United States of America v. Blake et al

Filing 38

OPINION AND ORDER denying 32 Defendants' Motion to Amend. Signed by District Judge Robert H. Cleland. (LWag)

UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF MICHIGAN
SOUTHERN DIVISION

UNITED STATES OF AMERICA
Plaintiff,
v.

Case No. 09-14224

FRANCIS A. BLAKE and MARY JOAN BLAKE,
Defendants.
/
OPINION AND ORDER DENYING DEFENDANTS’ MOTION TO AMEND
On June 22, 2011, Defendants Francis A. Blake and Mary Joan Blake moved to
amend their answer to assert a counterclaim for a declaration of their tax liabilities for
tax year 2003. In the above-captioned matter, to which Defendants seek to add the
counterclaim, the Government alleges unpaid taxes by Defendants for tax years 2000,
2001, 2002, and 2004. Defendants allege that an overpayment in the 2003 tax year will
reduce their liability on the Government’s complaint, thereby requiring a declaration of
their liability for 2003. On July 11, 2011, the Government responded in opposition to the
instant motion, arguing that it is barred by sovereign immunity. Defendants replied on
July 15, 2011. Having reviewed the briefs, the court concludes a hearing on this motion
is unnecessary. See E.D. Mich. LR 7.1(f)(2). For the reasons stated below, the court
will deny Defendants’ motion.
I. BACKGROUND
The Government filed a two-count amended complaint against Defendants
alleging failure to pay all tax liabilities. Count I asserts a claim against Francis Blake for
failure to pay an assessment upon demand for taxes withheld from employees and held

in trust by an employer (“trust fund taxes”) and penalties pursuant to 26 U.S.C. § 6672.
Count II asserts a claim for unpaid income tax assessments for the years 2000, 2001,
2002, and 2004 against Francis Blake and Mary Blake. The Government assessed tax
liabilities and demanded payment of taxes, penalties, and interest on the unpaid tax
liabilities for each of these four years. Although Defendants do not challenge their
failure to pay the assessed taxes, they argue that the assessed amounts for years 2001
and 2002 are inaccurate because of significant losses in year 2003, which they assert
may be carried back to 2001 and 2002, thereby reducing or eliminating their tax
liabilities for those years, pursuant to 26 U.S.C. § 172.
II. STANDARD
As a general matter, amendments to pleadings are governed by Federal Rule of
Civil Procedure 15. As amended in 2009, Rule 15 allows a plaintiff to amend a
complaint “once as a matter of course” within twenty-one days of a defendant’s answer
or motion under Rule 12. Fed. R. Civ. P. 15(a)(1)(B). Courts generally have no
discretion to reject timely filed motions to amend complaints. Where the time to amend
pleadings as a matter of course has expired, a party may nonetheless amend its
pleadings by leave of the court, and “[t]he court should freely give leave when justice so
requires.” Fed. R. Civ. P. 15(a)(2). The courts have long recognized a policy favoring
trying cases on the merits and liberally granting leave to amend when doing so does not
prejudice an opposing party. See Foman v. Davis, 371 U.S. 178, 182 (1962) (leave
should be freely given, absent factors “such as undue delay, bad faith or dilatory motive
on the part of the movant, repeated failure to cure deficiencies by amendments
previously allowed, undue prejudice to the opposing party by virtue of allowance of the

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amendment, [or] futility of amendment”); Jet, Inc. v. Sewage Aeration Sys., 165 F.3d
419, 425 (6th Cir. 1999); Tefft v. Seward, 689 F.2d 637, 639 (6th Cir. 1982).
III. DISCUSSION
The Government presents only one ground upon which it argues the court should
deny Defendants leave to file a counterclaim. Additionally, the court finds no undue
delay, bad faith, or prejudice to the Government that may arise from granting leave to
amend. See Foman, 371 U.S. at 182. The sole issue to be resolved on Defendants’
motion is whether amendment would be futile. The Government argues that
amendment would be futile because Defendants’ proposed counterclaim is barred by
the doctrine of sovereign immunity. Defendants argue that all material questions of fact
and law involved in the counterclaim will necessarily be decided in the course of trial on
the Government’s second count. The court finds amendment would be futile because
the Government as sovereign is immune from such claim.
“It is axiomatic that the United States may not be sued without its consent and
that the existence of consent is a prerequisite for jurisdiction.” United States v. Mitchell,
463 U.S. 206, 212 (1983). The proposed counterclaim asserts that jurisdiction is proper
under 28 U.S.C. § 1340, but it is well established that “[g]eneral jurisdictional statutes
such as . . . § 1340 do not waive sovereign immunity.” Berman v. United States, 264
F.3d 16, 20 (1st Cir. 2001); accord Carelli v. Internal Revenue Service, 668 F.2d 902,
904 (6th Cir. 1982). A suit against the United States for a tax refund or challenging a
tax assessment must comply with the statutory requirement of first filing an
administrative claim. 26 U.S.C. § 7422(a); United States v. Dalm, 494 U.S. 596, 601-02
(1990). Defendants’ reliance on Enochs v. Williams Packing Co., 370 U.S. 1 (1962), is

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misplaced, inasmuch as that case required a showing that the Government could
present no case sufficient to establish a tax liability. Id. at 7. Nothing in the pleadings,
motion, proposed counterclaim, or briefing suggests that the Government cannot, under
any circumstances, establish a tax liability for tax year 2003. Defendants merely assert
that they will eventually show that no liability existed for that year. Therefore,
Defendants have failed to meet their burden of establishing a waiver of sovereign
immunity. See Whittle v. United States, 7 F.3d 1259, 1262 (6th Cir. 1993).
The court need not address Defendants’ arguments regarding res judicata and
collateral estoppel. It may well be that the necessary adjudication of Defendants’ tax
liability for tax year 2003 will have preclusive effect on future actions, including those by
the Government to collect any deficiencies or penalties from that year. This remains,
nonetheless, a separate legal question from the Government’s assertion of sovereign
immunity.
IV. CONCLUSION
IT IS ORDERED that Defendants’ motion to amend [Dkt. # 32] is DENIED.

s/Robert H. Cleland
ROBERT H. CLELAND
UNITED STATES DISTRICT JUDGE
Dated: July 27, 2011
I hereby certify that a copy of the foregoing document was mailed to counsel of record
on this date, July 27, 2011, by electronic and/or ordinary mail.

s/Lisa Wagner
Case Manager and Deputy Clerk
[phone]

S:\Cleland\JUDGE'S DESK\C1 ORDERS\09-14224.BLAKE.Motion.Amend.nkt.wpd

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