Free Motion to Stay - District Court of California - California

Case 3:07-cv-02289-DMS-WMC

Document 22-6

Filed 06/18/2008

Page 1 of 4

EXHIBIT C

Case 3:07-cv-02289-DMS-WMC

Document 22-6 Filed 06/18/2008 Page 2 of 4 u.s. Department of Justice
Tax Division
Please reply to: Civil Trial Section, Western Region

Facsimile No. (202) 307-0054 Trial Attorney: Caroline A. Newman Attorney's Direct Line: (202) 305-2558

P.o. Box 683

Ben Franklin Station Washington, D.C. 20044

NJH:RRW:CANewman 5-12-12942 CMN 2008100778

February 22, 2008

VIA FACSIMILE
The Honorable Dana M. Sabraw U.S. District Court Southern District of California 940 Front Street San Diego, CA 92101-8900
Re: Rodney M. Toothacre v. United States of America Case No. 07-cv-2289-DMS-WMC
Dear Judge Sabraw:
This letter is being sent pursuant to Rule 6(a) of the Civil Pretrial & Trial Procedures. For the reasons that follow, the United States desires to file a motion to dismiss the Complaint in the above-referenced matter for lack of subject matter jurisdiction and for failure to state a claim upon which relief

may be granted pursuant to Rules 12(b)(1) and 12(b)(6), respectively.

Mr. Toothacre's Complaint concerns federal tax liens filed by the Internal Revenue Service ("IRS") for his employment tax liabilities for the fourth quarter of 1991 and the first quarter of 1992 and his income tax liabilities for the tax years 1993 and 1994. The Complaint seeks a temporary restraining order ("TRO") under 26 U.S.C. § 6331(i) to remove these federal tax liens and prays for damages under 26 U.S.C. §§ 7432, 7433.
Mr. Toothacre's claim fora TRO is barred by which "withdraw the Anti-Injunction

Act, 26 D.S.C. § 7421(a),

( s J jurisdiction from the state and federal courts to entertain suits seeking
federal taxes." Enochs v. Williams Packing & Navigation

injunctions prohibiting the collection of

Co., 370 U.S. 1,5 (1962). Mr. Toothacre's purported basis for jurisdiction for this claim does not

apply in this case because Mr. Toothacre does not have a refund suit pending in federal court. See 26 U.S.c. § 6331(i) (conferring jurisdiction to enjoin IRS collection activities where a taxpayer has a refund suit pending in federal court). Because Mr. Toothacre has not identified an express and unequivocal waiver of sovereign immunity for his claim for a TRO, this Court lacks jurisdiction over this claim and should dismiss it pursuant to Rule 12(b)(1) of the Federal Rules of Civil Procedure.
This Court lacksjurisdiction overMr. Toothacre's claim for damages under

26 U.S.C. § 7433

because Mr. Toothacre failed to exhaust his administrative remedies. Treasury Regulation

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§ 301.7433-1 (d) requires the taxpayer to submit an administrative claim to the IRS prior to bringing an action in federal district court. Mr. Toothacre failed to do so. Therefore, this Court lacks subject matter jurisdiction over this claim and should dismiss it pursuant to Rule 12(b)( 1) of the Federal Rules of Civil Procedure.

With respect to his claim for damages under 26 U.S.C. § 7432, Mr. Toothacre did submit an administrative claim to the IRS. However, it lacked the specificity required by Treasury Regulation § 301.7432-1 (f)(2)(v) because it failed to provide a description of the injuries suffered. Because the

failure to comply with the regulations deprives a court of jurisdiction even where the IRS has the claim, see Venen v. United States, 38 F.3d 100,103 (3d Cir. 1994);
received actual notice of

Amwest Surety Ins. Co. v. United States, 28 F.3d 690,696 (7th Cir.1994), this Court should dismiss this claim pursuant to Rule 12(b)(1) of the Federal Rules of Civil Procedure.

Alternatively, even ifMr. Toothacre had exhausted his administrative remedies for his claim for damages under 26 U.S.C. § 7432, the Complaint nonetheless fails to state a claim upon which relief can be granted. Under this provision, damages are limited to the "actual, direct economic damages sustained by the plaintiff which, but for the actions of the defendant, would not have been sustained." 26 U.S.C. § 7432. Further, "(i)njuries such as inconvenience, emotional distress and loss of reputation are compensable only to the extent that they result in actual pecuniary damages." Treasury Regulation § 301-7433-1(c)(1). Although the Complaint alleges that the IRS caused Mr. Toothacre "immense problems" and prays for $100,000.00 in damages, it does not allege how the actions of the IRS were the proximate cause of these damages, the nature of the immense problems,

or how the $100,000.00 figure was derived. Because the allegations in the Complaint do not
demonstrate that Mr. Toothacre has suffered "actual, direct economic damages" recoverable under § 7432, this Court should dismiss this claim pursuant to Rule 12(b)(6) of the Federal Rules of Civil
Procedure. i

pursuant to Rules 12(b)(1) and 12(b)(6) ofthe Federal Rules of

F or the foregoing reasons, the United States believes that a Motion to Dismiss the Complaint Civil Procedure is warranted. The United States has conferred with Mr. Toothacre regarding its position and believes there is potential

to negotiate a stipulation of dismissal of the claim for a TRO in light of the fact that the IRS
extinguished the 1991 and 1992 tax liabilities and has released the tax liens for the 1993 and 1994 liabilities.

An informal conference on this matter is scheduled for 8:30 a.m., Tuesday, February 26, 2008. A copy of this memorandum is being sent to Mr. Toothacre via email, as per his request.

¡Currently pending in Tax Court is Mr. Toothacre's Collection Due Process appeal in

which he challenges the underlying validity of the 1993 and 1994 income tax liabilities. The outcome ofthe Tax Court proceedings may have an effect on the present matter because in order for Mr. Toothacre to succeed on the merits of his claim for damages under 26 U.S.C. § 7432, he must demonstrate that liability for those tax years is "unenforceable." See 26 U.S.C. § 6325.

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Sincerely yours,

CAROLINE A. NEWMAN Trial Attorney Civil Trial Section, Western Region

cc: Rodney M. Toothacre (via email)

United States Attorney San Diego, California

3075 i 68. i