Searching over 5,500,000 cases.

Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.


April 19, 2004.


The opinion of the court was delivered by: MARILYN PATEL, Chief Judge, District

MEMORANDUM & ORDER Defendant's Motion for Summary Judgment
Plaintiff Fletcher H. Hyler filed this action in U.S. District Court on May 5, 2003, seeking to annul a tax penalty levied against him for the failures of a business he controlled to pay trust fund taxes. Specifically, plaintiffs action is postured as an appeal — on the grounds that plaintiff is not liable for the tax penalty in the first instance — from the Internal Revenue Service ("IRS") Appeals Office's decision to allow the IRS to proceed with a levy against plaintiffs property in order to fulfill this tax liability. Defendant has moved for summary judgment on the ground that this action is now moot: Plaintiff has now paid the tax penalty in full, and the IRS no longer seeks to levy against plaintiffs property. In the alternative, defendant claims that plaintiff may not now challenge his underlying tax liability because he had already raised the relevant issues in a prior administrative proceeding. Having considered the arguments presented and for the reasons stated below, the court enters the following memorandum and order.


  On October 24, 2000, plaintiff received a letter from the IRS informing him that Logical Marketing Inc., a company for which he acted as president, owed in excess of $290,000 in unpaid trust fund taxes. Weill Dec. Exh. B, at 1. The letter stated that as the individual responsible for collecting, accounting for, and paying these taxes, plaintiff would be charged with a personal tax penalty equal to the amount of unpaid trust fund taxes. Id. Plaintiff was afforded the opportunity to "appeal or protest this action," and he did file a protest, within the appropriate time frame, on December 22, 2000. Id. at 1; Weill Dec., Exh. C, at 1. In that protest, plaintiff based his claim of immunity from tax penalty in part on the argument that "its assertion is barred by the applicable statute of limitations." Weill Dec., Exh. C., at 2.

  A "settlement conference" took place before IRS Appeals Settlement Officer Richard Stefanski on November 21, 2001. Simpson Dec., Exh. 4. On March 22, 2002, plaintiff received a letter from the San Francisco Appeals Office memorializing the fact that "we were unable to reach an agreement with you" and explaining that "[t]he Fresno Service Center will compute the amount of tax as provided by law, and send you a bill for the amount due." Weill Dec., Exh. D, at 1. In addition, this letter stated that
Trust Fund Recovery Taxes may only be contested in the Federal District Court or the United States Court of Federal Claims. However, in order to petition either court to hear your case, you must first pay the tax due or at least the portion of the tax that the court may require.
Id. Plaintiff took no immediate action, and approximately three months later, on July 19, 2002, the IRS served plaintiff with a "FINAL NOTICE" and "NOTICE OF INTENT TO EEVY AND NOTICE OF YOUR RIGHT TO A HEARING," which announced that plaintiff had only 30 days in which to appeal the judgment of tax liability, after which the government would begin to seize his property. Weill Dec., Exh. E, at I. On July 17, 2002, within that 30-day window, plaintiff filed a "Request for a Collection Due Process Hearing," arguing again that the statute of limitations had run on Logical Marketing Inc.'s unpaid taxes before the IRS assessed plaintiff with a tax penalty. Weill Dec., Exh. F, at 1.
  The IRS Appeals Office responded on December 6, 2002, with a "NOTICE OF DETERMINATION" that referenced plaintiffs "Collection Due Process Hearing." Weill Dec., Exh. A, at 1. The Notice indicated that plaintiffs case had been considered at an "Appeals hearing," and that the IRS's "proposed levy action" had been subsequently been "sustained." Id. at 1-2.*fn1 The Appeals Office explained its ruling succinctly: "The taxpayer is trying to argue that the trust fund recover penalties were assessed after the legal statute of limitations. However, this argument has previously been heard and rejected by Appeals. No proposals for payment or alternatives thereof have been presented."*fn2 Id. at 3 (emphasis added). In the event that plaintiff did not agree with the Appeals Office's determination, the Notice outlined the procedure for further appeals:
If you want to dispute this determination in court, you have 30 days from the date of this letter to file a complaint in the appropriate United States District Court for a redetermination.
The time limit for filing your complaint (30 days) is fixed by law. The courts cannot consider your appeal if you file late. If the court determines that you made your complaint to the wrong court, you will have 30 days after such determination to file with the correct court.
Id. at 1.

  Rather than appeal directly to federal district court, at some point after receiving the Notice of Determination plaintiff filed an appeal with the United States Tax Court. Compl. ¶ 3.*fn3 The Tax Court dismissed plaintiffs appeal on April 23, 2003, explaining that it lacked jurisdiction to review tax liabilities that "relate to unpaid employment taxes." Compl. Exh. I, at 1. The Tax Court's order of dismissal also contained a reminder to plaintiff "of the applicability of Internal Revenue Code sections 6320(c) and 6330(d)(1) which provide a 30-day period for filing an appeal with the appropriate Federal District Court." Id.

