Franklin v. United States

MEMORANDUM OPINION AND ORDER

David C. Godbey United States District Judge

This Order addresses Defendants' (collectively, the “Government”) motion to dismiss and for summary judgment [24].^[1] The Court concludes that it lacks jurisdiction over most of Plaintiff Franklin's claims. As to the remaining causes of action, Franklin fails to state a claim upon which the Court may grant relief. Accordingly, the Court grants the Government's motion to dismiss in its entirety.

I. The Origins of the Dispute Over Tax Penalties

This case involves several claims by a taxpayer stemming from or related to tax penalties assessed against him by the Internal Revenue Service (“IRS”). The IRS determined that Franklin had failed to report income from a foreign trust for the tax years from 1998 to 2010. D.'s Mot. to Dismiss 2 [24]. In response, it assessed over $400, 000 in penalties against him. Pl.'s Am. Compl. ¶¶ 22, 24 [18]. To satisfy this liability, the IRS

has taken numerous steps, including levying on Franklin's property, garnishing his Social Security payments, and certifying his unpaid obligation to the State Department, resulting in the revocation of his passport. Id. ¶¶ 23-24, 27, 33. Franklin chose not to follow the normal path to contest the assessment of tax penalties, which is to pay the penalties and pursue a refund action under 26 U.S.C. § 7422. Instead, he has attempted to evade that exclusive path by a variety of end-arounds: He sought to obtain information via a Freedom of Information Act (“FOIA”) request, attempted to secure a reduction in his debt via settlement, and asserted various administrative claims for relief. Id. ¶¶ 25, 28, 34-35, 37. The IRS refused to process Franklin's written Offer in Compromise (“OIC”), spoiling his hopes for a settlement of the debt, and rejected his other claims for relief. Id. ¶¶ 29, 31, 38-39.

At bottom, Franklin objects to the tax penalties because he believes the IRS failed to observe certain procedural requirements before making the assessment, rendering the penalties invalid. Id. ¶ 2. This assertion animates his first set of claims, most of them under Title 26 of the U.S. Code (the “Tax Code”), which rely on the invalidity of the underlying penalties. Franklin also asserts that the statute permitting the State Department to revoke a delinquent taxpayer's passport violates Fifth Amendment Due Process. Id. ¶ 77. Finally, Franklin seeks fees and costs under FOIA. He alleges that the IRS wrongfully withheld a requested document from him and finally produced it only in response to this lawsuit. Id. ¶ 87. The Government has moved to dismiss under Rules 12(b)(1) and 12(b)(6) for lack of jurisdiction or for failure to state a claim. Alternatively, the Government

requests summary judgment in its favor on any issue that the court cannot resolve in a motion to dismiss.

II. Relevant Legal Standards

Sovereign immunity undergirds the Government's request that the Court dismiss Franklin's suit in its entirety. This principle generally prohibits claims against the federal government or against its agents in their official capacity. FDIC v. Meyer, 510 U.S. 471, 475 (1994). Congress may, however, waive the immunity, but courts construe such waivers narrowly. Lewis v. Hunt, 492 F.3d 565, 571 (5th Cir. 2007) (noting that “no suit may be maintained against the United States unless the suit is brought in exact compliance with the terms of a statute under which the sovereign has consented to be sued”) Absent a valid abrogation of sovereign immunity, a court lacks jurisdiction over an action against the federal government. Meyer, 510 U.S. at 475.

Because sovereign immunity implicates a court's jurisdiction, the plaintiff in a suit against the government bears the burden of establishing that a waiver of sovereign immunity applies to each claim. See Ramming v. United States, 281 F.3d 158, 161 (5^th Cir. 2001) (observing that “the plaintiff constantly bears the burden of proof that jurisdiction does in fact exist”). In assessing its jurisdiction in the context of a defendant's motion to dismiss under Federal Rule of Civil Procedure 12(b)(1), the court may “weigh the evidence and resolve factual disputes in order to satisfy itself that it has the power to hear the case.” Montez v. Dep't. of Navy, 392 F.3d 147, 149 (5th Cir. 2004). The court may consider either the complaint alone, the complaint supplemented by undisputed facts in the record, or the complaint supplemented by undisputed facts plus the court's resolution

of disputed facts. Ramming, 281 F.3d at 161. “Ultimately, a motion to dismiss for lack of subject matter jurisdiction should be granted only if it appears certain that the plaintiff cannot prove any set of facts in support of his claim that would entitle plaintiff to relief.” Id.

