USA v. Steele et al

Filing 81

MEMORANDUM OPINION & ORDER: 1. Defendant Steele's Motion to Strike [R. 32] is DENIED; 2. Defendant Steele's Motion to Permit CM/ECF Filing [R. 35] is DENIED; 3. Defendant Steele's Motion for Sanctions [R. 46] is DENIED; 4. Plaintiff United States' Motion to Dismiss [R. 53] is GRANTED and Defendant Steele's Counterclaim [R. 44] is DISMISSED WITH PREJUDICE; 5. Defendant Steele's Motion to Strike [R. 55] is DENIED; and 6. Defendant Steele's Motion to Dismiss [R. 78] is DENIED AS MOOT. Signed by Judge Gregory F. VanTatenhove on 3/26/2018.(AKR)cc: COR, paper copy to Mr. Steele via US Mail

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF KENTUCKY
SOUTHERN DIVISION
FRANKFORT

UNITED STATES OF AMERICA,
Plaintiff,
V.
JOHN K. STEELE, et al.,
Defendants.

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Civil No. 3:16-cv-00095-GFVT

MEMORANDUM OPINION
&
ORDER

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The United States of America sued Defendant John Steele on behalf of the Internal
Revenue Service over Mr. Steele’s failure to pay federal income taxes. In the complaint, the
Government seeks a judgment as to Mr. Steele’s indebtedness and a tax lien on a farm in
Bagdad, Kentucky. Mr. Steele has since filed a number of motions in attempt to dismiss this
lawsuit, as has the United States and the Court addresses the most recent of these here. 1 For the
following reasons, Mr. Steele’s motions are DENIED and the motion of the United States is
GRANTED.
II
Mr. John K. Steele, a sovereign citizen, believes that he has no duty to pay federal
income taxes. [R. 12.] Because of this, he also maintains that the Court lacks jurisdiction to hear
this case. Id. As a result of his failure to pay taxes, the United States brought this action seeking
judgment that Mr. Steele is indebted to the Government as well as a tax lien on Mr. Steele’s

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Mr. Steele also repeatedly claims this Court lacks jurisdiction for this matter. [See, e.g., R. 32 at 2.] While the
Court takes notice of Defendant’s continued objection to jurisdiction, this Court has already affirmed its jurisdiction
over the United States’ complaint and over Mr. Steele in this matter. [R. 29 at 1–3.]

property.
A
First, Mr. Steele has filed a Motion to Strike Ex Parte Conference for Joint Report of
Rule 26(f) Report held on March 2, 2017, because he believes the conference violated a court
order. [R. 32.] Mr. Steele claims this Court “ordered that the initial attorneys conference would
be stayed until March 3, 2017,” and thus, by holding the conference on March 2, the parties
violated this order. [R. 32 at 2.]
However, the Rule 26(f) conference was not stayed; this Court granted a stay for the
deadline of the conference, pushing the deadline from February 17, 2017 to March 3, 2017. [R.
26.] Therefore, the March 2, 2017, Rule 26(f) conference was timely: it was not held in violation
of a court order. Mr. Steele received notice of the deadline by receipt of the Court’s Order [R.
26], and while a pro se litigant is afforded more leniency than litigants represented by legal
counsel, such leniency has limits: “Where . . . a pro se litigant fails to comply with easily
understood court-imposed deadlines, there is no basis for treating that party more generously
than a represented litigant.” Pilgram v. Littlefield, 92 F.3d 413, 416 (6th Cir. 1996).
Next, Mr. Steele claims he was not provided notice of the conference. 2 [R. 32 at 2.] In

