Copeland v. United States of America
Filing
12
Memorandum of Opinion and Order: The Government's motion to dismiss the plaintiff's complaint is granted on the basis of the two-year statute of limitations in 26 U.S.C. §7433(d)(3). The plaintiff's complaint against the United States is dismissed. The Court certifies, pursuant to 28 U.S.C. § 1915(a)(3), that an appeal from this decision could not be taken in good faith. Judge Patricia A. Gaughan on 12/2/14. (LC,S) re 6
UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF OHIO
Terence Copeland,
Plaintiff,
v.
United States of America,
Defendant.
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CASE NO. 1:14 CV 1152
JUDGE PATRICIA A. GAUGHAN
Memorandum of Opinion and Order
Plaintiff Terence Copeland, an attorney proceeding pro se, filed this lawsuit against the
United States on May 29, 2014, seeking damages pursuant to 26 U.S.C. §7433. The
Government has filed a motion to dismiss the plaintiff’s complaint (Doc. No. 6), to which the
plaintiff has responded. For the reasons stated below, the Government’s motion is granted and
this action is dismissed.
Plaintiff’s Allegations
The plaintiff alleges that on October 9, 2009, the Internal Revenue Service (“IRS”) filed
two certificates releasing federal tax liens that had been filed against the plaintiff and his former
wife Margot J. Copeland for the tax years ending 12/31/1995 and 12/31/1996. (Pltf. Complt.,
¶3, Exs. 2 and 3.) Each of these certificates states that the “taxpayer, under the requirements of
section 6325(a) of the Internal Revenue Code has satisfied the taxes listed below and all
statutory additions. Therefore, the lien provided by Code section 6321 for these taxes and
additions has been released.” (Pltf. Complt., Exs. 2 and 3.)
The plaintiff alleges that, despite issuing these certificates releasing the federal tax liens
that were filed against him and his wife, the IRS subsequently filed levies against the plaintiff’s
property on 10/30/2009 and 5/30/2011 pertaining to unpaid tax balances for the tax periods
ending 12/31/1995 and 12/31/1996. (Pltf. Complt. ¶3, Exs. 5 and 6.) On October 30, 2009, the
IRS filed a levy to seize the plaintiff’s wages, and on May 30, 2011, the IRS filed a levy to seize
funds held for the plaintiff by Dollar Bank. The plaintiff alleges these levies were illegal and
“yielded over $4000” to the IRS. (Id., ¶3.)
The plaintiff alleges he wrote to the IRS on August 10, 2011, complaining about these
“illegal collections,” but he did not receive any reply until June 8, 2012, after enlisting the
assistance of Congresswoman Marcia Fudge and Senator Sherrod Brown and engaging the
services of the Taxpayer Advocate Service. The Taxpayer Advocate Service sent the plaintiff a
letter dated June 8, 2012, acknowledging the plaintiff’s contention that “the receipt of release of
the federal tax lien should have also removed the remaining balances owed on the accounts as of
the date of the release of the federal tax lien.” The letter stated the plaintiff’s tax liability for
1995 had been written off by the IRS on July 21, 2010, after the ten year statutory period for
collecting on that liability expired. (Pltf. Complt., Ex. 16.) The letter, however, stated that “the
balance due under the 1996 federal tax account [was] still owed” by the plaintiff because the
statutory period for collecting this liability from the plaintiff (but not his wife) extended to
December 2012 due to an offer-in-compromise the plaintiff submitted to the IRS in 2005. (Id.)
The plaintiff disagreed with the conclusions of the Taxpayer Advocate Service. He
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alleges the letter is filled with “inaccuracies.” (Id., ¶ 4.) Apparently, the plaintiff sought to
request a refund on the Form 1040 he filed for tax year 2011 based on the damages he claimed
to have suffered as a result of the allegedly unlawful 2009 and 2011 levies. He alleges he
attached “a copy of his complaint [regarding the levies] with accompanying documentation to
[his] tax return for the year 2011 in the hope of generating discussion and ultimately resol[ving]
the problem” with the IRS, but the IRS did not discuss the issues he raised. Instead, the IRS
denied his request for a refund for tax year 2011 and engaged in conduct to collect the plaintiff’s
2011 tax liability. (Id., ¶ 5.)
In this action, the plaintiff seeks damages from the United States pursuant to 26 U.S.C.
§7433 based on the IRS’s allegedly unauthorized 2009 and 2011 levies against the plaintiff’s
assets. Section 7433 provides that a taxpayer may bring a civil action for damages against the
United States “[if], in connection with any collection of Federal tax with respect to a taxpayer,
any officer or employee of the Internal Revenue Service recklessly or intentionally, or by reason
of negligence, disregards any provision of this title, or any regulation promulgated under this
title.” 26 U.S.C. §7433(a).1 The plaintiff alleges the IRS’s 2009 and 2011 levies constitute
violations of 26 U.S.C. §6325(a), which provides:
(a) Release of lien.– Subject to such regulations as the Secretary may prescribe,
the Secretary shall issue a certificate of release of any lien imposed with respect
to any internal revenue tax not later than 30 days after the day on which-(1) Liability satisfied or unenforceable.--The Secretary finds that the liability for
the amount assessed, together with all interest in respect thereof, has been fully
satisfied or has become legally unenforceable.