Rule 12(b)(6) permits a court to dismiss a plaintiff's complaint for failure to state a claim upon which relief can be granted. Fed.R.Civ.P. 12(b)(6). When addressing a rule 12(b)(6) motion to dismiss, the Court must determine whether the plaintiff has asserted a legally sufficient claim for relief. Blackburn v. City of Marshall, 42 F.3d 925, 931 (5th Cir. 1995). To survive dismissal, a complaint must include “enough facts to state a claim to relief that is plausible on its face.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007). To satisfy this standard, a plaintiff must plead factual content “that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). A plaintiff must provide “more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do.” Twombly, 550 U.S. at 555. A complaint, however, need not contain “detailed factual allegations.” Ashcroft, 556 U.S. at 678 (quoting Twombly, 550 U.S. at 555). The plaintiff's factual allegations “must be enough to raise a right to relief above the speculative level on the assumption that all the allegations in the complaint are true (even if doubtful in fact).” Twombly, 550 U.S. at 555.

III. The Court Lacks Jurisdiction Over Plaintiff's “Section 6751(b) Claims”

Franklin, in his response to the Government's motion to dismiss, groups several of his claims under the heading of “Section 6751(b) claims, ” referring to those predicated on the alleged procedural deficiency underlying the tax penalty assessments. Finding this convention helpful, the Court adopts this framework and addresses each claim in turn.

A. Fifth Circuit Precedent Requires Dismissal of Franklin's Quiet Title Action

Franklin seeks to quiet title to property currently subject to liens filed by the IRS. Pl.'s Am. Compl. ¶¶ 58-61. He invokes 28 U.S.C. § 2410, which provides a right of action and waiver of sovereign immunity to quiet title to property on which the federal government claims a lien. Id. § 2410(a)(1).

Fifth Circuit precedent forecloses Franklin's claim. McCarty v. United States, 929 F.2d 1085 (5th Cir. 1991), involved a section 2410 action to quiet title to property encumbered by a tax lien. The taxpayer argued that the court should enter judgment in his favor because “the tax [underlying the lien] was not properly assessed from a procedural standpoint.” 929 F.2d at 1087. The district court granted the government's motion to dismiss, reasoning that sovereign immunity deprived it of jurisdiction to entertain a challenge to the validity of the tax in a section 2410 action. Id. On appeal, the Fifth Circuit agreed, holding that a “taxpayer cannot contest the existence or validity of the tax assessment in an action under § 2410.” Id. at 1088. The dismissed portion of the taxpayer's claim in McCarty exactly mirrors Franklin's section 2410 claim. Like the plaintiff in McCarty, Franklin alleges only that the IRS failed to observe procedural requirements in

the assessment of the tax penalties against him, rendering them invalid. Accordingly, the Court dismisses Franklin's quiet title claim for want of subject matter jurisdiction.

B. The Court Lacks Jurisdiction Over Franklin's Section 7432 Claim

Franklin also seeks damages for the allegedly wrongful failure to release liens on his property. Pl.'s Am. Compl. ¶ 47. Section 7432 of the Tax Code provides a private right of action and waiver of sovereign immunity to seek damages against the federal government to remedy a knowing or negligent failure to release a lien when required by 28 U.S.C. § 6325. 28 U.S.C. § 7432(a). Section 6325, in turn, provides for the timely release of a lien on a taxpayer's property if the “Secretary [of the Treasury] finds that the liability for the amount assessed . . . has been fully satisfied or become legally unenforceable” or if the taxpayer furnishes - and the Secretary accepts - a bond securing payment of the assessed liability. 28 U.S.C. § 6325(a)(1)-(2). Franklin alleges that procedural deficiencies in the assessment of the tax penalties rendered the liability unenforceable from the start, requiring the Government to release the liens on his property under section 6325. The Court lacks jurisdiction over Franklin's claim. The waiver of sovereign immunity in section 7432 does not extend to challenges to the validity of the assessment. McIver v. United States, 650 F.Supp.2d 587, 592 (N.D. Tex. 2009) (citing Gandy Nursery, Inc. v. United States, 318 F.3d 631, 636 (5th Cir. 2003)); see also Pollinger v. I.R.S. Oversight Bd., 362 Fed.Appx. 5, 12 (11th Cir. 2010) (holding that section 7432 does not “allow for actions regarding assessment of tax liability”). Franklin does not allege that the Secretary of the Treasury or any officer or employee exercising the Secretary's authority has found his tax liability...