Free Reply to Response to Motion - District Court of Federal Claims - federal

Case 1:06-cv-00096-TCW

Document 14

Filed 09/20/2006

Page 1 of 17

No. 06-96C (Judge Wheeler) _________________________________________________________________ IN THE UNITED STATES COURT OF FEDERAL CLAIMS _________________________________________________________________ DENNIS W. JORDAN, Plaintiff, v. THE UNITED STATES, Defendant. _________________________________________________________________ DEFENDANT'S REPLY TO PLAINTIFF'S OPPOSITION TO OUR MOTION TO DISMISS _________________________________________________________________ PETER D. KEISLER Assistant Attorney General DAVID M. COHEN Director STEVEN G. GILLINGHAM Assistant Director KENT G. HUNTINGTON Trial Attorney Commercial Litigation Branch Civil Division Department of Justice Attn: Classification Unit, 8th Floor 1100 L Street, N.W. Washington, D.C. 20530 Tel. No.: (202) 353-9369 Fax. No.: (202) 353-7988 September 20, 2006 Attorneys For Defendant

Case 1:06-cv-00096-TCW

Document 14

Filed 09/20/2006

Page 2 of 17

TABLE OF CONTENTS PAGE(S) DEFENDANT'S REPLY TO PLAINTIFF'S OPPOSITION TO OUR MOTION TO DISMISS ............................................. 1 ARGUMENT ...................................................... 2 I. The Court Lacks Jurisdiction To Decide This Matter Because The Taxes Assessed Have Not Been Fully Paid And No Monetary Damages Have Been Incurred By Mr. Jordan ........................................... 2 The Tucker Act Does Not Provide This Court Authority To Issue The Declaratory Relief That Mr. Jordan Seeks ................................................ 5 The Complaint And Its Attachments Confirm That Mr. Jordan Has Not Stated A Claim That An Agreement Was Formed ........................................... 7 A. By Its Terms, Ms. Caldera's Letter To Mr. Jordan Was Not An Offer And His Response Was Not An Acceptance ....................................... 8 Mr. Jordan Cannot Establish That Ms. Caldera Had Actual Authority To Enter Into A Binding Contract ........................................ 10

II.

III.

B.

CONCLUSION ................................................... 11

Case 1:06-cv-00096-TCW

Document 14

Filed 09/20/2006

Page 3 of 17

TABLE OF AUTHORITIES CASES PAGE(S)

Bob Jones Univ. v. Simon, 416 U.S. 725 (1974) ...................................... 4 Buesing v. United States, 42 Fed. Cl. 679 (1999) ................................... 6 City of El Centro v. United States, 922 F.2d 816, 820 (Fed. Cir. 1990) .................. 10, 11 Enochs v. Williams Packing & Navigation Co., 370 U.S. 1 (1962) ........................................ 3 Federal Crop Ins. v. Merrill, 332 U.S. 380 (1947) ..................................... 10 Fisher v. United States, 69 Fed. Cl. 193 (Fed. Cl. 2006) .......................... 4 Flora v. United States, 362 U.S. 145 (1960) ...................................... 5 Harbert/Lummus Agrifels Projects v. United States, 142 F.3d 1429 (Fed. Cir. 1998) .......................... 10 Hunsaker v. United States, 66 Fed. Cl. 129 (2005) ................................ 4, 5 Layshenko v. United States, 41 Fed. Cl. 626 (1998) ............................. 3, 6, 7 Logan Canyon Cattle Ass'n v. United States, 34 Fed. Cl. 165 (1995) ................................... 6 New York Life Ins. Co. v. United States, 118 F.3d 1553 (Fed. Cir. 1997) ........................... 4 Rig Masters, Inc. v. United States, 42 Fed. Cl. 369 (1998) ................................... 6

-ii-

Case 1:06-cv-00096-TCW

Document 14

Filed 09/20/2006

Page 4 of 17

Thermalon Indus., Ltd. v. United States, 34 Fed. Cl. 411 (1995) .................................. 10 Total Med. Management, Inc. v. United States, 104 F.3d 1314 (Fed. Cir. 1997) ...................... 10, 11 Trauma Servs. Group v. United States, 104 F.3d 1321 (Fed. Cir. 1997) .......................... 11 United States v. King, 395 U.S. 1 (1969) ........................................ 6 STATUTES 26 U.S.C. § 7421(a) ........................................ 3, 7 26 U.S.C. § 7421 ........................................... 3, 6

-iii-

Case 1:06-cv-00096-TCW

Document 14

Filed 09/20/2006

Page 5 of 17

IN THE UNITED STATES COURT OF FEDERAL CLAIMS

DENNIS W. JORDAN, Plaintiff, v. THE UNITED STATES, Defendant.

