Connelly Firm, P.C. v. U.S. Dep't of the Treasury

• Decision Date: 18 April 2016
• Docket Number: Civil No. 15-2695 (RBK/JS)
• Parties: THE CONNELLY FIRM, P.C. Plaintiff v. U.S. DEPARTMENT OF THE TREASURY, et al. Defendants.
• Court: U.S. District Court — District of New Jersey

THE CONNELLY FIRM, P.C. Plaintiff v. U.S. DEPARTMENT OF THE TREASURY, et al. Defendants.

Civil No. 15-2695 (RBK/JS)

UNITED STATES DISTRICT COURT FOR THE DISTRICT OF NEW JERSEY CAMDEN VICINAGE

April 18, 2016

NOT FOR PUBLICATION

(Doc. No. 19, 25)

OPINION

KUGLER, United States District Judge:

This matter comes before the Court on the motions of the Defendant United States of America ("the United States") to dismiss Plaintiffs' first and second amended complaints. (Doc. No. 19, 25.) The United States' motion to dismiss (Doc. No. 19) Plaintiffs' first amended complaint is denied as moot. For the reasons expressed herein, the United States' motion to dismiss (Doc. No. 25) Plaintiffs' second amended complaint is granted.

I. BACKGROUND

Plaintiffs in this action are The Connelly Firm, P.C. ("CFPC"), a Philadelphia Law Firm that ceased operations in 2012; Thomas Connelly, Esquire ("TCE"), a sole proprietorship law practice operating in New Jersey; and Thomas P. Connelly, Jr. ("Connelly"), the sole shareholder of CFPC and sole proprietor of TCE, (collectively referred to herein as "Plaintiffs"). (Second Am. Compl. ¶¶ 8-12.) Plaintiffs name as Defendants the U.S. Department of the Treasury, the U.S. Internal Revenue Service (IRS), and IRS Officer Michael Tarantella ("Tarantella"). (Id. ¶¶ 13-15.)

Plaintiffs' causes of action are related to the 2013 bankruptcy filing of CFPC. On April 25, 2013, CFPC filed for Chapter 7 bankruptcy in the Eastern District of Pennsylvania. (Id. ¶ 18.) Plaintiffs allege that while the bankruptcy was pending, the IRS attempted on numerous occasions to collect from CFPC and Connelly a tax obligation owed by CFPC to the United States. (Id. ¶ 19.) From December 2013 to June 2015, the IRS apparently sent sixteen collection letters via mail and fax to Connelly, two of which threatened Connelly with personal liability for CFPC's debts. (Id. ¶¶ 20-21.) Tarantella allegedly also threated Connelly over the phone, id. ¶ 22, and appeared at the Law Offices of Elkind and Dimento, P.A. in March 2015, where Connelly was then employed. Tarantella apparently confronted Anthony Dimento, Esq. ("Dimento") over CFPC's debt and threatened to subpoena him. (Id. ¶ 26, 28.) Elkind and Dimento, P.A. has no affiliation with CFPC, and therefore Dimento could provide Tarantella with no information. (Id. ¶ 27.) Connelly sent repeated letters to the IRS and Tarantella—both before and after Tarantella's visit to Elkind and Dimento—notifying them that CFPC's bankruptcy was pending and that their collection efforts were violating the automatic stay provision of the Bankruptcy Code. (Id. ¶ 23, 31.)

On March 23, 2015, Plaintiffs filed a Complaint against the U.S. Department of Treasury and IRS in the Superior Court of New Jersey, Camden County, Law Division, Special Part, alleging that the IRS violated the automatic stay imposed under 11 U.S.C. § 362 . (Id. ¶¶ 32-33.) The United States removed the action to this Court on April 15, 2015 pursuant to 28 U.S.C. §§ 1442(a)(1), 1452(a), and 1334(b). On July 1, 2015, Plaintiffs moved to file an amended complaint, which Magistrate Judge Schneider granted on September 20, 2015. On September 14, 2015 filed an Amended Complaint, naming as Defendants the Department of Treasury, the IRS, Tarantella, and CFPC's Bankruptcy trustee Bonnie Finkel ("Finkel"). (Doc. No. 12). OnOctober 6, 2015, Plaintiffs terminated the action as against Finkel. (Doc. No. 18). Shortly thereafter, on October 13, 2015, the United States filed a Motion to Dismiss the Amended Complaint under Federal Rules of Civil Procedure ("Rules") 12(b)(1) and 12(b)(6) for lack of subject matter jurisdiction, lack of standing, and insufficient service of process. (Doc. No. 19.) Plaintiffs then filed a Second Amended Complaint pursuant to Rule 15(a)(1)(B). (See Doc. No. 20.) The Second Amended Complaint raises a RICO claim under 18 U.S.C. § 1962 (Count I); state law claims for tortious interference with a prospective economic advantage (Count II), unlawful interference with contractual relations (Count III), and violations of New Jersey rules against frivolous litigation (Counts V and IV); a claim for Retaliation per se under Section 1203 of the IRS Restructuring and Reform Act of 1988 (Count IV & V); and a violation of the automatic bankruptcy stay under 11 U.S.C. § 362 (Count VI.)

The United States again moves to dismiss the Second Amended Complaint for lack of jurisdiction, or, alternatively for failure to state a claim upon which relief can be granted. (Doc. No. 25.) Having been briefed by the parties, the issues are now ripe for the Court's review.

