Ednacot v. Mesa Medical Group, PLLC

Filing 24

MEMORANDUM OPINION & ORDER: 1) Dft's 21 MOTION to Amend its Motion to Dismiss is GRANTED. 2) Clerk shall FILE Dft's tendered [21-1] Memo in Support of its Motion to Amend in the record. 3) Pla's 13 MOTION to Remand is DENIED. 4) Df t's 5 Motion to Dismiss is GRANTED IN PART in that Pla's claims of breach of contract, conversion, violation of KRS 337.385, fraud and fraud in the inducement, and negligence are dismissed in so far as they seek damages for an alleged exc essive withholding of FICA taxes and an illegal withholding of FUTA taxes, and DENIED IN PART, in that Pla's claims of breach of contract, conversion, violation of KRS 337.385, fraud and fraud in the inducement, and negligence are not dismissed in so far as they seek damages for an alleged excessive withholding of state unemployment taxes and for expenses wrongfully withheld from Pla's paychecks. 5) Pla's claims as listed are REMANDED to the Boyle Circuit Court. Signed by Judge Joseph M. Hood on 06/04/2014. (KLB) cc: COR

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF KENTUCKY
CENTRAL DIVISION at LEXINGTON

KATISHA EDNACOT,
Plaintiff,
v.
MESA MEDICAL GROUP, PLLC,
Defendant.

)
)
)
)
)
)
)
)
)
)
)

Civil Action No.
5:14-cv-96-JMH
MEMORANDUM OPINION
AND ORDER

***
This matter is before the Court upon Defendant’s Motion to
Dismiss [D.E. 5] and Plaintiff’s Motion to Remand. [D.E. 13].
The motions being fully briefed,1 and the Court being otherwise
sufficiently advised, these motions are ripe for review.
I. Procedural Background
Plaintiff Katisha Ednacot filed this suit in Boyle County
Circuit

Court

on

February

18,

2014.

[D.E.

1-1].

Ednacot’s

complaint alleged breach of contract, conversion, violation of
KRS 337.385, and fraud and fraud in the inducement. [D.E. 1-1 at
3-4]. Plaintiff also seeks punitive damages. [D.E. 1-1 at 6].
Defendant filed a notice of removal on March 12, 2014. [D.E. 1].
Once removed, Defendant moved to reassign the case to the
undersigned, alleging that this matter is related to Berera v.
1

Defendant filed a Motion to Amend/Correct its Motion to
Dismiss. [D.E. 21]. That Motion, which is unopposed, will be
granted. The Court has considered those arguments herein.

Mesa

Medical

Group,

PLLC,

No.

5:13-cv-294-JMH

(E.D.

Ky.).

Defendant’s motion was granted on March 17, 2014. [D.E. 4].
Subsequently, Defendant filed its Motion to Dismiss [D.E. 5] and
Plaintiff filed her Motion to Remand. [D.E. 13].
Plaintiff

brings

her

claims

based

upon

allegations

that

Defendant incorrectly withheld improper amounts from Plaintiff’s
paychecks, in essence, Defendant’s share of state and federal
taxes, and expenses for benefits that Plaintiff did not incur.
Specifically,

Plaintiff

alleges

that

Federal

Insurance

Contributions Act (FICA) taxes, the Federal Unemployment Tax Act
(FUTA)

tax,

the

State

Unemployment

Insurance

(SUI)

tax,

and

expenses for a cell phone and travel were improperly deducted
from Plaintiff’s paychecks. Thus, according to Plaintiff, her
paycheck did not reflect the proper amount of wages owed.
II. Standard of Review
A. Plaintiff’s Motion to Remand
“[A]ny civil action brought in a State court of which the
district courts of the United States have original jurisdiction,
may

be

district

removed

by

the

defendant

court

of

the

United

or

States

the
for

defendants,
the

to

the

district

and

division embracing the place where such action is pending.”
U.S.C. § 1441.

28

“The notice of removal of a civil action or

proceeding shall be filed within 30 days after the receipt by
the defendant, through service or otherwise, of a copy of the
2

initial pleading.”

Id. § 1446(b)(1). “[I]f the case stated by

the initial pleading is not removable, a notice of removal may
be filed within 30 days after receipt by the defendant, through
service or otherwise, of a copy of an amended pleading, motion,
order or other paper from which it may first be ascertained that
the case is one which is or has become removable.”

Id.

