Kenner v. Kelly
| Decision Date | 10 April 2018 |
| Docket Number | Case No. 11-cv-1538 DMS (WVG) |
| Parties | BRIAN KENNER and KATHLEEN KENNER, Plaintiffs, v. ERIN KELLY et al., Defendants. |
| Court | U.S. District Court — Southern District of California |
Pending before the Court are Defendants United States of America, Barbara Dunn, and Lacey, Dunn & Do, APC's motions to dismiss Plaintiffs Brian and Kathleen Kenner's First Amended Complaint ("FAC") pursuant to Federal Rule of Civil Procedure 12(b)(1) & (6). Plaintiffs filed oppositions, and Defendants filed replies. For the following reasons, the Court grants Defendants' motions to dismiss.
On October 8, 2010, Plaintiffs filed their first lawsuit against individual Internal Revenue Service Employees ("IRS Defendants"), as well as Barbara Dunn and Lacey, Dunn & Do ("Dunn Defendants"). (See Kenner v. Kelly, 10-cv-2105 AJB (WVG).) Barbara Dunn is an attorney who formerly represented several defendants in another prior lawsuit where Plaintiffs sued their tax professionals, and Lacey, Dunn & Do is the law firm where Dunn is employed. The underlying facts of this case arose out of collection activities undertaken by the IRS to satisfy unpaid federal taxes. The Complaint alleged Defendants engaged in four distinct "criminal episodes" encompassing six different predicate acts under the Racketeer Influenced and Corrupt Organizations Act ("RICO"), 18 U.S.C. § 1961 et seq. Specifically, Plaintiffs alleged the IRS Defendants engaged in unauthorized collection actions, and the Dunn Defendants conspired with the IRS Defendants, in violation of RICO. On May 27, 2011, Judge Anthony J. Battaglia granted Defendants' motions to dismiss with prejudice. On June 21, 2011, Plaintiffs filed a notice of appeal, challenging the order granting the motions to dismiss.
On July 12, 2011, Plaintiffs filed the present action against the same IRS Defendants and the Dunn Defendants, alleging essentially identical claims for relief.1 The underlying facts of this case arose from the same events as the first action. The Complaint alleged Defendants engaged in four distinct "criminal episodes" encompassing 59 different predicate acts under RICO. Because the claims in this action were nearly identical to those in the first action, Judge Battaglia stayed the case pending resolution of appeal in the first action.2
On October 14, 2011, while the appeal was pending in the first action, Plaintiffs filed a third action in the San Diego County Superior Court against the same IRS Defendants, Capital One, Judge Battaglia, and Judge Barry Ted Moskowitz. (See Kenner v. Kelly, 11-cv-2520 BEN (BGS).) In the Complaint, Plaintiffs alleged the judicial Defendants .) The United States and the IRS Defendants removed the action on October 31, 2011. On January 13, 2012, Judge Roger T. Benitez granted the United States' motion to substitute party, dismissing the IRS Defendants and substituting the United States as a proper party defendant. Subsequently, Judge Benitez granted Defendants' motions to dismiss for lack of subject matter jurisdiction and failure to state a claim. Plaintiff filed a notice of appeal on July 20, 2012.
On April 25, 2012, Plaintiffs filed a fourth lawsuit against the United States, Eric Holder, and Tim Geithner. (See Kenner v. Holder, 12-cv-1011 MMA (WVG).) The underlying facts of this case also arose from the same events as the other lawsuits. The Complaint alleged "Defendants' agents engaged in a 'pattern of racketeering' (RICO) to confiscate our property during an 'offer in compromise' negotiation with the IRS." (Id., ECF No. 1.) On December 19, 2012, Judge Michael M. Anello granted Defendants' motion to dismiss for lack of subject matter jurisdiction. Plaintiffs subsequently filed a notice of appeal on December 28, 2012.
On October 17, 2013, the Ninth Circuit affirmed the dismissal of the first action. This Court then issued an order further staying this action pending appeal in the third and fourth actions. The Ninth Circuit subsequently affirmed the dismissals on June 16, 2017 and June 16, 2015, respectively. Because the appeal proceedings that gave rise to the stay of the instant action have concluded, the Court vacated the stay. On February 14, 2018, Plaintiffs filed a FAC substituting the United States as a defendant in lieu of the IRS Defendants and removing Fireman's Fund Insurance Company as a defendant. The FAC alleges the following causes of action: (1) failure to release lien, in violation of 26 U.S.C. § 7432, against the United States, (2) unauthorized collection action, in violation of 26 U.S.C. § 7433, against the United States, (3) conversion and misappropriation of funds against the Dunn Defendants, (4) actual fraud against the United States, (5) negligence against the DunnDefendants, and (6) declaratory relief. Defendants filed the present motions to dismiss the FAC for lack of subject matter jurisdiction and failure to state a claim.
