Watson v. Chessman

• Decision Date: 02 February 2005
• Docket Number: No. 04CV1229-DMS(WMC).,04CV1229-DMS(WMC).
• Court: U.S. District Court — Southern District of California
• Parties: Roxanne WATSON, Trustee of Rainbow's End Trust, Plaintiff, v. Millan CHESSMAN; Rosevelt Kyle, Trustee of Rainbow Nutrition Trust; the United States of America; and Mark W. Everson, Commissioner of the Internal Revenue Service, Defendants.

362 F.Supp.2d 1190

Roxanne WATSON, Trustee of Rainbow's End Trust, Plaintiff, v. Millan CHESSMAN; Rosevelt Kyle, Trustee of Rainbow Nutrition Trust; the United States of America; and Mark W. Everson, Commissioner of the Internal Revenue Service, Defendants.

No. 04CV1229-DMS(WMC).

United States District Court, S.D. California.

February 2, 2005.

COPYRIGHT MATERIAL OMITTED

COPYRIGHT MATERIAL OMITTED

Kenneth N. Hamilton, The McMillan Law Firm, La Mesa, CA, for Plaintiff.

US Attorney CV, US Attorney's Office, Southern District of California Civil Division, San Diego, CA, Jeremy N. Hendon, Traci L. Patterson, United States Department of Justice, Tax Division, Washington, DC, for Defendants.

ORDER GRANTING MOTION TO DISMISS; DISMISSING ACTION WITH PREJUDICE

SABRAW, District Judge.

The Court now considers the Government's motion to dismiss the first amended complaint, pursuant to Fed.R.Civ.P. 12(b)(1). The Government argues this Court is without jurisdiction to hear the merits of Plaintiff's allegations, as Plaintiff has failed to allege a proper basis of federal subject matter jurisdiction or indicate an express waiver of the United States' sovereign immunity. Further, the Government argues the Anti-Injunction Act bars Plaintiff's first and second causes of action, and the Declaratory Judgment Act precludes the relief sought in Plaintiff's third claim. For the reasons discussed below, The Government's motion is hereby GRANTED, and this case is DISMISSED with prejudice.

I. BACKGROUND

Plaintiff Roxanne Watson is the trustee of Rainbow's End Trust ("Trust"). According to Plaintiff, she is the fee simple owner of Lot 240 of Fletcher Hills Highlands Unit No. 6, located in El Cajon, California ("Lot 240"). Plaintiff avers Defendants Chessman, Kyle, and the United States of America have made adverse claims of ownership. According to the Government, Defendant Chessman is Plaintiff's mother, and owes a tax debt for the years 1994 and 1995. In 1990, the Government contends Defendant Chessman placed Lot 240 (her personal residence) into the Trust.

On July 17, 2003, James Haig, Internal Revenue Officer with the Internal Revenue Service, mailed Plaintiff a letter indicating his suspicion that the Trust was involved in a tax avoidance scheme. The letter warned that the Government may pursue civil or criminal penalties against taxpayers who use such schemes. Plaintiff explains that this letter was prompted by the IRS's belief that Defendant Chessman had an assignable interest in Trust property. In March of 2004, the IRS notified Defendant Chessman that Trust property would be subject to encumbrance, levy, and seizure by the IRS. As a result, Plaintiff insists that Trust property, Lot 240 specifically, is erroneously subject to immediate seizure. However, as of the date of this motion, the IRS has served no such levy upon any Trust property.

On September 22, 2004, Plaintiff filed her first amended complaint in this action, asserting three separate claims for relief. The first claim — brought against Defendants Chessman, Kyle, and Everson (in his official capacity as Commissioner of the IRS) — seeks to enjoin the seizure of Lot 240. Plaintiff's second cause of action, against Defendant Everson only, generally seeks to enjoin seizure or encumbrance of any Trust property. Plaintiff's third cause of action, against Defendant Everson only, seeks a judicial declaration that the IRS has no right, title, or interest in Trust property.

The Government filed this Rule 12(b)(1) motion to dismiss on December 13, 2004, contending this Court is without jurisdiction to hear any of Plaintiff's claims. Plaintiff opposed the motion on January 5, 2005. The Government replied on January 13, 2005. The Court took the matter under submission without oral argument, in accordance with Civ. L.R. 7.1(d)(1).

II. LEGAL STANDARD

A defendant may move to dismiss a complaint for "lack of jurisdiction over the subject matter." Fed.R.Civ.P. 12(b)(1). Dismissal for lack of subject matter jurisdiction is not a judgment on the merits, and therefore it has no claim preclusive or res judicata effect. See Thompson v. County of Franklin, 15 F.3d 245, 253 (2nd Cir.1994). The burden of proof on a Rule 12(b)(1) motion is on the party asserting jurisdiction — here, the Plaintiff. See Moir v. Greater Cleveland Regional Transit Authority, 895 F.2d 266, 269 (6th Cir.1990).

