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Allen v. United States

United States District Court, D. Nevada

September 9, 2014

CHARLES ALLEN, et al., Plaintiffs,
v.
UNITED STATES OF AMERICA, et al., Defendants.

ORDER: (1) DENYING PLAINTIFF'S REQUEST FOR ADDITIONAL DISCOVERY; AND (2) GRANTING DEFENDANTS' MOTION FOR SUMMARY JUDGMENT

DAVID ALAN EZRA, Senior District Judge.

On May 16, 2014, the Court heard argument on a Motion for Summary Judgment Regarding the Remaining Claim of Plaintiff Robert Kahre filed by Defendants Assistant United States Attorney Gregory Damm ("Damm") and IRS Criminal Investigation Division Agent Jared Halper ("Halper") (collectively, "Defendants"). ("Mot., " Dkt. #409.) Lisa A. Rasmussen, Esq., appeared at the hearing on behalf of Plaintiff Robert Kahre; and Charles M. Duffy, Esq., appeared at the hearing on behalf of the Defendants Damm and Halper. After a careful review of the Motion and the supporting and opposing memoranda, the Court DENIES Plaintiff's Request for Additional Discovery and GRANTS the Motion for Summary Judgment.

BACKGROUND

This case concerns a group of individuals, including former Plaintiffs and current Plaintiff Robert Kahre, who describe themselves as a group of individuals boycotting the Federal Reserve System by using gold and silver coins manufactured by the United States mint as a medium of exchange, "thereby avoiding income taxes based on the exchange rate between gold and silver dollars and Federal Reserve Notes denominated as if they were dollars." ("SAC, " Dkt. #104 at 3.)

Robert Kahre operated several businesses throughout Las Vegas, Nevada, including a building contractor business, a sheet metal fabricating business, and a contract labor leasing company. For Kahre's contract labor leasing company, Kahre would enter into agreements with individuals to provide labor and services for various businesses throughout Clark County. These agreements stated that compensation for services and labor shall be paid in post-1985 U.S. minted gold and silver coins at face value. Kahre failed to withhold federal income taxes because he asserted that the individuals themselves were responsible for paying federal income and social security taxes. Also, Kahre did not file business tax returns or employment taxes.

Because of Kahre's failure to withhold and pay taxes pursuant to the internal revenue laws, the Government began a criminal investigation of Kahre. On May 29, 2003, search warrants were executed at three separate locations: Kimberly Drive, North Grand Canyon Drive, and Bledsoe Lane.

A. Kimberly Avenue

The first search took place at 6270 Kimberly Avenue, Suites C and D. (Dkt. #56 at 2.) The following Plaintiffs were present at the Kimberly Avenue location at the time of the search: Charles Allen; Danielle Alires; Sherri Arendell; Allen Barclay; Shirley Boyse; Rosendo Cruz; Elvis Flores; Gustavo Gutierrez; John Kahre; Brandon Kahre; Robert Leidig; Pamela McDaniel; Heidi Rasmussen; Ron Ruggles; Julia Vargas; William Whitney; and Eziquio Trevino. (Id. at 3 n.2.) The Kimberly Avenue location is a commercial building comprised of offices, a warehouse, and a metal shop enclosed under a common roof that is encircled by a chain link fence with a gate that remains unlocked during work hours. (Id. at 3.) Plaintiffs allege that at 1:00 p.m. some of Defendants riding in an armored personnel carrier crashed through the closed but unlocked gate without asking permission or first trying to open the gate. (Id.) As a result, Plaintiffs contend that Defendants destroyed surveillance equipment nearby. (Id.)

Once on the property, Plaintiffs claim that Defendants armed themselves with submachine guns, entered the building, and trained their weapons on the occupants. (Id.) Plaintiffs also allege that Defendants handcuffed them, escorted them outside, searched them, and left them in the heat for an extended period of time at temperatures exceeding 106 degrees. (Id.) Defendants allegedly ignored Plaintiffs' requests for shade and water and did not consider the age or infirmities of some of the Plaintiffs. (Id.)

Further, according to Plaintiffs, Defendants allegedly destroyed Plaintiffs' property, including office cabinets, lockboxes, and the surveillance system unnecessarily. (Id. at 3-4.) Plaintiffs also state Defendants refused to present the search warrants during the search but left behind two search warrants that did not identify the crimes investigated, a description of the property to be searched, or the items to be seized. (Id. at 4.)

