Taylor v. U.S.

• Decision Date: 13 May 2011
• Docket Number: No. CV-09-2393-PHX-DGC,CV-09-2393-PHX-DGC
• Parties: Eddie Willie Taylor, Jr., Plaintiff, v. The United States; the U.S. Internal Revenue Service; the U.S. Department of Education; the Department of the Treasury; Lamson Junior College; Arizona Education Loan Marketing Corporation; and Southwest Student Services Corporation, and their individual employees, et al., Defendants.
• Court: U.S. District Court — District of Arizona

Eddie Willie Taylor, Jr., Plaintiff, v. The United States; the U.S. Internal Revenue Service the U.S. Department of Education; the Department of the Treasury Lamson Junior College; Arizona Education Loan Marketing Corporation and Southwest Student Services Corporation and their individual employees, et al., Defendants.

No. CV-09-2393-PHX-DGC

UNITED STATES DISTRICT COURT FOR THE DISTRICT OF ARIZONA

Dated: May 13, 2011

ORDER

Plaintiff claims to be a victim of identity theft. He alleges that an unknown person used his social security number to take out a federally guaranteed student loan in 1990, that the perpetrator defaulted on the loan, and that from 1990 through 2008, the federal government has seized his income tax refunds and social security payments to offset the debt owed to the Department of Education. In October 2009, Plaintiff filed a pro se complaint against the United States, certain federal agencies, various credit reporting bureaus, other entities with a connection to the student loan, and their respective employees. Doc. 1-1 at 5-37. The amended complaint pleads no specific cause of action, but instead contains "allegations" numbered one through sixteen. Doc. 51. Liberally construed, the pleading purports to assert the following claims: identity theft, defamation, fraud, conspiracy to defraud, racketeering, violations of equal protection anddue process under the Fourteenth Amendment, and violation of the Fair Credit Reporting Act. Id. The claims asserted against the credit bureau defendants have been dismissed. Docs. 61, 73, 101.

The United States, on behalf of all federal defendants, has filed a motion to dismiss pursuant to Rules 12(b)(1) and (b)(6) of the Federal Rules of Civil Procedure. Doc. 104. The motion is fully briefed. Docs. 105-108. No party has requested oral argument. For reasons stated below, the motion will be granted to the extent the United States argues lack of jurisdiction.

I. Rule 12(b)(1) Standard.

Federal courts are courts of limited jurisdiction, "possess[ing] only that power authorized by Constitution and statute[.]" Kokkonen v. Guardian Life Insurance Co. of America, 511 U.S. 375, 377 (1994). Once jurisdiction is challenged in a Rule 12(b)(1) motion, "[i]t is to be presumed that a cause lies outside this limited jurisdiction, and the burden of establishing the contrary rests upon the party asserting jurisdiction[.]" Id. (citations omitted); see Kingman Reef Atoll Invs., L.L.C. v. United States, 541 F.3d 1189, 1197 (9th Cir. 2008). To establish jurisdiction over the claims brought against the United States and its agencies and employees, Plaintiff must demonstrate both "statutory authority granting subject matter jurisdiction over the claims" and "a waiver of sovereign immunity." E.J. Friedman Co. v. United States, 6 F.3d 1355, 1357 (9th Cir. 1993) (citation omitted); see Murray v. IRS, 923 F. Supp. 1289, 1291 (D. Idaho 1996). Unless Plaintiff "satisfies the burden of establishing that [his] action falls within an unequivocally expressed waiver of sovereign immunity by Congress, it must be dismissed." Dunn & Black, P.S. v. United States, 492 F.3d 1084, 1088 (9th Cir. 2007).

II. Discussion.

The Court has read the amended complaint and the parties' briefs. Having considered the well-plead factual allegations of the complaint, the legal arguments made in the briefs, and additional legal authority, the Court rules as follows.

A. The Treasury, the IRS, and Federal Employees.

Pursuant to a provision of the Deficit Reduction Act of 1984, 26 U.S.C. § 6402(d), the Department of the Treasury ("Treasury") may reduce a person's income tax refund to offset debts owed to other federal agencies, including student loan debts owed to the Department of Education ("DOE"). See Oatman v. Dep't of Treasury-IRS, 34 F.3d 787, 788 (9th Cir. 1994); Glover v. Brady, No. 92 Civ. 7686 (CSH), 1994 WL 509918, at *3 (S.D.N.Y. Sept. 16, 1994); Roberts v. Bennett, 709 F. Supp. 222, 225 (N.D. Ga. 1989). The United States argues, correctly, that 26 U.S.C. § 6402(g) deprives the Court of jurisdiction over Plaintiffs claims against the Treasury and the Internal Revenue Service ("IRS") challenging the interception of his income tax refunds. Doc. 104 at 6-8; see Oatman, 34 F.3d at 788 ("Federal courts have no jurisdiction over any action brought against the Treasury to review [a § 6402] reduction."); Bianco v. IRS, No. 93 CIV. 3953 (LBS), 1994 WL 538020, at *2 (S.D.N.Y. Oct. 3, 1994) (taxpayers "who object to the setoff of their tax overpayments may sue only the agency that requested the setoff, not the IRS").¹

