1 2 3 4 5 6 UNITED STATES DISTRICT COURT 7 SOUTHERN DISTRICT OF CALIFORNIA 8 9 KEVIN J. MIRCH and MARIE C. Case No.: 3:24-CV-721 TWR (DDL) MIRCH, 10 ORDER GRANTING DEFENDANT’S Plaintiffs, 11 MOTION TO DISMISS AND v. DISMISSING WITH PREJUDICE 12 PLAINTIFFS’ FIRST AMENDED UNITED STATES OF AMERICA, 13 COMPLAINT Defendant. 14 (ECF No. 6) 15 16 Presently before the Court is Defendant United States of America’s Motion to 17 Dismiss Plaintiffs’ First Amended Complaint, (“Mot.,” ECF No. 6), as well as Plaintiffs 18 Kevin J. Mirch and Marie C. Mirch’s Response in Opposition to (“Opp’n,” ECF No. 9) 19 and Defendant’s Reply in Support of (“Reply,” ECF No. 10) the Motion. On January 30, 20 2025, the Court held a hearing on the Motion. (See ECF No. 16.) Having carefully 21 considered the Plaintiffs’ First Amended Complaint (“FAC,” ECF No. 5), the Parties’ 22 arguments, and the relevant law, the Court GRANTS Defendant’s Motion to Dismiss and 23 DISMISSES WITH PREJUDICE Plaintiffs’ First Amended Complaint as follows. 24 BACKGROUND 25 Plaintiffs Kevin J. Mirch and Marie C. Mirch are attorneys who have represented 26 taxpayers against the Internal Revenue Service (“IRS”) in civil and criminal tax cases. 27 (FAC ¶¶ 13, 15.) Specifically, Plaintiffs served as trial counsel in two criminal tax cases 28 tried in Nevada: U.S. v. Rutherford in 2004 and U.S. v. Forsythe in 2007. (Id. ¶¶ 17, 22, 1 28.) Plaintiffs allege that they were targeted by the IRS in retaliation for these legal 2 representations. (Id. ¶ 15.) In the years following James Forsythe’s acquittal on November 3 1, 2007, (id. ¶ 46), Plaintiffs allege that they “have been subjected to relentless regulatory 4 scrutiny, including, but not limited to IRS audits, assessments, [notices of federal tax liens,] 5 and levies.” (Id. ¶ 47.) 6 The majority of Plaintiffs’ allegations stem from tax years 2006, 2007, and 2008. 7 (See generally id.) On July 20, 2006, Defendant began an audit of Plaintiffs’ 2004 federal 8 income tax return, which was later closed on February 11, 2011, without adjustment or 9 assessment. (Id. ¶ 37.) On September 27, 2007, Defendant began an audit of Plaintiffs’ 10 2006 federal income tax returns, (id. ¶ 15), despite Plaintiffs having received an extension 11 to file their 2006 tax return until October 15, 2007. (Id. ¶ 41.) On September 18, 2008, 12 Defendant began an audit of Plaintiffs’ 2007 income tax return. (Id. ¶ 71.) During these 13 years, Plaintiffs allege that they overpaid their taxes, (id. ¶¶ 51, 61, 62), various IRS audits 14 did not result in any adjustments or additional assessments, (id. ¶¶ 49, 57, 82, 91), and 15 Defendant subsequently imposed unlawful penalties as a negotiating strategy to offset 16 refunds due to Plaintiffs. (Id. ¶¶ 96, 103, 256, 305(D), 305(R).) Plaintiffs also allege that 17 on January 6, 2010, Defendant issued a levy without first lawfully serving Plaintiffs with 18 a notice of assessment, demand for payment, notice of federal tax lien, notice of intent to 19 levy, or a Collection Due Process taxpayer rights letter. (Id. ¶¶ 87–88.) Further, Plaintiffs 20 allege that Defendant retaliated against Plaintiffs from 2010 to 2020 by assessing various 21 payroll tax liens and penalty tax liens. (Id. ¶¶ 98, 99, 100, 130, 131, 133, 148, 149, 156, 22 159, 252, 253, 257, 269, 283). Collectively, Plaintiffs allege that these actions demonstrate 23 that “Defendant intentionally assessed penalties on income and payroll tax amounts it knew 24 were not due.” (Id. ¶ 70.) 25 On June 28, 2011, Plaintiffs filed a Petition with the United States Tax Court in 26 which they disputed the assessment of Federal income tax deficiencies against them from 27 2004 to 2008 and alleged that Defendant did not properly mail them the required Statutory 28 Notice of Deficiency (“SNOD”). See Mirch et al. v. Comm’r, Case No. 15305-11 at 3 (Jan. 1 7, 2013); (see also FAC ¶ 120.) The Tax Court dismissed Plaintiffs’ petition on January 2 7, 2013, finding that the court lacked jurisdiction over the petition, the petition was time 3 barred, the IRS did in fact deliver the SNOD that Plaintiffs claimed not to have received, 4 and Plaintiffs did not timely file a petition contesting the determinations in the SNOD. See 5 Mirch, Case No. 15305-11 at 4. On appeal, the Ninth Circuit affirmed the decision of the 6 United States Tax Court. See Mirch v. Comm’r, 604 F. App’x 564, 565 (9th Cir. 2015). 