 9, 2000, thus exhausting his administrative remedies for his claim against the IRS.

II. STANDARD

If a plaintiff fails to state a claim upon which relief can be granted, then a defendant can move for relief under Federal Rule of Civil Procedure 12(b)(6). A Rule 12(b)(6) motion tests whether a claim has been adequately stated in the complaint. ¹ In evaluating a motion to dismiss under Rule 12(b)(6), all well-pleaded factual allegations in the complaint are taken as true and the complaint is construed liberally in favor of the non-moving party. Morgan v. Church's Fried Chicken, 829 F.2d 10, 12 (6th Cir. 1987); Westlake , 537 F.2d at 858; Leeds v. Meltz, 85 F.3d 51, 53 (2d Cir. 1996). A complaint should not be dismissed because it does not state all the elements giving rise to a legal basis of recovery, or because plaintiff misconceived the proper theory or claim, if plaintiff is entitled to relief under any theory. Myers v. United States , 636 F.2d 166, 169 (6th Cir. 1981). However, even though the pleading standard is liberal, bald assertions and conclusions of law will not enable a complaint to survive a Rule 12(b)(6) motion. Leeds , 85 F.3d at 53.

III. ANALYSIS

A. Unauthorized Collection--IRS Claim

Mr. Sachs brings his claim pursuant to 26 U.S.C. §7433(a), which authorizes suits against the U.S. if "in connection with any collection of Federal tax . . . any officer or employee of the [IRS] recklessly or intentionally, or by reason of negligence disregards any provision of this title, or any regulation under this title." He makes essentially six claims: (1) the IRS violated a revenue ruling and Internal Revenue Manual ("IRM") provision by not physically seizing his negotiable instruments, (2) the IRS violated the Fourth Amendment by not obtaining a writ of entry when it "constructively seized" his negotiable instruments, (3) the IRS collected the negotiable instruments without a valid tax lien, (4) the IRS did not follow proper procedure in its summons of a Q&R employee, (5) the IRS did not notify him of the seizure of securities, and (6) the IRS did not collect the liabilities within the allowable time period. The U.S. asserts that Mr. Swift does not present a cognizable basis for relief under §7433.

1. Violation of Revenue Rulings and the IRM

Mr. Sachs points out that Revenue Ruling 75-355, 1975-2 C.B. 478, and IRM §5.11.6.8(3) require physical seizure when negotiable instruments are seized. The U.S., however, claims that since these are neither a provision of Title 26 of the U.S. Code nor a regulation promulgated under Title 26, neither the Revenue Ruling not the IRM are relevant to a suit for damages under §7433.

In Schwarz v. U.S. [2001-1 USTC ¶50,111], 234 F.3d 428, (9th Cir. 2000), the Court of Appeals for the Ninth Circuit addressed the applicability of IRM provisions and the IRS National Policy Statement ("NPS") to §7433 claims. The court wrote that "because the manual and the NPS are not code provisions or regulations, violations of the manual and the NPS cannot support a claim under §7433." Id. at 434. This court is persuaded by the Ninth Circuit's reasoning and by a clear reading of the statute, which states that a successful claim under §7433 only occurs when Title 26, or a regulation promulgated thereunder, is violated. ² Thus, this aspect of Mr. Sachs's claim must fail.

2. Illegal Seizure

Mr. Sachs points to GM Leasing Corp. v. United States [77-1 USTC ¶9140], 429 U.S. 338 (1997), to support his contention that the IRS could not seize his assets without a writ of entry. The IRS, however, never physically seized the assets. Q&R liquidated Mr. Sachs' stocks and gave the IRS a check in satisfaction of his tax liability. Mr. Sachs claims this was a "constructive seizure" because the IRS required Q&R to liquidate his assets.

The Fourth Amendment cannot be part of a §7433 claim, as it is not a part of Title 26, nor a regulation promulgated under Title 26. An action seeking monetary damages for constitutional violations by the government should take the form of a Bivens ³ claim. Given this anticipated determination, Mr. Sachs seeks leave to amend his complaint so he can bring a Bivens suit against individual IRS employees. Mr. Sachs concedes that Bivens actions seeking monetary damages cannot be brought against the U.S. or the IRS. (Resp. to IRS's Mot. at 9.) Granting leave to amend, however, would be pointless because Mr. Sachs cannot bring a Bivens claim seeking monetary damages for actions arising out of the collection of taxes. Fishburn v. Brown [97-2 USTC ¶50,742], 125 F.3d 979, 982-83 (6th Cir. 1997).

3. Lack of a Valid Lien

According to Mr. Sachs, the IRS held four Notices of Federal Tax Lien ("NFTL") against Mr. Sachs, but all four NFTLs had expired before the IRS levied Mr. Sachs' assets that were held by Q&R. (Automated Lien Report, attached as Compl. Ex. A.) He asserts that an NFTL supercedes the statutory lien provided under 26 U.S.C. §6321 ⁴, which is applicable whenever a taxpayer refuses to pay all or part of their taxes. Accordingly, once an NFTL expires, he argues, the statutory lien no longer attaches to the property. Nothing on the NFTL, however, says that it supercedes the statutory lien. (NFTL, attached as Compl. Ex. B.) Moreover, a valid lien is not required for all levies. The Code of Federal Regulations dealing with Title 26 states that "[t]he district director may levy upon any property, or rights to property, whether real or personal, tangible or intangible, belonging to the taxpayer. The district directory may also levy upon all property with respect to which there is a lien. . . . " 26 C.F.R. §301.6331-1 (emphasis added). As the negotiable instruments held by Q&R were owned by Mr. Sachs, a valid lien was not required.

4. Improper Summons

Mr. Sachs claims that the IRS did not follow proper procedure in its summons of Mr. Edwin Mendez, a Q&R employee. He claims that the IRS summons was served by fax and required a response within one day. Pointing to 26 U.S.C. §§7603 ⁵ and 7605(a) ⁶, respectively, Mr. Sachs claims the IRS violated portions of Title 26.

The portions of Title 26 cited by Mr. Sachs are located in Chapter 78, entitled "Discovery of Liability and Enforcement of Title." The summons to Mr. Mendez dealt with a levy and not with the discovery of liability or the enforcement of title. Summonses relating to levies are governed by 26 U.S.C. §6333, located under Chapter 64, Subchapter D, entitled "Collection; Seizure of Property for Collection of Taxes," which states that:

If a levy has been made or is about to be made on any property, or right to property, any person having custody or control of any books or records, containing evidence or statements relating to the property or right to property subject to levy shall, upon demand of the Secretary, exhibit such books or records to the Secretary.

Absent from §6333 is any discussion of the requirements for the processing of a summons intended to effectuate the collection of a levy. Thus, the summons was proper.