) ) ) ) ) ) ) ) )

No. 06-96 (Judge Wheeler)

DEFENDANT'S REPLY TO PLAINTIFF'S OPPOSITION TO OUR MOTION TO DISMISS Defendant, the United States, respectfully submits this reply in response to plaintiff's opposition to our motion to dismiss. As we established in our opening brief and, as we again

establish below, the plaintiff, Mr. Dennis Jordan, has failed to establish that this Court possesses jurisdiction to entertain his claim that the Government breached a purported agreement to forgive his tax debt. Because the Mr. Jordan's complaint

effectively constitutes a claim to restrain the Internal Revenue Service ("IRS") from collecting taxes that were assessed against him for the income tax years of 1999 and 2000, this Court does not possess subject matter jurisdiction to entertain this action. Mr. Jordan has acknowledged that he has not fully paid those income tax years. Moreover, because the complaint essentially

requests a declaratory judgment or injunctive relief with respect to the parties' alleged contract, this Court similarly does not possess jurisdiction to rule upon Mr. Jordan's tax claim.

Case 1:06-cv-00096-TCW

Document 14

Filed 09/20/2006

Page 6 of 17

Alternatively, the Court should dismiss the complaint for failure to state a claim upon which relief may be granted, pursuant to RCFC 12(b)(6), because the facts alleged in the complaint, and more specifically its attachments, make clear that no contract was ever entered into between Mr. Jordan and the Government. See Compl. Ex. B. For the reasons established in

our opening brief, as well as those established below, we respectfully request that the Court dismiss the complaint. ARGUMENT I. The Court Lacks Jurisdiction To Decide This Matter Because The Taxes Assessed Have Not Been Fully Paid And No Monetary Damages Have Been Incurred By Mr. Jordan As we established in our opening brief, Mr. Jordan's efforts to enjoin the IRS from collecting assessed and unpaid taxes should be rejected. In his response brief, Mr. Jordan argues

that this matter is simply an "express contract" case, but he does not otherwise dispute that he is maintaining this litigation to prevent the Government from collecting the taxes assessed to him for the years of 1999 and 2000. Pl. Resp. at 3, 6-8.

In his complaint, Mr. Jordan never alleged that he was seeking monetary damages. He simply requested that the Court

rule that he owed no more taxes for the tax years of 1999 and 2000 based upon a purported contract. Compl. at 5. It is only

now, in his response brief, that Mr. Jordan alleges that he is -2-

Case 1:06-cv-00096-TCW

Document 14

Filed 09/20/2006

Page 7 of 17

seeking "money damages." at 3.

Compare Compl. ¶¶ 2-20 with Pl. Resp.

However, unless and until Mr. Jordan fully pays the taxes,

penalties, and interest due for 1999 and 2000, he has no grounds for alleging that he has suffered any monetary damages. Here,

Mr. Jordan has made clear that he is still simply trying to enjoin the IRS from collecting the full amount of his tax liability, in clear violation of the Anti-Injunction Act. As we previously established, the Anti-Injunction Act, 26 U.S.C. § 7421, precludes this Court from exercising jurisdiction over this matter. Section 7421 states, in relevant part, that:

[N]o suit for the purpose of restraining the assessment or collection of any tax shall be maintained in any court by any person, whether or not such person is the person against whom such tax was assessed. 26 U.S.C. § 7421(a). The Supreme Court has held that "the

manifest purpose of § 7421(a) is to permit the United States to assess and collect taxes alleged to be due without judicial intervention, and to require that the legal right to the disputed sums be determined in a suit for refund." Enochs v. Williams

