United States of America v. Bigley et al
ORDER the Bigleys' 21 and Kelsos' 20 Motions to Dismiss are denied. The 26 Motion for a Protective Order and Motion for Joinder are denied. The 27 Motion for Rule 11 Sanctions is denied. Signed by Judge H Russel Holland on 12/3/2014.(LFIG)
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF ARIZONA
UNITED STATES OF AMERICA,
MICHAEL A. BIGLEY, et al.,
Motions to Dismiss;
Motions for Protective Order, Joinder and Sanctions
The Bigley and Kelso defendants move to dismiss plaintiff’s complaint.1 These
motions are opposed.2 The Bigley defendants also move for a protective order, for joinder,
and for Rule 11 Sanctions.3 These motions are opposed.4 Oral argument has not been
requested on any of the pending motions and is not deemed necessary.
Docket Nos. 20 & 21.
Docket Nos. 23 & 28.
Docket Nos. 26 & 27.
Docket Nos. 30 & 31.
Plaintiff is the United States of America. Defendants are Michael A. Bigley, Carolyn
E. Bigley, Robert B. Kelso, Raeola D. Kelso, and ISA Ministries. The Bigley defendants and
the Kelso defendants are proceeding pro se.
Plaintiff has brought this action “to reduce the outstanding federal tax liabilities
assessed against [the Bigley defendants] to judgment and to foreclose federal tax liens on
real property.”5 “This action [has been] commenced pursuant to 26 U.S.C. §§ 7401 and
7403, at the direction of the Attorney General of the United States, with the authorization
and sanction and at the request of the Chief Counsel of the Internal Revenue Service
Plaintiff alleges that on May 17, 2002, the Bigleys acquired title to real property that
is commonly referred to as 3115 E. Park Avenue, Gilbert, Arizona.7 Plaintiff further alleges
that “[o]n May 2, 2008,” the Bigleys “purported to transfer title to the real property at issue
to ISA Ministries via a quitclaim deed.”8 Plaintiff alleges that “[t]he transfer claimed
exemption pursuant to Arizona Revised Statute § 11-1134(a)(7), which indicates that the
Complaint [etc.] at 2, ¶ 1.
Id. at ¶ 2.
Id. at 3, ¶¶ 8-9.
Id. at 4, ¶ 10.
transfer was ‘a deed of gift.’”9 Plaintiff further alleges that “[o]n May 15, 2009, ISA
Ministries purported to transfer title to the real property at issue to” the Kelso defendants
“via a corporate special deed.”10 Plaintiff alleges that the Kelso defendants and ISA
Ministries are “mere nominee[s] or alter ego[s]” of the Bigley defendants “who have now
and have at all relevant times been the actual beneficial owners of the real property at
Plaintiff alleges that in 2009 and 2010, the IRS recorded tax liens against Mr. Bigley
for tax years 2004, 2005, 2006, and 2007.12 Plaintiff alleges that in 2010, the IRS recorded tax
liens against Mrs. Bigley for tax years 2004, 2005, and 2006.13 And, plaintiff alleges that in
2011, the IRS recorded tax liens against ISA Ministries and the Kelsos as the nominees
and/or alter egos of the Bigleys.14
In its first claim for relief, plaintiff seeks to reduce federal tax assessments to
judgment. Plaintiff alleges that taxes and penalties of $214,912.78 have been assessed
Id. at ¶ 11.
Id. at 3, ¶¶ 6-7.
Id. at 4-5, ¶¶ 12, 14 & 15.
Id. at 4, ¶ 13 & 6, ¶ 20.
