Benistar Admin Serv. Inc. v. United States

• Citation: 758 F.Supp.2d 95
• Decision Date: 10 December 2010
• Docket Number: Civil Action No. 3:10–CV–1320 (JCH).
• Court: U.S. District Court — District of Connecticut
• Parties: BENISTAR ADMIN SERVICES, INC., Plaintiff,v.UNITED STATES, Defendant.

758 F.Supp.2d 95

BENISTAR ADMIN SERVICES, INC., Plaintiff,

v.UNITED STATES, Defendant.

Civil Action No. 3:10–CV–1320 (JCH).

United States District Court, D. Connecticut.

Dec. 10, 2010.

Brian W. Song, Frances Codd Slusarz, Joseph M. Pastore, III, Fox Rothschild LLP, Stamford, CT, David R. Makarewicz, Richard S. Order, Updike, Kelly & Spellacy, PC, William J. McGrath, Jr., Halloran & Sage, Hartford, CT, for Plaintiff.Austin L. Furman, U.S. Department of Justice, Washington, DC, Christine L. Sciarrino, U.S. Attorney's Office, New Haven, CT, for Defendant.

RULING RE: PLAINTIFF'S MOTION FOR PARTIAL SUMMARY JUDGMENT

(Doc. No. 30)

JANET C. HALL, District Judge.I. INTRODUCTION

Plaintiff, Benistar Admin Services, Inc. (“BASI”), brings this action against defendant, the United States (“the Government”), because of the filing of a notice of a federal tax lien (“the notice”) by the Internal Revenue Service (“the IRS”) against BASI. BASI seeks, inter alia, quiet title pursuant to 28 U.S.C. § 2410 to enjoin the Government from maintaining the notice, due to an alleged violation of BASI's Fifth Amendment due process rights.

BASI initially filed a Motion for a Temporary Restraining Order and a Motion for a Preliminary Injunction (Doc. No. 5). This court denied both Motions. See Doc. Nos. 14, 26. Specifically, the court denied BASI's Motion for Preliminary Injunction because BASI failed to establish that it faced irreparable harm. BASI subsequently filed the pending Motion for Partial Summary Judgment as to its quiet title claim (Count Two of the Second Amended Complaint (Doc. No. 35)). For the following reasons, the court denies this Motion.

II. FACTUAL BACKGROUND ¹

On August 10, 2009, the Government notified BASI that it had assessed penalties against the company for violating section 6708 of the Internal Revenue Code by failing to provide a list that identified each person for whom BASI acted as a “material advisor.” L.R. 56(a)(1) Stmt. ¶ 1. The assessment was based on a request, made by letter on January 20, 2006, for a list of individuals for whom BASI acted as a material advisor in the year 2002. Id. BASI did not pay the assessment, but on July 8, 2010, BASI filed a protest of the assessment to an IRS Appeals Officer. Id. at ¶ 2.

On August 2, 2010, the IRS sent a notice of intent to levy on the 2009 assessment. Id. at ¶ 3. On August 12, the IRS notified BASI that it had filed a Notice of Federal Tax Lien with the Town Clerk of Simsbury, Connecticut, in an amount of $1,120,000. Id. at ¶ 5. BASI has requested collection due process hearings with respect to the Government's lien and intent to levy. Id. at ¶¶ 4, 7.

III. STANDARD OF REVIEW

A motion for summary judgment “may properly be granted ... only where there is no genuine issue of material fact to be tried, and the facts as to which there is no such issue warrant judgment for the moving party as a matter of law.” In re Dana Corp., 574 F.3d 129, 151 (2d Cir.2009). Thus, the role of a district court in considering such a motion “is not to resolve disputed questions of fact but only to determine whether, as to any material issue, a genuine factual dispute exists.” Id. In making this determination, the trial court must resolve all ambiguities and draw all inferences in favor of the party against whom summary judgment is sought. See Fed R. Civ. P. 56(c); Loeffler v. Staten Island Univ. Hosp., 582 F.3d 268, 274 (2d Cir.2009).

“[T]he moving party bears the burden of showing that he or she is entitled to summary judgment.” United Transp. Union v. Nat'l R.R. Passenger Corp., 588 F.3d 805, 809 (2d Cir.2009). Once the moving party has satisfied that burden, in order to defeat the motion, “the party opposing summary judgment ... must set forth ‘specific facts' demonstrating that there is ‘a genuine issue for trial.’ ” Wright v. Goord, 554 F.3d 255, 266 (2d Cir.2009) (quoting Fed.R.Civ.P. 56(e)). “A dispute about a ‘genuine issue’ exists for summary judgment purposes where the evidence is such that a reasonable jury could decide in the non-movant's favor.” Beyer v. County of Nassau, 524 F.3d 160, 163 (2d Cir.2008) (quoting Guilbert v. Gardner, 480 F.3d 140, 145 (2d Cir.2007)); see also Havey v. Homebound Mortg., Inc., 547 F.3d 158, 163 (2d Cir.2008) (citing Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 252, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986)) (stating that a non-moving party must point to more than a mere “scintilla” of evidence in order to defeat a motion for summary judgment).

