Albert E. Schombs III v. Selvi Stanislaus, Executive Officer, California Franchise Tax Board, In Her Official Capacity, et al.

• Court: District Court, S.D. California
• Decided: April 7, 2026
• Docket: 3:25-cv-03761
• Status: Unknown

Opinion

1 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 SOUTHERN DISTRICT OF CALIFORNIA 10 11 ALBERT E. SCHOMBS III, Case No.: 25-CV-3761 JLS (JLB)

12 Plaintiffs, ORDER (1) GRANTING MOTION 13 v. TO DISMISS WITHOUT LEAVE TO AMEND AND (2) DENYING AS 14 SELVI STANISLAUS, Executive Officer, MOOT MOTION FOR California Franchise Tax Board, In Her 15 PRELIMINARY INJUNCTION Official Capacity, et al.,

16 Defendants. (ECF Nos. 5, 6, 13,14) 17 18 Presently before the Court are Plaintiff Albert E. Schombs III’s (“Plaintiff”) Motion 19 for Preliminary Injunction (“PI Mot.,” ECF No. 5), Defendants Selvi Stanislaus’s, Myriam 20 Bouaziz’s, and Shawna Ventolieri’s (collectively, “Defendants”) Opposition thereto (“PI 21 Opp’n,” ECF No. 15), and Plaintiff’s Reply in support thereof (“PI Reply,” ECF No. 18). 22 Also before the Court is Defendants’ Motion to Dismiss (“MTD,” ECF No. 14), Plaintiff’s 23 Opposition thereto (“MTD Opp’n,” ECF No. 19), and Defendants’ Reply in support thereof 24 (“MTD Reply,” ECF No. 21). Having considered Plaintiff’s Complaint (“Compl.,” ECF 25 No. 1), the Parties’ Motions, and the law, the Court GRANTS Defendants’ Motion to 26 27 28 1 Dismiss WITHOUT LEAVE TO AMEND and DENIES AS MOOT Plaintiff’s Motion 2 for Preliminary Injunction.1 3 BACKGROUND 4 Plaintiff did not pay income taxes to the State of California in tax years 2018, 2019, 5 or 2020. MTD at 3. According to Plaintiff, his federal tax returns in 2018, 2019, and 2020 6 reflected a taxable income of $0 because the federal reserve notes he redeemed are 7 “obligations of the United States” exempt from state taxation. Compl. ¶¶ 13, 14, 16. Yet, 8 on December 10, 2021, the Franchise Tax Board (“FTB”) issued income tax assessments 9 for these years and “falsely attributed W-2 income for 2019 to an entity with which Plaintiff 10 had no affiliation.” Id. ¶ 17. On April 24, 2024, FTB issued an Earnings Withholding 11 Order (“EWO”), “result[ing] in wage garnishments totaling approximately $34,818.67 12 . . . .” Id. ¶ 18. Plaintiff thereafter filed an appeal to the Office of Tax Appeals (“OTA”), 13 which was denied as frivolous. Id. ¶ 20. Plaintiff filed the instant Complaint on December 14 24, 2025, alleging claims for injunctive and declaratory relief, monetary damages, and 15 violations of 42 U.S.C. § 1983, generally arguing that Defendants unlawfully assessed 16 taxes on his redeemed federal reserve notes. See generally Compl. 17 LEGAL STANDARD 18 Federal Rule of Civil Procedure 12(b)(6) permits a party to raise by motion the 19 defense that the complaint “fail[s] to state a claim upon which relief can be granted.” To 20 survive a 12(b)(6) motion, “a complaint must contain sufficient factual matter, accepted as 21 true, to ‘state a claim to relief that is plausible on its face.’” Ashcroft v. Iqbal, 556 U.S. 662, 22 678 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)). A claim is 23 facially plausible when the facts pled “allow[] the court to draw the reasonable inference 24 that the defendant is liable for the misconduct alleged.” Id. That is not to say that the claim 25 must be probable, but there must be “more than a sheer possibility that a defendant has 26