5. Lack of Notice of Seizure

Mr. Sachs complains that he was not provided with the requisite Notice of Seizure, mandated by 26 U.S.C. §6335(a), although his attorney was. (Compl. ¶25(v).) He further argues that the Notice of Seizure that was filed was not sufficiently specific, since it only stated that "various negotiable instruments" had been seized. (Resp. to IRS's Mot. at 11-12.)

Although Mr. Sachs claims he was not provided with the Notice of Seizure, attached to Mr. Sachs' complaint was a Notice of Seizure with the addressee listed as "Ralph G Sachs; P.O. Box 10; Troy, MI 48099-0010." Moreover, 26 U.S.C. §6335(a) provides that a Notice of Seizure "shall be given by the Secretary to the owner of the property (or, in the case of personal property, the possessor thereof)." Q&R was the possessor of Mr. Sachs' negotiable instruments (Compl. at ¶12.) As Q&R was the possessor of the securities, the IRS was only required to provide a Notice of Seizure to Q&R.

Mr. Sachs further complains that the Notice of Seizure lacked the requisite specificity. ⁷ (Resp. to IRS's Mot. at 11-12.) The IRS stated that the property seized was "various negotiable instruments," however, which was an account of the property, as required by §6335(a). Moreover, on page two of the Notice of Seizure attached to the Complaint, the IRS lists a description of the property, including the number and type of shares liquidated and then seized. ⁸

6. Statute of Limitations

Mr. Sachs asserts that the levy on the assets held by Q&R was improper because it was not satisfied until after the CSED. The IRS asserts that 26 U.S.C. 6502(a), governing the collection of a levy, allowed it to collect the tax liability after the expiration of the CSED.

The IRS points to the following language of §6502 to support its assertion:

If a timely proceeding in court for the collection of a tax is commenced, the period during which such tax may be collected by levy shall be extended and shall not expire until the liability for the tax (or a judgment against the taxpayer arising from such liability) is satisfied or becomes unenforceable.

26 U.S.C. §6502(a). The IRS brought a proceeding in court on July 1 to reduce the tax assessment to a judgment ⁹, which was prior to the CSED of July 4. Accordingly, the deadline for collecting the tax was extended until the tax liability was satisfied, which occurred on July 13.

Mr. Sachs's only rebuttal to the plain language of this statute is that "a valid levy never occurred on [sic] this case." (Resp. to IRS's Mot. at 12.) He provides no support for this contention. In his complaint and in his response to the IRS's motion, he does discuss the alleged invalidity of the lien, but nowhere else does he make the argument that the levy itself is invalid. Indeed, no evidence on the record supports such a conclusion. Mr. Sachs fails to state how or why the levy was invalid, other than his futile claim, previously discussed, that the levy was improper without a valid lien.

B. Breach of Fiduciary Duty--Q&R Claim

Mr. Sachs's claim against Q&R vaguely avers that because Q&R failed to investigate his assertion that physical seizure was required when levying negotiable instruments, it breached its fiduciary duty to him. (Compl. ¶29.) Q&R responds that it was legally required to comply with an IRS levy.

Mr. Sachs claims that Q&R was not required to liquidate his negotiable instruments and turn them over to the IRS because of Revenue Ruling 75-355, which requires the IRS to satisfy a levy on a negotiable certificate of deposit by having said certificates surrendered to the IRS. Initially, this revenue ruling deals with certificates of deposit and not stocks, as were levied by the IRS in the instant case. Moreover, Q&R is legally bound to honor an IRS levy pursuant to 26 U.S.C. §6332(e), which states that:

Any person in possession of . . . property or rights to property subject to levy and upon which a levy has been made who . . . surrenders such property . . . 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). Indeed, one who ignores a levy may face stiff sanctions, including liability for the entire amount of the levy, plus costs, taxes and a penalty not greater than 50% of the value of the levy. 26 U.S.C. §6332(d)(1), (2).

Mr. Sachs concedes that there was a levy in place. (Compl. ¶¶11, 13.) He also admits that §6332(a) provides statutory immunity to "certain third parties who surrender property pursuant to an Internal Revenue Service . . . levy." (Resp. to Q&R's Mot. at 2.) He argues, however, that Q&R is not entitled to such immunity because "prior to any allowance of immunity under Section 6332(e) the third party involved must make a 'good faith determination' that the property at issue was actually subject to a levy." ( Id. ) Despite the lack of such a limitation on immunity in the language of §6332(e), Mr. Sachs asserts that 26 C.F.R. §301.6332-1(c)(2) requires a "good faith determination" before there is statutory immunity.

The reliance on 26 C.F.R. §301.6332-1(c)(2) is misguided. That section of the Code of Federal Regulations is entitled "Exception for Certain Incorrectly Surrendered Property" and removes statutory immunity when a levy is enforced against property in which an uninvolved third party has an interest, unless the levied party makes a good faith determination that the delinquent taxpayer also has an interest in the levied property. Clearly, that situation has no bearing on the instant case. There is no need for a good faith determination in this case because this suit is not being brought by a third party to whom the levy did not apply. There is no debate that the levied property belonged to Mr. Sachs, nor is there debate that it was Mr. Sachs who incurred the tax liability.

The Complaint only makes one other vague allegation against Q&R that "[a]t all times . . . Q&R's first loyalty was to IRS [sic], and despite explicit Treasury Regulations clearly on point, only after receiving permission from Zogut did Mr. Davidson [of Q&R] agree that the twenty-one day period would conclude as of July 6." ¹⁰ (Compl. ¶30.) The fact that Q&R waited for permission from the IRS to agree that the levy would expire on July 6 is not a basis for a claim of breach of fiduciary duty.

IV. CONCLUSION

For the foregoing reasons, Mr. Sachs has failed to state a claim upon which relief can be granted. Accordingly,

IT IS ORDERED that the United States ' "Motion to Dismiss" is GRANTED.

IT IS FURTHER ORDERED that Quick and Reilly's "Motion to Dismiss Pursuant to Fed.R.Civ.P. 12(b)(6)" is GRANTED.

¹ Federal Rule of Civil Procedure 8 sets forth the pleading requirements for a complaint and requires only a "short and plain statement of the claim." Fed. R. Civ. P. 8(a). Thus, a complaint is sufficient if it gives the defendant "fair notice of what the plaintiff's claim is and the grounds upon which it rests." Conley v. Gibson, 355 U.S. 41, 47 (1957); Westlake v. Lucas, 537 F.2d 857, 858 (6th Cir. 1976). However, the complaint is required to provide a ' "statement of circumstances, occurrences, and events in support of the claim presented.... [T]he complaint must disclose information with sufficient definiteness.' " Veney v. Hogan, 70 F.3d 917, 921-22 (6th Cir. 1995) (citation omitted).

