Hall v. United States of America et al

Filing 14

ORDER granting 11 Motion to Dismiss for Lack of Jurisdiction; granting 11 Motion to Dismiss for Failure to State a Claim. For the reasons set forth in the attached Memorandum and Order, the Court grants Defendants' motion to dismiss. The Cou rt grants Plaintiff leave to amend the Complaint if he filed an administrative appeal of his jeopardy levy under section 7429 and can allege sufficient facts to show that he exhausted his remedies prior to filing suit in federal court. Plaintiff is given thirty (30) days to do so. If Plaintiff fails to file an amended complaint within thirty days, the Court will dismiss this action. Ordered by Judge Margo K. Brodie on 7/13/2017. (Haji, Sara)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF NEW YORK
--------------------------------------------------------------ANTHONY HALL,
Plaintiff,
v.

MEMORANDUM & ORDER
16-CV-2073 (MKB)

UNITED STATES OF AMERICA, INTERNAL
REVENUE SERVICE, UNITED STATES
DEPARTMENT OF THE TREASURY, MARY
ANN ACONE and NATALIE CASSADINE,
Defendants.
--------------------------------------------------------------MARGO K. BRODIE, United States District Judge:
Plaintiff Anthony Hall, proceeding pro se, commenced the above-captioned action on
April 27, 2016 against Defendants the United States of America, the Internal Revenue Service
(“IRS”), the United States Department of the Treasury, Mary Ann Acone and Natalie Cassadine, 1
alleging an “unconstitutional theft of [Plaintiff’s] proprietary interest in [his] private property”
and the “capricious, wrongful and unreasonable imposition of [a] jeopardy levy.” (Compl. 1,
Docket Entry No. 1 (capitalizations omitted).) Defendants move to dismiss the Complaint for
lack of subject matter jurisdiction and for failure to state a claim pursuant to Rules 12(b)(1) and
12(b)(6), respectively, of the Federal Rules of Civil Procedure. (Defs. Mot. to Dismiss with
Incorporated Mem. of Law (“Defs. Mem.”), Docket Entry No. 11; Decl. of Natalie Cassadine
(“Cassadine Decl.”), Docket Entry No. 11-1.) Based on Plaintiff’s request that the Court “quash[]
the unlawful institution of [the] jeopardy levy and release . . . all holds, liens and restraints

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Acone is an IRS “Territory Manager” and Cassadine is an IRS revenue officer. (See
Decl. of Natalie Cassadine (“Cassadine Decl.”) ¶ 1, Docket Entry No. 11-1.)

currently placed on [Plaintiff’s] bank accounts,” (Compl. ¶ 12 (capitalizations omitted)), the Court
construes Plaintiff’s claims to seek review of a jeopardy levy under 26 U.S.C. § 7429 (“section
7429”) or to assert a wrongful levy action under 26 U.S.C. § 7426 (“section 7426”). 2
For the reasons set forth below, the Court grants Defendants’ motion to dismiss the
Complaint.
I.

Background
The Court assumes the truth of the factual allegations in the Complaint for purposes of this

Memorandum and Order. On April 13, 2016, Plaintiff received a notice from the IRS informing
him that he had a “balance due” of $1,022,289.60 from an allegedly fraudulent federal tax return
that Plaintiff had filed for the 2014 tax year. (Compl. ¶ 5.) The balance represented Plaintiff’s
2014 tax refund of $851,908 and accrued interest. 3 (Cassadine Decl. ¶ 4; see Notice of Tax Due
on Federal Tax Return at 12, annexed to Compl. as Ex. B.) By letter dated April 14, 2016, the

