Little Italy Oceanside Investments, LLC v. United States of America et al

Filing 29

OPINION AND ORDER (1) Granting Defendant's 16 Motion to Dismiss as to Counts I and III and (2) Granting Defendant Summary Judgment as to Count II. Signed by District Judge Matthew F. Leitman. (HMon)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF MICHIGAN
SOUTHERN DIVISION
LITTLE ITALY OCEANSIDE
INVESTMENTS, LLC,
Plaintiff,

Case No. 14-cv-10217
Hon. Matthew F. Leitman

v.
UNITED STATES OF AMERICA,
Defendant.
_________________________________/
OPINION AND ORDER (1) GRANTING DEFENDANT’S MOTION TO
DISMISS AS TO COUNTS I AND III AND (2) GRANTING DEFENDANT
SUMMARY JUDGMENT AS TO COUNT II
In September 2008, the Internal Revenue Service (the “IRS”) determined
that Plaintiff Little Italy Oceanside Investments, LLC (“Little Italy”), was the alter
ego of an individual taxpayer named Remo Polselli (“Polselli”). In an attempt to
collect taxes owed by Polselli, the IRS filed a Notice of Federal Tax Lien (the “Tax
Lien”) against a parcel of real property that Little Italy owned in Broward County,
Florida (the “Florida Property”). In 2013, Little Italy sold the Florida Property,
and a portion of the proceeds went to the IRS to satisfy the Tax Lien. After that
sale, Little Italy filed this action against Defendant the United States of America.
Little Italy seeks to quiet title to the property, seeks a refund of the amounts paid to
the IRS from sale of the Florida Property, and claims damages as a result of a due

process violation. For the reasons explained below, Little Italy is not entitled to
any of the relief it seeks.
RELEVANT FACTUAL BACKGROUND
Little Italy is a Florida limited liability company. (See Amended Complaint,
ECF #15 at ¶1; see also Polselli Affidavit, ECF #28-2 at ¶1.) Since 2005, Polselli
has been Little Italy’s sole member. (See Polselli Aff. at ¶1, Pg. ID 195.) On or
about April 29, 2008, Little Italy filed an annual report with the Florida Secretary
of State in which Little Italy listed both its principal place of business and it
mailing address as: 40800 Woodward Avenue, Bloomfield Hills, MI 48304. (See
Little Italy Annual Report, ECF #28-3.) The annual report also identified Polselli
as Little Italy’s managing member and provided the same Bloomfield Hills address
for him. (See id.) The report listed attorney Leonard Zedeck (“Zedeck”) of
Sunrise, Florida as Little Italy’s registered agent. (See id.)
By September of 2008, Polselli owed the IRS $555,749.06 in back taxes and
associated charges. In an effort to collect that amount, IRS Revenue Agent Linda
Stamey (“Agent Stamey”) prepared the Tax Lien which stated, in relevant part,
“there is a lien in favor of the United States on all property and rights to property”
belonging to Little Italy. (ECF #25-1 at 3, Pg. ID 165.) The IRS sought to collect
Polselli’s debt from Little Italy because the IRS believed that Little Italy was
Polselli’s alter ego. (See id. at 1, Pg. ID 163.)

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On September 26, 2008, Agent Stamey mailed Little Italy a Notice of
Federal Tax Lien Filing – Nominee or Alter Ego (the “Lien Notice”).

(See

Declaration of Agent Stamey, ECF #25 at ¶10, Pg. ID 161.) The Lien Notice
provided as follows:
You have been identified as the nominee or alter-ego for
Remo Polselli. This letter is to inform you that we have
filed a Notice of Federal Tax Lien.
You have the right to appeal this decision. We explain
your rights in the enclosed Publication 1660.
There may be other ways that we can resolve this issue.
Contact [Agent Stamey] for further information.
One option you have is to request a Certificate of
Discharge from the Federal Tax Lien. However, before
we will issue a discharge, you must pay the amount due
or post a bond guaranteeing payment. The enclosed
Publication 783, provides information on how to request
a certificate of discharge.
We will issue a Certificate of Release of Federal Tax
Lien within 30 days after you pay the full amount due or
within 30 days after we accept a bond guaranteeing
payment.
(ECF #25-1 at 1, Pg. ID 163.)
Agent Stamey sent the Lien Notice to Little Italy at the Bloomfield Hills
address it shared with Polselli. (See Agent Stamey Decl. at ¶10, Pg. ID 161.) She