² In addition, Revenue Ruling 75-355 deals with negotiable certificates of deposit, not stock certificates as were levied in this case, making the ruling seemingly inapplicable to Mr. Sachs's case.

³ Bivens v. Six Unknown Named Agents of Federal Bureau of Narcotics, 403 U.S. 388 (1971).

⁴ The statute provides that:

If any person liable to pay any tax neglects or refuses to pay the same after demand, the amount ... shall be a lien in favor of the United States upon all property and rights to property, whether real or personal, belonging to such person.

26 U.S.C. §6321.

⁵ 26 U.S.C. §7603 requires service of a summons by registered or certified mail.

⁶ 26 U.S.C. §7605(a) requires that the IRS allow at least ten days to respond to a summons.

⁷ The Notice of Seizure "shall specify the sum demanded and shall contain, in the case of personal property, an account of the property seized." 26 U.S.C. §6335(a).

⁸ The Notice of Seizure lists the property seized as follows:

 4,950 shares of Lucent Technologies Inc stock

 2,000 shares of Ligand Pharmaceuticals Inc stock

 4,000 shares of Micron Technology Inc stock

    50 shares of Niagara Mohawk Holdings Inc stock

 1,000 shares of PSS World Medical Inc stock

 2,000 shares of Altera Corp stock

36,000 shares of Atmel Corp stock

 1,000 shares of Bank of Tokyo-Mitsubishi Ltd-- stock

 2,000 shares of Cendant Corp stock

 

(Notice of Seizure at 2, attached as Compl. Ex. B.)

⁹ The U.S. withdrew this suit on September 17, 1999, as it was rendered moot by the successful levy of the funds in July.

¹⁰ The levy was received by Q & R on June 11, 1999 and required Q & R to satisfy the levy within twenty one days. Because of the July 4 holiday weekend, the twenty one days expired on July 6, according to Mr. Sachs.

 

[2003-1 USTC ¶50,277] Ralph G. Sachs, Plaintiff-Appellant v. United States of America, acting through the Internal Revenue Service, Defendant-Appellee.

U.S. Court of Appeals, 6th Circuit; 01-2224, 59 FedAppx 116, February 21, 2003.

Unpublished opinion affirming DC Mich., 2001-2 USTC ¶50,640.

[ Code Secs. 6331 and 7433]

Unauthorized collection actions: Civil actions: Damages: Exclusive remedy. --

An individual's complaint was properly dismissed because an alleged IRS violation of the Internal Revenue Manual and a revenue ruling could not support a claim under Code Sec. 7433, as that provision authorizes damages only in cases where Title 26 or any corresponding sections of the regulations have been violated. Alleged Fourth Amendment violations similarly fell outside the scope of Code Sec. 7433. Furthermore, because Code Sec. 7433 is the exclusive remedy for recovering damages against IRS agents for violation of constitutional rights, a Bivens action could not be maintained.

[ Code Secs. 6333 and 6335]

Summonses: Seizure: Notice requirements. --

A summons issued to a brokerage firm that held securities for an individual was proper, even though it did not provide ten-day notice and was not sent by certified mail. The summons was issued for the purpose of collection or seizure pursuant to Code Sec. 6333; therefore, the certified mailing and notice requirements of Code Sec. 7602 did not apply. Furthermore, the IRS was only required to provide a notice of seizure to the brokerage firm, and not to the individual himself.

[ Code Sec. 6502]

Sale of seized property: Notice of sale or seizure. --

An IRS levy on an individual's assets was not barred due to the expiration of the limitations period. The IRS brought suit against the taxpayer prior to the expiration date of the collection statute, whereupon the period of collectibility was extended, and the time period did not lapse until the tax was satisfied.

Before: Daughtrey and Cole, Circuit Judges, and Sargus, District Judge.

¬ Caution: The court has designated this opinion as NOT FOR PUBLICATION. Consult the Rules of the Court before citing this case.®

OPINION

COLE, JR., Circuit Judge: Plaintiff-Appellant Ralph G. Sachs appeals the dismissal of his claim against Defendant-Appellee United States of America, acting through the Internal Revenue Service ("IRS"), for unauthorized collection actions in violation of 26 U.S.C. §7433. Quick and Reilly, Inc. ("Q&R") was also named as a defendant in the original complaint; however, Sachs does not appeal the dismissal of his complaint against Q&R. Pursuant to Federal Rule of Civil Procedure 12(b)(6), the district court dismissed Sachs's complaint for failure to state a claim upon which relief could be granted. For the reasons that follow, we AFFIRM the judgment of the district court.

I. BACKGROUND

Sachs owed the IRS back taxes for the years 1978 and 1979. The Collection Statute Expiration Date ("CSED"), until which the IRS could collect the underlying tax liability in this matter, was July 4, 1999.

On June 1, 1999, the IRS mailed a Notice of Levy to Q&R, the brokerage firm which held Sachs's investment securities. Q&R received the notice on June 11, 1999, and had twenty-one days from the date of receipt to forward the requested funds to the IRS. During this three-week period. Sachs informed Q&R that he believed IRS internal rulings prohibited Q&R from liquidating his securities and forwarding the funds to the IRS. In response, Revenue Officer Jennifer Zogut faxed a summons to Edwin Mendez, Q&R's Assistant Director of Compliance, requesting information regarding the negotiable instruments Q&R held for Sachs, and requesting a response by the next afternoon.

On or about July 1, 1999, Q&R informed Sachs that it was going to respond to the Notice of Levy by liquidating certain securities which he owned and forwarding the corresponding monies to the IRS. On July 1, 1999, the IRS initiated court proceedings to have the tax liability reduced to a judgment.

On or about July 13, 1999, a check in the amount of $251,511.09, in full satisfaction of the levy, was obtained by the IRS from Sachs's account with the local Q&R office. On September 23, 1999, Sachs filed a Form 843, Claim for Refund, which was denied by the IRS. By filing this claim, Sachs effectively exhausted his administrative remedies, thereby providing the district court with jurisdiction over the present suit.

II. ANALYSIS

This Court reviews de novo a district court's grant of a motion to dismiss for failure to state a claim pursuant to Federal Rule of Civil Procedure 12(b)(6). Downie v. City of Middleburg Heights , 301 F.3d 688, 693 (6th Cir. 2002). In reviewing a Rule 12(b)(6) motion, this Court treats all well-pleaded allegations in the complaint as true, and the Court affirms the dismissal only where "it appears beyond doubt that the plaintiff can prove no set of facts in support of the claims that would entitle him or her to relief." Id.