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Plaintiff asserts that Defendants “violated Federal Statutes at 42 U.S.C. 1982, 42 U.S.C.
1983” and “violat[ed his] substantive due process rights.” (Compl. ¶¶ 9, 11.) Neither statute
provides a cognizable claim for Plaintiff under the facts alleged in the Complaint. However, the
Court is required to construe the submissions of a pro se litigant with “special solicitude” and “to
raise the strongest arguments that they suggest,” Williams v. Corr. Officer Priatno, 829 F.3d 118,
122 (2d Cir. 2016) (citations and internal quotation marks omitted), and the Court therefore
construes Plaintiff’s claims under sections 7426 and 7429.
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According to the IRS, Plaintiff filed an income tax return for the 2014 tax year on April
15, 2015, listing $3,192,142 of “other income” and $2,008,142 of tax withholding and claiming a
refund of $851,908. (Cassadine Decl. ¶ 4.) The IRS issued Plaintiff a refund check in the amount
of $861,823.43, which was the claimed refund plus interest in the amount of $11,915.43. (Id. ¶
5.) Plaintiff deposited the check into an account at a J.P. Morgan Chase Bank in Indianapolis,
Indiana. (Id.) The Frivolous Return Program unit of the IRS later identified Plaintiff’s tax refund
as “frivolous” and determined that it was consistent with “refund tax schemes such as the Form
1099-OID scheme.” (Id. ¶ 6; Defs. Mem. 3 n.2 (explaining the Form 1099-OID scheme).)

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IRS informed Plaintiff that it had approved a jeopardy levy4 to collect the amount Plaintiff owed.
(Compl. ¶ 6; Notice of Jeopardy Levy and Right of Appeal (“Notice of Jeopardy Levy”), annexed
to Compl. as Ex. A.) The Notice of Jeopardy Levy also informed Plaintiff that he was entitled to
request an administrative review of the action and was required to do so before he requested
judicial review in a United States District Court. (Notice of Jeopardy Levy at 1.) On April 24,
2016, Plaintiff received a notice from J.P. Morgan Chase Bank, N.A., placing holds in the
amounts of $181,095.84 and $204,915.50 on the balance in Plaintiff’s personal account and an
account named the “Hall Sovereign Irrevocable Private Trust.” (Compl. ¶ 7; Notice of Hold,
annexed to Compl. as Ex. C.) Plaintiff commenced this action on April 27, 2016. (See Compl.)
II. Discussion
a.

Standard of review
i.

Rule 12(b)(1)

A district court may dismiss an action for lack of subject matter jurisdiction pursuant to
Rule 12(b)(1) when the court “lacks the statutory or constitutional power to adjudicate
it.” Cortlandt St. Recovery Corp. v. Hellas Telecomms., S.À.R.L., 790 F.3d 411, 416–17 (2d Cir.
2015) (quoting Makarova v. United States, 201 F.3d 110, 113 (2d Cir. 2000)); Shabaj v. Holder,
718 F.3d 48, 50 (2d Cir. 2013) (quoting Aurecchione v. Schoolman Transp. Sys., Inc., 426 F.3d
635, 638 (2d Cir. 2005)); see also Chau v. S.E.C., 665 F. App’x 67, 70 (2d Cir. 2016). The
plaintiff has the burden to prove that subject matter jurisdiction exists, and in evaluating whether

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The IRS ordinarily may not collect a tax by levy until certain notice and waiting periods
have elapsed. See 26 U.S.C. §§ 6330(a), 6331(d). However, if the IRS determines that the
property is in jeopardy, it may impose a “jeopardy or termination assessment,” which consists of
an “immediate notice and demand” followed by a levy on the property (a “jeopardy levy”). See
id. § 6331(a); see also IRS Manual Part 5, Chapter 11, Section 3, available at
https://www.irs.gov/irm/part5/irm_05-011-003.html#d0e61 (last accessed July 10, 2017).

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the plaintiff has met that burden, “‘[t]he court must take all facts alleged in the complaint as true
and draw all reasonable inferences in favor of plaintiff,’ but ‘jurisdiction must be shown
affirmatively, and that showing is not made by drawing from the pleadings inferences favorable to
the party asserting it.’” Morrison v. Nat'l Austl. Bank Ltd., 547 F.3d 167, 170 (2d Cir. 2008)
(citations omitted), aff'd, 561 U.S. 247 (2010). A court may consider matters outside of the
pleadings when determining whether subject matter jurisdiction exists. M.E.S., Inc. v. Snell, 712
F.3d 666, 671 (2d Cir. 2013); Romano v. Kazacos, 609 F.3d 512, 520 (2d Cir. 2010).
ii.