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used that address because Polselli “was the taxpayer for purposes of” Little Italy,1
and the IRS’s records “indicate[d] that Polselli never used a Florida address for
[Little Italy] or anyone on its behalf.” (Id. at ¶¶7, 9; Pg. ID 161.)
Also on September 26, 2008, Agent Stamey sent a Notice of Additional
Federal Tax Lien Filing to both Polselli personally and to attorney Maurice Rose,
who had been identified as having power of attorney for Polselli (the “Additional
Lien Notices”). (Stamey Dec. at 11.) The Additional Lien Notices provided:
We have filed a Notice of Federal Tax Lien in Broward
County, FL. The enclosed Form 668(Y), Notice of
Federal Tax Lien, contains the type of tax, the tax period
and the initial amount of the debt.
The lien attaches to all property you currently own and to
all property you may acquire in the future. It also may
damage your credit rating and hinder your ability to
obtain additional credit.
We’ll issue a Certificate of Release of Notice of Federal
Tax Lien within 30 days after you pay the full debt or
after we accept a bond guaranteeing payment of the
amount owed. To get your current balance, contact
[Agent Stamey].
We’ve enclosed Publication 1450, Instructions on
Requesting a Certificate of Release of Federal Tax Lien.

1

Agent Stamey explained that when a single-member limited liability company
like Little Italy does not make an election to be taxed as a corporation or as an Scorporation, the taxpayer is the sole member of the limited liability company. (See
Stamey Decl. at ¶5, Pg. ID 160.) Agent Stamey stated that Little Italy did not
make an election to be taxed as a corporation or an S-corporation. (See id.)

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If you have any questions, please phone [Agent Stamey].
(ECF #25-1 at 2-5; Pg. ID 164-67.) Agent Stamey enclosed a copy of the Tax Lien
with the Additional Lien Notices. (See id.)
On October 1, 2008 – after the IRS mailed the Lien Notice to Little Italy and
the Additional Lien Notices to Polselli and Rose – the IRS filed the Tax Lien in
Broward County.

(See Stamey Decl. at ¶13, Pg. ID 162.)

The IRS filed a

duplicate of the Tax Lien in Broward County the next day. (See id.)
Polselli says that he never received the Lien Notice or the Additional Lien
Notices, and he likewise denies that Zedeck (Little Italy’s registered agent at the
time) ever received the notices. (See Polselli Aff. at ¶¶3-7, Pg. ID 195.) Polselli
claims that he first learned about the Tax Lien at some undefined point “in late
2013,” just as Little Italy was preparing to close on the sale of the Florida Property.
(Id. at ¶4, Pg. ID 195.)
According to Little Italy and Polselli, the buyers of the Florida Property
demanded a complete release of the Tax Lien prior to closing on the sale, and
“time was of the extreme essence in completing” the sale transaction. (Am. Compl.
at ¶¶11-12, Pg. ID 68; see also Polselli Aff. at ¶7, Pg. ID 195.) Little Italy says
that the only way it could obtain the release required by the buyer in time to
complete the closing was to provide full payment on the Tax Lien from the closing
proceeds. (See Am. Compl. at ¶¶11-12, Pg. ID 68.) And it did so. It paid the IRS

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$784,853.57 – the original $555,749.06, plus additional charges that had accrued
since 2008 – from the closing proceeds. (See id. at ¶10, Pg. ID 68.)
PROCEDURAL HISTORY
Little Italy filed its original Complaint in this action on January 17, 2014.
(See ECF #1.) Little Italy named “the United States of America – specifically
acting through the Internal Revenue Service, Department of Treasury,” as the
Defendant. (Id. at ¶2.) The original Complaint contained a quiet title claim (the
“Quiet Title Claim”) and a claim that the United States violated Little Italy’s due
process rights (the “Due Process Claim”). (See id.)
The United States moved to dismiss the original Complaint under Federal
Rule of Civil Procedure 12(b)(1) and 12(b)(6) (see ECF #11), and the Court heard
argument on that motion. Following the hearing, the Court directed Little Italy to
file an Amended Complaint (see ECF #14), and Little Italy did so. (See ECF #15.)
Little Italy’s Amended Complaint asserted the same Quiet Title and Due
Process Claims as in the original Complaint (supported by a few additional factual
allegations) and added a new claim for a refund of the monies paid to the IRS from
the closing on the sale of Little Italy’s real property (the “Refund Claim”). The
United States again moved to dismiss under Rules 12(b)(1) and 12(b)(6). (See
ECF #16.)

