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Goldsmith v. Internal Revenue Service

United States District Court, District of Nevada

April 7, 2015

JONATHAN GOLDSMITH, ESQ., an individual, Plaintiff,
INTERNAL REVENUE SERVICE, a United States Government Entity; JPMORGAN CHASE BANK, N.A., a national association; DOE, INDIVIDUALS, I-X; and ROE CORPORATIONS, I-X, inclusive, Defendants.


Gloria M. Navarro, Chief Judge United States District Court

Pending before the Court is the Motion to Dismiss (ECF No. 27) filed by Defendant Internal Revenue Service (the “IRS”). The IRS also filed a Memorandum in support of its Motion to Dismiss (ECF No. 28). Plaintiff Jonathan Goldsmith, Esq. (“Plaintiff”) filed a Response (ECF No. 29) and a Supplement to his Response (ECF. No. 30). The IRS filed a Reply (ECF No. 31). For the reasons discussed below, the IRS’s motion is GRANTED.


This case arises out of the IRS’s alleged violation of 28 U.S.C. 6331(k), which bars the levying of taxes while installment agreements are pending or in effect, and Internal Revenue Service Manual, which allows the levy of taxes only on funds that are cleared and are available for withdrawal.

Plaintiff was the sole owner of Jonathan B. Goldsmith, Ltd., a now dissolved Nevada Corporation. (Compl. ¶¶ 13–14, ECF No. 1). On March 10, 2014, Plaintiff received an “Intent to Levy” letter from the IRS and filed a “Request for a Collection Due Process or Equivalent Hearing” with the IRS in response. (Id. ¶¶ 16–17). Plaintiff allegedly withdrew this request after speaking with IRS Officer Jeffrey Fountain and scheduled an installment agreement with the IRS to start on July 20, 2014. (Id. ¶¶ 19–20). However, on July 11, 2014, prior to the start date of the installment agreement, Plaintiff allegedly transferred $5, 200.00 from the corporate operating bank account into the payroll account in order to fulfill payroll. (Id. ¶¶ 26–27). Plaintiff allegedly then discovered that the transferred funds were on hold by his bank due to an IRS levy despite his apparent success in removing the funds from the operating account. (Id. ¶¶ 28–31).

On August 7, 2014, Plaintiff initiated the present action alleging four causes of action against the IRS: (1) fraud; (2) violation of 26 U.S.C. § 6331(k)(2)(A); (3) violation of 26 U.S.C. § 6331(k)(2)(C); and (4) violation of § the Internal Revenue Service Manual. (Id. ¶¶ 38–53).


Rule 12(b)(1) of the Federal Rules of Civil Procedure permits motions to dismiss for lack of subject-matter jurisdiction. Fed.R.Civ.P. 12(b)(1). When subject matter jurisdiction is challenged, the burden of proof is placed on the party asserting that jurisdiction exists. Scott v. Breeland, 792 F.2d 925, 927 (9th Cir. 1986) (holding that “the party seeking to invoke the court’s jurisdiction bears the burden of establishing that jurisdiction exists”). Accordingly, the court will presume lack of subject matter jurisdiction until the plaintiff proves otherwise in response to the motion to dismiss. Kokkonen v. Guardian Life Ins. Co. of Am., 511 U.S. 375, 376–78 (1994).

“Ordinarily, a case dismissed for lack of subject matter jurisdiction should be dismissed without prejudice so that a plaintiff may reassert his claims in a competent court.” Frigard v. United States, 862 F.2d 201, 204 (9th Cir. 1988) (per curiam). However, where there is no way to cure the jurisdictional defect, dismissal with prejudice is proper. See id.


A. Fraud Claim

In his fraud claim, Plaintiff alleges the IRS, through its agents, made material representations they knew to be false when made, with intent to defraud Plaintiff. (Compl. ¶¶ 81–84, ECF No. 1). Plaintiff further alleges he reasonably relied on these representations to his detriment. (Id. ¶¶ 85–87).

Plaintiff’s allegations essentially amount to a common law fraud claim against the IRS. In order to assert a tort claim against the IRS, Plaintiff must first show that the federal government has consented to such a claim by waiving its sovereign immunity. Jachetta v. United States, 653 F.3d 898, 903 (9th Cir. 2011). However, Plaintiff does not put forward any argument establishing that sovereign immunity has been waived for such a claim against the IRS.

The general statute under which Plaintiff may assert a tort claim against the IRS is the Federal Tort Claims Act (“FTCA”), 28 U.S.C. § 1346(b). The FTCA, however, is a limited waiver of sovereign immunity. See 28 U.S.C. § 2680. Most importantly here, the FTCA does not allow recovery in two relevant circumstances. First, a Plaintiff may not bring a claim against the United States “arising in respect to the assessment or collection of any tax.” 28 U.S.C. § 2680(c); see also Hurt v. United States, 914 F.Supp. 1346, 1350–51 (S.D. W.Va. 1996); Perkins v. United States, 55 F.3d 910 (4th Cir. 1995); Capozzoli v. Tracey, 663 F.2d 654, 658 (5th Cir. 1981) (“Congress retained the United States’ sovereign immunity for any claim in respect of the assessment or collection of taxes. This language is broad enough to encompass any ...

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