Court Opinion

ID: 9381842
Source: CourtListenerOpinion
Date Created: 2023-03-24 00:00:27.247007+00
Date Added: 2024-06-11T17:17:34.802731
License: Public Domain

Case: 22-10993         Document: 00516687288             Page: 1      Date Filed: 03/23/2023

              United States Court of Appeals
                   for the Fifth Circuit
                                                                               United States Court of Appeals
                                                                                        Fifth Circuit
                                       No. 22-10993
                                     Summary Calendar                                 FILED
                                                                                March 23, 2023
                                                                                 Lyle W. Cayce
   William Jeffrey Gilliam,                                                           Clerk

                                                                    Plaintiff—Appellant,

                                             versus

   United States of America,

                                                                   Defendant—Appellee.

                      Appeal from the United States District Court
                          for the Northern District of Texas
                               USDC No. 3:20-CV-2366

   Before Davis, Smith, and Douglas, Circuit Judges.
   Per Curiam:*
          Plaintiff-Appellant, William Jeffrey Gilliam, proceeding pro se,
   appeals the district court’s judgment dismissing his claims against the
   Government for lack of jurisdiction based on failure to exhaust administrative
   remedies and for failure to state a claim. For the reasons set forth below, we
   AFFIRM AS MODIFIED.

          *
              This opinion is not designated for publication. See 5th Cir. R. 47.5.
Case: 22-10993         Document: 00516687288               Page: 2       Date Filed: 03/23/2023

                                           No. 22-10993

                                     I. BACKGROUND
           Beginning in 1995 and spanning two decades, Gilliam became involved
   in a series of lawsuits in multiple courts within the Fourth and Ninth Circuits.
   The lawsuits involved Gilliam’s tax liability and bankruptcy. The litigation
   ended with a judgment against Gilliam for millions of dollars in tax liability. 1
           In August 2020, Gilliam filed the instant action against the
   Government. Gilliam asserted he was entitled to (1) damages under 26
   U.S.C. § 7433 of the Internal Revenue Code for unlawful tax collection
   practices, specifically a tax levy on his social security retirement benefits;
   (2) damages under 26 U.S.C. § 7432 for wrongfully reinstating Government
   liens after they were released; (3) relief from any and all orders and
   judgments obtained through alleged fraud on multiple courts; and (4) tax
   mitigation relief under 26 U.S.C. §§ 1311-1314. In response, the Government
   filed a motion to dismiss, arguing that Gilliam’s complaint was barred by res
   judicata. The Government alternatively argued that Gilliam’s § 7433 claim
   for unlawful tax collection should be dismissed for failure to exhaust
   administrative remedies and his claim of alleged fraud on the court should be
   dismissed for failure to state a claim.
           The magistrate judge determined that two of Gilliam’s claims—his
   claim of wrongful reinstatement of Government liens and his tax mitigation
   claim—were barred by res judicata and recommended dismissal with
   prejudice. As to Gilliam’s § 7433 claim for unlawful tax collection of his
   social security retirement benefits, the magistrate judge found that Gilliam
   had failed to exhaust his administrative remedies. And, as to Gilliam’s claim

           1
            The litigation history is detailed in the district court’s opinion in United States v.
   Gilliam, No. 2:154064-MBS, 2017 WL 2417923 (D.S.C. May 5, 2017), aff’d, 737 F. App’x
   660 (4th Cir. 2018) (per curiam) (unpublished).

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                                          No. 22-10993

   of alleged fraud on the court, the magistrate judge determined that Gilliam
   had failed to state a claim. She recommended that those claims be dismissed
   without prejudice and that Gilliam be allowed to amend his complaint to
   demonstrate exhaustion of administrative remedies and to state a claim for
   alleged fraud on the court. Over Gilliam’s objections, the district court
   adopted the magistrate judge’s report and recommendation.
           Gilliam thereafter filed an amended complaint, which the
   Government again moved to dismiss. The magistrate judge determined that
   Gilliam’s amended complaint showed that he did not fulfill the mandatory
   exhaustion requirement with respect to his § 7433 claim for unauthorized tax
   collection and that the court consequently lacked jurisdiction over that claim.
   The magistrate judge further determined that Gilliam failed to state a claim
   for fraud on the court. The magistrate judge recommended dismissal of both
   claims with prejudice. Over Gilliam’s objections, the district court adopted
   the magistrate judge’s report and recommendation and issued a judgment
   dismissing Gilliam’s claims with prejudice. Gilliam moved for relief from the
   judgment under Federal Rules of Civil Procedure 59(e) and 60(b)(3). The
   district court denied the motion, and Gilliam filed a timely notice of appeal.
                                     II. DISCUSSION
           We review de novo the district court’s judgment dismissing Gilliam’s
   claims for lack of jurisdiction based on failure to exhaust administrative
   remedies and for failure to state a claim. 2

