Gross v. United States
| Decision Date | 10 February 2022 |
| Docket Number | Civil Action 2:20-CV-00192 |
| Parties | ROBERT GROSS, Plaintiff, v. UNITED STATES OF AMERICA, Defendant. |
| Court | U.S. District Court — Southern District of Texas |
Pro se Plaintiff Robert Gross seeks an $838, 077.40 tax refund under 26 U.S.C. § 1341. The United States filed a Motion to Dismiss, arguing that Gross fails to a state a plausible claim because a criminal judgment arising out of a plea agreement prevents him from receiving a tax refund under Section 1341. The Court GRANTS the Motion to Dismiss.
Gross a former psychiatrist, filed this lawsuit on July 27, 2020. (Dkt. No. 1). He asserts a single claim under 26 U.S.C § 1341 to obtain a tax refund. (Id.). Gross argues that he is entitled to a refund because he “reimbursed to Medicare $1, 832, 869.21 and to private insurance companies $297, 000” as part of a plea deal in a criminal case. (Id. at 2). Gross then filed an amended 2016 tax return requesting a refund based on the difference between “the taxes he paid and the taxes he actually owed after he reimbursed Medicare and the private insurance companies.” (Id.). He claims that he overpaid the IRS $838, 077.40-the amount he seeks in this case. (Id.). The IRS apparently did not consider the merits of Gross's claim. (Id.).
Less than two months after this lawsuit was filed, the United States filed a Motion to Dismiss under Rule 12(b)(6) of the Federal Rules of Civil Procedure. (Dkt. No. 5). The United States argues that Gross cannot state a claim for relief because a plaintiff is only entitled to a tax refund under 26 U.S.C. § 1341 if (1) the taxpayer had an unrestricted right to income in the prior years; and (2) the taxpayer provides another statutory source for a deduction. (Id. at 1). According to the United States, both requirements are not present here. Gross filed a Response, (Dkt. No. 15), the United States filed a Reply, [1] (Dkt. No. 17), and Gross filed a Sur-Reply. (Dkt. No. 21). The Motion to Dismiss is ripe.
Rule 12(b)(6) of the Federal Rules of Civil Procedure permits a defendant to move to dismiss for “failure to state a claim upon which relief may be granted.” Rule 8(a)(2) of the Federal Rules of Civil Procedure requires a pleading to contain “a short and plain statement of the claim showing that the pleader is entitled to relief.” Although “the pleading standard Rule 8 announces does not require ‘detailed factual allegations, '” it demands more than labels and conclusions. Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S.Ct. 1937, 1949, 173 L.Ed.2d 868 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555, 127 S.Ct. 1955, 1964, 167 L.Ed.2d 929 (2007)). “Threadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice.” Id. Put differently, “[c]onclusory allegations or legal conclusions masquerading as factual conclusions will not suffice to prevent a motion to dismiss.” Firefighters' Ret. Sys. v. Grant Thornton, L.L.P., 894 F.3d 665, 669 (5th Cir. 2018) (citation omitted).
In reviewing a Rule 12(b)(6) motion to dismiss, a court must accept the plaintiff's factual allegations as true and view those allegations in the light most favorable to the plaintiff. White v. U.S. Corrections, L.L.C., 996 F.3d 302, 306-07 (5th Cir. 2021). The court must evaluate whether “a complaint contains sufficient factual matter to state a claim to relief that is plausible on its face.” Iqbal, 556 U.S. at 678, 129 S.Ct. at 1949 (cleaned up). “A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Id. “The plausibility standard is not akin to a ‘probability requirement,' but it asks for more than a sheer possibility that a defendant has acted unlawfully.” Id. “Dismissal . . . is appropriate where the plaintiff fails to allege ‘enough facts to state a claim that is plausible on its face' and thus does not ‘raise a right to relief above the speculative level.'” Montoya v. FedEx Ground Package Sys., Inc., 614 F.3d 145, 148 (5th Cir. 2010) (quoting Twombly, 550 U.S. at 555, 127 S.Ct. at 1965).
A court must liberally construe Pro se filings. Erickson v. Pardus, 551 U.S. 89, 94, 127 S.Ct. 2197, 2200, 167 L.Ed.2d 1081 (2007) (per curiam). But even if a plaintiff proceeds Pro se, “conclusory allegations or legal conclusions masquerading as factual conclusions will not suffice to prevent a motion to dismiss.” Taylor v. Books A Million, Inc., 296 F.3d 376, 378 (5th Cir. 2002) (citation omitted).
