Pragovich v. United States

• Court: District Court, District of Columbia
• Decided: March 17, 2009
• Docket: Civil Action No. 2007-2079
• Status: Published

Opinion

UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA

GEORGE K. PRAGOVICH, et al., : : Plaintiffs, : : v. : Civil Action No. 07-2079 (JR) : UNITED STATES OF AMERICA, : : Defendant. :

MEMORANDUM

Pro se plaintiffs George and Claudia Pragovich sue the

United States Government seeking money damages for asserted

violations of the Internal Revenue Code.1 The case is similar to

an earlier one brought by the same plaintiffs (and dismissed).

Pragovich v. United States, 2007 WL 521890 (D.D.C. 2007). It is

genetically indistinguishable from a gaggle of other tax protest

suits that have been filed in this court, and it is almost

identical to one dismissed by Judge Huvelle in Wesselman v.

United States, 501 F. Supp. 2d 98 (D.D.C. 2007). Because this

court has no jurisdiction over many of the plaintiffs’ claims,

and because the plaintiffs have failed to exhaust their

administrative remedies as to the rest, the government’s motion

to dismiss will be granted.

1 A conspicuous footnote to the complaint disavows any claim for declaratory or injunctive relief, or for a tax refund -- remedies that are unavailable to these plaintiffs anyway. Analysis

This court does not have jurisdiction to hear claims

for money damages under the Administrative Procedure Act. 5

U.S.C. § 702. There is no waiver of sovereign immunity for a

damages claim in the Federal Records Act or the National Archives

Act. See, Ross v. United States, 460 F. Supp. 2d 139, 148-50

(D.D.C. 2006). No Bivens remedy is available to the plaintiffs

because the internal Revenue Code contains a comprehensive

remedial scheme. Marsoun v. U.S., 591 F. Supp. 2d 41, 47-48

(D.D.C. 2008) (citing, Wilson v. Libby, 535 F.3d 697, 705 (D.C.

Cir. 2008)). The only waiver of sovereign immunity applicable to

the plaintiff’s claims is found in 26 U.S.C. § 7433, which is

limited to actions seeking damages “in connection with any

collection of Federal tax with respect to a taxpayer.” All of

the plaintiffs counts that deal with issues other than the

collection of taxes -- counts 1-19, 27-29, and 33 -- must

therefore be dismissed for lack of jurisdiction. Fed. R. Civ.

Pro. § 12(b)(1); accord, Wesselman, 501 F. Supp. 2d at 100-101.

Section 7433(d)(1) states that a “judgment for damages

shall not be awarded . . . unless the court determines that the

plaintiff has exhausted the administrative remedies available to

such plaintiff within the Internal Revenue Service.” The

exhaustion procedures are set out in 26 C.F.R. § 301.7433-1. The

defendants urge me to reverse the position I took in Gross v.

- 2 - United States, 2006 U.S. Dist. LEXIS 68965 at *1 fn. 1 (D.D.C.

2006), that this exhaustion requirement is non-jurisdictional,

arguing that, in relevant part, the Supreme Court’s recent

decision in John R. Sand & Gravel Co. v. United States, ---U.S.

----, 128 S.Ct. 750 (2008), has undermined my reliance on Arbaugh

v. Y&H Corp., 546 U.S. 500 (2006), and Avocados Plus v. Veneman,

361 U.S. App. D.C. 519, 370 F.3d 1243, 1247-48 (D.C. Cir. 2004).

I decline to do so for substantially the same reasons articulated

by Judge Bates in the Marsoun case, i.e., that John R. Sand &

Gravel provides little support for the defendant’s position.

Marsoun, 591 F. Supp. 2d at 44-45.

In any event, the plaintiffs do not assert that they

have exhausted their administrative remedies. Instead, they

argue that § 301.7433-1 is a nonbinding “interpretive” rule that

courts should ignore or invalidate. Their assumption,

apparently, is that regulations issued under 26 U.S.C.

