Chandler v. Perini Power Constructors, Inc.

Decision Date31 August 1981
Docket NumberCiv. No. 81-262-D.
Citation520 F. Supp. 1152
CourtU.S. District Court — District of New Hampshire

Robert E. Chandler, pro se.

Wilbur A. Glahn, III, Manchester, N. H., Robert J. McDonough, Boston, Mass., for defendants.

John McAllister, DOJ, Washington, D. C., Helen J. Forsyth, Asst. U. S. Atty., Concord, N.H., for I.R.S.


SHANE DEVINE, Chief Judge.

May an employee whose paycheck has been diminished by the withholding of federal income tax by his employer pursuant to the direction of the federal tax authorities recover from said employer in an action of conversion? This is the issue presented to this Court by the instant litigation.

Robert E. Chandler, a resident of Northwood, New Hampshire, was employed in April 1981 by Perini Power Constructors, Inc. ("Perini"), a New Hampshire corporation with a place of business at Seabrook, New Hampshire. Perini was engaged in the ongoing construction of a nuclear power plant at Seabrook, and defendant William A. Dileo ("Dileo") was Perini's construction project manager. Perini was directed by the United States Internal Revenue Service ("IRS") to withhold certain income taxes from the plaintiff's weekly paycheck, and it did so. Plaintiff responded by commencing an action in the Rockingham County Superior Court, and defendants sought to remove such action to this court. Presently before the Court for resolution following oral argument are various motions filed by the parties.

1. The Motion to Remand.

The amended complaint1 seeks to recover for defendants' action in withholding the funds from plaintiff's paycheck, such actions being conceived by plaintiff to constitute an illegal and improper conversion of his wages. In urging entitlement to such recovery, plaintiff relies on certain state and federal statutes, and contends that inasmuch as he so relies, this Court is without jurisdiction as to removal of the instant action.

The crux of plaintiff's complaint is to be found in paragraph 8 whereof, wherein it is stated:

That from the pay for the week of April 19th through the 25th the Defendants Perini, by order of Mr. Dileo, did wrongfully and illegally remove from the Plaintiff's paycheck certain sums for the benefit of the Internal Revenue Service, a third party, without a court order, such money legally and rightfully belonging to Plaintiff, that he did not grant permission or allow Defendants to take those monies.

Initially imposed for a brief period between 1913 and 1917, federal tax withholding became more or less a permanent fixture in 1943. See Central Illinois Public Service Company v. United States, 435 U.S. 21, 26-27, 98 S.Ct. 917, 920, 55 L.Ed.2d 82 (1978). Section 3402 of the Internal Revenue Code, 26 U.S.C. § 3402, detailed the requirements imposed upon an employer, such as the defendants herein, to withhold income taxes from their employees, such as the plaintiff. The sums so withheld are commonly referred to as "trust fund taxes", thus reflecting the provision of the Internal Revenue Code that such withholdings or collections are deemed to be a "special fund in trust for the United States". 26 U.S.C. § 7501(a); Slodov v. United States, 436 U.S. 238, 243, 98 S.Ct. 1778, 1783, 56 L.Ed.2d 251 (1978). The employee is automatically given credit on its individual federal tax liability for the amount of taxes so withheld, even though the employer may not have turned over such sums to the Government. 26 U.S.C. § 1462; Feist v. United States, 607 F.2d 954, 957 (Ct.Cl.1979). Once such sums are credited against the employee's tax liability, the Government's recourse is against his employer pursuant to 26 U.S.C. § 3102(b) and § 3403, or against the corporate officer or employee who is deemed to be a person within the meaning of 26 U.S.C. § 6672 who willfully failed to collect and pay over the withheld taxes to the United States. Id.; see also United States v. Pomponio, 635 F.2d 293 (4th Cir. 1980); Garsky v. United States, 600 F.2d 86 (7th Cir. 1979). It is, accordingly, clearly demonstrable that the duties of withholding federal taxes from plaintiff's paycheck that were imposed upon the defendants herein were mandatory and not precatory in nature. In short, the Court finds and rules that the defendants had no discretion but to act in accordance with the directions of IRS in withholding such sums as were withheld from the paycheck of plaintiff. Plaintiff suggests, however, that the provisions of 26 U.S.C. § 3402(n)2 make clear that he is within the category of employees "incurring no income tax liability", id., and that, therefore, this case is not removable as it does not arise under a law of the United States.3 26 U.S.C. § 3402(n) provides:

(n) Employees incurring no income tax liability. — Notwithstanding any other provision of this subsection, an employer shall not be required to deduct and withhold any tax under this chapter upon a payment of wages to an employee if there is in effect with respect to such payment a withholding exemption certificate (in such form and containing such other information as the Secretary may prescribe) furnished to the employer by the employee certifying that the employee—
(1) incurred no liability for income tax imposed under subtitle A for this preceding taxable year, and
(2) anticipates that he will incur no liability for income tax imposed under subtitle A for his current taxable year.
The Secretary shall by regulations provide for the coordination of the provisions of this subsection with the provisions of subsection (f).