1
A taxpayer who sues under Section 7433 may collect the “costs of the action” and the “actual,
direct economic damages sustained by the plaintiff as a proximate result of the reckless or
intentional or negligent actions of the officer or employee.” 26 U.S.C. §7433(b).
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26 U.S.C. §6325(a).
The plaintiff alleges the levies violate §6325(a) and “were erroneously based upon taxes
allegedly due for the years 1995 and 1996” because certificates of release of federal tax liens
were issued to the plaintiff and his wife for these years. (Pltf. Complt, ¶10.) The plaintiff seeks
“(a) $250,000 for money seized and opportunity lost as a result of the illegal levies; (b)
$250,000 for pecuniary loss, embarrassment, and humiliation caused by the illegal levies at [his]
bank and place of employment; (c) $100,000 for the intentional nature of the illegal
enforcement and the financial and emotional damage caused by the lies and threats of the twoyear cover-up; (d) $350,000 for failure to pay the refund [for tax year 2011 as the IRS allegedly]
promised in . . . correspondence dated December 9, 2013, and the lie generated to cover it up
causing financial hardship and emotional distress, and; (e) $50,000 for the opportunity lost
through the failure of the IRS to timely pay the refund due [his] wife according to her 2012 tax
return. (Id., ¶13.)
Standards of Review
The United States seeks dismissal of the plaintiff’s complaint for lack of subject matter
jurisdiction pursuant to Fed. R. Civ. P. 12(b)(1) and for failure to state a claim upon which relief
may be granted pursuant to Fed. R. Civ. P. 12(b)(6).
A motion to dismiss pursuant to Rule 12(b)(1) “determines whether the plaintiff has a
right to be in the particular court”; whereas, a motion to dismiss pursuant to Fed. R. 12(b)(6) “is
an adjudication as to whether a cognizable legal claim has been stated.” Hamdi ex rel. Hamdi v.
Napolitano, 620 F.3d 615, 619, n. 3 (6th Cir. 2010). A motion to dismiss pursuant to Rule
12(b)(1) may either attack the claim of jurisdiction on its face or it can attack the factual basis of
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jurisdiction. Golden v. Gorno Bros., Inc., 410 F.3d 879, 881 (6th Cir. 2005). When a defendant
challenges subject matter jurisdiction on a factual basis, the plaintiff has the burden of proving
jurisdiction in order to survive the motion to dismiss. Moir v. Greater Cleveland Reg'l Transit
Auth., 895 F.2d 266, 269 (6th Cir. 1990).
A motion to dismiss pursuant to Rule 12(b)(6) tests the sufficiency of a complaint. To
survive a Rule 12(b)(6) motion to dismiss, the complaint’s “[f]actual allegations must be enough
to raise a right to relief above the speculative level on the assumption that all of the allegations
in the complaint are true.” Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555-56 (2007). See
also Barnett v. Luttrell, 414 Fed. Appx. 784, 786 (6th Cir. 2011) (a pro se complaint must
“contain sufficient factual matter, accepted as true, to state a claim to relief that is plausible on
its face”).
In deciding a motion to dismiss, the court must construe the complaint in the light most
favorable to the plaintiff and accept all well-pleaded material allegations in the complaint as
true. See Arrow v. Federal Reserve Bank of St. Louis, 358 F.3d 392, 393 (6th Cir. 2004). The
court need not, however, accept legal conclusions or unwarranted factual inferences. See
Gregory v. Shelby County, 220 F.3d 433, 446 (6th Cir. 2000).
Discussion
The Government contends the plaintiff’s complaint should be dismissed for three
reasons: (1) his damages action based on the IRS’s 2009 and 2011 levies is barred by the statute
of limitations; (2) the plaintiff has not alleged any other actionable collection action by the IRS;
and (3) the 2009 and 2011 levies were proper because the certificates the IRS issued releasing
liens did not preclude it from collecting on the plaintiff’s underlying tax liability via levy.
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Upon review, the Court agrees with the Government that the plaintiff’s damages action
is properly dismissed on the basis of the statute of limitations. Section 7433 contains an explicit
two-year statute of limitations: “Notwithstanding any other provision of law, an action to
enforce liability created under this section may be brought without regard to the amount in
controversy and may be brought only within 2 years after the date the right of action accrues.”
26 U.S.C. §7433(d)(3). The IRS’s regulations implementing Section 7433(d)(3) provide that
the right of action “accrues when the taxpayer has had a reasonable opportunity to discover all
essential elements of a possible cause of action.” 26 C.F.R. § 301.7433–1(g)(2).