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At that point, the Court asked the American College of Tax Counsel (the
“College”) to file an amicus brief that would provide the Court with an additional
perspective on the issues for decision. (See ECF #19.) The College thereafter filed
its brief (see ECF #22),2 and the United States responded to that brief. (See ECF #
24). The United States attached to its response evidentiary materials that went
beyond the allegations in Little Italy’s Amended Complaint.

These materials

consisted of a Declaration from Agent Stamey and copies of the Tax Lien, the Lien
Notice, and the Additional Lien Notices. (See ECF #25 and attachments.)
Because the United States submitted the additional evidentiary materials, the
Court issued a Supplemental Notice of Hearing in which it informed the parties
that was “inclined to … treat [the United States’ pending motion to dismiss under
Rules 12(b)] as one for summary judgment under Rule 56.” (ECF #26 at 2, Pg. ID
178.) The Court added, however, that it would give Little Italy “an opportunity at
the June 15, 2015, hearing to argue that the Court should exclude [the materials
submitted by the United States] and confine its analysis to Rule 12(b)….” (Id.)
Finally, the Court advised Little Italy that it would be given (1) “a reasonable
opportunity” at the upcoming hearing “to present all material that [would be]
pertinent” to the United States’ motion if the motion were treated as one for

2

The Court thanks the College for its excellent and timely work on this case. The
thorough and well-written brief filed by the College substantially aided the Court
in its consideration of the issues for decision.

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summary judgment under Rule 56 and/or (2) an opportunity to explain “why it
needs additional time to present all material that is pertinent….” (Id.)
Little Italy did not present any additional pertinent material at the hearing. It
asked for additional time to gather and submit such material, and the Court granted
that request. The Court also instructed Little Italy that it could file a Rule 56(d)
affidavit explaining why it needed yet more time to gather information to
appropriately respond to the United States’ motion.
Little Italy filed one last supplemental brief. (See ECF #28.) Little Italy
attached evidentiary materials to the brief, including an affidavit from Polselli, an
Annual Report it filed with the Florida Secretary of State, and an excerpt from an
IRS manual. Little Italy did not file a Rule 56(d) affidavit stating that it needed
additional time to gather and submit other evidentiary items that were then
unavailable.
GOVERNING LEGAL STANDARDS
A. The Quiet Title and Refund Claims
The United States seeks dismissal of Little Italy’s Quiet Title and Refund
Claims pursuant to Rule 12(b)(1). (See ECF #16 at 1-2, Pg. ID 73-74.) Rule
12(b)(1) provides for dismissal when a court lacks subject-matter jurisdiction over
a claim. See Fed. R. Civ. P. 12(b)(1). In considering a 12(b)(1) motion, a court
may consider matters outside the pleadings. See Cartwright v. Garner, 751 F.3d

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752, 760 (6th Cir. 2014). The plaintiff bears the burden of establishing that subject
matter jurisdiction exists. See Kiser v. Reitz, 765 F.3d 601, 606 (6th Cir. 2014).
B. The Due Process Claim
The United States seeks dismissal of Little Italy’s Due Process Claim
pursuant to Rule 12(b)(6). In general, a court may not consider matters outside of
the pleadings when addressing a motion under Rule 12(b)(6). See Kostrzewa v.
City of Troy, 247 F.3d 633, 643 (6th Cir. 2001). As explained above, the United
States has submitted in support of its motion evidentiary materials outside the
pleadings, and the Court gave Little Italy two opportunities – at the hearing on the
motion and in a supplemental filing – to present additional material that is pertinent
to the motion. Under these circumstances, the Court may treat the United States’
motion to dismiss the Due Process Claim as one for summary judgment under Rule
56. See Fed. R. Civ. P. 12(d). The Court has chosen to do so.
A movant is entitled to summary judgment when it “shows that there is no
genuine dispute as to any material fact....” U.S. SEC v. Sierra Brokerage Services,
Inc., 712 F.3d 321, 326–27 (6th Cir. 2013) (citing Anderson v. Liberty Lobby, Inc.,
477 U.S. 242, 251–52 (1986)) (quotations omitted). When reviewing the record,
“the court must view the evidence in the light most favorable to the non-moving
party and draw all reasonable inferences in its favor.” Id. “The mere existence of a
scintilla of evidence in support of the [non-moving party’s] position will be