Packing & Navigation Co., 370 U.S. 1, 7 (1962). This Court has explained that "in order to bring suit in this Court, the plaintiff must pay the taxes assessed, file a claim for refund with the IRS in accordance with I.R.C. § 7422(a), and then wait six months." -3Layshenko v. United States,

Case 1:06-cv-00096-TCW

Document 14

Filed 09/20/2006

Page 8 of 17

41 Fed. Cl. 626, 630 (1998).

The Supreme Court has sustained

this practice, stating that it offers a plaintiff a "full, albeit delayed, opportunity to litigate." U.S. 725, 746 (1974). Bob Jones Univ. v. Simon, 416

While, according to the Supreme Court,

this system may not be "the best that can be devised," id. at 747, the "powerful governmental interests in protecting the administration of the tax system from premature judicial interference" make any resulting delay for potential plaintiffs palatable, if not necessary. Id. Because Mr. Jordan has not

paid the taxes that were assessed to him, his efforts to enjoin the IRS from collecting properly-assessed taxes should be rejected. Therefore, because Mr. Jordan has not established that

his tax claim is within the jurisdiction of this Court, the complaint should be dismissed. Additionally, although Mr. Jordan argues that "[t]his is a contract case" and not a tax refund case, it remains that he effectively seeks a refund of assessed taxes that he told the IRS he could not pay. As we established in our opening brief, this

Court does possess jurisdiction to adjudicate Federal tax refund suits. See New York Life Ins. Co. v. United States, 118 F.3d

1553, 1558 (Fed. Cir. 1997); Fisher v. United States, 69 Fed. Cl. 193, 196 (Fed. Cl. 2006); Hunsaker v. United States, 66 Fed. Cl. 129 (2005). However, a taxpayer must first meet a jurisdictional -4-

Case 1:06-cv-00096-TCW

Document 14

Filed 09/20/2006

Page 9 of 17

prerequisite for adjudicating a tax refund suit, i.e., the taxpayer must make full payment of the tax liability, penalties, and interest. Flora v. United States, 362 U.S. 145, 163 (1960); Here, to the extent that Mr.

Hunsaker, 66 Fed. Cl. at 131.

Jordan essentially seeks a refund of taxes, which he alleged to the IRS that he could not pay, the complaint should be dismissed for lack of jurisdiction. As Mr. Jordan readily acknowledged in

his complaint, he has neither paid the tax liability that was assessed to him by the IRS, nor filed a claim for a refund with the IRS. II. Compl. ¶¶ 3-5.

The Tucker Act Does Not Provide This Court Authority To Issue The Declaratory Relief That Mr. Jordan Seeks As we noted in our opening brief, the prayer for relief in

the complaint does not seek monetary compensation; it merely seeks a judgment in Mr. Jordan's favor that a purported contract was entered into by the parties and that the alleged contract caps Mr. Jordan's tax liabilities. Compl. ¶¶ 5, 21-13. In his

response brief, Mr. Jordan argues that he seeks money damages arising from the Government's alleged breach of an express contract and that his "damages are equal to the excess of his total Tax Liability over the amount accepted by the [G]overnment." Pl. Resp. at 7. This is simply another way of

saying that Mr. Jordan seeks a declaration, or such other

-5-

Case 1:06-cv-00096-TCW

Document 14

Filed 09/20/2006

Page 10 of 17

equitable relief that the Court might "deem appropriate," that the Government cannot recover any additional funds above those that he offered to pay the Government in May 2003. 23; Pl. App. 38. This Court, like other Federal courts, is a court of limited jurisdiction. The Supreme Court has made clear that "absent an Compl. ¶¶ 21-

express grant of jurisdiction from Congress, we decline to assume that the Court of Claims has been given the authority to issue declaratory judgments." United States v. King, 395 U.S. 1, 5

(1969); see also Buesing v. United States, 42 Fed. Cl. 679, 692 (1999) (Court does not possess jurisdiction to entertain taxpayer's claims for declaratory judgment and specific performance of a tax settlement agreement); Layshenko, 41 Fed. Cl. at 630 (explaining that the Court is generally proscribed from issuing declaratory judgments); Rig Masters, Inc. v. United States, 42 Fed. Cl. 369, 373 (1998) (Court does not possess jurisdiction over claims for specific performance); Logan Canyon Cattle Ass'n v. United States, 34 Fed. Cl. 165, 168 & n.4 (1995). Although Mr. Jordan now argues in his response brief that he seeks damages that are equal to the excess of his total tax liability above the amount allegedly accepted by the Government, he is still attempting to restrain the Government from collecting assessed and unpaid taxes. The Anti-Injunction Act, 26 U.S.C. § -6-

