Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-3_05-cv-00955/USCOURTS-cand-3_05-cv-00955-2/pdf.json

Nature of Suit Code: 870
Nature of Suit: Tax Suits
Cause of Action: 28:1446 Petition for Removal

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United States District Court

For the Northern District of California

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Docket No. 90, Filed June 5, 2006.

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Docket No. 1, Filed March 7, 2005.

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Docket No. 1, Filed March 7, 2005. 

United States District Court

For the Northern District of California

IN THE UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF CALIFORNIA

RICHARD GEORGE, 

 Plaintiffs,

 v.

INTERNAL REVENUE SERVICE, et al., 

Defendant. /

No. C05-0955 MJJ

ORDER DENYING PLAINTIFF’S

MOTION FOR LEAVE TO AMEND 

INTRODUCTION

Before the Court is Plaintiff Richard George’s (“Plaintiff” or “George”) Motion for Leave to

File an Amended Complaint.1

 Defendants United States, Internal Revenue Service (“IRS”) Officer

Jane Allen (“Allen”), and Treasury Secretary John Snow (“Snow”) (collectively, “Defendants”)

oppose the motion. For the following reasons, the Court DENIES Plaintiff’s motion for leave to file

a Fourth Amended Complaint.

FACTUAL BACKGROUND

On February 14, 2005, Plaintiff, as a pro se litigant, filed suit against Defendants in the

Superior Court of California in the County of San Mateo alleging various violations determining and

collecting taxes.2

 On March 7, 2005, Defendants removed the action to this Court.3 Plaintiff now

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On June 5, 2006, Plaintiff filed a written Demand for Trial by Jury. (Docket No. 91.) Plaintiff claims that this

demand is timely because Plaintiff “reserved all rights” in a previous complaint and, in the alternative, asks the court to

excuse his untimeliness because he is a pro se plaintiff. Defendants opposes the demand, arguing that Plaintiff’s demand

is not timely. Defendants contend that Plaintiff’s demand was not filed within 10 days after the service of the last pleading.

Generally there is a presumption against waiver of the constitutional right to a trial by jury, but this right may be waived if

a plaintiff fails to file a timely demand in writing. Fed. R. Civ. Pro. 38(b)(d); Middle Tenn. News Co., Inc. v. Charnel of

Cincinnati, Inc. 250 F.3d 1077, 1083 (7th Cir. 2001). Despite a plaintiff’s untimely demand, the district court has the

discretion to grant a plaintiff’s request upon demand. Fed. R. Civ. Pro. 39(b). However, a plaintiff’s “oversight or

inadvertence . . . is not a sufficient basis to grant relief from an untimely jury demand.” Zivkovic v. Southern Cal. Edison

Co., 302 F.3d 1080, 1087 (9th Cir. 2002) . In this case, Plaintiff failed to file a timely written demand. The Court is unable

to excuse Plaintiff’s failure to file in a timely manner. Additionally, all of Plaintiff’s claims which could give rise to a jury

trial, have been adjudicated through this Court’s Order granting summary judgment in favor of Defendants. Thus, the jury

trial issue is moot. As such, this Court DENIES Plaintiff’s Demand for a Trial by Jury. 

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seeks leave to file a Fourth Amended Complaint to include additional information and claims.4

Plaintiff maintains that the additional information and claims are based, in part, on the contents of

Defendants’ substantive response to Plaintiff’s previous request for documents pursuant to the

Freedom of Information Act (“FOIA”). Plaintiff argues that the timing of Defendants’ FOIA

response precluded Plaintiff from including the additional information and claims in his operative

complaint. Plaintiff filed the operative complaint on September 8, 2005. Defendants’ substantive

FOIA response was not completed until May 4, 2006. 

LEGAL STANDARD

Rule 15(a) of the Federal Rules of Civil Procedure provides that a party may amend a

pleading once as a matter of course before a responsive pleading is served, after that the party may

amend the pleading only by leave of court or by written consent of the adverse party. Fed. R. Civ. P.

15(a). Additionally, Rule 15(a) instructs the Court that, “leave shall be freely granted when justice

so requires.” Id. The Supreme Court has made it clear that courts are to carefully heed this

mandate. See Foman v. Davis, 371 U.S. 178, 182 (1962). Moreover, “[t]his liberality in granting

leave to amend is not dependent on whether the amendment will add causes of action or parties.” 

