1 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 SOUTHERN DISTRICT OF CALIFORNIA 10 11 CRAIG PETERSEN, Case No. 21-cv-01345-BAS-AGS
12 Plaintiff, ORDER GRANTING DEFENDANTS 13 v. IRS AND UNGER’S MOTION TO DISMISS (ECF No. 10) 14 INTERNAL REVENUE SERVICE, et al.,
15 Defendants. 16 17 Mr. Petersen, acting pro per, brings this action against the Internal Revenue Service 18 (“IRS”), its revenue officer Joseph Unger, and Stefan Kasain claiming wrongful levy of 19 taxes against the bank account of Crystal Castle Alliance, an organization of which Plaintiff 20 alleges he is the “Director, President, Treasurer and Secretary.” (Compl. ¶¶ 3, 8.) 21 According to the Complaint, this wrongful levy occurred as a result of Kasain’s tax debts. 22 (Id. ¶ 6.) 23 The IRS and Unger move pursuant to Rules 12(b)(1), 12(b)(5), and 12(b)(6) to 24 dismiss the action against them. (ECF No. 10.) Plaintiff responds (ECF No. 14), and the 25 Government replies (ECF No. 15). The Court finds this motion suitable for determination 26 on the papers submitted and without oral argument. See Civ. L.R. 7.1(d)(1). For the 27 reasons stated below, the Court GRANTS the Motion. 28 // 1 I. LEGAL STANDARD 2 A. Rule 12(b)(1) 3 Federal courts are courts of limited jurisdiction. Kokkonen v. Guardian Life Ins. Co. 4 Of Am., 511 U.S. 375, 377 (1994). It is presumed that a case lies outside this limited 5 jurisdiction, and the party asserting federal jurisdiction bears the burden of establishing 6 federal court as the proper venue. Lujan v. Defenders of Wildlife, 504 U.S. 555, 561 (1992). 7 For claims against the United States, subject matter jurisdiction exists only if 8 plaintiff shows Congress has expressly waived sovereign immunity with respect to the 9 claim. United States v. Mitchell, 445 U.S. 535, 538 (1980). “A waiver of sovereign 10 immunity ‘cannot be implied but must be unequivocally expressed.’” Id. (quoting United 11 States v. King, 395 U.S. 1, 4 (1969)). When the United States has not consented to suit, 12 the case must be dismissed for lack of subject matter jurisdiction. Allied Royal Parking 13 L.P. v. United States, 166 F.3d 1000, 1003 (9th Cir. 1999). 14 15 B. Rule 12(b)(6) 16 A motion to dismiss pursuant to Rule 12(b)(6) of the Federal Rules of Civil 17 Procedure tests the legal sufficiency of the claims asserted in the complaint. Fed. R. Civ. 18 P. 12(b)(6); Navarro v. Block, 250 F.3d 729, 731 (9th Cir. 2001). The court must accept 19 all factual allegations pleaded in the complaint as true and must construe them and draw 20 all reasonable inferences from them in favor of the nonmoving party. Cahill v. Liberty 21 Mutual Ins. Co., 80 F.3d 336, 337–38 (9th Cir. 1996). 22 As a general rule, a court freely grants leave to amend a complaint which has been 23 dismissed. Fed. R. Civ. P. 15(a). However, leave to amend may be denied when “the court 24 determines that the allegation of other facts consistent with the challenged pleading could 25 not possibly cure the deficiency.” Schreiber Distrib. Co. v. Serv-Well Furniture Co., 806 26 F.2d 1393, 1401 (9th Cir. 1986). 27 // 28 // 1 C. Rule 12(b)(5) 2 A defendant may move for dismissal pursuant to Rule 12(b)(5) of the Federal Rules 3 of Civil procedure for insufficient service of process. When filing a lawsuit in this district 4 against an agency of the United States, such as the IRS, a plaintiff is required to “serve the 5 United States and also send a copy of the summons and of the complaint by registered or 6 certified mail to the agency, corporation, officer, or employee.” Fed. R. Civ. P. 4(i)(2). 