United States District Court, D. Colorado
DAVID L. SMITH, and M. JULIA HOOK, Plaintiffs,
UNITED STATES OF AMERICA, Defendant.
ORDER ON RECOMMENDATION OF UNITED STATES MAGISTRATE JUDGE (ECF NO. 101) AND GRANTING DEFENDANT'S MOTION TO DISMISS AMENDED COMPLAINT (ECF NO. 81)
RAYMOND P. MOORE, District Judge.
THIS MATTER is before the Court on the Recommendation of United States Magistrate Judge ("Recommendation") (ECF No. 101) to grant Defendant United States of America's Motion to Dismiss Amended Complaint ("Motion") (ECF No. 81), and to dismiss Plaintiffs' Verified Supplemental/Amended Complaint and Jury Demand ("Amended Complaint" or "AC") (ECF No. 68). Plaintiffs timely filed a written objection ("Objection") (ECF No. 105) to the Recommendation, raising a number of arguments as to why it should be rejected. The Court has reviewed the Recommendation, Plaintiffs' Objection, Court file, and decisions from Plaintiffs' prior lawsuits against the United States challenging their tax liabilities which are at issue in this case. The Court has also analyzed the applicable statutes, rules, regulations and case law. Upon consideration of these matters, and being otherwise fully advised, the Court OVERRULES Plaintiffs' Objection and ACCEPTS the Recommendation to dismiss Plaintiffs' Amended Complaint without prejudice, on the bases and for the reasons stated herein.
I. BACKGROUND AND PROCEDURAL HISTORY
Plaintiffs, attorneys appearing pro se, have been litigating their tax issues against the United States for many years, and before many different courts. Having repeatedly lost their challenges to the Internal Revenue Service's determination and assessment of income tax deficiencies for various tax years, Plaintiffs now seek relief before this Court.
In this case, Plaintiffs seek the "recovery of internal-revenue taxes erroneously or illegally assessed or collected, and penalties collected without authority, and sums that are excessive or were collected in a wrongful manner under internal-revenue laws... and to quiet title to real and personal property...." (ECF No. 68, pages (pp.) 1, 2). Plaintiffs' claims are based on the assessment of taxes, penalties, "additions to tax, " and interest for the 1992-1996 and 2001-2006 tax years. (ECF No. 68; Nos. 10-1 to 10-3; Nos. 10-11, 10-30.) As an initial matter, Plaintiffs challenge the assessments as improper. Assuming the assessments are proper, Plaintiffs claim they have fully satisfied such liabilities and, in fact, have overpaid them. Accordingly, Plaintiffs seek a refund under 26 U.S.C. § 6512 of the amounts claimed overpaid (Sections II, VI, and VII); the return and release of levied property under 26 U.S.C. § 6343(a) (Sections IV and V) as their tax liabilities have been fully satisfied; and the release of federal tax liens under 26 U.S.C. § 6325 (Section III) as their tax liabilities have been fully satisfied or become legally unenforceable.
Upon Motion to Dismiss ("First Motion") filed by Defendant, Magistrate Judge Kristen L. Mix recommended ("First Recommendation") that Plaintiffs' original Complaint be dismissed without prejudice under Fed.R.Civ.P. 12(b)(1)and 12(b)(6). After consideration of the Plaintiffs' objections ("First Objection") to the First Recommendation, by Order dated March 28, 2014, the Honorable Marcia S. Krieger, Chief United States District Judge, adopted the Magistrate Judge's First Recommendation as to dismissal of all claims without prejudice, but did so under Rule 12(b)(6). Nonetheless, Chief Judge Krieger granted Plaintiffs leave to file an amended complaint, finding that " some of the pleading deficiencies identified [in the Order] may be curable by amendment." (ECF No. 67, p. 16, italics supplied.)
The Order found Defendant had waived sovereign immunity for the claims alleged, but did not waive any other jurisdictional requirements that are specific to the claims asserted. The Order stated that Plaintiffs' Claims for Refund (Sections II, VI and VII of the Complaint) under 26 U.S.C. § 6512(a)(2) were conclusory and insufficient to support an overpayment was made; that the Claims for Return and Release of Levied Property (Sections IV and V of the Complaint) were not precluded under 26 U.S.C. § 7421(a) as a restraint on the assessment or collection of taxes, but Plaintiffs' conclusory allegations did not properly state the grounds for the release or return of such levied property, i.e., the allegations did not sufficiently show the taxes have already been collected in full; and that the Claims for Release of Tax Liens (Section III of the Complaint) under 26 U.S.C. §§ 6325 and 7432 failed to state a claim as Plaintiffs' conclusory allegations that they fully satisfied their tax liabilities or that the liens have become legally unenforceable did not sufficiently state grounds for the release of such liens.