Rule 12(b)(6)

A complaint must plead “enough facts to state a claim to relief that is plausible on its
face.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007). A claim is plausible “when the
plaintiff pleads factual content that allows the court to draw the reasonable inference that the
defendant is liable for the misconduct alleged.” Matson v. Bd. of Educ., 631 F.3d 57, 63 (2d Cir.
2011) (quoting Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009)). Although all allegations contained
in the complaint are assumed to be true, this tenet is “inapplicable to legal conclusions.” Iqbal,
556 U.S. at 678. In reviewing a pro se complaint, the court must be mindful that a plaintiff's
pleadings should be held “to less stringent standards than formal pleadings drafted by
lawyers.” Erickson v. Pardus, 551 U.S. 89, 94 (2007) (per curiam) (quoting Estelle v. Gamble,
429 U.S. 97, 104–105 (1976)); see Harris v. Mills, 572 F.3d 66, 72 (2d Cir. 2009) (noting that
even after Twombly, the court “remain[s] obligated to construe a pro se complaint liberally”).
b.

The Court lacks subject matter jurisdiction over Plaintiff’s section 7429 claim

Defendants argue that the Court lacks subject matter jurisdiction over Plaintiff’s challenge
to the jeopardy levy under section 7429 because Plaintiff failed to exhaust his administrative
remedies. (Defs. Mem. 10.) Plaintiff does not respond to this argument.

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A taxpayer seeking to challenge a jeopardy levy under section 7429(b) must follow the
administrative procedures set forth in section 7429(a) before bringing an action in federal court.
Zuckman v. Dep’t of Treasury, 448 F. App’x 160, 161 (2d Cir. 2012) (“To the extent that
Zuckman challenges the levy on his wages, there is no indication that he exhausted his
administrative remedies. Thus, the district court properly dismissed those claims for lack of
subject matter jurisdiction.”). Under section 7429(a), a taxpayer may seek administrative review
of a jeopardy levy by filing a written request with the Area Director 5 within thirty days of the date
on which the IRS provided the taxpayer with the written statement of the information on which it
relied in imposing the jeopardy levy. 26 U.S.C. § 7429(a)(2)–(3). The IRS then determines
whether or not the jeopardy levy was reasonable under the circumstances. Id. § 7429(a)(3)(B).
After seeking administrative review, a taxpayer may also seek judicial review “within 90
days after the earlier of” either “the day the [IRS] notifies the taxpayer of [its] determination”
regarding the request for administrative review or “the 16th day after the request [for
administrative review] . . . was made.” Id. § 7429(b)(1). Thus, “[s]ection 7429(b) allows [a]
district court to review an IRS jeopardy assessment only after the taxpayer has filed a request for
administrative review.” Wapnick v. United States, 112 F.3d 74, 74 (2d Cir. 1997).
Plaintiff has neither alleged in the Complaint nor argued in opposition to Defendants’
motion that he exhausted the administrative procedures in section 7429(a) before filing suit on
April 27, 2016. The Court therefore lacks subject matter jurisdiction over Plaintiff’s claim under
section 7429. See id.; see also Zuckman, 448 F. App’x at 161 (affirming dismissal for lack of

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IRS area directors ensure compliance across several geographic areas. See, e.g., Small
Business/Self Employed Division At-a-Glance, Internal Revenue Service, available at
https://www.irs.gov/uac/small-business-self-employed-division-at-a-glance (last accessed July 10,
2017).
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subject matter jurisdiction where the plaintiff failed to indicate that he exhausted his
administrative remedies under section 7429(a)); Sherwood v. Dep’t of Treasury, 372 F. App’x
101, 101 (2d Cir. 2010) (affirming dismissal for lack of subject matter jurisdiction where there
was “no indication that [the plaintiff] exhausted his administrative remedies as required with
respect to his claim” (citing section 7429)); United States v. Rabkin, 315 F.R.D. 159, 164
(E.D.N.Y. 2016) (dismissing action for failure to exhaust administrative procedures under section
7429(a)).
c.