§ 7805(a)’s general grant of authority after notice and comment,

which have been called “interpretive,” are like the non-binding

interpretations issued by some administrative agencies to clarify

existing duties, but which are not the product of notice and

comment rulemaking and do not have the force of law. This

- 3 - assumption is mistaken. Regulations issued under § 7805 after

notice and comment do have the force of law.2

Because it is “quite clear” from the “statutory and

historical context” of § 7433(d)(1) “that Congress has implicitly

authorized the IRS to prescribe the details of administrative

exhaustion,” Evans v. U.S., 433 F. Supp. 2d 17, 22 (D.D.C.

2006), and thus that the “IRS ha[d] authority under 26 U.S.C.

§ 7805(a), and § 7433 itself, to promulgate the exhaustion

regulation,” Marsoun, 591 F. Supp. 2d at 46; because the

regulation is reasonable; and because the plaintiffs have given

me no reason to do otherwise; I will follow the lead of several

of my learned colleagues and find that the regulation is

deserving of deference and valid. See, e.g., Evans, 433 F. Supp.

2d at 22; O'Connor v. U.S., 2007 WL 274755 (D.D.C. 2007);

2 The fact that regulations are issued under § 7805 are “interpretive” raises the question of whether their validity will be reviewed using the analysis prescribed by National Muffler Dealers Ass'n, Inc., v. U.S., 440 U.S. 472 (1979), and its more recent derivatives, or under Chevron USA, Inc. v. Natural Resources Defense Council, 467 U.S. 837 (1984). See, Swallows Holding, Ltd. V. C.I.R., 515 F.3d 167, 168 (3rd Cir. 2008). The D.C. Circuit appears to have resolved the matter by applying Chevron. See, Tax Analysts v. IRS, 350 F.3d 100, 103 (D.C. Cir. 2003); New Millennium Trading, L.L.C. v. C.I.R., 131 T.C. No. 18, 2008 WL 5330940 (U.S. Tax Ct. 2008) (“The U.S. Court of Appeals for the District of Columbia Circuit has held that regulations issued under the general authority of the IRS to promulgate necessary rules are entitled to Chevron deference.”) (citing Tax Analysts).

- 4 - Anderson v. U.S., 2007 WL 2059737 (D.D.C. 2007); Rippl v. U.S.,

2006 WL 2024966 (D.D.C. 2006).3

The plaintiffs’ argument that the regulation is not

binding because it was not properly promulgated also fails:

notice was published in the Federal Register. Civil Cause of

Action for Unauthorized Collection Actions, 56 Fed. Reg. 28842

(June 25, 1991). The regulation’s validity would not be

compromised, in any event, by technical Treasury Directives.

See, 1 C.F.R. § 5.1. The plaintiffs have made no showing of

exhaustion, and so their claims in counts 20-26 and 30-32 must be

dismissed for failure to state a claim upon which relief can be

granted. Fed. R. Civ. Pro. § 12(b)(6).

* * *

An appropriate order accompanies this memorandum.

JAMES ROBERTSON United States District Judge

3 Even under National Muffler I “must still treat the regulation with deference,” Boeing Co. v. U.S., 537 U.S. 437 (2003) (citing, Cottage Savings Assn. v. Commissioner, 499 U.S. 554, 560-561 (1991)), and “defer to the Commissioner's regulations as long as they implement the congressional mandate in some reasonable manner,” United States v. Cleveland Indians Baseball Co., 532 U.S. 200, 219 (2001), because “Congress has delegated to the [Secretary of the Treasury and his delegate, the] Commissioner [of Internal Revenue], not to the courts, the task of prescribing all needful rules and regulations for the enforcement of the Internal Revenue Code,” Nat'l Muffler Dealers Ass'n v. United States, 440 U.S. 472, 4777 (1979) (quoting United States v. Correll, 389 U.S. 299, 307 (1967)). The regulation here is reasonable.

- 5 -