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Petrillo v. United States

United States District Court, S.D. California

May 31, 2017



          Hon. Gonzalo P. Curiel United States District Judge

         On March 8, 2017, Defendant United States of America filed a motion to dismiss the first amended complaint (“FAC”) of Plaintiff Ronald G. Petrillo, DMD pursuant to Federal Rules of Civil Procedure 12(b)(1), 12(b)(2), and 12(b)(5). (Dkt. No. 16-1.) Having reviewed the motions and applicable law, and for the reasons set forth below, the Court GRANTS Defendant's motion to dismiss with leave to amend.


         Plaintiff is currently a dentist practicing in San Diego. (Complaint, Dkt. No. 14 at 11.)[1] In 1988, a former patient sued Plaintiff, alleging malpractice. (Id.) While that case was pending, Plaintiff's insurer cancelled his malpractice coverage, and he was unable to find another provider thereafter. (Id.) Plaintiff eventually prevailed in the malpractice suit, but the litigation, combined with the fallout of losing malpractice coverage, led to a “‘stress-induced' acute coronary spasm.” (Id.) Plaintiff sued his ex-insurance provider for intentional infliction of emotional distress. (Id.) In 1993, Plaintiff settled with the insurer for $1.75 million. (Id. at 14.)

         Plaintiff received $912, 000 from the settlement after his attorney deducted fees. (Id. at 5.) Plaintiff argues that, in 1993, “all lawsuit awards under” the personal injury code “were tax exempt, ” and thus he was not required to pay any tax on the settlement. (Id. at 4.)

         In 1997, the IRS audited Plaintiff's past returns and assessed a 68% tax on the settlement, plus penalties and interest, and demanded $908, 000. (Id. at 5.) Plaintiff alleges that the IRS improperly applied a 1996 amendment to the personal injury code, which made awards for “emotional distress” taxable. (Id. at 4.) Plaintiff argues his settlement was still tax-exempt as the amendment only applied retroactively through September 1995. (Id.)

         Plaintiff filed a written appeal contesting the new assessment and scheduled a meeting with an Appeals Officer. (Id. at 16, 23.) The officer missed the meeting, so Plaintiff asked the officer's receptionist to re-schedule; according to Plaintiff, the officer failed to do so. (Id. at 23.)

         Plaintiff admits he “was aware he had [a] ninety-day deadline to have an appeals meeting before being thrown to collections, ” but he also believed the Appeals Office was obligated to re-schedule a meeting. (Id.) Plaintiff also concedes that he was aware that he would be sent to “collections” if he did not have an appeals meeting and that he would have to “deposit $907, 910 with the Tax Court before his case could be heard.” (Id. at 23-24.)

         Plaintiff believes that paying towards the assessed deficiency constitutes an admission that he owes money, and he therefore refuses to pay. (Id. at 21, 30.) Because Plaintiff did not pay the deficiency, the IRS levied Plaintiff's bank accounts and placed a lien on his home. (Id. at 21-22.) Eventually the bank foreclosed on Plaintiff's home, and it was placed in auction. (Id. at 28-29.)

         Plaintiff filed his original complaint on August 26, 2015. (Dkt. No. 1.) On April 11, 2016, the complaint was dismissed for want of prosecution. (Dkt. No. 6.) Plaintiff requested that the Court re-open the case and promised to serve Defendant a copy of the complaint and summons. (Dkt. No. 11.)

         On September 14, 2016, the Court vacated the dismissal and permitted Plaintiff to file an amended complaint. (Dkt. No. 12.)

         Plaintiff filed an amended complaint (the “FAC”) on February 6, 2017. (Dkt. No. 14.) Plaintiff's complaint alleges eleven causes of action:[2] (1) improper assessment of tax deficiency in violation of Internal Revenue Code § 104(a)(2) (id. at 13-14); (2) improper assessment of tax deficiency in violation of Internal Revenue Code § 7491(a)(1) (id. at 14-19); (3) & (4) defamation stemming from the IRS's improper assessment (id. at 19); (5) tortious interference with Plaintiff's business and his mortgage (id. at 20-21); (6), (7), & (8) promissory fraud, deceit, and extortion from the IRS's improper use of its administrative system to “stone-wall” Plaintiff (id. at 22-27); (9) conspiracy to commit mortgage fraud by falsely inflating the value of Plaintiff's home (id. at 28-29); (10) intentional infliction of emotional distress stemming from the IRS's continued collection efforts, despite knowing Plaintiff was despondent and depressed (id. at 29); and (11) violation of Plaintiff's Fourth Amendment right to be free from unreasonable search and seizure (id. at 29-30).

         On March 8, 2017, Defendant brought the instant motion to dismiss for (a) improper service and (b) lack of subject-matter jurisdiction. (Dkt. No. 16.) The motion has been fully briefed. Plaintiff filed an opposition response on April 6, 2017 and Defendant filed a reply on April 14, 2017.


         Under Fed.R.Civ.P. 12(b)(1), a party “may assert . . . lack of subject-matter jurisdiction” by motion. Subject matter jurisdiction cannot be waived and “[i]f the court determines at any time that it lacks subject-matter jurisdiction, the court must dismiss the action.” Fed.R.Civ.P. 12(h)(3). “In general, dismissal for lack of subject matter jurisdiction is without prejudice.” Missouri ex rel. Koster v. Harris, 847 F.3d 646, 656 (9th Cir. 2017).

         In order to sufficiently “invoke a federal court's subject-matter jurisdiction . . . . [t]he plaintiff must allege facts, not mere legal conclusions, ” that establish the grounds for the court's jurisdiction. Leite v. Crane Co., 749 F.3d 1117, 1121 (9th Cir. 2014). “[T]he sufficiency of the pleadings to establish subject matter jurisdiction is determined by whether the movant brings a facial or factual challenge.” NewGen, LLC v. Safe Cig, LLC, 840 F.3d 606, 614 (9th Cir. 2016). A facial attack “accepts the truth of the plaintiff's allegations but asserts that they are insufficient on their face to invoke federal jurisdiction.” Leite, 749 F.3d at 1121. “A ‘factual' attack, by contrast, contests the truth of the plaintiff's factual allegations, usually by introducing evidence outside the pleadings.” Id.

         “The district court resolves a facial attack as it would a motion to dismiss under Rule 12(b)(6): Accepting the plaintiff's allegations as true and drawing all reasonable inferences in the plaintiff's favor, the court determines whether the allegations are sufficient as a legal matter to invoke the court's jurisdiction.” Leite, 749 F.3d at 1121.

         Any pleadings “filed pro se [are] to be liberally construed.” Erickson v. Pardus, 551 U.S. 89, 94 (2007) (internal quotations omitted). However, “pleadings that . . . [contain] no more than conclusions, are not entitled to the ...

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