United States of America v. Halpern et al
OPINION & ORDER denying 17 Motion to Dismiss for Failure to State a Claim. SO ORDERED that defts motion to dismiss the Governments second cause of action pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure is denied. Ordered by Judge Sandra J. Feuerstein on 10/5/2015. (Florio, Lisa)
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF NEW YORK
UNITED STATES OF AMERICA,
10/5/2015 11:35 am
U.S. DISTRICT COURT
EASTERN DISTRICT OF NEW YORK
LONG ISLAND OFFICE
OPINION & ORDER
-againstDAVID L. HALPERN, VALERIE J.
HALPERN and WELLS FARGO BANK, N.A.,
On January 5, 2015, plaintiff United States of America (“the Government”) commenced
this action against defendants David L. Halpern (“David”) and Valerie J. Halpern (“Valerie”)
(collectively, “defendants”), and defendant Wells Fargo Bank, N.A. (“Wells Fargo”)1 pursuant to
26 U.S.C. §§ 7401 and 7403, seeking, inter alia, (1) to reduce to judgment unpaid federal tax
assessments made by the Internal Revenue Service (“IRS”) against David; (2) to establish the
validity of its liens under 26 U.S.C. § 6321; and (3) to set aside the fraudulent conveyance of
certain real property known as 19 Marion Lane, East Hampton, New York 11937 (“the East
Hampton Property”) by David and enforce federal tax liens upon the East Hampton Property.
Pending before the Court is defendants’ motion to dismiss the Government’s second cause of
action pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure for failure to state a
Valerie and Wells Fargo were named as defendants pursuant to 26 U.S.C. § 7403(b) on
the basis that they “may claim an interest in the real property upon which [the Government] seeks
to foreclose its liens.” (Amended Complaint [“Am. Compl.”], ¶¶ 4-5). Unlike Valerie, Wells
Fargo has not appeared in this action or filed an answer to the complaint.
claim for relief. For the reasons set forth below, defendants’ motion is denied.
By warranty deed dated January 27, 1978 (“the 1978 Deed”), defendants, as husband and
wife, purchased the East Hampton Property. (Am. Compl., ¶19). The 1978 Deed was recorded
in the Suffolk County Clerk’s office on February 17, 1978 in Liber 8390, Page 380. (Id.)
The Government alleges that David “was responsible for collecting, truthfully accounting
for, or paying over the employment tax liabilities of Freedman Die Cutters Inc. [‘FDCI’] for the
corporate tax periods ending September 30, 2000, December 31, 2000, June 30, 2001, September
30, 2001, December 31, 2001, March 31, 2002, June 30, 2002 and September 30, 2002 (“the
Default Periods”). (Am. Compl., ¶ 8). By letter dated May 13, 2003, the IRS notified David
“that it intended to assess him with Trust Fund Recovery Penalties for the unpaid employment
taxes of [FDCI] that had accrued in 2000, 2001 and 2002.” (Id., ¶ 13). By letter dated July 14,
2003, David protested the proposed assessments. (Id., ¶ 14).
On or about September 24, 2004, David’s counsel met with IRS Appeals Officer Brenda
Sarver to discuss David’s appeal of the denial of his protest. (Am. Compl., ¶¶ 15, 21).
On October 16, 2004, by bargain and sale deed for ten dollars ($10.00) or less (“the 2004
Deed”), David conveyed record title of his interest in the East Hampton Property to Valerie.
(Am. Compl., ¶ 20). The 2004 Deed was recorded in the Suffolk County Clerk’s office on
The factual allegations are taken from the complaint and are assumed to be true for
purposes of this motion only. They do not constitute findings of fact by the Court.
October 27, 2004 in Liber D00012351, Page 631. (Id.)
By letter dated December 15, 2004, the IRS denied David’s protest of the proposed
assessments. (Am. Compl., ¶ 16).
On January 10, 2005, a delegate of the Secretary of the Treasury made assessments
against David pursuant to 26 U.S.C. § 6672 in the total amount of one million one hundred
twenty-five thousand ninety-two dollars and thirty-four cents ($1,125,092.34) “with respect to
the trust fund portion of federal income and Federal Insurance Contributions Act (‘FICA’) taxes
(collectively ‘employment taxes’) withheld from the wages of employees of [FDCI] * * *” for
the Default Periods. (Am. Compl., ¶ 7).