§

1446(b)(3).
Only state-court actions that originally could
have been filed in federal court may be removed to
federal court by the defendant. . . . The presence or
absence of federal-question jurisdiction is governed
by the ‘well-pleaded complaint rule,’ which provides
that federal jurisdiction exists only when a federal
question is presented on the face of the plaintiff’s
properly pleaded complaint.
Caterpillar, Inc. v. Williams, 482 U.S. 386, 392 (1987) (citing
Gully v. First Nat’l Bank, 299 U.S. 109, 112-13 (1936)).

“[A]

case may not be removed to federal court on the basis of a
federal defense, including the defense of pre-emption.”
393

(alteration

in

original).

However,

“[o]n

Id. at

occasion,

the

Court has concluded that the pre-emptive force of a statute is
so ‘extraordinary’ that it ‘converts an ordinary state commonlaw complaint into one stating a federal claim for purposes of
the well-pleaded complaint rule.’”

Id. (quoting Metro. Life

Ins. Co. v. Taylor, 481 U.S. 58, 65 (1987)).

“Once an area of

state law has been completely pre-empted, any claim purportedly
based on that pre-empted state law claim is considered, from its

3

inception, a federal claim, and therefore arises under federal
law.”

Id. (citing Franchise Tax Bd. of Cal. v. Constr. Laborers

Vacation Trust for S. Cal., 463 U.S. 1, 24 (1983)).
“The party seeking removal bears the burden of establishing
its right thereto.”

Her Majesty the Queen in Right of the

Province of Ontario v. City of Detroit, 874 F.2d 332, 339 (6th
Cir. 1989) (citing Wilson v. Republic Iron & Steel Co., 257 U.S.
92, 97-98 (1921)).

“The removal petition is to be strictly

construed,

doubts

with

all

resolved

against

removal.”

Id.

(citations omitted).
B. Defendant’s Motion to Dismiss
A party may present the defense of failure to state a claim
upon which relief can be granted through motion. Fed. R. Civ. P.
12(b)(6). A motion to dismiss pursuant to Federal Rule of Civil
Procedure
complaint.

12(b)(6)
The

tests

Court

the

views

sufficiency

the

complaint

of

the

plaintiff’s

in

the

light

most

favorable to the plaintiff and must accept as true “well-pleaded
facts” set forth in the complaint.

Morgan v. Church’s Fried

Chicken, 829 F.2d 10, 12 (6th Cir. 1987) (citations omitted). “A
complaint must contain either direct or inferential allegations
with respect to all material elements necessary to sustain a
recovery under some viable legal theory.” Weiner v. Klais & Co.,
108

F.3d

86,

88

(6th

Cir.

1997)

(citations

omitted).

If

it

appears beyond doubt that the plaintiff’s complaint does not
4

state

facts

sufficient

to

“state

a

claim

to

relief

that

is

plausible on its face,” then the claims must be dismissed.

Bell

Atl.

also

Corp.

v.

Twombly,

550

U.S.

544,

570

(2007);

see

Weisbarth v. Geauga Park Dist., 499 F.3d 538, 542 (6th Cir.
2007). Further, the complaint must establish “enough fact to
raise

a

reasonable

evidence”

to

show

expectation
the

that

averments

Twombly, 550 U.S. at 556.

discovery

are

will

factually

reveal

plausible.

While the Court presumes all factual

allegations to be true and makes all reasonable inferences in
favor

of

Plaintiffs,

the

Court

does

not

have

to

“accept

unwarranted factual inferences.” Total Benefits Planning Agency,
Inc. v. Anthem Blue Cross & Blue Shield, 552 F.3d 430, 434 (6th
Cir.

2008)

(citations

omitted).

If

the

“complaint

does

not

contain any factual allegation sufficient to plausibly suggest”
each essential element of the averred violation, it does not
contain enough factual content to nudge the claim across the
line

from

conceivable

to

plausible,

and

must

be

dismissed.

Ashcroft v. Iqbal, 556 U.S. 662, 680-83 (2009).
III. Analysis
A. Plaintiff’s Motion to Remand
This matter was properly removed on the basis of federal
question

jurisdiction.

See

28

U.S.C.

§

1331.

Plaintiff

has

attempted to artfully plead state law claims, but the bulk of
Plaintiff’s claims amount to a federal tax refund suit, thereby
5

giving

this

Court

jurisdiction

under

the

complete

preemption

doctrine. See Mikulski v. Centerior Energy Corp., 501 F.3d 555,
560

(6th

Cir.