Id. at 5-6, ¶¶ 16-19.
against Mr. Bigley.15 Plaintiff alleges that it has given Mr. Bigley timely notice of these
assessments and has made a demand for payment, but that Mr. Bigley “has neglected,
refused, or failed to make payment of the assessed amount....”16 Plaintiff further alleges
that Mr. Bigley “petitioned the United States Tax Court to contest the merits of the notice
of deficiency by the IRS for the 2004 tax year. The Tax Court issued a decision in favor of
the IRS, sustaining the deficiency determinations for the 2004 tax year, and additionally
sanctioned [Mr.] Bigley for filing frivolous submissions with the Tax Court.”17 Plaintiff also
alleges that $24,834.87 in taxes and penalties have been assessed against Mrs. Bigley.18
Plaintiff alleges that it has given Mrs. Bigley timely notice of these assessments and has
made a demand for payment, but that Mrs. Bigley “has neglected, refused, or failed to
make payment of the assessed amount....”19
In its second claim for relief, plaintiff seeks a determination that the Kelsos and ISA
Ministries were the nominees or alter egos of the Bigleys. Plaintiff alleges that Mr. Bigley
opened a bank account for ISA Ministries in November 2007 and listed the Gilbert address
as the account address and that the Bigleys “had access to the ISA Ministries checking
Id. at 6-7, ¶ 22.
Id. at 8, ¶¶ 23-24.
Id. at ¶ 25.
Id. at 8-9, ¶ 26.
Id. at ¶¶ 27-28.
account and regularly accessed it to pay their personal expenses.”20 Plaintiff further alleges
that the Kelsos are related to the Bigleys because Mrs. Kelso is Mr. Bigley’s sister.21
In its third claim for relief, plaintiff asserts a fraudulent transfer claim against the
Bigleys, alleging that the transfers to both ISA Ministries and the Kelsos were fraudulent.
In its fourth claim for relief, plaintiff seeks to foreclose the federal tax liens
encumbering the real property at issue. Plaintiff alleges that “[u]nder 26 U.S.C. § 7403(c),
[it] is entitled to a decree of sale of the real property at issue to enforce its tax liens.”22
The Bigley defendants and the Kelso defendants now move to dismiss plaintiff’s
complaint. The Bigley defendants also move for a protective order, to join KLA-Tencor and
Ameriplan as parties, and for Rule 11 Sanctions.
Bigley Defendants’ Motion to Dismiss
The Bigleys argue that this court lacks subject matter jurisdiction. “Under Rule
12(b)(1), a defendant may challenge the plaintiff’s jurisdictional allegations in one of two
ways.” Leite v. Crane Co., 749 F.3d 1117, 1121 (9th Cir. 2014). “A ‘facial’ attack accepts the
truth of the plaintiff’s allegations but asserts that they ‘are insufficient on their face to
invoke federal jurisdiction.’” Id. (quoting Safe Air for Everyone v. Meyer, 373 F.3d 1035,
Id. at 10, ¶¶ 30-31.
Id. at 11, ¶ 38.
Id. at 15, ¶ 60.
1039 (9th Cir. 2004)). “The district court resolves a facial attack as it would a motion to
dismiss under Rule 12(b)(6): Accepting the plaintiff’s allegations as true and drawing all
reasonable inferences in the plaintiff’s favor, the court determines whether the allegations
are sufficient as a legal matter to invoke the court’s jurisdiction.” Id. “A ‘factual’ attack,
by contrast, contests the truth of the plaintiff’s factual allegations, usually by introducing
evidence outside the pleadings.” Id. “When the defendant raises a factual attack, the
plaintiff must support [its] jurisdictional allegations with competent proof under the same
evidentiary standard that governs in the summary judgment context.” Id. (citation
Plaintiff alleges that the court “has jurisdiction over this action pursuant to 28 U.S.C.
§§ 1340 and 1345 and 26 U.S.C. §§ 7402 and 7403.”23 28 U.S.C. § 1340 provides, in pertinent
part, that “[t]he district courts shall have original jurisdiction of any civil action arising
under any Act of Congress providing for internal revenue[.]” 28 U.S.C. § 1345 provides,
in pertinent part, that “[e]xcept as otherwise provided by Act of Congress, the district
courts shall have original jurisdiction of all civil actions, suits or proceedings commenced
by the United States[.]” “Under 28 U.S.C. §§ 1340 and 1345, Federal District Courts have
jurisdiction to enforce federal tax liens.” United States v. Sarman, 699 F.2d 469, 470 (9th
Cir. 1983). 26 U.S.C. § 7402(a) provides that
Id. at 2, ¶ 3.
