United States of America v. Harvey et al
ORDER denying 4 Motion to Dismiss; granting 6 Motion to Strike. Signed by U.S. District Judge Karen E. Schreier on 10/11/2013. (KC)
UNITED STATES DISTRICT COURT
DISTRICT OF SOUTH DAKOTA
UNITED STATES OF AMERICA,
COLLEEN M. HARVEY; PURE
FREEDOM FOUNDATION; HARVEY
SPECIAL TRUST U/D/T; and THE
HARVEY FAMILY LIVING TRUST,
ORDER DENYING DEFENDANT’S
MOTION TO DISMISS AND
GRANTING PLAINTIFF’S MOTION
The United States of America commenced this action to reduce to
judgment federal income tax assessments made against Colleen M. Harvey, to
establish that the other named defendants are alter egos or nominees of
Harvey, and to foreclose the resulting tax lien. Harvey moves to dismiss on
behalf of all defendants. The United States resists the motion, and moves to
strike Harvey’s pleadings as they relate to all the named defendants except
Harvey. For the reasons below, the court grants the United States’s motion to
strike, and denies Harvey’s motion to dismiss.
The facts, according to the complaint (Docket 1), are as follows:
Harvey resides in Mitchell, South Dakota. Harvey and her late husband,
Delmer Harvey, established the Pure Freedom Foundation. Harvey is the sole
certificate holder of the Pure Freedom Foundation. Harvey is also a co-trustee
of the Harvey Special Trust and the Harvey Family Living Trust.
The Harvey Special Trust acquired the property described in the
complaint in April 2000. In June 2000, the Harveys began construction of a
home on the property. In December 2002, the Harvey Special Trust conveyed
the property and home to the Pure Freedom Foundation for twenty dollars.
Harvey has used the property as her principal residence at all times, operates a
business out of the house, pays the utilities and expenses related to the
property, uses Pure Freedom bank accounts for personal expenses, and has
never paid rent to the Pure Freedom Foundation.
Harvey did not file federal income tax returns for the tax years 1997
through 2005, inclusive. In 2007 and 2008, Harvey was given timely notice of
the assessments against her. As of March 31, 2013, Harvey owes
$1,895,161.07 in taxes and statutory additions. Notices of federal tax liens
were filed in February 2008 and February 2009. The federal tax liens are the
only encumbrances on the property, which has a fair market value of
Representation of Parties
The United States moves, pursuant to Federal Rule of Civil Procedure
12(f)(ii), to strike the motion to dismiss insofar as it is filed on behalf of the
Pure Freedom Foundation, the Harvey Special Trust, and the Harvey Family
Living Trust because Harvey, a nonlawyer, cannot represent the trusts and the
foundation in federal court. Harvey argues that she was served with process as
the trustee of the Harvey Special Trust and the Harvey Family Living Trust, so
she should be able to respond on their behalf. Harvey also moves to dismiss
the complaint in her position as manager of Pure Freedom Foundation.1
Harvey’s argument misses the point. Harvey is able to represent herself
before this court. But having been served with the summons and complaint as
the trustee of Harvey Special Trust U/D/T and the Harvey Family Living Trust
does not confer upon her the ability to represent another entity, such as a trust
or foundation, in court. Knoefler v. United Bank of Bismarck, 20 F.3d 347, 348
(8th Cir. 1994) (“A nonlawyer, such as these purported ‘trustee(s) pro se’ has
no right to represent another entity, i.e., a trust, in a court of the United
States.”); see also Rowland v. Cal. Men’s Colony, 506 U.S. 194, 202-03 (1993)
(holding that artificial entities may appear in federal courts only through
licensed attorneys). Because Harvey is not a licensed attorney, she is unable to
appear on behalf of any of the three entity defendants in this case.2
Mr. Rolfes also signed the motion to dismiss as a trustee of the Pure
Mr. Rolfes is not a lawyer either.
