Alturas Indian Reservation v. California Gambling Control Commission

Filing 59

ORDER signed by Judge Lawrence K. Karlton on 12/08/11 ORDERING that defendant intervenor United States' 44 Motion to Dismiss is GRANTED; the case is DISMISSED. Plaintiff's 2 Motion to Dismiss is DENIED as moot. The clerk of court SHALL disburse the funds interpleaded to the court pursuant to 43 Order to Defendant-Intervenor United States at the following address: W. Carl Hankla, c/o Tax FLU, U.S. Department of Justice, 555 Fourth St., N.W., Room 6647 Washington, D.C. 20001 (cc: Financial) CASE CLOSED (Benson, A.)

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UNITED STATES DISTRICT COURT

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EASTERN DISTRICT OF CALIFORNIA

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ALTURAS INDIAN RANCHERIA,
a federally recognized
Indian tribe,
NO. CIV. S-11-2070 LKK/EFB
Plaintiff,

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v.

O R D E R

CALIFORNIA GAMBLING
CONTROL COMMISSION, an
agency of the State of
California,

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Defendant.
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/

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Plaintiff in this case is the Del Rosa Faction of the Alturas

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Valley Indian Tribe. The Del Rosas filed this action seeking to

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enjoin the California Gambling and Control Commission (“CGCC”) from

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releasing funds held in trust for the Alturas Valley Indian Tribe

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to the IRS pursuant to two tax levies. Pending before the court are

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two motions to dismiss. One is by defendant-intervenor United

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States, and the other is a voluntary dismissal by plaintiff-

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intervenor, the Rose Faction of the Tribe.
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I. Background

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Plaintiff,

the

Del

Rosa

Faction

of

the

Alturas

Indian

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Rancheria1 filed suit this suit on August 1, 2011, against the

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California Gambling Control Commission (“CGCC”) in Sacramento

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County Superior Court. See Notice of Removal, ECF No. 1. The

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complaint, which seeks declaratory and injunctive relief, alleges

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that

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California’s Revenue Sharing Trust Fund (“RSTF”). Pursuant to state

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law, those funds are distributed quarterly to participating tribes

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through the CGCC, as trustee. According to plaintiff, “at the

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beginning of 2010, the CGCC determined that a leadership dispute

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within

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distributions pending resolution of the dispute.” Mot. for a

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Temporary Restraining Order 3, ECF No. 9.

plaintiff

the

is

Tribe

entitled

required

to

the

monetary

Commission

distributions

to

withhold

from

RSTF

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On or about July 20, 2011, plaintiff became aware that the IRS

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had contacted the CGCC seeking levies against the Tribe’s RSTF

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funds.2 At a meeting held on July 28, 2011, the CGCC voted to

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recognize the levies and to allow the IRS to execute the levies.

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Plaintiff claims that the Tribe has no knowledge of what the levies

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correspond to, and requested time from the CGCC for the Tribe

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At the time this case was filed, there was a leadership
dispute between two factions of the Tribe. The Del Rosa faction is
the plaintiff in the instant litigation, and the Rose faction is
a plaintiff-intervenor. The leadership dispute is at the heart of
a related case, Alturas v. Salazar, 2:10-cv-1997-LKK-EFB.
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In a letter from the CGCC to the IRS, CGCC indicated that
it believed that the levies were related to unpaid employment
taxes. See July 19, 2011 Letter from Tina Littleton to Fara Mills,
ECF No. 9-2 at 99.
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investigate the matter directly with the IRS. Plaintiff alleges

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that the CGCC’s conduct constitutes breach of a tribal-state

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compact, and breach of the covenant of good faith and fair dealing.

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This court granted a Temporary Restraining Order (“TRO”) to

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plaintiffs on August 10, 2011. The TRO, which enjoined the CGCC

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from distributing funds from plaintiff’s RSTF account, expired on

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August 29, 2011. See ECF No. 14. After a hearing on whether to

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issue a preliminary injunction, this court granted a motion by CGCC

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to interplead the funds subject to the IRS levies, and dismissed

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the preliminary injunction motion as moot. ECF No. 22. The court

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has also granted motions to intervene by the Rose Faction and by

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the United States.

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II. Standard for a Motion to Dismiss under Fed R. Civ. P.

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12(b)(1)

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It is well established that the party seeking to invoke the

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jurisdiction of the federal court has the burden of establishing

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that jurisdiction exists. KVOS, Inc. v. Associated Press, 299 U.S.