On July 8, 2009, the IRS filed a Notice of Tax Lien against Plaintiffs. (FAC, Ex. N.) The allegations in the FAC arise from the IRS's collection efforts regarding Plaintiffs' federal tax liabilities. According to the FAC, Defendants engaged in four "Due Process Denying Episodes." (Id. ¶ 1.) In the first episode, IRS Defendants allegedly unlawfully obtained the settlement funds from Plaintiffs' prior lawsuit while an Offer in Compromise ("OIC") was pending. (Id. ¶ 7.) Plaintiffs claim they settled a lawsuit with their prior tax professionals sometime in July 2009, and expected to receive settlement funds of approximately $250,000. (Id. ¶ 19.) The Dunn Defendants allegedly conspired with the IRS Defendants and "made the check payable directly to the United States Department of Treasury, and intentionally and knowingly failed to include the names of Plaintiffs on the check[.]" (Id. ¶ 20.) In the second episode, Plaintiffs assert the IRS Defendants fraudulently returned the OIC in order to gain access to the settlement funds. (Id. ¶ 50.) In the third episode, Plaintiffs allege the IRS Defendants made a "second attempt to fraudulently return [Plaintiffs'] OIC and thus gain access to ... settlement funds and eliminate [their] rights." (Id. ¶ 65.) Lastly, Plaintiffs complain they filed two Freedom of Information Act requests in December 2009 and the summer of 2010. (Id. ¶ 76.) Prior to receiving a response to their second request, Plaintiffs filed an administrative complaint against the IRS. (Id.) Plaintiffs allege IRS Defendants used the content of the administrative complaint and altered the computer program "ICS-HISTORY to conceal their dishonest activities." (Id.)
Pursuant to Rule 12(b)(1) of the Federal Rules of Civil Procedure, a party may move to dismiss based on the court's lack of subject matter jurisdiction. See Fed. R.Civ. P. 12(b)(1). A plaintiff has the burden to establish that subject matter jurisdiction is proper. Kokkonen v. Guardian Life Ins., Co., 511 U.S. 375, 377 (1994). Under Rule 12(b)(1), a jurisdictional attack may either be "facial" or "factual." White v. Lee, 227 F.3d 1213, 1242 (9th Cir. 2000). When a defendant challenges jurisdiction "facially," as they do here, all material allegations in the complaint are assumed to be true, and the question for the court is whether the lack of federal jurisdiction appears from the face of the pleading itself. Thornhill Publ'g Co. v. Gen. Tel. Elec., 594 F.2d 730, 733 (9th Cir. 1979); Mortensen v. First Fed. Sav. & Loan Ass'n, 549 F.2d 884, 891 (3d Cir. 1977). In a factual attack, the "defendant disputes the truth of the allegations that, by themselves, would otherwise invoke federal jurisdiction." Safe Air for Everyone v. Meyer, 373 F.3d 1035, 1039 (9th Cir. 2004). A challenge for lack of subject matter jurisdiction may be raised at any time by either party or sua sponte by the court. Fleming v. Gordon & Wong Law Group, P.C., 723 F. Supp. 2d 1219, 1222 (N.D. Cal. 2010) (citing Olson Farms, Inc. v. Barbosa, 134 F.3d 933, 937 (9th Cir. 1998)).
A motion to dismiss pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure tests the legal sufficiency of the claims asserted in the complaint. See Fed. R. Civ. P. 12(b)(6); Navarro v. Block, 250 F.3d 729, 731 (9th Cir. 2001). In deciding a motion to dismiss, all material factual allegations of the complaint are accepted as true, as well as all reasonable inferences to be drawn from them. Cahill v. Liberty Mut. Ins. Co., 80 F.3d 336, 338 (9th Cir. 1996). A court, however, need not accept all conclusory allegations as true. Rather, it must "examine whether conclusory allegations follow from the description of facts as alleged by the plaintiff." Holden v. Hagopian, 978 F.2d 1115, 1121 (9th Cir. 1992) (citation omitted); see Benson v. Ariz. State Bd. of Dental Exam'rs, 673 F.2d 272, 275-76 (9th Cir. 1982) (). A motion to dismiss should be granted if a plaintiff's complaint fails to contain "enough facts to state a claim to relief that is plausible on its face." Bell Atl. Corp. v. Twombly, 550U.S. 544, 570 (2007). "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." Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (citing Twombly, 550 U.S. at 556).
The United States moves to dismiss Plaintiffs' § 7432 claim for failure to state a claim, arguing Plaintiffs have not alleged the IRS found their liabilities satisfied or unenforceable, nor have they alleged they furnished a bond. Pursuant to § 7432, a taxpayer may recover damages from the United States when an IRS...
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