Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caed-2_05-cv-02176/USCOURTS-caed-2_05-cv-02176-2/pdf.json

Nature of Suit Code: 870
Nature of Suit: Tax Suits
Cause of Action: 26:7401 IRS: Tax Liability

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UNITED STATES DISTRICT COURT

EASTERN DISTRICT OF CALIFORNIA

UNITED STATES OF AMERICA,

2:05-CV-2176-MCE-CMK

Plaintiff,

v. MEMORANDUM AND ORDER

MICHAEL CAREY; LEONE CAREY;

DOUGLAS CARPA and ROBERT

TALBOT (or their successor

trustees), as Trustees of the

RANCH HOLDING TRUST; MICHAEL

BLOOMQUIST (or his successor

trustee), as Trustee of the

HIDDEN MEADOWS HOLDING TRUST;

PAMELA GRAFF; PATRICIA WELCH

(aka PATRICIA KOERNER); STATE

of CALIFORNIA FRANCHISE TAX

BOARD, and STATE of CALIFORNIA

DEPARTMENT of INDUSTRIAL

RELATIONS,

Defendants.

______________________________

MICHAEL CAREY and LEONE CAREY,

Cross Claimaints,

v.

UNITED STATES OF AMERICA, and

STATE of CALIFORNIA FRANCHISE

TAX BOARD,

Cross Defendants.

Case 2:05-cv-02176-MCE-CMK Document 62 Filed 06/14/06 Page 1 of 7
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Because oral argument will not be of material assistance, 1

the Court orders this matter submitted on the briefs. E.D. Cal.

Local Rule 78-230(h). 

2

Through the present action, the United States of America

(“United States”) seeks, inter alia, to foreclose federal tax

liens, plus penalties and interest, against certain real property

as provided by 26 U.S.C. § 7403. This action has been brought

against Michael and Leone Carey (“Careys”); Douglas Carpa and

Robert Talbot (both as trustees of the Ranch Holding Trust);

Michael Bloomquist (as trustee of the Hidden Meadows Holding

Trust); and various other Defendants including the State of

California Franchise Tax Board (“FTB”).1

Section 7403(b) requires the United States to name as

defendants all parties “having liens upon or claiming any

interest in the property involved” in the action. Given the

FTB’s interest in its own tax liens against the Careys, the

United States was statutorily mandated and, consequently, did

name the FTB as a Defendant. In response to having been named as

a Defendant in this action, the FTB filed an Answer accompanied

by copies of the certified liens held against the Careys’

property.

On April 10, 2006, the Careys filed a counter claim against

the FTB and against nonparty Bill Lockyer, as counsel for the

FTB, pursuant to Fed. R. of Civ. P. 13. This counter claim

alleges the following injuries: (1) criminal fraud of identify

theft (for the “unauthorized use of the Carey’s identity ... to

foreclose on an instrument not evidenced in the record”);

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3

(2) involuntary servitude (“legal coercion to seize property and

money not due and owing”); (3) libel and/or libelous slander (“by

the filing of an unsupported civil action”); and (4) “breach of

trust by violating the cestui que trusts” by naming them as

parties defendant and “implying the trusts ... hold ... property

that can be attached” by the FTB. Counter Claim, p. 4, ¶ 7. For

these alleged injuries, the Careys claim damages in the amount of

$19,747,252.70. Counter Claim, p. 9.

Now before this Court is the FTB’s unopposed Motion to

Dismiss the Careys’ counter claim for lack of subject matter

jurisdiction, lack of personal jurisdiction, insufficiency of

service, insufficiency of service of process, and for the failure

to state a claim upon which relief can be granted. Fed. R. Civ.

P. 12(b)(1), (2), (4), (5) and (6). Because it is dispositive,

the Court will only address the FTB’s 12(b)(1) ground for

dismissal. For the reasons set forth below, the FTB’s Motion to

Dismiss is granted without leave to amend.

BACKGROUND

The Court has already set forth a detailed factual

background for this action in its Order dated April 20, 2006,

which is incorporated by reference and need not be reproduced

herein. Mem. & Order 2, April 20, 2006.