Case 1:06-cv-00096-TCW

Document 14

Filed 09/20/2006

Page 11 of 17

7421, clearly precludes this Court from granting Mr. Jordan the injunctive relief he seeks. Section 7421(a) provides that "no

suit for the purpose of restraining the assessment or collection of any tax shall be maintained in any court by any person." U.S.C. § 7421(a); see also Layshenko, 41 Fed. Cl. at 630. Court does not generally possess jurisdiction to issue declaratory judgments and Mr. Jordan has failed to otherwise explain why equitable relief might be available to him. Accordingly, Mr. Jordan's attempt to obtain declaratory relief should be denied, and the complaint dismissed for lack of jurisdiction. III. The Complaint And Its Attachments Confirm That Mr. Jordan Has Not Stated A Claim That An Agreement Was Formed Mr. Jordan argues that the Government breached an express contract arising from his amended offer in compromise of $12,721. Pl. Resp. at 10; App. 7-10; Compl. ¶ 23. However, a review of 26 The

the offer in compromise at issue demonstrates that Mr. Jordan signed and tendered to the IRS an amended Offer in Compromise and that he, not the IRS, "offer[red] to pay $12,721.00." at 38, 41. Pl. App.

Nowhere upon the purported contract did an IRS App. 5-6;

official agree to accept Mr. Jordan's amended offer. See Pl. App. 41. Although Mr. Jordan argues that his

recollection of his interactions with Ms. Caldera created an express contract, Pl. Resp. at 9-11, the amended offer in -7-

Case 1:06-cv-00096-TCW

Document 14

Filed 09/20/2006

Page 12 of 17

compromise clearly establishes that the offer was contingent upon further IRS review and acceptance by authorized officials of the IRS. App. 21-24; Pl. App. 38-41. Indeed, Mr. Jordan was clearly

informed that, if his amended offer were rejected, as it ultimately was, he could then appeal the IRS's rejection of his offer to the IRS Office of Appeals. Compl. Ex. B; App. 5-6.

Because the May 2003 offer in compromise makes plain that it was an amended offer to be submitted by Mr. Jordan, the complaint should be dismissed. A. By Its Terms, Ms. Caldera's Letter To Mr. Jordan Was Not An Offer And His Response Was Not An Acceptance

A review of the correspondence that Mr. Jordan attached to his complaint and to his response brief reveals that Mr. Jordan submitted the amended offer to the IRS to absolve him of his tax liabilities and not the other way around. App. 41. See Compl. Ex. B; Pl.

Although Mr. Jordan characterizes Ms. Caldera's letter

of May 19, 2003 to be a "counteroffer," Compl. ¶ 9; Pl. Resp. at 3-5, and his response to be an "acceptance," Compl. ¶ 10; Pl. Resp. at 5, the exchange of correspondence between the parties clearly demonstrates otherwise. Indeed, in his response brief,

Mr. Jordan does not dispute that Ms. Caldera's May 19, 2003 letter to him contained the following statements: If the payment terms of your amended offer exceed ninety days, a notice of -8-

Case 1:06-cv-00096-TCW

Document 14

Filed 09/20/2006

Page 13 of 17

Federal Tax Lien will be filed. . . . [Y]ou may also provide any other information you believe we should consider in making a final determination as to whether to accept your offer. . . . Also, if your offer is accepted, your compliance will be monitored for 5 years. In that time, if you do not comply with all filing and paying requirements . . . your offer will be defaulted and all taxes will again become due and owing. If you do not respond within 14 days of the date of this letter, your offer cannot be recommended for acceptance . . . . [If] your offer is rejected you will receive information regarding how to appeal the rejection decision to the IRS Office of Appeals. Compl. Ex. B; App. 5-6 (emphasis added). Ms. Caldera was clearly

advising Mr. Jordan that the IRS would consider another, new offer in compromise from Mr. Jordan and was not issuing a counteroffer, as Mr. Jordan argues. In this regard, Mr. Jordan cannot dispute that he signed and sent back to Ms. Caldera an IRS Form 656, which is entitled "Offer in Compromise." App. 7; Pl. App. 41. Given the content

of Ms. Caldera's letter, and Mr. Jordan's response to it, any attempt to construct the exchange as a valid offer and acceptance under contract law should be rejected by the Court. A review of

the parties' correspondence reveals that no contract can be construed between Mr. Jordan and the Government.

