United States District Court, C.D. California
Norman Douglas Diamond, Plaintiff, Pro se, Ome City.
For United States of America, Defendant: James C Hughes, LEAD ATTORNEY, Office of the U.S. Attorney, Tax Division, Los Angeles, CA.
REPORT AND RECOMMENDATION OF UNITED STATES MAGISTRATE JUDGE
ALICIA G. ROSENBERG, United States Magistrate Judge.
The court submits this Report and Recommendation to the Honorable George H. King, United States District Judge, pursuant to 28 U.S.C. § 636 and General Order No. 05-07 of the United States District Court for the Central District of California. For the reasons set forth below, the magistrate judge recommends that Defendant's motion to dismiss the complaint be granted and that Plaintiff's motion for injunctions be denied.
SUMMARY OF PROCEEDINGS
On October 31, 2013, Plaintiff filed a complaint that asserted seven claims for relief. On December 26, 2013, Defendant United States of America (erroneously named as the " Internal Revenue Service" and the " Department of Justice") filed a motion to dismiss (" MTD") for lack of subject matter jurisdiction based on sovereign immunity or, alternatively, for failure to state a claim. On December 30, 2013, Plaintiff filed a preliminary opposition. On January 7, 2014, Plaintiff filed an opposition. On January 21, 2014, Defendant filed a reply. On February 10, 2014, Plaintiff filed a sur-reply.
On July 21, 2014, Plaintiff filed a motion for injunctions, which this court construes as a motion for preliminary injunctive relief.
A. Plaintiff's Tax-Related Litigations
This court takes judicial notice of the litigations Plaintiff has filed to obtain refunds or other relief from federal taxes. Fed.R.Evid. 201; see Reyn's Pasta Bella, LLC v. Visa USA, Inc., 442 F.3d 741, 746 n.6 (9th Cir. 2006).
On June 5, 2012, Plaintiff filed suit in the Court of Federal Claims challenging the IRS' denial of his claimed refund in the 2005 tax year. Diamond v. United States (Diamond I), 107 Fed.Cl. 702 (2012). The court dismissed Plaintiff's claim for lack of subject matter jurisdiction after finding that the original and amended 2005 tax return did not constitute a proper claim for refund. (Complaint ¶ 201); Diamond I, 107 Fed.Cl. at 705-07. The original return did not include social security numbers or wage and foreign income information, and was not signed under penalty of perjury. Id. at 705-06. The amended return indicated $0 in wages and foreign income " after 2555 exclusion, " but the amended return did not include the form 2555 and cited the Fifth Amendment. The court concluded that the amended return " does not provide sufficient information to calculate tax liability and is unreasonably deficient." Id. at 707. The Federal Circuit affirmed and the Supreme Court denied the petition for certiorari. (Complaint ¶ 201); Diamond v. United States (Diamond II), 530 Fed.Appx. 943 (Fed. Cir. 2013), cert. denied, 134 S.Ct. 1344, 188 L.Ed.2d 309 (2014).
On April 25, 2013, Plaintiff and his wife filed a complaint in the Court of Federal Claims seeking refunds for tax years 2006-2011 and abatement of a fee assessed by the IRS for filing a frivolous tax return for the 2008 tax year pursuant to 26 U.S.C. § 6702. See Diamond v. United States (Diamond III), 115 Fed.Cl. 516, 522 & n.10 (Fed. Cl. Apr. 4, 2014) (collecting cases filed by Plaintiff challenging tax liability). The court held that it did not have subject matter jurisdiction over the claim for abatement of the fee because Plaintiff had not paid it. Id. at 526. The court held that it could not provide relief on Plaintiffs' refund claims. " The IRS has the authority to withhold a tax refund and apply overpayments to a taxpayer's other outstanding liabilities." Id. at 528. The court found that the IRS had applied Plaintiffs' overpayments for 2006-2011 to mitigate their other tax liabilities. Id. The court rejected Plaintiffs' claim that the Government did not abide by stipulated decisions of the United States Tax Court. Id. at 529-30. Plaintiff and his wife have apparently appealed the decision to the Federal Circuit. That appeal remains pending. Diamond, et al. v. United States (Diamond IV), Case No. 2014-5088.
Plaintiff alleges that he has pending cases before the United States Tax Court. (Complaint ¶ 84, 145-46.) The Court of Federal Claims noted that the Tax Court reduced the amount of frivolous filing penalties for the 2005-2007 tax years. Diamond III, 115 Fed.Cl. at 528 n.17.