DCD Programs, Ltd. v. Leighton, 833 F.2d 183, 186 (9th Cir. 1987). In determining whether to

grant leave to amend, the Court considers the following factors: (1) whether the movant unduly

delayed in bringing the motion, (2) evidence of bad faith or dilatory motive on the part of the

movant; (3) the movant’s repeated failure to cure deficiencies by previous amendments; (4)

prejudice to the opposing party; and (5) futility of amendment. Id. While each of these factors is

relevant to determining the propriety of leave to amend, the crucial factor is the resulting prejudice

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to the opposing party. Howey v. Radio Corp. of Am., 481 F.2d 1187, 1190 (9th Cir. 1973). “Absent

prejudice, or a strong showing of any of the remaining factors, there exists a presumption under Rule

15(a) in favor of granting leave to amend. Eminence Capital, LLC v. Aspeon, Inc., 316 F.3d 1048,

1052 (9th Cir. 2003). Thus, if the party opposing the motion fails to establish any of these factors,

“the leave sought should, as the rules require, be ‘freely given.’” Foman, 371 U.S. at 182. 

ANALYSIS

Plaintiff argues that “justice so requires” that he be allowed file a Fourth Amended

Complaint. Plaintiff contends that Defendants will not be prejudiced by this amendment and,

therefore, the motion should be granted. Defendants oppose Plaintiff’s motion on several grounds. 

Specifically, Defendants argue that Plaintiff’s motion should be denied because Plaintiff had

multiple chances to cure deficiencies through previous amendments and because Plaintiff’s proposed

amendments would be futile. Defendants also insist that Plaintiff makes this motion in bad faith and

that it would cause undue delay. 

Generally, the court engages in this analysis with all inferences in favor of granting the

motion to amend. Griggs v. Pace Am. Group, Inc., 170 F.3d 877, 880 (9th Cir. 1999). However,

“the district court’s discretion to deny leave to amend is particularly broad where plaintiff has

previously amended the complaint.” Ascon Properties v. Mobile Oil Co., 866 F.2d 1149, 1160 (9th

Cir. 1989). In situations where more than one amended complaint has been filed, the district court

may deny “a motion to amend a complaint . . . when the movant presented no . . . satisfactory

explanation for his failure to fully develop his contentions originally.” Vincent v. Trend Western

Technical Corp., 828 F.2d 563, 570-71 (9th Cir. 1987). A court denying a motion for leave to

amend is required to make legal findings in support of the denial. Foman, 371 U.S. at 182. 

In Allen v. City of Beverly Hills, 911 F.2d 367 (9th Cir. 1990) the Ninth Circuit upheld a

district court’s dismissal of the plaintiff’s complaint without allowing him to amend. The case

involved a plaintiff who had previously amended his complaint, claiming a violation of 42 U.S.C. §

1983 against the city. In affirming the district court’s dismissal, the Ninth Circuit found that the

district court had “broad discretion” to deny leave to amend when the plaintiff had been given

opportunity to amend previously, especially when those amendments would be futile. Allen, 911

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F.2d at 373-74. 

This Court’s Local Rules of Practice in Civil Proceedings state, “[a]ny party filing or moving

to file an amended pleading must reproduce the entire proposed pleading and may not incorporate

any part of a prior pleading by reference.” Civil L.R. 10-1. In the present motion, Plaintiff did not

“reproduce the entire proposed pleading” with his motion as specified in this Court’s Local Rules. 

See Civil L.R. 10-1. Instead, Plaintiff incorporated parts of his proposed amendments within the

body of his motion to amend. See id. Despite Plaintiff’s failure to follow the Local Rules, the Court

will consider the proposed amendments contained within Plaintiff’s pending motion. Specifically,

Plaintiff seeks to make two amendments within his proposed Fourth Amended Complaint: (1) an

allegation for a violation of 26 U.S.C. § 7605; and (2) a constitutional challenge to 26 U.S.C. §

7433. 

