Betlyon v. Shy

• Decision Date: 25 October 1983
• Docket Number: Civ. A. No. 83-211 MMS.
• Citation: 573 F. Supp. 1402
• Parties: Theodore J. BETLYON, Robert S. Lech, and Steven Markoya, Plaintiffs, v. Clare SHY ("A"), R. Karakantas ("B"), C.A. McPhee ("C"), Defendants.
• Court: U.S. District Court — District of Delaware

573 F. Supp. 1402

Theodore J. BETLYON, Robert S. Lech, and Steven Markoya, Plaintiffs, v. Clare SHY ("A"), R. Karakantas ("B"), C.A. McPhee ("C"), Defendants.

Civ. A. No. 83-211 MMS.

United States District Court, D. Delaware.

October 25, 1983.

Theodore J. Betlyon, Robert S. Lech and Steven Markoya, pro se.

Richard J. McMahon, Asst. U.S. Atty., Wilmington, Del., J. Brian Ferrel and Stuart M. Fischbein, Dept. of Justice, Washington, D.C., for defendants Shy and Karakantas.

Januar D. Bove, Jr., Jeffrey B. Bove and James J. Woods, Jr., Connolly, Bove, Lodge & Hutz, Wilmington, Del., for defendant McPhee.

OPINION

MURRAY M. SCHWARTZ, District Judge.

This pro se action attacks the legitimacy of the federal tax withholding system. Plaintiffs Theodore J. Betlyon, Robert S. Lech and Steven Markoya, three employees of the General Foods Manufacturing Corporation ("General Foods"), seek damages against defendants for their complicity in the alleged illegal withholding of taxes from plaintiffs' paychecks. The complaint named as defendants Clare Shy, the District Director for the Wilmington District Office of the Internal Revenue Service ("IRS"), Richard Karakantas, a revenue agent in the Examination Section of the IRS's Wilmington District Office, and George A. McPhee, the Administrative Services Supervisor for General Foods.

I. Facts

The Court is unable to decipher from plaintiffs' illusory complaint exactly what wrong defendants are supposed to have committed. Plaintiffs allege that defendants Shy and Karakantas "conspired to alter Plaintiffs positions with General Foods" and that all three defendants "conspired ... to effect extortion from Plaintiffs, being without authorization to so withhold." This Court has "jurisdiction," the complaint further asserts, under 42 U.S.C. §§ 1983, 1985 and 1986.¹ When pressed at oral argument plaintiffs maintained that they rested their action solely on alleged violations of sections 1983, 1985 and 1986. Plaintiffs' complaint, however, alleged no specific actions by defendants that were supposed to have violated these civil rights statutes.

The uncontroverted facts outlined in defendants' briefs and documented by affidavits and exhibits paint a clear picture of the events underlying plaintiff's claims. In January, 1983, plaintiffs and nine other General Foods employees filed "W-4" forms with their employer which failed to list any withholding status. Instead, each of these twelve employees indicated on his W-4 form that the form did not provide for his status. Defendant McPhee reviewed these W-4's in the course of his work at General Foods and, in February, 1983, notified defendant Karakantas pursuant to Treas.Reg. 31.3402(f)(2)-(1)(g)(1) that these W-4 forms claimed complete exemptions from withholding.² When defendant Karakantas reviewed these W-4 forms he similarly interpreted them as claiming complete exemptions from withholding. Consequently, as he was required to do under Treas.Reg. 31.3402,³ he examined plaintiffs' tax records to determine plaintiffs' eligibility for complete exemption. On March 18, 1983, after ascertaining that plaintiffs' 1981 returns showed taxable income and that plaintiffs' W-2 forms for 1982 showed gross income, Karakantas sent work sheets to plaintiffs pursuant to the same treasury regulations.

Plaintiff Betlyon failed to return his work sheet or respond to the IRS inquiry in any manner. Plaintiffs Lech and Markoya responded by letters which explained that the plaintiffs were "not working on a W-4." Karakantas thereafter determined that plaintiffs had not met their burden of proving their entitlement to an exemption under Treas.Reg. 31.3402. He sent form letter 1659 to General Foods which instructed the company to place plaintiffs on a single withholding status with one allowance.⁴

II. Service of Process

Defendants have filed motions to dismiss primarily on the grounds of inadequate service of process and failure to state a claim. While continuing to assert their service of process defense, defendants at oral argument urged this Court to reach the merits of plaintiffs' substantive claims. Unless plaintiffs served defendants in accordance with Fed.R.Civ.P. 4, however, this Court lacks personal jurisdiction over defendants. See 4 C. Wright & A. Miller, Federal Practice & Procedure § 1063, at 204 (1969). The Court will, therefore, address the sufficiency of service of process before considering defendants' motions to dismiss for failure to state claim. See Season-All Industries, Inc. v. Turkiye Sise ve Cam Fabrikalari, A.S., 425 F.2d 34, 38 (3d Cir. 1970); Arrowsmith v. United Press International 320 F.2d 219, 221 (2d Cir.1963) (en banc); Allied Poultry Processors Co. v. Polin, 134 F.Supp. 278, 279-80 (D.Del. 1955); 5 C. Wright & A. Miller § 1351. The Court will first address service on defendant McPhee.

