Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caed-1_03-cv-06854/USCOURTS-caed-1_03-cv-06854-3/pdf.json

Nature of Suit Code: 440
Nature of Suit: Other Civil Rights
Cause of Action: 42:1983 Civil Rights Act

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UNITED STATES DISTRICT COURT

 EASTERN DISTRICT OF CALIFORNIA

AURELIO MARTIN SEPULVEDA

Petitioner,

v.

THE UNITED STATES OF AMERICA, 

Respondent.

1:03-CV-06854 OWW SMS

MEMORANDUM DECISION AND ORDER

RE: DEFENDANTS’ MOTION TO

DISMISS PURSUANT TO FED. R.

CIV. P. 12(b)(6), OR, IN THE

ALTERNATIVE, FOR SUMMARY

JUDGMENT PURSUANT TO FED. R.

CIV. P. 56(c) 

I. INTRODUCTION

Aurelio Martin Sepulveda (“Plaintiff”) filed a complaint

seeking a refund for taxes alleged to have been erroneously

assessed and collected by the Internal Revenue Service (“IRS”). 

The United States (“Defendant”) moves to dismiss the complaint

pursuant to Federal Rules of Civil Procedure 12(b)(6) or in the

alternative, for summary judgment pursuant to Rule 56(c).

II. PROCEDURAL HISTORY AND FACTUAL BACKGROUND

Plaintiff is incarcerated at the California Substance Abuse

Treatment Facility and State Prison-Corcoran (“CSATF/SP”). (Doc.

18, Second Am. Compl., filed July 15, 2004, ¶ 3.) 

Plaintiff asserts that, while incarcerated, (i) he was

employed by CSATF/SP as a welder, cook, sack lunch preparer, and

“Scullary Leadman” during the 2002 tax year; (ii) the prison paid

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federal taxes on his behalf; and (iii) such payment was credited

to his social security number. (Doc. 18 at ¶ 10-14, 18.) 

Plaintiff also alleges that on or about March 3, 2003, he filed

(i) a claim with the IRS for refund “of taxes erroneously

assessed and wrongfully collected for wages earned and taxes

paid,” and (ii) a federal tax return showing a refund of

$1,142.00 due for taxes paid in 2002. (Doc. 18 at ¶ 10-14, 17,

19, 37.) Attached to the tax return was an “Inmate Work

Supervisor’s Time Log Sheet,” in lieu of a Form W-2. (Doc. 18 at

¶ 19.)

On July 28, 2003, the IRS notified Plaintiff that the

alleged refund would not be issued because CSATF/SP “informed us

they did not employ you at any time during calendar year 2002.” 

(Doc. 18 at Ex. C.) Plaintiff alleges that he submitted a second

“Formal Notice of Appeal” to the IRS on or about August 25, 2003. 

(Doc. 18 at ¶ 27.) 

On December 16, 2003, Plaintiff filed this lawsuit against

the United States of America. (Doc. 1, Compl., filed Dec. 16,

2003.) He filed a first amended Complaint on May 5, 2004. (Doc.

16, First Am. Comp., filed May 5, 2004.) Both complaints were

dismissed with leave to amend. (Doc. 4, Order to Dismiss Compl.,

filed Dec. 23, 2003; Doc. 17, Order to Dismiss First Am. Compl.,

filed June 16, 2004.) Plaintiff filed a second amended complaint

seeking recovery of taxes withheld and paid to the IRS in the

amount of $1,142.00. (Doc. 18 at ¶ 24.) Exhibits attached to

Second Amended Complaint include a summary of Plaintiff’s 2002

tax year from the State of California Franchise Tax Board showing

taxable income of $2,202 and $21 in paid taxes. (Doc. 18 at Ex.

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B.)