7 The plaintiff may serve the United States by both: (1) “deliver[ing] a copy of the summons 8 and . . . complaint to the United States Attorney” for the Southern District of California or 9 sending copies of the summons and complaint “by registered or certified mail to the civil- 10 process clerk” at the U.S. Attorney for the Southern District of California’s office; and (2) 11 “send[ing] a copy of [both the summons and complaint] by registered or certified mail to 12 the Attorney General of the United States at Washington D.C.” Fed. R. Civ. P. 4(i)(1)(A)– 13 (B).1 14 15 II. ANALYSIS 16 As a preliminary matter, IRS revenue officers may not be sued for alleged 17 constitutional violations in the process of assessing and collecting taxes, no matter how 18 egregious plaintiff claims those violations were. Adams v. Johnson, 355 F.3d 1179, 1184 19 (9th Cir. 2004). Therefore, Defendant Unger is dismissed from the case. Since there is no 20 way for Plaintiff to cure this deficiency, Defendant Unger is dismissed with prejudice. 21 22 A. Rule 12(b)(1) 23 The United States has waived sovereign immunity for wrongful levy of taxes under 24 26 U.S.C. §7426. However, the United States only consents to the suit if the plaintiff has 25 exhausted his administrative remedies with the IRS. See 26 U.S.C. §§7426(h)(2), 7433(d). 26
27 1 “[I]f the action challenges an order of a nonparty agency or officer of the United States,” the plaintiff must also “send a copy of [the summons and the complaint] by registered or certified mail to the 28 1 Here, Plaintiff does not allege he exhausted his administrative remedies in either his 2 Complaint or in his Response to Defendants’ Motion to Dismiss. (ECF Nos. 1, 14.) 3 Additionally, the Government files a declaration asserting that “[n]o administrative claim 4 for damages pursuant to 26 U.S.C. §7426 on behalf of Craig Petersen . . . could be located 5 in a search of IRS records and databases.” (Unger Decl. at ¶ 7, ECF No. 10-1.) 6 Accordingly, the case must be dismissed for lack of subject matter jurisdiction. However, 7 if Plaintiff can allege that he has exhausted his administrative remedies with the IRS, he 8 may amend the Complaint to add this allegation. 9 10 B. Rule 12(b)(6) 11 The Complaint suffers from an additional defect in that Plaintiff appears to lack 12 statutory standing to bring the action. According to the Complaint, the wrongful levy was 13 against the bank account of a “legally separate business organization,” Crystal Castle 14 Alliance. (Compl. ¶ 3.) Plaintiff does not allege that he was the owner of Crystal Castle 15 Alliance or had any possessory interest in it, only that he was an officer of this organization. 16 The statute that authorizes an action for wrongful tax grants statutory standing to 17 “any person . . . who claims an interest in . . . such property” wrongfully levied upon. 26 18 U.S.C. § 7426(a)(1).
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1 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 SOUTHERN DISTRICT OF CALIFORNIA 10 11 CRAIG PETERSEN, Case No. 21-cv-01345-BAS-AGS
12 Plaintiff, ORDER GRANTING DEFENDANTS 13 v. IRS AND UNGER’S MOTION TO DISMISS (ECF No. 10) 14 INTERNAL REVENUE SERVICE, et al.,
15 Defendants. 16 17 Mr. Petersen, acting pro per, brings this action against the Internal Revenue Service 18 (“IRS”), its revenue officer Joseph Unger, and Stefan Kasain claiming wrongful levy of 19 taxes against the bank account of Crystal Castle Alliance, an organization of which Plaintiff 20 alleges he is the “Director, President, Treasurer and Secretary.” (Compl. ¶¶ 3, 8.) 21 According to the Complaint, this wrongful levy occurred as a result of Kasain’s tax debts. 22 (Id. ¶ 6.) 23 The IRS and Unger move pursuant to Rules 12(b)(1), 12(b)(5), and 12(b)(6) to 24 dismiss the action against them. (ECF No. 10.) Plaintiff responds (ECF No. 14), and the 25 Government replies (ECF No. 15). The Court finds this motion suitable for determination 26 on the papers submitted and without oral argument. See Civ. L.R. 7.1(d)(1). For the 27 reasons stated below, the Court GRANTS the Motion. 28 // 1 I. LEGAL STANDARD 2 A. Rule 12(b)(1) 3 Federal courts are courts of limited jurisdiction. Kokkonen v. Guardian Life Ins. Co. 4 Of Am., 511 U.S. 375, 377 (1994). It is presumed that a case lies outside this limited 5 jurisdiction, and the party asserting federal jurisdiction bears the burden of establishing 6 federal court as the proper venue. Lujan v. Defenders of Wildlife, 504 U.S. 555, 561 (1992). 