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Carter v. United States

United States District Court, N.D. Alabama, Northeastern Division

August 9, 2019

ELIZABETH R. CARTER, as Personal Representative of the Estate of Frances E. P. Roper, Plaintiff
v.
UNITED STATES OF AMERICA, Defendant

          MEMORANDUM OPINION

          HERMAN N. JOHNSON, JR. UNITED STATES MAGISTRATE JUDGE

         This action proceeds before the court on Defendant's Amended Motion to Dismiss or Alternatively for Summary Judgment. (Doc. 17). At the outset, the court does not possess subject matter jurisdiction over this action due to Plaintiff Elizabeth R. Carter's failure to file a timely administrative claim seeking a refund of tax payments. However, the court heeds recent Supreme Court jurisprudence establishing that most limitations periods are claims-processing rules rather than jurisdictional requisites, yet the same result ensues because Carter's alleged financial disability does not equitably toll the limitations period, whether deemed jurisdictional or not. Furthermore, the Internal Revenue Service properly assessed the stock at issue pursuant to its fair market exchange value rather than a reduced value engendered by a massive criminal fraud. Therefore, on the merits Carter's claim for a tax refund falters.

         As a result, for the reasons set out herein, the court GRANTS Defendant's motion.

         STANDARD OF REVIEW

         Rule 12(b)(1) Motion

         “Federal courts are courts of limited jurisdiction” and, as such, possess the power to hear cases only as authorized by the Constitution or United States' laws. Kokkonen v. Guardian Life Ins. Co. of Am., 511 U.S. 375, 377 (1994). “[B]ecause a federal court is powerless to act beyond its statutory grant of subject matter jurisdiction, a court must zealously insure that jurisdiction exists over a case.” Smith v. GTE Corp., 236 F.3d 1292, 1299 (11th Cir. 2001). “If the court determines at any time that it lacks subject-matter jurisdiction, the court must dismiss the action.” Fed.R.Civ.P. 12(h)(3).

         Federal Rule of Civil Procedure 12(b)(1) permits a district court to dismiss a case for “lack of subject-matter jurisdiction.” Fed.R.Civ.P. 12(b)(1). Plaintiff bears the burden of persuasion on establishing the court's subject matter jurisdiction. OSI, Inc. v. United States, 285 F.3d 947, 951 (11th Cir. 2002) (citing Thomson v. Gaskill, 315 U.S. 442, 446 (1942)).

         The Eleventh Circuit establishes particular modes of review for Rule 12(b)(1)

         challenges to subject matter jurisdiction:

[A] motion to dismiss for lack of subject matter jurisdiction pursuant to Fed.R.Civ.P. 12(b)(1) can be based upon either a facial or factual challenge to the complaint. If the challenge is facial, the plaintiff is left with safeguards similar to those retained when a Rule 12(b)(6) motion to dismiss for failure to state a claim is raised . . . Accordingly, the court must consider the allegations in the plaintiff's complaint as true . . . A facial attack on the complaint requires the court merely to look and see if the plaintiff has sufficiently alleged a basis of subject matter jurisdiction, and the allegations in his complaint are taken as true for the purposes of the motion . . .
Factual attacks, on the other hand, challenge the existence of subject matter jurisdiction in fact, irrespective of the pleadings, and matters outside the pleadings, such as testimony and affidavits are considered. Furthermore, . . . the district court has the power to dismiss for lack of subject matter jurisdiction on any of three separate bases: (1) the complaint alone; (2) the complaint supplemented by undisputed facts evidenced in the record; or (3) the complaint supplemented by undisputed facts plus the court's resolution of disputed facts.

McElmurray v. Consol. Gov't of Augusta-Richmond Cty., 501 F.3d 1244, 1251 (11th Cir. 2007) (citing, inter alia, Williamson v. Tucker, 645 F.2d 404, 412 (5th Cir. 1981); Lawrence v. Dunbar, 919 F.2d 1525, 1529 (11th Cir. 1990)) (internal quotation marks and alterations omitted).

         Therefore, a factual challenge to subject matter jurisdiction typically permits a “trial court . . . to weigh the evidence and satisfy itself as to the existence of its power to hear the case.” Williamson, 645 F.2d at 412-13. No presumptive truthfulness would attach to a plaintiff's claims, and “the existence of disputed material facts [would] not preclude the trial court from evaluating for itself the merits of jurisdictional claims.” Id; see also Lawrence, 919 F.2d at 1528-29.

         When “a Rule 12(b)(1) motion is filed in conjunction with other Rule 12 motions, the court should consider the Rule 12(b)(1) jurisdictional attack before addressing any attack on the merits.” Ramming v. United States, 281 F.3d 158, 161 (5th Cir. 2001) (citing Hitt v. City of Pasadena, 561 F.2d 606, 608 (5th Cir. 1977));[1] Harris v. Board of Trustees Univ. of Ala., 846 F.Supp.2d 1223, 1230 (N.D. Ala. 2012) (court considered Rule 12(b)(1) jurisdictional challenge before addressing Rule 12(b)(6) arguments).

         Rule 12(b)(6) Motion

         Rule 12(b)(6), Federal Rules of Civil Procedure, permits a court to dismiss a complaint if it fails to state a claim for which relief may be granted. In Ashcroft v. Iqbal, 556 U.S. 662 (2009), the Court revisited the applicable standard governing Rule 12(b)(6) motions to dismiss. First, courts must take note of the elements a plaintiff must plead to state the applicable claims at issue. Id. at 675.

