Eddy Leal, P.A. v. Bimini Development of Village West Corporation et al
Order on Defendants Motion to Dismiss denying 23 Motion to Dismiss for Failure to State a Claim. Signed by Judge Robert N. Scola, Jr on 8/21/2017. (lan)
United States District Court
Southern District of Florida
Eddy Leal, P.A., Plaintiff,
Bimini Development of Village West
Corporation and Jarrette Bay
) Civil Action No. 17–21207-Civ-Scola
Order on Defendants’ Motion to Dismiss
The Plaintiff, Eddy Leal, P.A., brings this lawsuit against the Defendants
Bimini Development of Village West Corporation and Jarrette Bay Investment
Corporation, alleging that the Defendants knowingly filed false Internal
Revenue Service Form 1099s, thereby falsely reporting income on behalf of the
Plaintiff. This matter is before the Court on the Defendants’ motion to dismiss
the amended complaint. For the reasons set forth in this Order, the Court
denies the motion to dismiss (ECF No. 23).
The Defendants and non-party Orlando Benitez, Jr. (“Benitez”) have been
in active litigation for more than seven years. (Am. Compl. ¶ 6, ECF No. 12.)
The Plaintiff represented Benitez for approximately two years. (Id. ¶ 7.) As part
of that litigation, the Defendants entered into agreed orders in state court
proceedings in which funds would be placed in the Plaintiff’s trust account
pending further order from the state court. (Id. ¶¶ 8–13.) Pursuant to those
agreed orders, the Defendants wrote monthly checks, made payable to “Eddy
Leal, P.A. Trust Account” to be deposited and held in escrow in the Plaintiff’s
trust account. (Id. ¶¶ 17, 30.)
Despite the fact that the agreed orders required that the funds be placed
in the Plaintiff’s trust account and thereby held in escrow, both of the
Defendants issued a Form 1099-Misc to the Plaintiff for the 2015 taxable year.
(Id. ¶ 18, 31.) Defendant Bimini Development of Village West Corporation
issued a Form 1099-Misc to the Plaintiff for $8,000 for the 2015 taxable year.
(Id. ¶ 31.) Defendant Jarrette Bay Investment Corporation issued a Form 1099Misc to the Plaintiff for $19,400.20 for the 2015 taxable year. (Id. ¶ 18.) The
Plaintiff contacted the Defendants to correct these improperly issued Form
1099s but the Defendants never responded to the Plaintiff’s attempts to resolve
the issue. (Id. ¶¶ 20–22, 33–35.) Both of the Defendants filed the Form 1099s
with the Internal Revenue Service (“IRS”). (Id. ¶¶ 19, 32.) The Plaintiff alleges
that the Defendants “filed the fraudulent [Form 1099s] with the IRS with the
purpose of either defrauding the IRS or harassing [the] Plaintiff.” (Id. ¶¶ 19,
The amended complaint asserts causes of action for fraudulent filing of
information returns pursuant to 26 U.S.C. § 7434. The Defendants have moved
to dismiss the amended complaint for failure to state a claim upon which relief
can be granted. The Defendants claim that the Plaintiff has failed to meet the
heightened pleading standard of Federal Rule of Civil Procedure 9(b) because
the Plaintiff did not attach to its amended complaint proof that the Form 1099s
were filed with the IRS.
2. Legal Standard
Federal Rule of Civil Procedure 8(a) requires “a short and plain statement
of the claims” that “will give the defendant fair notice of what the plaintiff's
claim is and the ground upon which it rests.” Fed. R. Civ. P. 8(a). The Supreme
Court has held that “[w]hile a complaint attacked by a Rule 12(b)(6) motion to
dismiss does not need detailed factual allegations, a plaintiff’s obligation to
provide the ‘grounds’ of his ‘entitlement to relief’ requires more than labels and
conclusions, and a formulaic recitation of the elements of a cause of action will
not do. Factual allegations must be enough to raise a right to relief above the
speculative level.” Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007)
(internal citations omitted).
“To survive a motion to dismiss, a complaint must contain sufficient
factual matter, accepted as true, to state a claim to relief that is plausible on its
face.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quotations and citations
omitted). “A claim has facial plausibility when the plaintiff pleads factual
content that allows the court to draw the reasonable inference that the
defendant is liable for the misconduct alleged.” Id. Thus, “only a complaint that
states a plausible claim for relief survives a motion to dismiss.” Id. at 679.