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269, 278 (1936); Assoc. of Medical Colleges v. United States, 217

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F.3d 770, 778-779 (9th Cir. 2000). On a motion to dismiss pursuant

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to Fed. R. Civ. P. 12(b)(1), the standards that must be applied

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vary according to the nature of the jurisdictional challenge.
Here, the challenge to jurisdiction is a facial attack.

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the

federal

defendants

contend

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is,

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jurisdiction contained in the complaint are insufficient on their

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face to demonstrate the existence of jurisdiction.

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Everyone v. Meyer, 373 F.3d 1035, 1039 (9th Cir. 2004).
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that

the

That

allegations

of

Safe Air for
In a Rule

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12(b)(1)

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safeguards similar to those applicable when a Rule 12(b)(6) motion

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is made. See Sea Vessel Inc. v. Reyes, 23 F.3d 345, 347 (11th Cir.

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1994), Osborn v. United States, 918 F.2d 724, 729 n.6 (8th Cir.

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1990); see also 2-12 Moore's Federal Practice - Civil § 12.30

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(2009).

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be true, and the motion is granted only if the plaintiff fails to

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allege an element necessary for subject matter jurisdiction.

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Savage v. Glendale Union High Sch. Dist. No. 205, 343 F.3d 1036,

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1039 n.1 (9th Cir. 2003), Miranda v. Reno, 238 F.3d 1156, 1157 n.1

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(9th Cir. 2001).

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motion

of

this

type,

the

plaintiff

is

entitled

to

The factual allegations of the complaint are presumed to

III. Analysis

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The Unites States asserts that the Anti-Injunction Act, 26

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U.S.C. § 7421(a), and the Declaratory Judgement Act, 28 U.S.C. §

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2201, render this court without jurisdiction to enjoin payment to

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the IRS, the relief sought by plaintiff.

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A. The Anti-Injunction Act

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The Anti-Injunction Act, 26 U.S.C. § 7421(a), provides: "no

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suit for the purpose of restraining the assessment or collection

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of any tax shall be maintained in any court by any person, whether

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or not such person is the person against whom such tax was

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assessed." The Supreme Court recognizes a single narrow exception

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to the Anti-Injunction Act: "An injunction may be obtained against

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the collection of any tax if (1) it is ‘clear that under no

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circumstances could the government ultimately prevail' and (2)

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‘equity jurisdiction' otherwise exists, i. e., the taxpayer shows
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that he would otherwise suffer irreparable injury." Church of

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Scientology v. United States, 920 F.2d 1481, 1485 (9th Cir.

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1990)(quoting Commissioner v. Shapiro, 424 U.S. 614, 627 (1976)).

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The purpose of the Anti-Injunction Act is to protect the ‘pay

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first and litigate later’ system that Congress has set up for the

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collection of taxes. “The Court has interpreted the principal

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purpose of this language [of the Anti-Injunction Act” to be the

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protection of the Government's need to assess and collect taxes as

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expeditiously

as

possible

with

a

minimum

of

pre-enforcement

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judicial interference, and to require that the legal right to the

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disputed sums be determined in a suit for refund." Bob Jones Univ.

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v. Simon, 416 U.S. 725, 736 (U.S. 1974).

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The Ninth Circuit has held that the "statutory ban against

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judicial interference with the assessment or collection of taxes

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is equally applicable to activities which are intended to or may

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culminate in the assessment or collection of taxes." Blech v.

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United States, 595 F.2d 462, 466 (9th Cir. 1979). In that case,

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plaintiffs sought an injunction to preclude the IRS from, among

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other things, further examination of plaintiffs' business records

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or deficiency notices. The District Court found that it lacked

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jurisdiction to grant the relief prayed for in the complaint, and

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the

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prohibited suit to enjoin tax assessment and collection." Id.

Ninth

Circuit

affirmed,

holding

that

the

action

was

"a

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Moreover, the Ninth Circuit has applied the Anti-Injunction

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Act to suits seeking to restrain third-parties from disbursing

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money to the IRS. See Bright v. Bechtel Petroleum, Inc., 780 F.2d
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766, 770 (9th Cir. 1986)(holding that the district court properly

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applied the Anti-Injunction Act in dismissing a suit against an

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employer for wrongful withholding of taxes because the action “can

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be viewed as one to restrain collection. . . of federal income

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taxes.”). See also Maxfield v. United States Postal Service, 752

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F.2d 433 (9th Cir. 1984).

