Charter HR, Inc. v. United States of America

Filing 31

OPINION AND ORDER that, because the court lacks jurisdiction to grant plf Charter HR, Inc. the injunctive relief it requests, its 15 MOTION for Preliminary Injunction is DENIED, as further set out in order. Signed by Honorable Judge Myron H. Thompson on 7/26/13. (Attachments: # 1 civil appeals checklist)(djy, )

IN THE DISTRICT COURT OF THE UNITED STATES FOR THE
MIDDLE DISTRICT OF ALABAMA, NORTHERN DIVISION

CHARTER HR, INC.,
Plaintiff,
v.
UNITED STATES OF AMERICA,
Defendant.

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CIVIL ACTION NO.
2:13cv466-MHT
(WO)

OPINION AND ORDER
Plaintiff Charter HR, Inc. brings this lawsuit against
defendant United States of America challenging tax liens
that have been issued by the Internal Revenue Service
(IRS) against Charter’s business assets.

Charter brings

this action under 28 U.S.C. § 2410, which allows the
United States to be named as a party in an action to quiet
title to property on which it has placed a lien, and
asserts jurisdiction through 28 U.S.C. § 1340.
This cause is now before the court on Charter’s motion
for

a

preliminary

injunction.

For

the

reasons

that

follow, this court concludes that the company’s motion is

foreclosed

by

§

and

7421(a),

the

Anti-Injunction

that,

accordingly,

Act,
this

26

U.S.C.

court

lacks

jurisdiction to grant the company the relief it requests.

I.
On July 1, 2013, Charter received a notice that the
IRS had issued three tax liens against it, each based on
an alleged alter-ego relationship with Nathan Wayne Stark,
Skilstaf, Inc., and PACA, Inc., respectively.
Skilstaf,

and

organizations,

PACA
and

are

all

Stark

owns

Charter,

professional-employer
the

latter

two

organizations.
Charter does not dispute the tax liability of Skilstaf
and PACA; instead, it argues that it is not an alter ego
of these entities or of Stark and that, accordingly, it is
not liable for the taxes they owe.
Charter contends that the existence of these liens
will place its very viability as a company at risk.

In

its most emphatic argument portending this scenario, the

2

company explains that it must make quarterly filings in
order to renew its licenses in the States in which it
operates.
existence

It
of

asserts

these

that,

tax

if

liens,

it

its

must

report

licenses

will

the
be

revoked.
Charter now asks this court to prevent that grave
result by issuing a preliminary injunction directing the
IRS to terminate any liens against its property and not to
issue any further such liens.

The United States argues

that this relief is barred by the Anti-Injunction Act,
which

provides

statutory

that,

exceptions,

outside
“no

suit

of

certain

for

the

enumerated
purpose

of

restraining the assessment or collection of any tax shall
be maintained in any court by any person, whether or not
such person is the person against whom such tax was
assessed.”

26 U.S.C. § 7421(a).

3

II.
Although it does not claim that it falls within one of
the

statutory

exceptions

to

the

Anti-Injunction

Act,

Charter offers a number of arguments for why this court
may decide its motion for injunctive relief.

The argument

that Charter advances most forcefully in its brief is that
the Act does not bar a quiet-title action brought under 28
U.S.C. § 2410 when that action does not challenge the
underlying assessment of a tax lien.
A plaintiff may bring suit under § 2410 to challenge
the procedural validity of a tax lien (but not the merits
of the underlying tax assessment).

See MacElvain v.

United States, 867 F. Supp. 996, 1001 (M.D. Ala. 1994)
(Thompson, J.).

However, while § 2410 may be a valid

means of seeking release from a federal lien, this does
not mean that this statute authorizes a plaintiff to
obtain injunctive relief that the Anti-Injunction Act
otherwise prohibits.

4

In order to argue that the Anti-Injunction Act does
not prevent it from obtaining injunctive relief,

Charter

relies heavily on the decision of the Ninth Circuit Court
of Appeals in United States v. Coson, 286 F.2d 453 (9th
Cir. 1961).

In that case, Coson brought suit under § 2410

when the United States claimed an interest in his property
by filing a tax lien.

Coson argued that the lien was

invalid because he had never been a general partner in the
organization whose operation gave rise to the underlying
taxes and because the government had never demanded that
the Coson pay taxes, as was required by statute.

The

government argued that the suit was tantamount to an
attempt to enjoin the collection of taxes and thus was
barred by the Anti-Injunction Act.

The appellate court

concluded that § 2410 plainly authorizes this type of suit
and that it “[could ]not assume that all Government tax
liens

were

excluded

from

Coson, 286 F.2d at 458-59.

the

meaning

of

§

2410(a).”

However, this holding does not

go so far as Charter contends it does.

5

Coson simply found

that the Act did not bar the quiet-title action and not
that injunctive relief would be permissible.

Indeed, in

reaching its conclusion, the court reasoned that “the only
type of relief needed here is a decree holding the tax
lien a cloud on [Coson]’s title and cancelling it.
is no need for any injunctive relief.”

There

Id. at 459

(emphasis added).
Similarly, the Second Circuit Court of Appeals, in
discussing § 2410, also noted the difference between a
quiet-title action and an injunction.

See Falik v. United

States, 343 F.2d 38, 42 (2d Cir. 1965) (agreeing with the
plaintiff “that an action to quiet title is not a suit for
an injunction and, more particularly, not a suit ‘for the
purpose of restraining the assessment or collection of any
tax,’ which § 7241(a) ... forbids.”).
Thus, this court is unconvinced that challenging a
lien under § 2410 gives the plaintiff a valid means by
which

to

circumvent

the

Anti-Injunction

Act.