           2
              Ernst v. Methodist Hosp. Sys., 1 F.4th 333, 337 (5th Cir. 2021) (applying de novo
   review to dismissal for failure to exhaust administrative remedies); Armstrong v. Ashley, 60
   F.4th 262, 269 (5th Cir. 2023) (applying de novo review to dismissal under Rule 12(b)(6)
   for failure to state a claim). Gilliam has not briefed the issue whether res judicata barred
   his claims for wrongful reinstatement of Government liens and tax mitigation. He therefore
   has forfeited any challenge to the district court’s dismissal of those claims. Stevens v. St.
   Tammany Par. Gov’t., 17 F.4th 563, 574 (5th Cir. 2021) (appellant forfeits challenge to

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                                              A.
           Gilliam first argues that the district court erred in determining that his
   claim for damages for unlawful tax collection practices should be dismissed
   because he failed to exhaust administrative remedies.
           Under 26 U.S.C. § 7433, entitled “civil damages for certain
   unauthorized collection actions,” a taxpayer may bring a civil action for
   damages against the Government “[i]f, in connection with any collection of
   Federal tax . . . any officer or employee of the [Internal Revenue Service
   (IRS)] recklessly or intentionally, or by reason of negligence, disregards any
   provision of [the Internal Revenue Code], or any regulation promulgated
   under [it].” 3 The statute requires that administrative remedies be exhausted.
   Specifically, it provides that “[a] judgment for damages shall not be awarded
   . . . unless the court determines that the plaintiff has exhausted the
   administrative remedies available to such plaintiff within the [IRS].” 4
           Gilliam argues that he was not required to exhaust administrative
   remedies because the Government waived its sovereign immunity under 11
   U.S.C. § 106 of the Bankruptcy Code when it filed proofs of claim for 1993
   and 1995 taxes in Gilliam’s 1996 bankruptcy proceeding. Under § 106, when
   a governmental unit “has filed a proof of claim” in a bankruptcy proceeding,
   it “is deemed to have waived sovereign immunity with respect to a claim
   against such governmental unit that is property of the estate and that arose

   district court’s holding on an issue when appellant does not raise and argue the issue on
   appeal). Gilliam does argue that res judicata is not a defense to his claim of fraud on the
   court, but for the reasons described below, he has failed to state such a claim.
           3
             § 7433(a). Except as provided in 26 U.S.C. § 7432, entitled “civil damages for
   failure to release lien,” the civil action allowed by § 7433 is “the exclusive remedy for
   recovering damages resulting from such actions.” Id.
           4
               § 7433(d)(1).

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   out of the same transaction or occurrence out of which the claim of such
   governmental unit arose.” 5 Gilliam calls our attention to a district court
   opinion which held that the plaintiffs (taxpayers) did not have to exhaust
   administrative remedies to assert a claim for damages under § 7433 because
   the IRS had filed a proof of claim in the plaintiffs’ bankruptcy proceeding. 6
          We find that case inapposite for several reasons.                  First, as the
   Government points out, the instant action is not part of a bankruptcy
   proceeding.        The bankruptcy proceedings involving Gilliam and his
   company, wherein the Government filed proofs of claim, were concluded in
   2009. Furthermore, the claim for § 7433 damages that Gilliam has asserted
   is based on actions allegedly taken by the IRS in 2019 and 2020. Specifically,
   Gilliam asserts that the IRS wrongfully levied 100 percent of his social
   security retirement income from May 2019 through April 2020. Considering
   that Gilliam alleges the unlawful actions occurred in 2019 and 2020, the
   Government could not have waived its sovereign immunity for any claim
   based on those actions by filing proofs of claim in bankruptcy proceedings
   that were concluded ten years before. For these reasons, Gilliam’s argument
   that the Government waived its sovereign immunity under § 106 of the
   Bankruptcy Code has no merit.
          Gilliam also argues that he, in fact, exhausted his administrative
   remedies.       The specific steps a taxpayer must follow when filing an
   administrative claim (prior to filing a § 7433 action for unauthorized tax
   collection in district court) are set forth in 26 C.F.R. § 301.7433-1(e). 7 As the

          5
              § 106(b).
          6
              See Cunningham v. United States, 165 B.R. 599, 604 (N.D. Tex. 1993).
          7
             Specifically, an administrative claim must be “sent in writing to the Area
   Director, Attn: Compliance Technical Support Manager of the area in which the taxpayer

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                                          No. 22-10993

   magistrate judge determined, the documents upon which Gilliam relies do
   not show that he complied with the requirements of § 301.7433-1(e).
   Specifically, Gilliam has identified no document addressed to the appropriate
   official setting forth the injuries he sustained from the alleged wrongful levy
   of his social security retirement income and the dollar amount of his claimed
   damages.
           Although we agree with the district court that Gilliam’s § 7433 claim
   should be dismissed for lack of jurisdiction based on failure to exhaust
   administrative remedies, the dismissal should have been without prejudice. 8
   Consequently, we AFFIRM the judgment AS MODIFIED to reflect that
   the dismissal of Gilliam’s § 7433 action for wrongful levying of his social
   security retirement income is without prejudice.
                                                B.
           Gilliam next argues that the district court erred in determining that he
   failed to state a claim under Rule 12(b)(6) for fraud on the court.
           Under Rule 12(b)(6), “a complaint must contain sufficient factual
   matter, accepted as true, to ‘state a claim to relief that is plausible on its
   face.’” 9 “To establish fraud on the court, it is necessary to show an
   unconscionable plan or scheme which is designed to improperly influence the

