Norvell v. Secretary of the Treasury et al

Filing 11

MEMORANDUM DECISION AND ORDER. NOW THEREFORE IT IS HEREBY ORDERED, that the motion to dismiss (docket no. 5 ) is GRANTED. Signed by Judge B. Lynn Winmill. (caused to be mailed to non Registered Participants at the addresses listed on the Notice of Electronic Filing (NEF) by (km)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF IDAHO
BRUCE NORVELL,
Case No. 1:18-cv-251-BLW
Plaintiff,
MEMORANDUM DECISION
AND ORDER

v.
SECRETARY OF THE TREASURY;
INTERNAL REVENUE SERVICE,
Defendants.

INTRODUCTION
Before the Court is Defendants’ Motion to Dismiss for lack of subject matter
jurisdiction based on Federal Rule of Civil Procedure 12(b)(1). The motion is fully
briefed and at issue. For the reasons set forth below, the Court will grant the motion.
BACKGROUND
Defendants move for dismissal on the grounds that plaintiff Bruce Norvell’s
complaint fails to establish the subject matter jurisdiction of this Court. Fed R. Civ. P
12(b)(1). Mr. Norvell filed his Complaint on June 6, 2018, alleging the IRS did not
consider his February 2018 Form 211 “Application for Award for Original Information”
as required by the IRS whistleblower award statute, 26 U.S.C. § 7623(b). Plaintiff alleges
the IRS’s failure to act on his Form 211 pursuant to § 7623(b) violates the requirements
of the Administrative Procedures Act (APA), 5 U.S.C. §§ 701 et seq.
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Section 7623 created the Whistleblower Office within the IRS to administer the
payment of awards to whistleblowers. 26 U.S.C. § 7623. Under this Section the IRS may
proceed with administrative or judicial action based on information brought to light by a
whistleblower’s Form 211 application. 26 U.S.C. § 7623(b)(1). If the IRS proceeds with
the enforcement action, it may award a claimant at least 15 percent, but not more than 30
percent, of the collected proceeds or from settlement with the taxpayer. Id. Upon
receiving a Form 211, the Whistleblower Office makes a final decision regarding a claim
under § 7623(b) and must either communicate denial of the claim, including the basis for
the denial, or follow the procedures for granting an award. See id; Treas. Reg. §
301.7623-3(c)(1)-(6). The claimant may appeal the Whistleblower Office’s final
administrative decision to the United States Tax Court within thirty days. See 26 U.S.C. §
7623(b)(4). A claimant can appeal any Tax Court decision to the applicable United States
Circuit Court of Appeals. See 26 U.S.C. § 7482(a).
Mr. Norvell filed separate IRS Form 211s in 2017 and 2018, asserting that the San
Francisco Company Airbnb, Inc. had failed to accurately report its taxes between 2009
and 2017. Dkt. 1, at 7. First, on April 10, 2017, Mr. Norvell filed a Form 211 claiming
Airbnb had failed to report non-employee compensation as required on Form 1099-MISC
for the years 2009-2016. Dkt. 1-4, at 1-2. The IRS Whistleblower Office rejected Mr.
Norvell’s 2017 Form 211 claim on August 16, 2017. Dkt. 1-6, at 1. Mr. Norvell then filed
a second Form 211 on February 2, 2018, alleging the same pattern of historical conduct.
Dkt. 1, at 7; Dkt. 1-5, at 1-2. The February 2018 Form 211 also added allegations related
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to Airbnb’s 2017 tax filings and its failure to report 2015 and 2016 payments to hosts on
either Form 1099-MISC or 1099-K. Id. The IRS Whistleblower Office rejected Mr.
Norvell’s February 2018 Form 211 on March 13, 2018. Dkt. 1, at 7-8; Dkt. 1-6. The
Whistleblower Office’s 2018 denial noted that “[the 2017 claim] was previously
rejected,” and attached a copy of the 2017 denial to its notice. Dkt. 1-6.
Plaintiff alleges that he was injured by the IRS “refusing to consider my 2/2/2018
claim.” Dkt. 1, at 8. Specifically, Plaintiff asserts the IRS failed to consider the February
2018 Form 211 at all, and instead treated it as a request for reconsideration of his 2017
Form 211. Id. The Parties agree that IRS regulations require the Whistleblower Office to
respond to each Form 211 in the event of a denial. See Dkt. 1, at 8-9; Dkt. 5, at 5; see also
26 U.S.C. § 7623(b). Mr. Norvell asserts the alleged “refusal to consider” his 2018 Form
211 amounts to either “unlawfully withheld or unreasonably delayed” agency action, or,
in the alternative, an “arbitrary, capricious, [] abuse of discretion, not in accordance with
law, or without observation of procedures as required by law” in violation of the APA, 5
U.S.C. §§ 706(1), (2)(A-D). Dkt. 1, at 9-10. At issue in the instant motion to dismiss is
whether this Court has jurisdiction to hear Plaintiff’s APA challenge to the IRS
Whistleblower Office’s alleged inaction under 26 U.S.C. § 7623(b).
LEGAL STANDARD
A defendant may move to dismiss a complaint for lack of subject matter
jurisdiction under Rule 12(b)(1) in one of two ways. See Leite v. Crane Co., 749 F.3d
1117, 1121 (9th Cir. 2014). The first is known as a “facial” attack, and it accepts the truth
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of the plaintiff's allegations but asserts that they are insufficient on their face to invoke