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Mr. Steele has also moved for this Court to permit him to file electronically, using the Eastern District of Kentucky
CM/ECF system. [R. 35.] Mr. Steele claims he is at an “extreme disadvantage” by using the mail service, citing the
cost of paper and mail, his lack of a driver’s license or method of transportation, and his responsibility of caring for
his ailing mother. Id. at 1. In the Eastern District of Kentucky, electronic filing must be completed in accordance
with Joint General Order 05-03. LR 5.4. General Order 05-03 states, “A party proceeding pro se shall not file
electronically, unless otherwise permitted by the court. Pro se filers shall file paper originals of all documents.”
While exceptions may be granted, this Court sees no reason to grant permission here. To utilize the CM/ECF
system for the Eastern District of Kentucky, attorneys must certify they have read and are familiar with the rules of
practice of the court and the administrative policies and procedures of electronic filing. Joint General Order 16-03.
They must also participate in training classes prior to becoming a filing user, and they must have a PACER account.
Id. Mr. Steele has not met any of these requirements, nor has he shown a willingness to learn the rules of practice of
this Court or the procedures for filing via the CM/ECF system. Furthermore, while Mr. Steele’s difficulties are
unfortunate, such hardships are not uncommon among other litigants, both those proceeding pro se and those
represented by legal counsel. The Court empathizes with Mr. Steele’s situation, but such does not rise to the level
this Court believes would warrant pro se access to the Eastern District of Kentucky CM/ECF system. Accordingly,
Mr. Steele’s Motion for Order to Permit Electronic Filing [R. 35] is DENIED.

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the Joint Rule 26(f) Report, the other parties indicated they had attempted to contact Mr. Steele,
but were unable to do so because he had not provided a working e-mail address or telephone
number. [R. 30 at 1.] The Eastern District of Kentucky requires all pleadings to include the
“name, address, and telephone number of the filing party’s attorney(s) of record or, if the party is
not represented by counsel, of the filing party.” LR 5.1(a). In addition to these requirements, all
pro se litigants must include a current telephone number, residential address, and mailing address
in their first filing. LR 5.2(d). Failure to provide the required information can result in dismissal
(when the pro se litigant is the plaintiff) or sanctions. Id. Mr. Steele provided his mailing
address in his first filing to this Court, however, he did not provide a phone number or e-mail
address. [R. 12.] Nor did he offer an explanation for such deficiencies. Prior to this meeting,
the United States already requested a fourteen-day extension of the deadline, in part, because
they were still attempting to reach Mr. Steele to schedule the conference. [R. 24.] The Order
granting that extension was mailed to Mr. Steele, demonstrating to him that the other parties had
attempted to contact him. Because the United States did provide its e-mail address, telephone
number, and address [R. 24 at 2], Mr. Steele could have then responded to the Government’s
motion to this Court or contacted the Government to schedule the conference. Fed. R. Civ. Pro.
26 requires parties to confer “as soon as practicable” to plan for discovery. While Mr. Steele
may not have had actual notice of the date of the conference, as opposing counsel had been
unable to reach him, he had adequate constructive notice of the pending requirement to convene
and should have known that other parties would attempt to schedule the required meeting. Mr.
Steele’s absence at the meeting is a product of his own failure to provide adequate contact
information and failure to proceed in this action according to the Federal Rules of Civil
Procedure and the Local Rules of the Eastern District of Kentucky, not because of any malice or

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negligence of another party. Accordingly, Defendant’s Motion to Strike the Rule 26(f) Report
[R. 32] is DENIED.
B
In his next motion, Mr. Steele filed a Mandatory Judicial Notice and Motion for
Sanctions, requesting this Court to sanction the United States’ Attorney, Mr. Kyle Bishop, for his
“disregard for due process.” [R. 46.] On May 1, 2017, the United States filed a motion
electronically for Partial Summary Judgment against Mr. Steele. [R. 41.] This motion was
served on Mr. Steele via United States Postal Service, but was returned to Mr. Bishop
undelivered. [R. 46 at 1.] Mr. Bishop immediately contacted Mr. Steele on June 7, 2017, when
he received the returned motion. Id. Mr. Steele received an e-mailed copy of the motion on June
7, 2017, the same day as Mr. Bishop’s phone call. Id. Though Mr. Steele did not receive the
motion until five weeks after it was filed, this Court has not yet entered a scheduling order for
this matter to set deadlines for dispositive motions, nor has this Court ruled on the Government’s
Motion for Partial Summary Judgment. Though the five week delay did not permit Mr. Steele to
answer within twenty-one (21) days, as required by Local Rule 7.1, the Court will afford Mr.
Steele more leniency as a pro se litigant. 3 Mr. Steele’s Response was filed on June 19, 2017,
within twenty-one days of receiving the United States’ motion via email, thus, this Court will
permit an extension of the deadline in this case to consider Mr. Steele’s Response [R. 47] timely.
Therefore, any delay in Mr. Steele receiving the Motion has not caused any undue hardship or
prejudice for him.
The Court finds no basis to sanction Mr. Bishop. The record does not reflect any
dishonesty or malicious behavior on behalf of Mr. Bishop. Accordingly, Mr. Steele’s Motion for

