Pesci v. I.R.S.

• Decision Date: 18 March 1999
• Docket Number: No. CV-S-98-00245-DWHRJJ.,CV-S-98-00245-DWHRJJ.
• Citation: 67 F.Supp.2d 1189
• Parties: John PESCI, Plaintiff, v. INTERNAL REVENUE SERVICE, The United States of America, John Miller, T.D. Fairchild, Jane Goodrow, Las Vegas Valley Water District, Does 1-100, Defendants.
• Court: U.S. District Court — District of Nevada

67 F.Supp.2d 1189

John PESCI, Plaintiff, v. INTERNAL REVENUE SERVICE, The United States of America, John Miller, T.D. Fairchild, Jane Goodrow, Las Vegas Valley Water District, Does 1-100, Defendants.

No. CV-S-98-00245-DWHRJJ.

United States District Court, D. Nevada.

March 18, 1999.

John Pesci, Pro per, Las Vegas, NV, for plaintiff.

Kathryn E. Landreth, United States Attorney, Las Vegas, NV, Keith S. Blair, Trial Attorney, Tax Division, Department of Justice, Washington, D.C., for United States, defendant.

Charles K. Hauser, Las Vegas, NV, for Las Vegas Valley Water District, defendant.

ORDER

Motion to Dismiss

HAGEN, District Judge.

Before the court are Defendants' Motions to Dismiss (# 4, 18). Defendants Las Vegas Valley Water District ("Water District") and Jane Goodrow (hereinafter "Water District Defendants") have filed separately from (# 4) and joined in part (# 20) the Internal Revenue Service, the United States of America, John Miller, and T.D. Fairchild (hereinafter "Federal Defendants") (# 18). Plaintiff has opposed (# 5, 19) and Water District Defendants have replied (# 9). Both motions are brought pursuant to Federal Rule of Civil Procedure 12(b)(6) and the Federal Defendants also rely on 12(b)(1). For the reasons stated below, the court grants defendants' motions.

Factual Background

On January 4th, 1996, plaintiff Pesci, an employee of defendant Water District, executed a United States Department of the Treasury W-4 Form (Employees Withholding Allowance Certificate) in which he claimed ninety-nine allowances and an "exempt" status from Internal Revenue withholding provisions. See Water District Defendants' Motion to Dismiss (# 4) at 2. On the same date, plaintiff also executed the required Affidavit of Exemption. Id. Both documents were turned over to the Water District's Human Resources Department. Id. Pursuant to regulations promulgated by the United States Treasury, the Human Resources Department then forwarded these documents to the Internal Revenue Service ("IRS") Computer Center in Detroit, Michigan. See Federal Defendants' Motion to Dismiss (# 18) at 2.

On August 12th, 1996, defendant Water District received a signed letter from John Miller, Chief of the IRS's Currency Reporting & Compliance division.¹ See Amended Complaint (# 2), Exhibit A. This letter directed defendant Water District to disregard plaintiff Pesci's Form W-4 and withhold tax as if the employee claimed a single filing status with zero allowances. Id. The letter also instructed defendant Water District not to honor any other Form W-4s from plaintiff claiming more than zero allowances or exemption from withholding unless it heard from the IRS. Id. Furthermore, the letter warned defendant Water District that: "employers who don't deduct or withhold the proper amount of tax from their employees, as we direct, may be required to pay the tax themselves." Id. The Water District complied with the IRS's instructions.

On October 3rd, 1996, defendant Water District received another letter from the IRS which repeated the conclusion of the first letter, to withhold plaintiff's tax as if he were claiming zero allowances.² See Water District Defendants' Motion to Dismiss (# 4) at 3. The second letter was signed by T.D. Fairchild, Tax Examiner. Id. Once again, pursuant to federal law, defendant Water District complied with the IRS's instructions.

Plaintiff has now filed suit against the Water District Defendants and the Federal Defendants seeking to recover the withheld money which totals approximately $24,000. In his complaint, plaintiff seeks to quiet title to the withheld money, alleges the withheld money was wrongfully seized, alleges an unlawful conversion has taken place, alleges his civil rights have been violated and claims both sets of defendants have violated racketeering laws. See Amended Complaint (# 2).

Analysis

A. Motion to Dismiss Standard Under Federal Rule of Civil Procedure 12(b)(6)

In considering a motion to dismiss for failure to state a claim, all material allegations in the complaint must be accepted as true and construed in a light most favorable to the nonmoving party. Russell v. Landrieu, 621 F.2d 1037, 1039 (9th Cir. 1980). The court need not, however, accept as true allegations that contradict matters properly subject to judicial notice, Mullis v. United States Bankruptcy Court, 828 F.2d 1385, 1388 (9th Cir.1987), are conclusory or mere legal conclusions, or unwarranted deductions of fact or unreasonable inferences, Clegg v. Cult Awareness Network, 18 F.3d 752, 754-55 (9th Cir.1994); Western Mining Council v. Watt, 643 F.2d 618, 624 (9th Cir.1981), or contradicted by documents referred to in the complaint, Branch v. Tunnell, 14 F.3d 449, 454 (9th Cir.1994), or are internally inconsistent, Response Oncology, Inc. v. Metrahealth Ins. Co., 978 F.Supp. 1052, 1058 (S.D.Fla.1997).

