Bennett v. U.S.

• Decision Date: 21 November 2006
• Docket Number: Civil Action No. 05-2297(RMC).
• Parties: Hamlet C. BENNETT, Plaintiff, v. UNITED STATES of America, Defendant.
• Court: U.S. District Court — District of Columbia

Page 35

462 F.Supp.2d 35

Hamlet C. BENNETT, Plaintiff, v. UNITED STATES of America, Defendant.

Civil Action No. 05-2297(RMC).

United States District Court, District of Columbia.

November 21, 2006.

Hamlet C. Bennett, Holualoa, HI, pro se.

Beatriz T. Saiz, U.S. Department of Justice, Tax Division, Pat S. Genis, U.S. Department of Justice, Washington, DC, for Defendant.

MEMORANDUM OPINION

COLLYER, District Judge.

Plaintiff Hamlet C. Bennett filed a pro se Complaint against the United States (the "Government"), alleging that beginning with tax year 1995, the Internal Revenue Service ("IRS") "recklessly, intentionally, or by reason of negligence disregarded" various provisions of Title 26 of the U.S.Code in connection with the collection of federal tax. Compl. ¶¶ 1 & 7. This Complaint is among the scores of nearly identical pro se complaints filed in the U.S. District Court for the District of Columbia over the past year seeking a refund, damages, and injunctive relief against further collection of federal taxes. See, e.g., Gaines v. United States, 424 F.Supp.2d 219, 221 (D.D.C.2006) (collecting cases); Def.'s Mem. in Supp. of Mot. to Dismiss at 2 n. 1 (Government estimates more than 60 such complaints have been filed in this District).

Mr. Bennett requested a Clerk's entry of default, and the Clerk entered default against the Government on February 28, 2006. Mr. Bennett now moves for entry of default judgment, and the Government moves to vacate the entry of default and to dismiss the Complaint. The Court will deny the motion for default judgment and will grant the motion to vacate entry of default and the motion to dismiss because: (1) the Government has shown good cause to vacate the entry of default; (2) Mr. Bennett failed to exhaust his administrative remedies, a prerequisite to a suit for damages for wrongful collection of taxes or for a tax refund; and (3) Mr. Bennett's injunction claim is barred by the Anti-Injunction Act, 26 U.S.C. § 7421(a).

I. LEGAL STANDARDS

The Government moves to dismiss pursuant to Federal Rules of Civil Procedure 12(b)(1), (2), (3), (5), and (6). The Court will grant its motion under Rules 12(b)(1) and (6). Under Rule 12(b)(1), which governs motions to dismiss for lack of subject matter jurisdiction, a plaintiff bears the burden of establishing by a preponderance of the evidence that the Court possesses jurisdiction. See Shekoyan v. Sibley Int'l Corp., 217 F.Supp.2d 59, 63 (D.D.C.2002); Pitney Bowes Inc. v. U.S. Postal Serv., 27 F.Supp.2d 15, 19 (D.D.C.1998). It is well established that, in deciding a motion to dismiss for lack of subject matter jurisdiction, a court is not limited to the allegations set forth in the complaint "but may also consider material outside of the pleadings in its effort to determine whether the court has jurisdiction in the case." Alliance for Democracy v. Fed. Election Comm'n, 362 F.Supp.2d 138, 142 (D.D.C. 2005); see Lockamy v. Truesdale, 182 F.Supp.2d 26, 30-31 (D.D.C.2001).

A motion to dismiss pursuant to Federal Rule of Civil Procedure 12(b)(6) challenges the adequacy of a complaint on its face, testing whether a plaintiff has properly stated a claim. "[A] complaint should not be dismissed for failure to state a claim unless it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief." Conley v. Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99, 2 L.Ed.2d 80 (1957). In deciding a 12(b)(6) motion, the Court "may only consider the facts alleged in the corn plaint, documents attached as exhibits or incorporated by reference in the complaint, and matters about which the Court may take judicial notice." Gustave-Schmidt v. Chao, 226 F.Supp.2d 191, 196 (D.D.C.2002) (citation omitted).

II. DISCUSSION

A. Clerk's Entry of Default

Default judgments are disfavored by modern courts. Jackson v. Beech, 636 F.2d 831, 835 (D.C.Cir.1980). Accordingly, under Federal Rule of Civil Procedure 55(c), so long as judgment has not yet been entered, a default may be set aside for "good cause shown." Id. (quoting Fed. R.Civ.P. 55(c)). The decision to set aside an entry of default rests in the discretion of the district court. Keegel v. Key West & Caribbean Trading Co., Inc., 627 F.2d 372, 373 (D.C.Cir.1980). In exercising such discretion, a court must consider whether

(1) the default was willful,

(2) a set-aside would prejudice plaintiff, and

(3) the alleged defense was meritorious.

