RAJMP, INC. v. United States

• Court: District Court, S.D. California
• Decided: February 25, 2020
• Docket: 3:19-cv-00876
• Status: Unknown

Opinion

1 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 SOUTHERN DISTRICT OF CALIFORNIA 10 11 RAJMP, INC., Case No.: 19-cv-876 AJB (WVG)

12 Plaintiff, ORDER: 13 v. (1) GRANTING UNITED STATES’ 14 UNITED STATES OF AMERICA, MOTION TO DISMISS RAJMP, 15 Defendant. INC.’S COMPLAINT;

16 (2) DENYING RAJMP’S MOTION 17 TO DENY THE UNITED STATES’ MOTION FOR SUMMARY 18 JUDGMENT; 19 (3) DENYING RAJMP’S MOTION 20 TO STRIKE THE UNITED STATES’ 21 MOTION TO DISMISS; AND

22 (4) DENYING RAJMP’S MOTION 23 FOR PRELIMINARY INJUNCTION 24 25 (Doc. Nos. 88, 93, 100, 101)

26 / / / 27 / / / 28 1 Pending before the Court are United States’ Motion to Dismiss, (Doc. No. 88), 2 Plaintiff RAJMP’s Motion for Preliminary Injunction, (Doc. No. 93), RAJMP’s Motion to 3 Deny United States’ Motion to Dismiss, (Doc. No. 100), and RAJMP’s Motion to Strike 4 United States’ Motion to Dismiss, (Doc. No. 101). As will be explained in greater detail 5 below, the Court GRANTS United States’ motion to dismiss, DENIES RAJMP’s motion 6 for preliminary injunction, DENIES RAJMP’s motion to deny United States’ motion to 7 dismiss, and DENIES RAJMP’s motion to strike the United States’ motion to dismiss. 8 BACKGROUND 9 Plaintiff RAJMP has brought suit against the United States to enforce the terms and 10 conditions of an alleged binding IRS Form 656 offer in compromise contract (“OIC”). 11 (Doc. No. 1 ¶ 1.)1 On July 14, 2006, RAJMP executed an OIC and sent it to the IRS Center 12 in Memphis, Tennessee. (Id. ¶ 8.) The OIC offered to pay $400,000 and the “proceeds from 13 the sale of each of the Taxpayer’s 10 shops after the satisfaction of the Taxpayer’s senior 14 creditors.” (Id. ¶ 9.) The OIC was to resolve all of RAJMP’s liabilities for payroll taxes, 15 penalties for failure to file, failure to deposit, and failure to pay. (Id. ¶ 10.) 16 On July 25, 2006, the United States accepted the OIC for processing. (Id. ¶ 11.) 17 RAJMP alleges that the United States never then issued any notice of rejection of the OIC 18 as in the manner mandated by 26 U.S.C. §§ 7122(a)–(f) and Treasury Regulation § 19 301.7122-1(f). (Id. ¶ 12.) RAJMP alleges that because these findings were never made the 20 OIC was not rejected. (Id. ¶ 13.) On July 25, 2008, as a result of the passage of two years 21 without the OIC being properly rejected the OIC was deemed accepted by the United States 22 and became binding on the United States. (Id. ¶ 15.) RAJMP paid the United States 23 $400,000, but the United States applied the amount to their account instead of payment for 24 the OIC. (Id. ¶ 18.) 25 As a result of this, RAJMP seeks non-monetary claims against RAJMP to enforce 26 27 1 The following facts are taken from Plaintiff’s complaint, (Doc. No. 1), and are construed as true for the limited purpose of resolving the instant motion. See Brown v. Elec. Arts, Inc., 724 F.3d 1235, 1247 (9th 28 1 all terms and conditions of the OIC contract. (See generally Doc. No. 1.) RAJMP alleges 2 the following causes of action: (1) a continuing breach of contract, (2) a non-monetary 3 claim under 5 U.S.C. § 702 (second sentence), (3) violations of the Administrative 4 Procedure Act, and (4) this count is based on the Court’s anomalous independent equity 5 jurisdiction, the Court’s supervisory power over federal officers and employees and the 6 equity jurisdiction conferred by the Judiciary Act of 1789. (Id.) Specifically, RAJMP’s 7 prayer for relief states: “Wherefore, RAJMP asks the Court to: (a) enter final judgment and 8 order enforcing all the terms and conditions of the OIC Contract against the U.S.; 9 including: (1) an order instructing the U.S. to abate any and all balances of the outstanding 10 assessments against RAJMP; (2) issue any other orders in law or in equity the court deems 11 appropriate; (3) award costs; (4) award legal fees.” (Id. at 10–11.) 