9

insufficient; there must be evidence on which the jury could reasonably find for
[that party].” Anderson, 477 U.S. at 252. Summary judgment is not appropriate
when “the evidence presents a sufficient disagreement to require submission to a
jury.” Id. at 251-252. Indeed, “[c]redibility determinations, the weighing of the
evidence, and the drafting of legitimate inferences from the facts are jury
functions, not those of a judge…” Id. at 255.
ANALYSIS
A. The Quiet Title Claim
Little Italy’s Quiet Title Claim (Count I in the Amended Complaint)
purports to seek to quiet title to the Florida Property. (See Am. Compl. at 3.)3
Little Italy alleges that the IRS wrongly treated Little Italy as Polselli’s alter ego
and that the IRS “lacks authority to claim any attachment” to the Florida Property
based upon Polselli’s indebtedness. (Id. at ¶¶7-8, 15.) Little Italy further alleges
that the IRS wrongly “compelled” Little Italy to satisfy Polselli’s debt from the
proceeds of the sale of the Florida Property. (Id. at ¶10.)
The United States contends that it has sovereign immunity from the Quiet
Title Claim and, thus, this Court lacks subject-matter jurisdiction over the claim.

3

Paragraph three of the Amended Complaint states: “This is an action to quiet title
to certain property on which Defendant has claimed a lien through which it has
improperly collected $784,853.57.” (Am. Compl. at ¶3, Pg. ID 67.) The property
fitting that description is the Florida Property.

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(See ECF #16 at 7-9, Pg. ID 79-81.) The United States invokes the settled rule
that, as the sovereign, it may not be sued absent its express consent. See, e.g.,
United States v. Testan, 424 U.S. 392, 399 (1976). The United States notes that
such consent must be “unequivocally expressed” by Congress and is to be “strictly
construed in favor of the United States.” United States v. Idaho, 508 U.S. 1, 6-7
(1993). The terms of the United States’ consent define this court’s jurisdiction.
See, e.g., Stocker v. United States, 705 F.3d 225, 230 (6th Cir. 2013).
Little Italy acknowledges that the United States may not be sued without its
express consent, but it insists that the United States has provided such consent for
suits to quiet title. (See ECF #17 at 4-9, Pg. ID 94-99.) Little Italy says that
consent is found in 28 U.S.C. § 2410(a)(1), which provides that (subject to certain
conditions) “the United States may be named as a party in any civil action or suit
in any district court, or in any State court having jurisdiction of the subject matter
to quiet title … to real or personal property on which the United States has or
claims a mortgage or other lien.” While this statute undeniably provides the
United States’ consent to be sued in quiet title actions, it does not save Little Italy’s
Quiet Title Claim because the consent does not extend to a plaintiff in Little Italy’s
circumstances.
Little Italy may not bring its Quiet Title Claim pursuant to § 2410 because at
the time it filed this action, Little Italy did not claim to have any interest in the

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Florida Property. Indeed, it is well-settled that a Ҥ 2410 plaintiff must be able to
claim some presently held property interest of its own to bring a § 2410 quiet title
action.” United States v. Wooley, 2003 WL 21790346 at *1 (D. Neb. 2003)
(collecting cases). Stated another way, “[s]tanding under [§ 2410] is based on the
presumption that the petitioner himself is making a claim of ownership to the
property for which title is to be quieted.” Matter of Coppola, 810 F.Supp. 429, 432
(E.D.N.Y. 1992).
Here, Little Italy specifically alleged that it “completed the sale” of the
Florida Property to “an unrelated buyer” before bringing suit. (Am. Compl. at ¶9.)
Little Italy did not allege that it maintained any post-sale interest in the Florida
Property. Little Italy’s attempt to quiet title to the Florida Property under § 2410
thus fails as a matter of law. See, e.g., Shaw v. United States, 331 F.2d 493, 49698 (9th Cir. 1964) (dismissing quiet title action under § 2410 because plaintiff
failed to assert invasion of her own property interest); Coppola, supra (rejecting
party’s attempt to invoke § 2410 where party maintained that it had no property
interest in the property whose title the party sought to quiet).
The decision of the United States Court of Appeals for the Ninth Circuit in
E.J. Friedman Co., Inc. v. United States, 6 F.3d 1355 (9th Cir. 1993), is
particularly instructive here. In that case, Ninth Circuit held that the plaintiff could