B. Claims and Allegations in This Case
The complaint in this case asserts seven claims for relief for (1) fraudulent filing of information returns in violation of 26 U.S.C. § 7434 (Complaint ¶ ¶ 229-34); (2) unauthorized disclosure in violation of the Privacy Act, 5 U.S.C. § 552a(g)(1)(D), and 26 U.S.C. § 7431(a)(1) (Id. ¶ ¶ 235-41); (3) conspiracy to interfere with civil rights in violation of 42 U.S.C. § 1985(2)-(3) (Id. ¶ ¶ 242-50); (4)-(6) imposition of frivolous filing penalties under 26 U.S.C. § 6702(a) in violation of the Constitution (Id. ¶ ¶ 251-55); and (7) perjury by defendant's employees in the Tax Court (Id. ¶ ¶ 256-70). Plaintiff seeks damages in the amount of $2, 250, 000. (Id. ¶ ¶ 271-78.) Plaintiff's complaint does not seek injunctive relief.
Plaintiff has resided in Tokyo, Japan since 1988. (Complaint ¶ 3.) In 1994, the IRS displayed his social security number next to his name and address on mail that was visible to passersby and postal employees. (Id. ¶ ¶ 18-20.) Plaintiff applied for a replacement social security number and " continued correspondence with the Social Security Administration from 1994 to 2010." (Id. ¶ ¶ 21-22.) Also in 1994, Plaintiff applied for a social security number for his wife. (Id. ¶ 30.) In 2005, the U.S. embassy informed plaintiff that the SSA had no record of an application from Plaintiff's wife. (Id. ¶ 94.) In 2010, the SSA rejected Plaintiff's application for a replacement social security number. (Id. ¶ 95.)
Plaintiff and his wife filed joint income tax returns for tax years 1999-2010. (Id. ¶ 32.) Plaintiff wrote either " applied for" instead of social security numbers or else wrote that " defendant instructed plaintiff not to report the status of their applications for social security numbers." (Id. ¶ 33.)
Defendant took the position that Plaintiff's income tax returns for 2002 and 2005-2008 were frivolous and/or fraudulent. (Id. ¶ ¶ 41, 45, 62, 104.) In June 2006, Plaintiff and his wife submitted a Form 1040 U.S. Individual Income Tax Return (" Form 1040") claiming a refund in the amount of $10, 645.40. (Complaint, Exh. 23 at 117-34.) Plaintiff did not include social security or taxpayer identification numbers with the return and directed the IRS to " see statement." (Id. at 117.) Plaintiff crossed out the portion of the return jurat which read, " to the best of my knowledge and belief, [these statements] are true, correct, and complete, " writing in its place " see statement." (Id. at 118.) Plaintiff listed both his wages and salary (Line 7 of the return) and " other income" (Line 21 of the return) as $0.00 and directed the reader to the attached statement. (Id. at 117.) Plaintiff claimed he was " not aware of any social security numbers that [he or his wife could] safely use" as a result of the Department of Treasury's " former violations of the Privacy Act of 1974." (Id. at 129.) The figures listed on lines 7 and 21 were computed based upon his Form 2555 Statement of Foreign Income, which he did not file " [i]n accordance with the 5th Amendment to the United States constitution." (Id. at 130; see Complaint ¶ 207.)
On September 15, 2006, the IRS informed Plaintiff that his 2005 tax return had been deemed frivolous. (Complaint, Exh. 29 at 144, 146.) Plaintiff was instructed to file a corrected return within thirty days or else face imposition of a frivolous filing penalty pursuant to 26 U.S.C. § 6702. (Id. at 145.) The IRS deemed frivolous Plaintiff's 2006, 2007 and 2008 returns. (Complaint ¶ 62.)
In 2009, the IRS filed a federal tax lien against Plaintiff and offered him the opportunity to request a Collection Due Process hearing. (Id. ¶ 78.) During the hearing, which took place in 2010, Plaintiff alleges he was instructed to re-file his 2005 and 2006 returns with a social security number " because defendant does not accept 'Applied for.'" (Id. ¶ 80.) Plaintiff challenged the various filing penalties before the United States Tax Court. (Id. ¶ 84, 144-46; Diamond v. Comm'r (Diamond I), No. 14482-10SL (T.C. 2010); Diamond v. Comm'r, No. 5516-12SL (T.C. 2012); Diamond v. Comm'r, No. 5518-12SL (T.C. 2012).) To resolve the Tax Court cases, Plaintiff and the IRS signed stipulated decisions setting certain penalties and fees. ...