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Jason v. Internal Revenue Service

United States District Court, N.D. California, San Francisco Division

July 27, 2016

BRENT JASON, Plaintiff,




         This case involves a delinquent taxpayer suing the Internal Revenue Service (“IRS”) for damages and injunctive relief for alleged overreach and bad faith in its efforts to collect a tax debt. The petitioner and taxpayer, Mr. Jason, seeks damages for deprivation of due process, deceptive business practices, fraud, perjury, and intentional and negligent infliction of emotional distress.[1]Mr. Jason also seeks injunctive relief to stay forfeiture, institute a payment plan, allow for leave to file bankruptcy, and allow for leave to secure counsel.[2] The IRS moves to dismiss the case for lack of subject-matter jurisdiction on the grounds of sovereign immunity and failure to exhaust administrative remedies.[3] The court decides this matter without oral argument and vacates the hearing set for July 28, 2016. See Civil L.R. 7-1(b). The court grants the government's motion and dismisses Mr. Jason's claims without prejudice because Mr. Jason has not exhausted his administrative remedies under 26 C.F.R. § 301.7433-1(d).


         Brent Jason owes over $20, 000 in back taxes, and beginning in March 2015, he attempted to set up a payment plan with the IRS.[4] Mr. Jason offered the IRS approximately $500 per month in installment payments, but the IRS rejected that offer.[5] Mr. Jason alleges that the IRS acted in bad faith in rejecting his offer to pay his delinquent tax bill by installment payments.[6]

         In August 2015, Mr. Jason received a notice of forfeiture from the IRS, which he alleges did not include particular details regarding what property was to be seized, when the forfeiture would occur, or any opportunity for a hearing.[7] Mr. Jason filed an appeal; he states that he received letters thereafter from the IRS that rejected his appeal.[8] Mr. Jason states that his next interaction with the IRS was a phone call with an IRS employee he identifies as a “Settlement Officer.”[9] Mr. Jason claims that the Settlement Officer, to his surprise, was actually conducting his appeal on this phone call, despite his belief that the IRS had already rejected his appeal.[10] On the call, Mr. Jason asked why his installment payments were rejected, requested a continuance of the appeal hearing, and asked why he was entitled to a hearing at all after receiving an appeal-rejection letter.[11]

         Mr. Jason states that he received a letter dated December 31, 2015, which denied his appeal.[12] Mr. Jason alleges that the letter misrepresented his testimony during the phone call, including his ability to make payments, his employment status, and his request for leave to file for bankruptcy protection.[13]

         Mr. Jason claims that because of his treatment by the IRS, he has suffered severe emotional distress, which has caused the symptoms of “depression, lack of sleep, headaches, pain associated or typically related to cardiac issues in the chest, arms, neck, and head, lack of self-confidence, thoughts of helplessness, and fear.”[14]

         To remedy these afflictions, Mr. Jason makes a number of claims, including violation of due-process rights, First Amendment rights, deceptive and misleading business practices, fraud and misrepresentation, perjury, intentional infliction of emotional distress, and negligent infliction of emotional distress. Mr. Jason requests damages, stay of forfeiture, an injunction forcing the IRS to accept his payment plan, and leave to file bankruptcy.[15]

         The government moved to dismiss the case for lack of subject-matter jurisdiction, citing sovereign immunity and the Tax Anti-Injunction Act as bars to Mr. Jason's suit.[16] Mr. Jason responded to the motion to dismiss, introducing a new argument regarding the government's waiver of sovereign immunity under 26 U.S.C. § 7433.[17] The government replied, arguing that Mr. Jason waived his § 7433 claim by not addressing it in his initial complaint.[18]


         1. Rule 12(b)(1)

         A complaint must contain a short and plain statement of the ground for the court's jurisdiction. Fed.R.Civ.P. 8(a)(1). The plaintiff has the burden of establishing jurisdiction. See Kokkonen v. Guardian Life Ins. Co. of Am., 511 U.S. 375, 377 (1994); Farmers Ins. Exchange v. Portage La Prairie Mut. Ins. Co., 907 F.2d 911, 912 (9th Cir. 1990). A defendant's Rule 12(b)(1) jurisdictional attack can be either facial or factual. White v. Lee, 227 F.3d 1214, 1242 (9th Cir. 2000). “A 'facial' attack asserts that a complaint's allegations are themselves insufficient to invoke jurisdiction, while a 'factual' attack asserts that the complaint's allegations, though adequate on their face to invoke jurisdiction, are untrue.” Courthouse News Serv. v. Planet, 750 F.3d 776, 780 n.3 (9th Cir. 2014). This is a facial attack; the court thus “accept[s] all allegations of fact in the complaint as true and construe[s] them in the light most favorable to the plaintiffs.” Warren v. Fox Family Worldwide, Inc., 328 F.3d 1136, 1139 (9th Cir. 2003).

         If a court dismisses a complaint, it should give leave to amend unless the “the pleading could not possibly be cured by the allegation of other facts.” Cook, Perkiss and Liehe, Inc. v. N. Cal. Collection Serv. Inc., 911 F.2d 242, 247 (9th Cir. 1990).

         2. Sovereign Immunity

         “It is axiomatic that the United States may not be sued without its consent and that the existence of consent is a prerequisite for jurisdiction.” Jachetta v. United States, 653 F.3d 898, 903 (9th Cir. 2011) (quoting United States v. Mitchell, 463 U.S. 206, 212 (1983)). This is the doctrine of sovereign immunity. The Ninth Circuit has explained: “Before we may exercise jurisdiction over any suit against the government, we must have 'a clear statement from the United States waiving sovereign immunity, together with a claim falling within the terms of the waiver.'” Id. (quoting in part United States v. White Mountain Apache Tribe, 537 U.S. 465, 472 (2003)). “[L]imitations and conditions upon which the Government consents to be sued must be strictly observed and exceptions thereto are not to be implied.” Mollison v. United States, 568 F.3d 1073, 1075 (9th Cir. 2009) (citing Soriano v. United States, 352 U.S. 270, 276 (1957)) (internal quotations omitted; alteration in original).

         Absent a waiver, “a court does not have authority to award relief against the United States or a federal agency . . . .” Isaacs v. United States, No. 13-cv-01394-WHO, 2013 WL 4067597, at *1 (N.D. Cal. Aug. 1, 2013). “As the party asserting a claim against the United States, [the plaintiff] has the burden of 'demonstrating unequivocal waiver of immunity.'” United States v. Park Place Assocs., Ltd., 563 F.3d 907, 924 (9th Cir. 2009) (quoting Cunningham v. United States, 786 F.2d 1445, 1446 (9th Cir. 1986)).

         Sovereign immunity should be decided on the merits and can be raised at any time because it speaks to a court's jurisdiction. Tobar v. United States, 639 F.3d 1191, 1195 (9th Cir. 2011) (citing I.R.S. v. Fed. Labor Relations Auth., 521 F.3d 1148, 1152 (9th Cir. 2008)).

         3. Civil Damages ...

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