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Neilson v. United States

December 17, 2009

KENNETH JAMES NEILSON, PLAINTIFF,
v.
UNITED STATES, ET AL., DEFENDANTS.



The opinion of the court was delivered by: John D. Bates United States District Judge

MEMORANDUM OPINION

Plaintiff Kenneth James Neilson, proceeding pro se, brings this action against the United States, the Internal Revenue Service ("IRS"), and IRS Special Agent Mercedes Manzur in her official capacity, pursuant to the Administrative Procedure Act, 5 U.S.C. §§ 701-706, and the Right to Financial Privacy Act ("RFPA"), 12 U.S.C. §§ 3416 and 3418. Plaintiff alleges that defendants unlawfully issued third-party summonses to seven financial institutions requesting their records in connection with him, and he requests an injunction prohibiting defendants from using records obtained through the summonses and a declaration that defendants have violated his rights. In response, defendants contend that plaintiff has failed to follow statutory procedures for seeking relief from the summonses. They also contend that the Court otherwise lacks jurisdiction to grant the relief requested. Hence, defendants have filed a motion to dismiss for lack of subject matter jurisdiction and failure to state a claim upon which relief can be granted. Upon consideration of defendants' motion, plaintiff's opposition, and the entire record, the Court will grant defendants' motion.

BACKGROUND

The special procedures applicable to third-party IRS summonses are set forth at 26 U.S.C. § 7609. "Generally speaking, the IRS may issue a summons to any third-party recordkeeper requiring the production of records and documents relating to a specific taxpayer's financial activities, with notice of the summons to be given to the taxpayer." See McCammon v. United States, 569 F. Supp. 2d 78, 80 (D.D.C. 2008) (internal citations and quotation marks omitted). Section 7609 also authorizes the taxpayer identified in the summons to file a petition to quash the summons in an appropriate judicial district. See 26 U.S.C. § 7609(b), (h). In this case, plaintiff has chosen to challenge the validity of the IRS third-party summonses under the Administrative Procedure Act and the Right to Financial Privacy Act, apparently choosing to forego the petition to quash process under § 7609.

Between December 15, 2006, and March 2, 2007, Mercedes Manzur, a Special Agent with the IRS Criminal Investigation Division, issued seven administrative summonses to request information concerning plaintiff's tax liabilities for the tax periods ending December 31, 1995, through December 31, 2005. Compl. ¶¶ 1-3 & Ex. A; Manzur Decl. ¶¶ 1-5. The summonses were issued to America First Credit Union, Charles Schwab & Co., Inc., Wells Fargo Bank/Wells Fargo Bank N.A., Merrill Lynch, Far West Bank, Zion's First National Bank, and US Bank N.A.. Compl. ¶ 2. Manzur did not provide advance notice of the summonses to plaintiff, but did send copies of the summonses to plaintiff on or about the same dates as they were mailed to the third parties. Id. ¶ 20; Manzur Decl. ¶¶ 6-13.

The summonses were signed by Manzur, but did not bear the signature of a separate "Approving Officer." Compl. ¶¶ 4-5, 10-11. The summonses also did not contain a certification of compliance with the Right to Financial Privacy Act, nor did the copy of the summonses mailed to plaintiff contain the RFPA notice set forth at 12 U.S.C. § 3405(2). Id. ¶¶ 35-36.

Based on the foregoing events, plaintiff alleges four causes of action. Counts One and Three allege that Manzur was without authority to issue the summonses and that they were issued without authorization from an approving officer in violation of the Internal Revenue Manual and Delegation Order No. 4. Count Two alleges that Manzur failed to provide plaintiff an advance notice of intent to contact third parties, in violation of 26 U.S.C. § 7602(c). Count Four alleges that the summonses were issued in violation of the certification and notice requirements set forth in the Right to Financial Privacy Act, 12 U.S.C. §§ 3403 and 3405. Based on the foregoing alleged violations, plaintiff seeks an injunction against defendants' use of any information about him obtained through the summonses and an injunction requiring defendants to comply with all substantive and procedural requirements of the internal revenue laws. Plaintiff also seeks a declaration that defendants violated those laws and the U.S. Constitution.