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not bring an action under § 2410 to quiet title to eleven lots that it had sold under a
workout agreement prior to bringing the action:
[Plaintiff] also seeks to quiet title to the eleven homes
sold under the workout agreement. However, [Plaintiff]
has ‘no property interest of its own’ in these properties.
Accordingly, § 2410 does not permit [Plaintiff] to bring
an action to quiet title to the [eleven] homes sold under
the workout agreement.
Friedman, 6 F.3d at 1358 (internal punctuation and citations omitted). Little
Italy’s position with respect to the Florida Property is exactly the same as the
position of the plaintiff in Friedman with respect to the eleven lots: before filing
suit, both Little Italy and the plaintiff in Friedman sold their interests in the
property at issue and ceased to claim an interest in the property. And just like the
plaintiff in Friedman, Little Italy may not invoke the United States’ consent to suit
under § 2410.
Little Italy counters that the decision of the United States Court of Appeals
for the Third Circuit in Kabakjian v. United States, 267 F.3d 208 (3d Cir. 2001),
supports Little Italy’s right to sue the United States to quiet title under the
circumstances presented here. In Kabakjian, the government seized and sold the
plaintiffs’ property in order to recoup unpaid income taxes. The plaintiffs sued the
government to quiet title after the tax sale had been completed, after the plaintiffs’
six-month period to redeem their interest in the property had expired, and after the
government conveyed the plaintiffs’ property to a third-party purchaser. The Third

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Circuit nonetheless allowed the plaintiffs to proceed under § 2410. Little Italy
insists that Kabakjian stands for the proposition that a plaintiff may sue under §
2410 even if it does not own or claim a present interest in the property at issue.
The Court disagrees for two reasons. First, the plaintiffs in Kabakjian may,
in fact, have claimed an interest in the property at the time they sued the United
States to quiet title. The Third Circuit’s decision makes clear that the plaintiffs
were not the record owners of the property at the time they sued, but the decision
does not indicate whether the plaintiffs were nonetheless claiming an interest in the
property. Second, and more importantly, there is no indication that the Third
Circuit considered the general rule that a plaintiff must claim an interest in the
relevant property in order to sue the United States under § 2410, and there is
certainly no suggestion in the decision that the Third Circuit intentionally departed
from, or rejected, the rule. Indeed, there is no indication that the United States
invoked the rule (which may indicate that the plaintiffs did claim an interest in the
property when they sued) or focused the court’s attention on it in any way.
Moreover, the key issue for decision in Kabakjian was whether the district court
retained jurisdiction to hear the suit under § 2410 once the United States filed a
certificate of release of the tax lien. For all of these reasons, the Court declines to
read Kabakjian as authority for the proposition that a plaintiff may sue the United

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States under § 2410 even if the plaintiff does not claim a current interest in the
property.
Little Italy’s claim to quiet title under § 2410 fails for one additional and
independent reason: Little Italy is not seeking to determine who owns title to the
Florida Property. Indeed, Little Italy has never disputed that the buyer of the
Florida Property currently holds clear title to the property. And “because there is
no title in dispute” with respect to the Florida Property, Little Italy’s claim “is not a
quiet title action within the immunity waiver of section 2410….” Raulerson v.
United States, 786 F.2d 1090, 1091-92 (11th Cir. 1986) (rejecting a plaintiff’s
effort to sue under § 2410 because there was “no controversy as to who has title to
th[e] property” and because the plaintiff’s “suit does not seek a determination of
who owns” the property) (emphasis in original).
In sum, Little Italy may not invoke the United States’ consent to suit in §
2410, and for that reason Little Italy’s Quiet Title Claim is barred by the sovereign
immunity of the United States.

The Court therefore lacks subject-matter

jurisdiction over the claim, and it must be dismissed. See, e.g., Raulerson, 786
F.2d at 1092.
B. The Due Process Claim
In its Due Process Claim (Count II of the Amended Complaint), Little Italy
alleges that its “Constitutional Due Process rights have been violated as it has been

15

deprived of its property though governmental action without any hearing, process,
or opportunity to appeal. Fuentes v. Shevin, 407 U.S. 67 (1972).” (Am. Compl. at
¶21, Pg. ID 70.) Little Italy claims that it never had a sufficient “statutory remedy
to address” (1) the IRS’ determination that it (Little Italy) was Polselli’s alter ego
and (2) the filing of the Tax Lien against the Florida Property. (Id. at 19.) But
Little Italy did have such a remedy, and the remedy satisfies the constitutional
requirements for due process.
“In order to establish a procedural due process claim, a plaintiff must show
that (1) he had a life, liberty, or property interest protected by the Due Process
Clause; (2) he was deprived of this protected interest; and (3) the state did not
afford him adequate procedural rights prior to depriving him of the property
interest.” Women’s Med. Prof’l Corp. v. Baird, 438 F.3d 595, 611 (6th Cir. 2006).
When the government deprives a person of a property interest, “[p]rocedural due
process generally requires that the state provide a person with notice and an
opportunity to be heard.” Warren v. City of Athens, Ohio, 411 F.3d 697, 708 (6th
Cir. 2005). The opportunity to be heard “must be granted at a meaningful time and
in a meaningful manner.” Armstrong v. Manzo, 380 U.S. 545, 552 (1965).
However, “due process does not always require the state to provide a hearing
prior to the initial deprivation of property.” Squire v. Coughlan, 469 F.3d 551, 558
(6th Cir. 2006) (citing Parratt v. Taylor, 451 U.S. 527, 540 (1981)) (emphasis in

