Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-azd-2_05-cv-02237/USCOURTS-azd-2_05-cv-02237-1/pdf.json

Nature of Suit Code: 870
Nature of Suit: Tax Suits
Cause of Action: 28:1346 Recovery of IRS Tax

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WO

IN THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF ARIZONA

GOLDEN WEST HOLDINGS TRUST, 

Plaintiff, 

v.

UNITED STATES OF AMERICA, et al.,

Defendants. 

AND RELATED CASES

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No. CV-05-2237-PHX-SMM (lead)

 CV-05-2238-PHX-SMM (cons)

 CV-05-2239-PHX-SMM (cons)

MEMORANDUM OF DECISION AND

ORDER

This matter comes before the Court on Defendants' Motion to Dismiss William

Wadman's Claim for Reward and Plaintiff's Claim for Injunctive Relief (Dkt. 25) pursuant

to Federal Rule of Civil Procedure 12(b)(1) for lack of subject matter jurisdiction. 

BACKGROUND

 William Wadman ("Wadman"), Golden West Holdings Trust and Tri-Star Real Estate

Investment Trust ("Tri-Star") (collectively "Plaintiffs"), brought this action against the

United States and the Internal Revenue Service (collectively "Defendants") for wrongful

jeopardy assessment and levy. (Dkt 21). Plaintiffs seek, among other forms of relief, a

reward on behalf of Wadman in the amount of not less than one million, one hundred and

fifty thousand dollars ($1,150,000) for information he provided to the IRS concerning the

failure to pay taxes by A.G. Braswell, G.B. Data Systems, Inc., and Gero Vita International,

Inc. (the "Braswell Parties"). (Dkt. 21,¶¶ 21-25). In addition, Tri-Star and Wadman request

Case 2:05-cv-02237-SMM Document 35 Filed 12/18/06 Page 1 of 6
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"[a] preliminary and, thereafter, a permanent injunction enjoining the Defendants from

levying upon or seizing Plaintiff's property and assets in the future." (Dkt. 21 at 7).

 On June 9, 2006, Defendants' moved to dismiss Wadman's claim for reward as well

as Tri-Star's and Wadman's prayer for injunctive relief. (Dkt. 25). On November 2, 2006,

this Court granted Wachovia Bank, N.A.'s (Wachovia's) Motion to Intervene on behalf of

Wadman and directed Wachovia to file a response to any outstanding motions by November

17, 2006. (Dkt. 34). Neither Wachovia nor any of the other Plaintiffs have responded to

Defendants' motion to dismiss for lack of subject matter jurisdiction. 

 Pursuant to Rule 7.2(i) of the Local Rules of Practice for the District of Arizona, when

an opposing party fails to file a response to a motion, the failure to file may be deemed a

consent to the motion. Because Plaintiffs have not opposed the motion to dismiss, they are

deemed to have consented to the dismissal. Regardless, the Court will address the merits of

Defendants' motion.

STANDARD OF REVIEW

 Federal Rule of Civil Procedure Rule 12(b)(1) provides for motions to dismiss for lack

of subject matter jurisdiction. The burden of proof on a Rule 12(b)(1) motion to dismiss is

on the party asserting jurisdiction. Kokkonen v. Guardian Life Ins. Co., 511 U.S. 375, 377

(1994). On a Rule 12(b)(1) motion to dismiss for lack of subject matter jurisdiction, the

court is not "restricted to the face of the pleadings, but may review any evidence, such as

affidavits and testimony, to resolve factual disputes concerning the existence of jurisdiction."

McCarthy v. United States, 850 F.2d 558, 560 (9th Cir. 1988).

DISCUSSION

 The United States moved to dismiss the claim for a reward on behalf of Wadman as

well as Tri-Star's and Wadman's request for an injunction to bar further tax collection by

Defendants.

 I. Third Claim for Relief for a Reward on Behalf of Plaintiff Wadman

 The United States moved to dismiss the "Third Claim for Relief for a Reward on

Behalf of Plaintiff Wadman" (Dkt. 21,¶¶ 21-25), arguing that this Court lacks jurisdiction

Case 2:05-cv-02237-SMM Document 35 Filed 12/18/06 Page 2 of 6
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over the claim because the United States, as sovereign, is immune from suit unless it consents

to be sued. The Court agrees.

 A suit is considered "against the sovereign" if the judgment sought would be paid out

of the public treasury, or if the effect would be to restrain the government from acting or

compel it to act. Dugan v. Rank, 372 U.S. 609, 620 (1963). Thus, a suit against the IRS is

essentially a suit against the United States and the principles of sovereign immunity are

applicable to this proceeding. Gilbert v. Da Grossa, 756 F.2d 1455, 1461 (9th Cir. 1985). 