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Courts generally apply a less stringent standard to pleadings made by pro se litigants. See Pilgram v. Littlefield, 92
F.3d 413, 416 (6th Cir. 1996); Jourdan v. Jabe, 951 F.2d 108, 110 (6th Cir. 1991).

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Sanctions against Mr. Bishop [R. 46] is DENIED.
C
Additionally, Mr. Steele has filed a counterclaim against the United States, citing a
failure to adequately “establish and disclose clear explanations of the [tax] laws” as a defense to
this lawsuit. [R. 44.] The United States filed their complaint against Mr. Steele on December 2,
2016, and Mr. Steele was personally served on December 10, 2016, at his residence in
Cincinnati, Ohio. [R. 1; R. 4.] Rather than file an Answer within 21 days, as required by Fed. R.
Civ. Pro. 12(a)(1)(A), Mr. Steele sent the United States a letter on December 27, 2017, stating
his response would be filed within the next thirty (30) days. [R. 6.] On January 30, 2017, Mr.
Steele filed his Answer, without stating any counterclaims or cross-claims. On May 30, 2017,
Mr. Steele filed a counterclaim against the United States, claiming a failure to adequately
“establish and disclose clear explanations of the [tax] laws.” [R. 44.] The United States moved
to dismiss this Counterclaim on July 6, 2017. [R. 53]. Mr. Steele filed an Opposition to R. 53
Motion to Dismiss Counterclaim [R. 54], which the Court construes as a Response to the United
States’ Motion to Dismiss. Mr. Steele then filed a Motion to Strike the United States’ Motion
[R. 55], claiming the motion violated Local Rule 7.1(c). This Court addresses each of these
filings.
1
First, Mr. Steele’s claim against the United States is a compulsory counterclaim, as
defined by Fed. R. Civ. Pro. 13(a), because it is against the United States, an opposing party, and
arises from the same transaction or occurrence that is the subject matter of the United States’
complaint. Compulsory counterclaims must be stated in the pleadings. Therefore, Mr. Steele
cannot assert a counterclaim via a motion. Fed. R. Civ. Pro. 13(a)(1).

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As a pro se litigant, the Court can construe this motion as a Motion to Dismiss the
Government’s complaint for failure to state a claim. 4 Mr. Steele is claiming the United States
cannot sue him for unpaid taxes when these unpaid taxes were not adequately explained or
established, or that the United States has failed to file a claim upon which relief may be granted
pursuant to Rule 12(b)(6). [R. 44.] A motion to dismiss pursuant to Rule 12(b)(6) tests the
sufficiency of the Plaintiff’s complaint. In reviewing a Rule 12(b)(6) motion, the Court
“construe[s] the complaint in the light most favorable to the plaintiff, accept[s] its allegations as
true, and draw[s] all inferences in favor of the plaintiff.” DirecTV, Inc. v. Treesh, 487 F.3d 471,
476 (6th Cir. 2007) (citation omitted). The Court, however, “need not accept as true legal
conclusions or unwarranted factual inferences.” Id. (quoting Gregory v. Shelby County, 220 F.3d
433, 446 (6th Cir. 2000)). The Supreme Court explained that in order “[t]o 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, 129 S. Ct. 1937, 1949 (2009) (quoting Bell
Atlantic Corp. v. Twombly, 550 U.S. 544, 570 (2007)). See also Courier v. Alcoa Wheel &
Forged Products, 577 F.3d 625, 629 (6th Cir. 2009).
Mr. Steele claims that the United States cannot collect income tax from him because the
Government has not provided a clear basis of the tax laws. [R. 44 at 3.] Article One, Section
Eight of the United States Constitution grants the United States Congress the power to lay and
collect taxes. The Sixteenth Amendment to the Constitution grants Congress the power to lay
and collect taxes on income, from whatever source derived. Title 26 U.S.C. § 1 mandates a tax
on all income and outlines the tax rates for income of different individuals. Indeed, the United
States has provided ample notice and explanation for taxes on Mr. Steele’s income.

