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United States v. Jpmorgan Chase Bank, N.A.

United States District Court, C.D. California

August 15, 2014

United States of America,
v.
JPMorgan Chase Bank NA.

CIVIL MINUTES - GENERAL

GARY ALLEN FEESS, District Judge.

Proceedings: (In Chambers)

FINDINGS OF FACT AND CONCLUSIONS OF LAW

I.

INTRODUCTION

At the pre-trial conference in this case, the parties, after conferring with the Court, agreed that the material facts were not in dispute and that the case could be submitted to the Court for decision on their pre-trial filings, agreeing to what amounts to a stipulated facts trial. (Docket No. 54 [Pl. Mem. of Fact and Law ("Pl. Mem.")]; Docket No. 56 [Def. Mem. of Fact and Law ("Def. Mem.")].) The undisputed facts present the Court with a purely legal question arising out of a failed attempt by the Internal Revenue Service ("IRS") to impose a levy on a delinquent taxpayer's bank accounts.

In 2009, James Waterman ("Waterman") received a tax refund of $75, 169, even though his adjusted gross income for the prior year was only $21, 594. Discovering the discrepancy, revenue officer Ted Hanson ("Hanson") was assigned to recover the money for the IRS. In an effort to do so, Hanson served a jeopardy levy on Defendant JPMorgan Chase Bank, N.A. ("Chase" or "Defendant"). The levy would have allowed the IRS to seize assets in two bank accounts held by Chase in the taxpayer's name.

However, after service of the notice of levy but before Chase acted to freeze the accounts, Waterman withdrew $40, 000 from his accounts. The United States of America ("Plaintiff" or the "United States") has been unable to recover those funds from Waterman, and therefore seeks recovery from Chase. Defendant argues that it froze the accounts with reasonable speed, and should not be held responsible for Waterman's ability to evade the IRS's levy.

Plaintiff's suit is premised on the rule that "[a]ny person who fails or refuses to surrender any property... subject to levy... shall be liable in his own person and estate to the United States." 26 U.S.C. § 6332(d)(1). This statute is not specific as to the expediency with which this "surrender" must occur, and the Court previously denied summary judgment to the United States because of this ambiguity.

However, following a further review of the applicable statutes and caselaw, the Court is compelled to change course. When Waterman refused to pay the IRS, the United States was left with only one option: to place a levy on his bank accounts. It did so, shifting any risk that the money might disappear onto Chase's shoulders. Accordingly, the Court must GRANT JUDGMENT in favor of the United States. The Court sets forth its reasoning, in further detail, below.

II.

FINDINGS OF FACT

James Waterman's adjusted gross income for 2008 was $21, 584. (Docket No. 54-1 [Pretrial Conference Order, Stipulated Facts ("Stip. Facts")] ¶ 5a.) Nonetheless, in August 2009, he received a refund of $78, 169 from the IRS. ( Id. ¶ 5b.) Shortly thereafter, the IRS determined that the refund had been issued in error and that Waterman actually owed $92, 779. ( Id. ¶ 5c.) Waterman's case was then assigned for collection to revenue officer Ted Hanson. ( Id. ¶ 5e.) The Office of the Chief Counsel for the IRS then approved the issuance of a jeopardy levy on Waterman's bank accounts. ( Id. ¶ 5f.)

At around 9:30 a.m. on September 9, 2009, Hanson went to Waterman's home with the levy in hand, notified him that he owed the IRS roughly $93, 000, and, in accordance with IRS statutory authority, demanded payment. ( Id. ¶¶ 5g, 5i, 5j.) Waterman did not pay the balance of his debt at that time, so Hanson served him with a series of ...


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