Court Opinion

ID: 801413
Source: CourtListenerOpinion
Date Created: 2012-06-01 14:55:20+00
Date Added: 2024-06-11T18:00:00.102787
License: Public Domain

Case: 11-10698        Document: 00511872992             Page: 1      Date Filed: 05/31/2012

            IN THE UNITED STATES COURT OF APPEALS
                     FOR THE FIFTH CIRCUIT  United States Court of Appeals
                                                     Fifth Circuit

                                                                                      FILED
                                                                                     May 31, 2012

                                         No. 11-10698                                Lyle W. Cayce
                                       Summary Calendar                                   Clerk

RODGER DON HUGHES,

                                        Plaintiff–Appellant
v.

CHEVRON PHILLIPS CHEMICAL COMPANY LP et al.,

                                        Defendants–Appellees

                 Appeal from the United States District Court for the
                             Northern District of Texas
                               USDC No. 1:10-cv-210

Before BENAVIDES, STEWART, and HIGGINSON, Circuit Judges.
BENAVIDES, Circuit Judge:*
        Plaintiff-Appellant Rodger Don Hughes appeals the district court’s denial
of his motion to remand and grant of summary judgment in favor of Defendants-
Appellees Chevron Phillips Chemical Company LP (“Chevron”) and Renee Bear.
Hughes maintains that the district court lacked subject matter jurisdiction over
his original complaint. Because we find that the district court properly asserted
jurisdiction and granted summary judgment against Hughes, we AFFIRM.

        *
         Pursuant to 5th Circuit Rule 47.5, the court has determined that this opinion should not be
published and is not precedent except under the limited circumstances set forth in 5th Circuit Rule
47.5.4.
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                                  No. 11-10698

                    FACTUAL AND PROCEDURAL BACKGROUND
      Hughes was an employee of Chevron in Borger, Texas.              During his
employment, he became deficient in the payment of his federal income taxes in
the amount of $133,842.07, such that the Internal Revenue Service (“IRS”)
issued an administrative levy on his earned income, wages, or salary. Chevron
received a notice dated May 18, 2010 regarding the levy, and an amended notice
dated June 28, 2010. The notices required Chevron to turn over to the IRS
Hughes’s unexempt wages. Accordingly, Chevron withheld portions of Hughes’s
wages and remitted them to the IRS until it received written confirmation that
the levy was released.
      Hughes subsequently filed this suit against Chevron and current or former
employees of the company in state court, contesting the validity of the
withholding.    He asserted multiple state causes of action against the
Defendants-Appellees, including breach of fiduciary duty, fraud, intentional
infliction of emotional distress, negligence, quantum meruit, retaliation, tortious
interference with contract, tortious interference with business relationship, and
promissory estoppel. The Defendants-Appellees removed the case to federal
court on the basis that Hughes’s pleadings indicated that he questioned the
validity of the IRS administrative levy and the lawfulness of the Defendants-
Appellees’ compliance with the levy. They also asserted that Hughes’s complaint
presented a federal question as to whether the Defendants-Appellees were
immune from liability under the Internal Revenue Code (“Code”), 26 U.S.C.
§ 6332(e). Due to the federal tax law issues in Hughes’s case, they claimed that
federal jurisdiction was appropriate.

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      The district court agreed, took jurisdiction of the case, and granted the
Defendants-Appellees’ motion for summary judgment. The court found that
Hughes had not provided any evidence to support his contention that his claims
against the Defendants-Appellees did not arise from Chevron’s garnishment of
his wages pursuant to an IRS levy. The court held meritless Hughes’s various
arguments regarding the inapplicability of the tax code to private citizens or to
citizens of Texas, the lack of genuine law giving the Defendants-Appellees the
right to garnish his wages, and the fact that a “notice of levy” is not a “levy,”
such that § 6332(e) of the Code does not apply. Instead, the court found that the
Defendants-Appellees had properly abided by a valid IRS levy on Hughes’s
wages. Therefore, the district court ruled that the Defendants-Appellees were
immune from suit, and entitled to summary judgment on all of Hughes’s claims
against them.
                            STANDARD OF REVIEW
      “Our standard of review as to determinations of jurisdiction is plenary.”
Bogle v. Phillips Petroleum Co., 24 F.3d 758, 760 (5th Cir. 1994) (citation
omitted). This Court also reviews a district court’s grant of summary judgment
de novo and applies the same standard as the district court. Holt v. State Farm
Fire & Cas. Co., 627 F.3d 188, 191 (5th Cir. 2010). Under that standard,
summary judgment is appropriate when “there is no genuine dispute as to any
material fact and the movant is entitled to judgment as a matter of law.” Fed.
R. Civ. P. 56(a). “If the evidence is merely colorable, or is not significantly
probative, summary judgment may be granted.” Anderson v. Liberty Lobby, Inc.,
477 U.S. 242, 249-50 (1986) (citations omitted). When reviewing a motion for
summary judgment, the Court construes all the evidence and reasonable