B. North Grand Canyon Drive

The second search took place at 6295 North Grand Canyon Drive. (Id.) At the time of the search the following Plaintiffs were present at this location: Lee Belcher; Lori Kahre; George Rodriquez; Debra Rosenbaum; and Ismael Curiel. (Id. at 4 n.3.) The primary structure on the property is a one-story building containing several administrative offices for Robert Kahre. (Id. at 4.) The secondary structure on the property serves as the primary residence for Lori Kahre and Lee Belcher. (Id.) A five foot cinder block wall surrounds the secondary structure separating it from the primary structure. (Id.)

At approximately 4:30 p.m., Defendants allegedly broke through the front door of the primary structure. (Id.) Plaintiffs claim that once inside, the Defendants broke the glass out of the sliding glass door from the inside rather than unlocking it. (Id.) Plaintiffs state that Defendants took them into custody at gunpoint and searched and handcuffed them. (Id.) Plaintiffs also assert that Defendants shot non-lethal bags at Plaintiff Lee Belcher, hitting him once in the back and twice in the stomach. (Id.) Plaintiffs claim that Lee Belcher, Lori Kahre, and George Rodriguez all sustained injuries while Defendants took them into custody. (Id.) The search allegedly resulted in the unnecessary destruction of the sliding glass door as well as damage to the house from an explosive device detonated by Defendants. (Id. at 4-5.)

C. Bledsoe Lane

The third search took place at 1555 Bledsoe Lane. At this location is a single story house on a large lot surrounded by a wrought iron fence where the Kahres store and repair heavy equipment. (Id. at 5.) It is also the residence of Plaintiff Don Hamilton. (Id.) Plaintiffs allege that at approximately 4:10 p.m., Don Hamilton exited his house and saw Defendants outside the fence and surrounding the Bledsoe property. (Id.) They allegedly ordered him to raise his hands and pointed machine guns at him. (Id.) Plaintiffs claim that Defendants made Hamilton turn and face the wall while they cut the lock on the gate, despite Hamilton claiming to tell them they could scale the fence and retrieve the key from inside the residence. (Id.) Hamilton was subsequently taken into custody, searched, and handcuffed. (Id.)

Finally, Plaintiffs allege that at approximately 1:30 p.m. Defendants arrested Robert Kahre at Bank of the West. (Id. at 5.) Kahre was there to cash two checks for a total of $230, 913.00. (Id.) Defendants confiscated Kahre's shoulder bag containing the money as well as other items. (Id.) Kahre was detained at Clark County Detention Center until the following morning. (Id.)

A. Civil Complaint

In October 2003, Plaintiffs filed suit against an Assistant United States Attorney in the Department of Justice ("DOJ"), Special Agents of the Internal Revenue Service ("IRS"), federal strike force/SWAT team members, and North Las Vegas Police Department ("NLVPD") officers, alleging numerous constitutional violations. (SAC ¶¶ 3-20.) Plaintiffs' allegations arose primarily out of searches conducted by Defendants at the three locations in Las Vegas, Nevada on May 29, 2003. Specifically, the Second Amended Complaint alleged that Defendants retaliated against Plaintiffs for engaging in protected First Amendment activity (id. ¶¶ 21-27); used excessive force, unreasonably detained Plaintiffs, and engaged in the unnecessary destruction of property and other misconduct in the execution of search warrants, in violation of the Fourth Amendment (id. ¶¶ 27-39); violated Plaintiffs' Fifth and Fourteenth Amendment right to due process and freedom from compelled self-incrimination by using grand jury proceedings to elicit evidence for use in civil tax cases (id. ¶¶ 62-65), utilizing warrantless arrests and excessive force to coerce bystanders to submit to interrogations (id. ¶¶ 66-71), and failing to serve search warrants to lawful tenants of property being searched (id. at ¶¶ 72-74); and, finally, conspired to violate Plaintiffs' First and Fourth Amendment rights (id. ¶¶ 75-77).

On February 18, 2004, Defendants filed Motions to Dismiss pursuant to Federal Rules of Civil Procedure 12(b)(1) and (6) or, in the alternative, for Summary Judgment ("Defendants' 2004 Motions"). (Dkt. ##20-21.) On August 12, 2004, Plaintiffs filed their First Amended Complaint. (Dkt. #53.) On October 4, 2004, United States District Judge Philip M. Pro granted in part and denied in part Defendants' 2004 Motions. ("Pro Order, " Dkt. #56.)