7 Plaintiffs later filed1 another petition with the United States Tax Court, alleging that 8 the IRS’s Notice of Determination upholding notices of federal tax liens filed for tax years 9 2004, 2006, and 2008 violated their Collection Due Process rights. See Mirch et al. v. 10 Comm’r, Case No. 16277-16L at 1 (June 16, 2023). On June 16, 2023, the Tax Court 11 granted partial summary judgment for the IRS, finding that Plaintiffs were precluded under 12 the doctrine of collateral estoppel from claiming that the June 29, 2010 SNOD was invalid. 13 See id at 7. 14 On April 22, 2024, Plaintiffs filed their initial Complaint (“Compl.,” ECF No. 1) 15 against Defendant in the United States District Court for the Southern District of California, 16 alleging two violations of 26 U.S.C. § 7433. (See generally Compl.) On July 23, 2024, 17 before Defendant had answered the Complaint, Plaintiffs filed their operative First 18 Amended Complaint, realleging two causes of action under Section 7433. (See generally 19 FAC.) On August 6, 2024, Defendant filed the instant Motion. (See generally Mot.) On 20 September 20, 2024, Defendant filed its Response, (see generally ECF No. 9), and on 21 October 21, 2024, Plaintiffs filed their Reply. (See generally ECF No. 10). 22 LEGAL STANDARD 23 A party may challenge the court’s subject matter jurisdiction through a motion filed 24 pursuant to Federal Rule of Civil Procedure 12(b)(1), and the Court must dismiss the action 25 when “the court determines at any time that it lacks subject matter jurisdiction.” See Fed. 26
27 1 The Tax Court’s summary judgment opinion, attached to the Motion as Exhibit 3, does not 28 1 R. Civ. P. 12(b)(1), (h)(3); see also White v. Lee, 227 F.3d 1214, 1242 (9th Cir. 2000). 2 Because “[f]ederal courts are courts of limited jurisdiction,” “[i]t is to be presumed that a 3 cause lies outside this limited jurisdiction.” Kokkonen v. Guardian Life Ins. Co. of Am., 4 511 U.S. 375, 377 (1994). Consequently, “the burden of establishing the contrary rests 5 upon the party asserting jurisdiction.” Id. The Court must first determine whether it has 6 jurisdiction and must not reach the merits where jurisdiction is lacking. See Bell v. Hood, 7 327 U.S. 678, 682 (1946); see also Orff v. United States, 358 F.3d 1137, 1149 (9th Cir. 8 2004). 9 “Rule 12(b)(1) jurisdictional attacks can be either facial or factual.” White, 227 F.2d 10 at 1242. “A ‘facial’ attack accepts the truth of the plaintiff’s allegations but asserts that 11 they ‘are insufficient on their face to invoke federal jurisdiction.’” Leite v. Crane Co., 749 12 F.3d 1117, 1121 (9th Cir. 2014) (quoting Safe Air for Everyone v. Meyer, 373 F.3d 1035, 13 1039 (9th Cir. 2004)).
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1 2 3 4 5 6 UNITED STATES DISTRICT COURT 7 SOUTHERN DISTRICT OF CALIFORNIA 8 9 KEVIN J. MIRCH and MARIE C. Case No.: 3:24-CV-721 TWR (DDL) MIRCH, 10 ORDER GRANTING DEFENDANT’S Plaintiffs, 11 MOTION TO DISMISS AND v. DISMISSING WITH PREJUDICE 12 PLAINTIFFS’ FIRST AMENDED UNITED STATES OF AMERICA, 13 COMPLAINT Defendant. 14 (ECF No. 6) 15 16 Presently before the Court is Defendant United States of America’s Motion to 17 Dismiss Plaintiffs’ First Amended Complaint, (“Mot.,” ECF No. 6), as well as Plaintiffs 18 Kevin J. Mirch and Marie C. Mirch’s Response in Opposition to (“Opp’n,” ECF No. 9) 19 and Defendant’s Reply in Support of (“Reply,” ECF No. 10) the Motion. On January 30, 20 2025, the Court held a hearing on the Motion. (See ECF No. 16.) Having carefully 21 considered the Plaintiffs’ First Amended Complaint (“FAC,” ECF No. 5), the Parties’ 22 arguments, and the relevant law, the Court GRANTS Defendant’s Motion to Dismiss and 23 DISMISSES WITH PREJUDICE Plaintiffs’ First Amended Complaint as follows. 