Portsmouth Ambulance, Inc. v. United States

• Decision Date: 25 June 2014
• Docket Number: No. 13–3826.,13–3826.
• Parties: PORTSMOUTH AMBULANCE, INC.; Kenneth Boggs, Plaintiffs–Appellants, v. UNITED STATES of America, Defendant–Appellee.
• Court: U.S. Court of Appeals — Sixth Circuit

756 F.3d 494

PORTSMOUTH AMBULANCE, INC.; Kenneth Boggs, Plaintiffs–Appellants,

v.UNITED STATES of America, Defendant–Appellee.

No. 13–3826.

United States Court of Appeals, Sixth Circuit.

June 25, 2014.

ON BRIEF:Joseph J. Braun, Stephen E. Schilling, Strauss Troy Co., LPA, Cincinnati, Ohio, for Appellants. Bridget M. Rowan, Christine D. Mason, United States Department of Justice, Washington, D.C., for Appellee.

Before: DAUGHTREY, CLAY, and STRANCH, Circuit Judges.

OPINION

MARTHA CRAIG DAUGHTREY, Circuit Judge.

The plaintiffs, Portsmouth Ambulance, Inc., and Kenneth Boggs, appeal the district court's ruling granting the motion of the United States to dismiss the plaintiffs' claim for damages for the alleged wrongful collection of employment taxes, as well as their claim for a refund of certain tax payments made to the Internal Revenue Service (IRS). The plaintiffs' challenge to the district court's dismissal of the damages claim is patently without merit. Furthermore, well-reasoned circuit precedent supports the district court's conclusion that the plaintiffs did not properly invoke the jurisdiction of the federal courts to challenge the allocation by the IRS of payments made to satisfy corporate tax liabilities. We thus affirm the judgment of the district court.

I. FACTUAL AND PROCEDURAL BACKGROUND

Prior to October 2006, Joy Irwin and Sherri Fannin owned and operated Portsmouth Ambulance, Inc., and Urgent Care Transport, Inc., two separate Ohio businesses. In 2000, 2002, and 2005, Irwin and Fannin failed to remit to the IRS the federal employment taxes and corporate income taxes for which Urgent Care was liable, resulting in the IRS filing and recording tax liens against Urgent Care in March 2003 and March 2007.

Seeking to improve their financial position, Irwin and Fannin entered into a stock-purchase-agreement on October 30, 2006, with a group of investors that included plaintiff Kenneth Boggs. Pursuant to that agreement, Irwin and Fannin transferred 86 percent of the Portsmouth Ambulance stock to the new owners, retaining ownership of the remaining 14 percent of the stock. The agreement also accorded the new Portsmouth Ambulance owners an option to purchase the stock of Urgent Care. Approximately ten months later, on September 5, 2007, Portsmouth Ambulance exercised that option, obtained all shares of Urgent Care stock, purchased certain assets of Urgent Care, assumed some of Urgent Care's existing debt, and converted Urgent Care into a wholly-owned subsidiary of Portsmouth Ambulance.

Following the new owners' exercise of their option to purchase Urgent Care's stock, Irwin and Fannin notified the IRS of the change in the company's ownership. Because of Urgent Care's outstanding tax liability, the IRS ordered a sale of Urgent Care's assets in an effort to cure that deficiency. The sale did not raise sufficient revenues, however, and Urgent Care was left with a remaining tax liability of $222,079.68, excluding penalties and interest.

Unfortunately, the financial situation of Portsmouth Ambulance under its new owners did not fare much better. The new owners failed to pay the corporation's federal employment taxes for each quarter of 2008, and notices of federal tax liens were filed and recorded against that corporation on October 27, 2008 (for $356,806.76), on January 6, 2009 ¹ (for $147,830.07), and on May 4, 2009 (for $169,095.34). A fourth notice of federal tax lien (for $36,382.51) was filed and recorded against Portsmouth Ambulance on February 9, 2009, as a result of the company's failure to file its W–2 forms. Also on January 6, 2009, the IRS filed a notice of federal tax lien against Portsmouth Ambulance as the alter ego of Urgent Care, in an effort to collect the tax liability still due and owing from Urgent Care. Because plaintiff Boggs, the responsible corporate officer of Portsmouth Ambulance, did not remit payroll taxes for five quarters in calendar years 2008 and 2009, the IRS also assessed civil penalties against him totaling $311,407.54.

Given the dire financial straits in which Portsmouth Ambulance found itself, a creditor bank sold the company's assets on June 18, 2009, for one million dollars, and Portsmouth Ambulance ceased its business operations. From the proceeds of the asset sale, a total of $636,587.40 was remitted to the IRS. The government agency applied $333,769.24 of that amount to Urgent Care's tax liabilities, resulting in the release of the tax lien against that corporation. The remaining $302,818.16 was used to reduce, but not eliminate, Portsmouth Ambulance's own tax liability. Not surprisingly, Portsmouth Ambulance objected to the IRS's allocation of the sale proceeds, arguing that it was not the alter ego of Urgent Care and that the $636,587.40 remitted to the IRS should have been applied to satisfy only the obligation that Portsmouth Ambulance itself still had to the agency.