II. STANDARD OF REVIEW

Pursuant to Federal Rule of Civil Procedure 12(b)(1), a complaint may be dismissed for lack of subject matter jurisdiction. Fed. R. Civ. P. 12(b)(1). Generally, where a defendant moves to dismiss under Rule 12(b)(1) for lack of subject-matter jurisdiction, the plaintiff bears the burden of proving by a preponderance of the evidence that the Court has subject matter jurisdiction. See Gould Elecs. Inc. v. United States, 220 F.3d 169, 178 (3d Cir. 2000).

A district court may treat a party's motion to dismiss for lack of subject-matter jurisdiction under Rule 12(b)(1) as either a facial or factual challenge to the court's jurisdiction. Gould Elecs., 220 F.3d at 176. "In reviewing a facial attack, the court must only consider theallegations of the complaint and documents referenced therein and attached thereto, in the light most favorable to the plaintiff." Id. (citing PBGC v. White, 998 F.2d 1192, 1196 (3d Cir. 1993)). "In reviewing a factual attack, the court may consider evidence outside the pleadings." Gould Elecs., 220 F.3d at 176 (citing Gotha v. United States, 115 F.3d 176, 178-79 (3d Cir. 1997)); see United States ex rel. Atkinson v. Pa. Shipbuilding Co., 473 F.3d 506, 514 (3d Cir. 2007). A district court has "substantial authority" to "weigh the evidence and satisfy itself as to the existence of its power to hear the case." Mortensen v. First Fed. Sav. & Loan Ass'n, 549 F.2d 884, 891 (3d Cir. 1977). "No presumptive truthfulness attaches to plaintiff's allegations, and the existence of disputed material facts will not preclude the trial court from evaluating for itself the merits of jurisdictional claims." Id.

Rule 12(b)(6) allows a court to dismiss an action for failure to state a claim upon which relief can be granted. Fed. R. Civ. P. 12(b)(6). When evaluating a motion to dismiss, "courts accept all factual allegations as true, construe the complaint in the light most favorable to the plaintiff, and determine whether, under any reasonable reading of the complaint, the plaintiff may be entitled to relief." Fowler v. UPMC Shadyside, 578 F.3d 203, 210 (3d Cir. 2009) (quoting Phillips v. County of Allegheny, 515 F.3d 224, 233 (3d Cir. 2008)). In other words, a complaint is sufficient if it contains enough factual matter, accepted as true, to "state a claim to relief that is plausible on its face." Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009); Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570 (2007). It is not for courts to decide at this point whether the moving party will succeed on the merits, but "whether they should be afforded an opportunity to offer evidence in support of their claims." In re Rockefeller Ctr. Prop., Inc., 311 F.3d 198, 215 (3d Cir. 2002). Yet, while "detailed factual allegations" are not necessary, a "plaintiff's obligation to provide the 'grounds' of his 'entitlement to relief' requires more thanlabels and conclusions, and a formulaic recitation of the elements of a cause of action will not do." Twombly, 550 U.S. at 555; see also Iqbal, 556 U.S. at 678-79.

III. DISCUSSION

The United States moves to dismiss Plaintiffs' claims based on lack of subject-matter jurisdiction under Rule 12(b)(1) and for failure to state a claim under Rule 12(b)(6). "When a motion under Rule 12 is based on more than one ground, the court should consider the 12(b)(1) challenge first because if it must dismiss the complaint for lack of subject matter jurisdiction, all other defenses and objections become moot." In re Corestates Trust Fee Litig., 837 F. Supp. 104, 105 (E.D. Pa. 1993).

A. RICO (Count I) and State Law Claims (Count II-V)

The United States argues that Plaintiffs' claims against the U.S. Department of Treasury, IRS, and Tarantella in his official capacity are actually claims against the United States, which is entitled to sovereign immunity from Plaintiffs' RICO and state law claims. The Court agrees. "Without a waiver of sovereign immunity, a court is without subject matter jurisdiction over claims against federal agencies or officials in their official capacities." Treasurer of New Jersey v. U.S. Dept. of Treasury, 684 F.3d 382, 395-96 (3d Cir. 2012) (citing United States v. Mitchell,445 U.S. 535, 538 (1980)). Here, Plaintiffs' claims against the U.S. Department of Treasury, the IRS, and Tarantella in his official capacity are claims against the United States. See id.; see also Snyder v. Lipuma, No. 05-3919, 2006 WL 1303135, at *2 (D.N.J. 2006) ("[T]he real party in interest here is the United States as a suit against an IRS employee in his official capacity is in reality a suit against the United States . . . . The IRS enjoys sovereign immunity as an agency of the United States unless that immunity has been waived by Congress." (internal quotation marks and citations omitted)).

To confer subject matter jurisdiction on a court, a waiver of sovereign immunity must be express and unambiguous. Id. at 396 (citing United States v. Bein, 214 F.3d 408, 412 (3d Cir. 2000)). Plaintiffs' RICO claims may not proceed because RICO does not waive sovereign immunity. See Jones v. Nat'l Comm. and Surveillance Networks, 409 F. Supp. 2d 456, 466 (S.D.N.Y. 2006), aff'd 266 Fed. App'x 31 (2d Cir. 2008); Jennette v. Holsey, No. 3:06CV974, 2006 WL 1984734, at *2 (M.D. Pa. 2006) (citing Donahue v. Federal Bureau of Investigation, 204 F. Supp. 2d 169, 173-74 (D. Mass. 2002...