(Emphasis added.)

Pursuant to the language above emphasized in § 3402(n), and in accordance with 26 U.S.C. § 7805, IRS promulgated certain temporary regulations,4 effective March 19, 1981. The Court finds and rules that these regulations were properly enacted within the rulemaking power of IRS, and accordingly must be sustained as they are not "unreasonable and plainly inconsistent with the revenue statutes". Thor Power Tool Company v. Commissioner of Internal Revenue, 439 U.S. 522, 533, n. 11, 99 S.Ct. 773, 781, n. 11, 58 L.Ed.2d 785 (1979) (and cases therein cited).

Plaintiff's reliance on certain state statutes as a primary basis5 of his claims for recovery is similarly misplaced. New Hampshire Revised Statutes Annotated Chap. 275 (Protective Legislation) provides for payment of weekly wages, RSA 275:43, and allows an unpaid employee to maintain an action for recovery of his unpaid wages and/or certain penalties "in any court of competent jurisdiction", RSA 275:53. Plaintiff, however, would have us overlook the exception in said statute, which provides, RSA 275:48,

no employer may withhold or divert any portion of an employee's wages unless:
I. the employer is required or empowered to do so by state or federal law .... emphasis added

It is clear, as the Court here finds, that the defendants herein were required to withhold wages from the plaintiff by the application of federal law and, accordingly, the Court rules that the provisions of RSA 275 are not applicable to the claims advanced in the instant litigation. And the criminal statute prohibiting Theft by Authorized Taking or Transfer, RSA 637:3, is clearly here not applicable in the context of this civil litigation.

In short, wholly apart from plaintiff's reliance on 26 U.S.C. § 3402 as (at least a secondary) basis for recovery herein, examination of paragraph 8, the crux of his complaint, demonstrates that a right created by federal law is an essential element of his cause of action, appearing on the face of the complaint unaided by any answer or petition for removal. First National Bank of Aberdeen v. Aberdeen National Bank, 627 F.2d 843, 849-50 (8th Cir. 1980) (and cases therein cited). The case has been properly removed to this court pursuant to the provisions of 28 U.S.C. § 1331 and § 1340, as the case is clearly one within the Internal Revenue laws of the United States, and the motion to remand must be and it is herewith denied.6

2. The Motion to Dismiss.

The law upholding the constitutionality of the federal tax withholding statutes is so well established as to render nugatory any challenge thereto. Campbell v. Amax Coal Company, 610 F.2d 701 (10th Cir. 1979); United States v. Smith, 484 F.2d 8 (10th Cir. 1973), cert. denied, 415 U.S. 978, 94 S.Ct. 1566, 39 L.Ed.2d 874 (1974); United States v. Shimek, 445 F.Supp. 884 (M.D.Pa. 1978); United States v. Roberts, 425 F.Supp. 1281 (D.Del.1977). See also Eagle v. Kenai Peninsula Borough, 489 F.Supp. 138 (D.Alaska 1980) (Borough employee submits W-4 claiming 29 exemptions, and when IRS instructs Borough to withhold in accordance with original filing of 2 exemptions, employee brings unsuccessful civil rights action against Borough).

With exceptions not here relevant, the Anti-Injunction Act, 26 U.S.C. § 7421(a), prohibits taxpayers in the position of plaintiff from bringing a suit "for the purpose of restraining the assessment or collection of any tax". The statutory language "could hardly be more explicit", Bob Jones University v. Simon, 416 U.S. 725, 736, 94 S.Ct. 2038, 2046, 40 L.Ed.2d 496 (1974). Manifestly, the purpose of the Act "is to permit the United States to assess and collect taxes alleged to be due without judicial intervention, and to require that the legal right to the disputed sums be determined in a suit for refund." Enochs v. Williams Packing and Navigation Co., Inc., 370 U.S. 1, 7, 82 S.Ct. 1125, 1129, 8 L.Ed.2d 292 (1962). The instant case is clearly one which has been brought for restraining the collection (through withholding) of federal income taxes, and the Court finds it is barred by the provisions of the Anti-Injunction Act. Moreover, the Court additionally finds that it is not within the exceptions outlined in Enochs v. Williams Packing and Navigation Co., Inc., supra, as the pleadings fail to clearly demonstrate (1) that the United States could not ultimately...

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