Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-azd-3_07-cv-08175/USCOURTS-azd-3_07-cv-08175-1/pdf.json

Nature of Suit Code: 870
Nature of Suit: Tax Suits
Cause of Action: 28:1331 Fed. Question

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WO

IN THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF ARIZONA

William A. Fry, a sentient human being,

Plaintiff, 

v.

United States, a Federal Corporation; the

Department of the Treasury; the Internal

Revenue Service; the Social Security

Administration; Northwestern Mutual

Life Insurance Co.; Defense Finance and

Accounting Service (DFAS); Public

Safety Personnel Retirement System

PSPRS); Title 26 U.S.C. § 6331 et. seq.;

Russell Nelson, in his official capacity;

and John Does 1 through 5 inclusively, 

 

 Defendants.

 

 

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No. CV-07-8175-PCT-MHM

 

ORDER

William Fry (“the Plaintiff”) has sued the government and several other defendants,

including Public Safety Personnel Retirement System (“the Defendant” or “PSPRS”), to

quiet title to his real and personal property. He also seeks “return and damages.” (Dkt. #1).

PSPRS has moved to dismiss the action pursuant to Fed. R. Civ. P. 12(b)(6) on the grounds

of sovereign immunity under the Eleventh Amendment, failure to assert any claims against

it, and failure to state a claim upon which relief may be granted. (Dkt. #3). 

I. Background and Procedural Posture

The Plaintiff’s Complaint alleges that he received three correspondences from the 

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Defendant between September 16, 2005 and August 30, 2007, stating that the agency had

received various Notices of Levy from the IRS. (Cmplt., Dkt. #1 at ¶ 20). The Defendant

informed the Plaintiff that it was required to forward the Plaintiff’s retirement benefits to the

IRS, which would result in the release of more than $12,174.40 from the Plaintiff’s

retirement account. (Id.) 

The Plaintiff responded by suing PSPRS and various other defendants to quiet title

to his real and personal property, and to seek “return and damages.” (Cmplt., Dkt. #1). In

its Motion to Dismiss, the Defendant asserts that, as a state agency, it is entitled to sovereign

immunity from suit under the Eleventh Amendment. It argues further that the Plaintiff has

not specifically asserted any claims against PSPRS to show that he is entitled to relief.

Finally, PSPRS argues that 26 U.S.C. § 6332(e) immunizes it from liability, and thus, the

Plaintiff has failed to state a claim upon which relief may be granted.

II. Standard of Review

A Rule 12(b)(6) motion to dismiss will not be granted unless it appears beyond a 

doubt that the plaintiff cannot prove a set of facts to support the claim that would entitle the

plaintiff to relief. Morely v. Walker, 175 F.3d 756, 759 (9th Cir. 1999). When determining

if a plaintiff has sufficiently stated a claim in his complaint, all allegations of material fact

are taken as true and are construed in the light most favorable to the non-moving party.

Whyler Summit Partnership v. Turner Broadcasting Sys., Inc., 135 F.3d 658, 661 (9th Cir.

1998). When deciding a motion to dismiss for failure to state a claim, the court will only

consider facts and evidence presented originally in the complaint. See North Star Int’l v.

Arizona Corp. Cmm’n, 720 F.2d 578, 581-82 (9th Cir. 1983). 

III. Analysis

Although the Defendant has asserted multiple grounds in favor of dismissal of the 

action, the Court finds, in the interest of judicial economy, it need address only one: failure

to state a claim upon which relief may be granted. 

The Plaintiff asserts that immunity under 26 U.S.C. § 6332(e) is limited to immunity

from liability to the IRS. (Response, Dkt. # 7). The Plaintiff argues further that, in any

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event, § 6332(e) does not affect the Defendant’s liability for the separate and collateral issue

of breach of fiduciary duty. These arguments will be addressed in turn.

A. § 6332(e) Only Provides Immunity From Liability to the IRS

The immunity provision of the statute provides:

Any person in possession of (or obligated with respect to)

property or rights to property subject to levy upon which a levy

has been made who, upon demand by the Secretary, surrenders

such property or rights to property (or discharges such

obligation) to the Secretary (or who pays a liability under

subsection (d)(1)) shall be discharged from any obligation or

liability to the delinquent taxpayer and any other person

with respect to such property or rights to property arising

from such surrender or payment.

