I3 Assembly, LLC v. United States

• Decision Date: 12 February 2020
• Docket Number: 3:18-cv-00599 (BKS/TWD)
• Citation: 439 F.Supp.3d 71
• Parties: I3 ASSEMBLY, LLC, Plaintiff, v. UNITED STATES of America, Defendant.
• Court: U.S. District Court — Northern District of New York

439 F.Supp.3d 71

I3 ASSEMBLY, LLC, Plaintiff,

v.UNITED STATES of America, Defendant.

3:18-cv-00599 (BKS/TWD)

United States District Court, N.D. New York.

Signed February 12, 2020

For Plaintiff: Thomas A. Saitta, Aswad & Ingraham, LLP, 46 Front St., Binghamton, NY 13905.

For Defendant: Richard E. Zuckerman, Principal Deputy Assistant Attorney General, Marie E. Wicks, Trial Attorney, Tax Division, U.S. Department of Justice, P.O. Box 55, Washington, D.C. 20044.

MEMORANDUM-DECISION AND ORDER

Hon. Brenda K. Sannes, United States District Judge:

I. INTRODUCTION

Plaintiff i3 Assembly, LLC brings this action against the United States of America under 26 U.S.C. § 7426 alleging that the Internal Revenue Service ("IRS") wrongfully levied property belonging to Plaintiff. (Dkt. No. 1).¹ Defendant moves to dismiss under Federal Rule of Civil Procedure Rule 12(b)(1) or, in the alternative, for summary judgment under Rule 56. (Dkt. No. 26). Plaintiff opposes. (Dkt. No. 28). For the reasons below, Defendant's motion to dismiss is granted as to Counts Two, Three, and Four, and denied without prejudice to renewal as to Count One.

II. FACTS²

Plaintiff³ entered into an agreement, dated October 2, 2015, with VMR Electronics Corporation ("VMR") to "purchas[e] certain ‘Acquired Assets’ from [it]." (Dkt. No. 1, ¶ 10). Plaintiff "assume[d] only specifically identified liabilities of [VMR]," (id. ¶ 11), which did not include "[a]ny obligation that [VMR] had with respect to the United States of America, the Internal Revenue Service, or any agency or department of the United States of America that was not one of the assumed liabilities." (Id. ¶ 12). VMR had a different Tax Identification Number than Plaintiff. (Id. ¶ 13). After purchasing VMR's assets, Plaintiff "used its own labor and materials to fulfill a number of contractual obligations to Defendant." (Id. ¶ 15). After Plaintiff fulfilled the "contractual obligations ... for work and product," it sent invoices to Defendant reflecting the amount it was owed. (Id. ¶¶ 16, 27).

Defendant did not pay Plaintiff the amount it billed for its work and product. (Id. ¶¶ 18, 21, 29, 32). Instead, the money Defendant owed Plaintiff was levied to fulfill tax debt owed by VMR—the party who had originally "entered into a number of contracts with the U.S. Department of Defense," which Plaintiff ultimately fulfilled. (Dkt. No. 26-1, ¶ 4; Dkt. No. 1, ¶ 15). Specifically, "[d]ue to an outstanding federal tax liability concerning [VMR's] ... corporate income taxes for 2015," (Dkt. No. 26-1, ¶ 3–4; see also Dkt. No. 26-3), "a federal contractor [Federal Payment Levy Program ("FPLP") ] levy was served by the [IRS] upon the Bureau of Fiscal Service [ ("BFS") ], which administers the FPLP, on July 18, 2016." (Dkt. No. 26-1, ¶ 4; see also Dkt. No. 26-2, ¶ 3). The IRS issued a "post-levy pre-collection due process (‘CDP’) notice" of the levy to VMR, which was mailed on or about July 25, 2016. (Dkt. No. 26-1, ¶ 7; Dkt. No. 26-2, ¶ 3).

The levy allowed the IRS to "offset three debts–matched through the FPLP–which were credited toward the tax liabilities of [VMR]." (Dkt. No. 26-1, ¶ 6; Dkt. No. 28-4, ¶ 6). The first seizure ("First Seizure") was based on two invoices dated June 16, 2016, which totaled $14,225.92. (Dkt. No. 1, ¶ 27; Dkt. No. 26-1, ¶ 8). The First Seizure was "credited toward VMR's tax liabilities on July 5, 2016." (Dkt. No. 26-1, ¶ 6; Dkt. No. 28-4, ¶ 6). The second seizure ("Second Seizure") was based on an invoice dated July 22, 2016, for $5,901.98. (Id. ). It was "credited toward VMR's tax liabilities on August 24, 2016." (Id. ). The third seizure ("Third Seizure") was based on an invoice dated November 16, 2016, for $47,025.16. (Id. ). It was "credited toward VMR's tax liabilities on July 22, 2017." (Id. ).⁴

After it sent Defendant invoices for its work and product, Plaintiff was informed on July 5 and August 24, 2016, "that the Government had seized its payments ... to pay for debts owed by [VMR]." (Dkt. No. 28, ¶ 11). Neither party has provided the Court with the notice that was provided to Plaintiff.⁵ Plaintiff has submitted an affidavit from its Vice President for Contracts, Roger Lucas, stating that from October 2016 through July 18, 2017, he had "several telephone conversations with IRS officials regarding the wrongful levy of its funds to pay for a debt of VMR Electronics." (Dkt. No. 28, ¶ 12). Lucas did not, however, describe the substance of any of these conversations. In its Complaint Plaintiff alleges that it was "advised ... that the application of the [First and Second Seizures] was clearly improper and that the matter would be resolved," again without describing any specific conversation or the date of any such conversation. (Dkt. No. 1, ¶ 34).