In addition, Federal Rule of Civil Procedure 11 requires that “[e]very
pleading, written motion, and other paper must be signed by at least one
attorney . . . or by a party personally if the party is unrepresented.” Numerous
courts have held that Rule 11 is not satisfied when a nonlawyer signs a
pleading on behalf of an unrepresented party, as Harvey has done here. 5A
Charles Alan Wright & Arthur R. Miller, Federal Practice and Procedure § 1333
n.15 (3d ed. 1998). “The 1993 amendment to Rule 11 requires that ‘[a]n
unsigned paper shall be stricken unless omission of the signature is corrected
promptly . . . .” Id.
As a result, the court grants the United States’s motion to strike the
motion to dismiss insofar as it is filed on behalf of the Pure Freedom
Foundation, the Harvey Special Trust, and the Harvey Family Living Trust. See
United States v. Lylalele, Inc., 221 F.3d 1345 at *1 (8th Cir. 2000) (unpublished
table opinion) (affirming the district court’s decision to strike pleadings filed pro
se on behalf of a corporation and a trust because those entities cannot appear
in federal court without legal representation). The court will consider Harvey’s
motion to dismiss as filed on her behalf alone. The court will not recognize
further submissions in this matter on behalf of the Pure Freedom Foundation,
the Harvey Special Trust, the Harvey Family Living Trust, or any other entity
unless that entity is represented by a licensed attorney.
Motion to Dismiss
The court will now consider Harvey’s motion to dismiss with regard to the
claims against Harvey. Harvey moves to dismiss the complaint for a variety of
reasons arising under Federal Rules of Civil Procedure 12(b)(1), (2), (3), (6), and
A. 12(b)(1) Lack of Subject-Matter Jurisdiction
Harvey argues that this court lacks subject-matter jurisdiction because
the right to recover has been extinguished by the statute of limitations. Docket
4 at 6-8. Harvey relies on either the four-year statute of limitations under
SDCL 54-8A-1 et seq., or the five-year statute of limitations under 12 U.S.C.
§ 1821(d)(17). But these statutes relate to South Dakota’s Uniform Fraudulent
Transfer Act and the Federal Deposit Insurance Corporation’s ability to avoid
fraudulent transfers, respectively. Neither statute applies to the collection of a
federal income tax debt. Rather, the statute of limitations for the collection of a
federal income tax debt is ten years from the date the tax was assessed. 26
U.S.C. § 6502(a)(1). Harvey does not contend that the United States failed to
timely enforce its rights under 26 U.S.C. § 6502(a)(1). Harvey’s argument that a
statute of limitations extinguishes this court’s subject-matter jurisdiction is
Furthermore, subject-matter jurisdiction is proper under 28 U.S.C.
§ 1340 (“The district courts shall have original jurisdiction of any civil action
arising under any Act of Congress providing for internal revenue . . . .”) and 26
U.S.C. §§ 7402(a) and (e) (conferring jurisdiction on district courts for actions
“necessary or appropriate for the enforcement of the internal revenue laws” and
“any action brought by the United States to quiet title to property if the title
claimed by the United States to such property was derived from enforcement of
a lien under this title”). Jurisdiction is also proper under 28 U.S.C. § 1345
(“[T]he district courts shall have original jurisdiction of all civil actions, suits, or
proceedings commenced by the United States . . . .”). In sum, this court has
subject-matter jurisdiction over the instant case.
B. 12(b)(2) Lack of Personal Jurisdiction
Harvey argues that this court lacks personal jurisdiction over her late
husband, Delmer Harvey. Because Delmer Harvey is not a named defendant,
however, personal jurisdiction over him is immaterial.
