5:18-cv-03755
N.D. Cal.Jan 22, 2019Background
- In August 2012 the IRS sent a Final Notice of Intent to Levy; the IRS levied Zhou’s brokerage account on August 17, 2012 (11 days after the notice date) and ultimately retained $12,298.25.
- Zhou submitted repeated calls/letters and filed two Form 843 refund requests in May 2014; the IRS has not issued a formal decision on those Forms.
- Zhou sued the United States (IRS) seeking (1) refund under 26 U.S.C. § 7422, (2) damages under 26 U.S.C. § 7433 for improper collection, (3) constitutional damages under 42 U.S.C. § 1983 and Bivens, and (4) injunctive relief; he sought compensatory and large punitive-type damages.
- The IRS moved to dismiss for lack of subject-matter jurisdiction and for failure to state a claim under Fed. R. Civ. P. 12(b)(1) and (6).
- The court concluded sovereign immunity bars constitutional claims against the United States; the § 7433 claim was time-barred; § 1983 is inapplicable to federal actors; injunctive relief is barred by the Anti-Injunction Act; and refund/damages claims are precluded by res judicata due to an earlier Federal Claims decision.
- The motion to dismiss was granted and all claims were dismissed without leave to amend.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether constitutional claims can be brought against the United States (Bivens/§1983) | Zhou asserted due process and Fourth Amendment violations and sought relief under §1983 and Bivens | United States argued sovereign immunity bars suit against the U.S.; §1983 applies only to state actors; Bivens is inapplicable to tax assessment/collection | Dismissed: sovereign immunity bars claims against the U.S.; §1983 inapplicable; Bivens remedy unavailable for tax-collection context; leave to amend denied |
| Whether §7433 claim is timely | Zhou argued his May 2014 Form 843 preserved his §7433 claim | United States argued §7433 has a two-year limitations period and Zhou’s cause accrued on Aug 17, 2012; Form 843 does not preserve a §7433 damages claim | Dismissed: §7433 claim untimely (limitations expired Aug 17, 2014); Form 843 does not toll §7433 period; no leave to amend |
| Whether injunctive relief is barred by the Anti-Injunction Act (26 U.S.C. §7421) | Zhou sought permanent injunctive relief against levy/collection | United States argued Anti-Injunction Act prohibits suits to restrain tax assessment/collection and Zhou did not invoke narrow exceptions | Dismissed: injunctive relief barred by Anti-Injunction Act; no showing of narrow exception |
| Whether refund/damages claims are precluded by res judicata | Zhou argued constitutional claims survived because Federal Claims dismissed them for lack of jurisdiction | United States argued prior Federal Claims judgment determined liability and proper levy; parties and claims identical | Dismissed/Precluded: res judicata applied to refund and damages claims (same transactional nucleus, final judgment, same parties); constitutional claims in any event barred |
Key Cases Cited
- Gilbert v. DaGrossa, 756 F.2d 1455 (9th Cir. 1985) (sovereign immunity requires an unequivocal waiver to sue the United States)
- United States v. Nordic Vill. Inc., 503 U.S. 30 (1992) (waivers of sovereign immunity are strictly construed)
- Bivens v. Six Unknown Named Agents, 403 U.S. 388 (1971) (recognized a damages remedy against federal agents in limited circumstances)
- Adams v. Johnson, 355 F.3d 1179 (9th Cir. 2004) (Bivens remedies not available for tax assessment/collection disputes)
- United States v. Dalm, 494 U.S. 596 (1990) (refund-jurisdiction statute must be read with statutory conditions such as §7422 filing requirements)
- Wages v. Internal Revenue Serv., 915 F.2d 1230 (9th Cir. 1990) (Ninth Circuit has not recognized constitutional damages arising from tax collection)