A. Proposed Violation of 26 U.S.C. § 7605

Plaintiff seeks to add information learned from Defendants’ FOIA response to allege a

violation of 26 U.S.C. § 7605. In particular, Plaintiff seeks to allege that because of Plaintiff’s

association with the “We the People” organization, Defendants wrongfully examined Plaintiff’s

records on four occasions during the years 2001 through 2002 and that Defendants took several

pictures of Plaintiff’s house. Defendant argues that Plaintiff has already made these allegation

within the Third Amended Complaint (“TAC”). Defendant also argues that the proposed claim fails

because Defendant has fully complied with Plaintiff’s FOIA requests. 

Section 7605(b) provides:

No taxpayer shall be subjected to unnecessary examination or

investigations, and only one inspection of a taxpayer’s books of

account shall be made for each taxable year unless the taxpayer

requests otherwise or unless the Secretary, after investigation, notifies

the taxpayer in writing that an additional inspection is necessary. 

26 U.S.C. § 7605 (2006) (emphasis added). Congress’s intent in enacting § 7605 was to prevent

“unnecessary annoyance of [the] taxpayer” and “repeated visits of tax examiners” to ensure that

additional examinations were properly authorized by the Secretary. United States, et al. v. Powell, et

al., 379 U.S. 48 (1964) (quoting Revenue Act of 1921, 42 Stat. 310); see also 26 U.S.C. § 7605(b). 

However, “Congress did not intend for section 7605(b) to be a severe restriction on the

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Commissioner’s power in monitoring and enforcing the Code.” Law Offices – Richard Ashare, P.C.

v. Commissioner, T.C. Memo 1999-284 (citing Powell, 379 U.S. at 54-55). In fact, the Supreme

Court has read the first clause of § 7605(b) as “surplusage to a large extent.” Powell, 379 U.S. at 56. 

The “examination or investigation” referred to in Section 7605 is inherently linked to the

IRS’s issuance of summonses under § 7602. See 26 U.S.C. §§ 7602, 7603, 7604, 7605(a); Powell,

379 U.S. at 57; see also Dickerson v. Conrad, et al., 274 F. Supp. 881 (D. Alaska, 1967); Mahapatra

v. United States., 1993 U.S. Dist. LEXIS 8859, *10. Section 7605 is a prohibition against repetitive

and unnecessary summonses of the “taxpayer’s books of account.” See Powell, 379 U.S. at 57. 

Therefore, section 7605 is not a prohibition against the summonses of records and documents from

third parties, even if those third parties hold the sought documents on behalf of the taxpayer. De

Masters v. Arend, 313 F.2d 79, 86 (9th Cir. 1963) (stating “this prohibition applies by its express

terms only to taxpayer’s records; it did not prevent the appellants from seeking information from

other sources, such as the bank, regarding the taxpayer’s possible liability”); see also Mahapatra,

1993 U.S. Dist. LEXIS 8859, *10-11. 

Additionally, § 7605 provides no explicit cause of action for damages. 26 U.S.C. § 7605. 

Therefore, a plaintiff seeking relief under § 7605 cannot seek damages from the government. 

Dickerson, 274 F. Supp. at 881; Dema v. Feddor, 470 F. Supp. 152 (N.D. Ill. 1979). While at least

two courts have fashioned some sort of remedy for illegal searches under § 7605, these cases are in

the minority and limited to their facts. See Reineman v. U.S., 301 F.2d 267, 272 (7th Cir. 1962)

(court invalidated an IRS deficiency assessment due to an illegal examination under section 7605);

see also Application of Leonardo, 208 F. Supp. 124, 127 (N.D. Cal. 1962); but see Field Enterprises,

Inc. v. United States, 172 Ct. Cl. 77, 85 (Fed. Cl. 1965); Moloney v. United States, 521 F.2d 491,

500 (6th Cir. 1975). 

Normally, an individual with a § 7605 claim is attempting to prevent the enforcement of the

IRS’s summonses of the “taxpayer’s books of account” contemporaneously with the suit; not

redressing prior examinations. See Powell, 379 U.S. at 57; United States, v. Church of Scientology,

973 F.2d 715, 718 (9th Cir. 1992); Vallerand v. Connett, 477 F. Supp. 106, 107 (C.D. Cal. 1979)

(outlining the typical section 7605 scenario involving inspections of books directly from the

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Docket No. 64, filed August 10, 2005. 