Defendant now moves to dismiss for failure to state a claim

upon which relief could be granted, or in the alternative, for

summary judgment. (Doc. 25, Mot. to Dismiss Second Am. Compl.,

filed Nov. 3, 2004.) In support of its motion, Defendant filed

the declaration of Ronald R. Hansen, the Custody Captain of the

Investigative Service Unit at CSATF/SP, in which Mr. Hansen

declares:

Every able-bodied person committed to the custody of

the Director of Corrections must work as assigned by

the department staff and personnel of other agencies to

whom the prisoner’s custody and supervision may be

delegated [and t]he amounts paid to inmates assigned to

appropriate work, education, vocation, therapeutic, or

other institution are not subject to federal or state

withholding.

(Doc. 27, filed Nov. 3, 2004, ¶ 3-4 (emphasis added).)

Plaintiff opposes the motion and seeks discovery under

Federal Rules of Civil Procedure 56(f). (Doc. 29, Opp’n to Mot.

to Dismiss Second Am. Compl., filed Dec. 10, 2004.) Thereafter,

Plaintiff moved for the production of documents and names and

business addresses of outside contractors. (Doc. 33, Mot. for

Produc. of Docs., filed Feb. 09, 2005.) He later filed a motion

to compel production of documents and request for a subpoena

duces tecum to a nonparty. (Doc. 35, Motion to Compel, filed

June 5, 2005.)

Plaintiff’s motion for production of documents was deemed to

be a request for production. (Doc. 38, Order Den. Mot. for Disc.

and Mot. To Compel, filed June 1, 2005 at 1.) Plaintiff’s motion

to compel production of documents and request for a subpoena

duces tecum were denied without prejudice to refiling after

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 No party explains how Hansen’s declaration stating that no 1

state or federal taxes was withheld from Plaintiff may be consistent

with the fact that Plaintiff’s summary for the 2002 tax year indicates

payment of state taxes for that year.

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determination of the motion to dismiss or for summary judgment in

the alternative. (Doc. 38 at 2-3.) 1

III. STANDARDS OF REVIEW

A. Motion to Dismiss

A motion to dismiss for failure to state a claim under

Federal Rules of Civil Procedure 12(b)(6) should not be granted

unless it appears beyond any doubt that plaintiff can prove no

set of facts in support of his claim which would entitle him to

relief.” Van Buskirk v. CNN, Inc., 284 F.3d 977, 980 (9th Cir.

2002). In deciding whether to grant a motion to dismiss, all

allegations of material fact in the complaint are taken as true

and construed in the light most favorable to the plaintiff. 

Buckey v. County of Los Angeles, 968 F.2d 791, 794 (9th Cir.

1992). “The Court need not however accept as true allegations

that contradict matters properly subject to judicial notice or by

exhibit. Nor is the court 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).

B. Motion for Summary Judgment 

Summary judgment is warranted only “if the pleadings,

depositions, answers to interrogatories, and admissions on file

together with the affidavits, if any, show that there is no

genuine issue as to any material fact.” Federal Rules of Civil

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Procedure 56(c); California v. Campbell, 138 F.3d 772, 780 (9th

Cir. 1998). Therefore, to defeat a motion for summary judgment,

the non-moving party must show (i) that a genuine factual issue

exists and (ii) that this factual issue is material. Id. A

genuine issue of fact exists when the non-moving party produces

evidence on which a reasonable trier of fact could find in its

favor, viewing the record as a whole and in light of the

evidentiary burden the law places on that party. Anderson v.

Liberty Lobby, Inc., 477 U.S. 242, 248 (1986).

The nonmoving party cannot simply rest on its allegations

without any significant probative evidence tending to support the

complaint. Devereaux v. Abbey, 263 F.3d 1070, 1076 (9th Cir.

2001). The plain language of Rule 56(c) mandates the entry of

summary judgment, after adequate time for discovery, against a

party who fails to make a showing sufficient to establish the

existence of an element essential to the party’s case and on

which that party will bear the burden of proof at trial. In such

a situation, there can be “no genuine issue as to any material

fact,” since a complete failure of proof concerning an essential

element of the nonmoving party’s case necessarily renders all

other facts immaterial. Celotex Corp. v. Catrell, 477 U.S. 317,

322-23 (1986).