[t]he district courts of the United States at the instance of the
United States shall have such jurisdiction to make and issue in
civil actions, writs and orders of injunction, and of ne exeat
republica, orders appointing receivers, and such other orders
and processes, and to render such judgments and decrees as
may be necessary or appropriate for the enforcement of the
internal revenue laws.
And, 26 U.S.C. § 7403 authorizes the Attorney General to file a civil action in district court
“in any case where there has been a refusal or neglect to pay any tax” and gives the district
to adjudicate all matters involved therein and finally determine
the merits of all claims to and liens upon the property, and, in
all cases where a claim or interest of the United States therein
is established, may decree a sale of such property, by the
proper officer of the court, and a distribution of the proceeds
of such sale according to the findings of the court in respect to
the interests of the parties and of the United States.
Although all four of these provisions appear to give the court jurisdiction over this
action to reduce federal tax assessments to judgment and to foreclose on the federal tax
liens at issue, the Bigleys argue that any exercise of this jurisdiction would be premature
because they have filed an appeal of the Tax Court decisions.24 Because they have filed an
appeal, the Bigleys argue that the Tax Court’s decisions are not final and thus not yet
Affidavit of Fact in Support of Motion to Dismiss at 2, ¶¶ 14-15; Letter from
Michael A. Bigley (dated May 27, 2014), both attached to Defendants’ Motion to Dismiss
Complaint [etc.], Docket No. 21.
The Bigleys’ argument is based on 26 U.S.C. § 6213, which sets out the procedures
by which a taxpayer may petition the Tax Court after receiving a notice of deficiency.
Section 6213 provides that “no levy or proceeding in court for [tax] collection shall be
made, begun, or prosecuted ... until the decision of the Tax Court has become final.” 26
U.S.C. § 6213(a). Pursuant to 26 U.S.C. § 7481, “a decision of the Tax Court becomes final
in 90 days if it is not appealed.” Abatti v. C.I.R., 86 T.C. 1319, 1323 (Tax Court 1986). If an
appeal is taken, the decision of the Tax Court does not become final until no further appeals
can be taken. 26 U.S.C. § 7481. In other words, “[w]hile the judicial review is taking place,
the Commissioner must suspend his activities with respect to assessment and collection of
the tax, but when those proceedings are completed, he may then proceed to assess and
collect any tax found to be due.” Id.
The Bigleys’ reliance on Section 6213(a) and Abatti are misplaced because Section
6213 has no application here. Section 6213 sets forth the procedures that apply when a
taxpayer files a petition with the Tax Court seeking a redetermination of the IRS’s
administrative determination that there is a tax deficiency.25 Section 6213 proceedings are
deficiency proceedings. Here, Mr. Bigley petitioned the United States Tax Court to contest
the merits of the notice of deficiency by the IRS for the 2004 tax year. Bigley v. C.I.R., Case
No. 14223–08, 2010 WL 610707 (T.C. Feb. 22, 2010). The Tax Court “sustained” the IRS’
IRS Prac. & Proc. ¶ 10.03.
“deficiency determination” and “grant[ed the IRS’s] motion for a penalty and require[d
Mr. Bigley] to pay a penalty to the United States pursuant to section 6673(a)(1) of $5,000.”
Id. at *2. This order became final “on May 24, 2010.”26 The IRS subsequently assessed the
2004 tax year deficiencies, additions to tax, and accrued interest and sent Mr. Bigley a Final
Notice of Intent to Levy and Notice of Your Right to a Hearing as well as a lien notice.27
Mr. Bigley then requested a collection due process (CDP) hearing to contest the proposed
levy and requested a hearing in response to the lien notice.28 “A CDP hearing is a specific
administrative procedure, set out in I.R.C. § 6330, through which taxpayers may challenge
proposed collection actions brought by the IRS.” Golden v. C.I.R., 548 F.3d 487, 492 (6th
Cir. 2008) (emphasis added). The appeals that are currently pending involve the Tax Court
decisions in Mr. Bigley’s collection cases which were brought pursuant to “Section 6320
Order and Decision at 2 in Tax Court Case No. 17747-12 L, Exhibit A, United States’
Opposition to Michael and Carolyn Bigley’s Rule 12(b)(1) Motion to Dismiss, Docket No.