A Rule 12(b)(1) motion may be used to attack two different types of defects. Ruiz v. McDonnell, 299 F.3d 1173, 1180 (10th Cir.2002). See generally 2 Moore's Federal Practice, § 12.03[4] (Matthew Bender 3rd ed.2004). With the first category of Rule 12(b)(1) attack (applicable here), a defendant may argue that the Plaintiff has failed to comply with Rule 8(a)(1), in that the allegations on the face of the complaint are insufficient to show federal subject matter jurisdiction. This first type of Rule 12(b)(1) motion is known as a "facial attack." See Warren v. Fox Family Worldwide, Inc., 328 F.3d 1136, 1139 (9th Cir.2003) ; White v. Lee, 227 F.3d 1214, 1242 (9th Cir.2000).¹

With facial attacks, the court examines the complaint as a whole to determine whether the plaintiff has alleged a proper basis of jurisdiction. See Cook v. Winfrey, 141 F.3d 322, 326 (7th Cir.1998). The plaintiff enjoys safeguards similar to those provided in opposing a Rule 12(b)(6) motion: the court must treat the allegations of the complaint as true and draw all inferences in favor of the plaintiff. See Gould v. U.S., 220 F.3d 169, 176 (3rd Cir.2000); Hammond v. Clayton, 83 F.3d 191, 192 (7th Cir.1996) (citation omitted). The court will not, however, infer allegations supporting federal jurisdiction; federal subject matter must always be affirmatively alleged. See Rule 8(a); Century Southwest Cable Television, Inc. v. CIIF Assoc., 33 F.3d 1068, 1071 (9th Cir.1994). When, as here, a plaintiff relies on the general federal question and tax jurisdiction statutes (28 U.S.C. §§ 1331 & 1340), a claim not "arising under" the Constitution, or any federal statute, including any section of the Internal Revenue Code, will not generally survive a Rule 12(b)(1) facial attack. See Baker v. Carr, 369 U.S. 186, 198, 82 S.Ct. 691, 7 L.Ed.2d 663 (1962).

III. DISCUSSION

The Government brings a Rule 12(b)(1) facial attack on the first amended complaint. To maintain a viable action against the United States in federal court, a plaintiff must satisfy two requirements: (1) it must identify a particular statute that confers federal subject matter jurisdiction on the federal court; and (2) it must identify a federal law that waives the sovereign immunity of the United States as to that particular cause of action. See Macklin v. U.S., 300 F.3d 814, 819 (7th Cir.2002) (citing Arford v. U.S., 934 F.2d 229, 231 (9th Cir.1991)). Failure to do either mandates dismissal of the entire claim. See Macklin, 300 F.3d at 819. According to the Government, however, Plaintiff has failed to meet both of these requirements.

The complaint alleges three causes of action, none of which mentions any specific jurisdictional basis, or waiver of sovereign immunity. First, Plaintiff seeks injunctive relief against the IRS (and others) from seizing Lot 240. Second, Plaintiff seeks general injunctive relief against the IRS from seizing or encumbering any of the Trust property. Plaintiff adds that this second claim is not barred by 26 U.S.C. § 7421(a) (more commonly referred to as the Internal Revenue Code's "Anti-Injunction Act"), because "the imminent encumbrance, levy, and seizure of the trust property is unlawful and void, such encumbrance, levy, and seizure would cause irreparable injury to the beneficiaries and the Trustee, and under no circumstances can the government ultimately prevail on the merits." (Compl.¶ 28.) Plaintiff's third claim seeks a judicial declaration that the IRS has no right, title, or interest in Trust property, specifically Lot 240. In support of this final claim, Plaintiff mentions that she "has no adequate remedy at law because it would require [her] to allow [the IRS] to encumber, levy and seize the trust property and impair the rights of the beneficiaries in violation of her fiduciary duties." (Id. at ¶ 32.)

The Government insists that the complaint, on its face, does not sufficiently allege a proper jurisdictional basis, and must therefore be dismissed pursuant to Rule 12(b)(1). The Government argues that any claims against Defendant Everson in his official capacity (as Commissioner of the IRS), should be dismissed because the suit is actually brought against the United States. See Hutchinson v. U.S., 677 F.2d 1322, 1327 (9th Cir.1982) ; Wilson v. Wilson, 141 F.2d 599, 600 (4th Cir.1944). Accordingly, the United States is the only proper federal defendant.

As to Plaintiff's first two causes of action against the United States (seeking injunctive relief), the Government contends that 26 U.S.C. § 7421(a), the Anti-Injunction Act, bars injunctive actions brought against the United States in an effort to prevent the United States from collecting taxes. Although the Act is subject to limited exceptions, the Government insists none of the exceptions are applicable here. As such, the Government moves to dismiss Plaintiff's first two claims for want of subject matter jurisdiction.

The Government further argues that Plaintiff's third claim (for declaratory relief) must fail because the Declaratory Judgment Act, 28 U.S.C. § 2201, bars the type of relief sought by Plaintiff in this case. Specifically, Section 2201(a) excludes suits "with respect to Federal taxes." Consequently, the Government avers this third claim must be dismissed pursuant to Rule 12(b)(1).

Finally, the Government insists Plaintiff has failed to identify a federal law that waives the United States' sovereign immunity for the specific causes of action raised in the complaint. The United States, as a sovereign entity, is immune from suit unless it has consented to be sued. See U.S....