C. Presumption of Correctness

In a tax refund action, any deficiency as determined by the

Commissioner is presumptively correct. Foster v. Commissioner,

756 F.2d 1430, 1439 (9th Cir. 1985), cert. denied, 474 U.S. 1055

(1986).

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IV. ANALYSIS

A. Motion to Dismiss

1. Subject Matter Jurisdiction

Defendants do not challenge subject matter jurisdiction, but

the federal courts have “an independent obligation to examine

their own jurisdiction.” FW/PBS, Inc. v. Dallas, 493 U.S. 215,

231 (1990). 

A federal district court may exercise jurisdiction over a

claim for the recovery of erroneously collected tax pursuant to

28 U.S.C. § 1346 only if three prerequisites are met. Plaintiff

must have (i) paid the tax in full before filing suit, Flora v.

United States, 362 U.S. 145, 177 (1957); (ii) filed an

administrative claim for refund with the IRS, 28 U.S.C. §

7422(a); Bear Valley Mutual Water Co. v. Riddell, 493 F.2d 948,

951 (9th Cir. 1974); and (iii) waited six months or until the IRS

denies their claim whichever is earlier, before filing a refund

action in a district court, 26 U.S.C. § 6532(a)(1).

Here, the full payment rule is met because Plaintiff alleges

that (i) CSATF/SP directly applied a portion of his earnings

toward Plaintiff’s federal tax liabilities for the 2002 tax year;

(ii) he filed a formal appeal; and (iii) he refrained from filing

this suit until after receiving notice from the IRS that his

claim for a refund was disallowed.

2. Plaintiff States a Claim

Defendant moves to dismiss the Second Amended Complaint

under Rule 12(b)(6) for failure to state a claim.

Federal Rule of Civil Procedure 8(a) simply requires “a

short and plain statement of the claim” giving the defendant fair

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Under certain circumstances, allegations may be subject to a 2

heightened pleading standard. For example, Federal Rules of Civil Procedure 9

requires greater specificity in the pleading of fraud claims. Defendants do

not suggest that a heightened pleading standard should apply in this case and

no authority could be located to suggest a heightened standard should apply in

a tax case.

Plaintiff’s Due process cause of action need not be discussed because 3

it is subsumed by his refund claim.

Although Plaintiff mislabels this allegation as a Section 1983 claim, 4

the order dismissing the original complaint establishes that such a claim

would be inappropriate under the circumstances. The order further states that

Plaintiff could “duly file[] a claim for refund” upon amendment of the

complaint.

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notice of (i) what the plaintiff’s claim is and (ii) the ground

upon which it rests. Swierkiewicz v. Sorema, 534 U.S. 506, 512-

13 (2002). This standard is liberally applied to ensure that 2

claims are determined on their merits. Id. Pleadings prepared

by pro se plaintiffs “however inartfully pleaded are held to less

stringent standards than formal pleadings drafted by lawyers.” 

Hughes v. Rowe, 449 U.S. 5, 9 (1980) (internal quotations and

citations omitted).

Here, the Second Amended Complaint provides adequate notice

of the claim for the refund. The claim: (i) seeks the recovery 3

of overpaid taxes; (ii) alleges facts consistent with a tax

refund claim; and (iii) claims jurisdiction for a tax refund

under 28 U.S.C. § 1346. The allegations are sufficient to allow 4

Defendant to file a response. 

Plaintiff also pleads facts sufficient to provide notice of

grounds for the tax refund claim. In a tax refund suit, the

ultimate question is whether Plaintiff has overpaid his taxes. 