24 BACKGROUND 25 Plaintiffs Kevin J. Mirch and Marie C. Mirch are attorneys who have represented 26 taxpayers against the Internal Revenue Service (“IRS”) in civil and criminal tax cases. 27 (FAC ¶¶ 13, 15.) Specifically, Plaintiffs served as trial counsel in two criminal tax cases 28 tried in Nevada: U.S. v. Rutherford in 2004 and U.S. v. Forsythe in 2007. (Id. ¶¶ 17, 22, 1 28.) Plaintiffs allege that they were targeted by the IRS in retaliation for these legal 2 representations. (Id. ¶ 15.) In the years following James Forsythe’s acquittal on November 3 1, 2007, (id. ¶ 46), Plaintiffs allege that they “have been subjected to relentless regulatory 4 scrutiny, including, but not limited to IRS audits, assessments, [notices of federal tax liens,] 5 and levies.” (Id. ¶ 47.) 6 The majority of Plaintiffs’ allegations stem from tax years 2006, 2007, and 2008. 7 (See generally id.) On July 20, 2006, Defendant began an audit of Plaintiffs’ 2004 federal 8 income tax return, which was later closed on February 11, 2011, without adjustment or 9 assessment. (Id. ¶ 37.) On September 27, 2007, Defendant began an audit of Plaintiffs’ 10 2006 federal income tax returns, (id. ¶ 15), despite Plaintiffs having received an extension 11 to file their 2006 tax return until October 15, 2007. (Id. ¶ 41.) On September 18, 2008, 12 Defendant began an audit of Plaintiffs’ 2007 income tax return. (Id. ¶ 71.) During these 13 years, Plaintiffs allege that they overpaid their taxes, (id. ¶¶ 51, 61, 62), various IRS audits 14 did not result in any adjustments or additional assessments, (id. ¶¶ 49, 57, 82, 91), and 15 Defendant subsequently imposed unlawful penalties as a negotiating strategy to offset 16 refunds due to Plaintiffs. (Id. ¶¶ 96, 103, 256, 305(D), 305(R).) Plaintiffs also allege that 17 on January 6, 2010, Defendant issued a levy without first lawfully serving Plaintiffs with 18 a notice of assessment, demand for payment, notice of federal tax lien, notice of intent to 19 levy, or a Collection Due Process taxpayer rights letter. (Id. ¶¶ 87–88.) Further, Plaintiffs 20 allege that Defendant retaliated against Plaintiffs from 2010 to 2020 by assessing various 21 payroll tax liens and penalty tax liens. (Id. ¶¶ 98, 99, 100, 130, 131, 133, 148, 149, 156, 22 159, 252, 253, 257, 269, 283). Collectively, Plaintiffs allege that these actions demonstrate 23 that “Defendant intentionally assessed penalties on income and payroll tax amounts it knew 24 were not due.” (Id. ¶ 70.) 25 On June 28, 2011, Plaintiffs filed a Petition with the United States Tax Court in 26 which they disputed the assessment of Federal income tax deficiencies against them from 27 2004 to 2008 and alleged that Defendant did not properly mail them the required Statutory 28 Notice of Deficiency (“SNOD”). See Mirch et al. v. Comm’r, Case No. 15305-11 at 3 (Jan. 1 7, 2013); (see also FAC ¶ 120.) The Tax Court dismissed Plaintiffs’ petition on January 2 7, 2013, finding that the court lacked jurisdiction over the petition, the petition was time 3 barred, the IRS did in fact deliver the SNOD that Plaintiffs claimed not to have received, 4 and Plaintiffs did not timely file a petition contesting the determinations in the SNOD. See 5 Mirch, Case No. 15305-11 at 4. On appeal, the Ninth Circuit affirmed the decision of the 6 United States Tax Court. See Mirch v. Comm’r, 604 F. App’x 564, 565 (9th Cir. 2015). 7 Plaintiffs later filed1 another petition with the United States Tax Court, alleging that 8 the IRS’s Notice of Determination upholding notices of federal tax liens filed for tax years 9 2004, 2006, and 2008 violated their Collection Due Process rights. See Mirch et al. v. 10 Comm’r, Case No. 16277-16L at 1 (June 16, 2023). On June 16, 2023, the Tax Court 11 granted partial summary judgment for the IRS, finding that Plaintiffs were precluded under 12 the doctrine of collateral estoppel from claiming that the June 29, 2010 SNOD was invalid. 