Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-azd-4_12-cv-00248/USCOURTS-azd-4_12-cv-00248-0/pdf.json

Nature of Suit Code: 870
Nature of Suit: Tax Suits
Cause of Action: 26:7422 IRS: Refund Taxes

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1 Donald Bailey has been a party to numerous other cases before this Court,

including as a defendant to a criminal prosecution for filing false tax returns, United States

v. Bailey, No. CR-97-676-TUC-FRZ, and as a plaintiff in multiple cases against the United

States, see, e.g., CV12-216-TUC-RCC; CV-00-37-TUC-JMR; CV-99-271-TUC-ACM;

CV93-779-TUC-RMB.

IN THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF ARIZONA

Donald D. Bailey and Sandra M. Bailey, 

Plaintiffs, 

vs.

United States of America, 

Defendant. 

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No. CV 12-248-TUC-DCB-DTF

REPORT AND RECOMMENDATION

Pending before the Court is Defendant’s Motion to Dismiss. (Doc. 9.) Plaintiffs filed

a response and Defendant replied. (Docs. 21-26.) Pursuant to the Rules of Practice in this

Court, the matter was assigned to Magistrate Judge Ferraro for a report and recommendation.

The Magistrate recommends the District Court, after its independent review of the record,

enter an order granting the motion to dismiss.

BACKGROUND

In April 2005, Plaintiffs filed suit against the United States seeking a refund of income

taxes paid for the year 1992.1

 (Bailey v. United States, No. CV 05-310-TUC-CKJ, Docs. 1,

5 (D. Az. filed Dec. 27, 2007).) After a June 2007 bench trial, the Court found against

Plaintiffs and in favor of the United States. (Id., Doc. 78.) The Court made a specific finding

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2 In denying the second motion, the Court ordered the Baileys to request

permission from the Court prior to filing further motions seeking relief based on Agent Hale

having committed perjury or fraud. (Bailey v. United States, No. CV 05-310-TUC-CKJ, Doc.

121 at 5 (D. Az. filed Sept. 26, 2008).)

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that, when the IRS conducted an audit of Donald and Sandra Bailey’s 1992 taxes, IRS Agent

Lori Hale had taken into account a $42,000 refund that Donald Bailey gave to his client

Comtec. (Id. at 5.) Donald Bailey testified that he did not believe it had been accounted for

in the audit, but the Court did not find him credible. (Id. at 4-5.) In a December 2007 motion

for new trial, the Baileys argued that Agent Hale committed perjury in testifying that she had

adjusted the Baileys’ income for the $42,000 refund to client Comtec and that other agents

falsified documents. (Id., Doc. 103 at 1-2.) Subsequent to the denial of the motion for new

trial in the 2005 case, the Court has denied four more motions by the Baileys seeking relief

from judgment.2

 (Id., Docs. 111, 117, 129, 135, 153, 156, 157, 159, 163.)

Plaintiffs commenced the instant case on April 6, 2012 (Doc. 1), and amended the

complaint soon thereafter. The Amended Complaint alleges that IRS Agent Hale committed

perjury when she testified in the 2007 tax refund proceeding in this Court. (Doc. 3 at 3-4.)

Plaintiffs allege that, in January 2010, they obtained some additional documents from the

Department of Justice, however, they did not review these documents until December 2011.

(Id. at 2-3.) Based on their recent review of the documents, the Baileys assert that they

discovered the 2007 alleged false testimony by Agent Hale. (Id. at 5.) Plaintiffs also identify

two other IRS agents and two attorneys that they allege contributed to the perjury or falsified

documents. (Id. at 4.) Plaintiffs allege that the actions of these individuals denied them their

right to a fair trial in violation of the United States Constitution. (Id. at 4-5.) Plaintiffs’

complaint is brought pursuant to Bivens v. Six Unknown Named Agents of Federal Bureau

of Narcotics, 403 U.S. 388 (1999). (Id. at 2.) Plaintiffs seek $4 million dollars and punitive

damages. (Id. at 6.)

In July 2012, Plaintiffs lodged a sixth motion for relief from judgment in their 2005

case based on the documents obtained in January 2010. (Bailey v. United States, No. CV 05-

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3 Because the Court finds the Amended Complaint is outside the statute of

limitations, it does not reach Defendant’s additional argument that the complaint is barred

by res judicata and claim preclusion.

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310-TUC-CKJ, Doc. 168 (D. Az. filed July 31, 2012).) That motion, which makes essentially

the same arguments as the Amended Complaint in this case, is pending. (Id.)