Plaintiff has provided the Court with a notice dated July 22, 2017 from the Bureau of the Fiscal Service, directed to VMR Electronic Corporation at PO Box 1830 in Binghamton, New York, in connection with the Third Seizure. (Dkt. No. 28-2, at 3). The record does not reflect how Plaintiff received this notice sent to VMR Electronic Corporation.⁶ The notice states that $47,024.15 was applied to a tax levy, in connection with the FPLP. The notice states that the agency "has previously sent notice to you ... explain[ing] the amount and type of debt you owe [and] the rights available to you," and states that "[i]f you believe your payment was reduced in error or if you have questions about this debt, you must contact the agency at the address and telephone number shown above." (Dkt. No. 28-2, at 3). In his affidavit, Lucas states that "[p]rior to the seizure of the $47,024.15 by the IRS in July 2017, [Plaintiff] had no knowledge that the Government had intended to seize such funds to pay for the tax debt of VMR Electronics," and that it had "no knowledge of the Service's use of the Federal Payment Levy Program to seize future payments of funds owed to VMR Electronics." (Dkt. No. 28, ¶ 13). Lucas asserts that the Government provided "no notice of the ‘levy’ served under the program." (Id. ).

Plaintiff has provided a copy of a letter that it faxed to an individual at the IRS Taxpayer Advocacy Service on August 28, 2017, with supporting documentation, requesting payment of the total amount seized, $67,154.05, because the monies were "erroneously redirected to pay down a debt of a totally different company." (Dkt. No. 28-1, at 1). Lucas states that Plaintiff spoke to an individual at the IRS on August 30, 2017, and faxed additional documentation supporting its request. (Dkt. No. 28, ¶ 15).

Plaintiff submitted an administrative wrongful levy claim to the IRS on October 31, 2017. (Dkt. No. 26-8). Lucas further states that on November 2, 2017, an individual with the Taxpayer Advocate Service contacted Plaintiff, and said that she was assigned to the case and that "the IRS could not raise a statute of limitations defense because of their on-going negotiations." (Dkt. No. 28, ¶ 16). By letter dated December 12, 2017, "[t]he IRS disallowed [Plaintiff's] wrongful-levy claim for the [First Seizure] and [Second Seizure], stating in its letter of disallowance that the claims were not filed within nine months of the date of the levy as required by 26 U.S.C. § 6532(c)(1)." (Dkt. No. 26-1, ¶ 12; Dkt. No. 28-4, ¶ 12). By letter dated January 19, 2018, "[t]he IRS also disallowed [Plaintiff's] claim of wrongful levy as to the [Third Seizure], stating in its letter of disallowance that [Plaintiff] failed to establish that the payment did not belong to VMR Electronics or that [Plaintiff] had an interest in the payment that was superior to that of the United States." (Dkt. No. 26-1, ¶ 13; Dkt. No. 28-4, ¶ 13). On May 21, 2018, Plaintiff filed the instant Complaint. (Dkt. No. 1).

III. STANDARD OF REVIEW

A. Fed. R. Civ. P. 12(b)(1)

"Dismissal for lack of subject matter jurisdiction is proper when the district court lacks the statutory or constitutional power to adjudicate a case." Sokolowski v. Metro. Transp. Auth. , 723 F.3d 187, 190 (2d Cir. 2013). The Court will "take all uncontroverted facts in the complaint (or petition) as true, and draw all reasonable inferences in favor of the party asserting jurisdiction." Tandon v. Captain's Cove Marina of Bridgeport, Inc. , 752 F.3d 239, 243 (2d Cir. 2014). In resolving a motion to dismiss for lack of subject-matter jurisdiction, the Court may consider competent evidence outside the pleadings, such as affidavits and exhibits. Makarova v. United States , 201 F.3d 110, 113 (2d Cir. 2000). "Where jurisdictional facts are placed in dispute, the court has the power and obligation to decide issues of fact by reference to evidence outside the pleadings." Tandon , 752 F.3d at 243 (quoting APWU v. Potter , 343 F.3d 619, 627 (2d Cir. 2003)). A plaintiff asserting subject-matter jurisdiction has the burden of proving by a preponderance of the evidence that it exists. Id.

B. Fed. R. Civ. P. 56

Under Federal Rule of Civil Procedure 56(a), summary judgment may be granted only if all the submissions taken together "show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law." Celotex Corp. v. Catrett , 477 U.S. 317, 322, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986) ; see also Anderson v. Liberty Lobby, Inc. , 477 U.S. 242, 247–48, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). The moving party bears the initial burden of demonstrating "the absence of a genuine issue of material fact." Celotex , 477 U.S. at 323, 106 S.Ct. 2548. A fact is "material" if it "might affect the outcome of the suit under the governing law," and is genuinely in dispute "if the evidence is such that a reasonable jury could return a verdict for the nonmoving party." Anderson , 477 U.S. at 248, 106 S.Ct. 2505 ; see also Jeffreys v. City of New York , 426 F.3d 549, 553 (2d Cir. 2005) (citing Anderson , 477 U.S. at 248, 106 S.Ct. 2505 ). The movant may meet this burden by showing that the nonmoving party has "fail[ed] to...