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inferences in the light most favorable to the nonmoving party. Amazing Spaces,
Inc. v. Metro Mini Storage, 608 F.3d 225, 234 (5th Cir. 2010) (quoting Xtreme
Lashes, LLC v. Xtended Beauty, Inc., 576 F.3d 221, 226 (5th Cir. 2009)).
                                    ANALYSIS
      On appeal, Hughes argues that the district court lacked subject matter
jurisdiction over his case, and thus should have granted his motion to remand
to state court. While Hughes’s briefing is somewhat difficult to decipher, his
main contention seems to be that he brought only state-law claims against the
Defendants-Appellees, such that the district court did not have jurisdiction to
grant summary judgment in their favor. The Defendants-Appellees counter that
the district court did not err by denying Hughes’s motion to remand, because
Hughes’s lawsuit was really aimed at the validity of the administrative levy with
which Chevron complied, as well as the lawfulness of the IRS’s actions.
      A civil suit may be removed from state court to federal court if the claim
therein is one “arising under” federal law, such that it is an action over which a
district court would have original jurisdiction. Franchise Tax Bd. of State of Cal.
v. Constr. Laborers Vacation Trust for S. Cal., 463 U.S. 1, 8 (1983); 28 U.S.C.
§§ 1331, 1441. In general, courts follow the “well-pleaded complaint” rule, which
holds that whether or not a case arises under federal law “must be determined
from what necessarily appears in the plaintiff’s statement of his own claim in the
bill or declaration,” and not based on anticipated defenses. Franchise Tax Bd.,
463 U.S. at 10 (quoting Taylor v. Anderson, 234 U.S. 74, 75 (1914)); see also
Merrell Dow Pharm. Inc. v. Thompson, 478 U.S. 804, 808 (1986) (“Under our
longstanding interpretation of the current statutory scheme, the question
whether a claim ‘arises under’ federal law must be determined by reference to

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the well-pleaded complaint.” (internal quotation marks and citation omitted)).
In this manner, the plaintiff is the “master of the claim,” and he “may avoid
federal jurisdiction by exclusive reliance on state law.” Caterpillar Inc. v.
Williams, 482 U.S. 386, 392 (1987).
      However, there are instances where a claim may “arise under” federal law
and be removed to federal court, even though the plaintiff makes no federal
claims. “[F]or purposes of § 1331[,] an action ‘arises under’ federal law if in order
for the plaintiff to secure the relief sought he will be obliged to establish both the
correctness and the applicability to his case of a proposition of federal law.”
Franchise Tax Bd., 463 U.S. at 9 (internal quotation marks and citation
omitted). The plaintiff’s “right to relief under state law [must require] resolution
of a substantial question of federal law in dispute between the parties.” Id. at
13; see also Grable & Sons Metal Prod., Inc. v. Darue Eng. & Mfg., 545 U.S. 308,
312 (2005) (stating that “in certain cases federal-question jurisdiction will lie
over state-law claims that implicate significant federal issues”). In addition, a
federal court must be able to entertain the suit “without disturbing any
congressionally approved balance of federal and state judicial responsibilities.”
Grable & Sons, 545 U.S. at 314. In this Circuit, we have held that “federal
question jurisdiction exists where (1) resolving a federal issue is necessary to
resolution of the state-law claim; (2) the federal issue is actually disputed; (3) the
federal issue is substantial; and (4) federal jurisdiction will not disturb the
balance of federal and state judicial responsibilities.” Singh v. Duane Morris,
LLP, 538 F.3d 334, 338 (5th Cir. 2008).
      Here, Hughes’s state-law claims meet all of the above criteria. First, it
would be impossible to determine whether the Defendants-Appellees breached