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original). For instance, the United States Court of Appeals for the Sixth Circuit
has recognized that in the tax context, a post-deprivation hearing satisfies
procedural due process. See Morris v. United States, 540 Fed. App’x 477, 479 (6th
Cir. 2013) (collecting cases).
Here, the alleged deprivation was the IRS’ filing of the Tax Lien on the
Florida Property in Broward County, Florida. (See, e.g., Am. Compl. at ¶19.)
Little Italy had two post-deprivation procedures available to it if it wished to
challenge the Tax Lien and/or the basis for the lien (i.e., the IRS’ determination
that Little Italy was Polselli’s alter ego). Little Italy could have filed a quiet title
action under § 2410 before it sold the Florida Property or, as discussed in Part C,
infra, it could have sought a certificate of discharge of the Tax Lien under 26
U.S.C. § 6325(b)(4). Little Italy had more than five years in which to exercise
these remedies – from the time that the IRS filed the Tax Lien in October 2008
through the sale of the Florida Property in late 2013.
Little Italy counters that these remedies were illusory because it never
actually received notice of the Tax Lien. (See ECF #17 at 11-12, Pg. ID 101-02.)
But the IRS did provide Little Italy notice of the Tax Lien in a manner that satisfies
the Due Process Clause.
Notice satisfies due process if it is “reasonably calculated, under all the
circumstances, to apprise interested parties of the pendency of the action….”

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Mullane v. Cent. Hanover Bank & Trust Co., 339 U.S. 306, 314 (1950). Notice
sent by regular mail to a person’s primary address is generally sufficient. See Ming
Kuo Yang v. City of Wyoming, Michigan, --- F.3d ---, 2015 WL 4174760, at *3 (6th
Cir. July 13, 2015); see also Mota-Roman v. Holder, 331 Fed. App’x 379, 383 (6th
Cir. 2009).
Here, the IRS mailed three notices. The IRS mailed the Lien Notice to Little
Italy at the Bloomfield Hills address that it shared with Polselli (the same address
that Little Italy listed as its principal place of business and its mailing address in its
annual report). It did so because Polselli was the sole member of Little Italy and,
thus, “was the taxpayer for purposes of” Little Italy. (Stamey Decl. at ¶5.) The
IRS also mailed an Additional Lien Notice to Polselli’s personal address. And the
IRS mailed an Additional Lien Notice to Maurice Rose, who had been identified as
having power of attorney for Polselli. The Court has little difficulty concluding
that all of these notices were reasonably calculated to reach Little Italy and
Polselli.
Little Italy insists that the IRS did not satisfy due process because it never
actually received the notices. (See ECF #28.) But under the Due Process Clause,
the key issue is not whether the intended recipient actually receives the notice, but
whether the government transmitted the notice in a way reasonably calculated to
reach the intended recipient. See Yang, 2015 WL 4174760, at *3. Thus, “[t]he fact

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that [Little Italy] may not have received the [notices] does not negate the
constitutional adequacy of the attempt to accomplish actual notice.” Trimble v.
U.S. Dept. of Agriculture, 87 Fed. App’x 456, 458 (6th Cir. 2003).
Because the United States provided Little Italy adequate notice of, and an
opportunity to challenge, the Tax Lien, Little Italy’s Due Process Claim fails as a
matter of law.
C. The Refund Claim
In its Refund Claim (Count III of the Amended Complaint), Little Italy seeks
“a refund of the full amount it was forced to pay through the overzealous and
improper collection activities of the United States.” (Am. Compl. at ¶26.) Little
Italy purports to bring this claim under “28 U.S.C. 1346(a)(1) as expounded by the
United States Supreme Court in United States v. Williams, 514 U.S. 527 (1995).”
(Id. at ¶24.) Section 1346(a)(1) grants jurisdiction to federal district courts to hear
civil actions challenging certain tax collections by the IRS, and the Supreme Court
in Williams did suggest that a claim like Little Italy’s may fall within that section.
See Williams, 514 U.S. at 529. But subsequent developments make clear that Little
Italy may not proceed under § 1346(a)(1) in the circumstances presented here.
Since neither § 1346(a)(1) nor any other federal statute authorizes Little Italy’s
Refund Claim against the United States, the claim is barred by the government’s
sovereign immunity.