“The language in the regulation - a ‘reasonable opportunity’- sets a relatively low bar.”
Keohane v. U.S., 669 F.3d 325, 329 (D.C. Cir. 2012). A cause of action accrues “if the plaintiff
had such notice as would lead a reasonable person either to sue or to launch an investigation
that would likely uncover the requisite facts.” Id. Courts have consistently held that a taxpayer
has a “reasonable opportunity” to know of the essential elements of a cause of action when the
IRS issues a levy against the taxpayer. In Keohane, the court held that a plaintiff taxpayer had a
reasonable opportunity to discover an allegedly unlawful IRS levy, and the two-year statute of
limitations for bringing an action to recover damages under 26 U.S.C. § 7433 began to run,
when the taxpayer received notice of the IRS levy. See also Kovacs v. U.S., 614 F.3d 666, 674
(7th Cir. 2010) (holding that a plaintiff’s cause of action against the IRS based upon six notices
of intent to levy accrued on the date the plaintiff received the notices); Zinstein v. U.S., No. 1:
13 cv 633, 2013 WL 5504418, at * 4 (E.D. Va. Oct. 2, 2013) (“Here, Plaintiffs had a
‘reasonable opportunity’ to know of the essential elements of their claim on April 7, 2008, when
the IRS first issued a levy against the Plaintiffs for tax years allegedly already paid off.”).
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The Government contends the plaintiff had a “reasonable opportunity to discover all
essential elements” of his damages claims arising from the IRS’s 2009 and 2011 levies more
than two years before he filed this lawsuit on May 29, 2014. It argues the plaintiff had notice of
his claims – at the very latest – on August 10, 2011, when the plaintiff expressly complained
about the levies to the IRS, but he did not timely file his lawsuit within two years.
The plaintiff does not dispute that a two-year statute of limitations applies to his
damages claims under 26 U.S.C. §7433, but he contends he did not have a reasonable
opportunity to discover all of the elements of his claims until he received the June 8, 2012 letter
regarding the 2009 and 2011 levies from the Taxpayer Advocate Service. Without citing
authority, he argues this letter “provided [him] the final and most essential element of a possible
cause of action,” specifically, information demonstrating the IRS’s conduct in issuing the 2009
and 2011 levies was “intentional” and not merely a mistake by an IRS employee as the plaintiff
initially thought. (Pltf. Opp. at 1.) The plaintiff contends his action was timely filed in May
2014.
The plaintiff’s argument is not persuasive. The problem with the plaintiff’s position is
that 26 U.S.C. §7433(a) allows damage suits against the United States where an officer or
employee of the IRS “recklessly or intentionally, or by reason of negligence, disregards any
provision of this title.” 26 U.S.C.§7433(a) (emphasis added.) Thus, a plaintiff has a reasonable
opportunity to discover all of the elements of a claim without regard to information as to
whether the IRS acted “intentionally.” Further, as noted above, courts have consistently held
that a taxpayer has a reasonable opportunity to discover all of the elements of a possible cause
of action when the taxpayer receives notice of an allegedly wrongful levy.
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Accordingly, the Court finds the plaintiff’s §7433 damage action based on the 2009 and
2011 levies accrued as soon as the plaintiff knew of the allegedly unlawful levies and
complained about them to the IRS, at the very latest in 2011. At that time the plaintiff had a
“reasonable opportunity” to learn of his claims and had two years thereafter to assert them. The
plaintiff’s damage claims in this case must be dismissed under 26 U.S.C. § 7433(d)(3) because
he did not bring them within two years after they accrued.2
Conclusion
For the reasons stated above, the Government’s motion to dismiss the plaintiff’s
complaint is granted on the basis of the two-year statute of limitations in 26 U.S.C. §7433(d)(3).
The plaintiff’s complaint against the United States is dismissed. The Court certifies, pursuant to
28 U.S.C. § 1915(a)(3), that an appeal from this decision could not be taken in good faith.
IT IS SO ORDERED.
/s/ Patricia A. Gaughan
PATRICIA A. GAUGHAN
United States District Judge
Dated: 12/2/14
2
Although the plaintiff alleges that conduct taken by the IRS in connection with his and his
wife’s 2011 tax liability constitutes additional “attempt[s] by the IRS to avoid observance of [26
U.S.C. §6325(a)], either through threats or lies” or to “cover-up” the IRS’s illegal activity, (see
Complt., at ¶¶10, 12), the only actions of the IRS the plaintiff contends violate §6325(a) are the
2009 and 2011 levies. See 26 U.S.C. §7433(a) (providing that the United States is liable where an
IRS officer or employee “disregards [a] provision of this title”). Therefore, the only damage claims
the plaintiff has alleged under Section 7433 are those based on the allegedly unlawful 2009 and
2011 levies, which are untimely.
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