Bright v. Bechtel Petroleum, Inc., s. 84-2866
| Citation | 780 F.2d 766 |
| Decision Date | 21 February 1986 |
| Docket Number | Nos. 84-2866,85-1730,s. 84-2866 |
| Parties | Willie D. BRIGHT, Plaintiff-Appellant, v. BECHTEL PETROLEUM, INC., a corporation doing business in the State of California and its individual agents; Tom Rowe, George Burns, Dan McGlathern and C.J. Grabelski, and Does 1 through 10, Defendants-Appellees. |
| Court | United States Courts of Appeals. United States Court of Appeals (9th Circuit) |
Willie D. Bright, pro per.
Philip R. Placier, Charles P. McCarthy, Thelen, Marrin, Johnson & Bridges, San Francisco, Cal., for defendants-appellees.
On Appeal From the United States District Court for the Northern District of California.
Before WRIGHT, KENNEDY and BEEZER, Circuit Judges.
Plaintiff brought an action against his employer in a California state court. He alleged that his employer had breached his employment contract by paying him less than the contract required. The employer removed the case to federal district court on the ground that plaintiff had artfully pleaded what was in reality a challenge to the employer's compliance with federal law requiring the withholding of federal income tax. The district court denied plaintiff's motion to remand, dismissed the action, and awarded attorney's fees to the employer. We affirm and impose sanctions.
On November 7, 1983, Willie D. Bright entered into an employment contract with Bechtel Petroleum, Inc. pursuant to a collective bargaining agreement. On January 3, 1984, Bright provided to Bechtel a federal Employee's Withholding Allowance Certificate (W-4 Form) on which he claimed an exemption from the withholding of federal income tax.
In accordance with federal internal revenue regulations, Bechtel forwarded Bright's W-4 Form to the Internal Revenue Service (IRS). On March 14, 1984, the IRS issued a directive to Bechtel declaring Bright's W-4 Form invalid and ordering Bechtel to begin withholding federal income tax. Pursuant to a California state income tax regulation, Bechtel also began withholding state income tax. In 1984, a total of $2,486.18 in federal tax and $736.00 in state tax was withheld from Bright's wages.
On June 1, 1984, Bright filed an action against Bechtel, and certain individual agents, in California Superior Court alleging a breach of contract. Bechtel removed the case to the United States District Court for the Northern District of California on the ground that the true basis of the complaint was that Bechtel had complied with federal income tax laws in withholding tax from Bright's wages. Bechtel also moved for dismissal of the action, and for an award of costs and attorney's fees on the ground the complaint was frivolous and filed in bad faith.
Bright moved to remand the case back to state court, arguing that he desired to litigate only the question of Bechtel's withholding of state income tax from his wages.
On December 4, 1984, the district court denied Bright's motion to remand, granted the motion to dismiss, and awarded attorney's fees in the amount of $3300 to Bechtel.
On December 19, 1984, Bright filed a motion asking the court for "clarification" of the grounds of its judgment. Before the district court had ruled on this motion, Bright filed a notice of appeal from the judgment. The court subsequently denied Bright's motion. Bright also filed a notice of appeal from that order. The two appeals have been consolidated.
A question of federal subject matter jurisdiction, such as that permitting removal of a case from state to federal court, is reviewable de novo. See Mobil Oil Corp. v. City of Long Beach, 772 F.2d 534, 538 (9th Cir.1985). This court reviews de novo a district court's ruling on a motion to dismiss for failure to state a claim upon which relief can be granted. Trerice v. Pedersen, 769 F.2d 1398, 1400 (9th Cir.1985).
Bright's complaint alleges that Bechtel breached the employment contract by "issuing to plaintiff paychecks that were in amounts less than contracted and agreed for." The complaint alleges a cause of action based upon "breach of contract and a gross violation of Christian principles."
Bechtel petitioned to remove the case to federal district court on the ground that the "breach" Bright alleges is based upon Bechtel's withholding of income tax pursuant to federal law. Bechtel contends the action falls within the district court's original jurisdiction because it "arises under" federal internal revenue statutes. 1
An action may "arise under" a law of the United States if the plaintiff's right to relief necessarily turns on construction of federal law. Franchise Tax Board v. Construction Laborers Vacation Trust, 463 U.S. 1, 9, 103 S.Ct. 2841, 2846, 77 L.Ed.2d 420 (1983); Mobil Oil Corp. v. City of Long Beach, 772 F.2d 534, 539 (9th Cir.1985). Under the "well-pleaded complaint" rule, the federal question, which invokes federal jurisdiction, must appear from the complaint and not from any federal defense the defendant might raise to defeat the claim. Franchise Tax Board, 463 U.S. at 10, 103 S.Ct. at 2846; Mobil Oil Corp., 772 F.2d at 538-39.