Id. at 2-3. For tax years 2005 and 2006, Mr. Bigley never petitioned the Tax Court
for a redetermination of the delinquency, but he did request a CDP hearing after he
received a levy notice. See Order and Decision at 2-3 in Tax Court Case No. 17529-12 L,
Exhibit B, United States’ Opposition to Michael and Carolyn Bigley’s Rule 12(b)(1) Motion
to Dismiss, Docket No. 28.
Order and Decision at 1 in Tax Court Case No. 17747-12 L, Exhibit A; Order and
Although Section 6213 has no application here because Mr. Bigley’s pending appeals
involve his collection cases, and not a deficiency proceeding, Section 6330, which applies
to collection cases, also contains a suspension clause. While a CDP hearing and any
appeals thereof are pending, “the levy actions which are the subject of the requested
hearing and the running of [certain] period of limitations [are] suspended.” 26 U.S.C. §
6330(e)(1); see also, 26 C.F.R. § 301.6330-1(g) (“the periods of limitation under section 6502
(relating to collection after assessment) ... are suspended until ... the determination
resulting from the CDP hearing becomes final by expiration of the time for seeking judicial
review or the exhaustion of any rights to appeals following judicial review”).
The IRS ... may levy for other taxes and periods not covered by
the CDP Notice if the CDP requirements under section 6330 for
those taxes and periods have been satisfied. The IRS also may
file NFTLs [notice for tax liens] for tax periods and taxes,
whether or not covered by the CDP Notice issued under
section 6330, and may take other non-levy collection actions
such as initiating judicial proceedings to collect the tax shown
on the CDP Notice or offsetting overpayments from other
periods, or of other taxes, against the tax shown on the CDP
26 C.F.R. § 301.6330-1(g)(2) Q&A G-3 (emphasis added). The instant suit is a “non-levy
collection action” brought pursuant to 26 U.S.C. § 7203(a) and thus the fact that Mr. Bigley
Decision at 1 in Tax Court Case No. 17529-12 L, Exhibit B; United States’ Opposition to
Michael and Carolyn Bigley’s Rule 12(b)(1) Motion to Dismiss, Docket No. 28.
is appealing decisions that the Tax Court made during his CDP hearings is irrelevant to the
question of whether this court has jurisdiction.
“The Internal Revenue Code provides two principal” ways for the IRS “to enforce
collection of ... unpaid taxes.” United States v. Nat’l Bank of Commerce, 472 U.S. 713, 720
(1985). “The first is the lien-foreclosure suit” brought pursuant to 26 U.S.C. § 7403(a). Id.
“The second tool is the collection of the unpaid tax by administrative levy[,]” which is
governed by § 6331(a). There are some fundamental differences between these two
methods of enforcing a lien. In a lien-foreclosure suit, the court must determine priority
disputes between the Government and other claimants, while “an administrative levy does
not determine priority disputes between the Government and other claimants[.]” United
States v. Triangle Oil, 277 F.3d 1251, 1255 (10th Cir. 2002). In addition “an administrative
levy does not ‘transfer ownership of the property to the IRS.’” Id. (quoting United States
v. Whiting Pools, Inc., 462 U.S. 198, 209–10 (1983)); see also, United States v. Hemmen, 51
F.3d 883, 887 (9th Cir. 1995) (“Unlike a foreclosure action, the levy is essentially a
provisional, administrative procedure”). Because this is a lien-foreclosure suit, not an
administrative levy action, the suspension clause in Section 6330(e) has no application. See
United States v. Zurn, Case Nos. 09- 55805, 09–55807, 2011 WL 1762711, at *1 (9th Cir. May
10, 2011) (“§ 6330(e) only applies to administrative tax levy proceedings, not
lien-foreclosure suits such as the one challenged here); Iantosca v. Benistar Admin Services,
Inc., Case No. 08–11785–NMG, 2012 WL 531013, at *12 (D. Mass. Feb. 17, 2012) (“Clearly,
a request for a CDP hearing requires only that the government suspend levy actions, not
lien-foreclosure actions in which a defendant has a full opportunity to contest the merits
of the underlying assessment”).