12 DISCUSSION 13 The Court will address the United States’ motion to dismiss, RAJMP’s motion for 14 preliminary injunction, RAJMP’s motion to deny the United States’ motion to dismiss, and 15 RAJMP’s motion to strike the United States’ motion dismiss in turn. 16 A. United States’ Motion to Dismiss 17 The United States seeks to dismiss RAJMP’s complaint in its entirety for lack of 18 jurisdiction and failure to state a claim. 19 i. Legal Standard 20 A motion to dismiss under Rule 12(b)(6) tests the legal sufficiency of a plaintiff’s 21 complaint and allows a court to dismiss a complaint upon a finding that the plaintiff has 22 failed to state a claim upon which relief may be granted. See Navarro v. Block, 250 F.3d 23 729, 732 (9th Cir. 1996). “[A] court may dismiss a complaint as a matter of law for (1) lack 24 of cognizable legal theory or (2) insufficient facts under a cognizable legal claim.” 25 SmileCare Dental Grp. v. Delta Dental Plan of Cal., Inc., 88 F.3d 780, 783 (9th Cir. 1996) 26 (citations and internal quotation marks omitted). However, a complaint will survive a 27 motion to dismiss if it contains “enough facts to state a claim of relief that is plausible on 28 its face.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007). In making this 1 determination, a court reviews the contents of the complaint, accepting all factual 2 allegations are true, and drawing all reasonable inferences in favor of the non-moving 3 party. Cedars-Sinai Med. Ctr. v. Nat’l League of Postmasters of U.S., 497 F.3d 972, 975 4 (9th Cir. 2007). 5 Notwithstanding this deference, the reviewing court need not accept “legal 6 conclusions” as true. Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). It is also improper for a 7 court to assume “the [plaintiff] can prove facts that [he or she] has not alleged[.]” Assoc. 8 Gen. Contractors of Cal., Inc. v. Cal. State Council of Carpenters, 459 U.S. 519, 526 9 (1983). However, “[w]hen there are well-pleaded factual allegations, a court should assume 10 their veracity and then determine whether they plausibly give rise to an entitlement to 11 relief.” Iqbal, 556 U.S. at 679. 12 ii. The Anti-Injunction Act and Declaratory Judgment Act 13 The United States asserts that RAJMP’s requested relief is bared by the Anti- 14 Injunction Act, 26 U.S.C. § 7421(a) (“AIA”) as well as the Declaratory Judgment Act, 28 15 U.S.C. § 2201(a) (“DJA”). (Doc. No. 84-1 at 9.) The AIA provides that generally no suit 16 for the purpose of restraining the assessment or collection of any tax shall be maintained 17 by any court by any person. 26 U.S.C. § 7421(a). The AIA encompasses not only the 18 assessment and collection of taxes, but also activities that are intended to or may culminate 19 in the assessment or collection of taxes. See, e.g., Blech v. United States, 595 F.2d 462, 466 20 (9th Cir. 1979). An action that is barred by the AIA is also barred under the federal tax 21 exception in the DJA. See Reimer v. United States, 919 F.2d 145 (9th Cir. 1990). 22 Here, RAJMP alleges that this is a simple contract dispute. However, it is clear from 23 RAJMP’s complaint that they are seeking to enforce the OIC so that the IRS is barred from 24 collecting the remainder of the $8 million tax liability. In RAJMP’s prayer for relief it 25 specifically requests that the Court issue an order instructing the United States to abate any 26 and all balances against RAJMP. This simply violates the AIA and DJA. See, e.g., Wilkens 27 v. United States, No. 3-CIV-1837, 2004 WL 1198138, at *3 (D. N.J. Feb. 19, 2004) 28 (holding that plaintiffs were attempting to impair the ability of the IRS to collect federal 1 tax by seeking an advance determination of the validity of the tax the IRS seeks to collect); 2 Johnson v. IRS, No. 14-CV-11269-RGS, 2014 WL 3798805, at *1 (D. Mass. Aug. 1, 2014) 3 (holding that plaintiff’s request that the Court order the IRS to release all levies and liens 4 and current wage garnishments places this action in the category of suits maintained for 5 the purpose of restraining the assessment or collection of tax). 