 Under the doctrine of sovereign immunity: "It is elementary that "(t)he United States,

as sovereign, is immune from suit save as it consents to be sued..., and the terms of its

consent to be sued in any court define that court's jurisdiction to entertain the suit." United

States v. Mitchell, 445 U.S. 535, 538 (1980) (quoting United States v. Sherwood, 312 U.S.

584, 586 (1941)). A waiver of sovereign immunity "cannot be implied, but must be

unequivocally expressed." United States v. King, 395 U.S. 1, 4 (1969). "Where a suit has not

been consented to by the United States, dismissal of the action is required." Gilbert, 756 F.2d

at 1458.

 In the instant case, relying on 26 U.S.C. § 7623, Wadman believes he is "entitled to

a reward in the amount of not less than one million, one hundred and fifty thousand dollars

($1,150,000)" for information provided to the IRS concerning the Braswell Parties. (Dkt.

21,¶¶ 21-25). Under 26 U.S.C. § 7623:

The Secretary, under regulations prescribed by the Secretary, is authorized to pay

such sums as he deems necessary for--

(1) detecting underpayments of tax, and

(2) detecting and bringing to trial and punishment persons guilty of violating the

internal revenue laws or conniving at the same,

in cases where such expenses are not otherwise provided for by law. Any amount

payable under the preceding sentence shall be paid from the proceeds of amounts

(other than interest) collected by reason of the information provided, and any

amount so collected shall be available for such payments. 

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Pursuant to the express language of the statute, the Secretary of the Treasury has

discretion over paying rewards such as the one to which Plaintiff Wadman believes he is

entitled. As the Sixth Circuit has previously stated, "[d]iscretionary activities belong to a

class of conduct of government officials in which Congress has expressed an intention not

to waive sovereign immunity." Carelli v. Internal Revenue Service, 668 F.2d 902, 904

(6th Cir. 1982). Thus, this Court lacks jurisdiction to review the IRS's decision not to

make a reward to Wadman and the "Third Claim for Relief for a Reward on Behalf of

Plaintiff Wadman" will be dismissed. 

 II. Tri-Star's and Wadman's Request for an Injunction

 In the prayer for relief located at the end of the Second Amended Complaint, TriStar and Wadman request, among other things, "[a] preliminary and, thereafter, a

permanent injunction enjoining the Defendants from levying upon or seizing Plaintiff's

property and assets in the future." (Dkt. 21 at 7). Defendants argue that "[t]o the extent

that [Plaintiffs'] prayer for relief could be construed as a claim for injunctive relief as to

the IRS collection activities," it is barred by 26 U.S.C. § 7421 (the "Anti-Injunction Act").

(Dkt. 25, attachment 1 at 7). 

The Anti-Injunction Act provides, in pertinent part, that "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." 26

U.S.C. § 7421. The statute contains numerous exceptions, including suits brought under

§ 7426(a). See id.

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 Here, Plaintiffs allege that this Court has jurisdiction pursuant to 28 USC §

1346(a)(1) and 26 USC § 7426(a)(1). (Dkt. 21 at 2). Under 26 USC § 7426(a)(1), a

federal cause of action exists for any person claiming an interest in or lien on property

that was wrongfully levied upon. While Plaintiffs did not allege it as a basis for

jurisdiction in their Second Amended Complaint, 26 USC § 7426(b)(1) allows a district

court to grant injunctive relief "if a levy or sale would irreparably injure rights in property

which the court determines to be superior to those of the United States in such property."

However, as the party asserting jurisdiction, Plaintiffs bear the burden of proof on

Defendants' Rule 12(b)(1) motion to dismiss on. Kokkonen, 511 U.S. at 377. 

Plaintiffs' Second Amended Complaint contains no allegations that they have

suffered, or are in danger of suffering, an irreparable injury as a result of Defendants

activities. Moreover, Plaintiffs did not respond to Defendants' motion as required under

the LRCiv 7.2(i). Therefore, the Court finds that it lacks jurisdiction to grant Tri-Star's

and Wadman's prayer for injunctive relief and their complaint will be dismissed to the

extent that it seeks such relief. 

CONCLUSION

Accordingly, 

IT IS ORDERED that Defendants' Motion to Dismiss William Wadman's Claim for

Reward and Plaintiff's Claim for Injunctive Relief (Dkt. 25) is GRANTED. 

IT IS FURTHER ORDERED that the "Third Claim for Relief for a Reward on

Behalf of Plaintiff Wadman" (Dkt. 21,¶¶ 21-25) is DISMISSED WITHOUT PREJUDICE.

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IT IS FURTHER ORDERED that Plaintiff Tri-Star's and Plaintiff Wadman's request

for preliminary and, thereafter, a permanent injunction enjoining the Defendants from

levying upon or seizing Plaintiff's property and assets in the future" (Dkt. 21 at 7) is

DISMISSED WITHOUT PREJUDICE. 

DATED this 15th day of December, 2006.

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