While

Charter may be able to pursue its quiet-title action under

6

that statute, it does not create a viable avenue for
injunctive relief.
Charter also seeks to escape the roadblock posed by
the Anti-Injunction Act by relying on South Carolina v.
Regan, 465 U.S. 367 (1984), in which the Supreme Court
observed that an exception to the Act exists where the
plaintiff cannot seek relief by any alternative means
(such as a refund suit).
not

intend

aggrieved

the

Act

parties

alternative

to

for

remedy,”

alternate remedy

Concluding that “Congress did
apply
whom

the

to

it

Court

actions

has
found

not

brought

by

provided

an

that,

where

no

exists, the Act does not bar the suit.

Id. at 378.
Charter argues that, by the time it avails itself of
a

refund

suit,

there

would

be

“no

Charter

existence.” Pl.’s Br. (Doc. No. 29) at 7.

left

in

Thus, Charter

argues that, because the liens threaten its viability, if
the court does not grant injunctive relief, the company
may go out of business and will not survive to challenge

7

the liens.

However, these are different circumstances

from those addressed by the Court in Regan.
the

plaintiff,

liability

itself

South
as

Carolina,
a

result

of

would

In that case,
incur

tax

challenged

the

no

law

(because the tax would be on its bondholders instead), and
would therefore be unable later to sue for a refund.
Here, on the other hand, Charter does not contest that
damages can be sought for wrongful liens.

The practical

barriers to alternative remedies that Charter may face are
simply

different

in

kind

from

the

nonexistence

of

alternative remedies that the Court addressed in Regan.
Charter does not cite any cases that conclude that
there was no alternative remedy as contemplated by the
Court in Regan where a lien threatens to put a company out
of business before it can challenge it.

The court today

thus sees no reason to widen the exception that the Court
created in Regan so that Charter might pass through it.
Nor can Charter satisfy the exception to the AntiInjunction Act that the Supreme Court created in Enochs v.

8

Williams Packing & Navigation Co., 370 U.S. 1 (1962).
There, the Court found that a court in equity could issue
an injunction that the Act would otherwise bar where
(among other requirements) “it is clear that under no
circumstances could the Government ultimately prevail.”
Id. at 7 (emphasis added).

Because it is by no means

clear to this court that the government could not prevail
in this suit, Charter finds no respite from the Act in
this exception.
“Property held by an ‘alter ego’ of the taxpayer is
subject to collection for the taxpayer’s tax liability.”
Eckhardt v. United States, 463 F. App’x 852, 855 (11th
Cir. 2012).

The determination of whether those entities

are alter egos is made under state law.

See Old West

Annuity and Life Ins. Co. v. Apollo Group, 605 F.3d 856,
861-62 (11th Cir. 2010).

Thus, this court is guided by

the Alabama Supreme Court’s refusal to recognize separate
corporate existence “where a corporation is so organized
and controlled and its business conducted in such a manner

9

as to make it merely an instrumentality of another.”

C.E.

Development Co. v. Kitchens, 264 So.2d 510, 515 (Ala.
1972) (quotations and citations omitted).

Both in its

brief and at the hearing in this court on July 23, 2010,
Charter insisted that it is wholly separate from Skilstaf,
PACA, and Stark.

Charter explains that no members of its

board of directors serve on the boards for Skilstaf or
PACA and that it engages only in arms-length transactions
with those entities.

Charter further submits that Stark

is not an employee, officer, or director of Charter and
plays

no

role

in

its

management

or

decisionmaking.

Instead, Stark is merely employed by a business called MCI
Management Services, Inc., which provides consulting and
information technology services for Charter.
The

government

contests

Charter’s

position.

It

explains that, in 2010, both Skilstaf and PACA defaulted
on installment agreements that each had made with the IRS
to pay employment tax liabilities.

In order to continue

to maintain a professional employer organization with

10

Skilstaf’s

and

PACA’s

clients,

but

avoid

their

tax

liabilities, Stark created a trust for his children, which
was

then

used

to

controls it today.

capitalize

Charter

and

which

still

In other words, according to the

government, Charter is effectively a successor to Skilstaf
and PACA, designed to maintain those businesses free of
their debts to the government.

The government presented

a

hearing

number

of

exhibits

at

the

supporting

this

account.
Charter disputes the government’s characterization of
its relationship with Stark, Skilstaf, and PACA. Instead,
Charter maintains that it was created in 2010 by a group
of managers who, separately from Stark, wished to form a
new company because it was clear that Skilstaf and PACA
would eventually buckle under the weight of their tax
liabilities.

Charter states that the only assets it

acquired from Skilstaf were furniture, but acknowledges
that it gained access to Skilstaf’s and PACA’s client
lists and some of its employees and managers as well.

11

The court does not decide at this point, based on the
limited record before it, whether Charter is, indeed, an
alter ego of Stark, Skilstaf, and PACA. However, it cannot
conclude that there are no circumstances under which the
government may prevail.

Therefore, Charter does not fall

within the equitable exception to the Anti-Injunction Act
recognized by the Supreme Court in Enochs.

***
Accordingly, it is ORDERED that, because the court
lacks jurisdiction to grant plaintiff Charter, HR, Inc. the
injunctive relief it requests, its motion for a preliminary
injunction (doc. no. 15) is denied.
DONE, this the 26th day of July, 2013.

/s/ Myron H. Thompson
UNITED STATES DISTRICT JUDGE