Plaintiff does not have a cause of action under section 7426

Defendants argue that, to the extent Plaintiff attempts to assert a claim for wrongful levy
under section 7426, the statute precludes him from bringing such a claim because he is not the
correct party to bring suit. (Defs. Mem. 8.) Plaintiff does not respond to this argument.
“[A] plaintiff must have a cause of action under the applicable statute. This was formerly
called ‘statutory standing.’” Am. Psychiatric Ass’n v. Anthem Health Plans, Inc., 821 F.3d 352,
359 (2d Cir. 2016). “The Supreme Court has recently clarified, however, that what has been
called ‘statutory standing’ is in fact not a standing issue, but simply a question of whether the
particular plaintiff ‘has a cause of action under the statute.’” Id. (quoting Lexmark Int’l, Inc. v.
Static Control Components, Inc., 572 U.S. ---, ---, 134 S. Ct. 1377, 1387 (Mar. 25, 2014)). The
Court therefore “appl[ies] traditional principles of statutory interpretation” to determine whether
section 7426 allows Plaintiff to bring a private right of action under the circumstances of this
case. See Lexmark, 572 U.S. at ---, 134 S. Ct. at 1388.
Section 7426(a) is titled “Actions permitted,” and provides in pertinent part:
If a levy has been made on property or property has been sold
pursuant to a levy, any person (other than the person against whom
is assessed the tax out of which such levy arose) who claims an

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interest in or lien on such property . . . may bring a civil action against
the United States in a district court of the United States.
26 U.S.C. § 7426(a)(1) (emphasis added). The plain language of the statute provides a private
right of action only for third parties that have an interest in a levied property. See Mottahadeh v.
United States, 33 F. Supp. 3d 210, 212 (E.D.N.Y. 2014) (interpreting section 7426 to provide a
right of action for “someone other than the taxpayer whose liability is the purpose of the levy”),
aff’d, 794 F.3d 347 (2d Cir. 2015); see also Ulloa v. United States, No. 06-CV-751, 2007 WL
2764792, at *5 (N.D.N.Y. Sept. 20, 2007) (dismissing wrongful levy claim because, “[i]n this
case, . . . [the] plaintiff is the person ‘against whom is assessed the tax out of which such levy
arose’”).
Even if the meaning of the statute was ambiguous, the Court would nevertheless reach the
same conclusion by relying on the principle that waivers of sovereign immunity are narrowly
construed. “Sovereign immunity shields the United States from suit absent a consent to be sued
that is ‘unequivocally expressed.’” United States v. Bormes, 568 U.S. ---, ---, 133 S. Ct. 12, 16
(Nov. 13, 2012) (citations and internal quotation marks omitted); see also United States v. Dalm,
494 U.S. 596, 608 (1990) (“Under settled principles of sovereign immunity, the United States, as
sovereign, is immune from suit, save as it consents to be sued.”) A waiver of the federal
government’s sovereign immunity must be “unequivocally expressed in statutory text,” and “may
not be implied.” Sossamon v. Texas, 563 U.S. 277, 284 (2011). Moreover, “a waiver of
sovereign immunity will be strictly construed, in terms of its scope, in favor of the sovereign.” Id.
at 285 (quoting Lane v. Pena, 518 U.S. 187, 192 (1996)).
Given the clear text of the statute and the strict construction of waivers against sovereign
immunity, the Court finds that the private right of action in section 7426 is limited to third parties
who claim an interest in the levied property. Here, Plaintiff was the person against whom the tax

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was assessed, see 26 U.S.C. § 7426(a)(1), and Plaintiff therefore lacks a cause of action under
section 7426. The Court therefore dismisses Plaintiff’s claim to the extent it is brought under
section 7426.
III. Conclusion
Although the Court recognizes that it is unlikely that Plaintiff exhausted his administrative
remedies, since Plaintiff filed this action within days of receiving the Notice of Jeopardy Levy
from the IRS, (see Compl. ¶ 6), the Court grants Plaintiff leave to amend the Complaint if he filed
an administrative appeal of his jeopardy levy under section 7429 and can allege sufficient facts to
show that he exhausted his remedies prior to filing suit in federal court. Plaintiff is given thirty
(30) days to do so. If Plaintiff fails to file an amended complaint within thirty days, the Court will
dismiss this action.
SO ORDERED:
s/ MKB
MARGO K. BRODIE
United States District Judge
Dated: July 13, 2017
Brooklyn, New York

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