7 For claims against the United States, subject matter jurisdiction exists only if 8 plaintiff shows Congress has expressly waived sovereign immunity with respect to the 9 claim. United States v. Mitchell, 445 U.S. 535, 538 (1980). “A waiver of sovereign 10 immunity ‘cannot be implied but must be unequivocally expressed.’” Id. (quoting United 11 States v. King, 395 U.S. 1, 4 (1969)). When the United States has not consented to suit, 12 the case must be dismissed for lack of subject matter jurisdiction. Allied Royal Parking 13 L.P. v. United States, 166 F.3d 1000, 1003 (9th Cir. 1999). 14 15 B. Rule 12(b)(6) 16 A motion to dismiss pursuant to Rule 12(b)(6) of the Federal Rules of Civil 17 Procedure tests the legal sufficiency of the claims asserted in the complaint. Fed. R. Civ. 18 P. 12(b)(6); Navarro v. Block, 250 F.3d 729, 731 (9th Cir. 2001). The court must accept 19 all factual allegations pleaded in the complaint as true and must construe them and draw 20 all reasonable inferences from them in favor of the nonmoving party. Cahill v. Liberty 21 Mutual Ins. Co., 80 F.3d 336, 337–38 (9th Cir. 1996). 22 As a general rule, a court freely grants leave to amend a complaint which has been 23 dismissed. Fed. R. Civ. P. 15(a). However, leave to amend may be denied when “the court 24 determines that the allegation of other facts consistent with the challenged pleading could 25 not possibly cure the deficiency.” Schreiber Distrib. Co. v. Serv-Well Furniture Co., 806 26 F.2d 1393, 1401 (9th Cir. 1986). 27 // 28 // 1 C. Rule 12(b)(5) 2 A defendant may move for dismissal pursuant to Rule 12(b)(5) of the Federal Rules 3 of Civil procedure for insufficient service of process. When filing a lawsuit in this district 4 against an agency of the United States, such as the IRS, a plaintiff is required to “serve the 5 United States and also send a copy of the summons and of the complaint by registered or 6 certified mail to the agency, corporation, officer, or employee.” Fed. R. Civ. P. 4(i)(2). 7 The plaintiff may serve the United States by both: (1) “deliver[ing] a copy of the summons 8 and . . . complaint to the United States Attorney” for the Southern District of California or 9 sending copies of the summons and complaint “by registered or certified mail to the civil- 10 process clerk” at the U.S. Attorney for the Southern District of California’s office; and (2) 11 “send[ing] a copy of [both the summons and complaint] by registered or certified mail to 12 the Attorney General of the United States at Washington D.C.” Fed. R. Civ. P. 4(i)(1)(A)– 13 (B).1 14 15 II. ANALYSIS 16 As a preliminary matter, IRS revenue officers may not be sued for alleged 17 constitutional violations in the process of assessing and collecting taxes, no matter how 18 egregious plaintiff claims those violations were. Adams v. Johnson, 355 F.3d 1179, 1184 19 (9th Cir. 2004). Therefore, Defendant Unger is dismissed from the case. Since there is no 20 way for Plaintiff to cure this deficiency, Defendant Unger is dismissed with prejudice. 21 22 A. Rule 12(b)(1) 23 The United States has waived sovereign immunity for wrongful levy of taxes under 24 26 U.S.C. §7426. However, the United States only consents to the suit if the plaintiff has 25 exhausted his administrative remedies with the IRS. See 26 U.S.C. §§7426(h)(2), 7433(d). 26