6 RAJMP argues that the OIC expressly stated the IRS agreed to not collect more and 7 they are just seeking to enforce the OIC. RAJMP relies upon United States v. Cohen, 650 8 F.3d 717 (D.C. Cir. 2011) to establish that this action is allowed under the AIA. In Cohen, 9 the plaintiffs brought a class action challenging the IRS’ refund procedures. Id. at 727. The 10 court held that this particular case did not concern an assessment or collection of any tax. 11 Id. However, the court found that the inquiry as to whether the litigation is concerning an 12 assessment or collection of any tax requires the court to carefully evaluate “the remedy 13 sought, the statutory basis for that remedy, and any implication the remedy may have on 14 assessment and collection.” Id. Here, the Court finds that the remedy is requesting a ruling 15 that the IRS may not collect any further taxes and that RAJMP is excused of its tax liability. 16 Accordingly, this is a case regarding collection or assessment of taxes. 17 RAJMP argues that AIA does not apply because AIA was not mentioned in the OIC. 18 However, this waiver does not appear to exist. RAJMP provides no authority to the Court 19 to directly support this argument. RAJMP relies upon Johnston v. Comm’r, 461 F.3d 1162, 20 1665–66 (9th Cir. 2006). However, Johnston bears no weight on the issues at hand in this 21 matter. Johnston involves the issue of not allowing a taxpayer to include additional tax 22 issues in a settlement after the OIC. Id. at 1163. Here, a settlement after the OIC never 23 occurred. 24 There is an exception to the AIA if a taxpayer establishes both: (1) that “under no 25 circumstances could the Government ultimately prevail” on the merits and (2) that “equity 26 jurisdiction otherwise exists.” Enochs v. Williams Packing & Nav. Co., 370 U.S. 1, 6–8 27 (1962); Bob Jones University v. Simon, 416 U.S. 725, 737 (1974). The United States argues 28 that RAJMP fails to establish either prong. The Court agrees. 1 First, RAJMP cannot establish that under no circumstances could the United States 2 prevail. RAJMP argues that there is only one way to reject an OIC and since the IRS did 3 not follow that procedure, it was accepted. However, the United States has shown through 4 the Declaration of Kathleen Lee that the IRS asserts it did properly reject the OIC. (See 5 generally Doc. No. 88-2.) The Court does not hold at this stage whether this declaration is 6 admissible, but the declaration does provide evidence that establishes that there is 7 possibility the United States could prevail on the merits. Second, the United States has 8 shown that the doctrine of laches may also apply to this litigation. (Doc. No. 88-1 at 18.) 9 Accordingly, RAJMP fails to show how under no circumstances the United States could 10 prevail in this matter. 11 Second, RAJMP argues that it has no adequate remedy at law. However, as the 12 United States aptly explained in their motion, RAJMP could have sought monetary 13 damages under a breach of contract claim pursuant to the Tucker Act, 28 U.S.C. § 1491, 14 or RAJMP could pay the taxes, file an administrative claim for a refund, and then file a 15 refund claim in the district court. Further, RAJMP could wait for the United States to sue 16 to collect the taxes and assert the OIC as a defense, which is in fact what RAJMP is actively 17 pursuing before this very Court in a related case. Accordingly, RAJMP has several other 18 legal remedies to pursue. 19 Accordingly, RAJMP has failed to meet the exception to AIA. This litigation is 20 barred by both the AIA and the DJA. Based on this alone, the entire complaint may be 21 dismissed, however, the Court will address the other arguments briefly. 