In Re Robert F. Rae

Decision Date25 August 2010
Docket NumberBankruptcy No. 09-23646 (ASD).,Adversary No. 10-02014.
Citation436 B.R. 266
CourtU.S. Bankruptcy Court — District of Connecticut
PartiesIn re Robert F. RAE, a/k/a Robert F. Lilly, Debtor Robert F. Rae, a/k/a Robert F. Lilly, Plaintiff v. United States of America, Internal Revenue Service, 1 Defendant.

OPINION TEXT STARTS HERE

COPYRIGHT MATERIAL OMITTED.

COPYRIGHT MATERIAL OMITTED.

Robert F. Rae, Pro Se.

Austin L. Furman, Esq., United States Department of Justice, Washington, DC, Attorney for Defendant.

MEMORANDUM OF DECISION GRANTING DEFENDANT'S MOTION TO DISMISS ADVERSARY COMPLAINT

ALBERT S. DABROWSKI, Bankruptcy Judge.

I. INTRODUCTION

The matter before the Court is the Defendant United States' Motion to Dismiss for Lack of Jurisdiction (hereafter, the Motion to Dismiss), ECF No. 9, wherein the United States of America Internal Revenue Service (hereafter, the IRS) seeks to dismiss the adversary complaint (hereafter, the “Complaint”), ECF No. 1, filed by Robert Rae, a/k/a Robert Lilly (hereafter, the Plaintiff) on the grounds that this court lacks subject matter jurisdiction over the various counts alleged therein. The Complaint contains numerous counts which, distilled to their essence, seek a determination that the Plaintiff is not liable for a $1.3 million tax assessed by the IRS, as well as civil damages and criminal penalties against the IRS for allegedly conspiring to act and acting “in bad faith and willful oppression under the color of law intentionally and recklessly with willful disregard” of the Internal Revenue Code by assessing the tax, filing liens against his property and that of his ex-wife, and seizing various assets, all of which “PROGRESSIVELY DISMANTLED AND SHATTERED PLAINTIFF'S LIFE.” Complaint, at 1. For the reasons stated hereafter, the Motion to Dismiss shall be granted and the Complaint dismissed.

II. JURISDICTION

The United States District Court for the District of Connecticut has jurisdiction over the instant matter by virtue of 28 U.S.C. § 1334(b); and this Court derives its authority to hear and determine this proceeding on reference from the District Court pursuant to 28 U.S.C. § 157(a), (b)(1) and the District Court's General Order of Reference dated September 21, 1984. This proceeding implicates non-core matters as well as core matters pursuant to 28 U.S.C. § 157(b)(2)(I) and (K).

III. PROCEDURAL AND FACTUAL BACKGROUND

On December 16, 2009, the Plaintiff commenced the present bankruptcy case by filing a voluntary petition under Chapter 7 of the Bankruptcy Code. On March 1, 2010, the Plaintiff initiated this adversary proceeding by filing the Complaint, 2 alleging, inter alia, that the IRS falsely assessed a $1.3 million tax liability against him in connection with his investment activities. The Complaint further alleges that the IRS subsequently executed liens upon his property and that belonging to his former spouse while knowing that the underlying assessment was improper. Complaint at 1. The Complaint also alleges that as a result of the “reckless, intentional and willful actions” of the IRS in connection with assessing and attempting to collect the tax, he suffered “irreparable harm and injury” including, inter alia, a broken marriage, a decline in health, the inability to pay his child support obligations, and the inability to obtain employment, and seeks, inter alia, $50 million to $100 million in compensation. Id. at 1, 22-23.

Although the Plaintiff lists various statutes on the cover page of the Complaint 3 , the Complaint itself seeks, inter alia, relief for violations of criminal statutes which the Plaintiff is either unauthorized to prosecute or untimely in litigating 4 , and is noticeably barren of any reference, other than on the cover page, to 11 U.S.C. § 505, the statute under which the Plaintiff presumably seeks a determination of his tax liability, or any reference to 11 U.S.C. § 523, under which the Plaintiff presumably seeks a determination that his tax obligations for the years 1997 through 2006 are not excepted from discharge. Nonetheless, “the failure in a complaint to cite a statute, or to cite the correct one, in no way affects the merits of a claim. Factual allegations alone are what matters.” Northrop v. Hoffman of Simsbury, Inc., 134 F.3d 41, 46 (2d Cir.1997) (quoting Albert v. Carovano, 851 F.2d 561, 571 n. 3 (2d Cir.1988)) (en banc).

On February 25, 2010, the Chapter 7 Trustee filed a Report of No Distribution stating, inter alia, that “there is no property available for distribution from the estate over and above that exempted by law.” The Debtor was granted a discharge on March 17, 2010. See, Order Discharging Debtor, ECF No. 18.