2007)

(“[P]laintiffs

may

not

‘avoid

removal

jurisdiction by artfully casting their essentially federal law
claims as state-law claims.’” (quoting Federated Dep’t Stores,
Inc. v. Moitie, 452 U.S. 394, 397 n.2 (1981))).
Twenty-six U.S.C. § 7422 provides that:
[n]o suit or proceeding shall be maintained in any
court for the recovery of any internal revenue tax
alleged to have been erroneously or illegally assessed
or collected, or of any penalty claimed to have been
collected without authority, or of any sum alleged to
have been excessive or in any manner wrongfully
collected, until a claim for refund or credit has been
duly filed with the Secretary, according to the
provisions of law in that regard, and the regulations
of the Secretary established in pursuance thereof.
26 U.S.C. § 7422. Section 7422 completely preempts Plaintiff’s
state law claims pertaining to an excessive withholding of FICA
taxes.
[Plaintiff] alleges that the amount withheld from her
paycheck was excessive, and that the 7.65 percent at
issue was wrongfully collected from her. These
allegations track the language of § 7422. That statute
required [plaintiff] to seek a refund from the IRS,
which would in turn seek to collect the employer FICA
tax due from [defendant]. Moreover, even if we did not
hold that the language of § 7422 expressly preempted
[plaintiff’s] claim, the broad sweep of § 7422 –
especially as described by the Supreme Court . . . –
suggests that Congress intended the IRS to occupy the
field of tax refunds, preempting claims such as
[plaintiff’s].

6

Umland v. PLANCO Fin. Servs., Inc., 542 F.3d 59, 69 (3d Cir.
2008) (citations omitted); see also Crouch v. Guardian Angel
Nursing, Inc., No. 3:07-cv-541, 2009 WL 3738095, at *5 (M.D.
Tenn. Nov. 4, 2009) (“Those few courts that have done so with
any degree of depth have overwhelmingly come down on the side of
preemption,

regardless

of

whether

the

claims

at

issue

are

asserted directly under FICA or are framed as state-law claims .
. . .”). Therefore, because Plaintiff seeks monies wrongfully
collected as a federal tax, but veils her claims in state law
causes of action, the Court has federal question jurisdiction.
Plaintiff’s assertions before this Court establish that she
is

seeking

paychecks.

to

recover

First,

taxes

excessively

Plaintiff

states

that

withheld
the

from

her

“Compensation

Schedule does not state ‘employer share,’ which ultimately aids
in the disguise as a legitimate deduction.” [D.E. 13 at 6].
Later, Plaintiff states that “the artificially created ‘wages’
here

were

in

fact

a

function

of

subtracting

the

employer’s

share.” [D.E. 13 at 27]. In effect, Plaintiff is admitting that
the full 15.3% of FICA taxes was withheld from Plaintiff rather
than

the

7.65%

owed

by

the

employee.

Thus,

Plaintiff

acknowledges that she overpaid her portion of the FICA tax and
she seeks a return of the excessive withholding. Therefore, the
claims, as they relate to FICA, are preempted and the Court has
federal

question

jurisdiction

under
7

28

U.S.C.

§

1331.

See

Caterpillar, Inc. v. Williams, 482 U.S. 386, 393 (1987) (“Once
an area of state law has been completely pre-empted, any claim
purportedly based on that pre-empted state law is considered,
from its inception, a federal claim, and therefore arises under
federal law.”).
As to the FUTA tax, the Court has federal jurisdiction
because Plaintiff, despite alleging state law causes of action,
has filed a federal tax refund suit to recover federal taxes
wrongfully

or

illegally

assessed.

Twenty-six

U.S.C.

§

7422

“means that if someone wrongfully collects money as a tax, then
a suit to recover the suit constitutes a tax refund suit, even
if the sum did not literally constitute an ‘internal revenue
tax.’” Brennan v. Sw. Airlines Co., 134 F.3d 1405, 1410 (9th
Cir. 1998), amended by Brennan v. Sw. Airlines Co., 140 F.3d 849
(9th Cir. 1998) (quoting Flora v. United States, 362 U.S. 145,
149

(1960)).

withheld

Plaintiff

portions

of

alleges

Plaintiff’s

that

Defendant

paycheck

as

wrongfully

a

FUTA

tax.