A. Absence of Physical Seizure

26 U.S.C. §7433(a) provides for the recovery of damages resulting from unauthorized collection activities when "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." Section 6331(a) of the Internal Revenue Code ("the Code") states that when any person is liable to pay any tax and neglects or refuses to pay that tax, it shall be lawful for the United States to collect that tax "by levy upon all property and rights to property ... belonging to such a person or on which there is a lien provided in this chapter for the payment of such tax." 26 U.S.C. §6331(a). The Code also notes that "[t]he term `levy' as used in this title includes the power of distraint and seizure by any means." 26 U.S.C. §6331(b).

Sachs contends that the IRS was required to physically seize the securities, rather than "seizing" their monetary value by check after their liquidation. In failing to physically seize the securities, Sachs argues that the IRS violated §6331 of the Code, thereby entitling Sachs to damages under §7433.

Section 7433 of the Code authorizes damages for the intentional, reckless, or negligent disregard of a "provision of this title, or any regulation promulgated under this title." 26 U.S.C. §7433(a). A successful claim under §7433 can only occur, therefore, when Title 26, or a regulation promulgated thereunder, is violated. Here, the alleged violation is a violation of the Internal Revenue Manual and a Revenue Ruling. These are not violations of Title 26, nor are they violations of any corresponding sections of the Code of Federal Regulations. As such, Sachs's claim falls outside the scope of §7433's protection.

The Ninth Circuit has ruled similarly. In Shwarz v. United States [ 2001-1 USTC ¶50,111], 234 F.3d 428 (9th Cir. 2000), the court ruled that "because the [IRS] manual and the [IRS National Policy Statement] are not code provisions or regulations, violations of the manual and the NPS cannot support a claim under §7433." Id. at 434; see also Gonsalves v. Internal Revenue Serv. [ 92-2 USTC ¶50,474], 975 F.2d 13, 16 (1st Cir. 1992) (holding that §7433 does not support a claim for a "right" that is created by internal IRS policy); cf. Schweiker v. Hansen, 450 U.S. 785, 789 (1981) ( per curiam) (holding that an agency policy manual "is not a regulation," "has no legal force," and "does not bind" the agency).

Because the alleged violation pertains to an internal IRS policy, rather than a portion of the Code or corresponding regulations, §7433 cannot support a claim by Sachs based on the failure of the IRS to physically seize the actual securities.

B. Illegal Seizure in Violation of the Fourth Amendment

Sachs argues that by forcing Q&R to liquidate the securities, the IRS "constructively seized" the assets, and that by constructively forcing this liquidation to obtain a check rather than the instruments themselves, the United States violated the Fourth Amendment. Sachs contends that this position is supported under any one of three alternative theories: (1) a §7433 theory: (2) a G.M. Leasing theory; and (3) a Bivens theory.



1. Section 7433 Theory

The Fourth Amendment is not a provision of Title 26, nor is it a regulation promulgated thereunder. See 26 U.S.C. §7433(a). Thus, by the plain language of the statute alleged Fourth Amendment violations fall outside its scope.



2. G.M. Leasing Theory

Sachs argues that the IRS was required to obtain a writ of entry in order to physically seize his securities. The Supreme Court has held that a warrantless entry by IRS agents into a corporation's private offices violated the Fourth Amendment because a search of private property without proper consent is unreasonable unless it has been authorized by a valid search warrant. G.M. Leasing Corp. v. United States [ 77-1 USTC ¶9140], 429 U.S. 338, 352-53 (1977).

In this case, the IRS agents never entered any private property of Sachs. Sachs nevertheless argues that because the securities were seized on behalf of the government and subsequently liquidated on the government's behalf, this "constructive seizure" was substituted for the required physical seizure, and therefore gives rise to a Fourth Amendment claim.

G.M. Leasing does not support the extrapolation suggested by Sachs. In this context, the "constructive seizure" that Sachs contends occurred is not the legal equivalent of an actual, physical seizure because G.M. Leasing recognizes a Fourth Amendment violation based on the privacy concerns that accompany a physical intrusion. The G.M. Leasing Court stated that, while §6331 of the Code is "silent on the subject of intrusions into privacy," it is also an "authorization for all forms of seizure." Id. at 358 (emphasis added). While the IRS does need a warrant to enter private premises in order to seize a delinquent taxpayer's property, the IRS does not need judicial authorization to simply seize property where it does not intrude upon privacy rights. See id. at 358: see also Maraziti v. First Interstate Bank of Cal. [ 92-1 USTC ¶50,206], 953 F.2d 520, 524 (9th Cir. 1992) (stating that "when the government seizes property to collect delinquent taxes, there is no violation of the Fourth Amendment if the seizure is not an invasion of the taxpayer's personal effects or premises"). The G.M. Leasing Court did not find a Fourth Amendment violation in the seizure of automobiles which "took place on public streets, parking lots, or other open places and did not involve any invasion of privacy." [ 77-1 USTC ¶9140], 429 U.S. at 351.

Because the IRS did not invade Sachs's privacy rights, G.M. Leasing does not support a finding in the present case that there was a Fourth Amendment violation.



3. Bivens Theory

Lastly, Sachs argues that he is able to state a claim for a Fourth Amendment violation under Bivens v. Six Unknown Named Agents of Federal Bureau of Narcotics, 403 U.S. 388 (1971). In Bivens, the Court held that damages may be obtained for injuries resulting from a violation of the Fourth Amendment by federal officials. Id. at 395-96.

This argument is unavailing because this Court has held that a Bivens claim seeking monetary damages cannot be brought for actions arising out of the collection of taxes. See Fishburn v. Brown [ 97-2 USTC ¶50,742], 125 F.3d 979, 982-83 (6th Cir. 1997); accord Downie, 301 F.3d at 695 (citing Fishburn for the proposition that a taxpayer cannot bring a Bivens action against IRS agents for Fourth Amendment violations).

Sachs contends that Fishburn should not be read as a blanket prohibition against claims for monetary damages for actions out of the collection of taxes. Rather. he asserts that Fishburn only precludes Bivens actions that should have been part of a §7433 claim. There is no basis for such a reading of Fishburn.

This Court has previously stated explicitly and unequivocally that taxpayers cannot "bring a Bivens action against IRS agents for violations of [their] Fourth Amendment rights." Downie. 301 F.3d at 695. Section 7433 provides that it shall be the "exclusive remedy for recovering damages from such actions." 26 U.S.C. §7433(a). "Although the damages provision does not mention constitutional violations, [this Court] noted that `[t]hese carefully crafted legislative remedies confirm that, in the politically sensitive realm of taxation, Congress's refusal to permit unrestricted damages actions by taxpayers has not been inadvertent." Downie, 301 F.3d at 695 (quoting Fishburn [ 97-2 USTC ¶50,742], 125 F.3d at 983).

Thus, because Bivens actions are not available to taxpayers claiming violations of the Fourth Amendment, Sachs's Bivens theory is not a valid claim for which relief may be granted.