While the Bigleys correctly point out that the IRS’ interpretation of the regulation
implementing Section 6330(e) provides that the IRS can only “levy for other taxes and
periods not covered by the CDP Notice”, 26 C.F.R. § 301.6330-1(g)(2) Q&A G-3, that does
not mean that the instant action was premature. The Bigleys seize on this language to
argue that plaintiff can only bring a judicial action “for other taxes and periods not covered
by the CDP Notice.” But, the Bigleys are ignoring the difference between an administrative
levy action and a judicial lien-foreclosure action.
Section 6330(e) only applies to
administrative levies and only places limits on the ability of plaintiff to pursue administrative action. Section 6330(e) simply has no application to a judicial lien-foreclosure action
such as this. The court has subject matter jurisdiction over this judicial lien-foreclosure
action, and thus the Bigleys’ motion to dismiss is denied.
Kelso Defendants’ Motion to Dismiss
The Kelso defendants move to dismiss plaintiff’s claims against them pursuant to
Rule 12(b)(6), Federal Rules of Civil Procedure. “Rule 12(b)(6) authorizes courts to dismiss
a complaint for ‘failure to state a claim upon which relief can be granted.’” In re Rigel
Pharmaceuticals, Inc. Securities Litig., 697 F.3d 869, 875 (9th Cir. 2012) (quoting Fed. R. Civ.
P. 12(b)(6)). “To avoid dismissal, the complaint must provide ‘more than labels and
conclusions, and a formulaic recitation of the elements of a cause of action will not do.’”
Id. (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007)). “‘[A] plaintiff must
‘allege sufficient factual matter ... to state a claim to relief that is plausible on its face.’”
OSU Student Alliance v. Ray, 699 F.3d 1053, 1061 (9th Cir. 2012) (quoting Pinnacle Armor,
Inc. v. United States, 648 F.3d 708, 721 (9th Cir. 2011)). “In evaluating a Rule 12(b)(6)
motion, the court accepts the complaint’s well-pleaded factual allegations as true and
draws all reasonable inferences in the light most favorable to the plaintiff.” Adams v. U.S.
Forest Srvc., 671 F.3d 1138, 1142-43 (9th Cir. 2012).
The Kelsos argue that plaintiff has failed to present any evidence to support the
allegations in its complaint. First, the Kelsos contend that plaintiff has not offered any
evidence that the U.S. Attorney General directed that this action be commenced. Although
plaintiff has alleged that this action was “commenced ... at the direction of the Attorney
General of the United States, with the authorization and sanction and at the request of the
Chief Counsel of the Internal Revenue Service,”30 the Kelsos complain that the complaint
is not verified and that plaintiff has not offered any declarations or affidavits to support
Complaint [etc.] at 2, ¶ 2, Docket No. 1.
This argument fails. Rule 11(a), Federal Rules of Civil Procedure, provides that
“[u]nless a rule or statute specifically states otherwise, a pleading need not be verified or
accompanied by an affidavit.” The Kelsos have not pointed to any rule or statute that
would require that the complaint in this matter be verified or accompanied by an affidavit
The Kelsos next argue that this court lacks subject matter jurisdiction.
argument also fails. As set out above, plaintiff has alleged that the court has jurisdiction
under four different federal statutes. These jurisdictional allegations are sufficient to
survive a Rule 12(b)(6) motion to dismiss.
The Kelsos also appear to be arguing that they are not proper defendants. Pursuant
to 26 U.S.C. § 7403(b), in an action such as this to enforce a tax lien, “[a]ll persons having
liens upon or claiming any interest in the property involved in [the] action shall be made
parties thereto.” The Kelsos are alleged to have an interest in the Gilbert property and thus
they are proper parties to this lawsuit.
The Kelsos next argue that plaintiff has not offered any evidence to support its
allegation that the Kelsos took title to the property in question as either nominees or the
alter ego of the Bigleys. But, in deciding a Rule 12(b)(6) motion, the court’s “review is
limited to the contents of the complaint.” Enesco Corp. v. Price/Costco Inc., 146 F.3d 1083,
1085 (9th Cir. 1998). A Rule 12(b)(6) motion tests the adequacy of the plaintiff’s pleading,
not the adequacy of the evidence. In order to prevail, plaintiff will have to offer proof to
support its contention that the Kelsos are either nominees or the alter ego of the Bigleys.