  On May 5, 2003, plaintiff filed the current action in this court, arguing that the IRS should not be allowed to levy against him because the underlying tax liability had been incorrectly (and unlawfully) assessed. See Compl. ¶¶ 4 & 9. Plaintiffs complaint stated that this court held jurisdiction over the matter under 26 U.S.C. § 6330 (d)(1), which permits a person against whose assets the IRS intends to levy to appeal the IRS's determination that such a levy is proper "to a district court of the United States." 26 U.S.C. § 6330(d)(1)(B). Defendant subsequently answered plaintiffs complaint and filed for summary judgment on the grounds that the issue of plaintiff's underlying tax liability "was raised in a prior administrative proceeding" (presumably the November 21, 2001, hearing before Appeals Officer Stefanski) and therefore "cannot be raised again." Def. Mot., at 1. On February 6, 2004, this court ordered the parties to conduct further discovery (and, if necessary, submit further briefing) related to whether the November 21, 2001, hearing had in fact provided plaintiff with a full and fair opportunity to dispute his tax liability, and whether plaintiff had indeed participated "meaningfully" in that hearing. See 26 U.S.C. § 6330(c)(2)(B) & 6330(c)(4).

  Discovery and briefing, however, were apparently not the only significant case-related activities that took place during the weeks after the court's February 2004 order. On March 4, 2004, in order to secure a home equity loan, plaintiff "paid all the tax liabilities at issue in this case." Weill Dec. ¶ 2; see also Hyler Dec. ¶¶ 6-8. By consequence, there is no longer any levy proceeding against plaintiff, and the United States represents that "the IRS will not need need [sic] to levy on the assets of plaintiff to collect any unpaid tax liabilities. . . ." Weill Dec. ¶ 2. Defendant now contends that this action is moot, LEGAL STANDARD

  "A claim is moot if it has lost its character as a present, live controversy." American Rivers v. National Marine Fisheries Service, 126 F.3d 1118, 1123 (9th Cir. 1997) (citing American Tunaboat Ass'n v. Brown. 67 F.3d 1404, 1407 (9th Cir. 1995)). "In the context of declaratory and injunctive relief, [a plaintiff] must demonstrate that she has suffered or is threatened with a concrete and particularized legal harm, coupled with a sufficient likelihood that she will again be wronged in a similar way." Bird v. Lewis & Clark College, 303 F.3d 1015, 1019 (9th Cir. 2002) (internal quotation marks and citation omitted), cert. denied. 538 U.S. 923. Where the activities sought to be enjoined have already occurred, and the courts "cannot undo what has already been done, the action is moot." Friends of the Earth. Inc. v. Bergland. 576 F.2d 1377, 1379 (9th Cir. 1978). "The burden of demonstrating mootness is a heavy one." Northwest Environmental Defense Center v. Gordon. 849 F.2d 1241, 1243 (9th Cir. 1988). DISCUSSION

  This action is before the court as an appeal from the IRS Appeals Office's determination that that agency may levy against plaintiffs assets in order to recoup unpaid taxes. Because plaintiff has now paid his outstanding tax penalty, the IRS no longer seeks to levy against his property — there is no longer any tax that remains to be paid. By consequence, this court could not now grant plaintiff any meaningful relief on his complaint as filed.*fn4 A ruling by this court that plaintiff had not received a full and fair opportunity to dispute his tax liability in an administrative proceeding before the IRS would result simply in a remand to the IRS with instructions to provide plaintiff with such an opportunity; the IRS, however, is no longer attempting to levy against plaintiff, and thus no administrative forum would remain to hear such challenges. Furthermore, this court originally took jurisdiction over this action under 26 U.S.C. § 6330(d)(1), which gives the federal courts the authority to entertain appeals from IRS determinations regarding tax levies. Since the IRS's determination that it may levy against plaintiff has now been mooted, any appeal from that determination has been similarly mooted, and jurisdiction no longer lies under section 6330.

  Plaintiff may — as he alleges — retain a viable claim that the IRS improperly and unlawfully assessed a tax penalty against him, and thus that the taxes that he has already paid should be refunded to him. However, plaintiff may not file suit seeking such a refund until he has first "filed a claim for refund or credit" with the Secretary of the Treasury, an action that he has not yet taken. 26 U.S.C. § 7422(a).*fn5 This court thus currently lacks jurisdiction over any suit brought by plaintiff to recover the taxes he has already paid, and any attempt by plaintiff to recast the current action as a suit for refund of the taxes he has remitted will ultimately be fufile in the absence of a prior filing of a claim for refund with the Secretary. Plaintiff has no remaining viable action before this court. CONCLUSION

  For the reasons stated above, plaintiffs action is DISMISSED and the Clerk of Court shall close the file.


Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.