STANDARD OF REVIEW

"[I]n passing on a motion to dismiss, whether on the ground of lack of jurisdiction over the subject matter or for failure to state a cause of action, the allegations of the complaint should be construed favorably to the pleader." Scheuer v. Rhodes, 416 U.S. 232, 236 (1974); see Leatherman v. Tarrant Cty. Narcotics and Coordination Unit, 507 U.S. 163, 164 (1993); Phillips v. Bureau of Prisons, 591 F.2d 966, 968 (D.C. Cir. 1979). Therefore, the factual allegations must be presumed true, and plaintiff must be given every favorable inference that may be drawn from the allegations of fact. Scheuer, 416 U.S. at 236; Sparrow v. United Air Lines, Inc., 216 F.3d 1111, 1113 (D.C. Cir. 2000). However, the Court need not accept as true "a legal conclusion couched as a factual allegation," nor inferences that are unsupported by the facts set out in the complaint. Trudeau v. Federal Trade Comm'n, 456 F.3d 178, 193 (D.C. Cir. 2006) (quoting Papasan v. Allain, 478 U.S. 265, 286 (1986)).

Under Rule 12(b)(1), the party seeking to invoke the jurisdiction of a federal court -- plaintiff here -- bears the burden of establishing that the court has jurisdiction. See US Ecology, Inc. v. U.S. Dep't of Interior, 231 F.3d 20, 24 (D.C. Cir. 2000); see also Grand Lodge of Fraternal Order of Police v. Ashcroft, 185 F. Supp. 2d 9, 13 (D.D.C. 2001) (a court has an "affirmative obligation to ensure that it is acting within the scope of its jurisdictional authority."); Pitney Bowes, Inc. v. United States Postal Serv., 27 F. Supp. 2d 15, 19 (D.D.C. 1998). "'[P]laintiff's factual allegations in the complaint . . . will bear closer scrutiny in resolving a 12(b)(1) motion' than in resolving a 12(b)(6) motion for failure to state a claim." Grand Lodge, 185 F. Supp. 2d at 13-14 (quoting 5A Charles Alan Wright & Arthur R. Miller, Federal Practice and Procedure § 1350 (2d ed. 1987)). Additionally, a court may consider material other than the allegations of the complaint in determining whether it has jurisdiction to hear the case, as long as it still accepts the factual allegations in the complaint as true. See Jerome Stevens Pharm., Inc. v. FDA, 402 F.3d 1249, 1253-54 (D.C. Cir. 2005); EEOC v. St. Francis Xavier Parochial Sch., 117 F.3d 621, 624-25 n.3 (D.C. Cir. 1997); Herbert v. Nat'l Acad. of Scis., 974 F.2d 192, 197 (D.C. Cir. 1992).

In reviewing a motion to dismiss pursuant to Rule 12(b)(6), the Court is mindful that all that the Federal Rules of Civil Procedure require of a complaint is that it contain "'a short and plain statement of the claim showing that the pleader is entitled to relief,' in order to 'give the defendant fair notice of what the . . . claim is and the grounds upon which it rests.'" Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007) (quoting Conley v. Gibson, 355 U.S. 41, 47 (1957)); accord Erickson v. Pardus, 551 U.S. 89, 93 (2007) (per curiam). Although "detailed factual allegations" are not necessary to withstand a Rule 12(b)(6) motion to dismiss, to provide the "grounds" of "entitle[ment] to relief," a plaintiff must furnish "more than labels and conclusions" or "a formulaic recitation of the elements of a cause of action." Twombly, 550 U.S. at 555-56; see also Papasan v. Allain, 478 U.S. 265, 286 (1986). "To survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to 'state a claim to relief that is plausible on its face.'" Ashcroft v. Iqbal, 556 U.S. ___, 129 S.Ct. 1937, 1949 (2009) (quoting Twombly, 550 U.S. at 570); Atherton v. District of Columbia Office of the Mayor, 567 F.3d 672, 681 (D.C. Cir. 2009). A complaint is plausible on its face "when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Iqbal, 129 S.Ct. at 1949.

DISCUSSION

I. Injunctive Relief

Defendants contend that injunctive relief is not available to plaintiff under the Administrative Procedure Act because the limited waiver of sovereign immunity with respect to a lawsuit challenging an IRS summons at 26 U.S.C. ยง 7609 precludes recourse under the APA. In response, plaintiff contends that the APA grants a cause of action to any "'person suffering legal wrong because of agency action,'" and that the APA expressly authorizes a court to "'hold unlawful and set aside agency action . . . found to be . . . in excess of statutory jurisdiction, authority, or limitations.'" Pl.'s Opp'n at 1-2 (quoting 5 U.S.C. ...


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