IV. DISCUSSION

BASI's claim is rather simple: the IRS, it argues, violated BASI's Fifth Amendment right to due process by failing to provide a hearing before it filed a notice of lien pursuant to 26 U.S.C. § 6320. The resolution of this claim, however, is not so simple. Rather, this court must engage in a “fact-intensive inquiry” into the interests at stake and the process provided to BASI. Diaz v. Paterson, 547 F.3d 88, 97 (2d Cir.2008).

BASI is correct that, in some respects, this is a case of first impression. This court has found no opinion addressing the legality of the specific Internal Revenue Code notice of lien provision in question. However, the principles underlying this claim are quite old. The federal government has withstood a number of challenges to its collection processes dating back over one hundred years. See, e.g., United States v. Nat'l Bank of Commerce, 472 U.S. 713, 105 S.Ct. 2919, 86 L.Ed.2d 565 (1985); Phillips v. Commissioner, 283 U.S. 589, 51 S.Ct. 608, 75 L.Ed. 1289 (1931). BASI nonetheless asks the court to find—in a series of (relatively) new Supreme Court opinions—a shift in the understanding of the process that is due a business in BASI's position. For the reasons stated below, the court declines this request.²

In order to analyze BASI's claim, the court applies the test articulated by the Supreme Court in Mathews v. Eldridge, 424 U.S. 319, 96 S.Ct. 893, 47 L.Ed.2d 18 (1976). A court must examine “(1) the private interest involved, (2) the risk of an erroneous deprivation of that interest through the procedures utilized, as well as the probable value of additional procedural safeguards, and (3) the government's interest, including the burden that additional procedural requirements would impose.” British Int'l Ins. Co. v. Seguros La Republica, S.A., 212 F.3d 138, 142 (2d Cir.2000) (citing Mathews, 424 U.S. at 325, 96 S.Ct. 893). Following the examples of the Second Circuit and the Supreme Court, the court examines each of the Mathews factors individually, comparing the facts in this case to facts discussed in similar cases. The court then determines the weight it should afford to the interests and processes of this case relative to the weight discussed in the relevant case law. The court then balances these factors, one against the other, to determine whether BASI received the process it was due under the Fifth Amendment.

For more than thirty years, courts have engaged in such careful and belabored examinations of the procedural protections provided by the Government to determine whether, in a particular context, due process is lacking. BASI's Memoranda suggest that, absent exigence, the Doehr decision requires the utilization of a particular process by the Government—a pre-notice hearing. The idea of a per se right to a pre-deprivation hearing, however, is inconsistent with the balancing test laid out in Mathews. While such a hearing is certainly protective of a property owner's interest, it has never been specifically required in all cases. See Gilbert v. Homar, 520 U.S. 924, 930–31, 117 S.Ct. 1807, 138 L.Ed.2d 120 (1997). Rather, the court must carefully examine the case before it and “remain mindful that ‘[d]ue process is inevitably a fact-intensive inquiry.’ ” Diaz, 547 F.3d at 97 (quoting Krimstock v. Kelly, 306 F.3d 40, 51 (2d Cir.2002)).

A. Mathews Step One—The Private Interest

BASI certainly has a property interest at stake. The Supreme Court in Connecticut v. Doehr made clear that an attachment or a lien constitutes a deprivation of property, even if it is only temporary. 501 U.S. 1, 11, 111 S.Ct. 2105, 115 L.Ed.2d 1 (1991). Such an attachment “clouds title; impairs the ability to sell or otherwise alienate the property; taints any credit rating; [etc.]” Id. Additionally, as it applies to BASI, the lien in question is large, totaling over one million dollars. See Ex. E to Robinson Decl. (Doc. No. 5–2); see also Robinson Decl. ¶ 13 (Doc. No. 5–2) (alleging that the lien exceeds BASI's net worth). However, this interest is less severe than if the IRS had seized the funds outright. See Doehr, 501 U.S. at 12, 111 S.Ct. 2105 (“[T]hese effects do not amount to a complete, physical, or permanent deprivation of real property ....”); cf. Diaz, 547 F.3d at 98 (“[L]is pendens is deemed one of the ‘less restrictive’ means of protecting a disputed property interest.” (quoting United States v. James Daniel Good Real Prop., 510 U.S. 43, 62, 114 S.Ct. 492, 126 L.Ed.2d 490 (1993))).

BASI's interest in protecting its business against a lien is also not as strong as interests discussed in a number of similar cases, including that in Doehr where the plaintiff's home was attached. See Doehr, 501 U.S. at 5, 111 S.Ct. 2105. The interest in a home “merits special constitutional protection.” United States v. All Assets of Statewide Auto Parts, Inc., 971 F.2d 896, 902 (2d Cir.1992); see also Good, 510 U.S. at 53–54, 114 S.Ct. 492 (“Good's right to maintain control over his home and to be free from governmental interference, is a private interest of historic and continuing importance.... The seizure of a home produces a far greater deprivation than ... attachment.”). In fact, a number of the key Supreme Court cases in which the Supreme Court found process inadequate involved a home or household goods. See, e.g., Good, 510 U.S. at 47, 114 S.Ct. 492 (seizure of a home); Fuentes v. Shevin, 407 U.S. 67, 70, 92 S.Ct. 1983, 32 L.Ed.2d 556 (1972) (seizure of household goods)...