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                                  No. 11-10698

their fiduciary duty to him or interfered with his contract without deciding
whether their actions were governed by a valid administrative levy issued by the
IRS. That question in turn requires determining whether the IRS had the
authority to issue an administrative levy on Hughes’s unexempted wages, and
whether it followed the proper procedures in doing so. Thus, we find that it is
necessary to resolve a federal issue in order to resolve Hughes’s state-law claims.
Second, Hughes clearly disputes the lawfulness of the Defendants-Appellees’
withholding of his wages pursuant to an administrative levy. He also challenges
the authority of the IRS, maintaining, among other arguments, that it has no
authority to operate in Texas, that he does not have “wages,” “salary,” or
“income,” as those terms are defined under federal law, and that the Code
sections dealing with levy and garnishment apply only to excise taxes on alcohol
and tobacco. Third, “[t]he meaning of the federal tax provision is an important
issue of federal law . . . .” Grable & Sons, 545 U.S. at 315. Finally, it clearly
would not disturb the balance of federal and state judicial power for a federal
court to decide questions of federal tax law. Indeed, as the Supreme Court has
stated, determinations regarding federal tax provisions “sensibly belon[g] in a
federal court.” Id. Accordingly, we find that Hughes’s claims arise under federal
law.
       “[A] plaintiff may not defeat removal by omitting to plead necessary
federal questions in a complaint.” Franchise Tax Bd., 463 U.S. at 22. Though
Hughes has tried to frame his claims as sounding only in state law, any judicial
consideration of those claims necessarily implicates substantial questions of
federal law. Indeed, the only contested question in this case appears to be
whether or not the IRS properly issued an administrative levy on Hughes’s

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earnings, and whether the Defendants-Appellees justifiably abided by that levy.
See Grable & Sons, 545 U.S. at 314-15 (“Grable has premised its superior title
claim on a failure by the IRS to give it adequate notice, as defined by federal law.
Whether Grable was given notice within the meaning of the federal statute is
thus an essential element of its quiet title claim, and the meaning of the federal
statute is actually in dispute; it appears to be the only legal or factual issue
contested in the case.”). We thus find that the district court properly took
jurisdiction of Hughes’s case, and denied his motion to remand.
      We also find that the district court properly granted summary judgment
in favor of the Defendants-Appellees. At base, Hughes’s suit questions the
jurisdiction and authority of the IRS, and it seeks to interpret the federal tax
code in a manner that exempts him from its reach. However, this Court has held
that “[t]he constitutionality of our income tax system–including the role played
within that system by the Internal Revenue Service and the Tax Court–has long
been established.” Cain v. I.C.R., 737 F.2d 1417, 1417-18 (5th Cir. 1984) (per
curiam). Similarly, “[t]he constitutionality of the levy procedure . . . has long
been settled.” United States v. Nat’l Bank of Commerce, 472 U.S. 713, 721 (1985)
(internal quotation marks and citations omitted). Furthermore, as the district
court correctly held, the Defendants-Appellees were immune from suit by
Hughes for honoring the administrative levy and turning over Hughes’s wages
to the IRS. 26 U.S.C. § 6332(e); Nat’l Bank of Commerce, 472 U.S. at 721; Melton
v. Teachers Ins. & Annuity Ass’n of Am., 114 F.3d 557, 561 (5th Cir. 1997)
(“Because TIAA complied with the levy issued by the IRS under §§ 6331 and
6332, it is immune from liability to Melton for complying with the levy.”).

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Consequently, there were no viable claims Hughes could maintain against them
individually.
          Hughes’s protestations regarding the procedure employed by the IRS in
issuing the administrative levy fall flat, as well. He asserts that the levy was
unlawful, in part because the IRS did not seek a court order before issuing it.
However, there is no such requirement for administrative levies. United States
v. Baggot, 463 U.S. 476, 481 (1983) (“The IRS need never go into court to assess
and collect the amount owed; it is empowered to collect the tax by non-judicial
means . . . without having to prove to a court the validity of the underlying tax
liability.”). If Hughes questions the propriety of imposing an administrative levy
on his wages, or the manner in which it was accomplished, then he should have
taken those claims to the proper court and requested review of the IRS’s actions.
See United States v. Rodgers, 461 U.S. 677, 682-83 (1983) (“Administrative levy,
unlike an ordinary lawsuit . . . does not require any judicial intervention, and it
is up to the taxpayer, if he so chooses, to go to court if he claims that the
assessed amount was not legally owing.”); see also Baggot, 463 U.S. at 478-79
(“Upon receiving a notice of deficiency, the taxpayer has, broadly speaking, four
options: (1) he can accept the IRS’s ruling and pay the amount of the deficiency;
(2) he can petition the Tax Court for a redetermination of the deficiency; (3) he
can pay the amount of the deficiency and, after exhausting an administrative
claim, bring suit for a refund in the Claims Court or in district court; or (4) he
can do nothing and await steps by the IRS or the Government to collect the
tax.”).
          Hughes cannot now attempt an end-run around the correct method for
challenging an IRS decision, any more than he can use a state-court suit to

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disguise his challenge to the legality of the federal income tax. We therefore
hold that the district court properly granted summary judgment in favor of
Chevron and Renee Bear.
                                CONCLUSION
      For the foregoing reasons, the judgment of the district court is
AFFIRMED.

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