On January 5, 2015, the Government commenced this action against defendants and
Wells Fargo. On February 4, 2015, the Government filed an amended complaint seeking, inter
alia, (1) to reduce to judgment unpaid federal tax assessments made by the IRS against David in
the total amount of one million one hundred twenty-five thousand ninety-two dollars and thirtyfour cents ($1,125,092.34), “plus interest and statutory additions that continue to accrue after
January 1, 2015” (first cause of action), (Am. Compl. at 7); and (2) judgment (a) declaring (i)
that Valerie is the nominee of David with respect to a one-half interest in the East Hampton
Property, that David is the true and equitable joint owner of the East Hampton Property, and that,
“as such, any interest held by Valerie  above her half interest in the East Hampton Property is
subject to the valid federal tax liens of [plaintiff],” (id. at 8); and (ii) that the transfer of the East
Hampton Property “was actually fraudulent within the meaning of New York Debtor and
Creditor Law §§ 270-281 or, in the alternative, was constructively fraudulent within the meaning
of New York Debtor and Creditor Law § 273[,]” (id.), and (b) ordering the enforcement of the
Government’s tax liens upon the East Hampton Property, a sale of the East Hampton Property
and that the proceeds of such sale be distributed, after the costs of the sale, to the Government
“and to the other parties in accordance with the law” (second cause of action). (Id.)
With respect to its first claim against David to reduce to judgment the unpaid IRS tax
assessments, the Government alleges, inter alia, (1) that David “willfully failed to collect,
truthfully account for, or pay over the employment tax liabilities of [FDCI]” for the Default
Periods, (Am. Compl., ¶ 9); (2) that “notices of the assessments and demands for payment of the
liabilities” were sent to David on January 10, 2005, (id., ¶ 10); and (3) that “[d]espite such notice
and demand, David  has failed, neglected, or refused to pay in full the employment tax
liabilities set forth [therein], and * * * remains liable to [plaintiff] for the unpaid balance of the
employment taxes * * * in the total amount of $1,125,092.34, plus interest and other statutory
addition that continue to accrue from January 1, 2015.” (Id., ¶ 11).
With respect to its second claim against defendants to enforce the federal tax liens and set
aside the fraudulent conveyance of the East Hampton Property, the Government alleges, inter
alia, (1) that “[a]s a result of [David’s] neglect, failure and refusal to pay the assessments * * *,
federal tax liens in the amount of the assessments, plus statutory interest, arose pursuant to the
provisions of 26 U.S.C. Sections 6321 and 6322, and attached, as of the dates of the assessments,
to all property and rights to property of David  then in existence or thereafter acquired[,]” (Am.
Compl., ¶ 17); (2) that “[a] delegate of the Secretary of Treasury filed notices of federal tax liens
(NFTL) in accordance with 26 U.S.C. § 6323(f) for the unpaid liabilities of David  at the
Recorder of Deeds of Suffolk County” on May 6, 2005, (id., ¶ 18); (3) that the transfer of the
East Hampton Property to Valerie was made “in anticipation of the assessment of the additional
Trust Fund Recovery Penalties” by the IRS, (id., ¶ 21); (4) that David continues to exercise
dominion and control over, to enjoy the benefits of ownership of, and to retain possession of, the
East Hampton Property, (id., ¶¶ 22-24); (5) that a close relationship exists between defendants,
(id., ¶ 25); (6) that “Valerie  holds record title to a one-half interest in the East Hampton
Property as the nominee of David , and David  remains the true and equitable joint owner of
the East Hampton Property[,]” (id., ¶ 26); (7) that David’s transfer of his interest in the East
Hampton Property to Valerie (a) was voluntary and done “with the actual intent to hinder, delay,
or defraud [his] creditors * * *, both present and future, including [the Government], and thus
was fraudulent[,]” (id., ¶ 27), and (b) “was made without receiving a reasonably equivalent value
in exchange for the transfer, at a time when [he] believed or reasonably should have believed that
he would incur debts beyond his ability to pay as they became due to creditors, including [the
Government] * * * and in anticipation of imminent future assessments of Trust Fund Recovery
Penalties for unpaid employment taxes arising in 2000, 2001 and 2002 and thus [when] he was
implicitly under the threat of litigation by virtue of his difficulties with the [IRS],” (id., ¶ 28); and
(8) that the transfer by David (a) was done with respect to an insider, namely his wife, Valerie
,” (id., ¶ 29); and (b) “was actually fraudulent within the meaning of New York Debtor and
Creditor Law §§ 270-281, or, in the alternative, was constructively fraudulent within the meaning
of New York Debtor and Creditor Law § 273 as the transfer rendered [him] insolvent.” (Id., ¶
Defendants now move pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure
to dismiss the Government’s second cause of action as barred by the applicable statute of
Standard of Review
The standard of review on a motion made pursuant to Rule 12(b)(6) of the Federal Rules
of Civil Procedure is that a plaintiff plead sufficient facts “to state a claim for relief that is
plausible on its face.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 127 S. Ct. 1955, 1974, 167 L.