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4

STANDARD

In moving to dismiss for lack of subject matter jurisdiction

pursuant to Rule 12 (b)(1), the challenging party may either make

a “facial attack” on the allegations of jurisdiction contained in

the complaint or can instead take issue with subject matter

jurisdiction on a factual basis (“factual attack”). Thornhill

Publ’g Co. v. Gen. Tel. & Elect. Corp., 594 F.2d 730, 733 (9th

Cir. 1979); Mortensen v. First Fed. Sav. & Loan Ass’n, 549 F.2d

884, 891 (3d Cir. 1977). If the motion constitutes a facial

attack, the Court must consider the factual allegations of the

complaint to be true. Williamson v. Tucker, 645 F.2d 404, 412

(5th Cir. 1981); Mortensen, 549 F.2d at 891. If the motion

constitutes a factual attack, however, “no presumptive

truthfulness attaches to plaintiff’s allegations, and the

existence of disputed material facts will not preclude the trial

court from evaluating for itself the merits of jurisdictional

claims.” Thornhill, 594 F.2d at 733 (quoting Mortensen, 549 F.2d

at 891).

If the Court grants a motion to dismiss a complaint, it must

then decide whether to grant leave to amend. Generally, leave to

amend should be denied only if it is clear that the deficiencies

of the complaint cannot be cured by amendment. Broughton v.

Cutter Labs., 622 F.2d 458, 460 (9th Cir. 1980).

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5

ANALYSIS

1. Eleventh Amendment

The FTB seeks dismissal of the Careys’ claims on the ground

that the Eleventh Amendment bars any suit in law or equity

commenced or prosecuted against the State. Under the Eleventh

Amendment, a state is immune from suit under state or federal law

by private parties in federal court absent a valid abrogation of

that immunity or an express waiver by the state. See Coll. Savs.

Bank v. Fla. Prepaid Postsecondary Educ. Expense Bd., 527 U.S.

666 (1999). In fact, the Eleventh Amendment provides:

The Judicial power of the United States shall not be

construed to extend to any suit in law or equity,

commenced or prosecuted against one of the United

States by Citizens of another State, or by Citizens or

Subjects of any Foreign State.

U.S. Const. amend XI.

The Amendment has been interpreted as applying to suits against a

state by its own citizens. See Hans v. La., 134 U.S. 1, 15

(1890). The Amendment also bars suits against state agencies.

See Fl. Dep't of State v. Treasure Salvors, Inc., 458 U.S. 670,

684 (1981).

The Careys do not oppose the FTB’s Motion to Dismiss their

claims based on Eleventh Amendment immunity. Indeed, they fail

to respond to the FTB’s Motion to Dismiss in any respect. 

Nonetheless, the Court has an independent obligation to examine

jurisdiction. Allstate Ins. Co. v. Hughes, 358 F.3d 1089 (9th

Cir. 2004).

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6

As noted above, the Careys allege criminal fraud,

involuntary servitude, libel and, breach of trust against the FTB

in direct response to the FTB’s submission of an Answer in this

matter setting forth their interest in the Careys’ property with

respect to enforcement of tax obligations. The Court finds that

adjudicating the Careys’ claims would coercively affect the legal

position of the State via federal court jurisdiction in violation

of the Eleventh Amendment. See Mitchell v. Franchise Tax Bd. (In

re Mitchell), 209 F.3d 1111, 1117 (9th Cir. 2000) (internal

citations omitted). There is no evidence in the record that the

FTB has abrogated or waived this immunity. Accordingly, the

Careys’ counter claims as against the FTB must be dismissed. In

addition, because amendment cannot cure this defect, no leave to

amend will be granted.

2. Violation of the Pretrial Scheduling Order

The Careys attempt, through their counter claim, to join

Bill Lockyer is fatally flawed. Specifically, in its Pretrial

Scheduling Order (“PTSO”), the Court provides that “[n]o joinder

of parties or amendments to pleadings is permitted without leave

of court, good cause having been shown.” Pretrial Scheduling

Order, p. 2. The Careys did not request leave of this Court to

join Lockyer nor have they provided sufficient cause for seeking

to join him in direct violation of the PTSO. Accordingly, the

claims against Bill Lockyer are dismissed.

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CONCLUSION

For the reasons set forth above, the Careys’ counter claim

against the FTB is dismissed in its entirety without leave to

amend. Additionally, the Careys’ claims against Bill Lockyer are

dismissed without leave to amend.

IT IS SO ORDERED.

DATED: June 14, 2006

_____________________________

MORRISON C. ENGLAND, JR

UNITED STATES DISTRICT JUDGE

Case 2:05-cv-02176-MCE-CMK Document 62 Filed 06/14/06 Page 7 of 7