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At the October 3, 2006 hearing, Plaintiff suggested that there had been wrongful IRS examinations of his personal

records that would support a claim under § 7605. However, Plaintiff was unable to present any evidence to support this

contention. Even if Plaintiff were to produce evidence of these personal examinations, Plaintiff’s motion would still fail

because Plaintiff’s delay in including this claim would prejudice Defendants. If Plaintiff’s “books of account” had been

summoned previously, then, presumably, Plaintiff would have had prior knowledge of these examinations. Thus, Plaintiff

should have included this claim, along with these allegations, in one of the previously amended complaints. 

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plaintiff); Dickerson, 274 F. Supp. at 881 (also noting typical section 7605 claim process and court’s

role). Proper procedure under § 7605 requires the taxpayer to object to any additional summonses at

the time the IRS serves the summons. Powell, 379 U.S. at 57; Dickerson, 274 F. Supp. at 881. 

Failure to object at the time of the summons may constitute waiver of right to claim a violation of §

7605. Moloney v. U.S., 521 F.2d at 500-01. 

Here, this Court previously dismissed the Plaintiff’s cause of action under § 7605 without

prejudice because Plaintiff failed to allege an illegal examination of his personal records.5

Plaintiff’s motion broadly alleges there were multiple examinations of his personal records. 

However, on October 3, 2006, during oral argument on Plaintiff’s Motion for Leave to File an

Amended Complaint, Plaintiff informed the Court that these examinations were of Plaintiff’s records

in the possession of third party sources. Since the § 7605 “prohibition applies by its express terms

only to taxpayer’s records; it [does] not prevent the [IRS] from seeking information from other

sources, such as the bank, regarding the taxpayer’s possible liability,” Plaintiff’s claim is futile. See

De Masters, 313 F.2d at 86. As such, the Court denies Plaintiff’s motion for leave to amend with

respect to adding a § 7605 claim.6 

 B. Constitutional Challenge to 26 U.S.C. § 7433 

Plaintiff next seeks to make a constitutional challenge to the damages provision of § 7433. 

Plaintiff argues that the alleged damages to his business are in excess of those authorized under §

7433 and therefore unconstitutional. Plaintiff claims that this constitutional challenge is a case of

first impression. Defendants contend that amendment is futile and prejudicial.

The purpose of § 7433 is to remedy injuries caused by the intentional or reckless violation of

the tax laws by IRS employees in connection with the improper collection of taxes. 26 U.S.C. §

7433. Section 7433 provides a statutory provision for damages. 26 U.S.C. § 7433(d). As a result,

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Congress has not waived the United States’ sovereign immunity for damages in excess of those so

enumerated. Celauro v. United States, 411 F. Supp. 2d 257, 269-70 (E.D.N.Y. 2006) (finding no

express waiver of sovereign immunity by the United States in action by taxpayer).

The United States is immune from suit unless it consents to waive its sovereign immunity. 

Hodge v. Dalton, 107 F.3d 705, 707 (citing Lehman v. Nakshian, 453 U.S. 156, 160 (1981)). The

terms of the United States’ consent to be sued in any court define that court’s jurisdiction to

entertain the suit. Id. (citations omitted). The doctrine of sovereign immunity applies to federal

agencies and to federal employees acting within their official capacities. South Delta Water Agency

v. United States Department of Interior, 767 F.2d 531, 536 (9th Cir. 1985). Any waiver of immunity

must be “unequivocally expressed,” and any limitations and conditions upon the waiver “must be

strictly observed and exceptions thereto are not to be implied.” Lehman, 453 U.S. at 160-61. 

Here, the Court declines to find that Plaintiff has sufficiently alleged a cause of action

challenging the constitutionality of the damages provision of § 7433. The Court finds that §

7433(d)’s damages provision is well-settled and that Plaintiff’s attempt to amend his complaint is

futile and prejudicial to Defendants. Plaintiff has had multiple opportunities to cure deficiencies and

to add new claims. For these reasons, the Court finds Plaintiff’s second proposed amendment is

futile and would be prejudicial to Defendants. 

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CONCLUSION

For the reasons so stated, the Court DENIES Plaintiff’s motion for leave to amend.

IT IS SO ORDERED.

Dated: October 5, 2006 

MARTIN J. JENKINS

UNITED STATES DISTRICT JUDGE

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