Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-azd-4_11-cv-00158/USCOURTS-azd-4_11-cv-00158-0/pdf.json

Nature of Suit Code: 870
Nature of Suit: Tax Suits
Cause of Action: 26:7426 IRS: Wrongful Levy for Taxes

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IN THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF ARIZONA

George O. Thurman and )

Elizabeth L. Thurman, )

)

 Plaintiffs, ) No. CV 11-158-TUC-DCB-DTF

)

 v. )

) REPORT AND RECOMMENDATION

Internal Revenue Service, )

)

 Defendant. )

 

Pending before the Court is Defendant’s Motion to Dismiss. (Doc. 10.) Plaintiffs filed

three responses. (Docs. 20, 23, 24.) Defendant filed a reply. (Doc. 22.) 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 with leave to amend.

BACKGROUND

The Complaint alleges that Plaintiff George Thurman and Defendant signed an

agreement in 2005. Plaintiffs allege they have satisfied their side of the bargain and

Defendant has failed to do so. Further, Plaintiffs contend the Government admitted that their

alleged tax liability was bogus and all Plaintiffs needed to do was to file prior year tax

returns. Plaintiffs allege they have done so. Despite that, Plaintiffs allege the Internal

Revenue Service (IRS) has garnished George Thurman’s wages and claimed Plaintiffs owed

on $1.9 million in capital gains from 2000. Plaintiffs ask that the Court order Defendant to

honor its agreement and dismiss the debt; stop attacking Elizabeth Thurman as a separate

Case 4:11-cv-00158-DCB Document 25 Filed 03/21/12 Page 1 of 6
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 1 As pointed out by Defendant, Plaintiffs appear to be referring to tax liens, not levies

as stated in the Complaint. (See Doc. 1 at 4 & App. at 3.) Plaintiffs mention tax levies,

however, they indicate they are no longer relevant as George Thurman left his employment

to avoid the levy of his wages. The Court, therefore, discusses only the tax liens that

Plaintiffs allege have been filed with the Pima County Records Office. (Id.)

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entity; and rescind the liens filed with the Pima County Recorder’s Office.1

DISCUSSION

Defendant argues that Plaintiffs’ Complaint fails to state a claim and is subject to

dismissal under Rule 12(b)(6).

Standard for Rule 12(b)(6) Motion to Dismiss

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.

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). The plausibility standard does not amount to a probability requirement, however, it

demands “more than a sheer possibility that a defendant has acted unlawfully.” Id. 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). Likewise, “a formulaic recitation of the elements of a cause of action will not do.”

Twombly, 550 U.S. at 555. Dismissal under Rule 12(b)(6) can be based on “the lack of a

cognizable legal theory” or “the absence of sufficient facts alleged under a cognizable legal

theory.” Balistreri v. Pacifica Police Dep’t, 901 F.2d 696, 699 (9th Cir. 1990).

Analysis

The United States, including its agencies, can only be sued to the extent it has

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expressly waived its sovereign immunity. Kaiser v. Blue Cross of Cal., 347 F.3d 1107, 1117

(9th Cir. 2003). Plaintiffs do not invoke any statute providing jurisdiction, nor do they cite

any authority for the waiver of the government’s sovereign immunity with respect to this suit.

The core of the remedy sought by Plaintiffs is a request for the Court to enjoin the IRS

from collecting a federal tax that they allege they do not owe. There is a statutory prohibition,

with limited exceptions, against a legal suit to restrain the assessment or collection of a

federal tax. 26 U.S.C. § 7421(a). If a taxpayer does not establish that he satisfies one of the

exceptions, this Court does not have jurisdiction and the case must be dismissed. Jensen v.

I.R.S., 835 F.2d 196, 198 (9th Cir. 1987). Plaintiffs do not argue that any of the statutory

exceptions are applicable and, upon its own review, the Court finds that they do no meet any

of those exceptions. There is one judicial exception, allowing suit when “it is clear that under

no circumstances could the Government ultimately prevail,” and “equity jurisdiction

otherwise exists.” Roat v. Comm., I.R.S., 847 F.2d 1379, 1383 (9th Cir. 1988) (quoting

Enochs v. Williams Packing Co., 370 U.S. 1, 7 (1962)). Defendant addressed this exception

in the motion to dismiss, arguing that Plaintiffs had not met it. In the three responses,

Plaintiffs do not argue otherwise. There is no information currently before the Court

demonstrating that the Government could not possibly prevail in its tax assessment as to

Plaintiffs. Further, Plaintiffs have not alleged facts demonstrating that a remedy in Tax Court

or in a refund suit would be inadequate. See Roat, 847 F.2d at 1383 (citing Comm., I.R.S. v.

Shapiro, 424 U.S. 614, 627 (1974)). Plaintiffs have failed to plead an exception to the AntiInjunction Act and this Court has no jurisdiction over the suit.