A. Defendant McPhee

An individual defendant such as McPhee must be served in accordance with Fed.R.Civ.P. 4(c)(2)(C)⁵ or 4(d)(1).⁶ Rule 4(d)(1) requires that a competent adult be served personally, be served by leaving a copy of the summons and complaint at his dwelling house or place of abode with a resident of suitable age and discretion, or be served through an authorized agent. McPhee states by affidavit that the summons and complaint were served on his supervisor at General Foods while McPhee was vacationing in another state. Service left at a person's place of employment does not meet Rule 4(d)(1)'s requirements, Gipson v. Township of Bass River, 82 F.R.D. 122, 125 (D.N.J.1979); 4 C. Wright & A. Miller § 1096, at 364, and plaintiffs have made no showing that McPhee's supervisor was authorized by appointment or law to accept service. Rule 4(c)(2)(C)(i) allows for service in accordance with the law of the state where the district court sits, but plaintiffs have failed to comply with either 10 Del.C. § 3103 (1975) or Del.Super.Ct.R. 4(f)(1), which prescribe requirements similar to those of Fed.R.Civ.P. (4)(d)(1). Rule 4(c)(2)(C)(ii) allows for service by mail (with certain conditions), but plaintiffs did not attempt to perfect service under that provision. Plaintiffs, therefore, have not properly served defendant McPhee.

B. Defendants Shy and Karakantas

Plaintiffs asserted strenuously at oral argument and in their briefs that they are suing defendants Karakantas and Shy in their individual capacities, not their official capacities'. For purposes of this opinion plaintiffs characterizations are accepted as true. Thus, plaintiffs needed to have complied with Rules 4(c)(2)(C) or 4(d)(1) to perfect service. See Micklus v. Carlson, 632 F.2d 227, 240 (3d Cir.1980); Navy, Marshall & Gordon v. United States International Development-Cooperation Agency, 557 F.Supp. 484, 489-90 (D.D.C.1983). Defendants assert that under Lawrence v. Acree, 79 F.R.D. 669 (D.D.C.1978), plaintiffs should have served defendants Shy and Karakantas under Rule 4(d)(5).⁷ This rule requires service upon the United States if an officer of the United States is named as a defendant. The rule in the Third Circuit Court of Appeals appears to be, however, that an officer served in his individual capacity, even if acting under color of his authority, must be served under Rule 4(d)(1). See Micklus v. Carlson, 632 F.2d at 240. Moreover, a recent decision of the United States District Court for the District of Columbia casts serious doubt on the continuing validity of the Lawrence case. See Navy, Marshall & Gordon v. United States International Development Corp., 557 F.Supp. at 489-90. Perhaps one could harmonize Micklus and Lawrence by requiring a plaintiff, suing a defendant in his individual capacity for actions taken under color of legal authority, to serve process under both Rule 4(d)(1) and Rule 4(d)(5). Indeed, it might make good sense to serve notice on both the individual and the government in such suits. This Court, however, will reserve that issue for a case where there is a full opportunity for adversary briefing and argument. For now, the Court will follow Micklus and hold that plaintiffs need have complied only with Rules 4(d)(1) or 4(c)(2)(C).

Uncontradicted affidavits show that defendant Shy, like defendant McPhee, was not properly served under Fed.R.Civ.P. 4(c)(2)(C) or 4(d)(1). Plaintiffs served Shy's secretary at Shy's place of employment. There is no indication that Shy's secretary was an agent authorized to receive service of process. Thus, for the same reasons defendant McPhee was not served properly, defendant Shy also was improperly served.

It is assumed that plaintiffs effected personal service on defendant Karakantas since he, unlike defendants Shy and McPhee, has not asserted by affidavit or otherwise that he was not so served. Thus, plaintiffs have complied with Rule 4(d)(1) with respect to defendant Karakantas.

Defendants' motion to dismiss for insufficient service of process will be granted with respect to defendants Shy and McPhee but denied as to defendant Karakantas.

III. Motion to Dismiss

Because this Court has personal jurisdiction over defendant Karakantas it must adjudicate his motion to dismiss for failure to state a claim. The Court has considered evidence outside of the pleadings, however, so it will treat defendants' motion as one for summary judgment. See Fed.R.Civ.P. 12(b).

Numerous recent court decisions have upheld the constitutionality of the federal income tax withholding system against claims such as those brought by plaintiffs. See Stonecipher v. Bray, 653 F.2d 398 (9th Cir.1981), cert. denied, 454 U.S. 1145, 102 S.Ct. 1006, 71 L.Ed.2d 297 (1982); Campbell v. Amax Coal Co., 610 F.2d 701 (10th Cir.1979); Donovan v. Maisel, 559 F.Supp. 171 (D.Del.1982); Schultz v. Stark, 554 F.Supp. 1219 (E.D.Wis.1983); Robinson v. A & M Electric, Inc., 534 F.Supp. 302 (D.N.M.1982), aff'd, 713 F.2d 608 (10th Cir. 1983); Chandler v. Perini Power Constructors, Inc., 520 F.Supp. 1152 (D.N.H. 1981); Rapp v. Peper, 80-1 U.S. Tax Cases (CCH) ¶ 9204 ...