13 See id at 7. 14 On April 22, 2024, Plaintiffs filed their initial Complaint (“Compl.,” ECF No. 1) 15 against Defendant in the United States District Court for the Southern District of California, 16 alleging two violations of 26 U.S.C. § 7433. (See generally Compl.) On July 23, 2024, 17 before Defendant had answered the Complaint, Plaintiffs filed their operative First 18 Amended Complaint, realleging two causes of action under Section 7433. (See generally 19 FAC.) On August 6, 2024, Defendant filed the instant Motion. (See generally Mot.) On 20 September 20, 2024, Defendant filed its Response, (see generally ECF No. 9), and on 21 October 21, 2024, Plaintiffs filed their Reply. (See generally ECF No. 10). 22 LEGAL STANDARD 23 A party may challenge the court’s subject matter jurisdiction through a motion filed 24 pursuant to Federal Rule of Civil Procedure 12(b)(1), and the Court must dismiss the action 25 when “the court determines at any time that it lacks subject matter jurisdiction.” See Fed. 26
27 1 The Tax Court’s summary judgment opinion, attached to the Motion as Exhibit 3, does not 28 1 R. Civ. P. 12(b)(1), (h)(3); see also White v. Lee, 227 F.3d 1214, 1242 (9th Cir. 2000). 2 Because “[f]ederal courts are courts of limited jurisdiction,” “[i]t is to be presumed that a 3 cause lies outside this limited jurisdiction.” Kokkonen v. Guardian Life Ins. Co. of Am., 4 511 U.S. 375, 377 (1994). Consequently, “the burden of establishing the contrary rests 5 upon the party asserting jurisdiction.” Id. The Court must first determine whether it has 6 jurisdiction and must not reach the merits where jurisdiction is lacking. See Bell v. Hood, 7 327 U.S. 678, 682 (1946); see also Orff v. United States, 358 F.3d 1137, 1149 (9th Cir. 8 2004). 9 “Rule 12(b)(1) jurisdictional attacks can be either facial or factual.” White, 227 F.2d 10 at 1242. “A ‘facial’ attack accepts the truth of the plaintiff’s allegations but asserts that 11 they ‘are insufficient on their face to invoke federal jurisdiction.’” Leite v. Crane Co., 749 12 F.3d 1117, 1121 (9th Cir. 2014) (quoting Safe Air for Everyone v. Meyer, 373 F.3d 1035, 13 1039 (9th Cir. 2004)). “The district court resolves a facial attack as it would a motion to 14 dismiss under Rule 12(b)(6): Accepting the plaintiff’s allegations as true and drawing all 15 reasonable inferences in the plaintiff’s favor, the court determines whether the allegations 16 are sufficient as a legal matter to invoke the court’s jurisdiction.” Id. (citing Pride v. 17 Correa, 719 F.3d 1130, 1133 (9th Cir. 2013)). 18 “A ‘factual’ attack, by contrast, contests the truth of the plaintiff’s factual 19 allegations, usually by introducing evidence outside the pleadings.” Id. (citing Safe Air for 20 Everyone, 373 F.3d at 1039; Thornhill Publ’g Co. v. Gen. Tel. & Elec. Corp., 594 F.2d 21 730, 733 (9th Cir. 1979)). “When the defendant raises a factual attack, the plaintiff must 22 support her jurisdictional allegations with ‘competent proof[]’” and “prov[e] by a 23 preponderance of the evidence that each of the requirements for subject-matter jurisdiction 24 has been met.” Id. (citing Hertz Corp. v. Friend, 559 U.S. 77, 96–97 (2010); Harris v. 25 Rand, 682 F.3d 846, 851 (9th Cir. 2012)). “With one caveat, if the existence of jurisdiction 26 turns on disputed factual issues, the district court may resolve those factual disputes itself.” 27 Id. at 1121–22 (citing Safe Air for Everyone, 373 F.3d at 1039–40; Augustine v. United 28 States, 704 F.2d 1074, 1077 (9th Cir. 1983); Thornhill Publ’g, 594 F.2d at 733). “The 1 caveat is that a court must leave the resolution of material factual disputes to the trier of 2 fact when the issue of subject-matter jurisdiction is intertwined with an element of the 3 merits of the plaintiff’s claim.” Id. at 1122 n.3 (citing Safe Air for Everyone, 373 F.3d at 4 1039–40; Augustine, 704 F.2d at 1077). 