Therefore, Plaintiff’s claim amounts to a tax refund suit. Tax
refund

suits,

even

if

cloaked

in

state

law

claims,

are

preempted. See id. at 1409 (“It is well established that the IRS
provides

the

preempts

state-law

omitted)).

exclusive

remedy

claims

Therefore,

in

that

this

tax

seek
Court

refund

tax
has

suits

refunds.”
federal

and

thus

(citations
question

jurisdiction over the claims relating to an illegal or wrongful
8

withholding of FUTA taxes. See Caterpillar, Inc., 482 U.S. at
393 (“Once an area of state law has been completely pre-empted,
any claim purportedly based on that pre-empted state law is
considered, from its inception, a federal claim, and therefore
arises under federal law.”).
Not

all

of

Plaintiff’s

claims

involve

a

federal

issue.

Plaintiff also alleges that Defendant excessively withheld state
unemployment taxes, as well as withheld money as reimbursement
for expenses never incurred. These claims form part of the “same
case

or

controversy,”

thereby

giving

the

Court

supplemental

jurisdiction over these claims. See 28 U.S.C. § 1367(a) (“[I]n
any civil action of which the district courts have original
jurisdiction,

the

district

courts

shall

have

supplemental

jurisdiction over all other claims that are so related to claims
in the action within such original jurisdiction that they form
part of the same case or controversy. . . .”); United Mine
Workers of Am. v. Gibbs, 383 U.S. 715, 725 (1966) (“But if,
considered without regard to their federal or state character, a
plaintiff’s claims are such that he would ordinarily be expected
to

try

them

all

in

one

judicial

proceeding,

then,

assuming

substantiality of the federal issues, there is power in federal
courts to hear the whole.”). This Court having jurisdiction over
all the claims, Plaintiff’s Motion to Remand must be denied.

9

B. Defendant’s Motion to Dismiss
Having
turns

to

alleging
illegally

established

that

it

Motion

Defendant’s

that

to

federal

assessed

must

taxes
be

has

jurisdiction,

Dismiss.

were

Plaintiff’s

excessively

dismissed.

the

The

Court
claims

withheld

remaining

or

claims

involving state taxes and reimbursed expenses will be remanded
because

the

Court,

in

its

discretion,

will

not

exercise

supplemental jurisdiction over those claims. See Carnegie-Mellon
Univ. v. Cohill, 484 U.S. 343, 351 (1988) (“When the single
federal-law claim in the action was eliminated at an early state
of the litigation, the District Court had a powerful reason to
choose not to exercise jurisdiction.”).
Defendant first alleges that the case must be dismissed
because it is barred by the doctrine of res judicata.
For res judicata to apply, the following elements must
be present: (1) a final decision on the merits by a
court of competent jurisdiction; (2) a subsequent
action between the same parties or their ‘privies’;
(3) an issue in the subsequent action which was
litigated or which should have been litigated in the
prior action; and (4) an identity of the causes of
action.
Bragg v. Flint Bd. of Educ., 570 F.3d 775, 776 (6th Cir. 2009)
(quoting Bittinger v. Tecumseh Prods. Co., 123 F.3d 877, 880
(6th Cir. 1997)).
Defendant alleges that a final decision on the merits was
reached by this Court in Berera v. Mesa Medical Group, PLLC, No.

10

5:13-cv-294-JMH, (E.D. Ky.). The Court dismissed the complaint
in Berera finding that it failed to state a claim upon which
relief could be granted. See Berera v. Mesa Medical Group, PLLC,
No. 5:13-cv-294-JMH, 2014 WL 29386, at *3 (E.D. Ky. Jan. 3,
2014). “The sustaining of a motion to dismiss for failure to
state a claim upon which relief can be granted is a judgment on
the merits.” Durham v. Mason & Dixon Lines, Inc., 404 F.2d 864,
865 (6th Cir. 1968) (citations omitted). Thus, the first element
is met.
Defendant alleges that Ednacot was a party in the Berera
case and Plaintiff alleges that Ednacot was never made a party.2
The

Court

finds

that

res

judicata

does

not

apply

because,

despite Plaintiff’s counsel’s representations to the contrary in
the Berera matter, Ednacot was never made a party to the Berera
suit. In the Berera matter, before the action was removed to
this Court, Plaintiff’s counsel filed a second amended complaint
adding Ednacot as a party. According to Kentucky Rule of Civil
Procedure 15.01, “[a] party may amend his pleading once as a
matter of course at any time before a responsive pleading is
served. . . . Otherwise a party may amend his pleading only by
leave of court or by written consent of the adverse party. . .
.” Ky. CR 15.01. Because Berera had already filed one amended

2

At the time of the Berera suit, Plaintiff, Katisha Ednacot,
went by the name Katisha Kabalen.
11

complaint and the second amended complaint was filed without
leave

or

“without

written
legal

consent,

effect.”