Defendant addresses several other possible claims that Plaintiffs might be raising.

Defendant discusses the possibility of a refund claim, but Plaintiffs clarified that they are not

seeking a refund of taxes collected. (Doc. 20 at 5.) Plaintiffs do not appear to be seeking

monetary damages for either the tax liens or for an unauthorized tax collection. However, the

Court notes that as to either type of action, there is a two-year statute of limitations and a

requirement that administrative remedies be exhausted. 26 U.S.C. §§ 7432(d)(1) & (3),

7433(d)(1) &(3). Based on the current information before the Court, a claim for damages

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appears to be untimely. Further, Plaintiffs have not alleged that they exhausted administrative

remedies available within the IRS.

Plaintiffs request the release of liens and Defendant argues that he fails to allege that

the tax lien is unenforceable or that the tax liability has been satisfied, pursuant to 26 U.S.C.

§ 6325(a). More importantly, this statute provides only for the release of a lien by the

Secretary of the Treasury, not for a court action. There is no accompanying waiver of

sovereign immunity with respect to a suit over a lien release. To the extent Plaintiffs are

seeking either injunctive relief or damages with respect to the liens, the court has no

jurisdiction for the reasons discussed above for those types of claim.

Finally, the focus of Plaintiffs’ factual allegations is that George Thurman reached an

agreement with the IRS in 2005, in which the IRS conceded the tax debt assessed against him

was bogus and that to resolve the situation he just needed to file his back tax returns. The

signed agreement reflecting this meeting is a list of actions to which Thurman agreed,

primarily documents he was to produce. (Doc. 1, App. at 1.) This agreement was entered into

on August 22, 2005, when Thurman appeared at a hearing in this Court, set because Thurman

had failed to comply with an IRS summons. United States v. Thurman, No. 05-MC-004-

DCB, Doc. 19 (D. Az. August 22, 2005). Thurman was given until August 30, 2005, to

comply with the Court’s order enforcing the IRS summons. Id. The signed agreement upon

which Thurman relies notes the date of August 30. Thus, the agreement is most readily

interpreted as Thurman’s agreement to provide documents in satisfaction of the summons

prior to the Court’s enforcement date. The IRS did not agree to take any action in the written

document and there is nothing for the Court to enforce against it.

Plaintiffs fail to allege a waiver of sovereign immunity, therefore, this court lacks

jurisdiction over the Complaint. Further, they fail to state a claim for relief.

Conclusion

Based on the above assessment, the Court should grant the motion to dismiss.

However, when a court dismisses for failure to state a claim, it “should grant leave to amend

even if no request to amend the pleading was made, unless it determines that the pleading

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could not possibly be cured by the allegation of other facts.” Cook, Perkiss & Liehe, Inc. v.

N. Cal. Collection Serv., 911 F.2d 242, 247 (9th Cir. 1990). Because Plaintiffs are pro se and

it is not absolutely clear that they could not state a cause of action, the Court finds that leave

to amend should be allowed.

When dismissing with leave to amend, a court is to provide reasons for the dismissal

so a plaintiff can make an intelligent decision whether to file an amended complaint. See

Bonanno v. Thomas, 309 F.2d 320 (9th Cir. 1962); Eldridge v. Block, 832 F.2d 1132 (9th Cir.

1987). The Court has advised Plaintiffs of the reasons their Complaint is being dismissed.

The Court emphasizes that Plaintiff must plead the basis of the Court’s jurisdiction, Fed. R.

Civ. P. 8(a)(1), which includes identifying an express waiver of sovereign immunity by the

United States with respect to the suit. If Plaintiffs intend to continue their pursuit of

injunctive relief, they must allege an applicable exception to the Anti-Injunction Act in order

to establish subject matter jurisdiction. 

An amended complaint must contain all allegations a plaintiff is asserting against the

defendant, as the original complaint will be superseded by an amendment and any arguments

not included in the amendment are waived. See London v. Coopers & Lybrand, 644 F.2d 811,

814 (9th Cir. 1981). The Court is aware that the legal issues in this case may be complex,

even to a lawyer; nevertheless, Plaintiffs are reminded of their obligation to comply with all

rules of procedure and Court orders, regardless of their pro se status. See King v. Atiyeh, 814

F.2d 565, 567 (9th Cir. 1987). Failure to do so may result in dismissal of the action. Fed. R.

Civ. P. 41(b); Ferdik v. Bonzelet, 963 F.2d 1258, 1260 (9th Cir. 1992). If Plaintiffs do not

amend their complaint in the time set by the District Court, the Court should dismiss the case

and enter judgment.

RECOMMENDATION

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

grant the motion to dismiss the complaint with leave to amend within twenty (20) days.

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

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Recommendation. If objections are not timely filed, they may be deemed waived.

DATED this 21st day of March, 2012.

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