5 ANALYSIS 6 Plaintiffs allege two claims under Section 7433. Section 7433 creates a private right 7 of action against the United States if “in connection with any collection of Federal tax . . . 8 any officer or employee of the Internal Revenue Service recklessly or intentionally, or by 9 reason of negligence disregards any provision of this title, or any regulation promulgated 10 under this title.” 26 U.S.C. § 7433(a); see Shwarz v. U.S., 234 F.3d 428, 432 (9th Cir. 11 2000). Here, Plaintiffs premise their Section 7433 claims on Defendant’s alleged 12 violations of Internal Revenue Code (“IRC”) §§ 6201, 6212, 6301, 6303, 6320–6331, 6672, 13 and 7602(c)(1), as well as Internal Revenue Manual (“IRM”) 4.8.9.11.02, IRM 0.9.1.9.1, 14 IRM 8.25.1.4, IRM 5.1.1.12, and IRM 25.27.1. (See Compl. ¶¶ 303–04.) Plaintiffs also 15 allege, in support of their Section 7433 claims, that Defendant violated “specific Tax Court 16 Orders.” (Id. ¶ 301.) 17 I. Exhaustion of Administrative Remedies 18 As a sovereign, the United States “is immune from suit unless it has expressly 19 waived such immunity and consented to be sued.” Dunn & Black, P.S. v. United States, 20 492 F.3d 1084, 1087–88 (9th Cir. 2007); see also United States v. Mitchell, 445 U.S. 535, 21 538 (1980) (“A waiver of sovereign immunity ‘cannot be implied but must be 22 unequivocally expressed.’” (quoting United States v. King, 395 U.S. 1, 4 (1969))). Where 23 the United States has not consented to suit, the action must be dismissed because such 24 consent is necessary for jurisdiction. See Dunn & Black, 492 F.3d at 1088. “To confer 25 subject matter jurisdiction in an action against a sovereign, in addition to a waiver of 26 sovereign immunity, there must be statutory authority vesting a district court with subject 27 matter jurisdiction.” Alvarado v. Table Mountain Rancheria, 509 F.3d 1008, 1016 (9th 28 Cir. 2007). 1 “[S]ection 7433’s limited waiver to the government’s sovereign immunity must be 2 read narrowly.” Allied/Royal Parking L.P. v. U.S., 166 F.3d 1000, 1003 (9th Cir. 1999). 3 An action under Section 7433 may only proceed if “the court determines that the plaintiff 4 has exhausted the administrative remedies available to such plaintiff within the Internal 5 Revenue Service.” 26 U.S.C. § 7433(d)(1); see Clark v. U.S., 462 Fed. App’x 719, 721 6 (9th Cir. 2011). In the Ninth Circuit, the exhaustion requirement of Section 7433 is 7 jurisdictional. See id. (holding that “the district court did not have jurisdiction over 8 [plaintiff]’s claims pursuant to [26 U.S.C. §7433], because [plaintiff] did not exhaust 9 administrative remedies as required by §7433(d)(1)”); see also Conforte v. United States, 10 979 F.2d 1375, 1377 (9th Cir. 1992) (“[Plaintiff] may not bring this action against the 11 United States under 26 U.S.C. §7433 without exhausting her administrative remedies,” and 12 her failure to do so deprived the court of jurisdiction.); see also Clift v. IRS, 214 F. Supp. 13 3d 1009, 1012 (W.D. Wash. 2016) (“Exhausting an administrative claim for damages 14 within the IRS is a prerequisite to a successful action under 26 U.S.C. §7433,” and Ninth 15 Circuit precedent instructs that failure to exhaust administrative remedies deprives the 16 court of jurisdiction.). 17 The administrative remedies which a plaintiff must pursue before filing suit against 18 the United States under Section 7433 are detailed in 26 C.F.R § 301.7433-1(d)–(e). See 26 19 U.S.C. § 7433(d)(1). The regulation provides that “[a]n action for damages filed in federal 20 district court may not be maintained unless the taxpayer has filed an administrative claim 21 pursuant to paragraph (e) of this section, and has waited for the period required under 22 paragraph (d) of this section.” 