Ed. 2d 929 (2007). “A claim has facial plausibility when the plaintiff pleads factual content that
allows the court to draw the reasonable inference that the defendant is liable for the misconduct
alleged.” Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S. Ct. 1937, 173 L. Ed. 2d 868 (2009). The
plausibility standard requires “more than a sheer possibility that a defendant has acted
“A pleading that offers ‘labels and conclusions’ or ‘a formulaic recitation of the elements
of a cause of action will not do.’” Iqbal, 556 U.S. at 678, 129 S. Ct. 1937 (quoting Twombly,
550 U.S. at 555, 127 S. Ct. 1955). “Nor does a complaint suffice if it tenders ‘naked assertion[s]’
devoid of ‘further factual enhancement.’” Id. (quoting Twombly, 550 U.S. at 557, 127 S. Ct.
1955). “Factual allegations must be enough to raise a right to relief above the speculative level,
on the assumption that all the allegations in the complaint are true (even if doubtful in fact).”
Twombly, 550 U.S. 544, 127 S. Ct. at 1959.
In deciding a motion pursuant to Rule 12(b)(6), the Court must liberally construe the
claims, accept all factual allegations in the complaint as true, and draw all reasonable inferences
in favor of the plaintiff. See Aegis Ins. Servs., Inc. v. 7 World Trade Co., L.P., 737 F.3d 166, 176
(2d Cir. 2013); Grullon v. City of New Haven, 720 F.3d 133, 139 (2d Cir. 2013). However, this
tenet “is inapplicable to legal conclusions. Threadbare recitals of the elements of a cause of
action, supported by mere conclusory statements, do not suffice.” Iqbal, 556 U.S. at 678, 129 S.
Ct. 1937. “While legal conclusions can provide the framework of a complaint, they must be
supported by factual allegations.” Id. at 679, 129 S. Ct. 1937. “In keeping with these principles a
court considering a motion to dismiss can choose to begin by identifying pleadings that, because
they are no more than conclusions, are not entitled to the assumption of truth.” Id.; see also
Ruston v. Town Bd. for Town of Skaneateles, 610 F.3d 55, 59 (2d Cir. 2010).
Nonetheless, a plaintiff is not required to plead “specific evidence or extra facts beyond
what is needed to make the claim plausible.” Arista Records, LLC v. Doe 3, 604 F.3d 110, 120-1
(2d Cir. 2010); accord Pension Benefit Guar. Corp. ex rel. St. Vincent Catholic Med. Ctrs. Ret.
Plan v. Morgan Stanley Inv. Mgmt. Inc., 712 F.3d 705, 729-30 (2d Cir. 2013). “When there are
well-pleaded factual allegations, a court should assume their veracity and then determine whether
they plausibly give rise to an entitlement to relief.” Iqbal, 556 U.S. at 679, 129 S. Ct. 1937.
In deciding a motion pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure,
the Court must limit itself to the facts alleged in the complaint, which are accepted as true; to any
documents attached to the complaint as exhibits or incorporated by reference therein; to matters
of which judicial notice may be taken; or to documents upon the terms and effect of which the
complaint “relies heavily” and which are, thus, rendered “integral” to the complaint. Chambers
v. Time Warner, Inc., 282 F.3d 147, 152-53 (2d Cir. 2002); see also ASARCO LLC v. Goodwin,