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Section 1346(a)(1) grants district courts original jurisdiction over:
[a]ny civil action against the United States for the
recovery of any internal-revenue tax alleged to have been
erroneously or illegally assessed or collected, or any
penalty claimed to have been collected without authority
or any sum alleged to have been excessive or in any
manner wrongfully collected under the internal-revenue
laws.
28 U.S.C. § 1346(a)(1).
In Williams, the Supreme Court interpreted § 1346(a)(1) to allow a plaintiff
to bring a refund claim against the IRS for taxes paid in order to release a lien that
the IRS placed on property due to the nonpayment of taxes by a third party. In that
case, Lori Williams (“Williams”) acquired her ex-husband’s interest in their
jointly-owned home when the couple divorced. Unbeknownst to Williams, the IRS
claimed more than $41,000 in tax liens on the property relating to the ex-husband’s
failure to pay certain business taxes for which he was personally liable. Williams
did not learn of the liens until she attempted to sell the property, at which point
Williams authorized disbursement of sale proceeds to satisfy the lien so that she
could convey clear title. Williams then sued the United States for a refund of the
taxes pursuant to § 1346(a)(1). The government argued that the federal court
lacked jurisdiction over Williams’ claim because § 1346(a)(1) “authorizes actions
only by the assessed party” – in this case, Williams’ ex-husband. Williams, 514
U.S. at 531.

The Supreme Court disagreed.

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The Supreme Court noted that

Williams “had no realistic alternative to payment of a tax she did not owe,” and
that the “government’s strained reading of § 1346(a)(1) … would leave people in
Williams’ position without a remedy.” Id. at 529, 535. Thus, the Supreme Court
concluded that § 1346(a)(1) authorized Williams to bring her refund claim.
Following Williams, Congress amended the Internal Revenue Code in 1998
to provide a specific statutory remedy for persons in Williams’ position.
Specifically, Congress added 26 U.S.C. §§ 6325(b)(4) and 7426(a)(4). These new
provisions “enable an individual like Williams … to challenge a lien placed upon a
plaintiff’s property as a result of a tax liability incurred by another party.”
Portsmouth Ambulance, Inc. v. United States, 756 F.3d 494,499 (6th Cir. 2014).
The Sixth Circuit has explained the effect of these amendments:
Under the new statutory scheme, 26 U.S.C. § 6325(b)(4)
requires the IRS to issue a certificate of discharge as a
matter of right to third parties under specified
circumstances. Pursuant to 26 U.S.C. § 6325(b)(4)(A),
the third party has the right to obtain a certificate of
discharge by applying to the Secretary of the Treasury for
such a certificate and either depositing cash or furnishing
a bond sufficient to protect the lien interest of the United
States. The Secretary does not have the discretion to
refuse to issue a certificate of discharge if this procedure
is followed. After the property owner follows the
procedure under 26 U.S.C. § 6325(b)(4)(A), the
Secretary must refund the amount deposited or release
the bond, to the extent that the Secretary determines that
the taxpayer's unsatisfied liability giving rise to the lien
can be satisfied from a source other than property owned
by the third party, or the value of the interest of the
United States in the property is less than the Secretary's

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prior determination of its value.
6325(b)(4)(B).

26 U.S.C. §

Section 7426(a)(4) provides a judicial remedy for
violations of § 6325(b)(4). The owner of the property
has 120 days after the certificate is issued to challenge
the Secretary's determination by bringing a civil action
against the United States in federal district court. Id. §
7426(a)(4). If no action is filed within the 120–day
period, the Secretary has 60 days to apply the amount
deposited or collected on the bond, to the extent
necessary to satisfy the unsatisfied liability secured by
the lien and refund any amount which is not used to
satisfy the liability. Id. § 6325(b)(4)(C). If an action is
filed and the court determines that the value of the
interest of the United States in the property is less than
the value that the Secretary determined, the court will
grant a judgment ordering the refund of the amount of the
deposit or a release of the bond to the extent that the
amount of the deposit or bond exceeds the value
determined by the court. Id. § 7426(b)(5). The statute
states clearly that “[n]o other action may be brought by
such person for such a determination.” Id. § 7426(a)(4).
Plaintiffs must exhaust these administrative remedies
prior to bringing suit for damages. See id. § 7426(h)(2).
Munaco v. United States, 522, F.3d 651, 654-55 (6th Cir. 2008) (footnotes
omitted).
In light of these amendments, a third party – such as Little Italy – seeking a
refund for payments made to satisfy another taxpayer’s liability now has explicit
administrative and judicial remedies. Specifically, the third party may obtain a
certificate of discharge from the IRS pursuant to § 6325(b)(4). The third party may