But, in order to survive a Rule 12(b)(6) motion, plaintiff is only required to state a plausible
In order to state a plausible claim, plaintiff must allege sufficient factual support for
its claims. “Property of the nominee or alter ego of a taxpayer is subject to the collection
of the taxpayer's tax liability.” Shades Ridge Holding Co. v. United States, 888 F.2d 725,
728–29 (11th Cir. 1989). Factors courts consider when determining nominee status include:
“(a) No consideration or inadequate consideration paid by the
(b) Property placed in the name of the nominee in anticipation
of a suit or occurrence of liabilities while the transferor
continues to exercise control over the property;
(c) Close relationship between transferor and the nominee;
(d) Failure to record conveyance;
(e) Retention of possession by the transferor; and
(f) Continued enjoyment by the transferor of benefits of the
United States v. Richardson, Case No. CV–04–0739–PCT–DGC, 2006 WL 388347, at *6 (D.
Ariz. Nov. 21, 006) (quoting Towe Antique Ford Foundation v. I.R.S., Dep’t of Treasury,
U.S., 791 F. Supp. 1450, 1454 (D. Mont. 1992)).
The Court may find that an entity is the alter ego of the
(1) the taxpayer treats the property as it belongs to him,
(2) minimal or no consideration is paid by the entity in consideration for the property,
(3) the taxpayer has expressed the intent to shelter the asset via
the trust mechanisms,
(4) the taxpayer maintains active or substantial control over the
operations and decisions of the property,
(5) a family or close relationship exists between the taxpayer
and the holding entity[.]
United States v. Landsberger, Case No. 94–0883–PHX–SMM, 1997 WL 792506, at *6 (D.
Ariz. Sept. 30, 1997) (internal citations omitted).
Plaintiff has alleged that the Bigleys have at all relevant times continued to occupy
the property in question and “enjoy all the incident benefits of ownership.”31 Plaintiff also
alleges that there is a close family relationship between the Kelsos and the Bigleys.32 These
are sufficient factual allegations to support plaintiff’s claim that the Kelsos are nominees
or the alter ego of the Bigleys. Whether the Kelsos were, as they contend, innocent
purchasers of the Gilbert property is a question for another day.
Complaint [etc.] at 10-11, ¶ 34, Docket No. 1.
Id. at 11, ¶ 38.
In sum, plaintiff has stated a plausible claim that the Kelsos are either nominees or
the alter ego of the Bigleys. The Kelsos’ motion to dismiss is denied.
Bigley Defendants’ Motion for a Protective Order and Motion for Joinder
The Bigley defendants move the court for a protective order to stop plaintiff from
attempting to serve the Bigleys with documents that should be served upon ISA Ministries.
The Bigleys contend that they have had nothing to do with ISA Ministries since November
2007, when Mr. Bigley “resigned from ISA Ministries” “other than as contributors” or as
“recipients” of funds.33 The Bigleys contend that even though plaintiff has had the address
for ISA Ministries, plaintiff attempted to serve the Bigleys with documents intended for ISA
Ministries on July 2013, April 2014, June 2014, and July 2014.
The Bigleys’ motion for a protective order is denied as moot. As of August 2014,
plaintiff has been serving ISA Ministries at a Roseville, California address34 and plaintiff’s
counsel contends that plaintiff will continue to do so.
The Bigley defendants also move for an order requiring plaintiff to join as
defendants in this matter KLA-Tencor and Ameriplan. The Bigley defendants contend that
these entities have mistakenly reported “non-taxable income” as “taxable income” for Mr.
Motion for Protective Order at 3, Docket No. 26. ISA Ministries “was formed to
provide help to other individuals who need financial support in their current situation in
their life which makes it not possible for them to meet their basic needs to survive.” Id. at
Certificate of Service, United States’ Response [etc.], Docket No. 30.
Bigley. The Bigley defendants contend that they have contacted these “payors” in an
attempt to get them to correct this problem, but that the “payors” have refused to make
any corrections. The Bigley defendants argue that the “payors” should be added as
defendants to this action because the “payors” have submitted the information that plaintiff
has relied on in making its determinations as to Mr. Bigley’s tax deficiencies.