         After establishing the elements of the claim at issue, the court identifies all well-pleaded, non-conclusory factual allegations in the complaint and assumes their veracity. Id. at 679. Well-pleaded factual allegations do not encompass mere “labels and conclusions, ” legal conclusions, conclusory statements, or formulaic recitations and threadbare recitals of the elements of a cause of action. Id. at 678 (citations omitted). In evaluating the sufficiency of a plaintiff's pleadings, the court may draw reasonable inferences in plaintiff's favor. Aldana v. Del Monte Fresh Produce, N.A., Inc., 416 F.3d 1242, 1248 (11th Cir. 2005).

         Third, a court assesses the complaint's well-pleaded allegations to determine if they state a plausible cause of action based upon the identified claim's elements. Iqbal, 556 U.S. at 678. Plausibility ensues “when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged, ” and the analysis involves a context-specific task requiring a court “to draw on its judicial experience and common sense.” Id. at 678, 679 (citations omitted). The plausibility standard does not equate to a “probability requirement, ” yet it requires more than a “mere possibility of misconduct” or factual statements that are “merely consistent with a defendant's liability.” Id. at 678, 679 (citations omitted).

         As the Eleventh Circuit provides, “[o]rdinarily, we do not consider anything beyond the face of the complaint and documents attached thereto when analyzing a motion to dismiss.” Fin. Sec. Assur., Inc. v. Stephens, Inc., 500 F.3d 1276, 1284 (11th Cir. 2007) (citing Brooks v. Blue Cross & Blue Shield of Fla., Inc., 116 F.3d 1364, 1368 (11th Cir. 1997)). The Eleventh Circuit “recognizes an exception, however, in cases in which a plaintiff refers to a document in its complaint, the document is central to its claim, its contents are not in dispute, and the defendant attaches the document to its motion to dismiss.” FSA, 500 F.3d at 1284 (citing Harris v. Ivax Corp., 182 F.3d 799, 802 n. 2 (11th Cir. 1999); Brooks, 116 F.3d at 1368-69). The exception applies in this case, as Defendant submits the Certificate of Assessments and Payments regarding the federal estate tax liability of the Estate of Frances E.P. Roper, the Estate's September 17, 2013, refund claim, and the IRS's acknowledgement of receipt of the refund claim on September 25, 2013. These documents are central to the Estate's refund claim.

         FACTS

         Plaintiff Elizabeth R. Carter serves as the personal representative of the Estate of Frances E. P. Roper. Ms. Roper died on September 21, 2007. At the time of her death, Ms. Roper owned 567, 092 shares of Colonial BancGroup stock, worth a market value of $17, 604, 767. Ms. Roper bequeathed the majority of her estate, comprised primarily of Colonial BancGroup stock, to her niece, Elizabeth R. Carter, and her nephew, Randy Roper. Within six months after Ms. Roper's death, the market value of the stock had decreased to $8, 548, 947.

         On June 19, 2008, Plaintiff filed a federal estate tax return, reporting an estate valued at $6, 261, 530.00 and tendering payment of the computed tax. On April 26, 2009, the Estate filed an amended return reporting a slightly lower tax of $6, 169, 892. The Colonial stock represented 46.8% of the gross estate. In valuing the Colonial stock, the Estate used the alternative valuation date to calculate the fair market value, a method which relies upon the stock's exchange price six months after a decedent's death. The IRS accepted the amended return and issued a refund.[2]

         On September 13, 2013, the Estate filed a refund claim with the Internal Revenue Service, alleging it overpaid its estate tax by $3, 731, 616, due to a criminal fraud perpetrated against Colonial by one of its customers.[3] The Estate asserted it did not have to rely upon the stock's exchange price for valuation due to the criminal fraud involving the bank. The IRS denied the claim.

         The Estate commenced a federal court action seeking a refund of the purportedly overpaid estate tax. Elizabeth R. Carter, Personal Representative of the Estate of Frances E.P. Roper v. United States, No. 2:15-cv-02357-TMP (N.D. Ala.). The government moved to dismiss the action on the basis of lack of subject matter jurisdiction and lack of merit. The Estate then sought dismissal of the action without prejudice, which the government did not oppose. The court dismissed the action without prejudice on May 12, 2016.

         The Estate filed another refund claim on August 26, 2016, on the same ground as previously asserted. The medical opinion of Ms. Carter's treating physician, Dr. William Hahn, accompanied the claim, in which he declared Ms. Carter suffered from a medical impairment for over five years which prevented her from managing the Estate's affairs. Ms. Carter also submitted a declaration in which she attested no other person had authority to act on her behalf in conducting any financial matters.

         When the IRS failed to dispose of the claim within the statutorily required time, the Estate filed the instant action for recovery of excess federal tax erroneously or illegally assessed and collected. It contends the Colonial stock was worthless on the valuation date, based on non-public information which later became available. Defendant asserts the court lacks subject matter jurisdiction to adjudicate Plaintiff's claim, yet if subject matter exists, Plaintiff's claim lacks merit.

         I. The Court Does Not Possess Subject Matter Jurisdiction

         As a threshold matter, the Defendant contends the court must dismiss this action pursuant to Federal Rule of Civil Procedure 12(b)(1) for lack of subject matter jurisdiction because the Estate submitted an untimely refund claim, citing 26 U.S.C. § 6511(a). Although recent Supreme Court jurisprudence strongly suggests any untimeliness does not ...


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