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then challenge the IRS’s decision to impose the lien pursuant to § 7426(a)(4) by
filing a claim within 120 days of the issuance of the certificate of discharge.
These new statutory remedies preclude a third party in Little Italy’s position
from maintaining a refund claim against the United States pursuant to § 1346(a)(1).
That is exactly what the Sixth Circuit held in Portsmouth Ambulance, supra. In
that case, the IRS filed a notice of federal tax lien against Portsmouth Ambulance,
Inc. as the alter ego of a company with outstanding tax liabilities. Portsmouth
Ambulance denied that it was the company’s alter ego, but it did not obtain a
certificate of discharge pursuant to § 6325(b)(4) nor challenge the lien pursuant to
§ 7426(a)(4). Proceeds from a creditor’s sale of Portsmouth Ambulance’s assets
were remitted to the IRS to satisfy the tax lien. Portsmouth Ambulance then sued
the IRS under § 1346(a)(4) for a refund.

The Sixth Circuit determined that

Portsmouth Ambulance could not bring a § 1346(a)(4) claim because §§
6325(b)(4) and 7426(a)(4) “provide[] the exclusive remedy for a third-party
property owner … to obtain a refund for payments made to satisfy the tax liability
of another entity.” Portsmouth Ambulance, 756 F.3d at 501 (emphasis added).
Accordingly, the Sixth Circuit affirmed the dismissal of Portsmouth Ambulance’s
claim. See id. at 504. See also Munaco, 522 F.3d at 656 (federal courts “lack[]
jurisdiction under § 1346(a)(1) to hear refund suits brought by third party real
property owners who wish to challenge tax lien-related collections by the IRS and

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who have not pursued the remedy provided to them by §§ 6325(b)(4) and
7426(a)(4)”) (quoting Four Rivers Invs., Inc. v. United States, 77 Fed. Cl. 592, 603
(Fed. Cl. 2007)) (internal punctuation omitted). Portsmouth Ambulance compels
the conclusion that Little Italy may not seek a refund pursuant to § 1346(a)(4)
because §§ 6325(b)(4) and 7426(a)(4) provided the sole remedies available to
Little Italy.4
Little Italy contends that it is not barred from maintaining its Refund Claim
under § 1346(a)(4). Little Italy relies on Reaser v. United States, 731 F.Supp.2d
681 (N.D. Ohio 2010), in support of its argument. (See ECF #17 at 17-18, Pg. ID
107-08.) But Little Italy simply ignores the fact that the Sixth Circuit expressly
disapproved of Reaser in Portsmouth Ambulance. See Portsmouth Ambulance,
756 F.3d at 502-03. Little Italy’s reliance on Reaser is unavailing.
For the reasons discussed above, the United States is immune from Little
Italy’s Refund Claim pursuant to § 1346(a)(4), and this Court therefore lacks
subject-matter jurisdiction over the claim. See id. at 504.

4

To the extent that Little Italy contends that the remedies in §§ 6325(b)(4) and
7426(a)(4) were not available to it because it did not have notice of the Tax Liens,
that argument fails because the United States provided notice to Little Italy in a
manner that complied with due process. See Part B, supra.

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CONCLUSION
For the reasons discussed in this Opinion and Order, IT IS HEREBY
ORDERED that the United States’ Motion to Dismiss (ECF #16) is GRANTED
as to the Quiet Title Claim (Count I) and the Due Process Claim (Count III). IT IS
FURTHER ORDERED that the United States is GRANTED summary judgment
as to the Due Process Claim (Count II). Little Italy’s Amended Complaint (ECF
#15) is DISMISSED WITH PREJUDICE.

s/Matthew F. Leitman
MATTHEW F. LEITMAN
UNITED STATES DISTRICT JUDGE

Dated: August 14, 2015
I hereby certify that a copy of the foregoing document was served upon the
parties and/or counsel of record on August 14, 2015, by electronic means and/or
ordinary mail.
s/Holly A. Monda
Case Manager
[phone]

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