26 C.F.R § 301.7433-1(a). Paragraph (e) specifies that a 23 prospective plaintiff must send an administrative claim “in writing to the Area Director, 24 Attn: Compliance Technical Support Manager of the area in which the taxpayer currently 25 resides.” 26 C.F.R § 301.7433-1(e)(1). The administrative claim must include the 26 taxpayer’s contact information, the grounds for the claim, a description of the injuries they 27 incurred, the dollar amount of the claim, and the taxpayer’s signature. See 26 C.F.R § 28 301.7433-1(e)(2). Paragraph (d) specifies that no action under the statute shall be 1 maintained in federal district court before the earlier of the following dates: “[t]he date the 2 decision is rendered on a claim filed in accordance with paragraph (e) of this section; or [] 3 [t]he date six months after the date an administrative claim is filed in accordance with 4 paragraph (e) of this section.” 26 C.F.R § 301.7433-1(d)(1)(i)–(ii). 5 Plaintiffs argue in their Opposition that they exhausted all administrative remedies 6 because they “regularly met with RA Lytle to provide substantiation and explanation.” 7 (Opp’n at 6:6–9; FAC ¶¶ 22–31.) Because meeting and speaking with an IRS employee is 8 not the administrative remedy proscribed by 26 C.F.R § 301.7433, this argument is without 9 merit. Plaintiffs also argue that the “[First Amended Complaint] alleges facts sufficient to 10 satisfy at least two exceptions under Treas. Reg. 26 CFR § 301.7430-1(f).” (Opp’n at 11 4:26–5:1.) Plaintiffs, however, were required to exhaust their administrative remedies 12 under 26 C.F.R. § 301.7433, and exceptions under § 301.7430 or any other unrelated statute 13 do not excuse that requirement. 14 Nowhere in the First Amended Complaint do Plaintiffs allege that they filed the 15 administrative claim required by 26 C.F.R § 301.7433-1(e) or waited for the period 16 required by 26 C.F.R § 301.7433-1(d). (See generally FAC.) At the hearing held on 17 January 30, 2025, Plaintiffs conceded that they did not file the requisite administrative 18 claim before pursuing the instant cause of action. (ECF No. 16.) After the hearing, 19 Plaintiffs filed a “Notice of Lodgment of Letter Re: Exhaustion of Administrative 20 Remedies Re: Motion to Dismiss,” (“Lodgment,” ECF No. 17), including a letter sent on 21 January 28, 2025 to the Internal Revenue Service Area Director pursuant to 26 C.F.R § 22 301.7433-1(e), attached to the Lodgment as Exhibit A. The Lodgment demonstrates that 23 Plaintiffs did not exhaust their administrative remedies before filing suit and are instead 24 pursuing administrative remedies concurrently with the action before this Court. Because 25 Plaintiffs did not exhaust their administrative remedies before filing suit, as required by 26 26 C.F.R § 301.7433-1, this Court is without jurisdiction and GRANTS Defendant’s Motion 27 to Dismiss pursuant to Federal Rule of Civil Procedure 12(b)(1). Further, because 28 Plaintiffs conceded that they did not exhaust their administrative remedies before filing 1 suit, the identified jurisdictional deficiency cannot be cured by amendment and the Court 2 therefore DISMISSES WITH PREJUDICE Plaintiff’s First Amended Complaint. 3 II. Statute of Limitations 4 An action under Section 7433 “may be brought only within 2 years after the date the 5 right of action accrues.” 26 U.S.C. § 7433(d)(3). Under 26 C.F.R. § 301.7433-1(g)(2), a 6 cause of action “accrues when the taxpayer has had a reasonable opportunity to discover 7 all essential elements of a possible cause of action.” 