Steele v. United States

• Decision Date: 08 August 2016
• Docket Number: Civil Case No. 14-1523 (RCL)
• Citation: 200 F.Supp.3d 217
• Parties: Adam STEELE, et al., Plaintiffs, v. UNITED STATES of America, Defendant.
• Court: U.S. District Court — District of Columbia

200 F.Supp.3d 217

Adam STEELE, et al., Plaintiffs,

v.UNITED STATES of America, Defendant.

Civil Case No. 14-1523 (RCL)

United States District Court, District of Columbia.

Signed August 8, 2016

Allen Buckley, Law Offices of Allen Buckley, Atlanta, GA, Christopher S. Rizek, Caplin & Drysdale, Chartered, Elizabeth S. Smith, Nathan David Finch, Motley Rice, LLC, Deepak Gupta, Gupta Beck PLLC, Washington, DC, William H. Narwold, Motley Rice, LLC, Hartford, CT, Meghan S.B. Oliver, Motley Rice, LLC, Mt. Pleasant, SC, for Plaintiffs.

Christopher James Williamson, Vassiliki Eliza Economides, U.S. Department of Justice, Washington, DC, for Defendant.

MEMORANDUM OPINION

Royce C. Lamberth, United States District Judge

Currently before the Court is plaintiffs' Motion for Reconsideration [56] of the Court's Order and Memorandum Opinion [54, 55] granting in part and denying in part plaintiffs' motion for class certification [46]. Upon consideration of plaintiffs' motion, defendant's response [59], plaintiffs' reply [60], defendant's notice of supplemental authority [61] and plaintiffs' response to that authority [62], along with the applicable law and the entire record herein, the Court will GRANT plaintiffs' motion for reconsideration. Accordingly, the Court finds that it has subject matter jurisdiction under the Administrative Procedure Act (APA) over plaintiffs' request for monetary relief, or restitution. Additionally, after finding it has the proper jurisdiction, the Court will GRANT plaintiffs' motion [46] for class certification in its entirety and certify plaintiffs' proposed class as it relates to the monetary relief portion of this case.

As stated, the Court will grant plaintiffs' motion to reconsider the Court's Order and accompanying Memorandum Opinion on class certification, dated February 9, 2016. In that Order, the Court certified the following class as it relates to plaintiffs' request for declaratory relief: "All individuals and entities who have paid an initial and/or renewal fee for a PTIN, excluding Allen Buckley, Allen Buckley LLC, and Christopher Rizek." See Order 1, ECF No. 54. Further, the Court denied plaintiffs' motion for certification as it related to their request for restitution. More specifically, the Court ruled that plaintiffs had not yet demonstrated that this Court holds subject matter jurisdiction over plaintiffs' request for monetary relief because it was unclear whether or not the United States had waived its sovereign immunity over that aspect of the case. See Mem. Op. 18-23, ECF No. 55.

As the Court explained in its previous Order, questions of sovereign immunity bear jurisdictional significance, and therefore must be determined at the outset of a lawsuit. See, e.g., Steel Co. v. Citizens for a Better Env't, 523 U.S. 83, 94, 118 S.Ct. 1003, 140 L.Ed.2d 210 (1998) ("Without jurisdiction the court cannot proceed at all in any case.") (quoting Ex parte McCardle, 7 Wall. 506, 514, 74 U.S. 506, 19 L.Ed. 264 (1868) ); Mem. Op. 19-20. Moreover, the APA contains only a limited waiver of sovereign immunity, Geronimo v. Obama, 725 F.Supp.2d 182, 186 (D.D.C.2010) (quotation omitted), which applies exclusively to "action[s] seeking relief other than money damages." 5 U.S.C. § 702 ; see also Benoit v. US Dep't of Agric., 608 F.3d 17, 19 (D.C.Cir.2010). In its previous Order, the Court found that plaintiffs' request for restitution could potentially be construed as a request for money damages and therefore ruled that plaintiffs had failed to sufficiently show the Court had jurisdiction over that portion of the case. Accordingly, the Court denied plaintiffs' motion for class certification as it related to their request for restitution. Mem. Op. 22-23. The Court's Order and Memorandum Opinion, however, made explicit that its ruling was subject to reconsideration and invited the parties to submit additional briefing on whether plaintiffs' request for restitution is subject to the government's waiver of sovereign immunity.