Although Harvey does not appear to argue that this court does not have
personal jurisdiction over her, the court will address that issue next. “To
survive a motion to dismiss for lack of personal jurisdiction, a plaintiff must
make a prima facie showing that personal jurisdiction exists, which is
accomplished by pleading sufficient facts ‘to support a reasonable inference
that the defendant can be subjected to jurisdiction within the state.’ ” K-V
Pharmaceutical Co. v. J. Uriach & CIA, S.A., 648 F.3d 588, 591-92 (8th Cir.
2011) (quoting Dever v. Hentzen Coatings, Inc., 380 F.3d 1070, 1072 (8th Cir.
2004)). The evidentiary burden is minimal, but it must be supported by
affidavits and exhibits in addition to the pleadings. Id. at 592. The evidence is
viewed in the light most favorable to the plaintiff. Id.
The complaint and Harvey’s own filings and exhibits show that she
maintains her primary and permanent personal residence in Mitchell, South
Dakota. This is sufficient to establish that there is personal jurisdiction in the
district court of South Dakota over Harvey. The fact that Harvey’s husband,
who was involved in some of the transfers involved in this case, is deceased
does not deprive this court of personal jurisdiction over Harvey.
C. 12(b)(3) Improper Venue
Although Harvey lists improper venue in the caption of her motion to
dismiss, she does not make any argument related to whether venue is proper.
Venue is proper because Harvey resides in this district. 28 U.S.C. § 1391(b)(1).
Additionally, a substantial part of the events or omissions giving rise to the
claim occurred in this district, and the property that is the subject of the action
is located in this district. 28 U.S.C. § 1391(b)(2).
D. 12(b)(6) Failure to State a Claim Upon Which Relief Can Be
The Federal Rules of Civil Procedure require that a complaint contain “a
short and plain statement of the claim showing that the pleader is entitled to
relief . . . .” Fed. R. Civ. P. 8 (a)(2). Though the complaint does not need to
provide detailed factual allegations, it must contain “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 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 (2009). At the motion to dismiss stage, a court “assumes all facts in the
complaint to be true and construes all reasonable inference from those facts
most favorably to the complainant.” Rochling v. Dept. of Veterans Affairs, 725
F.3d 927, 930-31 (8th Cir. 2013) (quoting Minn. Majority v. Mansky, 708 F.3d
1051, 1055 (8th Cir. 2013)).
The United States has properly pleaded facts that show it may be entitled
to a judgment against Harvey for her unpaid taxes from 1997 to 2005,
inclusive. Tax assessments are presumed to be correct, N.D. State Univ. v.
United States, 255 F.3d 599, 603 (8th Cir. 2001), and Harvey has not
challenged the accuracy of the assessments. Additionally, the United States
has properly pleaded facts that may show that the Pure Freedom Foundation is
her nominee, or alternatively, that the Pure Freedom Foundation may be her
alter ego. These plausible claims, if proven, would entitle the United States to
the relief it seeks in its complaint.
Harvey’s arguments supporting her motion to dismiss for failure to state
a claim upon which relief can be granted are without merit. First, Harvey
contends that the territorial application of federal tax law to Mitchell, South
Dakota, is not shown in the complaint or authorized by law, and that the
ability of federal agents to act outside of the District of Columbia or to attach
liens outside the District of Columbia is not shown in the complaint or
authorized by law.
The statutory sections to which Harvey cites do not support her position.
Furthermore, the contentions that the federal income tax does not apply to
Mitchell, South Dakota, that IRS officers cannot act outside the District of
Columbia, and that federal tax liens cannot attach to property outside the
District of Columbia have no basis in law and have been consistently rejected
in this and other circuits. See, e.g., Denison v. Comm’r, 751 F.2d 241, 242 (8th
Cir. 1984) (quoting Granzow v. Comm’r, 739 F.2d 265, 269-70 (7th Cir. 1984))
(“[W]e can no longer tolerate abuse of the judicial review process by
irresponsible taxpayers who press stale and frivolous arguments, without hope
of success on the merits, in order to delay or harass the collection of public
revenues or for other nonworthy purposes.”); Lonsdale v. United States, 919
F.2d 1440, 1448 (10th Cir. 1990) (imposing sanctions on taxpayers for
“patently frivolous” arguments); United States v. Kuyper, 2012 WL 1932111 at
*3 (D.S.D. May 29, 2012) (unreported) (rejecting, as frivolous, arguments
almost verbatim to those presented in the instant case); Gunnink v. U.S.