The United States requests that the Court consider the plea agreement and factual resume from Gross's criminal case because Gross incorporates both documents by reference in his Complaint. (Dkt. No. 5 at 2-3). In response, Gross claims that these documents were not referenced in his Complaint. (Dkt. No. 15 at 2).
A federal court can consider documents attached to a defendant's motion to dismiss if those documents are referred to in the complaint and are central to the plaintiff's claims. Walker v. Beaumont Indep. Sch. Dist., 938 F.3d 724, 735 (5th Cir. 2019). In his Complaint, Gross specifically references his plea agreement. (Dkt. No. 1 at 2). And that plea agreement is central to Gross's single claim under 26 U.S.C. § 1341 because, as discussed below, his claim is precluded if it arises from fraudulently obtained income. Thus, the Court finds that Gross incorporated the plea agreement by reference. See Walker, 938 F.3d at 735.
The Court, however, may not consider the factual resume under the same rule. While the United States argues that the plea agreement incorporates the factual resume, the United States does not cite authority for the proposition that a document referenced in a complaint and central to the complaint can, in turn, open the door to consideration of a document referenced by that document. Put another way, incorporation by reference does not open the door to “turtles all the way down.”[2] Instead, the standard is whether the document-here, the factual resume-was referenced in the complaint. See Walker, 938 F.3d at 735. It was not. The Court therefore considers, as incorporated by reference, the plea agreement but not the factual resume.
The United States requests that the Court take judicial notice of Gross's indictment, plea agreement, factual resume, and criminal judgment. (Dkt. No. 5 at 3). In his Response, Gross urges the Court to decline the invitation because the documents “[do] not pertain to the disputed tax matter.”[3] (Dkt. No. 15 at 2). If the Court takes judicial notice of those documents, Gross asks that the Court also consider documents filed in his habeas appeal.[4] (Id.).
At the Rule 12(b)(6) stage, a federal court can also consider “matters of which judicial notice may be taken under Federal Rule of Evidence 201.” Walker, 938 F.3d at 735. Under Rule 201, a “court may judicially notice a fact that is not subject to reasonable dispute because it: (1) is generally known within the trial court's territorial jurisdiction; or (2) can be accurately and readily determined from sources whose accuracy cannot reasonably be questioned.” Fed.R.Evid. 201(b).
Here, the documents that the United States asks the Court to take judicial notice of are not subject to reasonable dispute because they are accurately and readily determined from sources-the U.S. District Court for the Northern District of Texas and the U.S. Court of Appeals for the Fifth Circuit-whose accuracy cannot be reasonably questioned. See Fed.R.Evid. 201(b). Moreover, federal courts have judicially noticed criminal convictions, plea agreements, and factual resumes. See, e.g., Garcia v. Kerry, 557 Fed.Appx. 304, 309 (5th Cir. 2014) (per curiam) (criminal conviction); Berry v. Wal-Mart Stores Tex., LLC, No. 4:18-CV-4619, 2019 WL 1407212, at *4 (S.D. Tex. Mar. 28, 2019) (guilty plea); State Farm Mut. Auto. Ins. Co. v. Giventer, 212 F.Supp.2d 639, 647 (N.D. Tex. 2002) (guilty plea and factual resume). Thus, the Court takes judicial notice of the indictment, plea agreement, factual resume, and criminal judgment. The Court also takes judicial notice of the habeas proceedings before the Northern District of Texas and Fifth Circuit.[5]
The United States argues that Gross fails to state a claim under 26 U.S.C. § 1341. (Dkt. No. 5 at 5-10). Gross disagrees, offering various theories for why he has stated a plausible claim. (Dkt. No. 15). The Court agrees with the United States.
Gross seeks a tax refund under 26 U.S.C. § 1341. Broadly Section 1341 “allows an income tax deduction to a taxpayer who previously received taxable income under a claim of right, but who must later repay some or all of that income.” Estate of Smith v. Comm'r, 198 F.3d 515, 526 (5th Cir. 1999) (emphasis omitted). There are multiple requirements, two of which are at issue here. First, under Section 1341, an item must be “included in gross income for a prior taxable year (or years) because it appeared that the taxpayer had an unrestricted right to such item[.]” 26 U.S.C. § 1341(a)(1). Second, “Section 1341 only applies where the taxpayer is entitled to a deduction under another provision of the tax code.” Wood v. United States, 863 F.2d 417, 420 (5th Cir. 1989) (citing United States v. Skelly Oil Co., 394 U.S. 678, 683, 89 S.Ct. 1379, 1382-83, 22 L.Ed.2d 642 (1969)). Deductions, in turn, are strictly construed against the taxpayer because “they are a matter of legislative grace.” INDOPCO, Inc. v. Comm'r, 503...
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