Krieg v. Mills

• Decision Date: 15 May 2000
• Docket Number: No. C 98-3800SI.,C 98-3800SI.
• Citation: 117 F.Supp.2d 964
• Parties: Linda KRIEG and Keith Krieg, Plaintiffs, v. Ava MILLS and Frank McNulty, Defendants.
• Court: U.S. District Court — Northern District of California

117 F.Supp.2d 964

Linda KRIEG and Keith Krieg, Plaintiffs, v. Ava MILLS and Frank McNulty, Defendants.

No. C 98-3800SI.

United States District Court, N.D. California.

May 15, 2000.

Keith Krieg, Redwood City, CA, plaintiff pro se.

Linda Krieg, Redwood City, CA, plaintiff pro se.

David L. Denier, U.S. Attorney's Office, Tax Division, San Francisco, CA, for Ava Mills, Frank McNulty, defendants.

ORDER GRANTING MOTION TO DISMISS

ILLSTON, District Judge.

BACKGROUND

On September 30, 1998, plaintiffs Linda Krieg and Keith Krieg filed suit against defendants Ava Mills (now Ava Pointer) and Frank McNulty, both Internal Revenue Service (IRS) agents, for declaratory relief, injunctive relief, and damages. The complaint alleges that the defendants violated plaintiffs' constitutional rights and the Internal Revenue Code when defendants in their capacity as IRS agents, caused Notices of Federal Tax Lien Under Internal Revenue Laws to be filed in San Mateo County, California.¹

The liens in question were attached to plaintiffs' property due to plaintiffs' alleged tax deficiencies for their fiscal years 1990, 1991, and 1992.² Plaintiff Linda Krieg is alleged to owe more than $130,000 in back taxes and penalties, and plaintiff Keith Krieg more than $100,000 in back taxes and penalties, for fiscal years 1990, 1991 and 1992. In 1997, defendant McNulty obtained approval from IRS District Counsel to file a nominee lien against Keith and Linda Krieg, and then caused seven nominee liens to be prepared and filed with the San Mateo County Recorder.³ McNulty Decl., ¶¶ 3-6.⁴ After these liens were prepared, they were forwarded to defendant Mills, a revenue officer of the Internal Revenue Service who is also posted in Oakland, California, and who was at the time of these events Section Chief of Support, Special Procedures Function. Pointer Decl., ¶ 1-2. In accord with her job responsibilities, on August 6, 1997, Mills reviewed and signed the nominee liens before they were filed. Pointer Decl., ¶ 3.

In October 1997, plaintiffs and their nominees appealed the filing of the liens. On November 14, 1997, after considering all the protests and appeals, an IRS appeals officer concluded that appropriate steps had been taken in the filing of the liens and upheld them against challenge. In August 1998, plaintiffs filed an appeal with the District Director of the Internal Revenue Service, which was denied by letter in October 1998. McNulty Decl., ¶¶ 15-16, Ex. S-T. In October 1998, defendant McNulty discovered clerical errors in the liens and filed amended liens in San Mateo County which corrected those errors. McNulty Decl., ¶¶ 17-18, Ex. U, W.

On September 30, 1998, plaintiffs filed suit in this Court. Plaintiffs' complaint alleges that these liens were filed in violation of their right to due process because the IRS failed to properly assess the income tax liabilities against plaintiffs for the years 1990, 1991 and 1992, and that the IRS is engaging in fraud and coercion against plaintiffs.

On March 3, 2000, defendants filed the present motion to dismiss for lack of subject matter jurisdiction, failure to state a claim upon which relief can be granted, and for partial summary adjudication.

LEGAL STANDARD

"It is a fundamental principle that federal courts are courts of limited jurisdiction. The limits upon federal jurisdiction, whether imposed by the Constitution or by Congress, must be neither disregarded nor evaded." Owen Equipment & Erection Co. v. Kroger, 437 U.S. 365, 374, 98 S.Ct. 2396, 2403, 57 L.Ed.2d 274 (1978). "A federal court is presumed to lack jurisdiction in a particular case unless the contrary affirmatively appears." General Atomic Co. v. United Nuclear Corp., 655 F.2d 968, 968-69 (9th Cir.1981). Accordingly, the burden rests on the party asserting federal subject matter jurisdiction to prove its existence. See Kokkonen v. Guardian Life Ins. Co. of America, 511 U.S. 375, 377, 114 S.Ct. 1673, 1675, 128 L.Ed.2d 391 (1994). When deciding a motion to dismiss for lack of subject matter jurisdiction, a court must take all the allegations in plaintiff's complaint as true. See NL Indus. v. Kaplan, 792 F.2d 896, 898 (9th Cir.1986).

A motion to dismiss for failure to state a claim will be denied unless it appears that the plaintiff can prove no set of facts which would entitle it to relief. See Conley v. Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99, 102, 2 L.Ed.2d 80 (1957); Fidelity Fin. Corp. v. Federal Home Loan Bank, 792 F.2d 1432, 1435 (9th Cir.1986). All material allegations in the complaint will be taken as true and construed in the light most favorable to the plaintiff. NL Indus., Inc. v. Kaplan, 792 F.2d 896, 898 (9th Cir.1986). In deciding a motion to dismiss, a court may not consider material outside of the complaint, except that it may consider exhibits submitted with the complaint and take judicial notice of facts outside of the pleadings. See Levine v. Diamanthuset, Inc., 950 F.2d 1478, 1483 (9th Cir.1991); Hal Roach Studios, Inc. v. Richard Feiner & Co., 896 F.2d 1542, 1555 n. 19 (9th Cir.1989); Mack v. South Bay Beer Distrib., Inc., 798 F.2d 1279, 1282 (9th Cir.1986).