27 1 The Court further DENIES AS MOOT Plaintiff’s Request for Judicial Notice in Support of Plaintiff’s 28 Motion for Preliminary Injunction (ECF No. 6) and DENIES AS MOOT Plaintiff’s Motion for Leave 1 acted unlawfully.” Id. Facts “‘merely consistent with’ a defendant’s liability” fall short of 2 a plausible entitlement to relief. Id. (quoting Twombly, 550 U.S. at 557). 3 Though this plausibility standard “does not require ‘detailed factual 4 allegations,’ . . . it [does] demand[] more than an unadorned, the-defendant-unlawfully- 5 harmed-me accusation.” Id. (quoting Twombly, 550 U.S. at 555). In other words, a 6 complaint will not suffice “if it tenders ‘naked assertion[s]’ devoid of ‘further factual 7 enhancement.’” Id. (alteration in original) (quoting Twombly, 550 U.S. at 557). Put 8 differently, “a formulaic recitation of the elements of a cause of action will not do.” 9 Twombly, 550 U.S. at 555. 10 Review under Rule 12(b)(6) requires a context-specific analysis involving the 11 Court’s “judicial experience and common sense.” Iqbal, 556 U.S. at 679. In performing 12 that analysis, “a district court must accept as true all facts alleged in the complaint, and 13 draw all reasonable inferences in favor of the plaintiff.” Wi-LAN Inc. v. LG Elecs., Inc., 14 382 F. Supp. 3d 1012, 1020 (S.D. Cal. 2019). “[W]here the well-pleaded facts do not 15 permit the court to infer more than the mere possibility of misconduct, the complaint has 16 alleged—but it has not ‘show[n]’—‘that the pleader is entitled to relief.’” Iqbal, 556 U.S. 17 at 679 (second alternation in original). If a complaint does not survive Rule 12(b)(6), a 18 court grants leave to amend unless it determines that no modified contention “consistent 19 with the challenged pleading could . . . possibly cure the deficiency.” Schreiber Distrib. 20 Co. v. Serv-Well Furniture Co., 806 F.2d 1393, 1401 (9th Cir. 1986). 21 DISCUSSION 22 Defendants seek to dismiss Plaintiff’s Complaint on the grounds that the Tax 23 Injunction Act (“TIA”) bars Plaintiff’s claims for injunctive relief, the statute of limitations 24 has expired for Plaintiff’s claims, and Plaintiff’s claims are “legally unsupported and 25 factually deficient.” MTD at 2. 26 / / / 27 / / / 28 / / / 1 I. Tax Injunction Act 2 Defendants first argue that the TIA bars Plaintiff’s claims against Defendants 3 Stanislaus and Bouaziz in their official capacity, and that the Supreme Court and the Ninth 4 Circuit have made clear that the TIA applies to claims over the State of California’s 5 taxation. MTD at 4–5. Plaintiff responds that he seeks “narrowly tailored prospective 6 relief against ongoing enforcement conduct” that is not precluded by the TIA. MTD Opp’n 7 at 2. 8 Defendants argue correctly that the TIA precludes Plaintiff’s request for injunctive 9 relief against Stanislaus and Bouaziz in their official capacity. The TIA provides that 10 “district courts shall not enjoin, suspend or restrain the assessment, levy or collection of 11 any tax under State law where a plain, speedy and efficient remedy may be had in the courts 12 of such State.” 28 U.S.C. § 1341. Here, the plain language of the TIA precludes Plaintiff’s 13 claims. See id. Plaintiff seeks injunctive relief “prohibiting further assessment or 14 collection of state tax on redeemed federal reserve notes.” Compl. ¶ 28. Rather than seek 15 relief in state court, Plaintiff has filed an action with this Court, which is contrary to the 16 TIA. See Franchise Tax Bd. of California v. Alcan Aluminium Ltd., 493 U.S. 331, 338 17 (1990); California v. Grace Brethren Church, 457 U.S. 393, 415–17 (1982). Accordingly, 18 the Court GRANTS Defendants’ Motion to Dismiss as to Plaintiff’s claims for injunctive 19 and declaratory relief against Defendants Stanislaus and Bouaziz in their official capacity. 20 II. Federal Reserve Notes 21 Plaintiff argues that his federal reserve notes are exempt from taxation pursuant to 22 12 U.S.C. § 411 and 31 U.S.C. § 3124(a), and thus, Defendants unlawfully “attempt[ed] to 23 incorporate such federal obligations into a state tax computation . . . .” Compl. ¶ 14. 24 Defendants argue that every court to “consider[] this argument has rejected it.” MTD at 6 25 (citing cases). Plaintiff responds that the cases Defendants rely on “are not binding and 26 distinguishable from the narrower theory Plaintiff advances”—that “Defendants may not 27 compute and enforce tax liability in a way that required federal obligations to be considered 28 in computing a tax . . . .” MTD Opp’n at 5. 1 The Court agrees with Defendants. 