-9-

Case 1:06-cv-00096-TCW

Document 14

Filed 09/20/2006

Page 14 of 17

B.

Mr. Jordan Cannot Establish That Ms. Caldera Had Actual Authority To Enter Into A Binding Contract

In his response brief, Mr. Jordan argues that he was dealing with an IRS specialist, i.e., Ms. Caldera, who he believed had apparent authority to enter into a contract to forgive his tax debts. Pl. Resp. at 4, 11-12. This argument lacks merit. It

remains well-established Supreme Court precedent that the Government is not bound by the acts of its agents beyond the scope of their actual authority. 332 U.S. 380, 384 (1947). Federal Crop Ins. v. Merrill,

The Court of Appeals for the Federal

Circuit has consistently followed the Supreme Court's ruling in Federal Crop Ins. and made clear that, if the United States is a party to a purported contract, the Government representative whose conduct is relied upon must have actual authority to bind the Government in contract. See, e.g., Harbert/Lummus Agrifels

Projects v. United States, 142 F.3d 1429, 1432 (Fed. Cir. 1998); Total Med. Management, Inc. v. United States, 104 F.3d 1314, 1319 (Fed. Cir. 1997); City of El Centro v. United States, 922 F.2d 816, 820 (Fed. Cir. 1990). This Court also has further explained

that a valid contract requires that "the [G]overnment representative who entered or ratified the agreement ha[ve] authority to bind the United States in contract." Thermalon

Indus., Ltd. v. United States, 34 Fed. Cl. 411, 414 (1995).

-10-

Case 1:06-cv-00096-TCW

Document 14

Filed 09/20/2006

Page 15 of 17

Moreover, as the IRS informed Mr. Jordan, Ms. Caldera did not have the authority to enter into a Government contract to absolve his tax debts. App. 28. As the party attempting to

enter into a contract with the Government, it was Mr. Jordan's duty to accurately ascertain the authority of the agents purporting to act for the Government. Trauma Servs. Group v. Mr.

United States, 104 F.3d 1321, 1325 (Fed. Cir. 1997).

Jordan's attempt to argue that Ms. Caldera had apparent authority to forgive his tax debts is misguided and irrelevant. Total Med.

Management, 104 F.3d at 1319; City of El Centro, 922 F.2d at 820. The complaint should be dismissed. CONCLUSION For the foregoing reasons, we respectfully request that the Court dismiss the complaint. Respectfully submitted, PETER D. KEISLER Assistant Attorney General DAVID M. COHEN Director

Case 1:06-cv-00096-TCW

Document 14

Filed 09/20/2006

Page 16 of 17

s/ Steven J. Gillingham STEVEN J. GILLINGHAM Assistant Director

s/ Kent G. Huntington KENT G. HUNTINGTON Trial Attorney Commercial Litigation Branch Civil Division U.S. Department of Justice Attn: Classification Unit 8th Floor 1100 L Street, N.W. Washington, D.C. 20530 Tel.: (202) 353-7961 Fax: (202) 353-7988 September 18, 2006 Attorneys for Defendant

Case 1:06-cv-00096-TCW

Document 14

Filed 09/20/2006

Page 17 of 17

CERTIFICATE OF FILING I hereby certify that on September 20, 2006, a copy of the foregoing "DEFENDANT'S REPLY TO PLAINTIFF'S RESPONSE TO OUR MOTION TO DISMISS" was filed electronically. I understand that notice of this of this filing will be sent to all parties by operation of the Court's electronic filing system. Parties may access this filing through the Court's system.

s/ Kent G. Huntington Kent G. Huntington