6

the

second

Charles

amended

Alan

Wright

complaint
&

Arthur

was
R.

Miller, Federal Practice & Procedure § 1484 (3d ed.) (“[I]f an
amendment that cannot be made as of right is served without
obtaining the court’s leave or the opposing party’s consent, it
is without legal effect.”). Plaintiff’s counsel later filed a
motion to file the second amended complaint, which had not been
ruled upon when Defendant removed the case to this Court. This
motion was denied as moot when the case was dismissed. Berera v.
Mesa Medical Group, PLLC, No. 5:13-cv-294-JMH (E.D. Ky.), at
[D.E. 21]. Thus, the second amended complaint, filed without
leave of court, was of no legal effect and Ednacot was not made
a party to the Berera suit because this Court denied the motion
for

leave.

While

the

Court

believed,

based,

in

part,

on

Plaintiff’s counsel’s assertions to that effect, that Ednacot
was a party to the matter and indicated in its multiple orders
that Ednacot was a party, the Court will not prejudice Ednacot
due to the Court’s oversight.3

3

The Court is especially sensitive to prejudicing Plaintiff
because the Berera matter is now on appeal and Plaintiff is not
a party to that appeal. See [D.E. 14 at 6] (“[H]er counsel filed
the Brief for Appellant in the Berera appeal which, tellingly,
described the claims in the complaint and amended complaint, but
. . . did not mention Ms. Kabalen/Ednacot.”). The Court confirmed
that Plaintiff is not a named party to the Berera appeal by
reviewing the Sixth Circuit public docket sheet.
12

While

the

Court

will

not

punish

Plaintiff

and

takes

ultimate responsibility for its oversight, the Court points out
to Plaintiff’s counsel that candor to the Court is not only
appreciated, it is required. See Ky. SCR 3.3. Counsel’s Response
to Defendant’s Motion for Summary Judgment in the Berera matter
was purportedly filed on behalf of “Tammy Berera and Katisha
Kabalen.” Berera v. Mesa Medical Group, PLLC, No. 5:13-cv-294JMH (E.D. Ky.), at [D.E. 9 at 1]. Plaintiff’s counsel went on to
state that “Plaintiffs filed a Second Amended Complaint setting
forth the same allegations and adding Katisha Kabalen as an
additional named Plaintiff.” [D.E. 9 at 2]. Furthermore, it was
obvious
believed

from

the

Ednacot

Court’s
had

been

Show
made

Cause
a

Order

party

to

that
the

the

Court

Berera

suit.

Berera v. Mesa Medical Group, PLLC, No. 5:13-cv-294-JMH, 2013 WL
6383013, at *1 (E.D. Ky. Dec. 6, 2013) (“Berera filed a second
amended complaint to add Katisha Kabalen as a member of the
class.”). Plaintiff’s counsel filed a response to the Court’s
Show Cause Order and failed to advise the Court that Ednacot was
not a party to the action. It is only now, when it serves
Plaintiff’s counsel’s interests, that Plaintiff’s counsel felt
the need to properly advise the Court of its misunderstanding.
Finally, without comment on the wholly unsupported, speculative
accusations that Defendant willfully stole from its employees to
cover

overhead

expenses,

Plaintiff’s
13

counsel

has

asserted

in

briefs

before

Plaintiff’s

this

paycheck

Court

that

“bogus”

Defendant

travel

and

has

cell

withheld
phone

from

expenses.

[D.E. 10 at 2, 7]. Defendant has filed documents under seal
showing

that

argument.

The

the

only

Court

thing

will

bogus

not

is

tolerate

Plaintiff’s
similar

counsel’s

conduct

from

Plaintiff’s counsel in the future.
Nevertheless, Plaintiff’s claims alleging that FICA taxes
were withheld must be dismissed because FICA does not provide a
private right of action. Umland, 542 F.3d at 67 (“FICA does not
create a private right of action.”); McDonald v. S. Farm Bureau
Life Ins. Co., 291 F.3d 718, 726 (11th Cir. 2002) (“[W]e hold
that no private right of action may be implied under FICA.”);
Salazar v. Brown, 940 F. Supp. 160, 166 (W.D. Mich. 1996) (“I
conclude that the Sixth Circuit would likewise refuse to imply a
cause of action under FICA.”). Additionally, § 7422 provides
that “[n]o suit or proceeding shall be maintained in any court
for the recovery . . . of any sum alleged to have been excessive
or in any manner wrongfully collected, until a claim for refund
or credit has been duly filed with the Secretary.” 26 U.S.C. §
7422(a). Plaintiff seeks to recover a sum that was excessive or
wrongfully
refund

collected,

with

the

and

has

Secretary.

failed

to

Therefore,

file

a

pursuant

claim
to

§

for

7422,

Plaintiff cannot maintain this suit as it relates to FICA taxes.