Responding to that invitation, plaintiffs filed a motion for reconsideration [56] and argued that for the purposes of their request for restitution, the government has waived its sovereign immunity under both the APA¹ and the Little Tucker Act—though waiver would be sufficient under either one of the statutes. After considering this motion, defendant's response, plaintiffs' reply, and the applicable law, the Court finds that under the APA, the government has waived its sovereign immunity for the purposes of plaintiffs' request for restitution and that therefore, subject matter jurisdiction exists for that aspect of the case.² In coming to this conclusion, the Court principally relies on America's Community Bankers v. FDIC, which held that jurisdiction under the APA existed in a case where plaintiffs similarly alleged that the government had "improperly collected" certain fees and then brought suit against the government to "get their money back." 200 F.3d 822, 830 (D.C.Cir.2000). As such, the Court will grant plaintiffs' motion for reconsideration, finding that it has jurisdiction under the APA over the entirety of this case.

Moreover, after ruling that the proper subject matter jurisdiction exists, the Court finds that plaintiffs have satisfied the class certification requirements of Federal Rule of Civil Procedure (FRCP) 23(b)(3) as it relates to their request for restitution. The Court will adopt a hybrid approach, certifying a 23(b)(2) class for plaintiffs' claims for declaratory relief and a 23(b)(3) class for their claims for monetary relief. Building off of its previous Memorandum Opinion and Order, the Court will now certify the following proposed class under FRCP 23 for the entirety of this case: "All individuals and entities who have paid an initial and/or renewal fee for a PTIN, excluding Allen Buckley, Allen Buckley LLC, and Christopher Rizek."

I. BACKGROUND

As explained in detail in the original Memorandum Opinion dated February 9, 2016,³ this case deals with the Department of the Treasury (Treasury) and Internal Revenue Service's (IRS's) requirement that compensated tax return preparers both obtain and pay for a preparer tax identification number (PTIN). On September 30, 2010, a Treasury regulation became effective requiring that "all tax return preparers must have a preparer tax identification number or other prescribed identifying number that was applied for and received at the time and in the manner, including the payment of a user fee, as may be prescribed by the Internal Revenue Service." 26 C.F.R. § 1.6109–2(d). Consistent with this regulation, the IRS then began to charge $64.25 for the initial PTIN registration fee and $63 for each annual renewal—with $50 of each fee going to the IRS for processing the application and the remainder going to third-party vendors for administering the application process. Am. Compl. ¶¶ 13, 21. On October 30, 2015, the IRS then issued temporary regulation 26 C.F.R. § 300.13T, which lowered the PTIN application and renewal fees to $33 and eliminated any fee charged by third party vendors. In bringing this lawsuit, plaintiffs argue that the IRS is not authorized to require payment for a PTIN—i.e., the user fee—and even if the IRS is authorized to charge the fee, that fee is excessive⁴ and therefore invalid at its current level.

In its February 9, 2016 Memorandum Opinion, the Court provided ample detail of the statutory framework underpinning the PTIN and its user fee, the recent efforts the IRS has taken to regulate compensated tax return preparers, and the legal theories plaintiffs have crafted in an effort to partially or totally invalidate the PTIN user fee. The Court need not rehash those details here. For present purposes, it is sufficient to note that plaintiffs brought two separate and alternate claims, each of which seeks both declaratory relief and restitution. While plaintiffs' first claim alleges that "the IRS lacks legal authority to charge a fee for the issuance or renewal of a PTIN," Am. Compl. ¶ 39, their second claim alternatively argues that even "if the IRS has legal authority to charge a fee for the issuance or renewal of a PTIN, the fees charges exceed the amount that can be charged under 31 U.S.C. § 9701." Id. at ¶ 46.⁵

In pressing these separate, alternative legal theories, plaintiffs seek both declaratory relief and restitution. First, plaintiffs request the Court grant "a judgment declaring that the IRS lacks legal authority to charge a fee for issuance or renewal of a PTIN," or alternatively, "a judgment declaring that the fees charged for the issuance and renewal of a PTIN are excessive." Am. Compl. 15. In addition to this declaratory relief, plaintiffs separately seek restitution for the PTIN fees that they claim have been unlawfully assessed to date. Id. Plaintiffs believe that if the IRS has exceeded its statutory authority by imposing the PTIN fee, then the agency should be forced to return all of the fees it has unlawfully charged since 2010 when the regulation was first put into place. In other words, plaintiffs do not solely want to halt the continued implementation a rule they believe to be unlawful—they also want their money back.

After bringing these claims, plaintiffs sought to certify the entire case as a class action under FRCP 23. More specifically, they moved the Court to certify the following class: "All individuals and entities who have paid an initial and/or renewal fee for a PTIN, excluding Allen Buckley, Allen Buckley LLC, and Christopher Rizek" In making this motion, plaintiffs suggested that the Court adopt a "hybrid approach," meaning that their request for a declaratory judgment would be certified under 23(b)(2) and their request for restitution would be certified under 23(b)(3) in order to grant class members certain protections including the right to opt out at the monetary relief phase. See Pls.' Reply in Supp. of Class Certification 6, ECF No. 53.

In responding to this motion, defendants also...