Government, 2008 WL 3166308 at *9 (D. Minn. Aug. 4, 2008) (unreported)
(citing Denison, 751 F.2d at 242) (“In other words, Plaintiffs do not feel that
they have to pay taxes. This is patently frivolous and the Court will dismiss it
without further analysis.”).
Next, Harvey argues that the reference to “1040" is insufficient to prove
the validity of the liens and the underlying assessments, and the complaint is
therefore defective. The court disagrees. The notice of federal tax lien provided
by Harvey does not refer to a “1040 kind of tax” but rather lists “1040” under
the heading “kind of tax.” Docket 4-1; Docket 4-2. Harvey’s proposition that
this notice was insufficient to inform her of her tax deficiency is meritless.
Additionally, the reference to the individual income tax, which is a duly enacted
and enforceable tax, is unambiguously clear. See, e.g., Marranca v. United
States Internal Revenue Service, 2009 WL 909642 at *7 (W.D.N.Y. Mar. 31,
2009) (“Petitioner’s fifth claim is that the Notice of Levy is defective because it
seeks to collect a ‘1040 tax,’ which does not exist. . . . This argument is
disingenuous, at best. It is clear that ‘1040,’ which is the well known number
of the form used by most individuals filing federal income tax returns, is
employed simply as a shorthand to describe the type of tax that is due and
owing.”). Therefore, the court rejects Harvey’s arguments that the assessments
and liens were unclear and failed to identify a legally enacted tax.
The court finds that Harvey’s territorial arguments and her arguments
relating to the tax liability and sufficiency of the notices of federal tax liens are
without merit. The United States has stated a claim upon which relief can be
E. 12(b)(7) Failure to Join a Party
Harvey claims that the United States is not the proper party, and that
several individuals with roles in the tax collection process are the proper
Harvey argues that “United States” is a different entity than “United
States of America.” The United States is the proper plaintiff in this action, 26
U.S.C. § 7403, and Harvey’s arguments to the contrary are without merit. See
United States v. Kuyper, 2012 WL 1932111 at *4 n.7 (D.S.D. May 29, 2012)
(unreported). Harvey’s arguments that other parties, such as the IRS employee
who signed the notices, must be added is incorrect because those other parties
are not claimants and do not belong in the suit. 26 U.S.C. § 7403(b) (“All
persons having liens upon or claiming any interest in the property involved in
such action shall be made parties thereto.”). Because the United States is the
only claimant, it is the only party who should be named as a plaintiff.
This court has subject-matter jurisdiction over this action and personal
jurisdiction over Harvey. Venue is appropriate in this district. The United
States has pleaded sufficient facts to state a claim upon which relief can be
granted, and has included the proper parties. Harvey’s arguments to the
contrary are not supported by the law and are without merit. In addition,
Harvey may not represent an entity in federal court, so her motion to dismiss is
properly made only on her behalf. Accordingly, it is
ORDERED that plaintiff’s motion to strike (Docket 6) is granted.
IT IS FURTHER ORDERED that defendant’s motion to dismiss (Docket 4)
is stricken insofar as it is filed on behalf of the Pure Freedom Foundation, the
Harvey Special Trust, and the Harvey Family Living Trust.
IT IS FURTHER ORDERED that the remaining portions of defendant
Harvey’s motion to dismiss (Docket 4) are denied.
Dated October 11, 2013.
BY THE COURT:
/s/ Karen E. Schreier
KAREN E. SCHREIER
UNITED STATES DISTRICT JUDGE
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