Portsmouth Ambulance and Kenneth Boggs filed refund claims with the IRS. Portsmouth Ambulance sought a refund of the payments that had been applied to eliminate the tax liability of Urgent Care rather than of Portsmouth Ambulance. Boggs hoped to recoup the civil-penalty payment he made to the IRS that he asserted should have been satisfied from the sale proceeds of Portsmouth Ambulance's assets. However, those claims either were denied or were not addressed by the agency, leading the plaintiffs to file suit in federal district court, seeking the requested refund payments and damages for the government's allegedly improper prosecution of a collection action. The plaintiffs purported to invoke the jurisdiction of the district court pursuant to the provisions of 28 U.S.C. § 1346(a)(1), but the IRS moved for dismissal of the plaintiffs' complaint, arguing both that the district court lacked subject-matter jurisdiction over the refund claim under § 1346(a)(1) and that the plaintiffs' claim for damages was untimely.

The district court agreed with the government, granted its motion, and dismissed the plaintiffs' claims. In doing so, the district court determined that Congress, by enacting 26 U.S.C. §§ 6325(b)(4) and 7426(a)(4), established an exclusive procedure to be used to seek refunds for satisfaction of a tax lien by a property owner with respect to another party's tax liability. Specifically, a party in such a position must request a certificate of discharge of the tax lien upon payment of the value of the lien. See26 U.S.C. § 6325(b)(4). Only then, within 120 days of the issuance of that certificate, may the party challenge in court the IRS's determination of the value of the lien on the property in question. See26 U.S.C. § 7426(a)(4). Because the plaintiffs did not avail themselves of those specified procedures to bring suit against the United States, the district court concluded that it was without subject matter jurisdiction to entertain the refund claims.

The district court also ruled that the plaintiffs' request for damages was time-barred. Pursuant to the provisions of 26 U.S.C. § 7433, a suit for damages based upon an allegedly unauthorized collection action must be filed within two years of the accrual of that cause of action. Because the plaintiffs failed to comply with that timing requirement, the district court concluded that the plaintiffs were precluded from advancing their damages claim in court. Portsmouth Ambulance and Boggs now appeal those adverse determinations.

II. DISCUSSION

A. Dismissal of Plaintiffs' Refund Claims Made in Counts I and II of the Complaint

In their first issue on appeal, the plaintiffs assert that the district court erred in dismissing their cause of action for a refund of tax payments for failure to comply with the provisions of 26 U.S.C. §§ 6325(b)(4) and 7426(a)(4). We review de novo a district court's dismissal of a cause of action for lack of subject matter jurisdiction. Harkness v. United States, 727 F.3d 465, 469 (6th Cir.2013) (citing Taylor v. Geithner, 703 F.3d 328, 332 (6th Cir.2013)). The government's motion to dismiss on lack of subject matter jurisdiction does not challenge the factual basis of the plaintiffs' claims. Rather, the motion presents a facial attack that “questions merely the sufficiency of the pleading.” Gentek Bldg. Prods., Inc. v. Sherwin–Williams Co., 491 F.3d 320, 330 (6th Cir.2007) (citation omitted). In such situations, we take “the allegations in the complaint as true,” and “[i]f those allegations establish federal claims, jurisdiction exists.” Id.

The plaintiffs' complaint names the United States as a defendant; however, the principle of law is well established that the government may not be sued without its consent. See, e.g., S. Rehab. Grp., PLLC v. Sec'y of Health & Human Servs., 732 F.3d 670, 676 (6th Cir.2013) (citing United States v. Sherwood, 312 U.S. 584, 586, 61 S.Ct. 767, 85 L.Ed. 1058 (1941)). Moreover, only Congress may waive that immunity, and all “waivers of federal sovereign immunity must be unequivocally expressed in the statutory text ..., must be strictly construed in favor of the United States, ... and [may] not [be] enlarged beyond what the language of the statute requires.” United States v. Idaho ex rel. Dir., Idaho Dep't of Water Res., 508 U.S. 1, 6–7, 113 S.Ct. 1893, 123 L.Ed.2d 563 (1993) (citations and internal quotation marks omitted). “[W]here Congress has consented to suit against the government, it may define the terms and conditions under which it is willing to allow the United States to be sued.” S. Rehab. Grp., PLLC, 732 F.3d at 676–77 (citing Block v. North Dakota ex rel. Bd. of Univ. & Sch. Lands, 461 U.S. 273, 103 S.Ct. 1811, 75 L.Ed.2d 840 (1983)).

At first blush, the plain language of 28 U.S.C. § 1346(a)(1), the jurisdictional provision upon which the plaintiffs rely to support the federal courts' authority to decide the issues raised in this matter, appears to be expansive enough to vest the district court with jurisdiction over the plaintiffs' tax-refund suit against the...