Mirch v. United States

District Court, S.D. California·Decided February 6, 2025·No. 3:24-cv-00721·Unknown

Opinion

KEVIN J. MIRCH and MARIE C. Case No.: 3:24-CV-721 TWR (DDL) MIRCH, ORDER GRANTING DEFENDANT’S Plaintiffs, MOTION TO DISMISS AND v. DISMISSING WITH PREJUDICE PLAINTIFFS’ FIRST AMENDED UNITED STATES OF AMERICA, Defendant. (ECF No. 6) Presently before the Court is Defendant United States of America’s Motion to Dismiss Plaintiffs’ First Amended Complaint, (“Mot.,” ECF No. 6), as well as Plaintiffs Kevin J. Mirch and Marie C. Mirch’s Response in Opposition to (“Opp’n,” ECF No. 9) and Defendant’s Reply in Support of (“Reply,” ECF No. 10) the Motion. On January 30, 2025, the Court held a hearing on the Motion. (See ECF No. 16.) Having carefully considered the Plaintiffs’ First Amended Complaint (“FAC,” ECF No. 5), the Parties’ arguments, and the relevant law, the Court GRANTS Defendant’s Motion to Dismiss and DISMISSES WITH PREJUDICE Plaintiffs’ First Amended Complaint as follows. Plaintiffs Kevin J. Mirch and Marie C. Mirch are attorneys who have represented taxpayers against the Internal Revenue Service (“IRS”) in civil and criminal tax cases. (FAC ¶¶ 13, 15.) Specifically, Plaintiffs served as trial counsel in two criminal tax cases tried in Nevada: U.S. v. Rutherford in 2004 and U.S. v. Forsythe in 2007. (Id. ¶¶ 17, 22, 28.) Plaintiffs allege that they were targeted by the IRS in retaliation for these legal representations. (Id. ¶ 15.) In the years following James Forsythe’s acquittal on November 1, 2007, (id. ¶ 46), Plaintiffs allege that they “have been subjected to relentless regulatory scrutiny, including, but not limited to IRS audits, assessments, [notices of federal tax liens,] and levies.” (Id. ¶ 47.) The majority of Plaintiffs’ allegations stem from tax years 2006, 2007, and 2008. (See generally id.) On July 20, 2006, Defendant began an audit of Plaintiffs’ 2004 federal income tax return, which was later closed on February 11, 2011, without adjustment or assessment. (Id. ¶ 37.) On September 27, 2007, Defendant began an audit of Plaintiffs’ 2006 federal income tax returns, (id. ¶ 15), despite Plaintiffs having received an extension to file their 2006 tax return until October 15, 2007. (Id. ¶ 41.) On September 18, 2008, Defendant began an audit of Plaintiffs’ 2007 income tax return. (Id. ¶ 71.) During these years, Plaintiffs allege that they overpaid their taxes, (id. ¶¶ 51, 61, 62), various IRS audits did not result in any adjustments or additional assessments, (id. ¶¶ 49, 57, 82, 91), and Defendant subsequently imposed unlawful penalties as a negotiating strategy to offset refunds due to Plaintiffs. (Id. ¶¶ 96, 103, 256, 305(D), 305(R).) Plaintiffs also allege that on January 6, 2010, Defendant issued a levy without first lawfully serving Plaintiffs with a notice of assessment, demand for payment, notice of federal tax lien, notice of intent to levy, or a Collection Due Process taxpayer rights letter. (Id. ¶¶ 87–88.) Further, Plaintiffs allege that Defendant retaliated against Plaintiffs from 2010 to 2020 by assessing various payroll tax liens and penalty tax liens. (Id. ¶¶ 98, 99, 100, 130, 131, 133, 148, 149, 156, 159, 252, 253, 257, 269, 283). Collectively, Plaintiffs allege that these actions demonstrate that “Defendant intentionally assessed penalties on income and payroll tax amounts it knew were not due.” (Id. ¶ 70.) On June 28, 2011, Plaintiffs filed a Petition with the United States Tax Court in which they disputed the assessment of Federal income tax deficiencies against them from 2004 to 2008 and alleged that Defendant did not properly mail them the required Statutory Notice of Deficiency (“SNOD”). See Mirch et al. v. Comm’r, Case No. 15305-11 at 3 (Jan. 7, 2013); (see also FAC ¶ 120.) The Tax Court dismissed Plaintiffs’ petition on January 7, 2013, finding that the court lacked jurisdiction over the petition, the petition was time barred, the IRS did in fact deliver the SNOD that Plaintiffs claimed not to have received, and Plaintiffs did not timely file a petition contesting the determinations in the SNOD. See Mirch, Case No. 15305-11 at 4. On appeal, the Ninth Circuit affirmed the decision of the United States Tax Court. See Mirch v. Comm’r, 604 F. App’x 564, 565 (9th Cir. 2015). Plaintiffs later filed1 another petition with the United States Tax Court, alleging that the IRS’s Notice of Determination upholding notices of federal tax liens filed for tax years 2004, 2006, and 2008 violated their Collection Due Process rights. See Mirch et al. v. Comm’r, Case No. 16277-16L at 1 (June 16, 2023). On June 16, 2023, the Tax Court granted partial summary judgment for the IRS, finding that Plaintiffs were precluded under the doctrine of collateral estoppel from claiming that the June 29, 2010 SNOD was invalid. See id at 7. On April 22, 2024, Plaintiffs filed their initial Complaint (“Compl.,” ECF No. 1) against Defendant in the United States District Court for the Southern District of California, alleging two violations of 26 U.S.C. § 7433. (See generally Compl.) On July 23, 2024, before Defendant had answered the Complaint, Plaintiffs filed their operative First Amended Complaint, realleging two causes of action under Section 7433. (See generally FAC.) On August 6, 2024, Defendant filed the instant Motion. (See generally Mot.) On September 20, 2024, Defendant filed its Response, (see generally ECF No. 9), and on October 21, 2024, Plaintiffs filed their Reply. (See generally ECF No. 10). A party may challenge the court’s subject matter jurisdiction through a motion filed pursuant to Federal Rule of Civil Procedure 12(b)(1), and the Court must dismiss the action when “the court determines at any time that it lacks subject matter jurisdiction.” See Fed.

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