federal jurisdiction. Id. The second method is known as a “factual” attack, and it does not
assume the truth of plaintiff's allegations but instead challenges them by introducing
extrinsic evidence, requiring the plaintiff to support his jurisdictional allegations with
“competent proof.” Id. Here, Defendants bring a “facial” attack against Plaintiff’s
Complaint for lack of subject matter jurisdiction. See Dkt. 5. As such, the Court must
consider the factual allegations of the complaint to be true and determine whether they
establish subject matter jurisdiction. Leite, 749 F.3d at 1121. In the case of a facial attack,
the motion to dismiss is granted only if the nonmoving party fails to allege an element
necessary for subject matter jurisdiction. Id.
When bringing a claim against a federal government agency, a Plaintiff must show
the government has waived sovereign immunity with respect to that agency’s action or
inaction to establish subject matter jurisdiction. See Lane v. Pena, 518 U.S. 187, 192,
(1996). The United States is “immune from suit in state or federal court except to the
extent that Congress has expressly waived such sovereign immunity.” Tritz v. U.S. Postal
Serv., 721 F.3d 1133, 1136 (9th Cir. 2013). Any waiver of sovereign immunity “will be
strictly construed, in terms of scope, in favor of the sovereign.” Lane, 518 at 192. The
waiver must be “clearly discernable from the statutory text in light of traditional
interpretive tools. If it is not, then we take the interpretation most favorable to the
Government.” F.A.A. v. Cooper, 566 U.S. 284, 291 (2012). “A court lacks subject matter
jurisdiction over a claim against the United States if it has not consented to be sued on
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that claim,” and when the United States has consented to suit, “the terms of its waiver of
sovereign immunity define the extent of the court's jurisdiction.” Balser v. Dep't of
Justice, Office of U.S. Tr., 327 F.3d 903, 907 (9th Cir. 2003) (internal citation and
quotation marks omitted). The burden of demonstrating a waiver of sovereign immunity
lies with the plaintiffs. Holloman v. Watt, 708 F.2d 1399, 1401 (9th Cir. 1983).
ANALYSIS
Plaintiff alleges this Court has jurisdiction under 28 U.S.C. § 1331, 28 U.S.C. §
1346(a)(2) and 5 U.S.C. §§ 701 et seq. Dkt. 1, at 2. As the Ninth Circuit has held, § 1331
“cannot by itself be construed as constituting a waiver of the government's defense of
sovereign immunity,” and therefore does not independently grant the Court jurisdiction to
hear Plaintiff’s claim against the federal government. Dunn & Black, P.S. v. United
States, 492 F.3d 1084, 1088 n.3 (9th Cir. 2007); Black Dog Outfitters, Inc. v. Idaho, No.
4:09-CV-00663-EJL, 2010 WL 11469219, at *3 (D. Idaho 2010). Likewise, since
Plaintiff seeks “declaratory and injunctive relief” (Dkt. 1, at 9-10), and not monetary
damages, his citation of 28 U.S.C. § 1346(a)(2) is misguided. United States v. Park Place
Assocs., Ltd., 563 F.3d 907, 927 (9th Cir. 2009) (noting “[§ 1346(a)(2)]’s “jurisdictional
grant is limited to claims for money damages not exceeding $10,000 in amount.”). The
Court therefore must find the United States has waived sovereign immunity under the
APA, 5 U.S.C. § 701 et seq, to exercise subject matter jurisdiction over Plaintiff’s claim
regarding IRS inaction under 26 U.S.C. § 7623(b).
The Court will grant Defendant’s Motion to Dismiss for Lack of Jurisdiction
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because Plaintiff has not established that the APA’s sovereign immunity waiver applies
in this case. The Court lacks jurisdiction under the APA because there is another
appropriate review proceeding under federal law. See 5 U.S.C. § 704. Although Plaintiff
correctly notes that the APA waives sovereign immunity, granting “a broad spectrum of
judicial review of agency action,” his complaint does not show how the APA’s waiver of
sovereign immunity applies to his claims. See Dkt. 8, at 13 (citing Bowen v.
Massachusetts, 487 U.S. 879, 903 (1988)). Because § 7623 provides another review
proceeding and the APA excepts those claims from federal court jurisdiction, the Court
has no jurisdiction to hear this case.
1. The Court Lacks Subject Matter Jurisdiction Because Another Review
Proceeding is Appropriate
To challenge federal agency action or inaction under the APA, a Plaintiff must
show a lack of another adequate judicial remedy. Actions reviewable under the APA
must either be made reviewable by statute or be “final agency action for which there is no
other adequate remedy in a court.” 5 U.S.C. § 704 (emphasis added). The statute at issue
in this case, 26 U.S.C. § 7623 does not contain language about APA review. Instead,
§ 7623 provides that: “[a]ny determination regarding an award under paragraph (1), (2),
or (3) may, within 30 days of such determination, be appealed to the Tax Court (and the
Tax Court shall have jurisdiction with respect to such matter).” 26 U.S.C. § 7623(b)(4).
Plaintiff’s claim concerning the IRS’s failure to consider his Form 211, therefore, fails to
qualify as a “reviewable action” under § 704 of the APA. Section 7623 provides a review