In response, Plaintiffs filed their Amended Complaint which included additional allegations such as the amounts of Plaintiffs' original tax liabilities and "Additions to Tax" for 1992-96 and 2001-05; the amounts Plaintiffs paid (via levies and otherwise) toward satisfying each assessed liability for those same tax years, accounting only for taxes and Additions to Tax; and the amounts Plaintiffs claim constituted an overpayment or a wrongful collection. Based on Plaintiffs' calculations as to the amount of their Additions to Tax, they have apparently also included the amount of penalties assessed under 26 U.S.C. § 6662 as stated in the Tax Court's decisions. (ECF Nos. 10-1, 10-2, 10-3.) The Amended Complaint contains no information as to the amount of assessments for tax year 2006 or interest for any tax year, or any payments of such amounts. As relief, Plaintiffs seek: a credit/refund for overpayment of taxes, penalties and interest for tax years 1992-1996 and 2001-2006; abatement of penalties and interest for tax years 1992-1996 and 2001-2006; damages for Defendant's failure or refusal to release federal tax liens; the release of all federal tax liens; the return of all levied/seized property; the release of the continuing levy on social security payments; and an order quieting title to all real and personal property owned by Plaintiffs.
Defendant again moved to dismiss under Rules 12(b)(1) and 12(b)(6) (ECF No. 81). Defendant raised a number of arguments and provided evidence (including the Declaration of Yvonne Tibbs, with exhibits) showing no overpayment of tax liabilities, i.e., taxes, penalties, additions to tax, and interest. Plaintiffs, however, failed to substantively address the arguments or evidence in their Response. Instead, Plaintiffs declared Defendant's Motion falsely argued that Plaintiffs failed to correct the pleading deficiencies identified in the Order; Defendant's exhibits should be disregarded as improper parol evidence; and, even if Defendant's Motion is treated as a motion for summary judgment, there are genuine issues as to material facts for determination by a jury at trial.
The Magistrate Judge recommended that Defendant's Motion be granted based on Rules 12(b)(1) (Sections II, IV, V, VI, and VII) and 12(b)(6) (Section III). Plaintiffs timely objected, asserting they continue to contest the validity and amount of any and all tax assessments, accrued interest and penalties. In addition, in summary, Plaintiffs argue the Recommendation: (1) is moot because it is contrary to the Order ruling subject matter jurisdiction exists under 28 U.S.C. § 1346(a), that ruling is law of the case, and the Magistrate Judge abused her discretion in refusing to follow that ruling; (2) is erroneous because Plaintiffs cured the alleged pleading deficiencies identified in the Order; (3) was issued without authorization because Plaintiffs were improperly denied discovery; (4) ignored or misapplied this Court's Civil Practice Standards governing Rule 12(b) motions; (5) failed to acknowledge or consider the determination in the Order that Plaintiffs' allegations fall within the exception in § 6512(a)(2) (Recommendation, pp. 11-12); (6) ignored Plaintiffs' allegations demonstrating they have paid all assessments, including all accrued interest and penalties (Recommendation, pp. 12, 15, 16); and (7) ignored their allegations from which irreparable harm could reasonably be "inferred" and the information contained in their subsequently filed Motion for Temporary Restraining Order and/or Preliminary Injunction ("Motion for TRO") (ECF Nos. 96, 98) (Recommendation, p. 16). After a de novo review of the matters to which Plaintiffs properly objected, the Court finds dismissal of Plaintiffs' Amended Complaint is warranted.
II. STANDARD OF REVIEW
A. Review of Magistrate Judge's Recommendation
When a magistrate judge issues a recommendation on a dispositive motion, Federal Rule of Civil Procedure 72(b)(3) requires that the district court judge "determine de novo any part of the magistrate judge's disposition that has been properly objected to." In conducting its review, "[t]he district judge may accept, reject, or modify the recommended disposition; receive further evidence; or return the matter to the magistrate judge with instructions." Fed.R.Civ.P. 72(b)(3). An objection is proper if it is filed timely in accordance with the Federal Rules of Civil Procedure and specific enough to enable the "district judge to focus attention on those issues - factual and legal - that are at the heart of the parties' dispute.'" United States v. 2121 E. 30 th St., 73 F.3d 1057, 1059 (10th ...