Lewis v. Reynold, 284 U.S. 281 (1932). In most cases of this

type, taxpayers prove overpayment by challenging the substantive

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tax analysis used by the IRS to determine the deficiency. Such

challenges may involve complex analysis that afford the taxpayer

with multiple grounds for support. Fair notice in this instance

requires a factual basis for the challenge. Here, where no

deficiency has been assessed, Plaintiff simply seeks to prove

overpayment by showing that taxes paid exceed taxes owed. As

such, under the liberal pleading standards of Rule 8(a),

Plaintiff provides fair notice to Defendant of the basis of the

refund claim by alleging that taxes were withheld by CSATF/SP and

applied towards his federal tax liability. Defendant’s motion to

dismiss for failure to state a claim must be denied because

Second Amended Complaint adequately provides fair notice of the

claim and its basis. Absent any heightened standard, no more is

required. Defendant’s motion to dismiss is DENIED.

B. Summary Judgment

Defendant moves in the alternative for summary judgment,

arguing that since (i) the presumption of correctness requires

Plaintiff to come forward with enough evidence to support a

finding contrary to the Commissioner and (ii) Plaintiff “cannot

demonstrate that federal taxes were withheld,” there are no

genuine disputes of material fact.

1. Summary Judgment Should be Stayed

Plaintiff requests that the ruling on summary judgment be

delayed until he has had a chance to obtain certain documents in

discovery. 

Federal Rule of Civil Procedure 56(f) provides that:

Should it appear from the affidavits of a party

opposing the motion that the party cannot for reasons

stated present by affidavit facts essential to justify

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the party's opposition, the court may refuse the

application for judgment or may order a continuance to

permit affidavits to be obtained or depositions to be

taken or discovery to be had or may make such other

order as is just.

This rule allows litigants to avoid summary judgment when they

have not had sufficient time to develop affirmative evidence. 

United States v. Kitsap Physician Serv., 314 F.3d 995, 1000 (9th

Cir. 2002). Although 56(f) “may” disallow discovery where the

nonmoving party has not submitted evidence supporting its

opposition, the Supreme Court has restated the rule as requiring

discovery “where the nonmoving party has not had the opportunity

to discover information that is essential to its opposition.” 

Anderson, 477 U.S. at 250. Where no discovery has taken place, a

pro se party cannot be expected to frame its motion for discovery

with great specificity as to the kind of discovery likely to turn

up useful information. Jones v. Blanas, 393 F.3d 918, 930 (9th

Cir. 2004); Burlington Northern & Santa Fe Ry. v. Assiniboine,

323 F.3d 767, 774 (9th Cir. 2003). 

Here, Plaintiff’s request to postpone ruling on summary

judgment pursuant to Rule 56(f) should be granted because (i)

there has been no discovery and (ii) Plaintiff is proceeding pro

se and is incarcerated. The proof of whether the IRS received

the withheld payments for federal income tax shown by the state

prison’s withholding and earnings statement is in the possession

of the United States. Any postponement must be reasonably

limited to afford reasonable time for ascertainment of whether

any taxes were actually withheld and paid to the IRS.

2. Discovery Should be Limited

The decision that “summary judgment was premature in light

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of Rule 56(f) motion does not require that the district court

permit wholesale discovery.” Burlington Northern, 323 F.3d at

775. Rather, the district court may tailor limited discovery

before again entertaining a motion for summary judgment. Id.

Here, discovery will initially be limited to Plaintiff’s

federal tax account transcript. This document will clarify

whether taxes have been withheld and paid on Plaintiff’s behalf

during the 2002 tax year, and if so, how much. Defendant shall

provide a copy of this document to Plaintiff within sixty days

following service of this order. Thereafter, the court will

entertain a renewed motion for summary judgment and/or motions

for further discovery. 

v. CONCLUSION

For the reasons set forth above: (i) the motion to dismiss

is denied; (ii) the motion for summary judgment is stayed

pursuant to Rule 56(f); and (iii) Defendant shall provide to

Plaintiff a copy of his tax transcript for the 2002 tax year

within thirty days of service of this order.

SO ORDERED.

DATED: August __30___, 2006.

/s/ OLIVER W. WANGER__________

 Oliver W. Wanger

UNITED STATES DISTRICT JUDGE

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