Taylor v. Appleton

• Decision Date: 01 September 1994
• Docket Number: No. 92-4971,92-4971
• Parties: -6303 Charles R. TAYLOR, Plaintiff-Appellant, v. Ed APPLETON; Barbara Gutchin; Ken Bachman; Joseph B. Cimilluca; Frank Andreacchi; First Bank of Indiantown, Inc.; Robert Post, Jr.; Ann Larocca; United States of America, Defendants-Appellees, National Telephone System, Inc., Defendant.
• Court: U.S. Court of Appeals — Eleventh Circuit

Page 1365

30 F.3d 1365

74 A.F.T.R.2d 94-6303

Charles R. TAYLOR, Plaintiff-Appellant, v. Ed APPLETON; Barbara Gutchin; Ken Bachman; Joseph B.

Cimilluca; Frank Andreacchi; First Bank of

Indiantown, Inc.; Robert Post, Jr.;

Ann Larocca; United States of

America, Defendants-Appellees,

National Telephone System, Inc., Defendant.

No. 92-4971.

United States Court of Appeals, Eleventh Circuit.

Sept. 1, 1994.

Charles R. Taylor, pro se.

Gary R. Allen, Tax Div. Dept. of Justice, Jordan L. Glickstein, Michael L. Paup, Charles E. Brookhart, Washington, DC, for appellees.

Kenneth Scherer, Ackerman, Bakst, Choyd & Scherer, P.A., West Palm Beach, FL, for First Bank, Post & Appleton.

Appeal from the United States District Court for the Southern District of Florida.

Before COX and CARNES, Circuit Judges, and WOOD, ^* Senior Circuit Judge.

HARLINGTON WOOD, Senior Circuit Judge:

Regardless of whether a plaintiff is represented by a veteran attorney or, as in this civil case, proceeds pro se, a court must first determine whether it has proper subject matter jurisdiction before addressing the substantive issues. The district court dismissed Plaintiff Charles Taylor's complaint for lack of subject matter jurisdiction, but granted Taylor leave to amend within twenty days. The district court concluded that Taylor's complaint did not allege facts giving the court subject matter jurisdiction. On that same day the district court denied as moot Taylor's "Motion for Default on Twelfth Cause of Action and Denying Plaintiff's Motion to Strike Defendants' Out of Time Response" ("Motion for Default Judgment"). Rather than amend the complaint to correct the deficiencies, Taylor filed a motion for reconsideration of the motion for default judgment. Taylor challenges the district court's dismissal for lack of subject matter jurisdiction and the denial of his motion for reconsideration.

I. Background

Taylor's complaint contains twelve counts against multiple defendants. ¹ At Taylor's request the district court dismissed counts one and four. Counts two, three, and five through eleven allege state common law claims. Only count twelve possibly raises a federal issue.

The basis of Taylor's claims arise out of his six month oral employment contract with First Bank of Indiantown ("Indiantown"), through its president, Ed Appleton. Under this contract Taylor served as Indiantown's agent and supervised the operations of Mather & Associates, Inc. Taylor worked for Mathers & Associates and Mathers Survey Corporation, two companies that fell into tax problems with the Internal Revenue Service (IRS) for not paying taxes withheld from employees. Indiantown came to the rescue by loaning money to the companies to pay their tax obligations, but required Taylor to assume certain responsibilities. After the companies again failed to remit payment to the IRS for taxes due and owing, IRS Officer Ann LaRocca recommended that a penalty be assessed against Taylor as a responsible person under 26 U.S.C. Sec. 6672 for the last three quarters of 1986. Taylor argues that the IRS assessed these penalties against him based on false statements made by Barbara Gutchin and National Telephone Systems about him to the IRS during bankruptcy proceedings.

Believing that IRS files contained false and inaccurate information about him, Taylor filed a Freedom of Information Act request with the IRS on May 18, 1990. After receiving some but not all of the requested documents, Taylor filed this lawsuit.

II. Subject Matter Jurisdiction

Federal courts exercise limited subject matter jurisdiction, empowered to hear only those cases within the judicial power of the United States as defined by Article III of the Constitution or otherwise authorized by Congress. Wright, Miller & Cooper, 13 Federal Practice and Procedure, Sec. 3522 (1984). In 28 U.S.C. Sec. 1331-32 (Supp.1992), Congress granted federal courts jurisdiction over diversity actions and cases raising a federal question. If jurisdiction is based on either of these, the pleader must affirmatively allege facts demonstrating the existence of jurisdiction and include "a short and plain statement of the grounds upon which the court's jurisdiction depends." Fed.R.Civ.P. 8(a).

In the district court Taylor stated that he sought subject matter jurisdiction on diversity grounds. For a federal court to have diversity jurisdiction the plaintiff must allege a proper jurisdictional basis in the complaint including an amount in controversy in excess of $50,000 exclusive of interest and costs, and that the plaintiff and defendants are citizens of different states. 28 U.S.C. Secs. 1332. Taylor's complaint fulfills the first requirement, though not the second.