   currently resides” and must include, inter alia, “the grounds for the claim,” “description
   of the injuries,” and “[t]he dollar amount of the claim.” § 301.7433-1(e)(1)-(2).
           8
            See Wright v. Hollingsworth, 260 F.3d 357, 359 (5th Cir. 2001) (modifying
   judgment to reflect that a dismissal for failure to exhaust administrative remedies should
   be without prejudice).
           9
            Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atl. Corp. v. Twombly, 550
   U.S. 544, 570 (2007)).

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                                            No. 22-10993

   court in its decision.” 10 “Generally speaking, only the most egregious
   misconduct, such as bribery of a judge or member of a jury, or the fabrication
   of evidence by a party in which an attorney is implicated, will constitute fraud
   on the court.” 11 “Less egregious misconduct, such as nondisclosure to the
   court of facts allegedly pertinent to the matter before it, will not ordinarily
   rise to the level of fraud on the court.” 12
           Gilliam argues that the district court did not consider certain
   documents he submitted in support of his opposition to the Government’s
   motion to dismiss. He contends that had the district court done so, it would
   have determined he stated a claim for fraud on the court. These documents
   include his declaration in support of his opposition to the Government’s
   motion to dismiss, the numerous documents submitted with his opposition,
   and his motion requesting the district court to take judicial notice of his
   requests for assistance and/or investigation sent to various federal agencies.
           In these documents, which contain the same allegations as his
   amended complaint, Gilliam alleges that a bankruptcy trustee committed
   fraud on the court by not adhering to 26 U.S.C. § 1398(j)(2), relating to the
   treatment of “carrybacks”; that the IRS issued letters containing “false”
   information; that a bankruptcy judge assisted the IRS and the Department of
   Justice in misconduct; and that attorneys made false statements or presented
   false evidence in the proceedings before bankruptcy courts, district courts,
   and courts of appeals.

           10
             First Nat’l. Bank of Louisville v. Lustig, 96 F.3d 1554, 1573 (5th Cir. 1996) (internal
   quotation marks and citations omitted).
           11
                Id. (internal quotation marks and citations omitted).
           12
                Id. (internal quotation marks and citations omitted).

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                                            No. 22-10993

           Although in conducting a de novo review of a Rule 12(b)(6) dismissal,
   we “accept[] all well-pled facts as true, drawing all reasonable inferences in
   favor of the nonmoving party,” we do not “presume true . . . legal
   conclusions; mere labels; threadbare recitals of the elements of a cause of
   action; conclusory statements; and naked assertions devoid of further factual
   enhancement.” 13 As the Government rightly contends, when Gilliam labels
   a statement as “false” or “fraudulent,” he is describing his disagreement
   with the legal merit of various arguments and positions taken by the
   Government and other parties in the multitude of proceedings that have
   occurred since his tax troubles began. Gilliam lists as the “facts constituting
   fraud on the court”: (1) the failure of the IRS to amend its proof of claim and
   the bankruptcy trustee’s failure to object to the accuracy of the IRS’s 1993
   tax claims; (2) the bankruptcy trustee’s filing of an “ultra vires” tax return
   and the IRS’s acceptance of the return; and (3) a bankruptcy judge’s
   intentional disregard of one of its prior orders and misstatement on the record
   that the IRS had previously addressed many of Gilliam’s claims and defenses.
   These allegations do not plausibly set forth “an unconscionable plan or
   scheme which is designed to improperly influence the court in its decision.” 14
           Gilliam attempts to set forth allegations showing “the fabrication of
   evidence by a party in which an attorney is implicated.” 15 He describes the
   actions of a Government attorney during a bankruptcy hearing in August
   2015. He alleges that the attorney lied when she stated that certain tax liens
   were still in effect when the IRS had released the liens. Gilliam further
   asserts that the attorney, along with a bankruptcy trustee, made “false

           13
                Armstrong, 60 F.4th at 269 (internal quotation marks and citations omitted).
           14
              First Nat’l. Bank of Louisville, 96 F.3d at 1573 (internal quotation marks and
   citations omitted).
           15
                Id. (internal quotation marks and citations omitted).

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   statements/arguments” to the bankruptcy court, district court, and court of
   appeals. Finally, Gilliam alleges that a bankruptcy trustee’s final accounting
   was “false and fraudulent.” Here again, Gilliam is simply labeling as “false”
   and “fraudulent” legal positions advanced by the Government and other
   parties on various issues. We agree with the district court that Gilliam has
   failed to state a claim for fraud on the court.
                                III. CONCLUSION
          Based on the foregoing, we AFFIRM AS MODIFIED the district
   court’s judgment dismissing Gilliam’s claims.

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