Rules 19 and 20, Federal Rules of Civil Procedure, govern the joinder of parties.
Under Rule 19(a) ... a party is necessary if:
“(A) in that person’s absence, the court cannot accord
complete relief among existing parties; or
(B) that person claims an interest relating to the subject
of the action and is so situated that disposing of the
action in the person’s absence may:
(i) as a practical matter impair or impede the person’s
ability to protect the interest; or
(ii) leave an existing party subject to a substantial risk of
incurring double, multiple, or otherwise inconsistent
obligations because of the interest.”
In re Icenhower, 757 F.3d 1044, 1052 (9th Cir. 2014) (quoting Fed. R. Civ. P. 19(a)). The
“payors” are not necessary parties as complete relief can be afforded among the existing
parties. If the court determines that the money Mr. Bigley received from the “payors” is
not “income”, the court can afford Mr. Bigley relief. The “payors” are also not necessary
parties because they do not have any interest in the property that is the subject of this lienforeclosure suit.
Rule 20 governs permissive joinder and provides that
[p]ersons ... may be joined in one action as defendants if:
(A) any right to relief is asserted against them jointly, severally,
or in the alternative with respect to or arising out of the same
transaction, occurrence, or series of transactions or occurrences;
(B) any question of law or fact common to all defendants will
arise in the action.
However, “Rule 20(a) is a rule by which plaintiffs decide who to join as parties and is not
a means for defendants to structure the lawsuit.” Moore v. Cooper, 127 F.R.D. 422 (D.D.C.
In sum, the “payors” are not necessary parties and the Bigleys may not rely on Rule
20 as a means to add defendants to this matter. The Bigleys’ motion for joinder is denied.
Bigley Defendants’ Motion for Sanctions
Pursuant to Rule 11, Federal Rules of Civil Procedure, the Bigleys move for an
award of sanctions against plaintiff’s attorneys. Under Rule 11(c)(1), “the court may
impose an appropriate sanction on any attorney” who violates Rule 11(b). Rule 11(b)
By presenting to the court a pleading, written motion, or other
paper--whether by signing, filing, submitting, or later advocat-19-
ing it--an attorney or unrepresented party certifies that to the
best of the person’s knowledge, information, and belief,
formed after an inquiry reasonable under the circumstances:
(1) it is not being presented for any improper purpose,
such as to harass, cause unnecessary delay, or needlessly
increase the cost of litigation;
(2) the claims, defenses, and other legal contentions are
warranted by existing law or by a nonfrivolous argument for
extending, modifying, or reversing existing law or for establishing new law;
(3) the factual contentions have evidentiary support or,
if specifically so identified, will likely have evidentiary support
after a reasonable opportunity for further investigation or
(4) the denials of factual contentions are warranted on
the evidence or, if specifically so identified, are reasonably
based on belief or a lack of information.
The Bigleys contend that plaintiff’s attorneys have violated all four subdivisions of Rule
11(b) because the instant action was filed while Mr. Bigley’s appeals from the Tax Court
were still pending and because plaintiff has been harassing them by attempting to serve
them with pleadings and papers intended for ISA Ministries. As sanctions for this alleged
improper behavior, the Bigleys seek monetary sanctions of $2500, the dismissal of the
instant action with prejudice, the removal of all Notice of Federal Tax Liens from this court,
and any other sanctions that the court deems appropriate.
The Bigleys’ motion for Rule 11 sanctions is denied. First, the Bigleys failed to
comply with the Rule’s safe harbor provision. “[T]he Rule’s safe harbor provision requires
parties filing such motions to give the opposing party 21 days first to ‘withdraw or
otherwise correct’ the offending paper.” Holgate v. Baldwin, 425 F.3d 671, 678 (9th Cir.
2005) (citation omitted). The court must “enforce this safe harbor provision strictly.” Id.
The Bigleys contend that a May 27, 2014 letter that was sent to plaintiff’s attorneys
provided the requisite notice that the Bigleys would be seeking sanctions. Because they did
not file their motion for sanctions until August 6, 2014, the Bigleys contend that they
complied with the safe harbor provision.