Although the plaintiff is generally considered the "master of his complaint" and is free to choose the forum for his action, this principle is not without limitation. Schroeder v. Trans World Airlines, Inc., 702 F.2d 189, 190 (9th Cir.1983). 2 A plaintiff will not be allowed to conceal the true nature of a complaint through "artful pleading." Id. at 191; see also Olguin v. Inspiration Consolidated Copper Co., 740 F.2d 1468, 1472 (9th Cir.1984).
Bechtel, through background information in its petition for removal and supporting affidavits, 3 demonstrated that Bright, despite "artfully pleading" his action as a breach of contract, in fact is challenging federal income tax withholding laws and regulations. Bright had written two letters threatening a lawsuit for breach of contract against Bechtel for complying with the IRS directive to withhold income tax from his wages. Both letters criticized the IRS directive as illegal and cited federal internal revenue statutes. The second letter expressly referred to a decision in this circuit, 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), which dismissed a suit, similar to the instant action, as frivolous.
In addition, affidavits were presented to the district court showing that Bright's complaint contains language virtually identical to that in the complaint of another employee who had filed an action against Bechtel in state court. 4 That action had been removed to the Northern District on the same ground, that the alleged breach of contract derived from the company's withholding of federal income tax from a paycheck, and had been dismissed as frivolous shortly before Bright filed the complaint in this action.
Once the removal petition had been filed, Bright asserted for the first time that he intended only to litigate a claim involving the withholding of California state income tax. Thus, Bright argues, no federal question is raised. Bright's assertion must be regarded as disingenuous. The complaint simply does not state a claim limited to a state tax issue. It is clear under the circumstances that Bright has raised this new argument as another attempt to evade the jurisdiction of the Northern District, which has been acting swiftly to dismiss similar suits as frivolous.
Accordingly, the removal of the action to federal court was proper. See Chandler v. Perini Power Constructors, Inc., 520 F.Supp. 1152, 1155 (D.N.H.1981).
Under 26 U.S.C. Sec. 3402, an employer has a mandatory duty to withhold federal income tax from an employee's wages where required by applicable regulations. See Maxfield v. United States Postal Service, 752 F.2d 433, 434 (9th Cir.1984); Chandler v. Perini Power Constructors, Inc., 520 F.Supp. 1152, 1153 (D.N.H.1981). The actions taken by Bechtel, in withholding federal income tax from Bright's wages, were fully in accordance with federal internal revenue regulations. 5 This circuit has repeatedly held that an employer is not liable to an employee for complying with its legal duty to withhold tax. Maxfield, 752 F.2d at 434; see Stonecipher v. Bray, 653 F.2d 398, 403 (9th Cir.1981) (), cert. denied, 454 U.S. 1145, 102 S.Ct. 1006, 71 L.Ed.2d 297 (1982); Callow v. Amerace Corp., 681 F.2d 1242, 1243 (9th Cir.1982) ().
The Internal Revenue Code, 26 U.S.C. Sec. 3403, expressly provides that an employer is liable to the IRS for the payment of tax withheld, and "shall not be liable to any person for the amount of any such payment." Thus, suits by employees against employers for tax withheld are "statutorily barred." Chandler, 520 F.Supp. at 1156.
In addition, we have held that actions, such as this, are barred by the Anti-Injunction Act, 26 U.S.C. Sec. 7421(a), which prohibits suits "for the purpose of restraining the assessment or collection of any tax." Maxfield, 752 F.2d at 434. A lawsuit, such as in the instant case, can be viewed as one to restrain collection (through withholding) of federal income tax. See id.; Chandler, 520 F.Supp. at 1155.
The district court properly dismissed Bright's claim involving withholding of federal income tax.
Bright's complaint also raises a breach of contract claim against Bechtel based on the withholding of state income tax. Bechtel withheld state income tax in compliance with a California state regulation, 22 Cal.Admin.Code Sec. 4340-1(b), providing that a federal determination that a withholding exemption claim is invalid is also effective for...
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