Id. Federal courts favor trials on the merits. Id. at 374.

The Government neglected to respond to the complaint for approximately three months, but excuses this delay by explaining that service of process was faulty. While Mr. Bennett personally served the Attorney General and U.S. Attorney, he failed to serve the IRS. Proper service of process (or waiver of service) is a prerequisite to the Court's exercise of personal jurisdiction over a defendant. Murphy Bros. Inc. v. Michetti Pipe Stringing Inc., 526 U.S. 344, 350, 119 S.Ct. 1322, 143 L.Ed.2d 448 (1999). Federal Rule of Civil Procedure 4(i) prescribes whom to serve when the federal government is a defendant as follows:

(i) Serving the United States, Its Agencies, Corporations, Officers, or Employees

(1) Service upon the United States shall be effected

(A) by delivering a copy of the summons and of the complaint to the United States attorney for the district in which the action is brought or to an assistant United States attorney or clerical employee designated by the United States attorney in a writing filed with the clerk of the court or by sending a copy of the summons and of the complaint by registered or certified mail addressed to the civil process clerk at the office of the United States attorney and

(B) by also sending a copy of the summons and of the complaint by registered or certified mail to the Attorney General of the United States at Washington, District of Columbia, and (C) in any action attacking the validity of an order of an officer or agency of the United States not made a party, by also sending a copy of the summons and of the complaint by registered or certified mail to the officer or agency.

Because Mr. Bennett failed to serve the IRS, there was an error in effecting service and the Government neglected to respond timely. But now the Government has responded and seeks to set aside the default and dismiss the suit. There is no indication that the Government's delay was willful or that Mr. Bennett will be prejudiced if the Court sets aside the default. In light of this, as well as the Court's preference for resolving disputes on their merits and the validity of the Government's defense as explained infra, the Court finds good cause to set aside the Clerk's entry of default.

B. Damages Claims

Mr. Bennett invokes the subject matter jurisdiction of the Court pursuant to 26 U.S.C. § 7433, which provides a cause of action for damages for certain violations of Title 26. Compl. ¶ 1. That statute provides:

If, in connection with any collection of Federal tax with respect to a taxpayer, any officer or employee of the Internal Revenue Service recklessly or intentionally, or by reason of negligence disregards any provision of this title, or any regulation promulgated under this title, such taxpayer may bring a civil action for damages against the United States in a district court of the United States. Except as provided in [26 U.S.C. §] 7432, such civil action shall be the exclusive remedy for recovering damages resulting from such actions.

26 U.S.C. § 7433(a). However, section 7433 also explicitly requires that administrative remedies be exhausted as a predicate to suit: "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 Internal Revenue Service." Id. § 7433(d)(1). The IRS, in turn, has promulgated regulations that mandate that damages actions under § 7433 "may not be maintained unless the taxpayer has filed an administrative claim." 26 C.F.R. § 301.7433-1(a). Administrative claims must be submitted to the "Area Director, Attn: Compliance Technical Support Manager" and must include, inter alia, the grounds for the claim, a description of the injury incurred, including a dollar amount, and any substantiating documentation. Id. § 301.7433-1(e)(2). Until the IRS rules on a properly filed claim, or six months pass without a ruling, no civil action for damages will lie. Id. § 301.7433-1(d); see also Gaines, 424 F.Supp.2d at 221-22 (describing statutory and regulatory scheme); Turner v. United States, 429 F.Supp.2d 149, 151 (D.D.C. 2006) (same).

There are no exceptions to the exhaustion requirement set forth in section 7433. Id. at 152. In Turner, the taxpayer did not contest that he had failed to exhaust his administrative remedies, but instead argued that it would be futile to make the attempt because the administrative remedies were allegedly unavailable or inadequate. The court found this argument unavailing because "when exhaustion is mandated by statute, courts are not free to carve out exceptions that are not supported by the text." Id.; accord Lindsey v. United States, 448 F.Supp.2d 37, 51 (D.D.C.2006); see also Jaeger v. United States, No. 06-625, 2006 WL 1518938 (D.D.C. May 26, 2006) (where a taxpayer failed to state any basis for his claim of exhaustion in his boilerplate complaint or in response to the court's order to show cause, there was no dispute that the plaintiff failed to exhaust and the case was dismissed).

The Government argues in its motion to dismiss that Mr. Bennett failed to exhaust his administrative remedies. The boilerplate Complaint alleges in conclusory fashion that Mr. Bennett has satisfied the exhaustion requirement. See Compl. ¶ 6 ("Plaintiff has exhausted all administrative remedies ...."); id. ¶ 24 ("Administrative claims which plaintiff filed with the [IRS] and the Secretary of the Treasury...