However, the May 27, 2014 letter does not mention Rule 11 or the safe harbor
provision. The May 27, 2014 letter does address the Bigleys’ contention that the instant
case was filed prematurely, but nothing in the letter would have put plaintiff’s attorneys
on notice that the Bigleys would be filing a Rule 11 motion if plaintiff did not withdraw its
The Bigleys ask the court to ignore their failure to comply with the safe harbor
provision because they are proceeding pro se. As the Bigleys point out, “‘[c]ourts in this
circuit have an obligation to give a liberal construction to the filings of pro se litigants[.]”
Blaisdell v. Frappiea, 729 F.3d 1237, 1241 (9th Cir. 2013). “This rule relieves pro se litigants
from the strict application of procedural rules and demands that courts not hold missing
or inaccurate legal terminology or muddled draftsmanship against them.” Id.
But even ignoring the Bigleys’ failure to comply with the safe harbor provision, their
motion for sanctions is still denied. As discussed in connection with the Bigleys’ motion
to dismiss, this action has not been filed prematurely. As for the Bigleys’ contention that
plaintiff or its attorneys were harassing them by attempting to serve them with pleadings
or papers intended for ISA Ministries, plaintiff and its attorneys had reason to believe that
ISA Ministries was using the same address as the Bigleys. In connection with the motion
for a protective order, discussed above, plaintiff submitted bank records from 2011 which
list the Gilbert, Arizona address for ISA Ministries as well as ISA Ministries checks that
were signed by Mrs. Bigley in 2011.35 This evidence does not bear out the Bigleys’
contention that they have had nothing to do with ISA Ministries since 2007 other than as
contributors or recipients of funds.
Plaintiff believes that the Bigleys are also basing their Rule 11 motion on a
contention that Mr. Bigley has not refused or neglected to pay his tax liability. Mr. Bigley
sent a “‘Certified Promissory Money Note for $700,000 ‘” to the IRS on April 1, 2013, which
“the IRS could present to [Mr. Bigley] for payment with proof that certain demands had
Exhibit A, United States’ Response [etc.], Docket No. 30.
been met.”36 Mr. Bigley appears to be contending that this is evidence that he has
attempted to pay his tax liability. Plaintiff believes that the Bigleys are suggesting that
plaintiff is misrepresenting facts by contending to the contrary. But, plaintiff argues that
it is not misrepresenting the facts because payment for tax liability is limited to “any
commercially acceptable means that the Secretary deems appropriate to the extent and
under the conditions provided in regulations prescribed by the Secretary.” 26 U.S.C. §
6311. Plaintiff argues that the “Certified Promissory Money Note” that Mr. Bigley sent the
IRS would not be considered an acceptable form of payment. However, resolution of this
issue is unnecessary at this time because the Bigleys indicate in their reply brief that this
was not a basis for their Rule 11 motion.37
The court makes one final observation about the Bigleys’ motion for sanctions. The
Bigleys contend that plaintiff has conceded a number of facts that the Bigleys laid out in
their motion because plaintiff failed to respond to these facts. But, plaintiff was not
required to respond to the Bigleys’ presentation of “facts”, many of which were not
actually facts but rather the Bigleys’ opinion as to what specific actions or events meant.
Plaintiff was required to respond to the arguments that the Bigleys raised in their motion
Order and Decision at 7 in Tax Court Case 17529-12 L, Exhibit B, United States’
Opposition to Michael and Carolyn Bigley’s Rule 12(b)(1) Motion to Dismiss, Docket No.
Judicial Notice at 13, Docket No. 33.
for sanctions, which plaintiff has done. Plaintiff has conceded nothing by not responding
to the Bigleys’ “factual” presentation.
The Bigleys’ and the Kelsos’ motions to dismiss38 are denied. The Bigleys’ motion
for a protective order and motion for joinder39 is denied. The Bigleys’ motion for Rule 11
sanctions40 is denied.
DATED at Anchorage, Alaska, this 3rd day of December, 2014.
/s/ H. Russel Holland
United States District Judge
Docket Nos. 20 & 21.
Docket No. 26.
Docket No. 27.
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