22 iii. 5 U.S.C. § 702 23 RAJMP relies upon the first sentence of § 702 to establish a waiver of sovereign 24 immunity for its APA claims, (Count III), and the second sentence of § 702 for what it calls 25 its non-APA claims, (Counts I, II, and IV). (See generally Doc. No. 102.) 26 With respect to RAJMP’s APA claims (Count III), § 702 excludes from its waiver 27 claims for which an adequate remedy is available elsewhere. RAJMP simply asserts that it 28 has no adequate remedy. However, as explained above RAJMP has several other available 1 remedies. Accordingly, § 702 does not establish a waiver of sovereign immunity for its 2 APA claims. 3 With respect to RAJMP’s non-APA claims (Counts I, II, and IV), the waiver in the 4 second sentence of § 702 does not apply if the relief sought is “expressly or impliedly 5 forbidden by another statute.” Tucson Airport Auth. v. Gen. Dynamics Corp., 136 F.3d 641, 6 645 (9th Cir. 1998). The Ninth Circuit has held several times that the APA does not waive 7 sovereign immunity over non-monetary, contract-based claims because the Tucker Act 8 impliedly forbids equitable relief. See Gabriel v. Gen. Servs. Admin., 547 Fed. Appx. 829, 9 830–31 (9th Cir. 2013); see also Tucson Airport Auth., 136 F.3d at 646; North Star Alaska 10 v. United States (North Star II), 14 F.3d 36, 37 (9th Cir. 1994); North Side Lumber Co. v. 11 Block, 753 F.2d 1482, 1485 (9th Cir. 1985). However, RAJMP argues that the waiver under 12 the second sentence of § 702 is broad. Navajo Nation v. Dep’t of Interior, 876 F.3d 1144, 13 1172 (9th Cir. 2017). While the Court agrees the waiver is broad, the Ninth Circuit in 14 Navajo Nation did not overrule its previous rulings that the waiver does not apply if the 15 relief sought is expressly or impliedly forbidden by another statute. Accordingly, Navajo 16 Nation is inapplicable to the instant litigation. 17 Further, the waiver of § 702 may cover claims that are not contract-related. However, 18 RAJMP alleges it only seeks contract related claims. Accordingly, the United States has 19 not waived sovereign immunity under § 702. 20 iv. Waiver of Sovereign Immunity for Count IV 21 RAJMP relies upon Cardwell v. Kurtz, 765 F.2d 776 (9th Cir. 1985) to establish the 22 court’s equity jurisdiction over Count IV. (Doc. No. 102 at 24.) However, Cardwell 23 involves pre-indictment actions pursuant to Rule 41 of the Federal Rules of Criminal 24 Procedure seeking suppression of documents and records illegally obtained by the IRS in 25 violation of the Constitution. Cardwell, 765 at 778. Furthermore, the Ninth Circuit 26 explicitly found that it did not need to reach the question of applicability of the AIA in this 27 case. Id. at 779. RAJMP is not seeking suppression of evidence or a return of documents 28 governmental officials illegally seized from it. Rather, RAJMP alleges in Count IV that the 1 United States’ collection efforts constitute a breach of contract, a deprivation of capital and 2 property, a deprivation of due process, and a taking without just compensation. This case 3 simply does not support RAJMP’s claim that there exists a waiver of sovereign immunity 4 for Count IV. 5 v. Takings Claim 6 Lastly, RAJMP asserts that it has experienced a taking of its OIC contract rights by 7 the United States. (Doc. No. 102 at 26.) However, as a matter of law, tax collection is not 8 a cognizable “taking” under the Fifth Amendment. See Montagne v. United States, 90 Fed. 9 Cl. 41, 50 (Fed. Cl. 2009) (citing U.S. Shoe Corp. v. United States, 269 F.3d 1378, 1383 10 (Fed. Cir. 2002)). Further, RAJMP has not identified an actual property interest and has 11 not alleged how that interest was taken without just compensation. RAJMP’s argument that 12 the United States is breaching the OIC by continuing to collect tax liabilities constitutes a 13 taking without just compensation is unfounded. Accordingly, RAJMP’s taking claim is 14 dismissed. 15 Based on the foregoing, the Court GRANTS the United States’ motion to dismiss. 