12 U.S.C. § 411 provides that federal reserve 2 notes “shall be obligations of the United States and shall be receivable by all national and 3 member banks and Federal reserve banks and for all taxes, customs, and other public dues.” 4 31 U.S.C. § 3124(a) provides that “[s]tocks and obligations of the United States 5 Government are exempt from taxation by a State or political subdivision of a State.” Based 6 on the language of these two provisions, Plaintiff argues that state taxation of federal 7 reserve notes is “expressly prohibit[ed].” Compl. ¶ 14. However, “obligations of the 8 United States” refers to “interest bearing instruments such as United States bonds”—not 9 federal reserve notes. Provenza v. Comptroller of Treasury, 497 A.2d 831, 834 (1985); see 10 also In re Yuska, No. AP 15-9005, 2017 WL 571486, at *7 (Bankr. N.D. Iowa Feb. 13, 11 2017); Galbreath v. Dep’t of Revenue, No. TC-MD 060735E, 2007 WL 2229218, at *5 12 (Or. T.C. July 24, 2007); Smith v. Davis, 323 U.S. 111, 116–17 (1944). Plaintiff points to 13 no persuasive authority suggesting otherwise. See generally Compl.; MTD Opp’n. 14 Accordingly, the Court GRANTS Defendants’ Motion to Dismiss as to claims One, Two, 15 and Three insofar as they rely on 12 U.S.C. § 411 and 31 U.S.C. § 3124(a). 16 III. Statute of Limitations 17 Finally, Defendants argue that the statute of limitations has expired as to Plaintiff’s 18 § 1983 claim against Defendant Ventolieri in her individual capacity. MTD at 7–8. FTB 19 issued a Notice of Assessment for tax year 2019 on December 10, 2021, which Plaintiff 20 acknowledges receiving, yet Plaintiff did not file the Complaint until December 24, 2025, 21 well after the two-year statute of limitations expired. Id. Defendant further argues that 22 FTB’s later “garnishing and levying activities” do not reset the statute of limitations, as 23 they were “inevitable consequences of determining that Plaintiff owed FTB additional tax, 24 interest, and penalties for income not previously reported.” Id. at 8. Plaintiff responds that 25 the April 24, 2024, EWO started the two-year statute of limitations period and that 26 “continuing wage garnishment and ongoing deprivation of property” amount to “renewed 27 injury” supporting his claims. MTD Opp’n at 7. 28 / / / 1 The Court agrees with Defendants that the statute of limitations clock began to run 2 when Plaintiff received the Notice of Assessment on December 10, 2021. The statute of 3 limitations for § 1983 claims in California is two years. Abet Sec. Servs., Inc. v. City of 4 Los Angeles, No. 22-CV-07713-SB-KS, 2023 WL 4155389, at *2 (C.D. Cal. May 12, 5 2023). Claims under § 1983 accrue “when the plaintiff knows, or should know, of the 6 injury which is the basis of the cause of action.” Fink v. Shedler, 192 F.3d 911, 914 (9th 7 Cir. 1999), as amended on denial of reh’g and reh’g en banc (Dec. 13, 1999). Here, 8 Plaintiff knew, or should have known, that Defendants assessed taxes on his income when 9 he received the 2021 Notice of Assessment. As the alleged unlawful taxation of Plaintiff’s 10 income forms the basis of his claim, the statute of limitations began to run after he received 11 the Notice of Assessment. Plaintiff’s arguments otherwise are unsupported by the facts set 12 forth in the Complaint. Therefore, Plaintiff’s § 1983 claim is barred by the statute of 13 limitations, as more than two years have passed between the 2021 Notice of Assessment 14 and the date on which Plaintiff filed the Complaint. Accordingly, dismissal is further 15 warranted on statute of limitations grounds. The Court GRANTS Defendants’ Motion to 16 Dismiss as to claim Three. 17 IV. Leave to Amend 18 Leave to amend should be freely given “when justice so requires.” Fed. R. Civ. P. 19 15(a)(2). While the rule should be interpreted liberally, leave should not be granted 20 automatically. Jackson v. Bank of Haw., 902 F.2d 1385, 1387 (9th Cir. 1990). In 21 determining whether to grant leave to amend, trial courts should consider various factors, 22 including bad faith, undue delay, prejudice to the opposing party, futility of amendment, 23 and whether the party has previously amended. Foman v. Davis, 371 U.S. 178, 182 (1962).

24 Applying the Foman factors, the Court declines to grant Plaintiff leave to amend: 25 Plaintiff’s claims for injunctive and declaratory relief are barred by the TIA; the statute of 26 limitations bars Plaintiff’s claim under § 1983; and Plaintiff’s argument that federal reserve 27 notes are exempt from state taxation is meritless. Therefore, the Court finds that “it is clear 28 that granting leave to amend would [be] futile.” Thinket Ink Info. Res., Inc. v. Sun 1 || Microsystems, Inc., 368 F.3d 1053, 1061 (9th Cir. 2004). 2 CONCLUSION 3 In light of the foregoing, the Court GRANTS Defendants’ Motion to Dismiss (ECF 4 ||No. 14) WITHOUT LEAVE TO AMEND and DENIES AS MOOT Plaintiff's Motion 5 || for Preliminary Injunction (ECF No. 5). As this concludes the litigation in this matter, the 6 || Clerk of Court SHALL CLOSE the file. 7 IT IS SO ORDERED. 8 Dated: April 7, 2026 . Lt f 9 on. Janis L. Sammartino 10 United States District Judge 1] 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28