Because none of the theories provided by Sachs is legally viable, the district court's dismissal of his Fourth Amendment claim under 12(b)(6) was proper.

C. Remaining Issues

In addition, we are not persuaded by any of the other arguments asserted by Sachs on this appeal. First, Sachs argues that he possesses an actionable claim under 26 U.S.C. §7433(a) because the IRS did not possess a valid federal tax lien. However, the IRS did possess a valid lien, statutorily imposed pursuant to 26 U.S.C. §6321. Moreover, a valid federal lien is not required for the IRS to levy property under 26 U.S.C. §6331.

Sachs also contends that the IRS issued an improper summons because the summons was not sent by certified mail, and the summons did not provide ten-day notice. This argument is unavailing because these requirements apply to summonses issued for the purpose of ascertaining the correctness of a return, making a return, or determining a tax liability pursuant to 26 U.S.C. §7602. The summons in question here, however, was issued for the purpose of collection or seizure pursuant to 26 U.S.C. §6333, and the certified mailing and notice requirements therefore do not apply.

Next, Sachs asserts that the IRS failed to adequately notify Sachs of the seizure. Pursuant to 26 U.S.C. §6335, the IRS was only required to provide a notice of seizure to Q&R, and it properly did so.

Lastly, Sachs argues that the levy on the assets held by Q&R was improper because the statute of limitations had expired. The period during which a tax may be collected is extended if a court proceeding is filed, and the time period shall not lapse until the liability for the tax is satisfied. See 26 U.S.C. §6502(a). Because the IRS brought suit against Sachs prior to the expiration date of the collection statute, the deadline was extended.

III. CONCLUSION

For the foregoing reasons, we AFFIRM the judgment of the district court.

[2001-2 USTC ¶50,693] Jonathan Scott: O'Neill, Creditor, Secured Party, Claimant, Plaintiffs v. Hilton Grand Vacations Club, Rebecca Sloan, Esq., Ernest Iwata, Sharon Wong, Lydia Nahua, Does 1-100, Defendants

U.S. District Court, Dist. Hawaii, 01-452 DAE LEK, 9/21/2001

[Code Secs. 6332 , 7402 and 7421 ]

Levies: Failure to surrender property: Employer: Effect of honoring levy: Sovereign immunity: IRS agents: Injunctions: Restraining order.--An individual who challenged an IRS levy against his wages, arguing that the levy was improper and that the funds were being illegally withheld, was denied injunctive relief barring his employer and the IRS from continuing to hold the monies. The taxpayer did not have a likelihood of success on the merits of his underlying claims. The employer was not liable to him for complying with the levy, and the taxpayer failed to establish that the IRS agents named in the suit had waived their sovereign immunity. Moreover, he did not show that he had complied with all of the administrative prerequisites to challenging the levy.

ORDER DENYING WITHOUT PREJUDICE PLAINTIFF'S MOTION FOR A PRELIMINARY INJUNCTION AND TEMPORARY RESTRAINING ORDER

EZRA, Chief District Judge:

Pursuant to Local Rule 7.2(d), the court finds this matter suitable for disposition without a hearing.

On June 12, 2001, Plaintiff, acting pro se, filed a Complaint in the Circuit Court of the First Circuit in the State of Hawaii . Defendants removed the action to this court on July 5, 2001. Although the Complaint is very difficult to understand, Plaintiff appears to be challenging Defendants'e ¹ alleged withholding of certain money belonging to him. Apparently, the Complaint arises from a levy that the Internal Revenue Service ("IRS") placed on Plaintiff's wages. Plaintiff contends that the levy was improper and that funds are being illegally withheld from him, although he does not specifically list causes of action against Defendants.

On July 10, 2001, Defendants Hilton Grand Vacations and Rebecca Sloan filed a Motion to Dismiss Plaintiff's Complaint, arguing, among other things, that 26 U.S.C. §6332 rendered them immune from suit. On August 9, 2001, the other named Defendants (the IRS agents, represented by the United States ) also filed a Motion to Dismiss, arguing, among other things, that it has sovereign immunity and that Plaintiff, in any event, cannot challenge the wage levy by filing suit in the district court. These Motions are set for hearing October 15, 2001.

Shortly before these Motions were to be heard, however, Plaintiff (still acting pro se) filed a Motion for Preliminary Injunction and Temporary Restraining Order on September 18, 2001. The Motion seeks to restrain Defendants from continuing to hold Plaintiff's money. It contains no legal argument or authority.

The court finds that it would be premature to act on the instant Motion for Preliminary Injunction or Temporary Restraining Order before acting on the Motions to Dismiss currently pending and scheduled to be heard less than one month from now. If Plaintiff's Complaint survives Defendants' Motions to Dismiss, he may re-file a Motion for Preliminary Injunction or TRO.

In addition, even if prudence and judicial economy did not require the denial of Plaintiff's Motion at this time, the court would still deny it because it does not meet the requirements for issuance of a Preliminary Injunction or TRO. The Ninth Circuit authorizes district courts to issue a temporary restraining order/preliminary injunction if: (1) the motion raises serious questions on the merits; and (2) the balance of hardships tips sharply in the moving party's favor. See Los Angeles Memorial Coliseum Comm'n v. National Football League, 634 F.2d 1197, 1202 (9th Cir. 1980); Dumas v. Commerman, 865 F.2d 1093, 1095 (9th Cir. 1989).

In this case, the Motion does not raise any serious questions on the merits--indeed it does not raise any legal arguments at all. Moreover, from a review of the record, it appears that Plaintiff does not have a likelihood of success on the merits on his underlying claims in any event. Under 26 U.S.C. §6332(e), employers complying with notices of levy from the IRS are immune from suit by the taxpayer, making it unlikely that Plaintiff can press his claims against Hilton Grand Vacations and Rebecca Sloan. As for his claims against the IRS agents, Plaintiff is unlikely to succeed because he has failed to allege or demonstrate a statutory waiver of sovereign immunity. He further fails to establish that he has complied with all the administrative prerequisites to challenging a tax levy. In general, he has failed to even state precisely under what statute or legal theory the IRS agents might be liable. ²

For these reasons, then, the court finds that a preliminary injunction or TRO should not be issued at this time. Of course, this is not a final determination on the merits of Defendants' Motions to Dismiss, only a finding that Plaintiff is not likely to succeed on his claims. The Motions to Dismiss will be decided at or after the scheduled hearing on October 15, 2001. Plaintiff's Motion for Preliminary Injunction or TRO, however, is DENIED WITHOUT PREJUDICE.

IT IS SO ORDERED.