756 F.3d 191, 198 (2d Cir. 2014), cert. denied, 135 S. Ct. 715, 190 L. Ed. 2d 441 (2014).
Statute of Limitations
Although a statute of limitations “is an affirmative defense that a defendant must plead
and prove[,]” Staehr v. Hartford Fin. Servs. Group, Inc., 547 F.3d 406, 425 (2d Cir. 2008) (citing
Fed. R. Civ. P. 8(c)(1)), a defendant may raise it in a motion to dismiss pursuant to Rule 12(b)(6)
of the Federal Rules of Civil Procedure “if the defense appears on the face of the complaint.” Id.;
see also Ellul v. Congregation of Christian Bros., 774 F.3d 791, 798 (2d Cir. 2014) (“Although
the statute of limitations is ordinarily an affirmative defense that must be raised in the answer, a
statute of limitations defense may be decided on a Rule 12(b)(6) motion if the defense appears on
the face of the complaint.”)
Defendants are correct that under New York law, fraudulent conveyance claims must be
commenced within six (6) years from the date of the alleged fraud, or “two years from the time
the plaintiff or the person under whom the plaintiff claims discovered the fraud, or could with
reasonable diligence have discovered it[,]” N.Y. C.P.L.R. § 213(8), and that claims asserting
constructive fraud brought pursuant to § 273 of the New York Debtor and Creditor Law are
“governed by a six-year statute of limitations period which accrues at the time of the fraudulent
conveyance.” Analogic Corp. v. Manuelian, No. 12-cv-1428, 2014 WL 1330774, at *3
(E.D.N.Y. 2014); see also Felshman v. Yamali, 106 A.D.3d 948, 949-50, 966 N.Y.S.2d 145
(N.Y. App. Div. 2013) (“[A] cause of action based upon constructive fraud pursuant to Debtor
and Creditor Law § 273 must be commenced within six years after the date that the fraud
occurred, irrespective of the date of discovery.”); Jaliman v. D.H. Blair & Co. Inc., 105 A.D.3d
646, 647, 964 N.Y.S.2d 112 (N.Y. App. Div. 2013) (“New York law provides that a claim for
constructive fraud is governed by the six-year limitation set out in CPLR 213(1), and that such a
claim arises at the time the fraud or conveyance occurs[.]” (quotations and citation omitted)).
However, “[t]he New York State statute of limitations applicable to fraudulent
conveyances does not apply to the United States[,]” U.S. v. Alfano, 34 F. Supp. 2d 827, 835
(E.D.N.Y. 1999); see also United States v. Carney, 796 F. Supp. 700, 703 (E.D.N.Y. 1992)
(holding that the Government is not bound by the statute of limitations under New York Debtor
and Creditor Law); United States v. Inc. Vill. of Island Park, 791 F. Supp. 354, 369 (E.D.N.Y.
1992), because it “acts in its sovereign capacity when it brings suit to set aside a fraudulent
conveyance or to enforce a tax lien[,]” Alfano, 34 F. Supp. 2d at 835, and “is not bound by state
statutes of limitation * * * in enforcing its rights.” United States v. Summerlin, 310 U.S. 414,
416–17, 60 S. Ct. 1019, 1020, 84 L. Ed. 1283 (1940).
The Government “is, however, bound by the statute of limitations contained in 26 U.S.C.
Section 6502(a)(1)[.]” Alfano, 34 F. Supp. 2d at 835-36; see also U.S. v. Bushlow, 832 F. Supp.
574, 581 (E.D.N.Y. 1993) (holding that the statute of limitations in 26 U.S.C. § 6502(a) applies
to the government’s fraudulent conveyance claims). That statute provides, in relevant part, that
“[w]here the assessment of any tax imposed by this title has been made within the period of
limitation properly applicable thereto, such tax may be collected by levy or by a proceeding in
court, but only if the levy is made or the proceeding begun– (1) within 10 years after the
assessment of the tax * * *.” 26 U.S.C. § 6502(a)(1). Since this action was commenced on
January 5, 2015, less than ten (10) years from the date the IRS assessed David with unpaid
federal taxes, i.e., January 10, 2005, the Government’s fraudulent conveyance claims are timely
under the applicable statute of limitations. Accordingly, defendants’ motion to dismiss the
Government’s second cause of action pursuant to Rule 12(b)(6) of the Federal Rules of Civil
Procedure is denied.
For the foregoing reasons, defendants’ motion to dismiss the Government’s second cause
of action pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure is denied.
Sandra J. Feuerstein
United States District Judge
Dated: October 5, 2015
Central Islip, New York
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