In his Order, Judge Pro found that under Ninth Circuit precedent, "no Bivens action may lie for any alleged constitutional violation stemming from the assessment and collection efforts of IRS agents whenever there [are] meaningful and adequate protections available to the plaintiff" under the Tax Equity and Fiscal Responsibility Act of 1982 ("TEFRA"). (Id. at 9.) Accordingly, he dismissed all claims against IRS agents regarding alleged violations of First Amendment rights and claims regarding the seizure of Robert Kahre's gold, silver, and other currency to satisfy unpaid federal tax obligations. (Id. at 11, 23.) Judge Pro found that Robert Kahre was not present when the challenged search warrants were executed and thus did not have standing to challenge Defendants' failure to knock and announce and to present the warrant. (Id. at 10-11.) Judge Pro also dismissed Robert Kahre's claims regarding the sufficiency of the search warrant, all claims arising from alleged violations of the Fifth Amendment protection against self-incrimination, and claims against AUSA Damm relating to the drafting of the search warrant application and supporting affidavit. (Id. at 24.) Judge Pro denied Defendants qualified immunity with respect to Plaintiffs' claims for unreasonable detention and excessive force relating to a search at 6270 Kimberly Avenue; the unreasonable detention claims of certain of the Plaintiffs; and Plaintiff Lori Kahre's allegations that Defendants unlawfully entered her residence and detained her. (Id. at 16, 19.) Judge Pro found that Defendant Damm was not entitled to absolute immunity with respect to Plaintiffs' allegations that he planned every aspect of an unlawful raid, and denied Defendant IRS Agent Halper qualified immunity on Robert Kahre's unlawful arrest claim. (Id. at 20-21, 24.)

Plaintiffs filed their Second Amended Complaint on November 14, 2005. (SAC.) The Second Amended Complaint named the following defendants: AUSA Damm; IRS Agents Halper, Mercedes Manzur, and Dennis Crowther ("Crowther"); and officers with the NLVPD.

In an Order dated May 22, 2006, the Court concluded that Plaintiffs' claims against the NLVPD officers were barred by the statute of limitations, and therefore dismissed the state defendants from the lawsuit. (Dkt. #142.)

B. Kahre's Indictment

In April 2005, shortly before Plaintiffs filed their Second Amended Complaint, the Government filed two criminal indictments against Kahre and other defendants. Kahre was charged with, inter alia, willful failure to collect/pay over tax (26 U.S.C. § 7202); conspiracy to attempt to evade or defeat tax (18 U.S.C. § 371); and attempt to evade or defeat tax (26 U.S.C. § 7201). (Case No. 05-cr-120-RCJ-RJJ-1; Case No. 05-cr-121-RCJ-RJJ-1). On July 12, 2005, the Court stayed discovery proceedings pending resolution of the criminal cases against eleven of the Plaintiffs in the instant action. (Dkt. #99.)

On April 4, 2006, December 19, 2006, and November 20, 2007, the Government obtained respectively, superseding indictments (Case No. 05-cr-120-RCJ-RJJ-1, Dkt. #124; Case No. 05-cr-121-RCJ-RJJ-1, Dkt. #346), second superseding indictments (Case No. 05-cr-120-RCJ-RJJ-1, Dkt. #217; Case No. 05-cr-121-RCJ-RJJ-1, Dkt. #605), and a third superseding indictment (Case No. 05-cr-121-RCJ-RJJ-1, Dkt. #1671).[1]

In 2009, three of the remaining Plaintiffs in the civil action were adjudged guilty in their criminal cases. (See Case No. 2:05-cr-00121-RCJ-RJJ (hereinafter, "Crim. Dkt.").) Specifically, John Kahre pleaded guilty to five counts of willfully attempting to evade and defeat tax (see Crim. Dkt. ##605, 2614); Robert Kahre was found guilty of multiple counts of conspiracy to defraud, willfully failing to collect and pay over tax, attempting to interfere with the administration of the Internal Revenue law, attempting to evade and defeat tax, and wire fraud (see Crim. Dkt. ##1671, 2615); and Lori Kahre was found guilty of multiple counts of conspiracy to defraud, attempting to interfere with the administration of the Internal Revenue law, making a false statement to a bank and attempting to evade and defeat tax (see Crim. Dkt. ##1671, 2623). Robert and Lori Kahre filed a Notice of Appeal. (Crim. Dkt. #2602.)