DISCUSSION

A. Sovereign Immunity

The United States is a sovereign nation, and as such, it may not be sued absent consent. See Lehman v. Nakshian, 453 U.S. 156, 160, 101 S.Ct. 2698, 2701, 69 L.Ed.2d 548 (1981); Gilbert v. DaGrossa, 756 F.2d 1455, 1458 (9th Cir.1985). If the United States has not consented to the suit, subject matter jurisdiction is lacking and the complaint must be dismissed. See Fed.R.Civ.P. 12(h)(3); United States v. Mitchell, 463 U.S. 206, 212, 103 S.Ct. 2961, 2965, 77 L.Ed.2d 580 (1983); Gilbert, 756 F.2d at 1458. This immunity protects not only the United States but its agents and officers. See Hawaii v. Gordon, 373 U.S. 57, 58, 83 S.Ct. 1052, 1052-53, 10 L.Ed.2d 191 (1963); Gilbert, 756 F.2d at 1458; Hutchinson v. United States, 677 F.2d 1322, 1327 (9th Cir.1982). "[S]uit against IRS employees in their official capacity is essentially a suit against the United States." Gilbert, 756 F.2d at 1458.

When the government is sued, the plaintiff in that suit bears the burden of showing that the government has waived its sovereign immunity. See Sopcak v. Northern Mountain Helicopter Service, 52 F.3d 817, 818 (9th Cir.1995). The general jurisdiction statutes cited in plaintiffs' complaint are not sufficient to establish waiver of sovereign immunity. See Arford v. United States, 934 F.2d 229, 231 (9th Cir.1991); Complaint, ¶ 6.

1. Nature of the Relief Sought

Although plaintiffs claim to be suing defendants in their individual capacities only, plaintiffs seek both injunctive relief and a declaratory judgment. To the extent that plaintiffs seek such remedies, which would operate against the United States, their suit is against the United States rather than these individual defendants. See Hawaii, 373 U.S. at 58, 83 S.Ct. at 1052-53 (holding suit against federal official to be suit against United States because "relief sought nominally against an officer is in fact against the sovereign [because] the decree would operate against the latter"); Land v. Dollar, 330 U.S. 731, 738, 67 S.Ct. 1009, 1012, 91 L.Ed. 1209 (1947) (suit is against sovereign if judgment sought "would interfere with the public administration"); Demery v. Kupperman, 735 F.2d 1139, 1145-46 (9th Cir. 1984) (test for determining whether suit against state officials is treated as suit against state is whether court's judgment would restrain or compel government action); Palomar Pomerado Health Sys. v. Belshe, 180 F.3d 1104, 1108 (9th Cir.1999) (same). This conclusion is further bolstered by the Anti-Injunction Act, which provides that "no suit for the purpose of restraining the assessment or collection of any tax shall be maintained in any court by any person." 26 U.S.C. § 7421(a). The Anti-Injunction Act withdraws jurisdiction from state and federal courts over any actions seeking injunctions prohibiting the collection of federal taxes. See Enochs v. William Packing & Nav. Co., 370 U.S. 1, 5, 82 S.Ct. 1125, 1128, 8 L.Ed.2d 292 (1962).⁵ Accordingly, this Court lacks jurisdiction over plaintiffs' claims for injunctive and declaratory relief.

2. Exceptions to Sovereign Immunity

Plaintiffs cite statutes which waive sovereign immunity under certain circumstances, but these statutes do not apply in matters involving the IRS.

a. The Declaratory Judgment Act

Under the Declaratory Judgment Act, federal courts have jurisdiction to grant declaratory relief. See 28 U.S.C. § 2201. However, § 2201 does not convey jurisdiction to federal courts to grant declaratory relief "with respect to federal taxes." Id.; see also Bob Jones University v. Simon, 416 U.S. 725, 732 n. 7, 94 S.Ct. 2038, 2044 n. 7, 40 L.Ed.2d 496 (1974); Latch v. United States, 842 F.2d 1031, 1032 (9th Cir.1988). Because all of the actions that form the basis for plaintiffs' complaint came about during defendants' attempts to collect or assess plaintiffs' federal tax liability, this Court lacks jurisdiction to grant declaratory relief under 28 U.S.C. § 2201.

b. Federal Tort Claims Act

The Federal Tort Claims Act allows a private litigant to bring causes of action, for state law torts, against the United States and its employees acting in the scope of their employment. See 28 U.S.C. § 1346(b). However, the Federal Tort Claims Act does not apply to "[a]ny claim arising in respect of the assessment or collection of any tax or customs duty ..." 28 U.S.C. § 2680(c); see also Fishburn v. Brown, 125 F.3d 979, 982 (6th Cir.1997); Perkins v. United States, 55 F.3d 910, 913 (4th Cir.1995). All of the damages plaintiffs allege arise out of the assessment and collection of taxes by IRS agents, and plaintiffs' suit is therefore not authorized by the FTCA.

B. Defendants' Liability in Individual Capacity

As the government concedes, sovereign immunity does not bar actions for damages against federal officials in their...