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The Fourth Circuit has held the same, outside the context of

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employment

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Virginia State Lottery Dep't, 20 F.3d 589, 591 (4th Cir. 1994), the

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Fourth Circuit held that the district court lacked jurisdiction to

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grant

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requiring the Virginia State Lottery to pay the full amount of

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lottery prizes won by the fund without withholding any taxes. Over

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the Australian fund’s objections that it was entitled to tax

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exemptions under a treaty, the Fourth Circuit held that the fund

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had a perfectly valid remedy, “to pay the tax under protest and

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then seek a refund.” Id. Further, relevant to the instant case, the

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International Lotto court noted: “Regardless of how the claim is

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labeled, the effect of an injunction here is to interfere with the

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assessment or collection of a tax. The Fund is not free ‘to define

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the relief it seeks in terms permitted by the Anti-Injunction Act’

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while ‘ignoring the ultimate deleterious effect such relief would

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have on the Government's taxing ability.’” Id. (quoting Educo, Inc.

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v. Alexander, 557 F.2d 617, 620 (7th Cir. 1977))

tax

withholdings.

injunctive

relief

to

In

an

International

Lotto

Australian-owned

Fund

lotto

v.

fund,

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Here, the Del Rosas insist that their case is not barred

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because they seek “only to exercise the government-to-government
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relationship. . . to determine the underlying origin of the tax

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liability before executing the levies.” Pl.’s Opp’n to the United

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State’s Mot. 3:22-24. The Tribe also characterizes the relief it

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seeks as “involv[ing] a declaration of the rights and obligations

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of the parties to the Tribal-State Compact, and seeks to compel the

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CGCC to exercise its fiduciary duty to the Tribe.” Id. 5:8-10. In

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doing so, the Del Rosas ignore the deleterious effect such relief

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would have on the government’s taxing ability, as protected by the

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Anti-Injunction Act.

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The court concludes that this action falls squarely within the

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prohibition in the Anti-Injunction Act. Accordingly, the court

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holds that it lacks jurisdiction to hear plaintiff’s claim for

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injunctive relief.

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B. The Declaratory Judgment Act

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Plaintiff requests a declaratory judgment that plaintiff is

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the sole beneficiary of RSTF monies held for the benefit of the

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Tribe, and that the disbursement of RSTF funds by defendant CGCC

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to the IRS constitutes a breach of the Tribal-State Compact a and

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a breach of the covenant of good faith and fair dealing.

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The Declaratory Judgment Act provides “In a case of actual

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controversy within its jurisdiction, except with respect to Federal

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taxes other than actions brought under section 7428 of the Internal

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Revenue Code of 1986. . . any court of the United States, upon the

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filing of an appropriate pleading, may declare the rights and other

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legal relations of any interested party seeking such declaration,

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whether or not further relief is or could be sought. Any such
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declaration shall have the force and effect of a final judgment or

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decree and shall be reviewable as such.” 28 USCS § 2201 (emphasis

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added). The Declaratory Judgment Act, like the Anti-Injunction Act,

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is an expression of “the congressional antipathy for premature

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interference with the assessment or collection of any federal tax.

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. . the federal tax exception to the Declaratory Judgment Act is

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at least as broad as the Anti-Injunction Act.” Bob Jones Univ. v.

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Simon, 416 U.S. 725, 732 (1974).

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Plaintiff’s request for a declaratory judgment that the

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disbursement of funds to the IRS clearly falls within the federal

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tax exception to the Declaratory Judgment Act. Similarly, the court

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concludes that plaintiff’s request for a declaratory judgment that

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plaintiff is the sole beneficiary of RSTF monies held for the

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benefit of the Tribe is an attempt to “to define the relief it

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seeks in terms permitted by the” Declaratory Judgment Act, while

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“ignoring the ultimate deleterious effect such relief would have

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on the Government's taxing ability.” International Lotto Fund v.

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Virginia State Lottery Dep't, 20 F.3d 589, 591 (4th Cir. 1994).

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Accordingly, the court finds that it lacks jurisdiction to
hear plaintiff’s request for declaratory relief.
IV. Conclusion
For the reasons stated herein, the court ORDERS as follows:

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[1] The Motion to Dismiss by Defendant-Intervenor United

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States, ECF No. 44, is GRANTED. The case is DISMISSED.

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[2] The Motion to Dismiss by Plaintiff-Intervenor, ECF

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No. 48, is DENIED as moot.
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[3]

The

clerk

of

court

SHALL

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interpleaded to the court pursuant to ECF No. 43 to

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Defendant-Intervenor

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address:

United

disburse

States

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W. Carl Hankla

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c/o Tax FLU

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U.S. Department of Justice

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555 Fourth St., N.W., Room 6647

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Washington, D.C. 20001

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IT IS SO ORDERED.

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DATED: December 8, 2011.

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at

the

the

funds

following