When considering a motion to dismiss, the Court must accept all of the
plaintiff’s allegations as true in determining whether a plaintiff has stated a
claim for which relief could be granted. Hishon v. King & Spalding, 467 U.S. 69,
Under Federal Rule of Civil Procedure 9(b), “a party must state with
particularity the circumstances constituting fraud or mistake,” although
“conditions of a person’s mind,” such as malice, intent, and knowledge, may be
alleged generally. Fed. R. Civ. P. 9(b). “The ‘particularity’ requirement serves an
important purpose in fraud actions by alerting defendants to the precise
misconduct with which they are charged and protecting defendants against
spurious charges of immoral and fraudulent behavior.” W. Coast Roofing &
Waterproofing, Inc. v. Johns Manville, Inc., 287 F. App’x 81, 86 (11th Cir. 2008)
(citations omitted). To meet this standard, a complaint asserting a violation of
26 U.S.C. § 7434 states a claim by alleging the “who,” “what,” “when,” “why,”
and “how,” of the defendants’ allegedly unlawful acts. Diaz v. In Season
Distribs., LLC, No. 1:16-cv-21877, 2016 WL 4401141, at *2 (S.D. Fla. Aug. 17,
2016) (Ungaro, J.).
The amended complaint alleges that the Defendants willfully filed a
fraudulent information return with the IRS, in violation of 26 U.S.C. § 7434. As
a result, the Plaintiff alleges that the Defendants are liable to the Plaintiff in an
amount equal to the greater of $5,000.00 or the sum of actual damages to the
Plaintiff, costs, and reasonable attorneys’ fees. The Defendants allege that the
amended complaint only “casually refer[s] to a supposed ‘account transcript’
from the IRS that is neither affixed to the Amended Complaint nor are the
contents described with any requisite Rule 9(b) particularity” and therefore the
Plaintiff’s claim must be dismissed. (Mot. 3, ECF No. 23.)
26 U.S.C. § 7434 provides, “[i]f any person willfully files a fraudulent
information return with respect to payments purported to be made to any other
person, such other person may bring a civil action for damages against the
person so filing such return.” To establish a claim of tax fraud under 26 U.S.C.
§ 7434, the Plaintiff must prove: (1) the Defendants issued an information
return; (2) the information return was fraudulent; and (3) the Defendants
willfully issued a fraudulent information return. Leon v. Tapas & Tintos, Inc., 51
F. Supp. 3d 1290, 1297–98 (S.D. Fla. 2014) (Moreno, J.).
The Plaintiff alleges that (1) the Defendants “filed the fraudulent
information return with the IRS,” (2) “with the purpose of either defrauding the
IRS or harassing Plaintiff,” and (3) despite “direct knowledge that the funds
were not income to Plaintiff.” (Am. Compl. ¶¶ 18–19, 31–32, ECF No. 12.) The
Plaintiff attaches copies of the false Form 1099s to the amended complaint. (Id.
Ex. 5, Ex. 7.) The Plaintiff also alleges that account transcripts confirm that the
Defendants filed the Form 1099s with the IRS. (Id. ¶¶ 19, 32.) The Defendants
dispute these allegations, claiming that they are insufficient because the
Plaintiff did not attach copies of the account transcripts that confirm that the
Defendants filed the Form 1099s with the IRS. (Mot. 3–4, n.1, ECF No. 23.)
In response, the Plaintiff attaches the account transcripts referenced in
the amended complaint. (Resp., Composite Ex. 1, ECF No. 24-1.) The Eleventh
Circuit has held that a “a document need not be physically attached to a
pleading to be incorporated by reference into it; if the document’s contents are
alleged in a complaint and no party questions those contents, [the Court] may
consider such a document.” Day v. Taylor, 400 F.3d 1272, 1276 (11th Cir.
2005) (citing Horsley v. Feldt, 304 F.3d 1125, 1134 (11th Cir. 2002)). Thus, the
Defendants’ argument that the Plaintiff’s allegations are insufficient is
foreclosed by the evidence submitted with the Plaintiff’s response.
Therefore, the amended complaint plausibly alleges a violation of 26
U.S.C. § 7434. At this stage of the proceedings, the Plaintiff states a claim for
relief because the amended complaint presents allegations that “raise a right to
relief above the speculative level.” See Twombly, 550 U.S. at 545; see also Diaz,
2016 WL 4401141, at *2 (denying motion to dismiss where “Plaintiffs have
plausibly alleged a cause of action under § 7434”).
Accordingly, the Court denies the Defendants’ motion to dismiss (ECF
No. 23). Pursuant to Federal Rule of Civil Procedure 12(a)(4)(A), the Defendants
shall file an answer to the amended complaint on or before September 4,
Done and ordered in chambers, at Miami, Florida, on August 21, 2017.
Robert N. Scola, Jr.
United States District Judge
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