27 1 “[I]f the action challenges an order of a nonparty agency or officer of the United States,” the plaintiff must also “send a copy of [the summons and the complaint] by registered or certified mail to the 28 1 Here, Plaintiff does not allege he exhausted his administrative remedies in either his 2 Complaint or in his Response to Defendants’ Motion to Dismiss. (ECF Nos. 1, 14.) 3 Additionally, the Government files a declaration asserting that “[n]o administrative claim 4 for damages pursuant to 26 U.S.C. §7426 on behalf of Craig Petersen . . . could be located 5 in a search of IRS records and databases.” (Unger Decl. at ¶ 7, ECF No. 10-1.) 6 Accordingly, the case must be dismissed for lack of subject matter jurisdiction. However, 7 if Plaintiff can allege that he has exhausted his administrative remedies with the IRS, he 8 may amend the Complaint to add this allegation. 9 10 B. Rule 12(b)(6) 11 The Complaint suffers from an additional defect in that Plaintiff appears to lack 12 statutory standing to bring the action. According to the Complaint, the wrongful levy was 13 against the bank account of a “legally separate business organization,” Crystal Castle 14 Alliance. (Compl. ¶ 3.) Plaintiff does not allege that he was the owner of Crystal Castle 15 Alliance or had any possessory interest in it, only that he was an officer of this organization. 16 The statute that authorizes an action for wrongful tax grants statutory standing to 17 “any person . . . who claims an interest in . . . such property” wrongfully levied upon. 26 18 U.S.C. § 7426(a)(1). Thus, in order to establish statutory standing to bring a Section 19 7426(a)(1) claim, Plaintiff must allege that he has an interest in the bank account levied 20 upon. 21 It is well established that a shareholder lacks standing to bring an action on behalf 22 of a corporation in which he owns shares. See e.g., Sorrano’s Gasco Inc. v. Morgan, 874 23 F.2d 1310, 1318 (9th Cir. 1989) (section 1983 action); Sparling v. Hoffman Const. Co., 24 864 F.2d 635, 641 (9th Cir. 1988) (RICO action). A legally separate business organization 25 like Crystal Castle Alliance is simply an entity consisting of multiple individuals who could 26 conceivably be harmed if the organization is harmed. “If, however, [courts] allow the 27 corporation to litigate in its own name and collect the whole sum (as [courts] do), [courts] 28 must exclude attempts by the participants in the venture to recover for their individual 1 injuries.” Mid-State Fertilizer Co. v. Exch. Nat. Bank of Chicago, 877 F.2d 1333, 1336 2 (7th Cir. 1989). 3 Here, in order to establish standing, Plaintiff must allege ownership in the bank 4 account he claims was wrongfully levied upon. Otherwise, the only proper plaintiff is the 5 organization that owned the bank account. Because Plaintiff fails to so allege standing, the 6 motion to dismiss pursuant to Rule 12(b)(6) is also granted. Again, if Plaintiff can allege 7 a possessory interest in the bank account at issue, he may amend the Complaint to add this 8 allegation. 9 Finally, under Section 7426, a plaintiff is limited to “actual direct economic 10 damages.” 26 U.S.C. § 7426(h)(1)(A). Hence, any punitive damages claim is dismissed. 11 12 C. Rule 12(b)(5) 13 Defendants point out that Plaintiff improperly served the IRS since he was required 14 to also serve the U.S. Attorney’s Office for the Southern District of California and the 15 Attorney General of the United States, as outlined above. The Court agrees. Any amended 16 complaint must be properly served. 17 // 18 // 19 // 20 // 21 // 22 // 23 // 24 // 25 // 26 // 27 // 28 // 1 CONCLUSION 2 Defendant Unger’s Motion to Dismiss is GRANTED with prejudice. Joseph Unger 3 ||is dismissed from the action. 4 Defendant IRS’s Motion to Dismiss is GRANTED without prejudice. Plaintiff may 5 || file an amended Complaint, but only if he can allege: (1) that he exhausted his 6 ||administrative remedies with the IRS before bringing this lawsuit and (2) that he has a 7 || personal possessory interest in the bank account levied upon. Any amended Complaint 8 be filed on or before February 11, 2022. If no amended Complaint is filed by the 9 || date, the Court will dismiss this action with prejudice without a further order. 10 IT IS SO ORDERED. 11 /) 12 || DATED: January 21, 2022 (Yin A (Lyohan. 13 United States District Judge 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 _f.