26 U.S.C. § 6332(e) (emphasis added). The Plaintiff asserts that this provision “merely

protects the Defendant from being held liable by the IRS, it does not protect PSPRS from

being held liable by the Plaintiff . . . .” (Response, Dkt. #7).

The Plaintiff cites to no authority to support his position, and in fact, the plain

language of the statute is to the contrary. The statute provides that any entity that surrenders

property pursuant to a federal levy “shall be discharged from any obligation or liability to the

delinquent taxpayer and any other person.” 26 U.S.C. § 6332(e). The language could

scarcely be more clear. 

In addition, several unpublished cases have dismissed nearly identical claims by

delinquent taxpayers against third parties on immunity grounds. In Scully v. Fireman’s

Variable Pension Fund, this Court dismissed the taxpayer plaintiff’s claims for breach of

fiduciary duty, fraud and conspiracy on the basis that the third-party defendant “was

absolutely immune from liability for honoring the IRS notice of levy under 26 U.S.C. §

6332(e).” No. CV98-0121, 1998 U.S. Dist. LEXIS 21161, at *5 (D. Ariz. December 19,

1998). See also Kish v. Rogers, No. H-06-2389, 2006 U.S. Dist. LEXIS 81812, at *12 (S.D.

Tex. November 8, 2006) (dismissing third parties from suit on § 6332(e) immunity grounds

in delinquent taxpayer’s breach of contract action); Shephard v. IRS, No. 05-CV-885, 2006

U.S. Dist. LEXIS 69029, at *6 (N.D.N.Y. September 26, 2006) (“[T]o the extent the

[taxpayer’s] complaint challenges defendants’ compliance with the IRS’s ‘Notice of Levy,’

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because § 6332(e) immunizes defendants from suit, it fails to state a claim upon which relief

can be granted.”). Accordingly, the Court finds no support for the Plaintiff’s contentions. 

B. Qualified Immunity Does Not Extend to State Law Claims for Breach of Fiduciary Duty

The Plaintiff argues that the qualified immunity in § 6332(e) does not extend to the

Plaintiff’s right to sue for injuries arising out of PSPRS’s acts as a fiduciary. He also asserts

that PSPRS did not allow the Plaintiff to exercise his Due Process rights to stop “the nonjudicial administrative levy.” (Response, Dkt. #7). He argues that these claims are separate

and collateral issues, unaffected by the immunity provided for in the Internal Revenue Code.

The Plaintiff fails to support his position with any relevant case law, and the Court can

find no authority that would allow the Plaintiff to maintain this action, even under a broad

reading of his complaint. The plain language of the immunity provision discharges the

Defendant from “any obligation or liability to the delinquent taxpayer . . . arising from such

surrender or payment.” 26 U.S.C. § 6332(e). The statute makes no exception for the types

of claims the Plaintiff wishes to assert here.

Further, the actions the Plaintiff complains of fall squarely within the plain meaning

of the immunity provision: the Defendant surrendered to the IRS a portion of the Plaintiff’s

pension to partially satisfy the Plaintiff’s alleged federal tax liability. (Dkt. #3, 7). As such,

any conceivable liability to the Plaintiff would arise from “such surrender or payment.” See

26 U.S.C. § 6332(e). This is precisely the type of liability contemplated by the immunity

provision of the statute. Id. Reading an exception into the statute for the Plaintiff’s claims

would render the immunity virtually meaningless. Accordingly, the Court finds this

argument meritless.

/ / /

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IV. Conclusion

The Court finds that Defendant PSPRS is entitled to dismissal of the Plaintiff’s claims

against it, with prejudice, on the basis of immunity under 26 U.S.C. § 6332(e). 

Accordingly,

IT IS ORDERED granting the Defendant’s Motion to Dismiss. (Dkt. #3). 

DATED this 15th day of September, 2008.

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