16 B. RAJMP’s Motion to Deny the United States’ Motion for Summary Judgment 17 RAJMP asserts that the United States motion to dismiss was converted into a motion 18 for summary judgment by attaching the declaration of Kathleen Lee. (Doc. No. 100-1 at 19 2.) RAJMP argues that the declaration was outside the scope of the verified complaint and 20 thus, the motion must be converted to a motion for summary judgment. (Id.) However, the 21 declaration of Kathleen Lee was simply to establish that the United States may prevail in 22 this litigation as is required to show that the exception to the AIA does not apply to this 23 case. This is not outside the scope of the complaint. The complaint directly relates to this 24 issue. Further, a motion for lack of subject matter jurisdiction may factually attack the 25 allegations that, by themselves, would otherwise invoke jurisdiction. Safe Air for Everyone 26 v. Meyer, 373 F.3d 1035, 1039 (9th Cir. 2004). Accordingly, the Court does not convert 27 the United States’ motion to dismiss to a motion for summary judgment. The Court 28 DENIES RAJMP’s motion to deny the United States’ motion for summary judgment. 1 C. RAJMP’s Motion to Strike the United States’ Motion to Dismiss 2 RAJMP seeks to strike the United States’ motion to dismiss because the Court stated 3 in its Order dated June 3, 2019 that the United States may refile its motion to dismiss. (Doc. 4 No. 101-1 at 2.) RAJMP interpreted the Court’s Order to mean that the identical motion to 5 dismiss the United States had previously filed in front of the District Court of Colorado 6 was the only motion to dismiss this Court would accept. (Id.) However, the Court did not 7 state that it had to be identical. Further, if the United States had refiled the identical motion 8 as previously filed, it would have been inapplicable because the previous motion to dismiss 9 contained arguments regarding improper venue that are no longer applicable. Furthermore, 10 the attachment of the declaration of Kathleen Lee did not violate the Court’s Order. 11 Accordingly, the Court DENIES RAJMP’s motion to strike. 12 D. RAJMP’s Motion for Preliminary Injunction 13 RAJMP’s motion for preliminary injunction is moot as the Court is granting the 14 United States’ motion to dismiss. Also, the Court does not have jurisdiction over this matter 15 and therefore, simply cannot rule on the motion for preliminary injunction. Further, based 16 on the motion to dismiss, RAJMP clearly cannot establish likelihood of success on the 17 merits and the motion for preliminary injunction would be denied on that basis. At the 18 hearing on this matter, the Court allowed RAJMP to file supplemental briefing, despite 19 explaining that the Court was tentatively granting the motion to dismiss for lack of 20 jurisdiction. RAJMP filed supplemental briefing regarding two new Ninth Circuit opinions. 21 (See generally Doc. No. 117.) However, the Court finds these cases inapplicable to the 22 matter at hand. See Am. Diabetes Ass’n v. U.S. Dep’t of the Army, 938 F.3d 1147 (9th Cir. 23 2019); hiQ Labs, Inc. v. LinkedIn Corp., 983 F.3d 985 (9th Cir. 2019). Further, RAJMP 24 argues that these cases establish standing and irreparable harm. (Doc. No. 117 at 2.) 25 However, as explained above and at the hearing on this matter, the Court does not have 26 jurisdiction over this matter and the complaint fails to state a claim. Thus, the Court does 27 not reach the merits of the preliminary injunction as it is moot. Accordingly, the Court 28 DENIES RAJMP’s motion for preliminary injunction. 1 CONCLUSION 2 Based on the foregoing, the Court GRANTS the United States’ motion to dismiss 3 || WITHOUT LEAVE TO AMEND, DENIES RAJMP’s motion to deny the United States’ 4 ||motion for summary judgment, DENIES RAJMP’s motion to strike the United States’ 5 motion to dismiss, and DENIES RAJMP’s motion for preliminary injunction. 6 7 IS SO ORDERED. 8 |! Dated: February 25, 2020 | ZS Zt □□□ 7 Hon. Anthony J.@Battaglia 10 United States District Judge 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 10