4

Courts generally apply a less stringent standard to pleadings made by pro se litigants. See Pilgram v. Littlefield, 92
F.3d 413, 416 (6th Cir. 1996); Jourdan v. Jabe, 951 F.2d 108, 110 (6th Cir. 1991).

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Furthermore, 26 U.S.C. § 7421 prohibits any suit brought for the purpose of restraining
the assessment or collection of tax. This Court has no jurisdiction when a litigant brings a suit in
violation of § 7421. See Daulton v. United States, 76 Fed. App’x 652, 654 (6th Cir. 2003). Mr.
Steele advances several theories he believes bars the United States from collecting his federal
income tax, but each theory is proposed in an effort to convince this Court to enjoin the
collection of his tax. Thus, the Court has no jurisdiction to hear this motion, whether the Court
construes it as a Counterclaim or as a Motion to Dismiss. Mr. Steele’s Counterclaim [R. 44] is
DENIED and the Government’s Motion to Dismiss the Counterclaim [R. 53] is GRANTED.
2
Next, Mr. Steele filed a Mandatory Judicial Notice and Motion to Strike the Motion to
Dismiss by the United States, claiming the Motion at R. 53 violated Local Rule 7.1(c). [R. 55.]
Civil LR 7.1(c) requires a party opposing a motion to file a response within twenty-one days of
service of the motion, then the party who filed the original motion has fourteen days from service
of the response to file a reply. However, a Motion to Dismiss is not a “response” or a “reply” as
discussed in LR 7.1(c). The United States asserted a defense Fed. R. Civ. Pro. 12(b)(6), which
can be stated in a pleading, motion, or at trial. Defenses under Fed. R. Civ. Pro. 12(b)(6) are not
“responses” or “replies” subject to the 21 day requirement of Local Rule 7.1(c). Therefore, Mr.
Steele’s Motion to Strike [R. 55] is DENIED.
D
Finally, Mr. Steele has filed another Motion to Dismiss for lack of jurisdiction. [R. 78.]
This Court has repeatedly affirmed jurisdiction over this matter and Mr. Steele. [R. 29; 76.] Mr.
Steele, however, refuses to acknowledge this determination and continues to file motions
asserting that this Court has neither subject-matter jurisdiction nor personal jurisdiction to hear

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this matter. He is incorrect. Because this Court has already addressed his concerns [R. 29], Mr.
Steele’s Motion is denied as moot.
III
After reviewing Mr. Steele’s various attempts to dismiss this lawsuit, the Court finds no
basis for his claims. Accordingly, and the Court being sufficiently advised, it is hereby
ORDERED as follows:
1.

Defendant Steele’s Motion to Strike [R. 32] is DENIED;

2.

Defendant Steele’s Motion to Permit CM/ECF Filing [R. 35] is DENIED;

3.

Defendant Steele’s Motion for Sanctions [R. 46] is DENIED;

4.

Plaintiff United States’ Motion to Dismiss [R. 53] is GRANTED and Defendant

Steele’s Counterclaim [R. 44] is DISMISSED WITH PREJUDICE;
5.

Defendant Steele’s Motion to Strike [R. 55] is DENIED; and

6.

Defendant Steele’s Motion to Dismiss [R. 78] is DENIED AS MOOT.

This the 26th day of March, 2018.

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