DISCUSSION

Defendant argues that this case should be dismissed pursuant to Federal Rules of Civil

Procedure 12(b)(1) and (6) because the Court does not have jurisdiction and it violates the

statute of limitations.3

JURISDICTION

Defendant argues that the Court lacks subject matter jurisdiction because there has

been no waiver of sovereign immunity. Plaintiffs name the United States as the sole

defendant. The United States is immune from suit and this Court does not have jurisdiction

except to the extent the United States has expressly waived its sovereign immunity. United

States v. Testan, 424 U.S. 392, 399 (1976) (“there cannot be a right to money damages

without a waiver of sovereign immunity”). Plaintiffs suit is brought pursuant to Bivens v. Six

Unknown Named Agents of Federal Bureau of Narcotics, 403 U.S. 388 (1999), which

allowed suit against federal agents for alleged violations of an individual’s constitutional

rights. Bivens does not, however, waive the sovereign immunity of the United States to allow

claims directly against the government as opposed to its agents. Arnsberg v. United States,

757 F.2d 971, 980 (9th Cir. 1985). Because there has been no waiver of sovereign immunity

for this suit, the Court lacks jurisdiction and it must be dismissed.

Plaintiffs arguably could amend to name as defendants the agents identified in the

Amended Complaint rather than the United States. Therefore, the Court considers

Defendant’s other arguments to determine whether amendment would be futile.

FAILURE TO STATE A CLAIM

To survive a Rule 12(b)(6) motion to dismiss for failure to state a claim, the complaint

must allege facts sufficient “to raise a right to relief above the speculative level.” Bell Atl.

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4 In ruling on a motion to dismiss, the Court generally cannot consider any

material outside the complaint. S.F. Patrol Special Police Officers v. City and Cnty. of S.F.,

13 F. App’x 670, 675 (9th Cir. 2001). However, the documents from the Baileys’ prior case

are an exception to the rule because they are matters of public record of which the Court can

take judicial notice. Id.

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Corp. v. Twombly, 550 U.S. 544, 555 (2007). “A claim has facial plausibility when the

plaintiff pleads factual content that allows the court to draw the reasonable inference that the

defendant is liable for the misconduct alleged.” Ashcroft v. Iqbal, 129 S.Ct. 1937, 1949

(2009). In evaluating a motion to dismiss, “all well-pleaded allegations of material fact are

taken as true and construed in a light most favorable to the nonmoving party.” Wyler Summit

P’hip v. Turner Broad. Sys. Inc., 135 F.3d 658, 661 (9th Cir. 1998). However, “the court [is

not] required to accept as true allegations that are merely conclusory, unwarranted deductions

of fact, or unreasonable inferences.” Sprewell v. Golden State Warriors, 266 F.3d 979, 988

(9th Cir. 2001).

Defendant argues that Plaintiffs fail to state a claim for relief because the claim falls

outside the applicable limitations period. Arizona, as the forum state, provides the statute of

limitations for this action. Papa v. United States, 281 F.3d 1004, 1009 (9th Cir. 2002). In

Arizona, personal injury actions have a two-year limitations period from the time they

accrue. A.R.S. § 12-542. A claim pursuant to Bivens accrues when the party “knows or has

reason to know of the injury.” W. Ctr. for Journalism v. Cederquist, 235 F.3d 1153, 1156

(2000).

Plaintiffs filed the instant action alleging a Bivens violation in April 2012. (Doc. 1.)

The claim falls outside the limitations period because they have known of the alleged injury

for more than two years. Since December 27, 2007, they have been alleging that Agent Hale

committed perjury in the 2007 trial and that the IRS produced false documents. (Bailey v.

United States, No. CV 05-310-TUC-CKJ, Docs. 102, 103 (D. Az. filed Dec. 27, 2007)).4

 The

thrust of the instant complaint is that Agent Hale testified falsely about crediting a $42,000

refund to Comtec when auditing the Baileys and that other agents and attorneys participated

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in the fraud. (Doc. 3.) This is the same argument Plaintiffs made in 2007, thus, they knew

about the alleged injury for more than four years before filing this action. The only new

aspect of the instant complaint is the newly discovered evidence providing additional support

to the Plaintiffs’ claims.

Plaintiffs counter that they did not know about the perjury or false documents until

December 2011, when they reviewed additional documents. (Doc. 3 at 5.) This assertion is

clearly belied by the Baileys’s similar allegations in 2007. Further, they acknowledge in the

Amended Complaint that they received those additional documents in January 2010, more

than two years prior to filing this action. (Doc. 3 at 2.) Regardless of when they obtained

additional evidence, Plaintiffs have been of aware of the alleged injury and the agents

responsible for it since 2007. See United States v. Kubrick, 444 U.S. 111, 121-22 (1979)

(finding that a claim accrues when the plaintiff is aware of his injury and its cause). Thus,

this case is barred by the statute of limitations. Because this claim is barred by the statute of

limitations, amendment to name the individual agents as defendants would be futile.

RECOMMENDATION

Based on the foregoing, the Magistrate Judge recommends the District Court grant

Defendant’s Motion to Dismiss. (Doc. 9.)

Pursuant to Federal Rule of Civil Procedure 72(b)(2), any party may serve and file

written objections within fourteen days of being served with a copy of the Report and

Recommendation. A party may respond to the other party’s objections within fourteen days.

No reply brief shall be filed on objections unless leave is granted by the district court. If

objections are not timely filed, they may be deemed waived. Any objections filed should be

captioned with the following case number: CV-12-248-TUC-DCB.

DATED this 18th day of December, 2012.

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