¹ The named Defendants in this case are Plaintiff's employer, Hilton Grand Vacations, and its general counsel Rebecca Sloan. Plaintiff also names Ernest Iwata, Lydia Nauha and Sharon Wong, who are, to the best of the court's understanding, employees of the Internal Revenue Service in Hawaii .

² Because this court has found that Plaintiff fails to raise serious questions on the merits, it need not reach the second prong of the preliminary injunction test (whether the balance of hardships tips in Plaintiff's favor).

 

[2002-1 USTC ¶50,122] Jonathan Scott: O'Neill, Creditor, Secured Party, Claimant-Plaintiff v. Hilton Grand Vacations Club, Rebecca Sloan, Esq., Ernest Iwata, Sharon Wong, Lydia Nahua, Does 1-100, Defendants

U.S. District Court, Dist. Hawaii, 01-00452 DAE LEK, 10/16/2001, Previous decision in this same case, 2001-2 USTC ¶50,693

[Code Secs. 6332 and 7402 ]

Levies: Employer: Effect of honoring levy: Sovereign immunity: Official capacity of IRS agents: Jurisdiction: Pleading requirements.--A pro se individual's complaint against the government and his employer, for levied wages, was dismissed for lack of jurisdiction. The employer was immune from suit, under Code Sec. 6332 , because it simply complied with an IRS levy on the taxpayer's wages. The government had not waived its sovereign immunity nor consented to suit, and the IRS agents individually named were acting in their official capacity and could not be liable. Moreover, even if subject matter jurisdiction existed, the motions to dismiss would be granted because the taxpayer's complaint was extremely vague and did not meet the liberal pleading requirements necessary to show that he was entitled to any relief.

ORDER GRANTING DEFENDANTS' MOTIONS TO DISMISS

EZRA, Chief District Judge:

The court heard Defendants' Motions on October 15, 2001. Timothy Walker, Esq., appeared at the hearing on behalf of Defendants Hilton Grand Vacations Company and Rebecca Sloan; Department of Justice Attorney Keith S. Blair appeared on behalf of federal Defendants Ernest Iwata, Lydia Nahua, and Sharon Wong. Plaintiff Jonathan Scott O'Neill appeared pro se. After considering Defendants' Motion and the supporting and opposing memoranda, the court GRANTS Defendants' Motions to Dismiss.

BACKGROUND

On June 12, 2001, Plaintiff, acting pro se, filed a Complaint in the Circuit Court of the First Circuit in the State of Hawaii . Defendants removed the action to this court on July 5, 2001. Although the Complaint is very difficult to understand, Plaintiff appears to be challenging Defendants' ¹ alleged withholding of certain money belonging to him. Apparently, the Complaint arises from a levy that the Internal Revenue Service ("IRS") placed on Plaintiff's wages. Plaintiff contends that the levy was improper and that funds are being illegally withheld from him, although he does not specifically list causes of action against Defendants.

On July 10, 2001, Defendants Hilton Grand Vacations and Rebecca Sloan filed a Motion to Dismiss Plaintiff's Complaint, arguing, among other things, that 26 U.S.C. §6332 rendered them immune from suit. On August 9, 2001, the other named Defendants (the IRS agents, represented by the United States ) also filed a Motion to Dismiss, arguing, among other things, that it has sovereign immunity and that Plaintiff, in any event, cannot challenge the wage levy by filing suit in the district court. On August 13, 2001, Plaintiff filed a brief Opposition to the Motions. Defendants did not file any Replies.

Shortly before these Motions to Dismiss were to be heard, Plaintiff (still acting pro se) filed a Motion for Preliminary Injunction and Temporary Restraining Order on September 18, 2001. The Motion sought to restrain Defendants from continuing to hold Plaintiff's money. It contained no legal argument or authority. On September 21, 2001, the court denied this motion, finding that it would not be prudent to address it so soon before the hearing on the Motions to Dismiss. Moreover, the court held that Plaintiff's Motion did not meet the requirements necessary for the issuance of the TRO; specifically, Plaintiff had not raised any serious questions or shown a likelihood of success on the merits.

Currently before the court are Defendants' Motions to Dismiss Plaintiff's Complaint.

STANDARD OF REVIEW

A motion to dismiss will be granted where the plaintiff fails to state a claim upon which relief can be granted. Fed. R. Civ. P. 12(b)(6). For the purposes of a 12(b)(6) motion, "[r]eview is limited to the contents of the complaint." Clegg v. Cult Awareness Network, 18 F.3d 752, 755 (9th Cir. 1994).

A complaint should not be dismissed "unless it appears beyond doubt that plaintiff can prove no set of facts in support of [her] claim which would entitle [her] to relief." Buckey v. County of Los Angeles, 968 F.2d 791, 794 (9th Cir. 1992) (quoting Love v. United States, 915 F.2d 1242, 1245 (9th Cir. 1989) (further citations omitted). All allegations of material fact are taken as true and construed in the light most favorable to the plaintiff. Id.

To the extent, however, that "matters outside the pleadings are presented to and not excluded by the court, the motion shall be treated as one for summary judgment." Fed. R. Civ. P. 12(b); Del Monte Dunes at Monterey, Ltd. v. Monterey , 920 F.2d 1496, 1507 (9th Cir. 1990).

DISCUSSION

A. Hilton and Rebecca Sloan's Motion to Dismiss

Defendants Hilton and Rebecca Sloan argue that 26 U.S.C. §6332(e) renders them immune from liability based on their compliance with an IRS Notice of Levy. This court agrees. The statute states:

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); see also Farr v. United States [93-1 USTC ¶50,229], 990 F.2d 451, 456 (9th Cir. 1993) (noting that the provision of immunity is broadly interpreted). Therefore, the plain language of the statute makes clear that Plaintiff's employers cannot be liable to him for withholding funds when such withholding was the result of an IRS levy. The Seventh Circuit addressed a similar issue in Moore v. General Motors Pension Plans [96-2 USTC ¶50,539], 91 F.3d 848 (7th Cir. 1996). The court held that the defendant could not be held liable for its compliance with an IRS levy, even if the levy turned out to be invalid. See id.; accord Melton v. Teachers Ins. & Annuity Ass'n of America [97-2 USTC ¶50,492], 114 F.3d 557 (5th Cir. 1997). Defendant here has made no showing that Defendants Hilton and Rebecca Sloan are not entitled to the immunity which is clearly afforded to them under the statute. Their Motion is GRANTED.

B. The Government's Motion

The Government has also moved to dismiss this case against the three named IRS employees. It argues essentially that the United States has not waived sovereign immunity. The court again agrees.