With respect to Plaintiffs other claims, the Treasury and the IRS are not entities subject to suit and the United States is properly substituted in their place. See Hawpe v. United States, No. MC-10-8044-PCT-FJM, 2011 WL 814969, at *1 n.1 (D. Ariz. Mar. 4, 2011); Clark v. United States, No. CV F 10-0426 LJO SMS, 2010 WL 1660110, at *3 (E.D. Cal. Apr. 22, 2010); Krouse v. U.S. Gov't Treasury Dep'tI.R.S., 380 F. Supp. 219, 221 (C.D. Cal. 1974) (citing Blackmar v. Guerre, 342 U.S. 512 (1952)). Similarly, the claims asserted against the individual federal employees are properly deemed an action against the United States as they implicate only the employees' official duties. See Hawpe, 2011 WL 814969, at *1 n.1; Clark, 2010 WL 1660110, at *2; Ellis v. Comm'r ofInternal Revenue, No. 10cv2251-IEG(BGS), 2011 WL 1085648, at *1 (S.D. Cal. Mar. 22, 2011) (citing Gilbert v. DaGrossa, 756 F.2d 1455, 1458 (9th Cir. 1985)). The claims brought against the Treasury, the IRS, and the federal employees will be dismissed.

B. The United States.

It is axiomatic that, as sovereign, the United States "'may not be sued without its consent and... the existence of consent is a prerequisite for jurisdiction.'" DaGrossa, 756 F.2d at 1458 (quoting United States v. Mitchell, 463 U.S. 206, 212 (1983)). As explained above, "[a] party bringing a cause of action against the federal government bears the burden of showing an unequivocal waiver of immunity." Clark, 2010 WL 1660110, at *3 (citing Holloman v. Watt, 708 F.2d 1399, 1401 (9th Cir. 1983)). Plaintiff has not met this burden.

Plaintiff cites 28 U.S.C. 2410 as providing an express waiver of sovereign immunity. Docs. 51 at 2, 105 at 4, 17. Pursuant to that statute, the United States has waived its sovereign immunity and consented to be sued in civil actions "(1) to quiet title to, (2) to foreclose a mortgage or other lien upon, (3) to partition, (4) to condemn, or (5) of interpleader or in the nature of interpleader with respect to, real or personal property on which the United States has or claims a mortgage or other lien." 28 U.S.C. § 2410(a). "Congress expressly limited waiver of sovereign immunity under § 2410 to actions where the United States 'has or claims a mortgage or other lien.'" Dunn & Black, 492 F.3d at 1092. "'Congress in § 2410 did not consent to suits against the United States where the United States claims a title interest as distinguished from a lien interest, ' or where the monies 'have already come into the hands of the [United States].'" Id. (citations omitted).

The amended complaint alleges no lien, mortgage or otherwise, against any property, but instead challenges the IRS and the Treasury's remission of certain income tax refunds and social security payments to the DOE as a setoff against the outstanding student loan debt. Because the United States clearly "claims a title interest rather than alien interest" to monies remitted to the DOE, any claims asserted under § 2410 are "jurisdictionally barred." Hughes v. United States, 953 F.2d 531, 538 (9th Cir. 1992); see Dunn & Black, 492 F.3d at 1092 (no waiver of sovereign immunity under § 2410 where the government never claimed a lien or mortgage interest in a money judgment but instead "exercised its right of setoff against that judgment and therefore claimed title in the proceeds that had come to rest in the hands of the IRS"); Urias v. United States, No. 99-CV-0658 H JAH, 1999 WL 907522, at *3 (S.D. Cal. Sept. 2, 1999) (finding no waiver of sovereign immunity under § 2410 "as to plaintiffs claims regarding social security benefits that have already been seized").

Plaintiff further asserts (Doc. 105 at 10-11) a waiver of sovereign immunity under 28 U.S.C. § 1346(a)(1), "which allows civil actions against the United States for the recovery of erroneously or illegally assessed taxes." Thurber v. Agents for the IRS, No. CV-09-8230-PHX-GMS, 2010 WL 2991593, at *2 (D. Ariz. July 26, 2010). The amended complaint alleges no improper tax assessment, nor does Plaintiff seek to recover taxes on the ground that they were not owed.

Moreover, an express condition of the waiver of sovereign immunity provided in § 1346(a)(1) is the requirement, under 26 U.S.C. § 7422(a), that the plaintiff "first file an administrative claim for refund or credit with the Secretary of the Treasury before bringing suit to challenge the [tax assessment]." Moore-Backman v. United States, No. CV 09-397-TUC-RCC (BPV), 2010 WL 3342173, at *4 (D. Ariz. June 8, 2010). The Secretary "has no power to waive [this] statutorily-imposed exhaustion requirement, which is an inseverable condition on Congress's waiver of sovereign immunity under § 1346(a)(1)." Dunn & Black, 492 F.3d at 1091. If the plaintiff "neglects to file an administrative claim as required by § 7422(a), [he] has failed to satisfy a necessary condition of the waiver of sovereign immunity under § 1346(a)(1), and... the district court is necessarily divested of jurisdiction over the action." Id. at 1089.

The amended complaint contains no allegation that Plaintiff filed an administrativeclaim before bringing suit. Plaintiff asserts in his response that he filed an administrative claim with the IRS and DOE in 2005 (Doc. 105 at 16-17), but the cited evidence, a letter from DOE regarding information provided to credit bureaus (id. at 27), contains no mention of an administrative claim. See...