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mechanism in a court of competent jurisdiction, and Plaintiff should turn there. Because
the challenged agency action does not fall under the APA, Plaintiff has failed to show the
United States has waived its sovereign immunity over this type of claim. Therefore, the
Court has no jurisdiction to hear his claims.
As the Supreme Court has noted, “Congress did not intend the general grant of
review in the APA to duplicate existing procedures for review of agency action.” Bowen,
487 U.S. at 903. Furthermore, the Ninth Circuit has instructed that dismissal under Rule
12(b)(1) is appropriate if the underlying statute giving rise to the APA challenge provides
for another adequate judicial remedy. See, e.g., City of Oakland v. Lynch, 798 F.3d 1159,
1162 (9th Cir. 2015) (upholding dismissal under 12(b)(1)); see also S. California All. of
Publicly Owned Treatment Works v. United States Envt’l. Prot. Agency, 297 F. Supp. 3d
1060, 1071 (E.D. Cal. 2018) (finding lack of jurisdiction over an APA challenge because
there was another adequate judicial remedy provided by the statute); Chun v. Dep't of
Treasury Internal Revenue Serv., 2013 WL 12323966, at *3 (C.D. Cal. June 4, 2013)
(same). Outside the Ninth Circuit, other federal courts have consistently dismissed
attempts to challenge IRS inaction under § 7623 for lack of jurisdiction. See, e.g.,
Medinger v. Comm'r of Internal Revenue, 662 F. App'x 774, 776 (11th Cir. 2016);
Amsinger v. United States, 99 Fed.Cl. 254, 258 (Fed. Cl. 2011); Dacosta v. United States,
82 Fed. Cl. 549, 555 (2008). Plaintiff has not identified for the Court any federal district
court that has entertained a challenge to IRS inaction under § 7623. The Court finds it has
no jurisdiction to hear Plaintiff’s claims, and grants Defendants’ Motion to Dismiss.
Memorandum Decision and Order - 7

ORDER
In accordance with the Memorandum Decision set forth above,
NOW THEREFORE IT IS HEREBY ORDERED, that the motion to dismiss
(docket no. 5) is GRANTED.

DATED: January 3, 2019
_________________________
B. Lynn Winmill
U.S. District Court Judge

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