14

a

Plaintiff’s claims as they relate to FUTA taxes must also
be dismissed because, like FICA, FUTA does not expressly or
impliedly

create

a

private

right

of

action.

See

Wanken

v.

Wanken, No. 3:12-cv-2107-BK, 2013 WL 1828840, at *7 (N.D. Tex.
May

1,

2013)

(“[T]his

Court

finds

that

there

is

no

implied

private right of action under FUTA.”); Glanville v. Dupar, Inc.,
727 F. Supp. 2d. 596, 602 (S.D. Tex. 2010) (“This court finds
that there is no implied private right of action under FUTA.”);
Bendsen v. George Weston Bakeries Distrib. Inc., No. 4:08-cv-50JCH, 2008 WL 4449435, at *4 (E.D. Mo. Sept. 26, 2008) (citations
omitted) (“While the Eighth Circuit has not addressed whether
FICA and FUTA create private rights of action, the majority of
courts considering the issue has held they do not.”); White v.
White Rose Food, a Div. of DiGiorgio Corp., 62 F. Supp. 2d 878,
887 (E.D.N.Y. 1999) (“The Court agrees with the decision of the
Seventh Circuit Court of Appeals . . . and finds its rationale
applicable to FUTA, FICA, and SUI. . . . [T]he Seventh Circuit
stated

that

employers

to

‘[e]mployees
recover

have

wages

no

cause

withheld

and

of

action

paid

over

against
to

the

government in satisfaction of federal income tax liability.’”
(quoting Edgar v. Inland Steel Co., 744 F.2d 1276, 1278 (7th
Cir. 1984))).
Furthermore, pursuant to § 7422, Plaintiff may not maintain
this action as it relates to a recovery of an alleged illegal
15

withholding of FUTA taxes. While Plaintiff makes much of the
fact that an employee is not liable for FUTA taxes, it does not
change the fact that, according to Plaintiff, she was assessed
the amount as a tax. By the plain language of § 7422, the
statute

applies

revenue

tax

to

suits

alleged

to

“for
have

the
been

recovery

of

erroneously

any
or

internal
illegally

assessed or collected . . . or of any sum alleged to have been .
. . in any manner wrongfully collected.” 26 U.S.C. § 7422. The
Court finds that Plaintiff’s allegations meet this “expansive”
statute because Plaintiff alleges that an internal revenue tax
was illegally assessed against her or, at the very least, that a
sum was wrongfully collected from her.
Clintwood

Elkhorn

Mining

Co.,

553

U.S.

See United States v.
1,

7

(2008)

(“Five

‘any’s’ in one sentence and it begins to seem that Congress
meant the statute to have expansive reach.”); see also Flora v.
United States, 362 U.S. 145, 149 (1960) (“[T]he function of the
phrase [‘any sum’] is to permit suit for recovery of items which
might not be designated as either ‘taxes’ or ‘penalties’ by
Congress or the courts.”). Thus, even if FUTA created a private
right of action, Plaintiff may not maintain her action for a
recovery of amounts withheld as a FUTA tax in a United States
court until she has sought a tax refund from the IRS. See 26
U.S.C. § 7422.

16

All of Plaintiff’s claims, as they relate to federal taxes,
must be dismissed because they seek damages for an excessive
withholding of FICA taxes and damages for an illegal assessment
of FUTA taxes, for which there is no private remedy and because
Plaintiff

has

not

first

pursued

her

administrative

remedy.

Plaintiff first claims that Defendant breached the employment
contract. [D.E. 1-1 at 3]. Even assuming Defendant breached the
contract by not compensating Plaintiff the full amount she was
owed, the reason Plaintiff would not have received the full
amount owed is that Defendant was excessively withholding or
improperly assessing federal taxes. Plaintiff also makes a claim
for fraud and fraud in the inducement. [D.E. 1-1 at 4]. Any
damages Plaintiff may be awarded on this claim would be equal to
the amount of the tax excessively or improperly withheld, and,
therefore,
excessively
ComSmart,

Plaintiff
or
Inc.,

again

improperly
222

seeks

to

withheld.