The United States is a sovereign and as such, is immune from suit without its prior consent. See Hutchinson v. United States [82-1 USTC ¶9405], 677 F.2d 1322, 1327 (9th Cir. 1982). The Government's sovereign immunity is broad and generally cannot be abrogated except by express waiver. See Miller v. United States [95-2 USTC ¶50,516], 66 F.3d 220, 222 (9th Cir. 1995) (citing United States v. Nordic Village, Inc. [92-1 USTC ¶50,109], 503 U.S. 30, 33-35 (1992)). Moreover, plaintiffs have the burden of establishing subject matter jurisdiction, i.e., that sovereign immunity has been waived in a given case. See Haisten v. Grass Valley Medical Reimbursement Fund, Ltd., 784 F.2d 1392, 1396 (9th Cir. 1986).

Here, Plaintiff has made no showing that the United States has waived sovereign immunity such that he can bring the instant claims against the IRS. Several sections of the Tax Code do waive sovereign immunity in certain circumstances, but none of them apply here. For example, 26 U.S.C. §7426(a) provides that third parties may sue the Government when their property has been levied to satisfy the tax lien of another. But, the taxpayer himself is not entitled to bring such suit. See Allied/Royal Parking L.P. v. United States [99-1 USTC ¶50,229], 166 F.3d 1000, 1004 (9th Cir. 1999). In addition, the Declaratory Judgment Act does not help Plaintiff here (insofar as he is seeking a declaratory judgment) because even though courts typically have jurisdiction under the Act, they may not grant relief in controversies "with respect to Federal taxes." 28 U.S.C. §2201.

Before a taxpayer can bring suit in district court, he must either seek review in the Tax Court or else pay the entire amount due and sue for a refund. See Life Science Church v. Internal Revenue Service [81-2 USTC ¶9798], 525 F.Supp. 399, 402-03 (N.D. Cal. 1981) (citations omitted); see also 26 U.S.C. §1346(a)(1) (regarding refund suits). In this case, Plaintiff has made no showing that he has complied with either of these prerequisites. ² All told, Plaintiff has not established in any way a waiver of sovereign immunity such that this court can proceed with this case.

Finally, the court notes that even if there were not a sovereign immunity problem here, the court would still grant the Government's Motion to Dismiss because the Complaint is so vague and confusing as to not even meet the extremely liberal pleading requirements of Federal Rule of Civil Procedure 8. Rule 8 requires complaints to set forth "a short and plain statement of the grounds upon which the court's jurisdiction depends," and "a short and plain statement of the claim showing that the pleader is entitled to relief." As noted earlier, Plaintiff did not set forth a waiver of sovereign immunity and therefore failed to establish grounds for this court's jurisdiction. In addition, while Plaintiff's Complaint is quite long, it fails to set out specific statutory or common laws claims on which Plaintiff might be entitled to relief, leaving this court to guess the sources of Plaintiff's claims. For this reason too, then, Plaintiff's Complaint fails to state a claim on which relief may be granted. The Government's Motion to Dismiss, therefore, is GRANTED WITHOUT PREJUDICE for Plaintiff to seek relief the appropriate circumstances in the U.S. Tax Court.

CONCLUSION

For the foregoing reasons, the court GRANTS Defendants' Motions to Dismiss.

IT IS SO ORDERED.

¹ The named Defendants in this case are Plaintiff's employer, Hilton Grand Vacations, and its general counsel Rebecca Sloan. Plaintiff also names Ernest Iwata, Lydia Nahua and Sharon Wong, who are, to the best of the court's understanding, employees of the Internal Revenue Service in Hawaii .

² The instant suit cannot be construed as a refund suit, as it appears that Plaintiff has not yet paid the entire amount. Moreover, a refund suit must be brought against the United States and not against individually named IRS agents, as Plaintiff has done here. See 26 U.S.C. §7422(f).

 

[2002-1 USTC ¶50,286] Charles Raymond Dietz, Sr. v. Connecticut General Life Insurance Company

U.S. District Court, Dist. Md., Civ. JFM-01-3292, 1/17/2001, 179 F. Supp. 2d 532, 179 FSupp2d 532, 2001 U.S. Dist. LEXIS 22283

[Code Sec. 6332 ]

Levy and distraint: Taxpayer's property in possession of third party: Pension payments: Effect of honoring levy.--A pro se individual's wrongful levy claim against a life insurance company was dismissed. The company was required to surrender the taxpayer's pension payments to the IRS pursuant to Code Sec. 6332 . Moreover, wrongful levy actions have to be asserted against the IRS, rather than against the party upon which the notice of levy is served.

Charles Raymond Dietz, Sr., Baltimore, Md., pro se. Bryan D. Bolton, Funk and Bolton PA, Baltimore, Md., for defendant.

MEMORANDUM

MOTZ, District Judge:

Plaintiff, who is representing himself, and Connecticut General Life Insurance Company ("Connecticut General") have filed motions for summary judgment. ¹ Plaintiff's motion will be denied, and Connecticut General's will be granted. ²

The gravamen of plaintiff's claims is that Connecticut General has wrongfully honored a notice of levy from the Internal Revenue Service directing Connecticut General to forward all pension payments payable to plaintiff to the IRS as those payments become due. To the extent that plaintiff has asserted state law claims, they are preempted by ERISA. More fundamentally, federal law imposes upon a person receiving a levy from the IRS to surrender the property of the taxpayer subject to the levy to the IRS, see 26 U.S.C. §6332 (2001); United States v. National Bank of Commerce [85-2 USTC ¶9482], 472 U.S. 713, 720-21, 86 L.Ed.2d 565, 105 S.Ct. 2919 (1985); Congress Talcott Corp. v. Gruber [93-1 USTC ¶50,283], 993 F.2d 315, 318 (3d Cir. 1993). Any claim that the levy is wrongful must be asserted against the IRS itself, not against the person upon whom the notice of levy is served. ³

A separate order effecting the rulings made in this memorandum is being entered herewith.

ORDER

As stated in the accompanying memorandum, it is, this 17th day of January 2002 [sic]

ORDERED

1. The motion to dismiss or for summary judgment filed by CIGNA Retirement Investment Services is treated as one to dismiss and, as such, is granted;

2. Connecticut General Life Insurance Company is substituted as the party defendant for CIGNA Retirement Investment Services;

3. Plaintiff's motion for summary judgment is denied;

4. The motion for summary judgment filed by Connecticut General Life Insurance Company is granted; and

5. Judgment is entered in favor of Connecticut General against plaintiff.

¹ The defendant originally named in the complaint was CIGNA Retirement Investment Services, a marketing name used by Connecticut General and other CIGNA companies. CIGNA Retirement Services has filed a motion to dismiss that I will grant. However, the order of dismissal will substitute Connecticut General as a defendant (which has, as I have already indicated, filed a motion for summary judgment of its own).