8 Plaintiffs’ allegations are admittedly difficult to follow. It appears, however, that 9 the latest alleged collection activity in the First Amended Complaint which could give rise 10 to a possible cause of action occurred on October 27, 2021, when Plaintiffs allege that 11 “Defendant recorded a Revocation of Certification of Release of Federal Lien reinstating 12 $122,348.82 of the 2006 and the 2008 liens.” (FAC ¶ 273.) Absent any pleadings 13 otherwise, Plaintiffs had a reasonable opportunity to discover the essential elements giving 14 rise to their Section 7433 claim on October 27, 2021, the date of the recording. Each of 15 the events in the First Amended Complaint alleged to have taken place following October 16 27, 2021 involve internal IRS communications, IRS record keeping, or legal filings in 17 various related cases. None of these activities constitute “essential elements of a possible 18 cause of action” under a Section 7433 claim. See 26 C.F.R. § 301.7433-(1)(g)(2). 19 Plaintiffs argue that on April 21, 2023, they discovered additional facts relevant to 20 their claims and therefore had until April 21, 2025, to file suit. (Opp’n at 14.) On April 21 21, 2023, Defendant filed a motion for summary judgment in the Tax Court “which 22 included six [] June 29, 2010 SNODs” and “substantially more documents. . . which 23 Plaintiffs had never seen.” (Id.) However, Plaintiffs do not allege that they first learned 24 of the June 29, 2010 SNODs on April 21, 2023; on the contrary, they allege they have 25 “contested the validity of the June 29, 2010 SNOD,” (FAC ¶ 139), for more than a decade, 26 including by way of a Tax Court petition that was ongoing in 2012. (Id. ¶¶ 126, 136, 137, 27 143.) Instead, Plaintiffs assert that the documents they saw for the first time on April 21, 28 2023, “gave Plaintiffs evidence that the IRS’ wrongful conduct was intentional, an essential 1 element for a Section 7433.” (Opp’n at 15.) Intent, however, is not an essential element 2 of a Section 7433 claim. See 26 U.S.C. § 7433(a) (“If, in connection with any collection 3 of Federal tax with respect to a taxpayer, any officer or employee of the Internal Revenue 4 Service recklessly or intentionally, or by reason of negligence, disregards any provision of 5 this title, or any regulation promulgated under this title, such taxpayer may bring a civil 6 action for damages against the United States in a district court of the United States.” 7 (emphasis added)). Plaintiffs’ argument regarding newly discovered documentation on 8 April 21, 2023, is therefore without merit. 9 Plaintiffs filed their initial Complaint on April 22, 2024, more than two years after 10 Defendant recorded its Revocation of Certification of Release of Federal Lien on October 11 27, 2021. Plaintiffs’ claims are therefore barred by the temporal limitation in § 7433(d)(3). 12 Because such a pleading deficiency cannot be cured by amendment, the Court GRANTS 13 Defendant’s Motion and DISMISSES WITH PREJUDICE Plaintiff’s claims. 14 CONCLUSION 15 Plaintiffs did not exhaust their administrative remedies before filing suit as required 16 by Section 7433 and, as such, the United States has not waived its sovereign immunity. 17 Further, Plaintiffs’ claims are time barred under Section 7433. Each of these bases 18 independently require dismissal under Federal Rule of Civil Procedure 12(b)(1). 19 Generally, a dismissal under Rule 12(b)(1) should be without prejudice so that a plaintiff 20 may reassert their claims in a competent court. See Freeman v. Oakland Unified School 21 Dist., 179 F.3d 846, 847 (9th Cir. 1999) (holding that dismissals for lack of jurisdiction 22 should be without prejudice). However, neither Plaintiffs’ failure to exhaust their 23 administrative remedies nor the untimeliness of this action can be cured by further 24 amendment of the Complaint. See Goldsmith v. IRS, 2015 WL 1546813, No. 2:14-CV- 25 01297-GMN-NJK, at *3 (D. Nev. Apr. 7, 2015) (“where there is no way to cure the 26 jurisdictional defect, dismissal with prejudice is proper”) (citing Frigard v. United States, 27 / / / 28 / / / 1 |} 862 F.2d 201, 204 (9th Cir. 1988)). As such, the Court GRANTS Defendant’s Motion and 2 || DISMISSES WITH PREJUDICE Plaintiffs’ claims. 3 IT IS SO ORDERED. 4 Dated: February 6, 2025 —_—— 5 dd) (2 D (oe 6 Honorable Todd W. Robinson 5 United States District Judge 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28