S.W.3d

256,

recover

See

261

federal

Radioshack
(Ky.

Ct.

taxes

Corp.

App.

v.

2007)

(citations omitted) (“Where an individual is induced to enter
into the contract in reliance upon false representations, the
person may maintain an action for a rescission of the contract,
or may affirm the contract and maintain an action for damages
suffered on account of the fraud and deceit.”).
Plaintiff’s claims of conversion, violation of KRS 337.385,
and

negligence

likewise

seek
17

to

recover

the

amount

of

excessively or improperly withheld federal taxes. Plaintiff’s
conversion

claim

asserts

that

“Defendant

has

interfered

with

Plaintiff’s lawful right to her property,” the alleged violation
of KRS 337.385 occurred because Defendant paid “an amount less
than the wages to which she was entitled,” and the negligence
claim is based upon a negligent withholding of wages. [D.E. 11]. Thus, all of these claims are based upon an alleged failure
to pay the full amount of wages. The reason the full amount of
wages were allegedly not paid is because Defendant excessively
or

improperly

withheld

federal

taxes.

Therefore,

all

of

Plaintiff’s claims, as they relate to federal taxes, must be
dismissed. See Delue v. Scaife, 775 F. Supp. 712, 717 (S.D.N.Y.
1991) (“[Plaintiff] asks this Court to grant damages based upon
defendant’s violations of employment-related tax laws. . . .
Plaintiff

cannot

change

the

nature

of

her

claim

merely

by

calling it a tort; her claim is one for damages based upon
violations

of

statutes

that

do

not

expressly

[or

impliedly]

create a private cause of action.”).
The Court emphasizes that it is in no way expressing an
opinion on the merits of Plaintiff’s claims. The Court simply
holds that, based on the administrative and statutory scheme
established, Plaintiff seeks a remedy from an improper forum.
The proper avenue of relief is an administrative action before
the IRS. Plaintiff complains that this may require a full-scale
18

IRS investigation of Mesa’s tax obligations.4 [D.E. 10 at 33].
The Court will not ignore federal case law and federal statutes
simply because Plaintiff prefers a different remedy.
Plaintiff

argues

that

there

is

no

remedy

from

the

IRS

because “the administrative scheme does not contemplate a refund
to an employee for the employer share of FICA.” [D.E. 10 at 33]
(alteration in original). However, Plaintiff fails to recognize
that the recovery she seeks is a refund for an overpayment of
the employee share. An employee owes 7.65% of the full 15.3% of
the FICA tax assessed on an employee’s wages. 26 U.S.C §§ 3101,
3111. Plaintiff alleges that she paid the full 15.3%. Thus, she
overpaid her share by 7.65%. Simply because Plaintiff alleges
the overpayment was equal to the employer’s share of FICA does
not mean that she seeks a refund of the employer’s share of
FICA. The result would be the same if Plaintiff alleged 10% of
her wages were withheld as a FICA tax. In short, the amount of
the alleged overpayment does not change the fact that Plaintiff

4

Plaintiff’s counsel’s argument seems to ignore that if, as
alleged, Defendant was contractually obligated to pay a higher
wage and Plaintiff recovers, Plaintiff will also be forced to
pay additional taxes to reflect recovery of the correct wage.
See United States v. Cleveland Indians Baseball Co., 532 U.S.
200, 220 (2001) (“[W]e hold that, for FICA and FUTA tax
purposes, back wages should be attributed to the year in which
they are actually paid.”); Gerbec v. United States, 164 F.3d
1015, 1025 (6th Cir. 1999) (“[W]e must nevertheless determine
what portion of Plaintiffs’ settlement awards were for back
wages and therefore subject to income taxation.” (citations
omitted)).
19

claims she overpaid her portion of the FICA tax and that she
must

first

seek

a

remedy

from

the

IRS.