² The case was originally filed in the Maryland District Court, a small claims court. When it was initially removed, in accordance with my routine practice in pro se cases arising under ERISA removed from the Maryland District Court, I indicated that I would appoint counsel to represent plaintiff. However, after reviewing Connecticut General's motion for summary judgment, I realized that this is not a usual ERISA case (in which removals from the Maryland District Court can be perceived as an abusive defense tactic warranting the appointment of counsel for plaintiff) but one involving the alleged improper collection of federal taxes (in which Connecticut General's removal is entirely appropriate). Accordingly, I changed my mind about appointing counsel for plaintiff and so advised the parties.

³ Plaintiff suggests that he is entitled to have his case heard by a three-judge district court. Such courts are authorized only in actions challenging the constitutionality of the apportionment of congressional districts or the apportionment of any statewide legislative body. 28 U.S.C. §2284. This case is obviously not such an action.

 

[2004-2 USTC ¶50,306] Joseph Kenneth Howell, Plaintiff v. Wayne County Airport Authority, Defendant/Third-Party Plaintiff v. Internal Revenue Service, Third-Party Defendant.

U.S. District Court, East. Dist. Mich. , So. Div.; Civ. 03-40183, May 14, 2004.

[ Code Sec. 6332]

Suits enjoining assessment or collection: Surrender of property: Effect of honoring levy. --

A taxpayer's civil claim against his employer for honoring the IRS's levy against his wages was dismissed for failure to state a claim upon which relief could be granted. The employer was required to honor the levy, otherwise the employer would have been subject to liability under Code Sec. 6332. Moreover, Code Sec. 6332(e) specifically shields employers from liability that results from honoring an IRS levy. Finally, the court stated that any challenge to the levy should have been brought against the IRS and not against the employer who was simply following the law.

ORDER OF DISMISSAL

GADOLA, District Judge: There are three motions and a show cause order pending in this case. This order will resolve all the pending matters.

Joseph Howell, plaintiff, owes some $20,648.10 in unpaid taxes and interest to the Internal Revenue Service ("IRS"), and the IRS has issued a levy on Mr. Howell's wages. Mr. Howell's employer, Wayne County Airport Authority ("WCAA"), defendant, has honored this levy. On July 23, 2003, Mr. Howell, who is proceeding pro se, initiated this civil action against WCAA for honoring the IRS levy. In addition to answering the complaint, WCAA filed a third-party complaint against the IRS on August 19, 2003. WCAA's third-party complaint requests a judgment against the IRS for all sums that may be adjudged against WCAA as the result of this action. On October 9, 2003, the IRS filed a motion to dismiss WCAA's third-party complaint. See Fed. R. Civ. P. 12(b)(1) & (6).

Upon review of the IRS's motion and other filings in this action, the Court questioned whether it had subject matter jurisdiction because the allegations in the complaint appeared to be "totally implausible, attenuated, unsubstantial, frivolous, devoid of merit, or no longer open to discussion." Apple v. Glenn, 183 F.3d 477, 479 (6th Cir. 1999); see also Fed. R. Civ. P. 12(b)(1); Fed. R. Civ. P. 12(h)(3). Thus, on October 27, 2003, the Court, sua sponte, ordered Mr. Howell to show cause why this civil action should not be dismissed.

Meanwhile, WCAA appears to have been thinking along the same lines as the Court: WCAA filed a motion to dismiss the complaint for failing to state a claim upon which relief could be granted. See Fed. R. Civ. P. 12(b)(6). This motion was filed in the clerk's office on October 24, 2003. The Court received this motion after it had issued its show cause order. Because the reasoning in the Court's show cause order is so similar to the arguments in WCAA's motion, the Court will dismiss its sua sponte show cause order as moot.

Finally, with his response to WCAA's motion, Mr. Howell filed his own motion, a motion for summary judgment in opposition, on November 7, 2003. His response and his motion are contained within a single document and are indistinguishable from one another.

As argued by the IRS in its motion and by WCAA in its motion, Plaintiff has clearly failed to state a claim upon which relief can be granted. First of all, WCAA has no alternative but to honor the levy: the Internal Revenue Code mandates that "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 shall, upon demand of the Secretary [of the Treasury], surrender such property or rights ... to the Secretary." 26 U.S.C. §6332(a). Further, entities failing to honor a levy are subject to personal liability and penalties under the Internal Revenue Code. See 26 U.S.C. §§6332(d)(1)-(2).

More importantly, the Internal Revenue Code, specifically 26 U.S.C. §6332(e), ¹ shields entities, such as WCAA, from any liability that results from honoring an IRS levy. See 26 U.S.C. §6332(e); State Bank of Fraser v. United States [ 88-2 USTC ¶9592], 861 F.2d 954, 958 (6th Cir. 1988). Consistent with §6332(e)'s grant of immunity, 26 U.S.C. §7421(a) provides that, absent a specified exception, "no suit for the purpose of restraining the assessment or collection of any tax shall be maintained in any court by any person, whether or not such person is the person against whom such tax was assessed." See 26 U.S.C. §7421(a). "The purpose of [ §7421(a)] is to give the [IRS] a free hand in assessing and collecting taxes claimed to be due without intervention on the part of the courts." Queen City Sav. & Loan Ass'n v. Sanders [ 80-2 USTC ¶9657], No. C78-800M, 1980 WL 1642, at *2 (W.D. Wash. Aug. 7, 1980) (citing Enochs v. Williams Packing Co. [ 62-2 USTC ¶9545], 370 U.S. 1 (1962)).

Moreover, if the IRS issued the levy in error, any challenge by Mr. Howell concerning the levy should be brought against the United States and not his employer who has dutifully obeyed the law in honoring the levy. See 26 U.S.C. 7426(a)(1); State Farm Mut. Auto. Ins. Co. v. Internal Rev. Serv., No. 5:03-CV-1013, 2003 WL 22429275, at *1 (N.D. Ohio Sept. 18, 2003).

Consequently, as the Internal Revenue Code protects WCAA from liability in this situation, Mr. Howell's complaint against WCAA for honoring the IRS levy fails to state a claim upon which relief can be granted, and the Court will dismiss the complaint as well as the corresponding third-party complaint. See Fed. R. Civ. P. 12(b)(6).

ACCORDINGLY, IT IS HEREBY ORDERED that Defendant Wayne County Airport Authority's motion to dismiss [docket entry 18] and Third-Party Defendant's motion to dismiss [docket entry 14] are GRANTED: the complaint and the corresponding third-party complaint are DISMISSED.

IT IS FURTHER ORDERED that Plaintiff Joseph Howell's motion for summary judgment in opposition [docket entry 24] is DENIED.

IT IS FURTHER ORDERED that the Court's show cause order [docket entry 22] is DISMISSED AS MOOT.

SO ORDERED.

¹ 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 (or who pays a liability under subsection (d)(1)) 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."