On April 5, 2010, the IRS filed its Motion to Dismiss, accompanied by a ... Memorandum in Support of its Motion to Dismiss for Lack of Jurisdiction. The Defendant asserts three grounds for such dismissal: (1) this Court lacks subject matter jurisdiction over this proceeding as the claims in the Complaint are not “related to” this bankruptcy case pursuant to 28 U.S.C. § 1334(b), (2) to the extent the Complaint can be read to state a claim for a determination of tax liability, this Court lacks jurisdiction as the Defendant has not waived sovereign immunity, and (3) the Debtor lacks the requisite standing. Defendant's Memorandum pp. 3-11. Alternatively, to the extent the Court were to find jurisdiction, the Defendant argues that this Court should abstain from hearing those claims or making a determination of tax liabilities” See 28 U.S.C. § 1334(c)(1). Defendant's Memorandum, p. 9, fn 3. After notice and a hearing held May 6, 2010, the Court took the matter under advisement.

IV. STANDARD OF REVIEW

Fed.R.Civ.P. 12(b)(1), made applicable to adversary proceedings by Fed R. Bankr.P. 7012(b), provides for a defense to a complaint on the grounds that the court lacks subject matter jurisdiction. “Under Fed.R.Civ.P. 12(b)(1), [a] case is properly dismissed for lack of subject matter jurisdiction ... when the district court lacks the statutory or constitutional power to adjudicate it.’ Anderson v. Derby Bd. of Educ., 718 F.Supp.2d 258, 264-65, 2010 WL 2465431 at *3 (D.Conn.2010) (quoting Makarova v. United States, 201 F.3d 110, 113 (2d Cir.2000)). The plaintiff bears the burden of establishing the existence of subject matter jurisdiction by a preponderance of the evidence. Lunney v. United States, 319 F.3d 550, 554 (2d Cir.2003). In determining whether this burden has been met, the Court “must construe pro se complaints liberally,” Gavigan v. Comm'r of IRS, 2007 WL 1238651 at *3 (D.Conn., April 27, 2007), must “accept as true the factual allegations of the complaint, and construe all reasonable inferences that can be drawn from the complaint in the light most favorable to the plaintiff,” Arar v. Ashcroft, 585 F.3d 559, 567 (2d Cir.2009), unless such inferences relate to jurisdiction, because “jurisdiction must be shown affirmatively.” Shipping Fin. Servs. Corp. v. Drakos, 140 F.3d 129, 131 (2d Cir.1998) (citation omitted).

On a motion to dismiss for lack of jurisdiction, the court “must determine whether or not the factual predicate for subject matter exists.” Tilley v. Anixter Inc., 283 F.Supp.2d 729, 733 (D.Conn.2003) (citation omitted). [W]here 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 ...” APWU v. Potter, 343 F.3d 619, 627 (2d Cir.2003) (quoting LeBlanc v. Cleveland, 198 F.3d 353, 356 (2d Cir.1999)).

V. DISCUSSION
A. Violations of the Internal Revenue Code

The Complaint asserts numerous causes of action against the IRS for alleged violations of Title 26, the Internal Revenue Code, specifically 26 U.S.C. §§ 6001, 6020, 6212, 6303, 6330, 6331, 6502, 7214, 7422, 7429, 7432, 7433, and 7491. As an initial matter, [p]rivate citizens cannot enforce the provisions of the Tax Code. That is the duty of the Secretary of the Treasury and the Commissioner of the Internal Revenue Service ...” Seabury v. City of New York, 2006 WL 1367396 (E.D.N.Y.2006) (citing United States v. LaSalle Nat'l Bank, 437 U.S. 298, 308, 98 S.Ct. 2357, 57 L.Ed.2d 221 (1978)). The vast majority of the Internal Revenue Code provisions cited by the Plaintiff set forth internal IRS procedures that do not provide for a private cause of action.

Rather, the exclusive remedy for violations of the Internal Revenue Code is provided by § 7432 5 in conjunction with § 7433. Section 7433 provides, in pertinent part,

(a) If, in connection with any collection of Federal tax with respect to a taxpayer, any officer or employee of the Internal Revenue Service recklessly or intentionally, or by reason of negligence disregards any provision of this title, or any regulation promulgated under this title, such taxpayer may bring a civil action for damages against the United States in a district court of the United States. Except as provided in section 7432, such civil action shall be the exclusive remedy for recovering damages resulting from such actions.

26 U.S.C.A. § 7433(a) (emphasis added); See also, Pollinger v. United States, 539 F.Supp.2d 242, 252 (D.D.C.2008). Section 7432, on the other hand, permits a party to bring suit against the United States for civil damages resulting from the knowing or negligent failure of the IRS to release a lien under § 6325. 26 U.S.C.A. § 7432 (2010). Therefore, the Court will analyze under §§ 7233 and 7234 whether the Plaintiff has sufficiently established this Court's subject matter jurisdiction over the Plaintiff's counts brought under the Internal Revenue Code.

1. 26 U.S.C. §§ 6001, 6020, and 6212

Section 6001 sets forth the duty of taxpayers to maintain records, provide statements, and file returns. Section 6020 authorizes the Secretary of the Treasury to prepare and execute returns on behalf of taxpayers. And § 6212 authorizes the Secretary to send a notice of deficiency upon determining that such a deficiency exists, starting the clock...

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