If

the

IRS

awards

Plaintiff a refund and decides MESA owes that money as its share
of the FICA tax, the IRS will recover that money from MESA, and
if

the

refund

is

denied,

Plaintiff

may

then

bring

suit

in

federal court. See 26 U.S.C. § 7422; Crouch v. Guardian Angel
Nursing, Inc., No. 3:07-cv-541, 2009 WL 3738095, at *7 (M.D.
Tenn. Nov. 4, 2009)
need

to

federal

recognize
employment

(“The court there found that there was ‘no
an

equitable

taxes’

in

right

light

of

for

restitution

other

available

as

to

legal

remedies, namely the plaintiff’s ability to urge the IRS to
enforce the legal obligations of the employer to pay the taxes,
the ability to file an administrative claim for a refund from
the IRS under 26 U.S.C. § 6511(a), and the ability to file suit
under 28 U.S.C. § 1345(a) in the event the request for a refund
is denied.” (citing McElwee v. Wharton, 19 F. Supp. 2d 766, 771
(W.D. Mich. 1998))).
The

Court

also

notes

that,

contrary

to

Plaintiff’s

assertions, the IRS is not an innocent third party. Mesa only
had the power to withhold a portion of Plaintiff’s wages because
of the agency authority granted to it by the IRS. See Eastman
Kodak Co. v. United States, No. 517-71, 1975 WL 3591, at *6 (Ct.
Cl. Apr. 1, 1975), aff'd as modified Eastman Kodak Co. v. United
States, 534 F.2d 252 (Ct. Cl. 1976) (“[T]he employer functions .
20

. . as a statutory collection agent for purposes of the employee
portion of FICA.”). Thus, Mesa was acting on behalf of the IRS
when it allegedly made excessive withholdings.
The Court will remand the claims insofar as they are based
upon an excessive withholding of state unemployment taxes and
alleged unwarranted expenses. The Court has dismissed all the
federal claims that give this Court jurisdiction and the Court
declines to exercise its jurisdiction over the remaining claims.
See 28 U.S.C. § 1367(c)(3) (“The district courts may decline to
exercise supplemental jurisdiction . . . if the district court
has

dismissed

all

claims

over

which

it

has

original

jurisdiction.”). Due to the Court’s exercise of its discretion
not to entertain jurisdiction over these claims, the Court does
not

rule

on

Defendant’s

argument

that

the

claims

should

be

dismissed due to a violation of the forum selection clause in
the employment contract between Plaintiff and Defendant or that
the expenses were properly deducted as pre-tax deductions to
benefit Plaintiff. Rather, the claims, as they relate to state
taxes and excessive withholding of taxes, are remanded to the
Boyle County Circuit Court and Defendant is not prejudiced to
making those arguments before that court. See Carnegie-Mellon
Univ.

v.

Cohill,

484

U.S.

343,

351

(1988)

(“This

Court’s

crafting of the pendent jurisdiction doctrine in Gibbs strongly
supports

the

conclusion

that
21

when

a

district

court

may

relinquish jurisdiction over a removed case involving pendent
claims, the court has discretion to remand the case to state
court.”).
IV. Conclusion
Accordingly, for the foregoing reasons, IT IS ORDERED:
(1)

that Defendant’s Motion to Amend its Motion to Dismiss

[D.E. 21] be, and the same hereby is, GRANTED;
(2)

that

Memorandum

in

the

Clerk

Support

of

shall

FILE

the

its

Motion

to

Defendant’s
Amend

its

tendered
Motion

to

Dismiss [D.E. 21-1] in the record;
(3)

that Plaintiff’s Motion to Remand [D.E. 13] be, and

the same hereby is, DENIED;
(4)

that Defendant’s Motion to Dismiss [D.E. 5] be, and

the same hereby is, GRANTED IN PART, in that Plaintiff’s claims
of breach of contract, conversion, violation of KRS 337.385,
fraud and fraud in the inducement, and negligence are dismissed
in

so

far

as

they

seek

damages

for

an

alleged

excessive

withholding of FICA taxes and an illegal withholding of FUTA
taxes, and DENIED IN PART, in that Plaintiff’s claims of breach
of contract, conversion, violation of KRS 337.385, fraud and
fraud in the inducement, and negligence are not dismissed in so
far as they seek damages for an alleged excessive withholding of
state unemployment taxes and for expenses wrongfully withheld
from Plaintiff’s paychecks.
22

(5)

That

Plaintiff’s

claims

of

breach

of

contract,

conversion, violation of KRS 337.385, fraud and fraud in the
inducement,

and

negligence

seeking

damages

for

an

excessive

withholding of state unemployment taxes and expenses withheld
from Plaintiff’s paycheck be, and the same hereby are, REMANDED
to the Boyle County Circuit Court.
This the 4th day of June, 2014.

23