The purpose of a motion to dismiss under Federal Rule of Civil Procedure 12(b)(6) is to test the legal sufficiency of the complaint. North Star Inter'l v. Arizona Corp. Comm'n, 720 F.2d 578, 581 (9th Cir.1983). For the motion to succeed, it must appear to a certainty the plaintiff will not be entitled to relief under any set of facts that could be proven under the allegations of the complaint. Rae v. Union Bank, 725 F.2d 478, 479 (9th Cir.1984). However, the motion does not test whether the plaintiff will prevail on the merits, but merely whether the plaintiff has properly stated a claim. Scheuer v. Rhodes, 416 U.S. 232, 236, 94 S.Ct. 1683, 40 L.Ed.2d 90 (1974).

Furthermore, the court recognizes allegations of a pro se complaint are held to a less stringent standard than formal pleadings drafted by lawyers. Haines v. Kerner, 404 U.S. 519, 520, 92 S.Ct. 594, 30 L.Ed.2d 652 (1972).

B. The Water District Defendants

Plaintiff has brought five claims against the Water District Defendants. Plaintiff seeks to quiet title to the withheld money, alleges the withheld money was wrongfully seized, alleges an unlawful conversion has taken place, alleges his civil rights have been violated and claims the Water District defendants have violated racketeering laws. The court, however, finds plaintiff's complaint is simply a product of artful pleading and in reality, plaintiff merely challenges his employer's compliance with the Internal Revenue Code by withholding federal income tax. Therefore, the court is guided by the Ninth Circuit's decision in Bright v. Bechtel, 780 F.2d 766 (9th Cir. 1986).

In Bright, the IRS issued a directive to plaintiff's employer declaring plaintiff's W-4 Form invalid and ordering the employer to begin withholding federal income tax. Bright, 780 F.2d at 768. The Bright plaintiff brought a breach of contract claim in state court asserting the employer breached the employment contract by paying employee less than the contract required with a paycheck that withheld state and federal income taxes. Id. The employer removed the action to federal court and moved for dismissal. Id. The Bright court found plaintiff's complaint was a product of artful pleading, since it really challenged the federal income tax withholding laws and regulations. Id. at 769. Thus, relying on Ninth Circuit law, the court upheld the dismissal of plaintiff's complaint. Id. at 770.

Similarly, in the instant case, the IRS sent two letters to plaintiff Pesci's employer, the Water District, explicitly instructing it to disregard plaintiff's W-4 Form and to withhold tax as if Pesci claimed a single filing status with zero allowances. Moreover, the letters warned that: "employers who don't deduct or withhold the proper amount of tax from their employees, as [they] direct, may be required to pay the tax themselves." Thus, defendant Jane Goodrow, in her role as a Human Resources representative, explained to plaintiff Pesci that the IRS had directed the Water District to disregard plaintiff's W-4 Form and withhold taxes from plaintiff's paycheck. As a result, plaintiff brings this suit claiming the Water District Defendants acted on invalid IRS letters to withhold his money.³ Plaintiff contends the IRS had no authority to issue these letters nor did they comply with the strict procedures of the Internal Revenue Code. Yet, plaintiff argues, when he informed the Water District Defendants that the mere sending of a letter was inadequate for the seizure of his funds, they allegedly ignored his requests and paid the IRS the unlawfully withheld money.

Despite plaintiff's arguments, the court finds Pesci's complaint is without merit. Following the Ninth Circuit's approach in Bright, the court holds "[u]nder 26 U.S.C. § 3402, an employer has a mandatory duty to withhold federal income tax from an employee's wages where required by applicable regulations." Bright, 780 F.2d at 770 (citations omitted). In the instant case, the court finds the actions taken by the Water District Defendants, in withholding federal income tax from plaintiff's wages, were in full compliance with federal Internal Revenue regulations. See 26 C.F.R. § 31.3402(f)(2)-1 (an employer is required to secure from their employees a withholding exemption certificate relating to marital status and the number of withholding exemptions claimed); 26 C.F.R. § 31.3402(f)(2)-1(g)(1)(i) & (ii) (requires that if employees submit certificates, wherein the total number of exemptions exceed ten or claiming status exempting them from withholding, the certificate shall be submitted with a copy of any written statements made by the employee to the IRS); 26 C.F.R. § 31.3402(f)(2)-1(g)(1) & (2) (an employer is required to forward an employee's W-4 Form to the IRS, if the employee claims an exemption from withholding of tax while earning more than $200 per week); 26 C.F.R. § 31.3402(f)(2)-1(g)(5)(iii)-(v) (if the IRS issues a directive instructing an employer to disregard an employee's withholding exemption W-4 Form as defective, the employer must withhold amounts from the employee's wages in accordance with...