Citizenship, not residence, is the key fact that must be alleged in the complaint to establish diversity for a natural person. For a corporate defendant the complaint must allege either the corporation's state of incorporation or principal place of business. 28 U.S.C. Sec. 1332. Taylor's complaint alleges that he is a citizen of Florida, but does not allege the citizenship of the natural defendants or the principal place of business for the corporate defendants. Because of these deficiencies, the district court correctly concluded that the federal courts do not have subject matter jurisdiction on diversity grounds.

Federal question jurisdiction exists when an action arises under the Constitution, laws, or treaties of the United States. Count twelve alleges that the United States violated the Freedom of Information Act ("FOIA"), 5 U.S.C. Sec. 582, when the Internal Revenue Service ("IRS") did not comply to Taylor's satisfaction, with his request for documents under the Act. The district court concluded that it did not have subject matter jurisdiction because Taylor did not allege in his complaint that he exhausted his administrative remedies before seeking judicial review.

The FOIA clearly requires a party to exhaust all administrative remedies before seeking redress in the federal courts. Dresser Indus., Inc. v. United States, 596 F.2d 1231, 1238 (5th Cir.1979); Hedley v. United States, 594 F.2d 1043, 1044 (5th Cir.1979) (per curiam); ² Spannaus v. U.S. Dept. of Justice, 824 F.2d 52, 58 (D.C.Cir.1987); In re Steele, 799 F.2d 461, 465 (9th Cir.1986); Brumley v. U.S. Dept. of Labor, 767 F.2d 444, 445 (8th Cir.1985) (per curiam); Stebbins v. Nationwide Mutual Ins. Co., 757 F.2d 364, 366 (D.C.Cir.1985); Cazalas v. United States Dept. of Justice, 660 F.2d 612 (5th Cir.1981). ³ This exhaustion requirement is a condition precedent to filing suit intended to allow a federal agency to exercise its discretion and authority, as well as create a descriptive factual record for the district court to review if necessary. See Steele v. United States, 799 F.2d 461, 466 (9th Cir.1986). FOIA provides for two different types of exhaustion, actual and constructive. Actual exhaustion occurs when the agency denies all or part of a party's document request. Constructive exhaustion occurs when certain statutory requirements are not met by the agency. Taylor argues that the statutory requirements for constructive exhaustion are present, and that a federal question is properly raised by his complaint.

A party is deemed to have constructively exhausted all administrative remedies "if the agency fails to comply with the applicable time limit provisions of this paragraph." 5 U.S.C. Sec. 552(a)(6)(C). Two time limits are stated in paragraph (a). After receiving a FOIA request, a federal agency must:

"determine within ten days (excepting Saturdays, Sundays, and legal public holidays) after the receipt of any such request whether to comply with such request and shall immediately notify the person making such request of such determination and the reasons therefor, and of the right of such person to appeal to the head of the agency any adverse determination."

5 U.S.C. Sec. 552(a)(6)(A)(i). The second time limit concerns appeals and requires the agency to:

make a determination with respect to any appeal within twenty days (excepting Saturdays, Sundays, and legal public holidays) after the receipt of such appeal. If on appeal the denial of the request for records is in whole or in part upheld, the agency shall notify the person making such request of the provisions for judicial review of that determination under paragraph (4) of this subsection.

5 U.S.C. Sec. 552(a)(6)(A)(ii). In certain prescribed circumstances an agency may extend the response time by ten days if it provides written notice to the requester. 5 U.S.C. Sec. 552(a)(6)(B). If the agency has not responded within these statutory time limits, the requester may bring suit. These time limit provisions are intended to promote a timely agency response and contribute to the faster release of the information sought.

Taylor's complaint and the documents attached to it allege the following facts. On May 18, 1990, Taylor submitted to the IRS, Washington D.C. office, his initial FOIA request for all IRS records involving the assessment of a tax penalty against him. The IRS responded by letter dated May 23, 1990, and informed Taylor that his request had been referred to the IRS office in Ft. Lauderdale, Florida, because that office had jurisdiction over the documents he sought.

As Taylor notes, Section 552(a)(6)(A)(i) requires the government agency within ten days to immediately notify the person making the request (1) of a determination to comply or not comply, and (2) the right to appeal any adverse determination. The IRS did not simply ignore Taylor's FOIA request. Within the ten-day period, it acknowledged receipt of Taylor's request and informed him that his request was being forwarded to the IRS office in Ft. Lauderdale. The Ft. Lauderdale office did not reply within ten days. After the requirements for constructive exhaustion arguably were met under Section 552(a)(6)(C), Taylor could have filed a lawsuit in federal court to compel a response by the...