On December 5, 2013, the Ninth Circuit Court of Appeals affirmed the judgment of this Court and thus affirmed Robert Kahre's and Lori Kahre's convictions and sentences. (Crim. Dkt. #2849; United States v. Kahre, 737 F.3d 554, 583 (9th Cir. 2013).) On February 6, 2014, the Ninth Circuit denied Defendants' Petition for Rehearing En Banc. (Crim. Dkt. #2852.)

C. RICO Complaint

On February 23, 2007, Plaintiff Robert Kahre commenced another lawsuit against many of the same Defendants in the instant civil case, alleging numerous Racketeer Influenced and Corrupt Organizations ("RICO") violations. (See Case No. 2:07-CV-00231-DAE-RJJ ("RICO Dkt.").) The facts alleged in the RICO Complaint related to the May 29, 2003 searches at the three locations and ended with the return of the second superseding indictment in December 2006. Federal Defendants moved to dismiss, pursuant to Federal Rule of Civil Procedure 12(b)(1), (2), (5) and (6). Defendants also contended that the Nevada RICO claim should be dismissed because it was not appropriately brought in federal court.

This Court ultimately dismissed the myriad claims in that suit (RICO Dkt. #95). The Court granted Federal Defendants' Motion to Dismiss pursuant to Rule 12(b)(6). With regard to the federal RICO claims, the court determined that the United States was the real party in interest, and that it had not waived its sovereign immunity. (Id. at 19-25.) Alternatively, this Court held that even if sovereign immunity was inapplicable, Kahre's complaint failed to establish the necessary elements to plead a federal RICO claim. (Id.) Kahre failed to meet the higher pleading standard applicable to RICO with regard to the "conduct element." (Id.) Numerous alleged acts were not predicate acts under RICO, and as to those acts that were, the Court found that they constituted legitimate government action that did not amount to criminal activity. (Id. at 25-28.) Moreover, the Court noted that the United States, the real party in interest, was incapable of forming the malicious intent to support a RICO action. (Id. at 28-29.) The Court also noted that because I.R.C. § 7433 provided the exclusive remedy for violations of the Internal Revenue Code by IRS employees, Kahre's claims with regard to tax collection efforts were precluded. (Id. at 29-31.) Finally, the Court exercised its pendent jurisdiction over the Nevada RICO claim. (Id. at 31-35.) The Court determined that these claims should be dismissed for a variety of reasons, including that the allegation of violation of constitutional rights was irrelevant to a civil RICO action; that the complaint alleged harm to individuals who were not parties to the case; and Kahre could not establish the required number of "not isolated" predicate acts, because the events of May 29 were not isolated incidents, but were part of a single, coordinated operation. (Id. at 35-39.) This Court's decision was affirmed on appeal by the Ninth Circuit in June 2009. (RICO Dkt. #107.)

D. Civil Complaint Continues

The Court sua sponte lifted the stay in the civil proceedings on September 7, 2010, after Robert Kahre, Lori Kahre, and John Kahre were adjudged guilty in their criminal trials. (Dkt. #225.) Only three Plaintiffs elected to proceed in the civil case: Robert Kahre, Lori Kahre, and Lee Belcher ("Belcher"). (Dkt. #300 at 19.) The other Plaintiffs were dismissed. (Id.)

On November 15, 2010, Defendants filed a Motion to Dismiss or, in the Alternative, for Summary Judgment ("Defendants' 2010 Motion"). (Dkt. #254.) In its Order addressing Defendants' 2010 Motion, the Court identified five categories of claims that had not been dismissed in the Pro Order granting in part and denying in part Defendants' 2004 Motions:

1. Plaintiffs' claims for unreasonable detention arising from the execution of a search warrant at Kimberly Avenue;
2. Plaintiffs' claims of excessive force by federal agents during the execution of a search warrant at Kimberly Avenue;
3. Plaintiff Robert Kahre's claim for unlawful arrest against Defendant Halper;
4. Plaintiffs' claims against Defendant Damm for the alleged planning of ...

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